Chapter 517 of the Florida Statutes is the Florida Securities and Investor Protection Act. §517.011, Fla. Stat. (2015). Section 517.211 of the Act sets forth the remedies available to persons who bring claims for violations of Chapter 517, and includes a prevailing party attorneys’ fee provision. §517.211(6), Fla. Stat. (2015)("In any action brought under this section, including an appeal, the court shall award reasonable attorneys’ fees to the prevailing party unless the court finds that the award of such fees would be unjust.”) The Florida Fourth District Court of Appeal’s very recent decision in Nalasco v. Buckman, Buckman & Reid, Inc., No.4D14-861 (Fla. 4th DCA July 15, 2015), serves as both a primer and a reminder regarding the myriad of issues involved when an arbitrator or arbitration panel decides that a claimant is entitled to an award of attorneys’ fees under Chapter 517.
According to the Fourth District’s opinion, the investor brought a $30,000 securities claim against a securities broker-dealer. No arbitration hearing was held, and instead the single arbitrator resolved the case based upon the submissions of the parties. In other words, the case was decided solely “on the papers.”
The arbitrator awarded the claimants compensatory damages of $44,737, and also determined that the claimants could seek an award of attorneys’ fees under Section 517.211(6), the prevailing party attorneys’ fees provision. The arbitrator further directed the claimants to petition a court for the award of fees. In other words, the arbitrator determined entitlement to attorneys’ fees and left to a court the task of setting the amount of those fees.
Counsel for the claimants sought an attorneys’ fee award of approximately $300,000 on the compensatory damages award of $44,737. Stated differently, the claimants’ counsel sought attorneys’ fees of more than 6.5 times the amount of compensatory damages awarded by the arbitrator. The trial court ultimately awarded attorneys’ fees of $22,000, and counsel for claimants appealed.
The Fourth District reversed because the trial court had failed to make the findings required by the Supreme Court of Florida to support its award of attorneys’ fees. The trial court failed to make required finding relating to a reasonable number of hours expended by counsel for the prevailing party and a reasonable hourly rate for that counsel, i.e., the lodestar calculation mandated by the Florida Supreme Court. See Florida Patient’s Compensation Fund v. Rowe, 472 So. 2d 1145 (Fla. 1985), modified by,Standard Guaranty Insurance Co. v. Quanstrom, 555 So. 2d 828 (Fla. 1990). In addition, the Fourth District reversed because the trial court had failed to employ the proper contingency risk factor multiplier analysis.
Under Florida law, if an attorney takes a case on a contingency fee basis, the trial court must determine whether to employ a multiplier to enhance the amount of reasonable attorneys’ fees, determined by using the lodestar approach, although use of a multiplier is not mandated. See Quanstrom, 555 So. 2d at 831. The Fourth District joined Florida’s Second District Court of Appeal in determining that the appropriate multiplier for a claim based on a violation of Chapter 517 was the multiplier applicable to tort and contract claim cases under the Quanstrom analysis. As a result, using the multiplier applicable to tort and contract claim cases, the trial court could have applied a multiplier of 1-to-1.5, if the trial court determined that success was more likely than not at the outset of the case; a multiplier of 1.5-to-2, if the trial court determined that the likelihood of success was approximately even at the outset of the case; and a multiplier of 2-to-2.5, if the trial court determined that success was unlikely at the outset of the case.
In Nalasco, the trial court determined that at the outset of the case, the likelihood of success was approximately even. In light of that determination, the trial court should have determined whether to apply a multiplier of 1.5-to-2. In other words, if the trial court had correctly determined the lodestar amount to award as attorneys’ fees, it then should have considered whether to enhance that amount by a factor of 1.5-to-2 and award the attorney representing the claimants 1.5-to-2 times the lodestar amount. As the trial court had used a different contingency risk factor multiplier analysis, the Fourth District reversed for this separate ground and directed the trial court to consider a multiplier of 1.5-to-2.
The trial court rejected the effort by counsel for claimants to recover an award of attorneys’ fees for time spent litigating the amount of fees to be awarded. The Fourth District rejected this effort outright because it flew in the face of established precedent in Florida, which denies fees incurred for litigating the amount of attorneys’ fees to be awarded. See Barron Chase Sec, Inc. v. Moser, 794 So. 2d 649 (Fla. 2d DCA 2001)(counsel for party may not recover attorneys’ fees under Section 517.211(6) for time spent litigating amount of those fees).
Lastly, in terms of the opinion, the Fourth District reversed because the trial court had not considered an award of pre-judgment interest. Under Florida law, claimants were entitled to an award of pre-judgment interest accruing from the date that entitlement to fees was determined. See Quality Engineered Installation, Inc. v. Higley S., Inc., 670 So. 2d 929, 931 (Fla. 1996) (holding, in context of contractual prevailing party fee provision, that interest accrues on attorney’s fees from the date entitlement is determined, even though amount is not yet set); Olde Discount Corp. v. Amsel, 800 So. 2d 667, 667 (Fla. 5th DCA 2001) (applying the Quality EngineeredInstallation decision to Chapter 517 fees).
As this brief discussion reaffirms, litigating post-arbitration attorneys’ fees in Florida certainly can have its moments. Not only will the non-prevailing party face a statutory requirement to pay attorneys’ fees to the prevailing party, the non-prevailing party, in contingency fee cases, also may face the possibility of paying a multiplier on the amount of reasonable fees determined by the trial court. Moreover, once entitlement is determined, pre-judgment interest on the amount of attorneys’ fees begins to accrue, even if the amount of fees is determined at a later date.
To add another layer of potential concern, Florida has amended its arbitration code dramatically in regard to the ability of arbitrators to award attorneys’ fees. Formerly, Florida law specifically prohibited arbitrators from awarding attorneys’ fees unless the parties consented to an award by the arbitrators. Compare §682.11, Fla. Stat. (2012)(arbitrators may not award attorneys’ fees) withTurnberry Associates v. Service Station Aid, Inc., 651 So. 2d 1173, 1175 (Fla.1995)( parties to an arbitration may waive their right to have a court address the issue of attorneys’ fees and agree that the arbitrators may do so). Now, the Florida Arbitration Code specifically provides that arbitrators may award attorneys’ fees in arbitration proceedings. §682.11, Fla. Stat. (2015). As a result, arbitrators finding liability under Chapter 517 of the Florida Statutes, unless the parties agree to reserve the issues for a court’s determination, also could decide (1) entitlement to attorneys’ fees, (2) the amount of “reasonable” attorneys’ fees to award, and (3) whether to apply a multiplier of 1.5 to 2 to any award of attorneys’ fees.