Court Opinion

ID: 75407
Source: CourtListenerOpinion
Date Created: 2010-04-26 23:01:53+00
Date Added: 2024-06-11T12:16:01.068469
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[PUBLISH]

                IN THE UNITED STATES COURT OF APPEALS

                         FOR THE ELEVENTH CIRCUIT
                                                                     FILED
                           ________________________           U.S. COURT OF APPEALS
                                                                ELEVENTH CIRCUIT
                                                                    JUNE 15, 2001
                                 No. 00-12181
                                                                 THOMAS K. KAHN
                           ________________________                   CLERK

                       D. C. Docket No. 88-00640-CV-DLG
                       D.C. Docket No. 92-01264-CV-DLG

HERBERT H. DAVIS,
                                                                  Plaintiff-Appellee,

                                       versus

NATIONAL MEDICAL ENTERPRISES, INC.,
                                                               Defendant-Appellant.

__________________________________________________________________
_

NATIONAL MEDICAL ENTERPRISES, INC.,
a foreign corporation authorized to do business
in the State of Florida,
                                                                 Plaintiff-Appellant,

                                       versus

SUSAN DAVIS, BESSEMER TRUST, personal
representatives of the estate of the “Herbert Davis Marital
Trust ‘B’ Under Agreement Dated January 10, 1991",

                                                              Defendants-Appellees.
                           ________________________

                   Appeal from the United States District Court
                       for the Southern District of Florida
                         _________________________
                                 (June 15, 2001)

Before EDMONDSON, FAY and GARWOOD*, Circuit Judges.

FAY, Circuit Judge:

      This appeal involves competing post-trial motions for attorneys’ fees. The

district court ruled that Appellees Susan Davis and Bessemer Trust (“Davis”) were

entitled to attorneys’ fees and costs as the prevailing party under the net judgment

rule, and awarded the full amount of fees requested without an evidentiary hearing.

The district court denied the request by National Medical Enterprises (“NME”) for

attorneys’ fees. Because we find the claims of the parties separate, and find that

both Davis and NME have a legal basis for the award of attorneys’ fees, we vacate

the findings of the district court and remand for further proceedings to determine

the correct amounts due to each party.

__________________________________________________________________
_

                                          2
       *Honorable Will. L. Garwood, U.S. Court of Appeals for the Fifth Circuit, sitting by
designation.
I      Factual and Procedural History

       We summarize the long and convoluted history of this case to help focus the

issues on appeal. In March 1984, NME purchased eighty percent (80%) of Av-

Med, Inc., a closely-held health maintenance organization, from Herbert Davis and

others. Pursuant to the Stock Purchase Agreement, Davis made various

representations and warranties and agreed to indemnify NME for all claims arising

from the breach thereof, including any claims related to Av-Med’s stock. The

Stock Purchase Agreement contained an attorneys’ fee clause.

       Contemporaneous with the execution of the Stock Purchase Agreement,

Davis and National Medical Management, Inc. (“NMMI”), a subsidiary of NME,

entered into an employment agreement for Davis’ continued employment with Av-

Med. The parties agree that this employment contract was subsequently

superceded by two separate documents.1 As a result of these agreements

(collectively “Employment Contract”), the district court concluded that a valid and

       1
         Anticipating the sale of Av-Med to a third party, Davis and NME entered into a
Settlement Agreement on June 27, 1986, by which NME concedes that it guaranteed payment of
Davis’ salary under the Employment Contract. Later, the parties executed an Amendment to
Settlement Agreement dated September 8, 1986. That agreement obligated NME to pay Davis
on January 2, 1988, all amounts accruing under the Employment Contract after the closing of the
sale of Av-Med.

                                               3
binding agreement existed between the parties, pursuant to which NME was bound

to employ Davis at specified compensation through a given date.

      On or about November 17, 1986, Davis and Av-Med were sued for

securities fraud in connection with the purchase of Av-Med shares from a minority

shareholder. NME defended the case on behalf of Av-Med and sought

indemnification from Davis under the Stock Purchase Agreement. Davis did not

respond to the notice for indemnification, and NME eventually settled the claims

against Av-Med for $350,000.2 When Davis refused NME’s demand for indemnity

in the amount of $463,000, including $113,000 in attorneys’ fees, NME

discontinued paying Davis under his Employment Contract.

      On January 15, 1988, Davis sued for breach of the Employment Contract.

NME removed the case to the District Court for the Southern District of Florida,

based on diversity jurisdiction, and counterclaimed for indemnification based on

the indemnification clause in the Stock Purchase Agreement.

      At trial, the matters pertaining to NME’s liability on the Employment

Contract were deemed conclusively admitted and required no proof. After a two

day trial, the district court ruled in favor of NME on its claim for indemnification.

On March 19, 1991, the district court entered a final judgment awarding Davis

      2
       Thereafter, Davis settled the securities fraud action for $1,125,000.

                                               4
$1,006,159.46 on his breach of contract claim, and awarding NME $645,452 on its

indemnification claim.

       Both Davis and NME filed motions for attorneys’ fees. NME based its

claim for fees on the attorneys’ fees clause in the Stock Purchase Agreement, while

Davis sought fees based on § 448.08 of the Florida Statutes providing for

attorneys’ fees and costs in actions for unpaid wages. NME filed objections to the

affidavit of counsel, attached to Davis’ motion for attorneys’ fees, on the grounds

that it failed to establish the number of hours or the nature of the work performed.

       Before the attorneys’ fees were decided, Davis appealed the district court’s

ruling in favor of NME on the indemnification claim. This Court affirmed the

judgment, Davis v. Nat’l Medical Enterprises, 963 F.2d 385 (11th Cir. 1992), and

on September 4, 1992, granted NME’s motion for its appellate attorneys’ fees and

remanded to the district court to conduct an evidentiary hearing on the amount to

be awarded. Accordingly, NME filed a motion for an evidentiary hearing on

attorneys’ fees in the district court.

       While this Court’s order, NME’s motion for an evidentiary hearing, and the

cross-motions for attorneys’ fees were pending in the district court, Davis died.

Pursuant to Florida Probate Code, NME instituted a new action, District Court

Case No. 92-1264, against Davis’ estate for fees. The two cases were consolidated.

                                          5
       On September 30, 1998, the district court entered an Order on Entitlement to

Attorneys’ Fees and Costs (“Order on Entitlement”) determining that Davis was

entitled to attorneys’ fees and NME was not. Applying Prosperi v. Code, Inc., 626

So.2d 1360 (Fla.1993), the district court determined that Davis was the winner of

the net judgment in the primary lawsuit. The district court also reasoned that the

amount of trial time spent on a particular issue did not, per se, establish which

party prevailed on the most significant issues in the case. Finally, the district court

found that the claim and counterclaim were “not inseparable,” and that the equities

favored neither NME nor Davis because both parties had breached their respective

obligations.3

       The September 30, 1998, Order on Entitlement directed the parties to confer

and resolve between themselves the dollar amount of fees that should be awarded,

and to file a report with the court within 35 days. Despite two extensions of time,

the parties were unable to agree before the court’s final deadline of November 17,

1999. On November 19, 1999, Davis filed a unilateral report advising the court

that the parties could not agree on a fee award, and reiterating his request for

$115,761.25 in fees and costs. NME filed its unilateral report on December 16,

       3
        Senior Judge James W. Kehoe entered the Order on Entitlement but soon thereafter died.
NME’s Motion for Reconsideration was denied by Judge Graham, to whom the case was
reassigned, on July 9, 1999. On June 23, 2000, this Court dismissed NME’s appeal from the
September 30, 1998, and July 9, 1999, orders for lack of jurisdiction.

                                              6
1999, advising the court that an evidentiary hearing was necessary because Davis

could not produce adequate time records.

       Before NME filed its report, Magistrate Judge William C. Turnoff issued a

Report and Recommendation, dated December 15, 1999, that the Davis attorneys

be awarded the full amount of fees requested. The Magistrate Judge found that

NME had failed to challenge the reasonableness of the fees sought, and

alternatively, that the amount of time expended and the hourly rates sought were

reasonable. NME filed three sets of Objections to the Report and

Recommendation, two of which were referred to and denied by the Magistrate

Judge. The Magistrate Judge explained that NME’s untimely unilateral report

merely requested an evidentiary hearing without challenging the time expended by

Davis’ counsel as unreasonable.4 The third time NME filed Objections, the

district court, Judge Graham presiding, adopted the Report and Recommendation

of the Magistrate Judge awarding Davis $112,761.25 in attorneys’ fees and

$3,479.84 in costs.5 This appeal followed.

       4
        The Magistrate Judge also explained that NME’s failure to timely serve a unilateral
report due to “an intervening holiday, an out-of-town business trip, and preparation for a trial”
did not demonstrate the grounds necessary to grant NME’s Motion for Reconsideration.
       5
         The district court awarded Davis (1) 467.9 hours of attorney work at an hourly rate of
$145.82 and 165 hours of paralegal work at an hourly rate of $60 per hour from the inception of
the case until judgment in March 1991; (2) 202.25 hours of attorney work at an average hourly
rate of $160.02 and 24.9 hours of paralegal work at an hourly rate of $90 from September 1,
1992 to March 2000.

                                                 7
       First, NME claims error with the district court’s failure to conduct an

evidentiary hearing to determine the amount of appellate fees to which it is entitled

pursuant to this Court’s order in the first appeal. Second, NME appeals the district

court’s Order of September 30, 1998, finding that Davis was entitled to attorneys’

fees, but that NME was not. Third, NME appeals the amount of fees awarded

Davis, by Order dated March 21, 2000, arguing that Davis’ attorneys did not

produce adequate time records and did not make any attempt to exclude time spent

on claims which failed.

II     Standard of Review

       We review the decision to grant or deny attorneys’ fees for an abuse of

discretion. See United States v. Gilbert, 198 F.3d 1293, 1298 (11th Cir. 1999).

While we generally accord deference in diversity cases to a district court’s

interpretation of the law of the state in which it sits, we review de novo a district

court’s determination of state law. Insurance Co. of N. Am. v. Lexow, 937 F.2d

569, 571 (11th Cir. 1991) (quoting Salve Regina College v. Russell, 499 U.S. 225,

111 S.Ct. 1217, 1221 (1991).6

III    Discussion

       6
         As a federal court sitting in diversity, we apply the substantive law of the forum state.
Insurance Co. of N. America v. Lexow, 937 F.2d 569, 571 (11th Cir. 1991). In applying state
law, we adhere to decisions of the state’s intermediate appellate courts absent some persuasive
indication that the state’s highest court would decide the issue otherwise. Id. at 571.

                                                 8
      A.     Entitlement to Appellate Fees

      As an initial matter, NME is correct that it is entitled to recover its attorneys’

fees incurred in the first appeal. Per this Court’s Order of September 4, 1992, the

district court should have conducted an evidentiary hearing to determine the

amount of appellate fees to which NME is entitled.

      B.     Entitlement to Trial Fees

      NME contends that the district court erred in applying Prosperi because

NME prevailed on its indemnification claim and was contractually entitled to an

award of fees under the Stock Purchase Agreement regardless of whether Davis

won his claim asserted under the Employment Contract. NME argues that the

district court should not have reached the issue of which party was the net winner

or won the most significant issue because each party brought suit on a separate

cause of action and thus, each party’s fee claim rises or falls on its own. Davis

contends that the district court correctly awarded Davis attorneys’ fees as the

winner of the net judgment.

             1.    NME’s Entitlement to Attorneys’ Fees

      We agree with NME that Prosperi is not controlling. Prosperi involved a

claim for mechanic’s lien and a claim for breach of contract, both arising out of the

same transaction, only one of which called for the payment of attorneys’ fees to the

                                           9
prevailing party. See Prosperi, 626 So.2d at 1361. The trial court denied the claim

for mechanic’s lien and held that the contractor had breached the contract, but

awarded the contractor a net judgment for amounts owing under the contract. See

id. As a consequence of the net judgment in favor of the contractor, the trial court

denied the owner’s claim for attorneys’ fees pursuant to the prevailing party fee

provision in the mechanic’s lien statute, section 713.29 of the Florida Statutes. See

id. at 1361-62. The Florida Supreme Court reversed and held that the owner was

entitled to attorneys’ fees because it had prevailed on the significant issues in the

case. See id. at 1363.7

       Davis is correct that Prosperi has not been limited to mechanic’s lien cases,

and has been followed by courts in numerous different contexts.8 As a general

rule, Prosperi stands for the proposition that, in awarding attorneys’ fees, a trial

court has discretion to consider the equities and to determine which party prevailed

on the significant issues when neither party has been vindicated fully. Implicit in

this principle is that only one party is entitled to attorneys’ fees pursuant to a

prevailing party fee provision when litigation involves alternative theories of

       7
        Thus, although Prosperi did not abolish the net judgment rule, the Florida Supreme
Court expressly disapproved strict application of the rule. See Prosperi, 626 So.2d at 1363.
       8
        See, e.g., Mulato v. Mulato, 734 So.2d 477, 478 (Fla. 4th DCA 1999) (civil theft action);
Lewis Oil Co., Inc. v. Milliken, 711 So.2d 636, 637 (Fla.1st DCA 1998) (breach of contract
dispute); Pizza U.S.A. of Pompano, Inc. v. R/S Associates of Florida, 665 So.2d 237, 241 (Fla.
4th DCA 1995) (landlord/tenant dispute).

                                               10
liability for the same wrong. Cf. Reinhart v. Miller, 548 So.2d 1176 (Fla. 4th DCA

1989) (stating that there could not be two prevailing parties if there could not be

two breaches).

      Where, however, each claim is separate and distinct and would support an

independent action, as opposed to being an alternative theory of liability for the

same wrong, the prevailing party on each distinct claim is entitled to an award of

attorneys’ fees for those fees generated in connection with that claim. Folta v.

Bolton, 493 So.2d 440, 442-43 (Fla. 1986) (reasoning that each claim involved

different acts or conduct occurring at different times, by different persons, resulting

in different injuries). This distinction accords with the guidelines set forth by the

United States Supreme Court. See Hensley v. Eckerhart, 461 U.S. 424, 435, 103

S.Ct. 1933, 1940 (1983) (in determining reasonable hours for award of attorneys’

fees, the district court must deduct time spent on discrete and unsuccessful claims).

      Where claims are separate and divisible, each should be given separate

consideration for the purpose of awarding attorneys’ fees. For example, in

Welleby Condo. Assoc. One, Inc. v. Brown, 561 So.2d 7 (Fla. 4th DCA 1990), the

defendant prevailed in an action to recover condominium assessments and the

plaintiff prevailed on the counterclaim for damages for the loss of parking spaces

at the condominium. See Welleby, 561 So.2d at 7. The Fourth District Court of

                                          11
Appeal held that each party was entitled to attorneys’ fees for the claim on which it

prevailed because the claim and counterclaim were separate and distinct. See id.

      In this case, the claim and counterclaim were unrelated, involving wholly

separate contracts and resulting in separate breaches. See Consolidated Southern

Sec., Inc. v. Geniac & Associates, Inc., 619 So.2d 1027, 1028 (Fla. 2nd DCA

1993) (citation omitted) (reasoning that claims were separate and distinct for

purposes of attorneys’ fee award because they involved essentially different

contracts). Although the Employment Contract and the Stock Purchase Agreement

were entered into contemporaneously, the former governed the employment

relationship between Davis and NMMI while the latter comprised numerous

agreements related to the complex stock buy-out of Av-Med by NME. Either

could have been executed separately and neither was dependent upon the other.

      Davis contends that the claim and counterclaim were inseparable based on

NME’s admission that it refused to pay Davis under the Employment Contract

because Davis failed to indemnify NME under the Stock Purchase Agreement.

However, we find no evidence in the record that the contracts were incorporated by

reference or that performance pursuant to each was in any way connected. If they

were inseparable, the breach by one party would have released the other party from

future performance. Instead, the district court judge expressly concluded that

                                         12
NME had breached the Employment Contract, and that Davis had breached the

indemnification provision of the Stock Purchase Agreement.9

       NME has a contractual right to attorneys’ fees as the prevailing party on the

indemnification claim. When the parties to a contract determine that the prevailing

party in any litigation shall be entitled to attorneys’ fees, it is the court’s duty to

enforce the attorneys’ fee provision in the parties’ contract. See Pelican Bay

Homeowners Ass’n Inc. v. Sedita, 724 So.2d 684, 685 (Fla. 5th DCA 1999). Since

we find that the claim and counterclaim were separate and distinct, NME is entitled

to attorneys’ fees incurred in connection with its claim for indemnification.

               2.     Davis’ Entitlement to Attorneys’ Fees

       We must now determine whether Davis is entitled to attorneys’ fees as the

prevailing party on his claim for breach of contract. NME claims that there is no

contractual or statutory basis for the award. See Dade County v. Pena, 664 So.2d

959, 960 (Fla. 1995) (holding that attorneys’ fees may not be awarded absent a

statutory or contractual provision for such fees). It is undisputed that the

Employment Contract does not contain a prevailing party fee provision. Therefore,

Davis relies exclusively on Florida Statute § 448.08 which provides a trial court

       9
        Indeed we are a little confounded by the district court’s order awarding fees to Davis and
not to NME after finding that the claims were “not inseparable,” in other words separable. We
assume this is a typographical error.

                                               13
with the discretion to award attorneys’ fees to the prevailing party in an action for

unpaid wages. See Fla. Stat. § 448.08 (1997).10

      The question is whether it is reasonable to interpret Davis’ claim against

NME as an action for unpaid wages within the purview of the statute. See, e.g.,

Speer v. Mason, 769 So.2d 1102, 1103 (Fla. 4th DCA 2000). This is a mixed

question of law and fact. See id.

      The district court must have relied on F.S. § 448.08 in awarding Davis fees

because that is the sole basis on which Davis sought attorneys’ fees. Furthermore,

in its Findings of Fact and Conclusions of Law, the district court found that NME

“agreed to employ Davis at specified compensation, through a given date” and that

“NME breached that agreement through its failure to make the agreed

compensation payments to Davis on the dates due.”

      However, in objecting to these fees, NME misplaces reliance on Joseph v.

Commonwealth Land Title Ins. Co., 707 So.2d 376 (Fla. 5th DCA 1998). In

Joseph, the employee alleged that the employer breached an employment contract

by terminating him. See id. at 377. The court denied the claim for attorneys’ fees

pursuant to F.S. 448.08 because the suit involved unaccrued wages, wages that

      10
           Section 448.08 of the Florida Statutes provides:
                 The court may award to the prevailing party in an action for unpaid
                 wages costs of the action and a reasonable attorney’s fee.
           Fla. Stat. § 448.08 (1997).

                                                 14
would have been due had the employment not been terminated. See id. Here,

Davis alleged that NME breached the Employment Contract by failing to pay him

monies that were due and owing. The district court agreed and found that NME

had failed to pay Davis “on the dates due,” i.e., that the payments had accrued.

       The only remaining question is whether the payments constitute wages. The

money owed Davis stems from a straight employment contract. If that were the

only agreement between the parties, the payments would clearly be wages.

However, the parties altered the employment contract because NME decided that it

would be easier to resell Av-Med, a perfectly reasonable business decision. That

does not change the fact that the monies owed Davis derive from the employment

relationship and thus, we conclude would be considered “wages” under F.S.

448.08.11 Accordingly, we affirm the district court’s order awarding Davis

attorneys’ fees, but only those fees incurred in connection with the breach of

contract claim.

       C.     Amount of Fees Awarded

       Given our decision above, we do not address NME’s argument that the

Magistrate erred in the amount of fees awarded Davis because Davis failed to

       11
         We recognize that we are making an “Erie” guess. Erie Railroad Co. v. Tompkins, 304
U.S. 64, 58 S.Ct. 817 (1938).

                                             15
produce sufficient evidence to establish the number of hours expended or a

reasonably hourly rate.12 On remand, the district court will have to recompute the

amount of attorneys’ fees to which each party is entitled.

IV     Conclusion

       For the reasons set forth above, we AFFIRM that portion of the district

court’s Order of September 30, 1998, awarding Davis attorneys’ fees, and

REVERSE that portion of the Order denying attorneys’ fees to NME. We

VACATE the Order of March 21, 2000, and REMAND to the district court for an

evidentiary hearing to determine the amount of trial fees to which each party is

entitled on the claim on which it prevailed. On remand, the district court should

also conduct an evidentiary hearing to determine the amount of appellate fees to

which NME is entitled.

       12
        Our review of Davis’ fee request reveals a substantial lack of documentation. For
example, a significant portion of the entries stated only, “For General Representation.”
However, a district court is itself an expert on the question of fees, and may consider its own
knowledge and experience in making a fee award. Norman v. Hous. Auth.of the City of
Montgomery, 836 F.2d 1292, 1304 (11th Cir.1988).

                                                16