Key Points

  • The Third District held that a prevailing insured's lawyer may not recover both current market billing rates and prejudgment interest from the date of entitlement, because both compensate for the same delay in payment.
  • The court expressly adopted the First District's reasoning in Philip Morris USA, Inc. v. Brown, 313 So. 3d 898 (Fla. 1st DCA 2021).
  • Each remedy remains lawful on its own; counsel must elect the one that best compensates for delay in a given case.
  • The court reversed only the prejudgment interest on lead counsel's fees and affirmed the rest of the fee award, because other legal professionals were paid below current market rates.
  • The court rejected the insured's reliance on United Automobile Insurance Co. v. Coastal Radiology, LLC and her argument that current rates and interest compensate different harms.

A Florida appeals court ruled Wednesday that lawyers who win fee awards against insurers cannot be paid for the same delay twice, holding that a Miami-Dade judge erred by giving a homeowner's lead attorney both his current billing rate and interest on his fee dating to when she became entitled to it.

The Third District Court of Appeal sided with Citizens Property Insurance Corporation in a fee fight with its policyholder, Mirna Rodriguez, and reversed the prejudgment interest awarded on her lead counsel's fees. Judge Miller wrote for a three-judge panel that also included Judges Fernandez and Lobree, and no judge wrote separately. The court affirmed the rest of the award.

The decision means that in fee-shifting cases under section 627.428, Florida Statutes, the fee-shifting provision under which the homeowner's fees were awarded, a lawyer in the Third District must now choose between two forms of compensation for a slow payout. In doing so the court adopted the reasoning of the First District Court of Appeal in Philip Morris USA, Inc. v. Brown, a 2021 decision, putting the two appellate districts on the same footing.

The underlying case was a first-party homeowners insurance dispute over a Tropical Storm Eta claim. According to the opinion, the parties settled on the eve of a 2022 trial and stipulated that Rodriguez was entitled to fees. "They then spent the better part of two years litigating how much those fees should be," Judge Miller wrote.

After an evidentiary hearing, a general magistrate recommended that lead counsel be paid at current market rates rather than the historical rates in effect when he did the work, plus prejudgment interest, meaning interest running from the date the right to fees was fixed. Citizens filed exceptions, arguing that the combination produced an impermissible windfall. Judge Daryl E. Trawick overruled the exceptions and entered judgment, and Citizens appealed.

The panel treated the question as a pure issue of law and reviewed it de novo. Judge Miller wrote that each remedy is permitted on its own. The Florida Supreme Court held in Quality Engineered Installation, Inc. v. Higley South, Inc. in 1996 that interest on attorney's fees accrues from the date entitlement is fixed, even before the amount is set, reasoning that the rule "serves as a deterrent to delay by the party who owes the attorney fees." Florida courts and others around the country have separately approved fees calculated at current rates in cases involving substantial delay, the opinion said.

"Consequently, each remedy is lawful standing alone," Judge Miller wrote. "The difficulty arises only when one is stacked on top of another, which is exactly what happened here."

The First District, Judge Miller wrote, "resoundingly rejected" that stacking in Brown, a case in which the trial court had used current rates because the litigation had stretched across most of a decade. The Brown court reasoned that "[t]he current rate approach . . . tacitly includes an adjustment for the time value of money," so adding interest on top would partially or fully duplicate it.

Judge Miller also pointed to the U.S. Supreme Court's 1986 decision in Library of Congress v. Shaw, which held that "[i]nterest and a delay factor share an identical function. They are designed to compensate for the belated receipt of money." The panel wrote that fee enhancements count among those delay factors.

"Because both remedies compensate for the same harm, they function as substitutes rather than supplements," Judge Miller wrote.

The opinion quoted at length from a 1992 Seventh Circuit decision by Judge Richard Posner, whom Judge Miller described as a leading economics expert, explaining why interest on historical rates is often the more straightforward method. Judge Posner wrote that changes in billing rates reflect at most the inflation component of an interest rate, and that if rates had fallen, using current rates "would be in effect to award them negative interest."

The panel acknowledged that neither approach is exact. It quoted a 2021 federal decision from the Southern District of New York calling current rates "at best, an imperfect proxy for the loss to counsel from a delay in payment." Judge Miller wrote that "imperfection is a reason to carefully exercise a choice of remedies, not a license for double recovery," adding that attorneys "are best situated to assess the market and elect the avenue that will most fully compensate them for delay in a given case."

Applying that rule, the court found that the trial court "effectively compensated him twice for the loss of use of his fee," referring to lead counsel. "In our view, this created an unwarranted windfall," Judge Miller wrote.

The court limited the reversal to that one piece of the award. "The error, however, was confined, as it only infected the award to lead counsel," the opinion said, because all of the other legal professionals on the case were paid at rates below their current market rates.

In a footnote, the panel rejected Rodriguez's reliance on the Third District's own 2022 decision in United Automobile Insurance Co. v. Coastal Radiology, LLC, writing that the opinion "is devoid of any facts or analysis bearing on this issue." The court also rejected her argument that current rates reflect only market appreciation while interest compensates for loss of use.

Lawyers for Citizens included C. Ryan Jones of Traub Lieberman Straus & Shrewsberry, LLP. Rodriguez was represented by Robert J. Lee of Robert J. Lee, P.A.

The court affirmed in part, reversed in part and remanded the case to the Miami-Dade circuit court. The opinion is not final until the disposition of any timely filed motion for rehearing.