Progressive Express v. Schultz
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IN THE DISTRICT COURT OF APPEAL OF THE STATE OF FLORIDA
FIFTH DISTRICT
JULY TERM 2006
PROGRESSIVE EXPRESS INSURANCE COMPANY,
Petitioner,
v.
Case No. 5D06-444
DONALD SCHULTZ,
Respondent.
________________________________/
Opinion filed October 20, 2006
Petition for Certiorari Review of
Decision from the Circuit Court
for Seminole County Acting in its
Appellate Capacity.
Betsy E. Gallagher and Michael C. Clarke,
of Kubicki Draper, P.A., Tampa, for
Petitioner.
Glenn Klausman, of Jacobs & Goodman,
P.A., Altamonte Springs, for Respondent.
Anthony J. Russo of Butler Pappas
Weihmuller Katz Craig LLP, Tampa,
for Amicus, Florida Defense Lawyers
Association.
ORFINGER, J.
Progressive Express Insurance Company seeks certiorari review of a decision
rendered by the circuit court of Seminole County, Florida, acting in its appellate
capacity.
Progressive contends that the circuit court departed from the essential
requirements of law by affirming a county court order awarding attorney’s fees totaling
$193,750.
For the reasons explained below, we agree and grant the petition for
certiorari.
Donald Schultz, a Progressive insured, was injured in an automobile accident.
The next day, Mr. Schultz began chiropractic treatment with Dr. Jason Masters. After
four months of treatment with Dr. Masters, Progressive elected to have Mr. Schultz
exami ned by Dr. David Bennett, also a chiropractor. After Dr. Bennett concluded that
no further chiropractic treatment was reasonable, necessary or related to the accident,
Progressive stopped paying PIP benefits, leaving Mr. Schultz with a balance of
$1,315.30 owed to Dr. Masters.
At Dr. Masters’s suggestion, Mr. Schultz consulted with attorney Glen Klausman
about pursuing a suit to recover for the unpaid chiropractic treatments. Following that
consultation, Mr. Schultz retained Mr. Klausman, who then filed a PIP suit in county
court, seeking to recover the outstanding chiropractic bills, mileage, attorney’s fees and
costs. Following extensive pretrial discovery, the parties settled the dispute, leaving
only the issue of the amount of attorney’s fees and the appropriateness of a fee
multiplier for resolution by the court. After a hearing, at which Progressive conceded
Mr. Schultz’s entitlement to attorney’s fees, the county court approved Mr. Klausman’s
fee request for 193.75 hours at $400 per hour, resulting in a lodestar fee of $77,500.
After the county court approved a 2.5 multiplier, the fee, now set at $1,000 an hour,
totaled $193,750.
2
Progressive appealed to the circuit court, which affirmed the county court’s
judgment.
Progressive now seeks certiorari review of the circuit court’s decision,
contending that the use of an attorney’s fee multiplier was error and a manifest injustice.
Mr. Schultz opposes review, arguing that this case fails to satisfy the high standard
necessary for certiorari review. Because we conclude the fee award, particularly the
application of a multiplier, is a manifest injustice, we elect to exercise our discretionary
certiorari jurisdiction.
Certiorari review of a circuit court acting in its appellate capacity is only available
when the circuit court does not afford procedural due process or departs from the
essential requirements of law. Haines City Cmty. Dev. v. Heggs, 658 So. 2d 523 (Fla.
1995). A departure from the essential requirements of law is more than a simple legal
error. “A district court should exercise its discretion to grant certiorari review only when
there has been a violation of a clearly established principle of law resulting in a
miscarriage of justice.” Allstate Ins. Co. v. Kaklamanos, 843 So. 2d 885, 889 (Fla.
2003).
A “clearly established principle of law” can derive from a number of legal
sources, including the constitution, statutes, rules of court and controlling case law.
Progressive Express Ins. Co. v. Physician’s Injury Care Ctr., Inc., 906 So. 2d 1125 (Fla.
5th DCA 2005). In this case, the circuit court departed from controlling statutory and
case law in affirming the county court’s fee award.
While it would be easy to characterize this case as a run of the mill PIP dispute,
admittedly, it was somewhat more than that. Mr. Schultz’s attorney expended 193.75
hours, a significant amount of time, in a successful effort to undermine the credibility of
3
Progressive’s chiropractic expert.1
Of course, it is hardly unusual that one side
searches for evidence to impeach or discredit the other side’s expert.
And, the
additional work is reflected in the lodestar amount, and, consequently, should have little
or no impact on the need for a multiplier.
Underlying our analysis is the premise that both the applicable statute, section
627.428(1), Florida Statutes (2003), and the Rules Regulating the Florida Bar, require
that all fees awarded by the court be reasonable.2 Section 627.428(1) authorizes the
court to award reasonable attorney’s fees to be paid by an insurer to an insured in the
event the insured brings a successful action against an insurer under an insurance
contract. Section 627.428 was intended “to discourage the contesting of valid claims
against insurance companies and to reimburse successful insureds for their attorney’s
fees when they are compelled to defend or sue to enforce their insurance contracts.”
Ins. Co. of N. Am. v. Lexow, 602 So. 2d 528, 531 (Fla. 1992).
In Florida Patient’s Compensation Fund v. Rowe , 472 So. 2d 1145, 1150 (Fla.
1985), the supreme court adopted the federal lodestar approach, holding that in setting
a reasonable attorney’s fee, the federal lodestar approach “provides a suitable
foundation for an objective structure.”
The federal lodestar approach establishes a
“strong presumption” that the lodestar, the product of the reasonable hours expended
times the hourly rate, represents the “reasonable fee.”
Pennsylvania v. Del. Valley
Citizens’ Council for Clean Air, 478 U.S. 546, 565 (1986).
1
Progressive’s attorney’s fees expert opined that 143.25 hours was reasonable.
“An attorney shall not . . . charge, or collect . . . [a] clearly excessive fee . . . .”
R. Regulating Fla. Bar 4-1.5(a).
2
4
The concept of a fee multiplier entered our jurisprudence in Standard Guaranty
Insurance Co. v. Quanstrom, 555 So. 2d 828 (Fla. 1990).3 Quanstrom set forth a
number of factors to be considered in evaluating the need for a multiplier, including:
1. Whether the relevant market requires a contingency fee
multiplier to obtain competent counsel;
2. Whether the attorney was able to mitigate the risk of nonpayment in any way; and
3. Whether any of the factors set forth in Florida Patient’s
Compensation Fund v. Rowe , 472 So. 2d 1145 (Fla. 1985)
are applicable.
555 So. 2d at 835. In later cases, the ability to obtain competent counsel rose to
prominence in determining under what circumstances a multiplier was necessary and
appropriate. See Bell v. U.S.B. Acquisition Co., Inc., 734 So. 2d 403, 411 (Fla. 1999)
(holding “[a] primary rationale for the contingency risk multiplier is to provide access to
competent counsel for those who could not otherwise afford it”).
Because Mr. Schultz did not testify at the fee hearing, we have nothing to
suggest that he had any difficulty obtaining competent counsel to pursue his PIP claim,
other than Mr. Klausman’s statement that the attorney handling Mr. Schultz’s third-party
liability claim was not interested in pursuing Mr. Schultz’s PIP case. In our view, that
lack of evidence alone is fatal to the claim for a multiplier. Common sense also has a
role to play here. We are not so isolated from the world around us to know that few
people have any difficulty retaining competent counsel in these circumstances. Our
3
Quanstrom was premised on the United States Supreme Court’s decisions
approving fee multipliers in Blanchard v. Bergeron, 489 U.S. 87 (1989), and
Pennsylvania v. Delaware Valley Citizens’ Council for Clean Air, 483 U.S. 711 (1987).
The Supreme Court receded from the use of multipliers in federal fee shifting cases in
Burlington v. Dague, 505 U.S. 557 (1992).
5
docket, and the dockets of the trial courts in Central Florida, have hundreds, and,
perhaps, thousands, of PIP suits pending at any given time. It seems that few insureds,
if any, have difficulty obtaining competent counsel to represent them. To the contrary,
every television station and telephone book, and many billboards and buses, call out
with ads from lawyers seeking to represent the injured.
We also choose to exercise our discretionary jurisdiction in this case because
judges have a special responsibility in determining reasonable fees for both attorneys
and expert witnesses. Miller v. First Am. Bank & Trust, 607 So. 2d 483 (Fla. 4th DCA
1992). As Judge Farmer wrote in Ziontz v. Ocean Trail Unit Owners Association, Inc.,
663 So. 2d 1334, 1335-36 (Fla. 4th DCA 1993):
[J]udges and lawyers [have lost] . . . sight of a truth they
formally accepted almost universally: viz., that there is an
economic relationship to almost every legal service in the
marketplace. The value of any professional service is
almost always a function of its relationship to something else
--i.e., some property or other right . . . . Trial judges and
lawyers used to accept a priori the idea that, no matter how
much time was spent or how good the advocate, the fair
price of some legal victories simply could not exceed--or,
conversely, should not be less than--some relevant sum not
determined alone by hours or rates. Since Rowe, that all
seems lamentably forgotten.
“Lawyers are officers of the court.
The court is an instrument of society for the
administration of justice. Justice should be administered economically, efficiently, and
expeditiously.
The attorney’s fee is, therefore, a very important factor in the
administration of justice, and if it is not determined with proper relation to that fact[,] it
results in a species of social malpractice that undermines the confidence of the public in
the bench and bar. It [sic] does more than that; it brings the court into disrepute and
6
destroys its power to perform adequately the function of its creation.” Miller, 607 So. 2d
at 485, n.4 (quoting Baruch v. Giblin, 164 So. 831, 833 (Fla. 1935)).
The testimony at the fee hearing was informative. Mr. Klausman testified that no
client had ever paid him $400 per hour. Rather, the only time he charged that rate was
when he testified as a fee expert for other lawyers.4
Additionally, Mr. Klausman
acknowledged that the accident was a “fender-bender.” More significantly, however,
Mr. Schultz’s fee expert described the case thusly:
A
Well, an IME case is going to be a fifty/fifty shot
under these circumstances anyway. You’ve got a minor
impact, car drivable afterwards, you’ve got no
hospitalization, no medical doctor, excessive chiropractic
treatment over a four -month period where the plaintiff is
treating still three times a week when the IME takes place
four months later -- almost five months later. And in the IME
there’s no objective signs of injury at all clearly documented
by Dr. Bennett [the “IME” physician] . . . . He only has some
subjective complaints which if you look at Masters’ notes,
and this is critical when you’re looking at a PIP case, there is
no sign of improvement with the treatment that’s been going
on. It is entirely foreseeable that a jury in this case would
say, you know what, this guy has six thousand dollars’ worth
of PIP treatment already. The defense is going to say,
ladies and gentlemen, enough is enough . . . .
....
Plus there was a surface EMG that was done here and paid.
The surface EMG -- there’s a question from the insurance
industry whether or not it’s even a legit test and in this
particular case the medical records do not document any
radiculopathy and would not document this need for an
EMG. Dr. Bennett found that also.
Q
credibility?
So
that
would
4
have
hurt
Dr.
Masters’
We, too, are aware of the fees that prevail in the Central Florida market. The
fee approved here, $400 an hour before the multiplier, certainly pushes the upper limit
for hourly fees, even in the most complex litigation.
7
A
Right, running a test that is questionable, but
not warranted in any event in this particular case.
Armed with this same information, Progressive stopped paying Mr. Schultz’s PIP
benefits. While in hindsight that decision may have been wrong, it does not seem
unreasonable, unwarranted or outrageous. And, it hardly seems to justify attorney’s
fees of $1,000 per hour.
Our jurisprudence, because of the ability to obtain a fee multiplier in long shot
cases, routinely approves fees that reward lawyers for pursuing cases that have little
chance of success. The riskier the case, the greater the multiplier. See Holiday v.
Nationwide Mut. Fire Ins., 864 So. 2d 1215 (Fla. 5th DCA 2004) (upholding the use of a
multiplier when the trial court found that “both attorneys took the case, as a ‘flyer’ in the
hope of ‘getting
lucky’ and recovering a huge fee”).
“ n attorney operating on a
A
contingency-fee basis pools the risks presented by his various cases: cases that turn
out to be successful pay for the time he gambled on those that did not. To award a
contingency enhancement under a fee-shifting statute would in effect pay for the
attorney's time (or anticipated time) in cases where his client does not prevail.”
Burlington v. Dague, 505 U.S. 557, 565 (1992). A sensible judicial system should not
encourage lawyers to bring suits that are extreme long shots. See In re Oracle Secs.
Litigation, 852 F. Supp. 1437, 1452 (N.D. Cal. 1994).
In this case, the use of a multiplier fails in several respects. First, there was no
evidence that Mr. Schultz had any difficulty obtaining competent counsel to represent
him. Second, we are troubled by the fact that no client has ever paid Mr. Schultz’s
counsel $400 an hour.
Finally, and, in large part, this was a fairly unremarkable
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contract case involving a dispute over $1,315. There is absolutely nothing about this
case that calls for a fee multiplier.
“Fees of the kind awarded here threaten to make the respect of nonlawyers for
judicial control of fees -- indeed, for the very legal system itself -- a thing of the past.
Because of the manifest justice rule in this instance, . . . we conclude that this fee award
must be set aside.” Ziontz, 663 So. 2d at 1336. “No court is obliged to approve a
judgment which so obviously offends even the most hardened appellate conscience and
which is so obviously contrary to the manifest justice of the case. Indeed, it is obliged
not to.” Miller, 607 So. 2d at 484.
We conclude that the circuit court departed from the essential requirements of
law in affirming the county court’s order allowing the use of an attorney’s fee multiplier.
Accordingly, we grant the writ and quash the circuit court’s judgment, to the extent that it
sanctions the use of an attorney’s fee multiplier in this case.5
MONACO, J., concurs.
PLEUS, C.J., concurs and concurs specially with opinion.
5
We are troubled by the lodestar fee awarded by the county court, particularly
the hourly rate deemed to be reasonable. However, we will leave that issue for another
case when the scope of our review is broader.
9
CASE NO.: 5D06-444
PLEUS, C.J., concurring specially, with opinion.
This case demonstrates why a multiplier should not be given automatically. If the
plaintiff's attorney spent only ten hours, and his or her normal hourly rate is $200,
yielding a lodestar of $2,000, a multiplier might be appropriate. On the other hand, a
lodestar of $77,500 based on 193 hours at $400 per hour is a gracious plenty. Any
attorney who would not be pleased with $400 per hour and a collectible fee of $77,500
is most unusual.
I do not suggest for a minute that the plaintiff's attorney is unprofessional. He
had every right to ask for the multiplier. The error was by the judges who gave it to him.
In this case, $193,000 is not a reasonable fee; it is a penalty. In my view, the multiplier
should not be used as a penalty.
In the words of Judge Orfinger, it amounts to a
"manifest injustice."
To avoid a manifest injustice, the trial judge should question whether a plaintiff in
similar cases would have a hard time finding competent counsel without the use of a
multiplier. The plaintiff should have the burden to prove that. I doubt he could.
Four hundred dollars per hour seems a bit above the normal hourly rate charged
by plaintiff's counsel in routine PIP cases, especially when the plaintiff's attorney works
mainly under contingency fee agreements and has never charged or collected that
amount on PIP cases. Is that a reasonable hourly rate for the plaintiff's attorney in this
type of case? I do not think so.
The fee agreement with the client should be considered by the court. Does the
fee agreement apply in this case? Does it make the fee charged the plaintiff for the
representation contingent upon recovery?
Did the plaintiff acknowledge in the fee
agreement that $400 per hour is reasonable? Does the fee agreement mention who
shares in the attorney's fee? These issues apparently were never addressed. The
result is a manifest injustice.
2
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