Key Points

  • The Fifth District Court of Appeal reversed a 2.0 contingency fee multiplier that had doubled a $125,080 lodestar fee award against Security First Insurance to $250,160.
  • The court held that the insureds failed to prove the first Quanstrom factor because their expert did not address whether they could have obtained competent counsel in the relevant market without a multiplier.
  • The court also held that the record lacked competent substantial evidence on the second Quanstrom factor because no specific evidence showed the insureds could not afford a retainer or hourly fees.
  • The trial court must enter an amended final judgment awarding the $125,080 lodestar with no multiplier.
  • In a footnote, the court stated that the record supported the insurer's argument that the case was not rare and exceptional under amended section 57.104(2), but it did not decide whether that amendment applies retroactively.

A Florida appeals court on Oct. 9 struck a 2.0 multiplier that had doubled a $125,080 attorney's fee award against Security First Insurance Co. to $250,160, holding that the two policyholders who won the fees never proved they needed the enhancement to hire a competent lawyer.

A unanimous three-judge panel of the Fifth District Court of Appeal reversed the Flagler County Circuit Court's application of a 2.0 contingency fee multiplier. Judge Lambert wrote the opinion, and Judges Edwards and Boatwright concurred. The panel ordered the trial court to enter an amended judgment awarding the insureds, Mark Annon and Amy Annon, $125,080 with no multiplier.

The decision applies the test the Florida Supreme Court set in its 1990 decision in Standard Guaranty Insurance v. Quanstrom, which requires the party seeking a multiplier to prove each of three factors. The panel held that the Annons' evidence failed on the first two. Their fee expert did not address whether the Annons could have found counsel without a multiplier, and the record contained no specific evidence that they could not pay a retainer or hourly fees.

Security First was the defendant in a first-party property dispute that was resolved without a trial. The trial court, Judge Andrea K. Totten, then awarded the Annons fees under section 627.428, Florida Statutes, which permitted fee awards in that type of case. According to the opinion, the statute was repealed in 2023, but the Annons' claim pre-dated the repeal.

The trial court first computed the lodestar, the base fee figure it computed consistent with the Florida Supreme Court's 1985 decision in Florida Patient's Compensation Fund v. Rowe. That figure was $125,080, and Security First did not challenge it on appeal. The court then applied the 2.0 multiplier, which brought the award to $250,160.

Under Quanstrom, courts ask "(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." The third factor asks whether the considerations listed in Rowe apply, especially the amount involved, the results obtained and the type of fee arrangement between attorney and client.

The opinion noted that a trial court's decision to apply a multiplier is reviewed for abuse of discretion. Quoting a 2020 Third District decision, Judge Lambert wrote that "the trial court's findings as to the multiplier must be supported by competent, substantial evidence."

Security First argued that the Annons failed to present evidence that the relevant market required a multiplier to obtain competent counsel. The insurer also contended that the trial court's finding that the Annons' lawyer could not mitigate the risk of nonpayment lacked support in the record.

The panel agreed on both points. To meet the first factor, Judge Lambert wrote, the Annons "were required to demonstrate, without inference, that they would have faced substantial difficulties in obtaining competent counsel in the relevant market without the risk-enhancement multiplier."

The Annons did not testify at the fee hearing. Their expert witness admitted under oath that he did not handle first-party property insurance cases and had not spoken with the Annons. He also testified that he made no inquiry into whether other lawyers would have accepted the case without the possibility of a multiplier.

The panel compared that testimony to the record in its own 2024 decision in PHH Mortgage Corp. v. Schreiber, a foreclosure case. The expert there testified that almost all foreclosure clients could not pay their lawyers, or paid very little, and that most foreclosures involved some type of contingency fee. The Fifth District reversed that multiplier because the testimony said nothing about whether a foreclosure client could have obtained competent counsel without one.

Judge Lambert wrote that the Annons' expert testimony "was similarly lacking as to whether Appellees could have obtained competent counsel in the relevant market absent the possibility of a multiplier." The court held, "without further elaboration, that Appellees failed to meet their evidentiary burden under the first Quanstrom factor to support the imposition of the contingency risk multiplier."

The panel also found the record insufficient on the second factor. Quoting a 2022 Third District decision, which in turn quoted a 2020 First District decision, the opinion stated that generally "the controlling consideration in determining whether an attorney can mitigate the risk of nonpayment . . . is whether the plaintiffs can afford a retainer or hourly fees."

"Simply stated, there was no specific, non-inferential evidence before the trial court that Appellees could not have afforded or lacked the financial means to either pay a retainer fee or counsel's hourly rate," Judge Lambert wrote.

In a footnote, the court addressed an amendment to section 57.104, Florida Statutes, that took effect March 24, 2023. The amendment provides that "there is a strong presumption that a lodestar fee is sufficient and reasonable," which may be overcome "only in a rare and exceptional circumstance with evidence that competent counsel could not otherwise be retained."

Security First had argued briefly that the amendment should apply retroactively to the Annons' case. The panel wrote that "the record in this appeal supports Security First's argument that this case was not rare and exceptional." Because the first issue resolved the appeal, the court found it unnecessary to decide whether the amendment applies retroactively.

Security First was represented by Michael Fox Orr and Loreyn P. Raab of Orr Cook in Jacksonville. The Annons were represented by Michael Ciocchetti of Michael Ciocchetti, PLLC, in Daytona Beach.

The decision is not final until the court disposes of any timely and authorized motion under Florida Rules of Appellate Procedure 9.330 or 9.331. The case returns to the Flagler County Circuit Court, which must enter an amended final judgment awarding the Annons the $125,080 lodestar the court previously determined.