TEC SERV, LLC v. Michael Alan Crabb

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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 14-11309
Non-Argument Calendar
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D.C. Docket No. 0:11-cv-62040-WPD
TEC SERV, LLC,
a Florida Limited Liability Company,
JOHN R. TOSCANO, INC.,
a Florida corporation,
Plaintiffs-Counter
Defendants-Appellants,
MARILYN TOSCANO,
JOHN TOSCANO,
Third Party Defendants-
Counter Defendants-Appellants,
versus
MICHAEL ALAN CRABB,
individually,
A DESIGN AT SUNNINGHILL, INC.,
a Florida corporation,
Defendants-Third Party
Plaintiffs-Counter Claimants-
Appellees.
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________________________
Appeal from the United States District Court
for the Southern District of Florida
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(August 11, 2015)
Before MARTIN, ANDERSON and BLACK, Circuit Judges.
PER CURIAM:
John Toscano and Marilyn Toscano (collectively, the Toscanos) appeal the
district court’s denial of their motion for attorneys’ fees and costs in a civil suit
brought against them in their individual capacities by a former work associate,
Michael Crabb. Upon review, we vacate and remand for further proceedings
consistent with this opinion.
I. BACKGROUND
To place the current appeal in context, it is first necessary to briefly recount
the procedural history of this case. In 1985, John Toscano formed an engineering
and project management services company, John R. Toscano, Inc. (JRTI). In July
2005, JRTI hired Crabb as an engineer. In 2008, the Toscanos and Crabb formed
another company, Toscano Engineering and Construction Services, LLC (TEC
Serv), to provide engineering contracting services on behalf of large petroleum-
related customers. Pursuant to the TEC Serv Members’ Agreement (the
Agreement), the Toscanos held 52 percent of the membership interest in TEC Serv
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and Crabb owned the remaining 48 percent interest. Crabb served as Vice
President and his duties included the marketing and sale of TEC Serv’s services.
In July 2011, the Toscanos terminated Crabb’s membership interest and
employment with TEC Serv based on his alleged failure to adhere to company
policies. In September 2011, Crabb filed suit in state court, alleging that the
Toscanos and TEC Serv breached the Agreement and the implied covenant of good
faith and fair dealing by terminating his employment. The Toscanos and TEC Serv
subsequently removed the action to federal court.
TEC Serv and JRTI then filed a separate sixteen-count suit 1 against Crabb.
Briefly stated, TEC Serv and JRTI alleged that Crabb: (1) breached the terms of a
non-competition clause in the Agreement with his post-termination conduct; and
(2) misappropriated and converted a company laptop and USB drive that contained
confidential information, including trade secrets and project, financial, business,
and employment records.
Crabb in turn filed a thirteen-count counterclaim and third party complaint
against TEC Serv and JRTI, and he also named the Toscanos as individual
defendants. Crabb largely reiterated the claims from his original state-court
complaint surrounding his termination, namely, breach of the Agreement, breach
1
In their complaint, TEC Serv and JRTI alleged, inter alia, violations of the Computer Fraud
and Abuse Act (CFAA), 18 U.S.C. § 1030 et seq., the Stored Communications Act, 18 U.S.C.
§ 2701 et seq., the Lanham Act, 15 U.S.C. § 1126, the Florida Deceptive and Unfair Trade
Practices Act, misappropriation of trade secrets, trespass of chattels, conversion, and replevin.
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of the covenant of good faith, fraudulent inducement, and a declaration that the
non-compete clause in the Agreement was void by material breach.
In a motion for summary judgment, the Toscanos argued they could not be
held individually liable for any purported breach of the Agreement because “any
actions taken by the Toscanos were in their representative capacity and on behalf
of TEC Serv, and not as individuals.” The district court rejected this argument and
concluded that the Toscanos could be held individually liable for the purported
breach because they signed the Agreement in their individual capacities.
Following a twelve-day bench trial, the district court found in favor of TEC
Serv on its claim that Crabb engaged in conversion when he retained a laptop and a
USB drive and granted the request for replevin of those items. But the court
highlighted that TEC Serv had failed to establish damages. Additionally, the court
noted that TEC Serv’s remaining claims failed, and all of Crabb’s claims were
without merit because he was properly terminated due to his breach of TEC Serv’s
policies. The court observed that “[t]his case is not unlike a divorce case” with
each side accusing the other of wrongdoing, and thus “the outcome to the parties’
disputes should be a wash.”
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After entry of judgment, TEC Serv, JRTI, and the Toscanos jointly moved 2
for attorneys’ fees and costs based on the terms of the Agreement, which provided,
in pertinent part, that:
Should it become necessary for any party to institute legal action to
enforce the terms and conditions of this Agreement, the prevailing
party or parties shall be awarded a reasonable attorneys’ fee, which
shall include a reasonable attorneys’ fee for any appellate proceedings
and expenses, including any accounting expenses and costs.
The Toscanos highlighted that as third-party defendants, they were entitled to fees
and costs because they had prevailed on each of Crabb’s claims against them. The
magistrate judge issued a report and recommendation (R&R), recommending that
the Toscanos’ motion for fees be denied because “[n]o damages were proved by
any party.” The district court adopted the R&R, explaining “Tec Serv et al.” had
succeeded only on a conversion claim and replevin claim, but lost on thirteen other
claims, while Crabb had lost on all his claims. As such, the court concluded that
“there was no ‘prevailing party’ entitled to fees or costs under the Members’
Agreement.” The instant appeal followed. 3
II. STANDARD OF REVIEW
2
Crabb also submitted a motion for attorneys’ fees, but noted that “based on . . . controlling
precedent and the Court’s findings of fact and conclusions of law, neither Plaintiffs nor
Defendant should be awarded their or his attorneys’ fees.”
3
The parties do not raise any arguments pertaining to the merits of the underlying judgment in
their appellate briefs. As such, the sole issue on appeal is whether the district court erred by
denying the Toscanos’ motion for attorneys’ fees and costs.
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Under Florida law, “where a contract provides for an award of prevailing
party attorney’s fees, the trial court is without discretion to decline to enforce that
provision.” Lasco Enters., Inc. v. Kohlbrand, 819 So. 2d 821, 826 (Fla. Dist. Ct.
App. 2002). In limited circumstances, however, courts may determine that no
prevailing party exists and may decline to award any fees pursuant to a contractual
provision. Id. at 826-27. We review the factual findings underlying a district
court’s determination regarding prevailing party status for clear error. Church of
Scientology Flag Serv., Org., Inc. v. City of Clearwater, 2 F.3d 1509, 1512-13
(11th Cir. 1993). “Whether the facts as found suffice to render the plaintiff a
‘prevailing party’ is a legal question reviewed de novo.” Id. at 1513.
III. DISCUSSION
TEC Serv’s Members’ Agreement provides for an award of attorneys’ fees
and costs to the “prevailing party” on any claim brought to “enforce the terms and
conditions” of the Agreement. The Agreement, by its own terms, is governed by
Florida law. The parties do not dispute that Crabb sued the Toscanos, individually,
to enforce the terms and conditions of the Agreement. The only question,
therefore, is whether, under Florida law, the Toscanos would be considered the
prevailing party on Crabb’s claims.
Under Florida law, the prevailing party for attorneys’ fees is “the party
prevailing on the significant issues in the litigation.” Moritz v. Hoyt Enters., Inc.,
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604 So. 2d 807, 810 (Fla. 1992). Notably, a party need not obtain affirmative relief
to be considered a prevailing party; it is enough that a party successfully defends
against claims brought against it. See Point E. Four Condo. Corp. v. Zevuloni &
Associates, Inc., 50 So. 3d 687, 688 (Fla. Dist. Ct. App. 2010) (“When one party
loses in an action for breach of contract, the adverse party is the prevailing party.”).
Applying these principles here, the Toscanos are prevailing parties because
Crabb lost all of his claims against them. In fact, the district court specifically
found all of Crabb’s claims failed as a matter of law. Nonetheless, the district
court concluded no party to the litigation—the Toscanos included—qualified as
prevailing parties because, according to the district court, the dispute “ended in a
wash” and “no party obtained any substantial relief.”
While that may be true with respect to the litigation between TEC Serv and
Crabb, there was no “wash” between the Toscanos and Crabb. See, e.g.,
Schoenlank v. Schoenlank, 128 So. 3d 118, 122 (Fla. Dist. Ct. App. 2013)
(affirming trial court’s decision not to award attorneys’ fees because “[e]ach party
prevailed, and lost, on significant issues” and thus “neither party clearly
prevailed”). Crabb sued the Toscanos in their individual capacities, legally
separate from TEC Serv. See Fla. Stat. § 605.0108(1) (noting that a limited
liability company such as TEC Serv is considered “an entity distinct from its
members”). As third-party defendants, the Toscanos had no role in the litigation
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between TEC Serv and Crabb. Although the Toscanos were listed out as
individual defendants in Crabb’s suit, they did not join TEC Serv’s suit against
Crabb and never filed a counterclaim against Crabb. Cf. AmSouth Bank v. Wynne,
772 So. 2d 574, 575 (Fla. Dist. Ct. App. 2001) (stating if a corporate shareholder
suffers damages “only indirectly . . . as a result of injury to the corporation, the
stockholder does not have a cause of action as an individual”) (citation omitted)).
Accordingly, the district court should have analyzed whether the Toscanos
qualified as prevailing parties separate and apart from whether TEC Serv qualified
as a prevailing party. 4
Unlike TEC Serv, who won on some issues and lost on others, the Toscanos
prevailed on every claim. Accordingly, the Toscanos were prevailing parties
entitled to attorneys’ fees under the Agreement. We therefore vacate the district
court’s order and remand for the court to determine the amount of expenses and
reasonable attorneys’ fees for the services of the Toscanos’ attorneys in
successfully defending Crabb’s claims for breach of the Agreement.
VACATED AND REMANDED.
4
Notably, in denying the Toscanos’ motion for summary judgment, the district court
highlighted that the Toscanos had signed the Agreement as individuals, and thus could have been
held personally liable for any damages Crabb sustained as a result of their alleged breach. See
Lindon v. Dalton Hotel Corp., 49 So. 3d 299, 304-05 (Fla. Dist. Ct. App. 2010) (holding that if an
individual signs a contract in his or her individual capacity, that individual may be liable for his
or her breach of that contract, even if that agreement also has a corporation as a signatory). For
the same reasons, we believe the Toscanos should be viewed as separate third-party defendants
in an assessment of their entitlement to attorneys’ fees and costs.
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