United States v. Pepper's Steel & Alloys, Inc.

[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FILED
FOR THE ELEVENTH CIRCUIT U.S. COURT OF
________________________ APPEALS
ELEVENTH CIRCUIT
No. 01-11249 APRIL 25, 2002
________________________ THOMAS K. KAHN
D. C. Docket No. 85-00571-CV-AJ
UNITED STATES OF AMERICA,
Plaintiff,
versus
PEPPER’S STEEL & ALLOYS, INC.,
Defendant,
Cross-Defendant,
Third-Party Plaintiff,
Appellant,
Cross-Appellee,
FLORIDA POWER & LIGHT COMPANY,
Defendant,
Cross-Defendant,
NORTON BLOOM,
Defendant,
Third-Party-Plaintiff,
Appellant,
Cross-Appellee,
THOMAS A. CURTIS, WILLIAM PAYNE,
FLORA PAYNE, LOWEL PAYNE,
Defendants,
HOME INSURANCE COMPANY, MIAMI BATTERY
MANUFACTURING COMPANY, TRANSPORTATION
INSURANCE CO., CONTINENTAL CASUALTY
COMPANY, CERTAIN UNDERWRITERS AT LLOYD’S
LONDON, London and Insurance Companies
subscribing to twenty-two policies numbered
inclusively L116-8, L1024-27, L1209-12,
C116-18, C1024-27, and C1209-12 (Wallis and
Companies) a.k.a. London Market Insurers,
LEXINGTON INSURANCE COMPANY,
Third-Party Defendants,
UNITED STATES FIDELITY AND GUARANTY COMPANY,
Third-Party Defendant,
Appellee,
Cross-Appellant.
________________________
Appeals from the United States District Court
for the Southern District of Florida
_________________________
(April 25, 2002)
Before BIRCH and WILSON, Circuit Judges, and DOWD*, District Judge.
PER CURIAM:
Pepper’s Steel & Alloys, Inc., and Norton Bloom (collectively Pepper’s
Steel) appeal the district court’s determination that, under section 627.428 of the
*
Honorable David D. Dowd, Jr., U.S. District Judge for the Northern District of Ohio,
sitting by designation.
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Florida Statutes, they are not entitled to attorneys’ fees incurred in seeking to
enforce a settlement agreement with United States Fidelity and Guaranty Co.
(USF&G). Finding that this case turns on an important question of state law for
which there is no clear controlling precedent, we certify the question to the Florida
Supreme Court for resolution.
BACKGROUND
After being sued by the United States to recover remediation costs arising
from an allegedly polluted site, Pepper’s Steel demanded coverage from USF&G,
which had issued an insurance policy covering the site. In 1991, USF&G made an
oral offer to settle for $2,000,000. On October 22, 1993, after an intervening
Florida Supreme Court decision drastically reduced USF&G’s exposure, Pepper’s
Steel accepted USF&G’s offer. USF&G claimed that its offer had been rejected or
had lapsed, but the district court held that the settlement agreement was valid.
Under the district court’s order, each party had to bear its own costs and attorneys’
fees.
USF&G appealed and Pepper’s Steel cross-appealed, seeking attorneys’
fees. We affirmed the district court’s determination that there was a binding
settlement agreement, but remanded the case for further consideration of Pepper’s
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Steel’s claim for attorneys’ fees under section 627.428.1 Although we noted that
any claim for fees incurred before October 22, 1993 was foreclosed by the
settlement agreement, we stated that if Pepper’s Steel was “seeking an award of
fees incurred after October 22, 1993, in connection with [its] motion to enforce the
agreement, then [it] may have a viable claim. Since these fees were incurred post-
agreement, we cannot assume the parties compromised them in their settlement.”
United States v. Pepper’s Steel & Alloys, Inc., 11th Cir. 1996, __ F.3d __, (No. 94-
5187, May 31, 1996).
On remand, the district court concluded that section 627.428 did not permit
Pepper’s Steel to recover attorneys’ fees.2 Although the court acknowledged that
Florida law permits an insured to recover fees incurred in reaching a settlement, the
1
Section 627.428 provides,
Upon the rendition of a judgment or decree by any of the courts of this
state against an insurer and in favor of any named or omnibus insured or
the named beneficiary under a policy or contract executed by the insurer,
the trial court or, in the event of an appeal in which the insured or
beneficiary prevails, the appellate court shall adjudge or decree against the
insurer and in favor of the insured or beneficiary a reasonable sum as fees
or compensation for the insured’s or beneficiary’s attorney prosecuting the
suit in which the recovery is had.
Fla. Stat. § 627.428(1).
2
The fees Pepper’s Steel seeks fall into the following three categories: fees incurred in
enforcing the settlement agreement, fees incurred in defending USF&G’s appeal and prosecuting
Pepper’s Steel’s cross-appeal, and fees incurred in prosecuting Pepper’s Steel’s efforts to obtain
fees.
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court held that Florida law does not permit Pepper’s Steel to recover fees incurred
in enforcing the settlement agreement. This appeal followed.
DISCUSSION
Under Florida law, each party generally bears its own attorneys’ fees unless
a contract or statute provides otherwise. Fla. Patient’s Comp. Fund v. Rowe, 472
So. 2d 1145, 1148 (Fla. 1985). Under section 627.428, however, “[u]pon the
rendition of a judgment or decree . . . against an insurer and in favor of” the
insured, the insured is entitled to reasonable attorneys’ fees. Fla. Stat. §
627.428(1). The Florida Supreme Court has held that under this statute, an insured
may recover fees incurred in reaching a settlement. Wollard v. Lloyd’s & Cos. of
Lloyd’s, 439 So. 2d 217, 218 (Fla. 1983). However, the Florida Supreme Court
has not answered the question before us here: whether section 627.428 provides
for an award of attorneys’ fees when an insured successfully sues to enforce an
agreement that purportedly settled a coverage issue.
USF&G argues that the district court correctly relied on Travelers Indemnity
Co. of America v. Morris, 390 So. 2d 464 (Fla. Dist. Ct. App. 1980), in
determining that Florida law does not permit the collection of attorneys’ fees
incurred in litigating the validity of a settlement agreement. In Morris, after
securing a judgment against an insurer on a personal injury protection insurance
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claim, the plaintiff sought attorneys’ fees for time spent trying to secure payment
of the benefits required by the judgment. Id. at 464–65. The Morris court denied
fees, stating that section 627.428 must be strictly construed and that the statute
permits fees “only for services involved in obtaining a judgment against a carrier,
and not for those required to effect compliance with, collection of, or execution
upon that judgment.” Id. at 465.
Pepper’s Steel counters that permitting the collection of fees incurred in
enforcing a settlement agreement against an insured is consistent with the purpose
of section 627.428, which is to “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); see also
Wollard, 439 So. 2d at 218 (stating that the statute is meant “to discourage
litigation and encourage prompt disposition of valid insurance claims without
litigation”). Pepper’s Steel relies primarily on Bankers Security Insurance Co. v.
Brady, 765 So. 2d 870 (Fla. Dist. Ct. App. 2000), to argue that it would be
consistent with the purpose of section 627.428 to award fees when an insured
successfully litigates the validity of a settlement agreement. In Brady, the insurer
was held liable for attorneys’ fees, because it breached its oral agreement to pay a
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claim arising under the policy. Id. at 873. After the insured’s home was destroyed
by fire, the insurer’s adjuster agreed to pay $65,000. Id. at 871. When the insurer
then replaced the adjuster and refused to pay $65,000, the insured sued for breach
of the oral settlement agreement. Id. The insurer contested the validity of the
settlement agreement, claiming that the adjuster had no authority to bind it. Id. at
872. The district court of appeal held that there was a binding settlement
agreement and awarded the insured attorneys’ fees, holding that a fee award was
consistent with the purposes of section 627.428. Id. at 873. The court found that
Brady was forced to sue his insurer “for breach of its agreement to pay for his loss.
Had Brady filed a breach of contract action and prevailed, he would clearly be
entitled to fees under section 627.428. It is unreasonable to deny fees to Brady for
what is in essence the same action.” Id.
We find it difficult to reconcile the conflicting language in Morris and
Brady. Because this case presents an important question of Florida law that has
not been directly addressed by the Florida Supreme Court, we certify, pursuant to
section 25.031 of the Florida Statutes and Rule 9.150 of the Florida Rules of
Appellate Procedure, the following question of law to the Florida Supreme Court:
UNDER SECTION 627.428 OF THE FLORIDA STATUTES, IS AN
INSURED ENTITLED TO AN AWARD OF ATTORNEYS’ FEES
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INCURRED IN ENFORCING A SETTLEMENT AGREEMENT
AGAINST AN INSURER?
The phrasing of this question is not meant to restrict the Florida Supreme
Court’s consideration of the issues involved or the manner in which it gives its
answer. “This latitude extends to the Supreme Court’s restatement of the issue or
issues . . . .” Washburn v. Rabun, 755 F.2d 1404, 1406 (11th Cir. 1985). To assist
the Florida Supreme Court in considering this question, the record in this case and
the parties’ briefs shall be transmitted to the court.
QUESTION CERTIFIED.
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