In previous pages we briefly touched upon on some important substantive factors to help assess the merits of a breach of contract claim. In this segment more weight is given to matters surrounding the initiation and defense of a lawsuit in order to provide the reader with some basic knowledge of what to expect. The information provided herein should not be relied upon and is not intended to replace the advice of an experienced business attorney who must carefully review your individual circumstances before advising you on the merits of the case.
Once it has been determined that a valid and enforceable contract exists, and the defendant had a present duty to perform, a breach of contract claim and accompanying causes of action should be carefully considered before filing a lawsuit. If necessary a demand should be made to the prospective defendant. However, a prospective litigant must not only ascertain the merits of the case, but to the extent possible, must also consider the risks involved and the amount of damages he or she could expect to recover. Even where the projected recovery (damages) can be estimated to significantly outweigh the projected expenses and costs of litigation, and the case is meritorious enough to permit a good chance of recovery, the claimant still needs to consider whether the prospective defendant is collectable. For instance, if the prospective defendant is amidst financial crises or is facing bankruptcy, a victorious claimant's expensive and hard-earned judgment may turn into a worthless paper if any recovery from it becomes discharged as a consequence of bankruptcy. Even if the defendant is found to have significant non-exempt assets, such assets may be encumbered by perfected secured creditors or other interests having a possible priority over a claimant's judgment lien. This will leave the claimant with pennies on a dollar and short of covering the costs, expenses and attorneys fees incurred to finance the lawsuit. While this result may be acceptable for an attorney, who in an hourly arrangement gets paid regardless of the outcome, it is a great disservice to the client who should have been informed of the pitfalls ahead of his or her financial investment. Lawsuits therefore should not be initiated without due regard to all such considerations, including the prospective defendant's ability to settle or satisfy a judgment lien and the risks associated with awarding attorney's fees. The author does not suggest that a wronged party should not consider filing a claim or that the unpredictability of lawsuits can be entirely eliminated or even reduced. Instead, the emphasis should be to carefully assess the viability and risks commonly associated with costly litigation, to minimize an undesired result, before aggressively pursuing a claim at the client's expense. For this reason, and since business litigation can be complicated, it should be carefully conducted by a skilled business attorney to ensure that all the rights and interests of the client are protected. Should alternatives to litigation be present, such as a binding arbitration clause in a contract or offers to settle, they should be carefully considered and weighed.
A judgment lien helps the party who won the lawsuit collect his or her monetary award by selling the debtor's property. Before this can be done, the lien must be properly attached to debtor's real or personal property, and remains in effect for 5 years in case of personal property and 10 years if it is attached to real estate. To bring about a judgment lien, the attaching party must record the judgment with the county recorder in Florida where the debtor either owns the real estate or may own the same in the future. See Florida Statute, §55.10. If debtor's personal property is being attached, the judgment lien certificate must be filed with the Florida Department of State. F.S. §55.202. It should be noted that according to F.S. §202(c) "the effective date of a judgment lien is the date, including the time of day, of filing… priority among competing judgment liens is determined in order of filing date and time." Furthermore, F.S. §205(1) provides that "A judgment creditor who has not acquired a judgment lien as provided in s. 55.202 or whose lien has lapsed may nevertheless proceed against the judgment debtor's property through any appropriate judicial process. Such judgment creditor proceeding by writ of execution acquires a lien as of the time of levy and only on the property levied upon." When priorities involve a buyer who in the ordinary course of business, and knowingly or otherwise, acquires property that is encumbered by a judgment lien, the buyer "takes free of a judgment lien acquired as provided in s. 55.202 or s. 55.204." F.S. §205(2). Certain priorities may also exist for "after-acquired property" that has been perfected, as well as for certain "buyers of goods for personal, family or household use" if they meet additional criteria. Id. For detailed discussion regarding this topic see Florida Statute §55.205(2) and (3).
A person moving forward with a judgment lien should also be mindful of certain exemptions involving the garnishment of wages. According to F.S. §222(11) when a person provides more than ½ the support for a child or dependent, his or her net earnings "after the deduction from those earnings of any amounts required by law to be withheld" will be exempt from garnishment or attachment if they are equal to or less than $750 per week. See F.S. §222(11)(1) and (2). If above earnings exceed $750 per week, the "head of the family" can agree in writing to waive this exemption provided that all requirement of F.S. §222(11)(2)(b) have been met. If the person is not providing more than ½ the support for a child or a dependent, his or her earnings can be garnished as long as it is done in compliance with Consumer Credit Protection Act. F.S. §222(11)(2)(c). Finally, F.S. §222(11)(3), which qualifies above exemptions in the event exempt earnings are deposited with a bank or financial institution, states as follows:
Earnings that are exempt under subsection (2) and are credited or deposited in any financial institution are exempt from attachment or garnishment for 6 months after the earnings are received by the financial institution if the funds can be traced and properly identified as earnings. Commingling of earnings with other funds does not by itself defeat the ability of a head of family to trace earnings. Id.
Another important consideration is whether to file a case in state or federal court. There are both advantages and disadvantages in choosing a federal forum. A jury or a judge in federal court may provide a less biased or more forgiving venue for a particular party while permitting faster adjudication as a consequence of a smaller case load. In contrast, state courts might be closer, allow award of attorney's fees and costs (or vice-versa), have certain discovery advantages and allow for longer (or shorter) deadlines for a particular claim. Your attorney should carefully consider the particular situation and circumstances that surround your case in choosing the most favorable forum to bring the lawsuit. However, even before deciding which court will be most appropriate, the party must decide if certain required criteria for filing an action in federal court have been met. Specifically, for a party to file a lawsuit in federal court, there must either be a federal question at issue based on 28 U.S.C. §1331, or there must be what is known as diversity jurisdiction under 28 U.S.C. §1332. The former requires district courts to "have original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States." Id. There is no minimum amount of monetary requirement under the statute. Because a federal right without a remedy may not give rise to a cause of action in federal court, it is important to consider whether federal law provides a right as well as a remedy. With certain exceptions aside, federal jurisdiction may still exist even if federal law incorporates state law as long as the complaint (lawsuit) itself is grounded upon federal law or is at least a necessary or vital component thereto.
In contrast to federal question, diversity jurisdiction exists when the amount in controversy is more than $75,000 and none of the plaintiffs is a citizen of the same state as any of the defendants at the time the lawsuit is filed. This monetary requirement must be stated in the actual complaint and includes reasonable attorney's fees, albeit excluding interest and costs. It should be noted that the state of domicile of an I-551 alien registration card holder (green card) is considered to be his or her state of citizenship. While diversity jurisdiction appears to be a rather straightforward concept, certain considerations exist in deciding what constitutes citizenship for a specific entity. For limited liability companies and unincorporated entities such as partnerships (including professional or limited partnerships), it is important to consider the citizenship of all of its equity holders or owners. For corporations, courts often make this determination by considering the entity's principal place of business, which is generally the place where the corporation's key personnel (officers) govern or conduct the business; - i.e., corporation's headquarters or "nerve center." See Hertz Corp. v. Friend, 130 S.Ct. 1181 (2010). The corporation is also deemed to be a citizen of its state of incorporation. 28 U.S.C. §1332(c)(1). It should be noted that absent certain exceptions, such as complicated issues of state law or extraordinary circumstances, additional or supplemental state based claims can be brought, provided that they are part of the "same case or controversy." 28 U.S.C. §13679(a). Trial courts may also consider the relevance of federal and state claims to the key facts and circumstances common to the case and the adequacy of considering them within a single lawsuit.
If a party chooses to bring an action in state court it must decide whether to file in civil or circuit court. County courts are trial courts of limited jurisdiction governed by Florida Statute §34.01. Subsection (1)(c) of this statute states that "County courts shall have original jurisdiction… of all actions at law in which the matter in controversy does not exceed the sum of $15,000, exclusive of interest, costs, and attorney's fees, except those within the exclusive jurisdiction of the circuit courts." Courts handling small claims should be considered if the matter in controversy does not exceed $5,000. In contrast, Florida circuit courts are trial courts of general jurisdiction that in addition to certain exclusive matters, handle cases in excess of $15,000. Thus, in the absence of original jurisdiction within the exclusive domain of county courts, if the amount in controversy exceeds $15,000, it must be filed in the circuit court. For more information see Florida Statute §26.012, which details the jurisdictional considerations associated with the circuit courts. Note also the chart below this article illustrating the various federal and state court structures in state of Florida.
While courts in Florida have adopted the general common law rule requiring parties to pay their own attorney's fees such fees can nevertheless be recovered if there is an enforceable contractual provision or a statute providing for it. An attorney's fees request, which must be plead in the initial or responsive pleading, can have considerable implications on the strategic planning and outcome of the case, since the amount of recovery can be substantial especially when the prospect of a trial is at issue. A common award of fees and costs provision found in contracts reads something among the lines of "in the event of litigation relating to the subject matter of this Agreement, the non-prevailing party shall reimburse the prevailing party for all reasonable attorney fees and costs" or "if any legal action is brought or becomes necessary to enforce this contract, the prevailing party shall be entitled to reasonable attorney fees, costs and expenses in addition to any other relief deemed right, just and proper." While such clauses are relatively common, they neglect to properly specify the scope and application required to encompass matters such as collecting a judgment or bringing an action for declaratory relief. An attorney's fees clause must therefore be composed with great care to account for various scenarios and circumstances that may be applicable to a particular client's situation. Similarly, when a party is defending against the clause, it should consider whether the inclusion of any narrow or limiting language may allow interpretation precluding recovery. It is important to keep in mind that in a contract enforcement action, if such a clause or provision awards fees to only one party, the other party may also recover the same if he or she prevails. See F.S. §57.105(7).
In addition to contract language, there are statutes that allow for recovery of attorney's fees. There are many, and some of these include among others: F.S. §57.105, detailed in full at the end of this article; F.S. §768.79, dealing with demands and offers of judgment; Fla.R.Civ.P. 1.380 and related discovery provisions requiring proper and timely compliance, - such as failure to abide with court order mandating discovery; F.S. §817.41, dealing with misleading advertisements, F.S. §44.103, pertaining to matters involving court ordered non binding arbitration; F.S. §772.11, providing attorney's fees for civil remedy for theft; and F.S. §620.2005, 607.07401 & 517.211(6), concerned with derivative shareholder actions. Of particular importance is section F.S. §768.79 which, in part, provides that if a proposal for settlement is served on the plaintiff by the defendant who refuses to accept it within 30 days, and subsequently the plaintiff obtains a judgment that is at least 25% less than the amount proposed by the defendant, or if there is a judgment of no liability, the defendant will be entitled to recover its attorney's fees. Similarly, if an offer is made by plaintiff to a refusing defendant, and a judgment is rendered in favor of the plaintiff in excess of 25% of the amount of the plaintiff's proposal, the plaintiff will be entitled to recover his or her attorney's fees from the defendant. The recovery of attorney's fees begins from the time an official written offer is served. It should be noted that a party may purchase (or his or her attorney may advance) an insurance protection plan to deal with this potential liability in the event such fees are awarded. This can be of particular importance for a wealthy client with substantial assets and capital at stake. In a situation where statutory and contractual provisions provide separate recovery to each party, the contractual entitlement is not preempted or purged by the other party's right to fees as a result of an offer to settle.
Florida Statute §57.105 is a very important statute in civil cases and is there to prevent unnecessary expense and time associated with unsupported or frivolous claims or defenses. According to this statute, if at anytime after inception and prior to trial, a claim or a defense is brought, which a party or his or her attorney knows is either unsupported by material facts, or by the application of existing law to such facts, absent certain exceptions, the court "shall award a reasonable attorney's fee, including prejudgment interest, to be paid... in equal amounts" by that party and his or her attorney. F.S. §57.105(1). In addition, if a party can show that more likely than not (by preponderance of the evidence) the other party's conduct was designed to purposefully cause an "unreasonable delay," the delaying party will be liable for all reasonable expenses of the party making this showing, including attorney's fees and other harm arising from such a delay. F.S. §57.105(2). An express finding of bad faith may also be necessary pursuant to case law. While the court or a party by motion can invoke this statute, it must be done by the court prior to a voluntary dismissal or settlement. F.S. §57.105(3)(d). If the statute is invoked by a party's motion, a 21 day grace period to cure the alleged wrong must be given to the party against whom the motion is introduced, before it can be filed or brought to the court's attention. F.S. §57.105(4).
An exception exists to the latter prong (where a claim or defense is not supported by application of existing law to material facts) for monetary sanctions, when a party argues in "good faith" and "reasonable expectation of success" that the existing law should be extended, modified, reversed and/or newly enacted to allow justice or equity to take place. F.S. §57.105(3)(a). It should be noted that absent delay, if the attorney acted in good faith based on "representations of his or her client as to the existence of those material facts," the attorney will not face sanctions, but the party he or she represents may still be sanctioned if the claim or defense is not supported by material facts. F.S. §57.105(3)(b) and (c).
Aside minor exceptions, F.S. §57.105(5) and (6), apply all of the above rules to administrative proceedings brought under F.S. §120, and are in addition to other "sanctions or remedies available under law or under court rules." Id. Finally, F.S. §57.105(7) states that "If a contract contains a provision allowing attorney's fees to a party when he or she is required to take any action to enforce the contract, the court may also allow reasonable attorney's fees to the other party when that party prevails in any action, whether as plaintiff or defendant, with respect to the contract." The latter subsection applies to contracts entered into as of October 1, 1988.
If your company is facing or entertaining the prospect of litigation in Orlando, Tampa or anywhere in Central Florida, and needs guidance to file or defend a lawsuit, we highly recommend that you obtain experienced legal counsel to ensure that your interests are properly protected. Our Central Florida business attorney can be reached by calling (407) 205-2330. You may also complete the online form and our Orlando and Tampa business lawyers will contact you immediately. We have successfully helped many businesses navigate through this maze and will be proud to provide the same outstanding legal services to your business.
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