Foodtown, Inc. v. Argonaut Insurance

United States Court of Appeals,

Eleventh Circuit.

No. 95-3216.

FOODTOWN, INC. OF JACKSONVILLE, a Florida Corporation, Plaintiff-
Appellant,

v.

ARGONAUT INSURANCE COMPANY, a foreign corporation, Argonaut-
Midwest Insurance Company, a foreign corporation, Defendants-
Appellees,

Travelers Express, Movant.

Dec. 30, 1996.

Appeal from the United States District Court for the Middle
District of Florida. (No. Wm. Terrell Hodges, Judge.

Before TJOFLAT and COX, Circuit Judges, and VINING*, Senior
District Judge.

PER CURIAM:

Foodtown, Inc. of Jacksonville ("Foodtown") appeals the

district court's order awarding attorneys' fees to Foodtown

pursuant to a Florida fee-shifting statute, section 627.428,

Florida Statutes.1 The district court determined the maximum

amount of attorneys' fees it could award based solely on a written

contingent fee agreement between Foodtown and its attorneys and

refused to recognize a different oral agreement between those two

parties. We affirm.

*
Honorable Robert L. Vining, Jr., Senior U.S. District Judge
for the Northern District of Georgia, sitting by designation.
1
Foodtown also appeals the district court's order relating
to damages. In that order, the court denied Foodtown's claim for
income loss under its insurance policy and for consequential
damages allegedly resulting from a denial of its insurance claim.
Pursuant to 11th Cir.R. 36-1, we affirm that order without
discussion.
 I. BACKGROUND

In 1989, a fire damaged Foodtown's grocery store. After

Foodtown's insurer, Argonaut-Midwest Insurance Company

("Argonaut"), denied coverage for Foodtown's losses resulting from

the fire, Foodtown hired a law firm to represent it in a claim

against Argonaut. As compensation for representation, Foodtown and

the law firm orally agreed that the law firm would receive the

greater of either a sliding scale percentage of any recovery it

obtained for Foodtown or a court-determined reasonable amount.2

Although this particular agreement was not reduced to writing,

Foodtown and the law firm did sign a written agreement which stated

that as compensation for representation, the law firm would receive

a sliding scale percentage of any recovery it obtained for

Foodtown.

Subsequently, the law firm assumed representation and filed

suit against Argonaut. Following a non-jury trial, the district

court found that Foodtown was entitled to both recovery under its

insurance policy and attorneys' fees under section 627.428. The

court then referred the specific issue concerning the amount of

attorneys' fees to the magistrate judge.

To calculate the maximum amount of attorneys' fees to which

Foodtown would be entitled under its fee agreement with the law

firm, the magistrate judge examined the oral and written agreements

and determined that the oral agreement violated the Florida ethical

2
Under this type of agreement, a court may apply a
contingent risk multiplier and award reasonable attorneys' fees
which exceed the amount of the fees under the
percentage-of-recovery alternative. See Kaufman v. MacDonald,
557 So.2d 572, 573 (Fla.1990).
rule requiring that contingent fee agreements be in writing. For

this reason, the magistrate judge refused to enforce the oral

agreement, adding that "[t]o enforce oral contingent fee agreements

in the fee-shifting context would needlessly expend scarce judicial

resources to determine the actual terms of the agreement despite a

clear written agreement which provides otherwise. There is also a

great potential for abuse...." R. 7-204-16.

After refusing to recognize the oral agreement, the magistrate

judge employed the written agreement to set the maximum amount of

fees and recommended that the amount of fees be equal to this

maximum amount; specifically, 40% of recovery as prescribed by the

written agreement's sliding percentage scale. Over Foodtown's

objections, the district court adopted the recommendation.

Foodtown appeals that decision, contending that the oral and

written agreements together substantially comply with the Florida

ethical rule governing contingent fee agreements and therefore the

district court erred in setting the maximum amount of fees

according to the written agreement alone. Alternatively, Foodtown

contends that the written and oral agreements together make up one

indivisible fee contract and the district court should not have

enforced any part of that contract after refusing to enforce the

oral portion. Instead, Foodtown argues that the district court

should have determined attorneys' fees using the lodestar method.

Argonaut contends that the oral agreement violated the Florida

ethical rule requiring that contingent fee agreements be in writing

and therefore should be unenforceable as against public policy.

Further, Argonaut contends that the district court properly
recognized the written agreement as divisible from the

unenforceable oral agreement to determine the maximum amount of

fees.

This court must decide whether the district court properly

refused to recognize the oral agreement, and, if so, whether the

court properly employed the written agreement to establish the

maximum amount of attorneys' fees it could award.3

II. DISCUSSION

This court reviews an attorneys' fee award for abuse of

discretion. Clark v. Housing Auth. of City of Alma, 971 F.2d 723,

728 (11th Cir.1992). Nevertheless, "that standard of review still

allows us to closely scrutinize questions of law decided by the

district court in reaching [the] fee award." Id.

A fee agreement entered into between a prevailing party and

its attorneys does not substantially control a court's

determination of reasonable fees to be awarded under fee-shifting

statutes such as section 627.428. Florida Patient's Compensation

Fund v. Rowe, 472 So.2d 1145, 1151 (Fla.1985). Rather, the fee

agreement merely establishes the maximum amount that the court can

award. Id.

In this case, the district court refused to recognize the

oral fee agreement between Foodtown and its attorneys which avoided

setting a maximum amount by providing for attorneys' fees based on

the higher of either a percentage of recovery or court-determined

amount. We conclude that the district court properly refused to

3
Argonaut does not argue that Foodtown is not entitled to
the maximum amount determined by the written contingent fee
agreement.
recognize the oral agreement under Chandris, S.A. v. Yanakakis, 668

So.2d 180 (Fla.1995).

In Chandris, the Florida Supreme Court held that "a contingent

fee [agreement] entered into by a member of the Florida Bar must

comply with the rule governing contingent fees in order to be

enforceable.... [T]he requirements for contingent fee [agreements]

are necessary to protect the public interest." Id. at 186. Under

the rule governing contingent fees, a contingent fee agreement

"must be reduced to a written contract" and "each participating

attorney or law firm [must] sign the contract or agree in writing

to be bound by the terms of the written contract with the

client...." R. Regulating Fla. Bar 4-1.5(f)(1), (2). Because the

oral agreement between Foodtown and the law firm violated the rule

governing contingent fees, the district court properly refused to

recognize it.

After refusing to recognize the oral agreement, the district

court limited the amount of attorneys' fees to the maximum amount

set forth in the written agreement. In so doing, the district

court properly employed the clear, enforceable, written contract

between the parties which complied fully with the rule governing

contingent fee agreements. As stated inMedical Center Health Plan

v. Brick, 572 So.2d 548, 551 (Fla.Dist.Ct.App.1990), "[a] party is

bound by ... the clear and unambiguous terms of a voluntary

contract."

We reject Foodtown's contention that the district court should

not have employed the written agreement after finding the oral

agreement unenforceable. As the magistrate judge recognized, a
great potential for abuse would arise in the fee-shifting context

(where the party paying the fee has not participated in making the

fee agreement) if the court refused to recognize a clear,

enforceable, written agreement because of the existence of an

unenforceable oral agreement. Further, the Florida Supreme Court's

Chandris decision leaves no doubt that a law firm which does not

ensure that an oral contingent fee agreement is included in its

written contingent fee agreement does so at its own risk. See

Chandris, 668 So.2d at 185-86.

III. CONCLUSION

Finding that the district court did not abuse its discretion

for the above reasons, we affirm the district court's order

relating to attorneys' fees.

AFFIRMED.