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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