Opinion
Case No. 4D00-633.
Opinion filed February 20, 2002.
Appeal and cross-appeal from the Circuit Court for the Fifteenth Judicial Circuit, Palm Beach County; Catherine Brunson, Judge; L.T. Case No. CL 96-2577 AH.
Martha S. Eskuchen, Juno Beach, for appellant/cross-appellee.
Lisa S. Small of Small Small, P.A., Jupiter, for appellee/cross-appellant.
This suit, initially filed by appellant as a claim for damages, soon expanded by counter-claim into a full blown class action. In the course of the proceedings, the trial court found that appellant, as counter-defendant, had abused the class action notification and "opt-out" process. For that conduct, it imposed several sanctions against appellant, one of which was an award of attorney's fees. The propriety of the attorney's fee award, which was subsequently reduced to judgment, is the sole issue on this appeal. For the reasons stated below, we reverse.
Appellant was the developer of a recreational vehicle condominium park consisting of approximately 246 lots. A provision in the condominium documents reserved to the developer the exclusive right of rental of a lot if the owner was not then using it and wished to rent it to another, the gross rent received to be shared 50/50 between the developer and the lot owner. Appellant perceived that one of the lot owners, appellee herein, had rented some of her lots in violation of this rent sharing provision and sued her for damages.
Appellee counter-claimed, challenging the validity of the rent sharing provision and seeking class action status for herself and as Class Representative on behalf of other similarly affected lot owners. The court entered an order certifying the class and approving a form for notification to members of the class. The notification form, copy of which was furnished to each of the lot owners, explained the procedure to opt-out of the class; it also cautioned that any class members who did not elect to out would be responsible for a proportionate share of expenses of the litigation other than expenses relative to the Class Representative's individual claim. Nothing in the court's order prohibited either the Class Representative or the appellant from contacting class members in regard to their respective responses to the notification; to the contrary, the court gave verbal approval for either party to contact the class members, independently of the official notification process, for the purpose of explaining the status of the case and the opt-out procedure. Within the time period provided by the notification, the majority of the members of the class gave notice of intent to opt-out of the class action.
The developer and its principal together owned 48 of the lots. Of the remaining 198 lots, the owners of all except 81 elected to opt-out.
Appellee, concerned by this negative response to the notification, interviewed a number of the lot owners who had elected to opt-out. That inquiry disclosed evidence that appellant, through its principal, had contacted many of the class members urging them to opt-out, describing with some hyperbole the dire consequences that likely would befall any who remained in the class.
Some of the statements made by appellant's principal to various lot owners were (1) that lot owners who remained in the class would be responsible for several thousand dollars each for attorney's fees, and (2) any that had rented their units in the past and not shared the rental with the developer would be sued for damages if they did not opt-out.
Armed with that information, appellee sought an order striking the class action responses and granting other relief on the basis that the notification process had been tainted by appellant's misconduct. Following an evidentiary hearing on that motion, the court entered an order dated June 18, 1998, finding that appellant had interfered with, tainted, and prejudiced the class action notification and "opt-out" process by improperly contacting, threatening and intimidating class members, causing them to fear that by remaining in the class they would be exposed to liability for attorney's fees and costs. The court's order (1) granted the motion to strike the responses to the prior notification; (2) required a new notification process at appellant's expense; (3) determined that appellee was entitled to an award of costs and attorney's fees incurred due to appellant's improper actions and conduct; and (4) prohibited appellant from contacting the members of the class except through its attorneys.
Pursuant to the June 18 order, a hearing on attorney's fees and costs resulted in the judgment here appealed. The appellant's sole issue is that the court improperly assessed attorney's fees against it as a sanction for its conduct. Appellee cross-appeals, asserting that the trial court abused its discretion in awarding fees in a lesser amount than the evidence justified. Because we hold that under the circumstances the court was without authority to award appellee her attorney's fees as a sanction against appellant, we vacate that portion of the judgment, rendering the cross-appeal moot.
The specific issue before us is whether, under the circumstances of this case, attorney's fees may be awarded against appellant, the defendant in a class action suit, as a sanction for the latter's improperly threatening or intimidating class members in an attempt to persuade them to opt-out of the class. The court did not find that the appellant violated, willfully or otherwise, any court order. Nor, contrary to appellee's argument, did the court find that there was any fraud or malice on appellant's part.
Although appellee states that the court made such finding, she subsequently clarifies that appellant's conduct would fall within either malice or fraud. Appellee makes that argument because in Codomo v. Emanuel, 91 So.2d 653 (Fla. 1956), the court, by way of dicta, made the statement that fraud or malice may modify the rule that the right to recover attorneys' fees as part of the costs did not exist at common law under circumstances. Id. at 655. That statement is clarified inWeisenberg v. Carlton, 233 So.2d 659, 661 (Fla. 2d DCA 1970), which points out that the presence of fraud and malice are not exceptions to the American rule. Id.
Although the court likewise did not expressly find that the appellant had acted in bad faith, we, nonetheless, agree with appellee that appellant's conduct equates with bad faith and we think that such a finding is implicit in the court's order. Therefore, we broaden the issue to be whether, in Florida, a court has inherent power to assess attorney's fees against a party for litigating in bad faith. That issue, according to our research, has only been touched upon in two cases in this jurisdiction, i.e., Department of Revenue of State v. Arga Co., 420 So.2d 323 (Fla. 4th DCA 1982), and Sheldon Greene and Associates, Inc. v. Williams Island Associates, Ltd., 592 So.2d 307 (Fla. 3d DCA 1991), and then with different results.
In Arga, this court was faced with the issue of whether an attorney's fee, awarded against a party on the basis that it had litigated in bad faith, could be sustained on the authority of Roadway Express, Inc. v. Piper, 447 U.S. 752 (1980). Arga, 420 So.2d at 323. In Roadway Express, the Supreme Court held that federal courts have inherent power to assess attorneys' fees against a party's lawyers for bad faith in the conduct of litigation. Additionally, by way of dicta, the court indicated that the same sanction could be imposed on a party who litigated in bad faith. TheArga court, in reversing the attorney's fee award, declined to follow the dicta of Roadway Express and instead adopted the analysis in Perkins State Bank v. Connolly, 632 F.2d 1306 (5th Cir. 1980), wherein that court recognized that Florida does not accept the federal "bad faith" exception to the American rule.
In Sheldon Greene, the court, without recitation of facts or any analysis, affirmed the trial court's order assessing fees and costs against the appellant based on the authority of Chambers v. Nasco, Inc., 501 U.S. 32 (1991), and Sanchez v. Sanchez, 435 So.2d 347 (Fla. 3d DCA 1983). In Chambers, the Supreme Court expressly held that which was stated only as dicta in Roadway Express, i.e., the federal courts have inherent power to impose attorney's fees on a party which litigates in bad faith. Id. at 44.
The Sanchez case does not appear to support the court's decision in the Sheldon Greene case. In Sanchez, the court vacated an award of attorney's fees against the litigant for bad faith and directed that the award be levied against the litigant's attorney. Id. at 350. The award of attorney's fees against a lawyer as a sanction for bad faith is a proper exercise of the court's inherent power, as this court has recognized and approved in Patsy v. Patsy, 666 So.2d 1045 (Fla. 4th DCA 1996). The issue here, altogether different, is the inherent power to award attorney's fees against a party for bad faith.
It thus appears that the only two cases in Florida on this issue which have come to our attention, i.e., this court's decision inArga and the Third District's decision in Sheldon Greene, are in conflict. We are constrained to follow our prior decision.
Appellee argues that under federal case law involving class actions the imposition of attorney's fees has been approved as a sanction for both lawyer and party misconduct. See, e.g., Kleiner v. First Nat'l Bank of Atlanta, 751 F.2d 1193 (11th Cir. 1985); Impervious Paint Indus., Ins. v. Ashland Oil, 508 F. Supp. 720 (W.D.Ky. 1981). Therefore, the argument continues, because Florida Rule of Civil Procedure 1.220 is patterned after Federal Rule of Civil Procedure 23, and because Florida looks to the federal case law as persuasive authority on the interpretation of our rule, see Concerned Class Members v. Sailfish Point, Inc., 704 So.2d 200 (Fla. 4th DCA 1998); Broin v. Philip Morris Cos., Inc., 641 So.2d 888, 891, n. 1 (Fla. 3d DCA 1994), we should adopt the federal position on this issue. However, we are not here concerned with an interpretation of rule 1.220. Furthermore, unlike the Florida rule, the federal class action rule includes a provision allowing the court to enter such orders as are necessary to the protection of class members. See Fed.R.Civ.P. 23(d). Hence, the federal decisions allowing for sanctions against a litigant for bad faith in contacting class members are supported by a federal rule which has no counterpart in the Florida rule.
That portion of the judgment on appeal which awards attorney's fees to appellee is vacated. The cross-appeal is moot. The cause is remanded for further proceedings not inconsistent herewith.
TAYLOR, J., and DELL, JOHN W., Senior Judge, concur.
NOT FINAL UNTIL THE DISPOSITION OF ANY TIMELY FILED MOTION FOR REHEARING.