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On Behalf of | Feb 24, 2022 | Firm News

Florida Lien Law allows for the recovery of reasonable attorneys’ fees and legally taxable costs for the “prevailing party” under Florida Statute §713.29 following a lien foreclosure action, appeal, or arbitration. Recovery includes both fees and costs under sections 713.29 and 57.041, Florida Statutes. The courts reasoned that “[t]he award of attorney’s fees and costs to the prevailing party in a mechanic’s lien action serves to encourage settlement of disputes before resorting to litigation. Forcing the loser to bear the costs and fees of producing the opponent’s victory engenders a more realistic appraisal of the merits of the claim and discourages dilatory or obstructive tactics.” Trytek v. Gale Indus., Inc., 3 So. 3d 1194, 1200 (Fla. 2009). Nevertheless, determining “prevailing party” is not always a simple task and is often heavily litigated.

Typically, “[w]here a contractor complies with all provisions of Chapter 713, Florida Statutes, and has substantially performed the contract, he is entitled to a mechanic’s lien.” Grant v. Wester, 679 So. 2d 1301, 1307 (Fla. 1st DCA 1996). It is important to recognize that only “substantial performance” is required, not strict performance, making it much easier for a contractor (or other party eligible to record a mechanic’s lien claim) to successfully prosecute an action for foreclosure on a claim of lien. Trytek, 3 So. 3d at 1202. However, although being awarded a judgment for damages pursuant to a claim of lien is a factor in determining if a contractor is the prevailing party in an action, that fact alone is not the sole determinator of entitlement to attorneys’ fees and taxable costs under the Construction Lien Law.

Before 1993, the courts employed the “net judgment rule,” which held that the party who recovers the greater award is the prevailing party and entitled to its attorneys’ fees. This essentially meant that if you could net any positive sum, even a dollar, you would be determined to be the prevailing party. Unfortunately for contractors, this is no longer the case.

In 1993, the Florida Supreme Court departed from the net judgment rule and developed the “significant issues test” which, just like it sounds, holds that the party who prevails on the significant issues in the litigation should be determined the prevailing party for attorney’s fees. Prosperi v. Code, Inc., 626 So. 2d 1360 (Fla. 1993). “The reasoning supporting the decision in Prosperi to replace the ‘net judgment rule’ with the ‘significant issues’ test conveys this Court’s preference for a flexible rule that will achieve an equitable result with respect to the determination of the ‘prevailing party,’ irrespective of which party recovers a judgment on the lien claim. Although the fact that a contractor has obtained a ‘net judgment’ on its lien is certainly a factor to be considered, it is not determinative of whether that party is the ‘prevailing party’ for purposes of entitlement to attorneys’ fees.” Trytek, 3 So. 3d at 1202 (Fla. 2009). For example, a homeowner’s successful litigation of a compulsory breach of contract counterclaim could be considered in the court’s determination of the prevailing party. Id. at 1202-1203.

Typically, a contractor who prevails on its mechanic’s lien claim is entitled to the award of attorneys’ fees under statute, regardless of success on other issues in litigation. Michael David Ivey, Inc. v. Salazar, 903 So. 2d 329, 331-332 (Fla. 5th DCA 2005); see also Trytek, 3 So. 3d at 1200. The courts have held that it is an error to treat two claims, such as foreclosure of mechanic’s lien and counterclaim for breach of contract, as truly merged claims for the purposes of determining attorneys’ fees. CDI Contractors, LLC. v. Allbrite Elec. Contractors, Inc., 836 So. 2d 1031, 1033 (Fla. 5th DCA 2002). The reasoning is that the cases are consolidated to minimize expense and delay, and that the consolidation is compulsory. Id. “Consolidation affects the procedure of the cases, but has no effect on the substantive rights of the parties in an individual case, and does not destroy their separate identities.” Id. “[A] party who has prevailed under a claim which entitles the party to attorney’s fees cannot have that right defeated by a larger award recovered by the opposing party under a counterclaim which has no basis for collecting attorney’s fees” Shores Supply Co. v. Aetna Cas. & Sur. Co., Inc., 524 So. 2d 722, 725 (Fla. 3d DCA 1988) (citing Folta v. Bolton, 493 So.2d 440 (Fla.1986). Moreover, a prevailing party can argue that the success or not of any competing claim or compulsory counterclaim did not substantially increase the prevailing party’s fee claim since the claims were interrelated and indivisible. Dow v. McKinley, 776 So. 2d 1017, 1018 (Fla. 5th DCA 2001).

The danger here is that even if the contractor can recover net positive judgment on the lien claim, should the competing claims or counterclaims, such as construction defect or breach of contract, chip away enough recovery against the claimed lien amount, and the ultimate award on the claim of lien is significantly lower than the recorded lien amount, the homeowner could be deemed the prevailing party and be entitled to attorneys’ fees and taxable costs, turning that net positive judgment into a net negative recovery and essentially, a loss. But the opposite holds true as well. “For example, where an owner successfully defends a mechanic’s lien foreclosure, but is held liable in damages for breach of contract, the owner is not the prevailing party and is not entitled to recover attorney’s fees under section 713.29.” GMPF Framing, LLC v. Vills. at Lake Lily Assocs, LLC, 100 So. 3d 243, 245 (Fla. 5th DCA 2012). The courts have also held that neither party is to be determined the prevailing party and thus neither party is entitled to recover fees and costs. Therefore, before pursuing litigation to foreclose a lien, it is important to talk to your attorney about your chances of successful recovery; in other words, is the juice worth the squeeze.

Additionally, a rejection of a proposal for settlement or offer of judgment which was more favorable than the judgment later acquired may render the contractor devoid of “prevailing party” status for purposes of the statutory entitlement to attorney’s fees; however, the rejection does not limit any potential for recovery pursuant to the contractor’s claim for any attorney’s fees pursuant to the contract. Sullivan v. Galske, 917 So. 2d 412, 414 (Fla. 2d DCA 2006). This is why it is important to have your attorney review your contract to ensure that there is fee recovery under the contract provisions as well. Also, there is no fee multiplier in action for breach of construction contract or foreclosure of a construction lien where both parties were able to obtain competent counsel when the dispute arose, and where the issues raised by defendant were novel and complex. Michnal v. Palm Coast Dev., Inc., 842 So. 2d 927, 933 (Fla. 4th DCA 2003). Learn why you should choose Magaziner Law.

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