State Farm Mutual Automobile Insurance Company v,. Shelly R. Coker, et al

[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
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No. 12-13900
Non-Argument Calendar
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D.C. Docket No. 6:10-cv-01923-GAP-DAB
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY,
Plaintiff – Appellant,
versus
SHELLY R. COKER,
JAMES DAVID OSBORNE,
BELINDA A. KEELS,
individually & as parent, guardian
& next friend of A.L., a minor,
A. L.,
a minor, individually,
Defendants – Appellees.
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Appeal from the United States District Court
for the Middle District of Florida
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(January 29, 2013)
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Before HULL, JORDAN and KRAVITCH, Circuit Judges.
PER CURIAM:
State Farm Mutual Automobile Insurance Company (“State Farm”) sued
Shelly Coker in federal district court seeking a declaratory judgment that it had no
duty to defend and indemnify her in a state court negligence suit. Before the
district court ruled on the parties’ cross-motions for summary judgment, the state
court dismissed the underlying negligence suit with prejudice because it found the
plaintiffs had perpetrated fraud on the court, a ruling those plaintiffs did not appeal.
State Farm then filed a suggestion of mootness in the federal declaratory judgment
action. The district court found the case moot and dismissed it.
Thereafter, Coker moved for attorneys’ fees pursuant to Fla. Stat.
§ 627.428(1). The district court granted the request and applied a contingency fee
multiplier to award Coker $72,555 in attorneys’ fees. State Farm appeals the
district court’s award of attorneys’ fees on two alternative grounds: (1) Coker was
not entitled to fees under § 627.428(1); and (2) even assuming Coker was entitled
to fees, the district court erred by applying the contingency fee multiplier. After
careful review, we vacate the district court’s order of attorneys’ fees.
We review a district court’s interpretation of state law de novo. Trans
Coastal Roofing Co. v. David Boland, Inc., 309 F.3d 758, 760 n.1 (11th Cir. 2002).
Section 627.428(1) of the Florida Statutes provides, in relevant part:
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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 . . . insured . . . the
trial court . . . shall adjudge or decree against the insurer and in favor
of the insured . . . a reasonable sum as fees or compensation for the
insured’s . . . attorney prosecuting the suit in which the recovery is
had.
The purpose of this statute is “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). Hence, it
permits an award of attorneys’ fees not only when there is a judgment entered
against the insurer but also when the insurer “decline[s] to defend its position,”
resulting in “the functional equivalent of a confession of judgment or a verdict in
favor of the insured.” Wollard v. Lloyd’s & Cos. of Lloyd’s, 439 So. 2d 217, 218
(Fla. 1983).
The district court treated State Farm’s suggestion of mootness as the
functional equivalent of a confession of judgment or a verdict in favor of Coker.
The court reasoned that State Farm had the right to further pursue the declaratory-
judgment action because, if the coverage dispute were resolved in its favor, State
Farm could then recover from Coker the costs it incurred for its participation in the
negligence suit. Because State Farm chose not to do so, the district court found
that the suggestion of mootness was the functional equivalent of a voluntary
dismissal that entitled Coker to prevailing party attorneys’ fees under § 627.428(1).
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In this appeal, State Farm contends it did not have the right to continue with
the declaratory-judgment action after the underlying negligence suit was dismissed
with prejudice. Because it had not reserved its right to recover costs from Coker,
State Farm contends, it could not do so under Florida law. State Farm also argues
that, because the negligence suit did not settle but rather was dismissed for fraud
on the court, it did not decline to defend its position that it owed Coker no defense
or indemnification.
We agree. State Farm was not entitled to pursue attorneys’ fees and costs
after the underlying negligence suit had terminated because it did not reserve the
right to recover its costs in the negligence suit. See Colony Ins. Co. v. G & E Tires
& Serv., Inc., 777 So. 2d 1034, 1039 (Fla. 1st Dist. Ct. App. 2000) (holding that
the insurer was entitled to recover attorneys’ fees from the insured because, among
other reasons, it “timely and expressly reserved the right to seek reimbursement of
the costs of defending clearly uncovered claims”); see also Wendy’s of N.E. Fla.,
Inc. v. Vandergriff, 865 So. 2d 520, 522 (Fla. 1st Dist. Ct. App. 2003) (“Because
[the insurer] expressed no such reservation of rights to attorney’s fees and costs to
[the insured] when undertaking its defense, Colony Insurance is
inapplicable . . . .”). Because State Farm had no right to seek those fees, it lacked
the right to continue the declaratory judgment action. Cf. Ethredge v. Hail, 996
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F.2d 1173, 1175 (11th Cir. 1993) (“A case is moot when it no longer presents a
live controversy with respect to which the court can give meaningful relief.”).
Nor did State Farm “decline[] to defend its position” that it had no duty to
defend or indemnify Coker in the negligence suit. See Wollard, 439 So. 2d at 218.
The negligence suit was dismissed because the plaintiff perpetrated fraud on the
court. Hence, State Farm did not “provide[] the insured precisely what [State
Farm] was contending the insured was not entitled to in the declaratory action” –
namely a defense to or payment of the claim against her in the state court suit.
O’Malley v. Nationwide Mut. Fire Ins. Co., 890 So. 2d 1163, 1164 (Fla. 4th Dist.
Ct. App. 2004).1
Because State Farm could not have further pursued the declaratory-judgment
action and did not decline to defend its position, the district court erred when it
determined that the suggestion of mootness was functionally equivalent to a
confession of judgment or a verdict in Coker’s favor. We therefore vacate the
district court’s award of attorney’s fees under § 627.428(1) to Coker.2
VACATED.
1 The district court’s reliance on O’Malley is therefore misplaced. In that case, the court awarded
attorneys’ fees to the insured in a declaratory judgment action because the insurer had settled the
underlying negligence suit on behalf of the insured. 890 So. 2d at 1164-65. Here, by contrast,
State Farm did not settle the underlying suit and therefore did not functionally concede a duty to
indemnify or defend that was inconsistent with its position in the declaratory-judgment action.
2 Because we reach this result, we do not consider State Farm’s alternative argument that the
district court improperly applied a contingency fee multiplier.
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