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FCCI COMMERCIAL INSURANCE COMPANY, Appellant, v. EMPIRE INDEMNITY INSURANCE COMPANY, as subrogee and assignee of Lakeview at Carlton Lakes Condominium Association, Inc.; Patnode Roofing, Inc.; Celerity Construction, Inc. ; and NTC Development, Ltd., Appellees.

District Court of Appeal of Florida, Second District2018-07-13No. Case No. 2D17-1749
250 So. 3d 858

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Opinion

majority opinion

ROTHSTEIN-YOUAKIM, Judge.

FCCI Commercial Insurance Company (FCCI) appeals the trial courts order awarding attorneys fees to Empire Indemnity Insurance Company (Empire), as subrogee and assignee of Lakeview at Carlton Lakes Condominium Association, Inc., under the trial courts inherent authority to impose sanctions for egregious or bad-faith conduct. FCCI had retained an attorney to defend its insureds, Celerity Construction, Inc. (Celerity), and NTC Development, Ltd. (NTC), in Empires construction-defect action, but on Empires motion, the trial court disqualified the attorney for misconduct and determined that Empire was entitled to unspecified attorneys fees and costs in connection with the motion (the 2012 order). After FCCI intervened and moved for summary judgment on the fee issue, the court held a hearing and awarded Empire attorneys fees as a sanction against FCCI based on its finding that FCCI did direct and orchestrate the attorneys misconduct (the 2016 order). Because the evidence did not support a finding that FCCI had engaged in egregious or bad-faith conduct, we reverse the award of fees and direct the trial court to enter summary judgment in FCCIs favor on Empires supplemental precautionary motion for attorney fees.

Background

In the 2012 order, the trial court determined that the attorney had improperly initiated direct contact with a represented party, had improperly obtained privileged documents from that represented party and then forwarded them to other defendants rather than informing the sender, and, in so doing, had violated various Rules of Civil Procedure and Rules Regulating the Florida Bar. Accordingly, the court disqualified the attorney. The court also generally granted Empires request for sanctions by determining that Empire was entitled to attorneys fees. Celerity and NTC sought certiorari review of the 2012 order, and this court denied their petition per curiam. See Celerity Constr., Inc. v. Empire Indem. Ins. Co., 125 So.3d 1026 (Fla. 2d DCA 2013) (table decision).

Thereafter, Empire filed a supplemental precautionary motion for attorneys fees based on the 2012 order, in which Empire also sought discovery regarding FCCIs role, if any, in the attorneys misconduct. Consequently, FCCI sought and was granted leave to intervene in connection with the motion. FCCI subsequently moved for summary judgment on the motion, arguing, among other things, that it could not be liable for the attorneys misconduct and that it had not engaged in any misconduct itself. As set forth above, after a hearing, the court denied FCCIs motion for summary judgment and granted Empires motion for fees. The trial court subsequently entered a final order awarding Empire attorneys fees against FCCI, and this appeal followed.

Analysis

As an initial matter, Empire incorrectly contends that we lack jurisdiction to consider this appeal. See Burt v. SP Healthcare Holdings, LLC, 163 So.3d 1274, 1275 (Fla. 2d DCA 2015). Not only is the order awarding Empire attorneys fees an executable judgment against FCCI concluding a portion of the litigation ancillary to Empires ongoing litigation against Celerity and NTC (and other codefendants), see Hastings v. Osius, 104 So.2d 21, 22 (Fla. 1958) ; Burt, 163 So.3d at 1275 ; Saye v. Pieschacon, 750 So.2d 759, 760-61 (Fla. 1st DCA 2000), but FCCIs limited intervention solely for the purpose of addressing fees demonstrates that the conclusion of the attorney fees proceeding ended judicial labor as to FCCI, see Fla. R. App. P. 9.110(k) ; Smith v. State, 902 So.2d 179, 181 (Fla. 3d DCA 2005) (holding that an order awarding sanctions against an attorney was a final, appealable order because the entry of sanctions ended judicial labor in the case with respect to a nonparty); see also Gator Boring & Trenching, Inc. v. Westra Constr. Corp., 210 So.3d 175, 180 (Fla. 2d DCA 2016) (Because the trial courts orders completely dispose of all claims involving Travelers, we have jurisdiction to review Gators appeal from the dismissal of count II as a partial final judgment in accordance with rule 9.110(k).).

Empire also argues that Celerity and NTCs earlier certiorari proceeding bars this appeal under the law-of-the-case doctrine. Again, Empire is incorrect. First, the law-of-the-case doctrine does not apply because our review in the prior certiorari proceeding was limited to the attorneys disqualification; we lacked certiorari jurisdiction to review the sanction portion of the order. See Parrish v. RL Regi Fin., LLC, 194 So.3d 571, 571 (Fla. 2d DCA 2016) (Generally, an order imposing monetary sanctions against trial counsel and directing that they be paid on a certain date is a final, appealable order.... An order determining an entitlement to attorneys fees and costs without setting the amount is a nonfinal, nonappealable order. (first citing Burt, 163 So.3d at 1275 ; then citing Greenberg v. Greenberg, 129 So.3d 470, 471 (Fla. 2d DCA 2014) ) ); DeMartino v. Simat, 948 So.2d 841, 843-44 (Fla. 2d DCA 2007) ([T]he law of the case doctrine ... applies only to rulings on questions of law that were actually presented and considered in a prior appeal. Other than the dismissal of a previous attempt to appeal a nonfinal, nonappealable order, there have been no appellate court rulings on questions of law in this case. (first citing Fla. Dept of Transp. v. Juliano, 801 So.2d 101, 106 (Fla. 2001) ; then citing U.S. Concrete Pipe Co. v. Bould, 437 So.2d 1061, 1063 (Fla. 1983) ) ).

Moreover, the findings in the 2012 order pertained only to the attorneys conduct, and as explained below, findings of misconduct must be tailored to the entity against which sanctions are entered. Although the findings in the 2012 order provided the context for the 2016 order, the 2012 order did not address whether FCCI had engaged in egregious conduct or had acted in bad faith in directing the attorney. See Juliano, 801 So.2d at 106 (Under the law of the case doctrine, a trial court is bound to follow prior rulings of the appellate court as long as the facts on which such decision are based continue to be the facts of the case.); Specialty Rests. Corp. v. Elliott, 924 So.2d 834, 838 (Fla. 2d DCA 2005) (Because they were not parties to the earlier appeal, this courts earlier ruling did not become law of the case as to them and therefore is not binding upon them.).

Turning to the merits, a trial court has the inherent authority to award attorneys fees where one party has exhibited egregious conduct or acted in bad faith. Bitterman v. Bitterman, 714 So.2d 356, 365 (Fla. 1998). This authority, however, should rarely be exercised, as it is reserved for those extreme cases where a party acts in bad faith, vexatiously, wantonly, or for oppressive reasons, id. (quoting Foster v. Tourtellotte, 704 F.2d 1109, 1111 (9th Cir. 1983) ), whether in connection with the conduct leading to the litigation or during the litigation itself, id. (quoting Dogherra v. Safeway Stores, Inc., 679 F.2d 1293, 1298 (9th Cir. 1982) ). This authority also extends to imposing sanctions against an attorney, Moakley, 826 So.2d at 224, as does the caveat that it be exercised sparingly and cautiously, id. at 225 (citing Patsy v. Patsy, 666 So.2d 1045, 1047 (Fla. 4th DCA 1996) ).

Before exercising its inherent authority to impose sanctions, a trial court must provide to the parties notice and an opportunity to be heard-including the opportunity to present witnesses and other evidence. Id. at 227. The courts imposition of sanctions under that authority must be based upon an express finding of bad faith conduct and must be supported by detailed factual findings describing the specific acts of bad faith conduct that resulted in the unnecessary incurrence of attorneys fees. Id. The court, however, need not employ any magic words. See Robinson v. Ward, 203 So.3d 984, 990 (Fla. 2d DCA 2016) (explaining that the courts order need not specifically intone the words bad faith as long as it specifically identifies the incidents of bad-faith conduct). We review for an abuse of discretion the trial courts award of sanctions. See Tenev v. Thurston, 198 So.3d 798, 801 (Fla. 2d DCA 2016).

We have found no case that would preclude a trial court from sanctioning an insurer for egregious or bad-faith conduct that the insurer committed while performing its duty to defend the insured. Nonetheless, in such circumstances, the trial court cannot ignore that it should rarely invoke this inherent authority, see Bitterman, 714 So.2d at 365, and should do so only after complying with Moakley. Thus, although we do not rule out that an insurer could be liable for the egregious or bad-faith conduct of the attorney that it has hired to represent its insured, it would not be sufficient for the trial court to find simply that the insurer had taken an active role in the representation of the insured because no authority provides an exception to the requirement that the trial court make detailed factual findings describing the specific egregious or bad-faith conduct committed by the party against whom sanctions are imposed. See Moakley, 826 So.2d at 227 ; see also Robinson, 203 So.3d at 991 (affirming sanctions imposed against lead trial counsel because the trial court specifically articulated eight instances of egregious or bad-faith conduct during trial but reversing imposition of sanctions against cocounsel based on the same factual findings because cocounsel was only tangentially involved in one of those instances); State Farm Mut. Auto. Ins. Co. v. Swindoll, 54 So.3d 548, 551-52 (Fla. 3d DCA 2011) (reversing sanction imposed against State Farm based on conduct of its expert witness on cross-examination because there is no finding that State Farms attorneys, much less any State Farm officer or employee, coached [the expert] or elicited the testimony in question and because there is no rule of imputation that can justify such an award without some bad faith or egregious conduct on the part of the party or counsel as well); Shniderman v. Fitness Innovations & Techs., Inc., 994 So.2d 508, 515-17 (Fla. 4th DCA 2008) (affirming sanctions against attorney based on specific findings of that attorneys egregious conduct, which was independent of the inherent-authority sanction imposed against the attorneys client for separate egregious conduct that the court had already sanctioned); Allegheny Cas. Co. v. Roche Sur., Inc., 885 So.2d 1016, 1020 (Fla. 5th DCA 2004) (reversing because the trial court failed to follow Moakley procedures; noting that the courts order awarding fees to Roche does not specify whether it is against Allegheny and/or Alleghenys attorneys and that it is not clear whether the court thought that Allegheny indulged in litigation tactics that warranted sanctions, or that Allegheny was acting in bad faith by refusing to release the money, or both). Regardless, the trial court in this case did not find that the attorney had engaged in egregious or bad-faith conduct: it found that the attorneys disqualification was warranted, but disqualification does not require a finding of such conduct. Compare Moriber v. Dreiling, 95 So.3d 449, 454 (Fla. 3d DCA 2012) (explaining that the disqualification of counsel based on the inadvertent disclosure of privileged or confidential information requires a finding of a possibility that the disclosure provided the recipient with an unfair informational advantage, which requires an examination of the actions of counsel upon receipt of information), with Moakley, 826 So.2d at 224, 227 (explaining that [t]he inequitable conduct doctrine permits the award of attorneys fees where one party has exhibited egregious conduct or acted in bad faith but that it is rarely applicable and is reserved for those extreme cases where a party acts in bad faith, vexatiously, wantonly, or for oppressive reasons and holding, therefore, that the trial courts exercise of the inherent authority to assess attorneys fees against an attorney must be based upon an express finding of bad faith conduct and must be supported by detailed factual findings describing the specific acts of bad faith conduct that resulted in the unnecessary incurrence of attorneys fees (quoting Bitterman 714 So.2d at 365 ) ).

To comply with Moakley, the trial court had to make specific findings of FCCIs egregious or bad-faith conduct. The only finding that the court expressly made in the 2016 order as to FCCI, however, was that FCCI did direct and orchestrate the actions by [the attorney]. At the hearing, the court also stated that it found very helpful Empires memorandum in response to FCCIs motion for summary judgment, and so we assume that the court relied on Empires assertions in that memorandum, which included that FCCI had identified and targeted the deponent early on in the litigation as someone they wanted to contact and obtain information from, had directed the attorney to contact the deponent and obtain information from him, had Supervised, Directed, Authorized, and/or Acquiesced in the actions and conduct of [the attorney] with respect to [ ] the filing of all of the pleadings, Motions and Court papers filed on behalf of NTC and Celerity, and had Authorized and/or acquiesced, and otherwise directed the actions and conduct which formed the basis for the [2012 order]. Empire also suggested that FCCI had told the attorney not just to set a deposition but also to personally contact the deponent despite FCCIs knowing that he was represented by counsel and that FCCI had subsequently reviewed the privileged information received from the attorneys improper contact with the deponent.

Taking Empires assertions as true, the trial court might have been able to make the requisite findings of specific acts of egregious or bad-faith conduct on FCCIs part. The summary judgment evidence, however, did not support the assertions. First, that evidence establishes that the only direction that FCCI gave the attorney was a general direction to depose the deponent. But setting a deposition does not, in itself, amount to impermissible contact with a represented individual. Indeed, the trial court did not disqualify the attorney because he sought to depose the deponent; it did so based on the manner in which he did it and what he did with the documents that he received from it. There is no evidence demonstrating that FCCI gave the attorney any specifics as to how or when to depose the deponent or whether the attorney should obtain any documents when deposing him. Moreover, although FCCIs case handling guidelines for law firms for liability matters require that FCCI and counsel develop a litigation plan and budget at the outset of the case and confer regarding the investigation of a case, that guide also explicitly provides that in no event shall the Litigation Plan interfere with the rendering of independent professional judgment of defense counsel. Further, the preface to the guidelines also provides:

The Law Firm is expected to work with FCCI and the insured to achieve the best result for the insured in an efficient and cost-conscious manner consistent with the Law Firms ethical obligations. Nothing contained herein is intended to nor shall restrict Counsels exercise of professional judgment in rendering legal services for the Insured or otherwise interfere with any ethical directive governing the conduct of counsel.

(Footnote omitted.) Thus, if we assume that the courts invocation of its inherent authority to sanction FCCI is based on the attorneys violations of multiple bar regulations and rules of civil procedure, then there is no evidence to support the trial courts finding that FCCI did direct and orchestrate the actions of [the attorney].

For the same reason, Empires reliance on Burt, 163 So.3d 1274, for the alternative proposition that sanctions were available under Florida Rules of Civil Procedure 1.280 and 1.380 is unavailing. The sole issue in Burt was the propriety of a monetary sanction imposed directly against a partys law firm based on that firms asserted failure to comply with discovery orders. Id. at 1276. Burt, therefore, is inapposite in the context of a party being sanctioned for the conduct of its counsel.

Conclusion

Because the evidence did not support a finding that FCCI had engaged in egregious or bad-faith conduct, the trial court erred in sanctioning FCCI under its inherent authority. Accordingly, we reverse the courts award of fees and remand for the entry of summary judgment in FCCIs favor on Empires motion.

Reversed; remanded with directions.

MORRIS and BADALAMENTI, JJ., Concur.

Because this appeal does not require us to review the trial courts findings and conclusions with regard to the attorneys misconduct, the attorneys identity is not relevant to this appeal, and we do not refer to him by name.

We therefore do not reach FCCIs arguments concerning the amount of the sanctions award.

Indeed, if the trial court in the 2012 order had made findings regarding FCCI and then had sanctioned FCCI under its inherent authority based on those findings, it would have violated FCCIs right to due process because FCCI was not a party either below until 2014, when it intervened, or in the prior certiorari proceeding. See Moakley v. Smallwood, 826 So.2d 221, 226-27 (Fla. 2002) ([A] trial court[s] inherent authority to impose attorneys fees against an attorney for bad faith conduct ... carries with it the obligation of restrained use and due process.... [S]uch a sanction is appropriate only after notice and an opportunity to be heard-including the opportunity to present witnesses and other evidence.).

Neither party requested an evidentiary hearing on their motions or challenges the trial courts resolution of the sanctions issue in a summary-judgment fashion.

In its characterization of FCCIs directions to the attorney, Empire suggests that, in addition to conducting the deposition, FCCI wanted the attorney to communicate with the deponent through some means other than deposition. Contrary to Empires suggestion, there is no evidence of a direction from FCCI to contact the deponent by other means.

Although not referenced even indirectly in the trial courts oral ruling or 2016 order, to the extent that the court may have adopted Empires suggestion that FCCI had reviewed the improperly obtained privileged documents, there is no evidence to support such a finding.