Motor Vehicle Dealers in Florida - How the State Works...

Transcription

1 PUTTING EXCESSIVE ATTORNEYS FEES CLAIMS OUT TO PASTURE RELYING ON A STATUTORY CAP TO PREVENT MOTOR VEHICLE DEALER BOND SURETIES FROM BEING MILKED LIKE CASH COWS PRESENTERS: Gregory P. Brown, Esq. Hill Ward Henderson PA Erik P. Raines, Esq. Hill Ward Henderson PA Gary W. Horst, Esq. Platte River Insurance Company

2 BACKGROUND Chapter 320 of the Florida Statutes governs motor vehicle dealers in Florida. Section (10) requires motor vehicle dealers to obtain a surety bond or irrevocable letter of credit in the sum of $25,

3 BACKGROUND The purpose of the statute is to provide a modest fund from which car buyers can recover in the event the dealer violates the statute and is no longer in business.

4 BACKGROUND The statute contemplates a pre-suit claim process to the DMV and a determination by the DMV that a covered loss has occurred. In practice, this never happens.

5 BACKGROUND Finally, the statute provides a cap on the surety s potential liability, stating: However, the aggregate liability of the surety in any one year shall in no event exceed the sum of the bond or, in the case of a letter of credit, the aggregate liability of the issuing bank shall not exceed the sum of the credit. Section does NOT contain an attorneys fee provision.

6 HOW THE MILKING BEGAN

7 HOW THE MILKING BEGAN Hubbel v. Aetna Cas. & Sur. Co., 758 So. 2d 94 (Fla. 2000) Florida Supreme Court case addressing whether a party can recover attorneys fees against a motor vehicle dealer bond surety under Section , Florida Statutes. Case dealt with a $ damage claim and a $10, claim for attorneys fees.

8 HOW THE MILKING BEGAN Hubbel held that plaintiffs could not recover attorneys fees against MVDB sureties pursuant to Section (10), Florida Statutes, because neither that statute, nor the bond at issue provided for the recovery of fees. The Hubbel Court noted that permitting fee recovery on the $25, fund established by the statute, would mean that the primary beneficiary of the fund would be the attorneys, not the consuming public, and would effectively destroy the statutory scheme[.]

9 HOW THE MILKING BEGAN The Hubbel Court rejected the plaintiff s argument for entitlement to fees pursuant to , Florida Statutes, because the plaintiff failed to assert a right to fees under that statute in the lower courts. This left the door wide open for plaintiffs attorneys to seek fees under section , Florida Statutes.

10 HOW THE MILKING BEGAN Section , Florida Statutes, requires courts to award attorneys fees against when an insured obtains a judgment against an insurer. Plaintiffs attorneys turned to Section as a basis to assert fee claims against MVDB sureties.

11 HOW THE MILKING GOT OUT OF CONTROL

12 HOW THE MILKING GOT OUT OF CONTROL Plaintiffs attorneys purposefully avoid making a pre-suit claim to the surety or going through the contemplated DMV claims process. No incentive to make a pre-suit claim. They don t get paid if the surety simply pays on these minor claims.

13 HOW THE MILKING GOT OUT OF CONTROL

14 HOW THE MILKING GOT OUT OF CONTROL Plaintiffs attorneys have pursued fees not only up to the $25, penal sums of these bonds, but they successfully been obtaining fees far in excess of the penal sum.

15 HOW THE MILKING GOT OUT OF CONTROL How is this possible? Nichols v. Preferred Nat l Ins. Co., 704 So. 2d 1371 (Fla. 1997) Florida Supreme Court decision holding that authorized an award of attorneys fees against a guardianship bond surety. The guardianship statute, Section , Florida Statutes, provides that [n]o surety for a guardian shall be charged beyond the property of the ward.

16 HOW THE MILKING GOT OUT OF CONTROL The Nichols Court held that, even though the guardianship bond surety s liability was ostensibly capped by statute, when the trial court specifically determines that attorneys fees and costs were incurred because a surety failed to act diligently and unreasonably delayed the payment of a claim, such attorneys fees and costs are not protected by section

17 HOW THE MILKING GOT OUT OF CONTROL Plaintiffs attorneys have been using Nichols to persuade trial courts that MVDB sureties who either tender their defense or defend the merits of MVDB claims once sued fail to act diligently and unreasonably delay payment of of claims, even though no pre-suit claim had ever been made.

18 HOW THE MILKING GOT OUT OF CONTROL The 5 th District Court of Appeals recently held that fees are recoverable against MVDB sureties under Section Snow v. Jim Rathman Chevrolet, Inc., 39 So. 3d 368 (Fla. 5th DCA 2010) Snow did not address whether a party could recover fees in excess of the penal sum of the MVD bond.

19 HOW THE MILKING GOT OUT OF CONTROL

20 PUTTING THE EXCESSIVE FEE CLAIM OUT TO PASTURE Hakes v. Orlando s Auto Specialists, Inc., 77 So. 3d 196 (Fla. 5 th DCA 2011). Plaintiff filed suit without ever submitting a pre-suit claim to Platte River, the surety, and without going through the administrative process.

21 PUTTING THE EXCESSIVE FEE CLAIM OUT TO PASTURE In Hakes, the surety tendered its defense. Case went to arbitration. The parties stipulated to the existence of the bond. Surety did not otherwise participate the in the arbitration because it was not a party to the arbitration agreement.

22 PUTTING THE EXCESSIVE FEE CLAIM OUT TO PASTURE Plaintiff obtained a $12, damage award. Plaintiff s counsel sought an award of $187, in attorneys fees and costs against Platte River.

23 PUTTING THE EXCESSIVE FEE CLAIM OUT TO PASTURE The trial court in Hakes didn t buy it. The Hakes trial court noted that Section (10), Florida Statutes, expressly provides that, the aggregate liability of the surety in any one year shall in no event exceed the sum of the bond.

24 PUTTING THE EXCESSIVE FEE CLAIM OUT TO PASTURE

25 PUTTING THE EXCESSIVE FEE CLAIM OUT TO PASTURE Fifth DCA affirmed the trial court s order holding that Platte River s liability was limited to the $25, statutory cap.

26 PUTTING THE EXCESSIVE FEE CLAIM OUT TO PASTURE

27 PRACTICE POINTERS Plaintiffs attorneys may argue that the decision does not preclude a fee award in excess of the penal sum of the bond under section , if they can prove that a surety failed to investigate or unreasonably delayed payment of a claim. Plaintiffs attorneys will claim that the 5 th DCA s decision in Hakes has little precedential value because the Court did not write an opinion.

28 PRACTICE POINTERS Sureties should investigate MVDB claims with the same, if not more, rigor typically afforded to other claims. The investigation should reveal whether the claim is valid, and if so, whether the damages are significant. If the claim is valid and the damages are nominal, then it may simply be more costefficient to pay the claim, than to tender the claim or litigate it.

29 PRACTICE POINTERS If the claim is meritless, or if there is dispute about the amount of damages, then a surety can litigate knowing that its investigation efforts will likely immunize it from exorbitant fee claims. Make sure to document all efforts at obtaining information regarding the bond claim.

30 CONCLUSION

31 This presentation is made available by Hill Ward Henderson for educational purposes only to provide you general information and a general understanding of the law, it is not intended to provide nor does it constitute legal advice. The presentation should not be used as a substitute for specific legal advice from a licensed professional attorney. Further, the subject matter contained in this presentation is complex and subject to change. Any tax statements in this material are not intended to suggest the avoidance of U.S. federal, state or local tax penalties.