IN THE UNITED
STATES COURT OF APPEALS
FOR
THE ELEVENTH CIRCUIT
________________________
No. 99-11778.
________________________
ALL UNDERWRITERS, All Underwriters subscribing to policy number 03789600 including
Underwriters at Lloyds, London,
Plaintiff-Counter-Defendant-Appellee,
v.
Mark WEISBERG, Robert Berzon,
Defendants-Third-Party Plaintiffs-Counter-Claimants-
Appellants.
Aug. 18, 2000.
Appeal from the United States District
Court for the Southern District of Florida.
Before ANDERSON, Chief Judge, and
DUBINA and SMITH*, Circuit Judges.
___________________
*Honorable Edward S. Smith, U.S. Circuit
Judge for the Federal Circuit, sitting by designation.
DUBINA, Circuit Judge:
This appeal involves the question
of whether a district court may award attorney's fees pursuant
to a state statute in a marine insurance contract dispute. The
district court answered the question in the negative. We reverse.
I. Background
Appellants, Mark Weisberg and Robert
Berzon ("Weisberg," "Berzon," or collectively,
"Appellants"), entered into a marine insurance contract
with Appellee, Underwriter's at Lloyds, London ("Underwriters"),
to insure Appellants' 32 foot motor vessel named "After
Hours." The policy provided hull and machinery coverage
for $50,000, beginning on September 27, 1996, and extending for
a one-year period. Underwriters issued the policy pursuant to
Florida's Surplus Lines Law and delivered it to Weisberg's residence
in Miami, Florida.
On November 16, 1996, the After
Hours sank as a result of heavy winds and storm surge. Appellants
made a claim for constructive total loss of the After Hours within
four days of the sinking. After conducting an investigation,
Underwriters filed a declaratory judgment action in the United
States District Court for the Southern District of Florida seeking
to have the contract deemed void ab initio due to alleged
misrepresentations by Appellants in their application for insurance.
Underwriters invoked the district court's admiralty jurisdiction
pursuant to 28 U.S.C. § 1333 and sought the special admiralty
procedures pursuant to Federal Rule of Civil Procedure 9(h).
Appellants filed a counter-claim against Underwriters for breach
of contract.
In their Answer and Counterclaim,
Appellants demanded attorney's fees pursuant to Fla. Stat. §
627.428. The district court struck Appellants' demand for attorney's
fees, finding that "[a]ny Florida law awarding attorney's
fees to a prevailing party in the absence of bad faith clearly
conflicts with federal maritime law and cannot be applied."
After the district court denied
Underwriters' summary judgment motion, the Parties agreed to
settle Appellants' claim for the full contractual value of Appellants'
loss, plus costs and interest. In the settlement agreement, Appellants
specifically reserved their right to appeal the district court's
order striking their demand for attorney's fees and reserved
their right to seek attorney's fees. After the district court
entered judgment in favor of Appellants on their counter-claim,
the Appellants filed a timely appeal on the issue of attorney's
fees.
On appeal, this court faces two
questions. First, we must decide whether Fla. Stat. § 627.428
is procedural or substantive law for Erie1 purposes.
If we hold that § 627.428 is substantive law, then we must
decide whether a federal court may award attorney's fees pursuant
to a state statute in a marine insurance controversy.
II. Standard of Review
This court reviews a district court's
application of admiralty law de novo. See Isbrandtsen Marine
Serv., Inc. v. M/V Inagua Tania, 93 F.3d 728, 733 (11th Cir.1996).
III. Analysis
A.Is Fla. Stat. § 627.428 Procedural
or Substantive Law?
Underwriters contend that Fla. Stat.
§ 627.428 is procedural law, and thus, a federal court sitting
in admiralty cannot apply it.2See
Gasperini v. Center for Humanities, Inc., 518 U.S. 415, 427,
116 S.Ct. 2211, 135 L.Ed.2d 659 (1996) ("Under the Erie
doctrine, federal courts sitting in diversity apply state substantive
law and federal procedural law."). Underwriters correctly
notes that this circuit has referred to Fla. Stat. § 627.428
as procedural. See Blasser Bros. v. Northern Pan-American
Line, 628 F.2d 376, 386 (5th Cir.1980) ("The applicable
statute, however, is a procedural one, and the parties must satisfy
the statutory requirements.");3Fidelity-Phenix
Fire Ins. Co. of New York v. Cortez Cigar Co., 92 F.2d 882,
885 (5th Cir.1937) ("This statute is plainly a procedural
one limited to the courts of Florida.").4 This
court, however, has consistently held that "this right to
attorneys' fees is applicable in federal courts sitting in Florida."5Blasser
Bros., 628 F.2d at 386; see also Steelmet, Inc. v. Caribe
Towing Corp., 842 F.2d 1237, 1245 (11th Cir.1988); North
Am. Life & Casualty Co. v. Wolter, 593 F.2d 609, 611
(5th Cir.1979); Meeks v. State Farm Mutual Auto. Ins. Co.,
460 F.2d 776, 781 (5th Cir.1972); Coblentz v. American Sur.
Co. of New York, 421 F.2d 187, 188 (5th Cir.1969). By applying
Fla. Stat. § 627.428 in federal court, we have obviously
viewed the statute as substantive law for Erie purposes.
Moreover, this court has referred
to Fla. Stat. § 627.428 as substantive law for Erie purposes.
See Windward Traders, Ltd. v. Fred S. James & Co. of New
York, 855 F.2d 814, 817 n. 3 (11th Cir.1988). In Stuyvesant
Insurance Co. of New York v. Nardelli, 286 F.2d 600 (5th
Cir.1961), our predecessor court cited Orlando Candy Co. v.
New Hampshire Fire Insurance Co. of Manchester, 51 F.2d 392
(S.D.Fla.1931), for the proposition that this statute applies
to actions brought in federal courts sitting in Florida. See
286 F.2d at 604 n. 11. The district court, in Orlando Candy,
reasoned that this "statute imposes a liability for judicially
determined delinquency on the part of an insurer in the payment
of its obligation. A corresponding right of recovery necessarily
arises in favor of the beneficiary. The right thus created in
favor of the beneficiary is a substantive right...." See
51 F.2d at 393.
In addition, the Florida state courts
have viewed Fla. Stat. § 627.428 as substantive law. See
Bitterman v. Bitterman, 714 So.2d 356, 363 (Fla.1998) ("The
ability to collect attorney's fees from an opposing party, as
well as the obligation to pay such fees, is substantive in nature.");
L. Ross, Inc. v. R.W. Roberts Constr. Co., Inc., 481 So.2d
484, 485 (Fla.1986) ("The right to attorney fees is a substantive
one...."). As the Fifth District Court of Appeals explained
in L. Ross:
Statutes, such as 627.428, Florida
Statutes (1983), which create a new right to attorney's fees
creates a substantive right in favor of a limited class of potential
plaintiffs (insureds) and a substantive burden or obligation
upon a limited class of potential defendants (insurers). The
right to an attorney's fee is substantive because it gives to
a party who did not have that right the legal right to recover
substance (money!) from a party who did not theretofore have
the legal obligation to render or pay that money. The right is
not merely a new or different remedy to enforce an already existing
right and is, for that reason, not merely procedural.
See L. Ross, Inc. v. R.W. Roberts
Constr. Co., Inc., 466 So.2d
1096, 1098 (Fla.App. 5th Dist.1985). Accordingly, we hold that
Fla. Stat. § 627.428 is substantive law for Erie
purposes.
B.Are Attorney's Fees Available
in Marine Insurance Contract Disputes?
Appellants argue that the district
court erred in holding that a federal maritime law existed on
the issue of attorney's fees, thereby preempting the application
of Fla. Stat. § 627.428. Accordingly, we must resolve whether
federal or state law governs.
Federal courts have long considered
actions involving marine insurance policies to be within the
admiralty jurisdiction of the federal courts and governed by
federal maritime law. See Wilburn Boat Co. v. Fireman's Fund
Ins. Co., 348 U.S. 310, 321, 75 S.Ct. 368, 99 L.Ed. 337 (1955);
New England Mut. Marine Ins. Co. v. Dunham, 78 U.S. (11
Wall.) 1, 33-34, 20 L.Ed. 90 (1870); Morewitz v. West of England
Ship Owners Mut. Protection & Indem. Ass'n, 896 F.2d
495, 498-99 (11th Cir.1990); Morrison Grain Co., Inc. v. Utica
Mut. Ins. Co., 632 F.2d 424, 428 n. 4 (5th Cir.1980). "But,
when neither statutory nor judicially created maritime principles
provide an answer to a specific legal question, courts may apply
state law provided that the application of state law does not
frustrate national interests in having uniformity in admiralty
law." Coastal Fuels Mktg., Inc. v. Florida Express Shipping
Co., Inc., 207 F.3d 1247, 1251 (11th Cir.2000); see also
Offshore Logistics, Inc. v. Tallentire, 477 U.S. 207, 222-23,
106 S.Ct. 2485, 91 L.Ed.2d 174 (1986) ("[T]he extent to
which state law may be used to remedy maritime injuries is constrained
by a so-called 'reverse-Erie ' doctrine which requires
that the substantive remedies afforded by the States conform
to governing federal maritime standards."); Steelmet,
Inc. v. Caribe Towing Corp., 779 F.2d 1485, 1488 (11th Cir.1986)
("One must identify the state law involved and determine
whether there is an admiralty principle with which the state
law conflicts, and, if there is no such admiralty principle,
consideration must be given to whether such an admiralty rule
should be fashioned. If none is to be fashioned, the state rule
should be followed."). The parties in this case differ as
to whether an applicable maritime principle governs the question
at issue.
Underwriters argues that there exists
a well-established maritime law prohibiting any award of attorney's
fees in an admiralty action absent a contract provision, a federal
statute, or bad faith in the litigation process. See Coastal
Fuels, 207 F.3d at 1250; Noritake Co., Inc. v. M/V Hellenic
Champion, 627 F.2d 724, 730 n. 5 (5th Cir.1980). Because
Fla. Stat. § 627.428 allows an insured to collect attorney's
fees based solely on whether he prevailed, Underwriters asserts
that § 627.428 conflicts with established maritime law.
Appellants agree that, in general,
attorney's fees are not recoverable in admiralty actions. They,
however, contend that this general rule does not apply in the
context of marine insurance contract actions. The Supreme Court
has held that in the absence of a specific and controlling rule,
the interpretation or construction of a marine insurance contract
is to be determined by state law. See Wilburn Boat, 348
U.S. at 321, 75 S.Ct. 368 ("We, like Congress, leave the
regulation of marine insurance where it has been-with the States.");
see also Steelmet, 842 F.2d at 1244 n. 9 ("[A]dmiralty
courts will generally look to appropriate state law in determining
questions involving a marine insurance contract.") (quoting
Gulf Tampa Drydock Co. v. Great Atlantic Ins. Co., 757 F.2d
1172, 1174 (11th Cir.1985)). "Having held that state law
controls the interpretation of marine insurance policies, it
would defy both logic and sound policy were we to hold that the
applicability of attorney's fees vel non must be determined
by reference to uniform federal law." INA of Texas v.
Richard, 800 F.2d 1379, 1381 (5th Cir.1986). Thus, the question
becomes whether there exists an established federal maritime
policy addressing the specific issue of whether attorney's fees
lie in the context of marine insurance contract disputes.
This circuit has awarded attorney's
fees pursuant to Fla. Stat. § 627.428 in a number of marine
insurance contract disputes. See Windward Traders, 855
F.2d at 819-20 (11th Cir.1988) (awarding attorney's fees pursuant
to Fla. Stat. § 627.428 where a vessel owner prevailed against
his insurers to recover under a marine insurance contract); Steelmet,
842 F.2d at 1245 (same); Stuyvesant, 286 F.2d at 604 (awarding
attorney's fees pursuant to Fla. Stat. § 625.08 (now codified
as § 627.428) where a vessel charterer prevailed against
the vessel owner's insurers to recover under a marine insurance
contract); see also Blasser Bros., 628 F.2d at 386 (rejecting
an attorney's fees award pursuant to Fla. Stat. § 627.428
where the vessel owner failed to follow the statute's procedures);
American Eastern Dev't Corp. v. Everglades Marina, Inc.,
608 F.2d 123, 125-26 (5th Cir.1979) (rejecting an attorney's
fees award pursuant to Fla. Stat. § 627.428 because the
statute did not permit an award of fees when an injured third
party beneficiary brought the case).6 Underwriters
notes that in these cases, this court did not address expressly
whether an established federal maritime policy existed. Rather,
this court assumed without any discussion that state law applied.
Nonetheless, because these cases consistently applied state law
to decide whether or not attorney's fees lie in the context of
a marine insurance dispute, they strongly support, if not implicitly
hold, that there exists no specific and controlling federal law
relating to attorney's fees in maritime insurance litigation.
See Robertson, 27 J. Mar. L. Com. at 562 ("The ...
Eleventh Circuit take[s] the view that '[t]here is no specific
and controlling federal rule of law relating to attorney's fees
in maritime insurance litigation' and that therefore 'state law
... govern[ ]s the issue ... whether or not attorney's fees lie
in the context of a marine insurance dispute.' "). Furthermore,
Underwriters has not cited, nor have we found, any Eleventh Circuit
decision which rejects an award of attorney's fees in the context
of a marine insurance contract dispute on the basis that federal
law and not state law applies.
Two other courts of appeal have
addressed this issue and have reached opposite results from each
other. In INA of Texas v. Richard, 800 F.2d 1379 (5th
Cir.1986), the Fifth Circuit, citing to a number of cases from
the Old Fifth Circuit, held that "[t]here is no specific
and controlling federal rule of law relating to attorney's fees
in maritime insurance litigation." Id. at 1381. To
the contrary, the court concluded that the Fifth Circuit has
consistently found state law to govern the issue of whether or
not attorney's fees lie in the context of a marine insurance
contract dispute. See id. In contrast, the Second Circuit,
in American National Fire Insurance Co. v. Kenealy, 72
F.3d 264 (2nd Cir.1995), held that there exists an established
federal maritime law that prohibits attorney's fees in marine
insurance contract disputes. See id. at 270.
Underwriters argues that this court
should reject its prior decisions and the Fifth Circuit's decision
in Richard7 and follow the decision in Kenealy
as signifying the emergence of an established federal law. In
reviewing the Kenealy decision, we, however, observe that
the cases which underlie the court's rationale in Kenealy
do not support the notion of an emerging federal rule of law
relating to attorney's fees in maritime insurance litigation.
See Robertson, 27 J. Mar. L. Com. at 566 ("It [ ]
appears that [Kenealy ] was wrongly decided. The court
mistakenly took the American rule-a general federal procedural
rule-for a substantive rule of maritime law, and wrongly used
that rule to displace state substantive law.").
The Kenealy court concluded
that the Second Circuit in Ingersoll Milling Machine Co. v.
M/V Bodena, 829 F.2d 293 (2d Cir.1987), held that the general
prohibition on attorney's fees in admiralty suits applies in
a suit over a marine insurance contract. See 72 F.3d at
270. Next, the Kenealy court rejected the Richard
decision by noting that the First and Third Circuits, writing
after Ingersoll, reached the same conclusion as Ingersoll.
However, neither the First nor the Third Circuit cases dealt
with a dispute over a marine insurance contract. The Third Circuit,
in Sosebee v. Rath, 893 F.2d 54 (3d Cir.1990), faced a
maritime tort action. See id. at 55. In Southworth
Machinery Co. v. F/V Corey Pride, 994 F.2d 37 (1st Cir.1993),
the First Circuit found the defendant liable as a result of its
breach of its express warranty for parts and workmanship incident
to the repair of a ship which is a standard contractual breach
to which maritime law has always applied. See id. at 42.
Moreover, the First Circuit's decision supports the proposition
that federal maritime law does not cover marine insurance contract
disputes. The First Circuit stated that:
State statutes providing for attorney's
fees may sometimes be given effect in admiralty cases, notably,
where the attorney's fees are awarded incident to a dispute that
is not normally a subject of maritime law. For example, in Pace
v. Insurance Company of North America, 838 F.2d 572, 578-79
(1st Cir.1988), we held that maritime law did not preempt a Rhode
Island cause of action allowing recovery of damages and attorney's
fees for an insurer's bad faith refusal to pay or settle claims;
the refusal to settle [insurance] claims is normally left
untouched by maritime law.
Id.
at 41 (emphasis added). Thus, the cases relied upon by Kenealy
do not support the Kenealy court's proposition that they
reached the same conclusion as Ingersoll.
In addition, Underwriters does not
provide any reason, nor have we found one, to require a unitary
and uniform federal rule respecting attorney's fees in maritime
insurance litigation. See INA, 800 F.2d at 1381; see
also Coastal Fuels, 207 F.3d at 1251 (holding that no reason
existed to create a uniform national rule in admiralty where
the case concerned attorney's fees and whether the contractual
provision which provided for attorney's fees should allow a party
to recover attorney's fees where it succeeded on all but one
minor issue).
In conclusion, we hold that a district
court may award attorney's fees pursuant to Fla. Stat. §
627.428 against an insurer in a maritime insurance contract case.
Accordingly, we reverse the district court's judgment and remand
this case for further proceedings consistent with this opinion.
REVERSED AND REMANDED.
FOOTNOTES
[1]
Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188
(1938).
[2]
Fla. Stat. § 627.428 provides:
(1) 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 or omnibus insured or the named beneficiary
under a policy or contract executed by the insurer, the trial
court or, in the event of an appeal in which the insured or beneficiary
prevails, the appellate court shall adjudge or decree against
the insurer and in favor of the insured or beneficiary a reasonable
sum as fees or compensation for the insured's or beneficiary's
attorney prosecuting the suit in which the recovery is had.
[3]
One commentator has stated that
"the context of the court's remark [in Blasser Brothers
] indicates that it meant only to assert that the attorneys'
fee statute specified the procedures for asserting a claim under
it, and not that it was a procedural rule for vertical choice-of-law
purposes." David W. Robertson, Court-Awarded Attorneys'
Fees in Maritime Cases: The "American Rule" in Admiralty,
27 J. Mar. L. Com. 507, 565 n. 331 (1996).
[4]
In Bonner v. City of Prichard,
661 F.2d 1206 (11th Cir.1981) (en banc ), this court adopted
as binding precedent all decisions rendered by the former Fifth
Circuit prior to October 1, 1981.
[5]
This court has held that a federal
court sitting in Georgia cannot award attorney's fees pursuant
to Fla. Stat. § 627.428 in an insurance contract dispute
where the contract was written in Florida and covered Florida
property. See Fidelity-Phenix, 92 F.2d at 885. We noted
that the statute expressly confines itself to judgments rendered
by courts in Florida. See id.; see also Fla. Stat. §
627.428 ("Upon the rendition of a judgment by any of the
courts of this state...."). In turn, we reasoned that this
right to reimbursement is not inherent in the contract, but is
an incident of a Florida suit on an insurance contract made anywhere.
See Fidelity-Phenix, 92 F.2d at 885.
[6]
Underwriters argues that these cases
are distinguishable from the case at bar because they followed
the general maritime principle of awarding attorney's fees based
upon a contract provision or bad faith. None of the above cited
cases, however, relied upon bad faith or a contract provision
in awarding attorney's fees. For example, in affirming an award
of attorney's fees, this court, in Stuyvesant, made no
mention of bad faith or of a contract provision as the reason
it awarded attorney's fees. See 286 F.2d at 604. Instead,
this court awarded attorney's fees under Fla. Stat. § 627.428
solely because the insured prevailed in establishing the insurers
liability on the policy. See id.
[7]
Underwriters also argues that this
court should not follow the Richard decision because it
relied on cases which impermissibly engaged in a weighing of
state interests versus federal interests. The court in Richard,
however, did not itself engage in any weighing of interests.
Instead, the court held that no federal law and no national interest
in uniformity existed on this point, thereby obviating any reason
to weigh state and federal interests for no federal interest
existed. See 800 F.2d at 1381. Accordingly, we reject
Underwriters's argument on this point.
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