SOUTHERN-OWNERS INSURANCE COMPANY

v.

MARONDA HOMES, INC. OF FLORIDA

Having successfully convinced the Court to dismiss this case because the Court lacked subject matter jurisdiction over a state law claim, Defendants now return seeking attorneys’ fees under state law as “prevailing parties.” But lacking subject matter jurisdiction over the case, the Court is likewise without subject matter jurisdiction over the attorneys’ fees claim. In reaching this conclusion, the Court must respectfully disagree with a non-binding Eleventh Circuit opinion to the contrary.

I. BACKGROUND

Southern-Owners Insurance Company filed a complaint for declaratory relief asking this Court to determine, among other things, whether Southern- Owners had a duty to defend or indemnify its insured, JROD Plastering LLC, and additional insured, Maronda Homes, Inc. of Florida, (collectively “Defendants”) against a construction defect claim. (Doc. 1). Southern-Owners alleged diversity jurisdiction; however, the Court dismissed the Complaint without prejudice for lack of subject matter jurisdiction because Southern- Owners failed to satisfy the amount in controversy requirement. (Doc. 52).1 Based on this dismissal, Maronda and JROD separately moved for attorneys’ fees and costs under § 627.428, Florida Statutes,2 and Federal Rule

Southern-Owners subsequently filed sur-replies. (Docs. 64, 65).

II. ANALYSIS

Although the parties spend most of their motions arguing whether Defendants are “prevailing parties,” this case boils down to whether a federal court has the power to award fees based on state substantive law if it never had diversity jurisdiction over the underlying state claim to begin with. Because the Court finds that it lacks jurisdiction to award fees under § 627.428, it need not address whether Defendants are “prevailing parties” under the statute or the reasonableness of the requested fees.³ A. The Court Lacks Jurisdiction to Award Attorneys’ Fees Under State Law This declaratory judgment action was premised on diversity jurisdiction. (Docs. 1, 51). As the Court is without diversity jurisdiction over the declaratory action, it also lacks jurisdiction over a claim for attorneys’ fees under § 627.428. See S.-Owners Ins. Co. v. Tomac of Fla., Inc., 687 F. Supp. 2d 665, 667–68 (S.D. Tex. 2010) (“[I]f this Court lacks jurisdiction to hear claims brought under

SCOLA/TORRES, 2019 WL 383868, at *4 (S.D. Fla. Jan. 15, 2019) (same); Mid- Continent Cas. Co. v. G.R. Constr. Mgmt., Inc, No. 2:17-cv-55-FtM-38CM, 2018 WL 2945613, at *2 (M.D. Fla. May 25, 2018) (relying on Prime to award fees under § 627.428 after a dismissal for lack of ripeness).

In holding that the district court properly exercised jurisdiction to award fees, Prime recognized that “a district court may not adjudicate the merits of a claim once it has determined that it lacks subject matter jurisdiction . . . .” Prime, 270 F. App’x at 964 (citing Stanley v. CIA, 639 F. 2d 1146, 1157 (5th Cir. Mar. 16, 1981)). However, the court reasoned, “that is not what we have here. The court’s award of attorney’s fees was collateral to the merits of the case and was therefore within the court’s jurisdiction, even after the court determined it lacked subject matter jurisdiction over the underlying suit.” Id. at 965 (emphasis added). Respectfully, the Court finds this holding unpersuasive for two reasons. First, Prime’s reasoning appears to conflict with published Eleventh Circuit precedent. Second, the cases Prime relies on are distinguishable from Prime’s facts and do not establish a federal court’s jurisdiction to award fees based on a state statute in the absence of diversity jurisdiction. 1. Prime’s reasoning conflicts with prior Eleventh Circuit precedent. Key to its determination that the district court retained jurisdiction to award fees under § 627.428 is Prime’s assertion that a fee award under that statute is “collateral to the merits of the case.” Prime, 270 F. App’x at 965. This appears to contradict the reasoning of Certain British Underwriters at Lloyds of London, England v. Jet Charter Service, Inc., 739 F. 2d 534 (11th Cir. 1984), a case which Prime did not discuss.

In Jet Charter, an insurer filed a diversity action against its insured seeking a declaratory judgment. Id. The district court granted the insured’s motion for summary judgment, but reserved jurisdiction to award attorneys’ fees under § 627.428. Id. The insurer appealed the order and the insured moved to dismiss the appeal on the basis “that the grant of summary judgment without an award of attorney’s fees is not a final, appealable order under 28 U.S.C. § 1291.” Id. at 535. Thus, the court explored whether such an order is appealable. Id. To aid in its determination, the court applied Florida law to determine whether an award of fees under § 627.428 is collateral, or integral, to the merits. Id. at 536. The Eleventh Circuit stated that “an award of attorney’s fees under Sec. 627.428 is ‘an integral part of the merits’ and must be part of any final judgment.”⁵ Id.; see Phillips v. Certain Underwriters at Lloyd’s London, No. 6:04-cv-1430-Orl-DAB, 2005 WL 5926927, at *4 (M.D. Fla. Oct. 21, 2005) (“The Eleventh Circuit [in Jet Charter] has interpreted [§ 627.428], indicating that an award of attorney fees to a prevailing insured upon rendition of a judgment against insurer is not part of the costs and collateral to the main claim but, rather, is an integral part of the merits of the case and part of the plaintiff's damages.”); see also Laborers Local 938 Joint Health & Welfare Tr. Fund v. B.R. Starnes Co. of Fla., 827 F. 2d 1454, 1458 (11th Cir. 1987) (“Given that the federal court dismissed the case for lack of subject matter jurisdiction and the merits of the state claims have yet to be tried, it would be inappropriate to award fees under [Florida law] at this time.”).6

§ 1988 “collateral to the merits” for purposes of § 1291 appealability, id. at 200, the Court was interpreting a federal statute. (continued on next page). The Supreme Court acknowledged that some “statutes creating liability for attorney’s fees can cause them to be part of the merits relief,” it just did not consider § 1988 one of them. Id. at 201. Therefore, Budinich has no bearing on Jet Charter’s statement that a fee award under § 627.428, Florida Statutes, is an “integral part of the merits of the case,” especially as Jet Charter cited Florida law to support its conclusion. See Jet Charter, 739 F. 2d at 536 (citing Florida cases); see also United States v. Vega-Castillo, 540 F. 3d 1235, 1237 (11th Cir. 2008) (For the Supreme Court to overrule [an Eleventh Circuit] case, its decision ‘must have actually overruled or conflicted with [this court’s prior precedent].’ There is a difference between the holding in a case and the reasoning that supports that holding.”) (internal citations omitted). The outcome might be different if the Budinich Court had interpreted a state statute or if the statutes at issue here and in Jet Charter were federal statutes. Subsequent Florida cases provide support for this position. See Spiegel v. Williams, 545 So. 2d 1360, 1362 (Fla. 1989) (agreeing with Lamm); Smith v. Sitomer, 550 So. 2d 461, 462 (Fla. 1989) (agreeing with Spiegel).⁷ Although a number of federal district courts in Florida have found jurisdiction to award fees on similar facts and agreed with Prime that attorneys’ fees are, in general, collateral to the merits, all did so in a conclusory manner and did not address the apparent conflict with Jet Charter. See Landmark Equity Fund II, LLC v. Residential Fund 76, LLC, No. 13-20122-CIV-HUNT, 2014 WL 12603175, at *1 (S.D. Fla. May 12, 2014) (awarding fees under a contractual provision); Oliva v. NBTY, Inc., No. 11-80850-CIV-

Co. of Pittsburgh v. F. Vicino Drywall, Inc., No. 10-60273-CV- GOLD/McALILEY, 2011 WL 13214289, at *3 (S.D. Fla. Aug. 22, 2011) (awarding fees under § 627.428). Even though Jet Charter was decided in a different context, its reasoning applies here. Because Jet Charter explicitly states that an award of fees under § 627.428 is integral to the merits of the claim—and relies on Florida law in doing so—the Court should follow that precedent.⁸

2. The cases Prime relies on are distinguishable from

its facts and this case.

The cases cited by Prime fail to establish jurisdiction to award fees here because none of them examined a federal court’s ability to award fees under a

The first two cases cited by Prime concern an award of fees under federal law. See Willy v. Coastal Corp., 503 U.S. 131, 138 (1992) (deeming Rule 11 sanctions collateral to the merits); Moore v. Permanente Med. Grp., Inc., 981 F. 2d 443, 445 (9th Cir. 1992) (deeming fees under 28 U.S.C. § 1447(c) collateral to the merits in a diversity action).⁹ That these cases found jurisdiction to award fees comports with jurisdictional principles because even if a federal court loses diversity jurisdiction over a state claim, it retains an independent grant of jurisdiction to award fees under an applicable federal statute or rule.

See Tomac, 687 F. Supp 2d at 667 (“The exception . . . is when the fee statute itself contains an independent grant of jurisdiction.”); see also, e.g., 28 U.S.C. § 1927 (allowing an award of fees when an attorney “multiplies the proceedings

Notably, the Eighth Circuit, in a published decision, has questioned Prime’s reasoning. See Dakota, Minn. & E. R.R. v. Schieffer, 715 F. 3d 712, 713 n.2 (8th Cir. 2013). Schieffer involved a contract dispute. Id. at 712. After finding no federal question or diversity jurisdiction, the district court dismissed the claim and declined to award attorneys’ fees under a contractual provision. Id. Although Schieffer is not entirely on point with our facts, its rejection of Prime’s reasoning is instructive: “We find [Prime] unpersuasive, as it relied on cases involving a court’s jurisdiction to award sanctions under Rule 11 and 28 U.S.C. § 1447(c).” Id. at 713 n.2. Further, the Eighth Circuit stated:

As there is neither diversity nor federal question jurisdiction over Schieffer’s contract-based claim for attorneys’ fees and expenses, federal jurisdiction must be based upon the district court’s supplemental jurisdiction under 28 U.S.C. § 1367. But courts have uniformly held that, when original federal jurisdiction is wholly lacking (as here), this statute confers no discretion to exercise supplemental jurisdiction over remaining state-law claims. Id. at 713; see also Toste Farm Corp. v. Hadbury, Inc., 70 F. 3d 640, 646 n.11 (1st Cir. 1995) (“Supplemental jurisdiction . . . cannot survive the jurisdictional failure of the original claim.”). Although the Ninth Circuit has not addressed Prime, it has impliedly disagreed with its reasoning. See Skaff v. Meridien N. Am. Beverly Hills, LLC, 506 F. 3d 832, 837 (9th Cir. 2007) (“A court that lacks jurisdiction at the outset of the case lacks the authority to award attorneys’ fees.”); Smith v. Brady, 972 F. 2d 1095, 1097 (9th Cir. 1992) (“Standing is a jurisdictional issue, and if the district court lacked jurisdiction over the underlying suit, ‘it had no authority to award attorney’s fees.’”) (internal citations omitted) (quoting Latch v. United States, 842 F. 2d 1031, 1032 (9th Cir. 1988)). Further, a district court in Texas explicitly disagreed with Prime, and did so in a detailed manner. See Tomac, 687 F. Supp. 2d at 669–71. Tomac’s facts are nearly identical to those here and involve the same Florida attorneys’ fees statute. See id. at 666, 669. In Tomac, the court dismissed an insurer’s declaratory action for lack of subject matter jurisdiction because it failed to satisfy the amount in controversy requirement. Id. at 666. Subsequently, the insured moved for attorneys’ fees under both Texas law and § 627.428, Florida Statutes. Id. at 669. Like the Eighth Circuit in Schieffer, the Tomac court pointed out that Prime relied on cases “in which fees were awarded pursuant to Federal Rule 11 and [28 U.S.C.] Section 1447(c).” Id. In declining to follow Prime, the court noted that it “is not persuaded that the propriety of awarding fees pursuant to federal law can serve as the jurisdictional basis for federal enforcement of state feeshifting provisions.” Id. Finally, the court stated, “[o]utside of the exercise of valid diversity jurisdiction, state laws have no bearing upon the authority of federal courts, and therefore cannot bestow fee-shifting power.” Id. at 668; see also Archer v. Silver State Helicopters, LLC, No. 06CV1229 JAH(RBB), 2007 WL 4258237, at *1 (S.D. Cal. Dec. 3, 2007) (examining a California fee shifting statute similar to § 627.428 and declining to award fees after dismissing for lack of diversity jurisdiction because “the general rule is that a district court lacks jurisdiction to award attorney’s fees where it lacks subject matter jurisdiction over the underlying action”).

“It is abundantly clear that, when a court is validly exercising diversity jurisdiction, it can and should award attorneys’ fees pursuant to state substantive law. However, few courts have directly addressed the precise question of whether a [federal] court may do the same in cases where it lacks lawful diversity jurisdiction.” Tomac, 687 F. Supp. 2d at 667. The elusiveness of caselaw and secondary sources addressing this issue makes it somewhat novel. However, the few courts that have squarely addressed it have pointed out—accurately, this Court believes—that Prime’s holding is incorrect. While this Court is reluctant to disagree with an Eleventh Circuit decision, even a non-binding one, a federal court may not act without subject matter jurisdiction. I find no subject matter jurisdiction to award fees under § 627.428, Florida Statutes, where the Court has dismissed the case for want of subject matter jurisdiction.

B. The Court Will Award Costs

While the Court lacks jurisdiction to award attorneys’ fees under state law, it retains jurisdiction to award costs under federal law. See Stavrakis v. Underwriters at Lloyd’s London, No. 8:16-cv-2343-EAK-JSS, 2018 WL 4908104,

at *4 (M.D. Fla. June 29, 2018) (“Even in diversity cases . . . the taxation of costs by a federal court is controlled by federal rather than state law.”). In cases where a district court dismisses a suit for “want of jurisdiction,” 28 U.S.C. § 1919 controls the award of costs. See Ali v. Prestige Window & Door

Installation, LLC, 626 F. Supp. 2d 1259, 1261 (S.D. Fla. 2009). “Unlike Rule 54(d), § 1919 is permissive, allows the district court to award ‘just costs,’ and does not turn on which party is the ‘prevailing party.’” Miles v. California, 320 F. 3d 986, 988 n.2 (9th Cir. 2003). When proceeding under § 1919, the Court is not bound by the costs enumerated in 28 U.S.C. § 1920, but that list of costs can be a useful guide. See Callicrate v. Farmland Indus., Inc., 139 F. 3d 1336, 1339 (10th Cir. 1998). Maronda and JROD request $38.25 and $164.25 in costs, respectively. These totals include printing costs and the cost to obtain certain documents. The Court finds an award of costs just in this situation and grants Defendants’ motions as to costs. Accordingly, it is hereby ORDERED: 1. Maronda Homes, Inc. of Florida’s Motion for Attorneys’ Fees, Legal

Assistant Fees, and Costs (Doc. 53) is DISMISSED without prejudice in part and GRANTED in part. a. Maronda’s motion for attorneys’ fees is DISMISSED without prejudice for lack of subject matter jurisdiction.

b. Maronda’s motion for costs in the amount of $38.52 is GRANTED. 2. JROD Plastering LLC’s Motion for Entitlement to Attorneys’ Fees, Legal Assistant Fees, and Costs (Doc. 54) is DISMISSED without prejudice in part and GRANTED in part.

a. JROD’s motion for attorneys’ fees is DISMISSED without prejudice for lack of subject matter jurisdiction. b. JROD’s motion for costs in the amount of $164.25 is GRANTED. 3. The Court assumes that Southern-Owners will voluntarily pay the costs no later than May⁸, 2020. If not, then Defendants may move to have a cost judgment entered. DONE AND ORDERED in Jacksonville, Florida this 25th day of March, 2020.

TIMOTHY J. CORRIGAN

United States District Judge mbd Copies to: Counsel of record