Arbitration & Mediation

Fourth District Determines the Prevailing Party by the "Significant Issues Test" and Not By Contract

By Christopher B. Hopkins, Esq.

Can a pre-dispute contract define the "prevailing party" based upon whether someone wins 75% or more of its claim? Apparently not, according to the Fourth DCA.

It is not uncommon for contracts to indicate that the prevailing party is entitled to fees and costs. In Port-A-Weld, Inc. v. Padula & Wadsworth Construction, Inc., the contract was more specific, indicating: "a party shall not be considered as a 'prevailing party' if its recovery shall be less than 75% of its claim amount." Unique idea, yes. But don't scribble that clause down, at least if you have disputes in the Fourth District.

The case involved a dispute between contractor (Padula) and subcontractor (Port A Weld) where the subcontractor sued for payment and the contractor countersued for delays and expenses. Discussions of underlying claims, change orders, delay costs per day, and interest complicate the factual picture. Suffice it to say, the appellate court determined that the subcontractor won about 60-80% of its claim.

The Panel (Taylor, Shahood and Levin) confirmed that the counterclaim was compulsory and that, while other districts have recognized there can be "ties" in such situations, the Fourt District maintains that, in breach of contract cases, only one party can prevail (those other districts appear to be the Second, Third and Fifth). That said, the Panel held this was not even close to being a tie since the subcontractor was entitled to most of its contract price claim. If the Panel is right, then, this decision is not grounds for Supreme Court review.

The Florida Supreme Court, in 1992, held that the "fairest test to determine who is the prevailing party is to allow the trial judge to determine from the record which party has in fact prevailed on the significant issues tried before the court." Using that test, the subcontractor won the day but this does not factor in the contractual "75% or more" definition of prevailing party.

As a matter of first impression, the Fourth DCA held that the "significant issues" test cannot be modified by contract due to public policy, case law, and statutory interpretation. Again, if it is true that this is an issue of first impression, this case likely does not have grounds to travel to the Supreme Court. Yet.

Full post as published by Florida Arbitration Law on May 27, 2008 (boomark / email).