Opinion
No. 3D19-1969
08-26-2020
Robert CORNFELD, etc., Appellant, v. PLAZA OF THE AMERICAS CLUB, INC., etc., et al., Appellees.
Saul Ewing Arnstein & Lehr LLP, and Franklin L. Zemel, Alan R. Poppe, and Ariel R. Deray (Fort Lauderdale), for appellant. Vernis & Bowling of Miami, P.A., and Evelyn Greenstone Kammet, for appellees.
Saul Ewing Arnstein & Lehr LLP, and Franklin L. Zemel, Alan R. Poppe, and Ariel R. Deray (Fort Lauderdale), for appellant.
Vernis & Bowling of Miami, P.A., and Evelyn Greenstone Kammet, for appellees.
Before EMAS, C.J., and LOGUE and SCALES, JJ.
EMAS, C.J.
INTRODUCTION
Robert Cornfeld appeals the trial court's final judgment awarding certain costs to Plaza of the Americas Club ("the Club"), following the involuntary dismissal of Cornfeld's shareholder derivative action. Cornfeld contends, and we agree, that the trial court erred in awarding investigative costs pursuant to Florida Rule of Civil Procedure 1.420(d) or section 57.041, Florida Statutes (2016). We reverse, and hold that entitlement to an award of investigative costs following an involuntary dismissal of Cornfeld's shareholder derivative action was controlled by the more specific provisions of section 617.07401(5), Florida Statutes (2016), and no entitlement to an award of costs under that section was found by the trial court.
FACTS AND PROCEDURAL HISTORY
The relevant facts are largely undisputed. The Club is a not-for-profit corporation that owns and operates a condominium complex. This case was initiated by Cornfeld, a unit owner, as a shareholder derivative action, pursuant to section 617.07401, against the Club and several individual directors of the Club. Cornfeld sought injunctive relief, alleging multiple breaches of fiduciary duties.
The Club filed a motion to dismiss the shareholder derivative claim. The trial court deferred ruling and stayed the action for ninety days, ordering that an independent person be appointed to conduct an investigation of the allegations of Cornfeld's complaint pursuant to section 617.07401(3) which provides:
The court may dismiss a derivative proceeding if, on motion by the corporation, the court finds that one of the groups specified in paragraphs (a)-(c) has made a good faith determination after conducting a reasonable investigation upon which its conclusions are based that the maintenance of the derivative suit is not in the best interests of the corporation. The corporation has the burden of proving the independence and good faith of the group making the determination and the reasonableness of the investigation. The determination shall be made by:
(a) A majority vote of independent directors present at a meeting of the board of directors, if the independent directors constitute a quorum;
(b) A majority vote of a committee consisting of two or more independent directors appointed by a majority vote of independent directors present at a meeting of the board of directors, whether or not such independent directors constitute a quorum; or
(c) A panel of one or more independent persons appointed by the court upon motion by the corporation.
Thereafter, an independent investigator was appointed. She completed her investigation and issued a report, concluding that maintenance of the derivative action was not in the Club's best interest. Following a hearing, the trial court adopted the investigator's report and dismissed the derivative action with prejudice. This court affirmed. See Cornfeld v. Plaza of the Americas Club, Inc., 273 So. 3d 1096 (Fla. 3d DCA 2019).
The Club later sought an award of attorney's fees and costs expended in the trial court, including the cost of the independent investigator and her investigation ("the investigative costs"). The Club alleged it was entitled to attorney's fees and costs (including the investigative costs) on three alternative bases: section 718.303(1) ; Article 8, section 3 of the Bylaws of the Club ; and section 617.07401(5). The trial court entered an order granting entitlement to attorney's fees and costs, finding that the Club is a prevailing party under Fla. Stat. 718.303, and alternatively, the appellate court has already found that Defendants are the prevailing party and thus entitled to fees."
It is undisputed that section 718.303(1) could not serve as a basis for an award of costs; by its terms, that statute provides that a prevailing party in certain actions "is entitled to recover reasonable attorney's fees" but contains no provision for an award of costs.
We reject the Club's contention that Article 8, section 3 of the Bylaws could serve as a basis for the costs award in this shareholder derivative action. That Bylaw provides for an award of attorney's fees and costs to a prevailing party "[i]n any proceeding arising because of an alleged default by a unit owner," a scenario not presented by the instant action.
Cornfeld does not challenge that portion of the order finding entitlement to and awarding attorney's fees.
Following the entitlement order, Cornfeld asserted no objection to the reasonableness and amount of attorney's fees incurred by the Club. However, he asserted that the Club was not entitled to recover the investigative costs, as these were neither an attorney's fee nor a taxable cost under the uniform guidelines. In response, the Club asserted that it was entitled to recover the investigative costs pursuant to Florida Rule of Civil Procedure 1.420(d) and section 57.041. Cornfeld countered that the Club was not entitled to an award of the investigative costs in this shareholder derivative action unless the Club first established (and the trial court made a finding) "that the proceeding was commenced without reasonable cause." See § 617.07401(5). Nonetheless, the trial court granted the Club's motion and entered an order awarding costs, including investigative costs of $125,021.75 to be paid by Cornfeld to the firm that had conducted the investigation. This appeal followed.
See Fla. R. Civ. P., App. II, "Statewide Uniform Guidelines for Taxation of Costs in Civil Actions" most recently amended in 2014, see In re Amendments to Florida Rules of Civil Procedure, 131 So. 3d 643 (Fla. 2013).
Florida Rule of Civil Procedure 1.420(d) provides in pertinent part:
Costs in any action dismissed under this rule shall be assessed and judgment for costs entered in that action, once the action is concluded as to the party seeking taxation of costs. When one or more other claims remain pending following dismissal of any claim under this rule, taxable costs attributable solely to the dismissed claim may be assessed and judgment for costs in that claim entered in the action, but only when all claims are resolved at the trial court level as to the party seeking taxation of costs.
Section 57.041(1), Florida Statutes (2016) provides:
The party recovering judgment shall recover all his or her legal costs and charges which shall be included in the judgment; but this section does not apply to executors or administrators in actions when they are not liable for costs.
The order on appeal included a separate sum of $3,479.93 awarded to the Club's counsel for other costs incurred. Cornfeld has not challenged that aspect of the order.
STANDARD OF REVIEW
As a general rule, a "trial court's award of costs is reviewed by appellate courts for an abuse of discretion." Albanese Popkin Hughes Cove, Inc. v. Scharlin, 141 So. 3d 743, 745 (Fla. 3d DCA 2014). However, to the extent the issues involve statutory construction or the legal determination of whether and what costs may be awarded at all, our standard of review is de novo. See Frosti v. Creel, 979 So. 2d 912 (Fla. 2008) ; Magdalena v. Toyota Motor Corp., 253 So. 3d 24 (Fla. 3d DCA 2017).
ANALYSIS
On appeal, Cornfeld argues that the trial court erred in finding entitlement and awarding the investigative costs as a "taxable cost" under the general provisions of Rule 1.420 and section 57.041, because the award of such costs in a shareholder derivative action is instead governed by the more specific provisions of section 617.07401(5), which states:
Upon termination of the proceeding, the court may require the plaintiff to pay any defendant's reasonable expenses, including reasonable attorney's fees, incurred in defending the proceeding if it finds that the proceeding was commenced without reasonable cause .
(Emphasis added.)
This statute is part of a comprehensive statutory scheme established by the Florida Legislature in Chapter 617, entitled "Corporations Not For Profit." Section 617.07401(5) differs significantly from other, more conventional "prevailing party" provisions in that: (1) it applies only to a prevailing defendant; (2) even if a defendant prevails, that party is not entitled to an award of reasonable expenses unless the trial court first finds "that the proceeding was commenced without reasonable cause;" and (3) the ultimate decision to award reasonable expenses is permissive, not mandatory: even if a defendant prevails and the court finds that the proceeding was commenced without reasonable cause, the statute gives the trial court the discretion to deny an award of reasonable expenses to the prevailing defendant.
By contrast, the very next subsection of the statute provides for an award of reasonable expenses to a prevailing plaintiff in a shareholder derivative proceeding:
The court may award reasonable expenses for maintaining the proceeding, including reasonable attorney's fees, to a successful plaintiff or to the person commencing the proceeding who receives any relief, whether by judgment, compromise, or settlement, and may require that the person account for the remainder of any proceeds to the corporation; however, this subsection does not apply to any relief rendered for the benefit of injured members only and is limited to a recovery of the loss or damage of the injured members.
§ 617.07401(6), Fla. Stat. (2016) (emphasis added).
It's important to note that this statute treats prevailing plaintiffs and prevailing defendants differently, reflecting policy considerations and legislative judgment regarding the circumstances in which one party or the other may be awarded the reasonable expenses of a shareholder derivative proceeding. There can be no question that section 617.07401(5) applies to the instant shareholder derivative proceeding, and unambiguously requires certain conditions be met before the Club is entitled to an award of investigative costs as a reasonable expense of the proceeding. Because the trial court did not find that the proceeding was commenced without reasonable cause, the Club is not entitled to an award of investigative costs under section 617.07401(5).
To the extent that Florida Rule of Civil Procedure 1.420(d) is inconsistent with section 617.07401(5) regarding entitlement to an award of costs, the statute controls. See Timmons v. Combs, 608 So. 2d 1 (Fla. 1992) (providing that "the circumstances under which a party is entitled to costs and attorney's fees is substantive" and the rules of civil procedure only control procedural matters). Further, to the extent the general award-of-costs provision of section 57.041 is inconsistent with the more specific provision of section 617.07401(5), which addresses with particularity the award of costs in shareholder derivative actions, the more specific statutory provision controls. See Morales v. Rosenberg, 919 So. 2d 476, 480 (Fla. 3d DCA 2005) (holding, in the same context of a defendant's motion to tax costs in a shareholder derivative action, that where "a civil action is governed by a specific statute which contains a more particular provision concerning the taxation of costs, the more particular provision controls") (citing 5 Fla. Prac., Civil Practice § 13.3 (2004-05 ed.)) (providing: " Section 57.041 applies to all civil actions except those that are governed by specific statutes containing more particular provisions concerning the taxation of costs.")
Were the law otherwise, a prevailing defendant in a shareholder derivative action could seek an award of costs under the less demanding provisions of Rule 1.420 and section 57.041, evading the more stringent requirements of section 617.07401(5) and rendering that statutory provision meaningless. See Palm Beach Canvassing Bd. v. Harris, 772 So. 2d 1273, 1287 (Fla. 2000) (noting that "it is well settled that where two statutory provisions are in conflict, the specific statute controls the general statute" and that "related statutory provisions must be read as a cohesive whole. A statutory provision will not be construed in such a way that it renders meaningless or absurd any other statutory provision.") (citations omitted.)
CONCLUSION
We hold that the Club's entitlement to an award of investigative costs following an involuntary dismissal of Cornfeld's shareholder derivative action was controlled neither by rule 1.420(d) nor by section 57.041, but by the more specific provisions of section 617.07401(5). Because no entitlement to an award of investigative costs under that section was established by the Club or found by the trial court, we reverse that portion of the trial court's order awarding $125,021.75 for the investigator's costs, and remand for entry of an amended order that does not include an award of said costs.
Reversed and remanded.