In Lemartec Corp. v. E. Coast Metal Structures Corp., a commercial owner hired a contractor to construct a project consisting of three buildings: an office building; a molding building; and a pulping building. 2024 WL 2178312, at *1 (Fla. 4th DCA May 15, 2024). The contractor issued drawings to a subcontractor and provided three Letters of Intent (“LOIs”), one for each building, listing a lump sum price for each. Unlike the LOIs, each of the subcontracts included a cross-default provision providing that if the subcontractor breached any of the subcontracts, the contractor could “offset all costs to complete the Work from this Subcontract Agreement and/or other contracts … to recompense the Contractor.” Id. at *1.

The subcontractor completed all work except for installing the stairs in the pulping building. The owner hired a new subcontractor to complete the stairs for approximately $127,000.00. The owner refused to pay the subcontractor the balance owed on the subcontracts, including the retainages on the molding and office building subcontracts, pursuant to the cross-default provisions.

Due to the refusal to pay, the subcontractor sued the commercial owner and general contractor seeking payment of the contract balances and attorney fees pursuant to the prevailing party fee provision in the subcontracts. In response, the owner and contractor moved for attorney fees on the same basis and for a lapsed proposal for settlement pursuant to Florida Statute § 768.79. The trial court ultimately concluded the subcontractor to be the prevailing party because it recovered a money judgment, while the commercial owner and general contractor “failed on their affirmative defenses to entirely avoid payment to [subcontractor] altogether.” Id. at *4. The trial court also rejected the commercial owner and general contractor’s request for attorney fees pursuant to Florida Statute § 768.79 because it was allegedly not propounded in good faith. In its final judgment, the trial court awarded the subcontractor $446,628.65 in attorney’s fees and costs.

On appeal, the defendants argued the trial court abused its discretion when it determined that the subcontractor prevailed on the significant issues in the litigation and erred in determining their proposal for settlement was not in good faith. The Fourth District Court of Appeals agreed.

In reaching its holding on who was the prevailing party, the appellate court determined the trial court “ignored the fact that Defendants prevailed on all but one of the counts” and prevailed “on the significant issues” of the case. Id. at *4-5. The appellate court clarified that the trial court conflated being a prevailing party with merely recovering a judgment. In other words, “the mere fact that a party recovers an affirmative judgment does not control the prevailing party determination.” Id. at *5. As to the proposal for settlement, the appellate court determined the defendants acted in good faith because they provided a “reasonable foundation upon which they based their offer.” Id. at *9. As a result, the appellate court reversed and remanded in favor of the owner and general contractor.