William B. Mills v. Vero Beach Country Club, Inc.

• Court: Court of Appeals for the Eleventh Circuit
• Decided: October 14, 2020
• Docket: 20-11762
• Status: Unpublished

Opinion

USCA11 Case: 20-11762 Date Filed: 10/14/2020 Page: 1 of 9

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT ________________________

No. 20-11762 Non-Argument Calendar ________________________

D.C. Docket Nos. 8:19-cv-81476-KAM; 15-bk-29068-EPK

In re: WILLIAM B. MILLS, Debtor. ____________________________________________________________

WILLIAM B. MILLS, MARY JANE MILLS,

Plaintiffs - Appellants,

versus

VERO BEACH COUNTRY CLUB, INC.,

Defendant - Appellee.

________________________

Appeal from the United States District Court for the Southern District of Florida ________________________ (October 14, 2020)

Before JORDAN, ANDERSON, and EDMONDSON, Circuit Judges.

PER CURIAM: USCA11 Case: 20-11762 Date Filed: 10/14/2020 Page: 2 of 9

Defendants William and Mary Jane Mills appeal the district court’s order

affirming the bankruptcy court’s denial of Defendants’ motion for a determination

of entitlement to attorney’s fees under Fla. Stat. § 57.105(1). No reversible error

has been shown; we affirm.1

Background:

This appeal arises from a Chapter 7 bankruptcy proceeding filed by William

Mills. As part of the bankruptcy proceedings, the bankruptcy court placed Mills’s

solely-owned company -- Real Estate & Management Group, LLC (“REMG”) --

into receivership. A court-appointed receiver filed an adversary complaint against

Vero Beach Country Club (“VBCC”) to recover membership dues paid by REMG

on behalf of Defendants (Adversary Case No. 18-01215). The Receiver’s claims

were brought pursuant to the Florida Uniform Fraudulent Transfer Act, Fla. Stat.

§§ 726.105(1)(b) and 726.106(1).

1 VBCC’s “Motion for Award of Damages and Costs for Frivolous Appeal,” pursuant to Fed. R. App. P 38, is DENIED. Although we rule against Defendants in this appeal, Defendants’ arguments are not so “utterly devoid of merit” as to warrant Rule 38 sanctions. For background, see Parker v. Am. Traffic Solutions, Inc., 835 F.3d 1363 (11th Cir. 2016); Bonfiglio v. Nugent, 986 F.2d 1391 (11th Cir. 1993). 2 USCA11 Case: 20-11762 Date Filed: 10/14/2020 Page: 3 of 9

VBCC answered the Receiver’s complaint and also brought a third-party

complaint against Defendants, asserting claims for contractual indemnification

(“Count I”) and for common law indemnification under Florida law (“Count II”).

In response, Defendants asserted a counterclaim against VBCC for wrongful

suspension of Defendants’ membership privileges.

The Receiver and VBCC later agreed to settle the case for $25,000. The

bankruptcy court approved the settlement. The bankruptcy court also retained

jurisdiction over VBCC’s third-party claims and over Defendants’ counterclaim.

On 7 August 2019, the bankruptcy court denied VBCC’s motion for

summary judgment on Count II. The bankruptcy court explained that no Florida

court had “applied common law indemnity to a fraudulent transfer claim brought

under the Florida Uniform Fraudulent Transfer Act.” The bankruptcy court,

however, granted VBCC’s motion for summary judgment on Defendants’

wrongful-suspension counterclaim.

Meanwhile -- about two weeks before the bankruptcy court entered its

summary judgment order -- Defendants filed a civil action against VBCC in state

court, alleging wrongful suspension of their VBCC membership privileges and

seeking money damages and declaratory and injunctive relief. VBCC removed

that case to the bankruptcy court on 19 August 2019 (docketed as Adversary Case

No. 19-01329).

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The bankruptcy court then entered -- in both Case No. 18-01215 and in Case

No. 19-01329 -- an order to show cause why the court should not abstain from

hearing both matters so the claims could be adjudicated in state court. In response,

Defendants asked the bankruptcy court to abstain from considering the remaining

claim in Case No. 18-01215 and the claims in Case No. 19-01329. Defendants

also requested that both cases be remanded to state court so Defendants could seek

a jury trial. VBCC also consented to a remand.

The bankruptcy court entered an order (1) abstaining from hearing and

remanding Case No. 19-01329 to state court and (2) abstaining from hearing the

third-party complaint and counterclaim presented in Case No. 18-01215 and

dismissing the case “without prejudice to their pursuit in the State Court Matter.”

Defendants moved the bankruptcy court for a determination of their

entitlement to attorney’s fees in Case No. 18-01215, pursuant to Fla. Stat. §

57.105.2 After a hearing, the bankruptcy court denied Defendants’ motion. About

Count I, the bankruptcy court said there was no “prevailing party” for purposes of

section 57.105 because the bankruptcy court abstained and remanded the matter to

state court without addressing the merits. About Count II, the bankruptcy court

ruled that Defendants were unentitled to attorney’s fees for two reasons: (1) the

2 Defendants also moved for attorneys’ fees under 28 U.S.C. § 1447. Defendants have raised no challenge to the bankruptcy court’s denial of relief under that statute. 4 USCA11 Case: 20-11762 Date Filed: 10/14/2020 Page: 5 of 9

court’s denial of VBCC’s motion for summary judgment on Court II was no final

judgment ending the litigation and, thus, Defendants were no “prevailing party” on

that issue; and (2) VBCC’s common law indemnity claim constituted “a good faith

attempt to extend existing Florida law to fraudulent transfer matters.”

On appeal, the district court affirmed the bankruptcy court’s denial of

attorney’s fees under Fla. Stat. § 57.105. This appeal followed.

Discussion:

“When the district court affirms the bankruptcy court, we review the

bankruptcy court’s decision, reviewing its factual findings for clear error and its

legal conclusions de novo.” Roth v. Nationstar Mortg., LLC (In re Roth), 935 F.3d

1270, 1274 (11th Cir. 2019). We review for abuse of discretion the denial of a

motion for attorney’s fees under Fla. Stat. § 57.105. See Boca Burger, Inc. v.

Forum, 912 So. 2d 561, 573 (Fla. 2005).

Section 57.105(1) provides for an award of reasonable attorney’s fees to the

“prevailing party” under these circumstances:

the court finds that the losing party or the losing party’s attorney knew or should have known that a claim or defense when initially presented to the court or at any time before trial:

(a) Was not supported by the material facts necessary to establish the claim or defense; or

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(b) Would not be supported by the application of then-existing law to those material facts.

Fla. Stat. § 57.105(1). Attorney’s fees may not be awarded under section

57.105(1)(b), however, “if the court determines that the claim or defense was

initially presented to the court as a good faith argument for the extension,

modification, or reversal of existing law or the establishment of new law, as it

applied to the material facts, with a reasonable expectation of success.” Id. §

57.105(3)(a).

“The purpose of section 57.105 is to discourage baseless claims, stonewall

defenses and sham appeals in civil litigation by placing a price tag through

attorney’s fees awards on losing parties who engage in these activities.” Schwartz

v. Millon Air, Inc., 341 F.3d 1220, 1227 (11th Cir. 2003) (deciding a case under an

earlier version of section 57.105); see Wendy’s of N.E. Fla., Inc. v. Vandergriff,

865 So.2d 520, 523 (Fla. Dist. Ct. App. 2003) (stating -- after section 57.105 was

amended in 1999 -- “the central purpose of section 57.105 is, and always has been,

to deter meritless filings”). Relief under section 57.105 “must be applied carefully

to ensure that it serves the purpose for which it was intended, which was to deter

frivolous pleadings.” Wendy’s of N.E. Fla. Inc., 865 So.2d at 523.

That a party “was successful in obtaining the dismissal of the action or

summary judgment in an action” is not enough by itself to warrant relief under

section 57.105. See id. Instead, “to justify an award under section 57.105, the trial

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court must find the action to be frivolous or so devoid of merit both on the facts

and the law as to be completely untenable.” Murphy v. WISU Props., Ltd., 895

So.2d 1088, 1093-94 (Fla. Dist. Ct. App. 2004).

The bankruptcy court abused no discretion in declining to award Defendants

attorney’s fees under section 57.105. First, we accept that the bankruptcy court

could, without error, determine that no prevailing party existed on Count I. The

bankruptcy court -- triggered by Defendants’ filing in state court of a civil action

related to Defendants’ counterclaim in Case No. 18-01215 -- proposed that the

court abstain from considering the claims in both Case Nos. 18-01215 and 19-

01329. No party objected, and Defendants requested expressly that both cases be

remanded so that Defendants could pursue a jury trial. Under these circumstances

-- where the bankruptcy court raised the issue of abstention, no party objected, and

no ruling was made on the merits of Count I -- no party prevailed for purposes of

an award of attorney’s fees. 3 More important, because the bankruptcy court

abstained from considering the merits of Count I and dismissed that claim (letting

it be pursued in state court), the bankruptcy court necessarily made no frivolity

3 On appeal, Defendants characterize the bankruptcy court’s abstention order as an “involuntary dismissal” of VBCC’s claims justifying an award of attorney’s fees. The cases relied upon by Defendants (none of which deal with section 57.105) are distinguishable from the circumstances of this case. Among other things, this case involves no act by VBCC that led to the bankruptcy court’s decision to abstain. Instead, the bankruptcy court’s abstention ruling stemmed from Defendants’ own conduct: filing a separate civil action in state court and then requesting that the bankruptcy court abstain and remand to the state court. 7 USCA11 Case: 20-11762 Date Filed: 10/14/2020 Page: 8 of 9

finding for that claim. Accordingly, no award of attorney’s fees is warranted based

on Count I.

Nor did the district court abuse its discretion in denying attorney’s fees

based on Count II. Although the bankruptcy court determined that common law

indemnification is inapplicable to claims made under Florida’s Uniform Fraudulent

Transfer Act, the bankruptcy court noted the issue was a matter of first impression.

In asserting its common law indemnification claim, VBCC relied on language in

the bankruptcy court’s decision in In re GPC Miami, Inc., 582 B.R. 534 (Bankr.

S.D. Fla. 2018). There, the bankruptcy court discussed the parties’ arguments

about the existence of a common law indemnity cause of action in the context of a

fraudulent transfer claim, but ultimately declined to decide the issue. 582 B.R. at

537-41 (concluding that “even if a claim for common law indemnity can be made

in a case arising from a fraudulent transfer claim, there are no grounds to make a

claim in this case.”). Given the language in In re GPC Miami, Inc. and the absence

of contrary rulings from the Florida courts, the bankruptcy court’s finding that

VBCC’s argument in Count II was made in good faith is not clearly erroneous.4

4 We reject Defendants’ contention that the bankruptcy court abused its discretion in finding good faith without an evidentiary hearing. Defendants never requested an evidentiary hearing. Further, the record was sufficient for the bankruptcy court to make a finding about whether VBCC’s legal argument was made in good faith. 8 USCA11 Case: 20-11762 Date Filed: 10/14/2020 Page: 9 of 9

VBCC’s argument in Count II thus fell within section 57.105(3)’s “good faith”

exception.

The bankruptcy court abused no discretion in denying Defendants’ section

57.105 motion for attorney’s fees; we affirm the district court’s decision.

AFFIRMED.