Creditor Attorney Fees in a Florida Fraudulent Transfer Action

Florida’s fraudulent transfer statute does not authorize an award of attorney fees. Chapter 726 of the Florida Statutes lists the remedies available to a creditor who proves a fraudulent transfer, but fee-shifting is not among them. Under Chapter 726 alone, a creditor who unwinds a debtor’s transfer cannot recover the legal costs of prosecuting the fraudulent transfer claim.

The absence of fee-shifting in Chapter 726 reduces the financial risk of contesting a creditor’s fraudulent transfer allegations. Fees can still shift once the creditor holds a judgment. In proceedings supplementary, the court may order the judgment debtor to pay the creditor’s reasonable attorney fees. Two Florida appellate courts also let a creditor take a money judgment against the transferring debtor.

Why Chapter 726 Does Not Allow Fee Recovery

Florida follows the “American Rule” on attorney fees. Each side bears its own legal costs unless a statute, contract, or court rule expressly authorizes fee-shifting. Chapter 726, the Florida Uniform Fraudulent Transfer Act (FUFTA), contains no such provision.

Creditors have tried to work around this limitation by relying on the statute’s catch-all remedy. Section 726.108(1)(c)(3) authorizes courts to grant “any other relief the circumstances may require” in a fraudulent transfer action. Some creditors have argued that this open-ended language permits an award of attorney fees and even punitive damages.

The Eleventh Circuit Court of Appeals rejected this argument in SE Property Holdings, LLC v. Welch (2023). The court held that the catch-all provision was intended to give effect to the statute’s other equitable remedies, not to create independent grounds for monetary awards. Relying on the Florida Supreme Court’s decision in Freeman v. First Union National Bank (2004), the Eleventh Circuit reasoned that FUFTA was designed as a creditor remedy statute. Adding attorney fees or punitive damages would expand FUFTA beyond its legislative purpose.

A federal district court in Florida reached the same conclusion in Wesolek v. Wesolek (2020), striking a creditor’s request for attorney fees under Chapter 726. The court applied the American Rule and found no express fee provision in FUFTA for fraudulent transfer actions.

Can a Creditor Recover Punitive Damages in a Fraudulent Transfer Action?

No Florida appellate court has upheld a punitive damages award under Chapter 726. The Eleventh Circuit in SE Property Holdings noted a split among states on whether their versions of the Uniform Fraudulent Transfer Act permit punitive damages, but concluded that Florida’s Supreme Court would reject them. Punitive damages are not mentioned in FUFTA and are not among the equitable remedies the statute enumerates.

A debtor whose transfer is set aside for actual intent to hinder creditors faces no fine or criminal penalty under Chapter 726, but can still be ordered to pay money.

The First and Fourth District Courts of Appeal, in McCalla v. E.C. Kenyon Construction (2016) and Hansard Construction v. Rite Aid (2001), held that the statute permits a money judgment against the transferring debtor and the transferee alike. Applying Florida law, the Eleventh Circuit predicted the Florida Supreme Court would bar a judgment against the transferor, so a federal court may rule differently. The judgment for the transfer itself cannot exceed what the creditor is owed, though prejudgment interest and a fee award against the judgment debtor in proceedings supplementary add to the total.

Attorney Fees Under Section 57.115 in Proceedings Supplementary

Section 57.115 permits a court to award a judgment creditor reasonable attorney fees and costs incurred while executing on a judgment. The court considers whether the judgment debtor attempted to avoid or evade payment.

This provision applies to the general judgment collection process, not to fraudulent transfer claims alone. A creditor pursuing proceedings supplementary to execute on a judgment may seek fees under this statute. The fee award is discretionary.

Courts have limited the reach of Section 57.115. In Paz v. Hernandez (Fla. 3d DCA 1995), the court held that a creditor who collects by garnishment rather than by execution cannot recover fees under this statute. The statute is more likely to support fee awards where the creditor undertook extensive collection efforts beyond routine garnishment.

A debtor who cooperates with post-judgment discovery and does not actively obstruct collection faces less exposure to fee awards under Section 57.115. A debtor who hides assets, lies on financial disclosure forms, or repeatedly evades service gives the court a reason to award fees.

Contractual Fee-Shifting and Its Limits

Some underlying judgments include attorney fee provisions from the original contract or statute that gave rise to the debt. A contract clause awarding fees to the prevailing party in any action to enforce the agreement might be broad enough to cover post-judgment collection activity, including fraudulent transfer litigation.

Whether a contractual fee provision extends to a fraudulent transfer action depends on the language of the clause. A provision covering fees incurred “to enforce this agreement” or “to collect amounts due” may reach collection-related litigation. A narrower provision tied to breach of contract claims likely does not extend to a separate fraudulent transfer proceeding.

Florida’s reciprocal fee statute, Section 57.105(7), also applies. If a contract allows fees to one party, a court may allow the other party a reasonable fee when that party prevails. A debtor who successfully defends against a fraudulent transfer claim brought by a creditor holding a contract with a fee provision may be able to recover defensive fees.

Fee-Shifting in Bankruptcy Fraudulent Transfer Actions

Federal bankruptcy proceedings have separate fee-shifting rules. Section 548(c) of the Bankruptcy Code provides a defense for transferees who received property in good faith and for value, but it does not independently authorize fee awards.

The bankruptcy court’s general equitable powers and the Bankruptcy Code’s provisions for sanctions against bad-faith conduct can produce fee-shifting in extreme cases. A debtor who files for bankruptcy and then obstructs the trustee’s investigation into pre-petition transfers may face sanctions that include the trustee’s attorney fees.

A transfer challenged in bankruptcy subjects the debtor to federal court procedures, where the fee-shifting rules differ from those in Florida state court. The statute of limitations for bankruptcy fraudulent transfers follows its own rules, and a trustee bringing a creditor’s Chapter 726 claim gets no more time than the creditor had.

How the Fee Rules Affect Settlement

In a fraudulent transfer claim filed as its own lawsuit, a creditor bears its own legal costs whatever the outcome. A creditor holding a $200,000 judgment who spends $50,000 prosecuting a fraudulent transfer claim can recover, at most, the original judgment amount plus prejudgment interest. The $50,000 comes out of the creditor’s recovery unless the claim was brought in proceedings supplementary, where the court may shift fees to the judgment debtor. When the transferred assets are modest or the legal issues are contested, the math may favor settlement over continued litigation.

Fee exposure can still arise outside Chapter 726. Collection activity under proceedings supplementary, contractual fee provisions in the underlying debt instrument, and bankruptcy proceedings all create potential fee liability. Effective asset protection planning accounts for these separate fee risks when evaluating the consequences of a transfer that may later be challenged.