26
Fla. L. Weekly Fed. C987aTop of Form

Insurance
— Settlement agreement — Enforceability against insurer — Fraud and
collusion — Settlement agreement whereby insured homeowners association
consented to entry of judgment against it on homeowner’s claim for attorney’s
fees in amount of homeowner’s choosing so long as homeowner agreed never to
execute against association — District court properly applied framework set
forth in Coblentz v. American Surety Co. to determine whether settlement
agreement could be enforced against insurer — Relevant inquiry for determining
whether to enforce Coblentz agreement against an insurer that wrongfully
denied coverage and refused to defend is whether agreement was produced through
fraud or collusion, not whether insurer had notice of settlement and
opportunity to object to it — District court’s determination that settlement
agreement was negotiated in bad faith rested on substantial evidence

ORLINE
SIDMAN, FLORIDA POLICYHOLDERS, LLC, Plaintiffs-Appellants, v. TRAVELERS
CASUALTY AND SURETY, Defendant-Appellee. 11th Circuit. Case No. 15-15197.
November 17, 2016. Appeal from the U.S. District Court for the Middle District
of Florida (No. 8:12-cv-02928-RAL-EAJ).

(Before
JILL PRYOR, Circuit Judge, and SCHLESINGER,* District Judge.**)

(JILL
PRYOR, Circuit Judge.) The issue before us is whether Travelers Casualty and
Surety is bound by a settlement agreement between its insured, Culbreath Isles
Property Owners Association, and Phyllis Kirkwood, settling Kirkwood’s claim
for attorney’s fees against Culbreath but stipulating that Kirkwood would not
enforce the resulting consent judgment against Culbreath. Under Florida law,
such agreements are unenforceable against insurers if tainted by fraud or
collusion. To determine whether fraud or collusion exists, we look to whether
the settlement amount was unreasonable and whether the negotiations were
conducted in bad faith. Substantial evidence exists to support the district
court’s determination, after a bench trial, that the negotiations were
conducted in bad faith when Culbreath agreed to stipulate to a judgment in an
amount of Kirkwood’s choosing so long as Kirkwood agreed never to execute
against it. We thus affirm the district court’s judgment that the settlement
agreement cannot be enforced against Travelers.

I.
BACKGROUND

A.
Factual Background

This
case arises out of Culbreath’s attempts to enforce its restrictive covenants
against Kirkwood, a homeowner in the Culbreath Isles neighborhood. Culbreath
sued Kirkwood in Florida state court for breach of the community’s restrictive
covenants, alleging that she had failed to maintain her lawn and landscaping.
In her answer, Kirkwood brought a counterclaim for slander of title and also
demanded her attorney’s fees and costs, as permitted under Florida Statute §
720.305(1),1 if she prevailed in the lawsuit.

Culbreath
notified Travelers, its insurer, of Kirkwood’s counterclaim. Travelers provided
counsel to defend the counterclaim under a reservation of rights. Because
Travelers’ coverage counsel represented Culbreath only with respect to the
slander of title claim, a separate attorney paid and retained by Culbreath
continued to represent the association on its claim against Kirkwood for
violating the restrictive covenants.

The
state court granted summary judgment to Kirkwood. Kirkwood then filed a motion
seeking her attorney’s fees and costs under § 720.305. Culbreath notified
Travelers that Culbreath was potentially liable to Kirkwood for her fees and
requested coverage under the policy. Travelers denied Culbreath’s request to
defend and disclaimed coverage with respect to Kirkwood’s attorney’s fees
claim.

Culbreath
and Kirkwood began to litigate the attorney’s fees issue. Initially, Mark
Buell, Kirkwood’s attorney, advised Culbreath that his attorney’s fees were
$87,175, and that he would seek a multiplier of two to two-and-a-half on any
fee awarded. Culbreath contested this amount, retaining an expert who opined
that the requested fee was unreasonable and unnecessary. Based on the expert’s
opinions, Culbreath’s attorney was prepared to litigate the issue in court.

At
the same time, Culbreath and Kirkwood explored the prospect of settling the
attorney’s fees claim. Culbreath kept Travelers informed of the ongoing
settlement negotiations and sought to convince Travelers to provide coverage.
When Culbreath and Kirkwood were close to an agreement, Culbreath informed
Travelers’ attorney that it was prepared to agree to a $295,000 judgment on
Kirkwood’s attorney’s fee claim. Travelers’ attorney neither objected nor
advised Culbreath against agreeing to the judgment. Travelers has acknowledged
that it knew prior to the settlement agreement’s execution of Culbreath and
Kirkwood’s settlement discussions and the specific terms discussed.

Kirkwood
and Culbreath entered into a Joint Stipulation and Agreement (the “settlement
agreement”) in which Culbreath agreed to (1) entry of a $295,000 consent
judgment against it for “trial court and appellate fees and costs,” payable to
Buell & Elligett, P.A. (“Buell”), the law firm representing Kirkwood and
(2) assignment to Kirkwood and/or Buell of the proceeds from any and all
actions, causes of actions, or rights Culbreath had against Travelers, in
exchange for Kirkwood’s agreement not to execute the judgment against Culbreath.
Joint Stipulation and Agreement at 3 (Doc. 67-14).2 Buell signed the settlement agreement
on Kirkwood’s behalf. At the time, Kirkwood was incapacitated due to a stroke.
Soon thereafter, Orline Sidman was appointed her guardian. The state court
approved the settlement agreement and entered the Consent Final Judgment
without a hearing.

Kirkwood
and Culbreath also executed a promissory note that they did not disclose to the
state court in which Culbreath agreed to pay Kirkwood or Buell $50,000 less
whatever amount Kirkwood or Buell could obtain from Travelers; if they
succeeded in obtaining $50,000 or more, Culbreath would owe them nothing. Buell
again signed on Kirkwood’s behalf. After the state court entered judgment,
Culbreath assigned its rights against Travelers under its insurance policy to
Kirkwood and/or Buell.

B.
Procedural History

Sidman,
on behalf of Kirkwood, brought a third-party breach of contract suit in state
court against Travelers.3 Sidman alleged that Travelers
breached the contract of insurance with Culbreath when Travelers refused to
defend and indemnify Culbreath with respect to Kirkwood’s claim for attorney’s
fees and that Culbreath had assigned its right to proceed against Travelers to
Kirkwood. Travelers removed the action to federal court.

Travelers
moved to dismiss the action for failure to join an indispensable party,
asserting that Buell should have been joined because Culbreath had assigned its
right to sue Travelers to Kirkwood as well as Buell. Buell then assigned its
rights against Travelers to Florida Policyholders, LLC (“FP”), an entity
created by the Buell partners. Sidman and FP filed an amended complaint joining
FP as a plaintiff.

After
discovery, the district court granted summary judgment to Travelers on the
ground that the insurance policy did not cover Kirkwood’s claim for attorney’s
fees and costs. On appeal, we concluded that Travelers owed a duty to defend
and indemnify Culbreath with respect to Kirkwood’s claims and thus reversed and
remanded for further proceedings. Culbreath Isles Prop. Owners Ass’n, Inc.
v. Travelers Cas. & Sur. Co. of Am., 601 F. App’x 876, 879 (11th Cir.
2015).

Upon
remand, the district court held a bench trial to determine whether the
settlement agreement bound Travelers. Travelers presented evidence that, it
contended, showed the amount of Kirkwood’s attorney’s fees was unreasonable and
that Kirkwood and Culbreath colluded when they entered into the settlement
agreement.

With
respect to collusion, Travelers presented evidence about Culbreath’s attempt to
settle a similar attorney’s fees claim.4 Around the same time that it sued
Kirkwood, Culbreath also sued Richard and Nancy Lewis, also homeowners in
Culbreath Isles, for violating the restrictive covenants. Like Kirkwood, the
Lewises defeated Culbreath’s claim at summary judgment and then sought their
attorney’s fees from Culbreath. Scott Frick, the Lewises’ attorney, testified
that during settlement negotiations Culbreath offered to assent to any
attorney’s fee amount the Lewises sought, so long as they agreed not to execute
the judgment against Culbreath. Frick testified that Culbreath acknowledged it
reached a similar agreement with Kirkwood.

The
district court found that the settlement agreement was neither reasonable in
amount nor negotiated in good faith and thus could not be enforced against
Travelers. Specifically, the court determined that Culbreath “acted in bad
faith when it offered to ‘lie down’ and accept a judgment of $295,000 against
it as long as recovery of that sum came from Travelers.” Culbreath Isles
Prop. Owners Ass’n, Inc. v. Travelers Cas. & Sur. Co. of Am., 151 F.
Supp. 3d 1282, 1292 (M.D. Fla. 2015). To support this determination, the
district court found that Culbreath had allowed Kirkwood to determine the
amount of the consent judgment in exchange for an agreement to collect it only
from Travelers and not Culbreath. The court then entered judgment in favor of
Travelers and against Sidman and FP. This is Sidman and FP’s appeal.

II.
STANDARD OF REVIEW

After
a bench trial, “[w]e review the [district] court’s conclusions of law de
novo.” Fischer v. S/Y NERAIDA, 508 F.3d 586, 592 (11th Cir. 2007)
[21 Fla. L. Weekly Fed. C200a]. “The district court’s findings of fact —
including determinations of the credibility of witnesses and weight of the
evidence — will not be set aside unless they are clearly erroneous.” Id.
“Under the clear error standard, we may reverse the district court’s findings
of fact if, after viewing all the evidence, we are left with the definite and
firm conviction that a mistake has been committed.” Crystal Entm’t &
Filmworks, Inc. v. Jurado, 643 F.3d 1313, 1319-20 (11th Cir. 2011) [22 Fla.
L. Weekly Fed. C2212a] (internal quotation marks omitted). But the district
court’s findings of facts must “stand so long as they are supported by
substantial evidence.” Fischer, 508 F.3d at 592.

“In
a case in which the evidence is largely testimonial, like this one, the
district court has the advantage of observing the witnesses and evaluating
their credibility firsthand, and the standard of review imposes an especially
heavy burden on an appellant.” Id. (internal quotation marks omitted).
Stated another way, “[t]he credibility of a witness is in the province of the
factfinder and this court will not ordinarily review the factfinder’s
determination of credibility.” Crystal Entm’t, 643 F.3d at 1320.

III.
ENFORCEABILITY OF THE

SETTLEMENT
AGREEMENT

To
determine whether the district court erred in refusing to enforce the
settlement agreement, we must first decide whether the district court (1) used
the correct legal framework to determine whether the settlement agreement was
enforceable against Travelers and (2) had substantial evidence to support its
factual findings that the agreement’s amount was unreasonable and that
Culbreath and Kirkwood did not negotiate in good faith.

A.
The District Court Applied the Correct Legal Framework to Determine Whether the
Settlement Agreement Was Enforceable Against Travelers.

The
first issue we consider is whether and when, under Florida law, an insurer who
wrongly refuses to defend its insured is bound by a settlement agreement that
the insured negotiates permitting the injured party to collect the judgment
only from the insurer.

1. Florida Courts Construe Coblentz
as Preventing Enforcement Against an Insurer of a Settlement Agreement That
Is Unreasonable in Amount or Produced through Bad Faith.

Sidman
and FP rely on Coblentz v. American Surety Co., 416 F.2d 1059 (5th Cir.
1969), to argue that Travelers is so bound. In Coblentz, our predecessor
court recognized that under Florida law, an insurer who wrongly refused to
defend its insured is bound by the insured’s settlement agreement unless the
agreement was obtained through “fraud or collusion,” even though the insurer
did not appear in the underlying action. Id. at 1062-63.5 Because there was no allegation that
the settlement in Coblentz was obtained by fraud or collusion, the court
did not address how to determine when fraud or collusion exists.

Florida
courts have recognized the difficulty inherent in determining whether a Coblentz
agreement was obtained by fraud or collusion. To illustrate this
difficulty, in Steil v. Florida Physicians’ Insurance Reciprocal, the
Florida court contrasted a settlement agreement that permits collection only
against the insurer with a settlement agreement where the insured could be on
the hook for the judgment. 448 So.2d 589 (Fla. Dist. Ct. App. 1984).6 When the insured “actually pays for
the settlement of the claim against him or where the case is fully litigated at
trial before the entry of a judgment, the amount of the settlement or judgment
can be assumed to be realistic.” Id. at 592. When negotiating directly
its own liability, an insurer can protect its own interests; similarly, an
independent factfinder is unlikely to approve an unreasonable settlement
amount. “Therefore, if the insurer is later determined to have wrongfully
refused to defend and the claim is within the coverage, it will be obligated to
pay the amount of the settlement or judgment, at least within its policy
limits, in the absence of a showing of collusion or fraud.” Id.

But
the settlement amount in a Coblentz agreement that “involve[es] a
consent judgment with a covenant not to execute” may not necessarily represent
a realistic valuation of the injured party’s claim. Id. When an insured
“stipulates to a large settlement figure in order to obtain his release from
liability,” it “has little or nothing to lose because [it] will never be
obligated to pay. As a consequence, the settlement of liability and damages may
have very little relationship to the strength of the plaintiff’s claim.” Id.
Although such conduct by itself “can hardly be characterized as
fraudulent,” the emergent “settlement figure is more suspect” than one produced
through a more adversarial process. Id.

The
Florida court then addressed how to evaluate whether a Coblentz agreement
is tainted by fraud or collusion. In crafting a standard, the court weighed the
countervailing interests of (1) protecting insurers against settlement
agreements that overstate their liability and (2) preserving incentives for
insureds and injured parties to resolve claims when they can. The Steil court
recognized the need to protect insurers when the injured party and the insured
settle for an amount for which neither will be on the hook: the settlement “may
not actually represent an arm’s length determination of the worth of the
plaintiff’s claim.”7 Id. At the same time, Steil
recognized that countervailing policy interests weigh in favor of enforcing
Coblentz agreements against insurers. If an insured’s mere lack of
incentive to negotiate would render a Coblentz agreement fraudulent or
collusive, such agreements could rarely be enforced. As a result, insureds and
injured parties would be discouraged from settling their claims even when they
were able to reach agreement on the amount of the insured’s liability. Instead,
injured parties would have an incentive to insist either that an independent
factfinder determine the amount of liability or that insureds pay out of their
own pockets. See id.

Given
these competing interests, the Steil court explained that Coblentz agreements
could not be reviewed under “the ordinary standard of collusion or fraud,”
under which they would often if not always be invalid. Id. Instead, it
directed courts to look to evidence of an unreasonable settlement amount and of
bad faith on the part of the negotiating parties as proxies for collusion or
fraud. Id. Steil also assigned the party seeking to enforce a Coblentz
agreement the initial burden of producing “evidence sufficient to make a
prima facie showing of reasonableness and lack of bad faith, even though the
ultimate burden of proof will rest upon the carrier.” Steil, 448 So.2d
at 592.

Because
the Florida Supreme Court has not addressed how to determine when a settlement
agreement is tainted by fraud or collusion, and in light of our obligation to
resolve questions of Florida law as we believe it would, we conclude that Steil
provides the proper framework for analyzing whether a Coblentz agreement
is enforceable under Florida law. Indeed, other Florida District Courts of
Appeal have adopted Steil‘s analytical framework. See, e.g., Hyatt
Legal Servs. v. Ruppitz, 620 So. 2d 1134, 1136 (Fla. Dist. Ct. App. 1993)
(“To protect against the obvious possible abuses of th[e Coblentz]
settlement procedure, we held that the insured must prove that the settlement
was reasonable and was not tainted by bad faith.”); Quintana v. Barad,
528 So. 2d 1300, 1301 n.1 (Fla. Dist. Ct. App. 1988) (“Subsequent to entry of
the [Coblentz] agreement, the injured party must bring an action against
the insurer and prove coverage, wrongful refusal to defend, and that the
settlement was reasonable and made in good faith.”). Thus, we conclude the
district court used the proper framework to determine whether fraud or
collusion tainted the settlement when it considered the reasonableness of the
settlement amount and whether it was negotiated in good faith.

2. Under Florida Law, an
Insurer is Not Bound by a Fraudulent or Collusive Coblentz
Agreement Merely Because It Knew of and Failed to Object to the Settlement
Earlier.

Sidman
and FP argue that the Coblentz framework is inapplicable here because
Travelers knew about and acquiesced in the settlement. We reject this assertion
as legally unsupported. The practical effect of such a rule would be that once
an insurer is given prior notice of and fails to object to a settlement
agreement between its insured and an injured party, it will be deemed to have
waived all objections despite underlying fraud or collusion of which it had no
knowledge. There is no such rule in Florida law.8

Sidman
and FP cite Jones v. Florida Insurance Guaranty Association for the
proposition that a judgment against an indemnitee is enforceable against an
indemnitor under Florida law so long as the indemnitor had notice of the settlement
and could have, but declined to, object. 908 So.2d 435, 450 (Fla. 2005) [30
Fla. L. Weekly S581a]. They also rely on cases addressing Florida’s “vouching
in” doctrine, which recognizes “[t]he general rule” that “an indemnitor who has
notice of the suit filed against the indemnitee by the injured party and who is
afforded the opportunity to appear and defend is bound by a judgment rendered
against the indemnitee as to all material questions determined by the
judgment.” Camp, Dresser & McKee, Inc. v. Paul N. Howard Co., 853
So.2d 1072, 1079 (Fla. Dist. Ct. App. 2003) [28 Fla. L. Weekly D1412a].

But
like Coblentz, Jones and the vouching in cases explicitly
recognize that an agreement between an indemnitee and injured party is
enforceable against an absentee indemnitor only if rendered “without fraud or
collusion.” Jones, 908 So.2d at 450 (internal quotation marks omitted); Camp,
Dresser & McKee, Inc., 853 So.2d at 1079 (same).9 Here, because Travelers contends that
the settlement agreement was in fact rendered through fraud or collusion, even
under Sidman and FP’s authorities, it is not enforceable.

Despite
the exception for fraud and collusion, Sidman and FP argue that under the
vouching in cases, in entering a consent judgment the state court implicitly
decided that the settlement amount was reasonable in amount and negotiated in
good faith such that the indemnitor is bound by the determination. We disagree.
The vouching in doctrine concerns only issues that were actually determined by
the settlement judgment, see Camp, Dresser & McKee, 853 So.2d at
1079, and here, the question of whether fraud or collusion tainted Kirkwood and
Culbreath’s settlement agreement was not litigated in the action in which it
was entered; the state court simply entered the consent judgment. Furthermore,
we cannot say that an indemnitor’s knowledge of a Coblentz agreement’s
terms will necessarily put it on notice that the agreement arises from fraud or
collusion, as the agreement’s fraudulent or collusive nature will not always
(or even often) be apparent on its face. This case is illustrative: neither the
settlement agreement nor the consent judgment reflected the insured’s offer to
accept a judgment of any amount so long as the injured party refrained from
seeking satisfaction against it.10 This conduct was fraudulent and
collusive, yet nothing on the settlement agreement’s face would reveal that
fact.

We
acknowledge that allowing insurers to challenge settlement agreements between
their insureds and injured parties after having kept quiet during the
settlement negotiations may appear inequitable or at the very least
inefficient. Indeed, Sidman and FP portray Travelers as lulling Kirkwood and
Culbreath into complacency by failing to object in the state court case to the
settlement agreement or consent judgment. But even under the legal framework
that Sidman and FP advance, Travelers would not be bound by a settlement
agreement that was obtained by fraud or collusion. And we follow the Florida
courts in rejecting a framework that would, in effect, prohibit indemnitors and
insurers from challenging settlement agreements as fraudulent or collusive
simply because they had knowledge of the settlement terms, even though the
fraudulent or collusive nature of the agreement was not apparent from the face
of the settlement or even was hidden from the insurer by the parties to the
settlement. Had Kirkwood and Culbreath negotiated a reasonable settlement
agreement in good faith, they would have been entitled to bind Travelers to it under
Coblentz. By choosing instead to collude, they forfeited this right.

In
summary, the relevant inquiry for determining whether to enforce a Coblentz agreement
against an insurer that wrongfully denied coverage and refused to defend is
whether the agreement was produced through fraud or collusion, not whether the
insurer had notice of the settlement and an opportunity to object to it. A
contrary approach would render Coblentz‘s fraud or collusion exception
meaningless, as all Coblentz agreements arise out of an insurer’s
refusal to defend its insured. Thus, an insurer may challenge a Coblentz agreement
as fraudulent or collusive notwithstanding its prior notice of and opportunity
to challenge the agreement. The district court properly applied the Coblentz
framework in considering whether the settlement was unreasonable in amount
and negotiated in bad faith — proxies for fraud or collusion — and did not
err in allowing Travelers to challenge the settlement agreement.

B.
The District Court Did Not Err in Determining that the Settlement Agreement Was
Negotiated in Bad Faith.

We
next consider whether the district court erred in determining that the
settlement agreement was unreasonable in amount and negotiated in bad faith.
Because substantial evidence supports the district court’s finding that
Culbreath agreed to settle the claim for any amount in exchange for Kirkwood
and Buell’s agreement not to execute the judgment against it, we affirm on the
ground that the settlement agreement was negotiated in bad faith, without the
need to consider whether the settlement was reasonable in amount.

Substantial
evidence supports the district court’s determination that the parties
negotiated the consent judgment in bad faith. To find bad faith, the district
court relied on evidence that Culbreath was willing to agree to any fee so long
as the Kirkwood and Buell would enforce the judgment only against Travelers.11 Frick, the attorney for the Lewises
— the other homeowners Culbreath sued — testified that Culbreath offered to
“stipulate to whatever number that you want” with respect to the Lewises’
attorney’s fee claim, so long as they would agree not to execute against
Culbreath.12 Trial Tr. at 102 (Doc. 170). He also
testified that Culbreath acknowledged having entered into a similar arrangement
with Kirkwood, agreeing to a large multiplier in exchange for Kirkwood’s
agreement to collect the judgment from Travelers. In addition, Kirkwood, Buell,
and Culbreath had entered into a side agreement — which they did not disclose
to the state court — in which Culbreath agreed to pay Kirkwood or Buell up to
$50,000 depending on their relative success in enforcing the settlement
agreement against Travelers.

This
evidence supports the inference that the settlement agreement was negotiated in
bad faith, as it shows that Culbreath was willing to lie down and accept a
judgment of any amount against it so long as it would not be on the hook to
satisfy the judgment. It demonstrates that Culbreath only acquiesced to this
arrangement because it believed that it could impose on Travelers all or most
of the financial burden of the settlement agreement, with its own exposure
limited to $50,000 pursuant to the side agreement. A reasonable party would not
be indifferent to the amount of a judgment entered against it were its own
money on the line. As factfinder, the district court was entitled to accept
Frick’s testimony as credible. Crystal Entm’t, 643 F.3d at 1320. The
district court’s finding that the settlement agreement was negotiated in bad
faith was thus not clearly erroneous.

Sidman
and FP argue that the settlement agreement was not collusive as a matter of
Florida law because Kirkwood and Culbreath never agreed to share the settlement
proceeds. They contend that Chomat v. Northern Insurance Company of New York,
held that an agreement is collusive only if the parties to the agreement agreed
to split its proceeds. 919 So. 2d 535, 538 (Fla. Dist. Ct. App. 2006) [31 Fla.
L. Weekly D169a]. But they misread the authority on which they rely. In Chomat,
the Florida District Court of Appeal stated, “[w]ithout attempting a
comprehensive definition, we think a bad faith claim includes a false claim, or
collusion in which the plaintiffs agree to share the recovery with the
insured.” Id. (internal citation omitted). Although Chomat recognized
that an agreement to split a negotiated judgment is one form of collusion, it
did not hold that collusion requires an agreement between injured party
and insured to split a negotiated judgment.

Indeed,
such a construction is inconsistent with the term collusion’s ordinary meaning.
Dictionary definitions of collusion include a “secret agreement,” “secret
cooperation for a fraudulent or deceitful purpose,” “a secret agreement between
two or more persons to defraud a person of his rights often by the forms of
law,” an “agreement between parties considered adversaries at the law,” and “a
secret agreement considered illegal for any reason.” Collusion,
Webster’s 3d New Int’l Dictionary 446 (2002). These definitions do not require
an agreement to split a scheme’s bounty, and they easily encompass Kirkwood and
Culbreath’s agreement. Accordingly, we hold that an agreement in which an
insured agrees to accept essentially any judgment amount that the injured party
seeks in exchange for a promise to not execute against it is collusive for Coblentz
purposes. We therefore affirm the district court’s finding of bad faith.13

V.
CONCLUSION

For
the foregoing reasons, we conclude that the district court properly applied the
Coblentz framework to determine whether the settlement agreement could
be enforced against Travelers, that its finding of bad faith in the settlement
agreement’s negotiation rested on substantial evidence, and that it did not err
in declining to award Sidman and FP a reasonable attorney’s fee. Accordingly,
we affirm its judgment.

AFFIRMED.

__________________

*Honorable
Harvey E. Schlesinger, United States District Judge for the Middle District of
Florida, sitting by designation.

**The
Honorable Robin S. Rosenbaum, Circuit Judge, heard oral argument and thereafter
recused. We therefore decide this case as a quorum. 28 U.S.C. § 46(d).

1This
statute authorizes, among other things, homeowners associations to bring
actions against their members for violating the community’s governing documents
or the association’s rules. See Fla. Stat. § 720.305(1). Importantly, it
entitles “[t]he prevailing party in any such litigation” to “reasonable
attorney fees and costs.” Id.

2Unless
otherwise specified, all citations in the form “Doc. __” refer to the district
court docket entries.

3Culbreath
initially was a plaintiff in this case because it brought claims against
Travelers with respect to attorney’s fees awarded to a different homeowner.
Culbreath and Travelers settled that dispute, which is not before us.

4Because
we conclude substantial evidence supported the district court’s determination
that the settlement agreement was negotiated in bad faith, we need not discuss
the evidence relating to the reasonableness of the attorney’s fee.

5In Bonner
v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), we
adopted as binding precedent all decisions of the former Fifth Circuit handed
down prior to October 1, 1981.

6Because
the Florida Supreme Court has not addressed how to determine when a settlement
was obtained by fraud or collusion, in this diversity case governed by Florida
law “we follow relevant decisions of Florida’s intermediate courts and attempt
to determine the issues of state law as we believe the Florida Supreme Court
would.” Tampa Bay Water v. HDR Eng’g, Inc., 731 F.3d 1171, 1177 (11th
Cir. 2013) [24 Fla. L. Weekly Fed. C672a] (internal quotation marks omitted).

7See
also Bond Safeguard Ins. Co. v. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa,
No. 13-cv-561, 2014 WL 5325728, at *9 (M.D. Fla. Oct. 20, 2014) (“Coblentz does
not . . . authorize the insured to indiscriminately load the carrier’s wagon
with bricks of damage that no reasonable person would expect as consequences of
the underlying claim.”).

8Indeed,
such a rule would seem to conflict with a recent statement of the Florida
Supreme Court that an insured’s “reasonable settlement agreement” may be
enforced against an insurer who wrongfully refuses to defend. Perera v. U.S.
Fid. & Guar. Co., 35 So.3d 893, 900 (Fla. 2010) [35 Fla. L. Weekly
S235a] (emphasis added).

9Sidman
and FP also cite Burke v. Ripp, 619 F.2d 354 (5th Cir. 1980), but Burke
did not address what standard courts should apply to determine whether an
agreement is fraudulent or collusive; in that case there was no allegation that
the agreement was fraudulent or collusive.

10Sidman
and FP raise a related argument that Travelers’ failure to object to the
settlement terms during negotiations equitably estops it from raising its
current challenge. Estoppel “prevents a party from raising a claim or taking a
legal position when his conduct with regard to that claim is contrary to his
position. [It] requires (1) words, acts, conduct, or acquiescence causing
another to believe in the existence of a certain state of things; (2)
willfulness or negligence with regard to the acts, conduct, or acquiescence;
and (3) detrimental reliance by the other party upon the state of things so
indicated.” Matter of Garfinkle, 672 F.2d 1340, 1346-47 (11th Cir.
1982). “Silence or acquiescence may be sufficient conduct to create an estoppel
if under the circumstances there was both a duty and opportunity to speak.” Id.
at 1347. Here there was neither a duty nor an opportunity to speak because
Travelers had no knowledge of the fraudulent and collusive nature of the
settlement agreement, and it never claimed or took the position that the settlement
agreement was untainted by fraud or collusion.

11The
district court also relied on the fact that Mark Buell signed the settlement
agreement on behalf of Kirkwood, who was hospitalized at the time following a
stroke that left her incapacitated and unable to give her consent. Because we
find substantial evidence to support the district court’s determination that
the settlement negotiations were conducted in bad faith without considering the
circumstances under which the agreement was signed, we have no need to review
the district court’s findings on this issue.

12Frick
testified that Culbreath said, “Hey, if you don’t come after us for the fees,
we don’t care how much it is.” Trial Tr. at 105 (Doc. 170).

13In
their reply brief, Sidman and FP raise for the first time the argument that the
district court erred in declining to award them a “reasonable” attorney’s fee
of its own calculation after finding that they could not enforce the settlement
agreement against Travelers. “Parties must submit all issues on appeal in their
initial briefs.” United States v. Britt, 437 F.3d 1103, 1104 (11th Cir.
2006) [19 Fla. L. Weekly Fed. C223a]. Because Sidman and FP failed to raise
this argument in their initial brief, we will not entertain it now.

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