Proposals for Settlement when there is a Contractual or Statutory Basis for Attorney’s Fees

Posted by David Adelstein on October 16, 2016
Trial Perspectives

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In an earlier posting I talked about proposals for settlement / offers of judgment.   Again, these are used as a vehicle to create an argument for attorney’s fees down the road, particularly in cases where a party does not have a contractual or statutory basis to recover attorney’s fees. Please check out this article for more information on proposals for settlement because they have become an unnecessarily complicated vehicle with nuances that have resulted in an exorbitant amount of case law, some of which is conflicting. As a result, while the argument to recover fees is preserved by serving the proposal for settlement, it is an argument and not a guaranty.

Sometimes, parties with a contractual or statutory basis to recover attorney’s fees will still serve a proposal for settlement. This becomes tricky because the right to attorney’s fees per the contract or statute is not cut-off by virtue of the proposal for settlement.

Say, for example, a defendant serves a proposal for settlement. The plaintiff, however, prevails in the case through trial in a claim in which the plaintiff is entitled to contractual attorney’s fees. There are two considerations.  

First, when determining the merits of a proposal for settlement, you need to look at the “net” judgment, which would include attorney’s fees and costs incurred by the opposing party (party receiving offer that prevailed in the case) through the date of the offer. See Leon F. Cohn, M.D., P.A. v. Visual Health and Surgical Center, Inc., 125 So.3d 860, 863 (Fla. 4th DCA 2013) (“Because Cohn prevailed on the breach of contract claim and the contract contained a provision awarding attorney’s fees to the prevailing party, we reverse and remand for the trial court to reconsider the issue of Cohn’s entitlement to fees after conducting an evidentiary hearing to determine the total net judgment, which shall include the amount of fees and taxable costs incurred by Cohn in litigating the breach of contract claim up to the date of the offer.”). Since the proposal for settlement is based on the net judgment, to determine whether the above defendant would be a prevailing party for purposes of recovering its attorney’s fees from the date of the proposal on forward would require an analysis to see what the total net judgment to the plaintiff would be factoring in fees and taxable costs through the date the defendant served the proposal.   The issue in looking at the net judgment is to determine whether the defendant could offset some of the attorney’s fees entitled to the plaintiff by being entitled to attorney’s fees from the date of the proposal on forward.

Second, the proposal for settlement does not cut-off the opposing party’s contractual right to fees incurred after the proposal for settlement is served. See Tierra Holdings, Ltd. v. Mercantile Bank, 78 So.3d 558 (Fla. 1st DCA 2011).   The above plaintiff would still be entitled to its attorney’s fees if deemed the prevailing party under the contract through the trial.   The issue, as discussed above, is whether the defendant could offset some of the fees entitled to the plaintiff by being entitled to attorney’s fees from the date of the proposal on forward.

Let’s use real numbers. Assume the defendant served the proposal for settlement to the plaintiff for $100,000. The plaintiff has a contractual right to attorney’s fees. The plaintiff rejects the proposal for settlement and at trial the plaintiff is awarded $40,000. Now, let’s assume the total net judgment through the date of the proposal for settlement factoring in fees and costs entitled to the plaintiff as the prevailing party under the contract is $60,000.   This $60,000 is at least 25% less than the defendant’s proposal for settlement of $100,000, meaning the defendant would be entitled to its attorney’s fees from the date of the proposal on forward. Assume those reasonable fees are $75,000. Assume the plaintiff’s total reasonable fees are $90,000.

Under step one, the defendant would presumably be the prevailing party for purposes of fees per the proposal for settlement and be entitled to its reasonable fees of $75,000 from the date of the proposal through trial.   The reason being is that the total net judgment to the plaintiff at the time the defendant served the proposal when factoring in fees and costs was at least $25% less than the defendant’s proposal for settlement.

Under step two, the plaintiff is still entitled to its attorney’s fees for prevailing under the contract, which are $90,000 through trial. Thus, the $75,000 owed to the defendant in fees would simply be credited in a judgment given to the plaintiff (reducing the plaintiff’s judgment by $75,000). For example, if the court entered an attorney’s fees judgment, the plaintiff would be entitled to $15,000 in fees, or the difference between the $90,000 and the $75,000.

 

Please contact David Adelstein at dadelstein@gmail.com or (954) 361-4720 if you have questions or would like more information regarding this article. You can follow David Adelstein on Twitter @DavidAdelstein1.

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