proposal for settlement

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 / Comments Off on Proposals for Settlement when there is a Contractual or Statutory Basis for Attorney’s Fees

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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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Strategic Reasons for Serving a “Good Faith” Proposal for Settlement

Posted by David Adelstein on September 02, 2015
Trial Perspectives / Comments Off on Strategic Reasons for Serving a “Good Faith” Proposal for Settlement

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You know how proposals for settlement / offers of judgment (“proposals for settlement”) work because I previously wrote about this topic. You know that such proposals for settlement need to be made in good faith. Remember, proposals for settlement create the argument to recover attorney’s fees from the date the proposal for settlement is served on forward.

The recent case of Key West Seaside, LLC v. Certified Lower Keys Plumbing, Inc., 40 Fla. L. Weekly D2052b (Fla. 3d DCA 2015), exemplifies a defendant relying on a proposal for settlement.  In this case, a defendant served the plaintiff with a proposal for settlement.  Notably, the defendant was being indemnified by a co-defendant meaning another defendant was paying for its legal fees.  This defendant prevailed at trial by getting a judgment of no liability.  The trial court, however, refused to grant this defendant its reasonable attorney’s fees from the time it served the proposal for settlement on forward.

On appeal, the Third District maintained that because the trial court did not find that the defendant’s proposal for settlement was made in bad faith–not in good faith–there was no basis to deny the defendant its reasonable attorney’s fees.  The Third District further held that the fact that another party may have paid the defendant’s legal fees was of no relevance.  

There is a value for serving proposals for settlement, especially if you have no statutory or contractual right to recover your legal fees. But, even if you do, there still may be a strategic reason to serve a proposal for settlement in good faith to create another basis to recover your attorney’s fees and costs.

 

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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Considerations Involving Proposals for Settlement / Offers for Judgment

Posted by David Adelstein on March 29, 2015
Trial Perspectives / Comments Off on Considerations Involving Proposals for Settlement / Offers for Judgment

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There needs to be a contractual or statutory basis in order to be entitled to recover your reasonable attorneys’ fees at trial. See Cadenhead v. Gaetz, 677 So.2d 96, 97 (Fla. 1st DCA 1996). This means either the contract needs to support a basis for the party to recover attorney’s fees (such as a prevailing party attorneys’ fees provision or a contractual indemnification provision that authorizes attorneys’ fees) or there needs to be a statute that authorizes you to recover reasonable attorneys’ fees. Absent these bases, there is generally no basis to recover attorneys’ fees.

However, there is a vehicle under Florida law that allows you to create the argument to recover reasonable attorneys’ fees irrespective of any contractual or statutory basis. This vehicle is referred to as a Proposal for Settlement a/k/a Offer for Judgment (“Proposal”). This vehicle is governed under both Florida Statute s. 768.79 and Florida Rule of Civil Procedure s. 1.442.

 

How a Proposal Works if You are a Defendant

 

If you are a defendant, you can serve a Proposal no earlier than 90 days from the date the plaintiff initiated the lawsuit and no later than 45 days from the trial date (or first day of the trial docket). You should be entitled to recover your reasonable attorneys’ fees and costs from the date of the Proposal on forward if the plaintiff does not accept the Proposal within 30 days and the “judgment [against you] is one of no liability or the judgment obtained by the plaintiff [against you] is at least 25 percent less than” the Proposal. For instance, let’s say you are a defendant and serve a proposal for $100,000. The plaintiff does not accept the Proposal within 30 days. Now let’s say the plaintiff gets a judgment against you for $70,000. The 70,000, however, is at least 25 percent less than the $100,000 Proposal. This gives you the argument that you should be entitled to your reasonable attorneys’ fees from the date of the Proposal on forward and these fees and costs would set off from the $70,000 judgment against you and/or the plaintiff would owe you any excess (if your fees and costs exceeded $70,000).

 

How a Proposal Works if You are a Plaintiff

 

If you are a plaintiff, you can serve a Proposal no earlier than 90 days from the date the defendant was served with the complaint and no later than 45 days from the trial date (or first day of the trial docket). You should be entitled to recover your reasonable attorneys’ fees and costs from the date of the Proposal on forward if the defendant does not accept the Proposal within 30 days and you recover a “judgment in an amount at least 25 percent greater than the” Proposal. Let’s say you are a plaintiff and serve a proposal for $100,000. The defendant does not accept the Proposal within 30 days. Now, let’s say you get a judgment against the defendant for $130,000. The $130,000, however, is at least 25 percent greater than the Proposal. This gives you the argument that you should be entitled to your reasonable attorney’s fees from the date of the Proposal on forward.

 

 Proposal Considerations

 

There is a lot of thought to Proposals that need to be ironed out with your counsel before serving the Proposal. The content and form of the Proposal must be specific and reference and comply with both Florida Statute s. 768.79 and Florida Rule of Civil Procedure s. 1.442.   However, this is an area of law that contains extensive and, sometimes, conflicting case law meaning that you really cannot bank your entire case on recovering attorneys’ fees pursuant to a Proposal. This is why I use the terminology that the Proposal is a vehicle to create an argument to recover attorneys’ fees, since recovery is never an absolute.

Here are some considerations regarding Proposals:

  • Amount – The amount to include in the Proposal needs to be made in good faith and a nominal amount included in the Proposal does not mean it was not made in good faith. See, e.g., Isaias v. The H.T. Hackney Co., 40 Fla. L. Weekly D753a (Fla. 3d DCA 2015) (finding a $500 offer was made in good faith since offeror / proposer had reasonable basis at time Proposal was made that its exposure was nominal);
  • Joint Proposal – If the Proposal is made jointly on behalf of multiple parties it must apportion the amounts to each proposer / offeror. See Arnold v. Audiffred, 98 So.3d 746 (Fla. 1st DCA 2012); Carey-All Transport, Inc. v. Newby, 989 So.2d 1201 (Fla. 2d DCA 2008);
  • Release – If the Proposal requires a mutual release or a release of the offeror / proposer, it needs to specifically attach a form of the release. See Jones v. Publix Supermarkets, Inc., 68 So.3d 422 (Fla. 4th DCA 2011);
  • Net Judgment – You need to consider whether to include and factor attorneys’ fees, prejudgment interest, and other taxable costs in the Proposal. See White v. Steak and Ale of Florida, Inc., 816 So.2d 546, 551 (Fla. 2002) (“We conclude that the ‘judgment obtained’ pursuant to section 768.79 includes the net judgment for damages and any attorneys’ fees and taxable costs that could have been included in a final judgment if such final judgment was entered on the date of the offer [Proposal]. Thus, in calculating the ‘judgment obtained’ for purposes of determining whether the party who made the offer is entitled to attorneys’ fees, the court must determine the total net judgment, which includes the plaintiff’s taxable costs up to the date of the offer and, where applicable, the plaintiff’s attorneys’ fees up to the date of the offer.”); and
  • Timing – You need to consider whether to serve a Proposal at all and, if so, the appropriate timing. Once the Proposal is served, the cat is already out of the bag regarding that amount and the other party may always feel this is an amount they can resolve the case down the road if the Proposal is not accepted.

 

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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