Proposals for Settlement: A Tool and a Trap

Posted on: May 4th, 2017

By Alex Diaz, Klein Glasser Park & Lowe, P.L.

Proposals for settlements can be a remarkably powerful tool for a litigator.

A valid proposal can serve to create an opportunity for your client to recover his or her fees incurred in prosecuting or defending a claim where otherwise no contractual or statutory fee claim exists. It can also serve as a useful bargaining chip at mediation or post-trial setting. Additionally, because a proposal for settlement has to be communicated to a client—more on that later—the offering party can force the opposing party to have a long and hard conversation with his or her client concerning a claim and a client’s prospect for success. This oftentimes has a profound effect on litigation.

Yet, despite its usefulness, many practitioners are not aware what constitutes a valid proposal for settlement. This is troublesome on both ends—both for the lawyer issuing a proposal for settlement, particularly in light of the strict construction required to approve an award; and for the lawyer who receives a proposal for settlement who cannot intelligently explain or assess its validity to his or her client.

Don’t get caught in the trap. Whether you are serving a proposal for settlement, or have just received one, it is important that you keep the following tips in mind:

1. Proposals for settlement should be served in strict conformity with Florida Rule of Judicial Administration 2.516. In a 2014 Fourth District decision, Matte v. Caplan, 140 So.3d 686, 687 (Fla. 4th DCA 2014), the defendant served the plaintiff with a § 57.105 motion via email. Contrary to Florida Rule of Judicial Administration 2.516, which sets forth specific and detailed requirements for service by email, the subject line and body of the email failed to contain the requisite information.

Despite plaintiff’s counsel’s admission of receipt of the email, the Fourth District struck the § 57.105 motion because it was not served in strict conformity with Florida Rule of Judicial Administration 2.516. Id. at 690. The Court noted that because statutes awarding attorney’s fees are in derogation of the common law, they must be strictly construed. Id. at 689. The Fourth District thus rejected the defendant’s contention that because it had “substantially complied” with the Rule of Judicial Administration, its proposal ought to be enforced. Id.

In February 2017, the Third District relied upon Matte v. Caplan and extended its application and reach to proposals for settlement. Wheaton v. Wheaton, 42 Fla. L. Weekly D411 (Fla. 3d DCA Feb. 15, 2017).

Recently, however, the Second District Court of Appeal disagreed with and certified conflict with the Third District’s decision in Wheaton. In Boatright v. Philip Morris USA Inc., 2017 WL 1363915 (Fla. 2d DCA April 12, 2017), the Court concluded that the mandatory email service requirements in Rule 2.516 do not apply to proposals for settlement.

Although there is presently conflict regarding whether Rule 2.516 applies or not, in an abundance of caution, every practitioner should be serving proposals for settlement in strict conformity with the rule. While it may indeed be inequitable or draconian that a minor misstep or deviation from 2.516 could serve to invalidate an otherwise valid proposal, no attorney wants to be in a position where he or she has to explain to his or her client why the proposal for settlement that they served is not enforceable, potentially foregoing the client’s opportunity to recover substantial attorney’s fees.

2. Proposals for settlement in multi-party litigation is a minefield. One of the most common grounds—if not the most common ground—for rejecting proposals for settlement arises in multi-party litigation because the potential for ambiguity, and therefore confusion, is multiplied. Quite commonly, plaintiffs and defendants send undifferentiated joint offers to globally conclude a lawsuit. Although such a proposal is simple, the results are generally disastrous; such proposals do not permit a party to independently evaluate or settle his or her claim, rendering such a proposal ambiguous and therefore unenforceable.

For example, in Pratt v. Weiss, 161 So. 3d 1268 (Fla. 2015), multiple defendants sent a joint, undifferentiated offer to a plaintiff in an effort to globally resolve an action. The Florida Supreme Court struck the proposal because it failed to apportion the settlement amount to be paid by the multiple defendants. Id. at 1272. The reasoning has likewise been applied to offers by multiple plaintiffs to a defendant. In Willis Shaw Express, Inc., etc., et al. v. Hilyer Sod, Inc., 849 So. 2d 276 (Fla. 2003), a joint offer from plaintiffs to a single defendant that did not specify the amount and terms each plaintiff was requesting was stricken.

Similarly, an attempt by a defendant to condition payment and settlement upon the co-plaintiff joining in the settlement was rebuked by the Florida Supreme Court. Attorneys’ Title Ins. Fund, Inc. v. Gorka, 36 So. 3d 646 (Fla. 2010). The courts have not permitted these types of proposals because neither offeree (receiving party) can “independently evaluate or settle his or her respective claim by accepting the proposal.” Id. at 649. Ultimately, that is the key in either drafting or analyzing a joint proposal and determining whether such a proposal will pass muster.

Generally speaking, a joint proposal must state the amount and terms attributable to each party to permit each offeree to evaluate the terms and amount of an offer as it pertains to him or her. A failure to comply with this requirement likely renders a proposal ambiguous and thus unenforceable.

However, one exception is created by the rule itself. Florida Rule of Civil Procedure 1.442 permits a joint proposal to be made without apportionment where a party is “alleged to be solely vicariously, constructively, derivatively or technically liable.” Fla. R. Civ. P. 1.442(c)(4). For example, in Saterbo v. Markuson, 210 So. 3d 135 (Fla. 2d DCA 2016), an injured motorist successfully enforced an undifferentiated proposal for settlement issued against the driver and his father, the latter who was solely liable as the owner of the vehicle.

This exception, however, is not without its own thorn bushes. In Duplantis v. Brock Specialty Services, Ltd., 85 So. 3d 1206 (Fla. 5th DCA 2012), a joint offer by multiple defendants to a plaintiff was rejected; although the plaintiff had alleged that various defendants were vicariously liable, vicarious liability was contested by the various defendants. The Fifth District concluded that in those circumstances, “separate offers from each defendant . . . would have permitted [plaintiff] to independently and intelligently assess and evaluate each offer.” Id. at 1209.

In multi-party litigation, it is thus advisable to either apportion a joint offer, or alternatively, issue separate offers to ensure that each party can independently assess the terms or amount of a proposal for settlement.

3. If you insist on including a release, check and double-check the release to ensure that the release comports with the actual proposal for settlement. Historically, practitioners were in the habit of including form or standard releases with proposals for settlement. However, various courts have stricken proposals for settlements that attach releases that are overly broad or leave the receiving party ambiguous about exactly what claims or parties are being released.

For example, in Dryden v. Pedemonti, 910 So. 2d 854 (Fla. 5th DCA 2005), the Fifth District struck a proposal for settlement in a personal injury action because the release was ambiguous as to whether it would also release plaintiff’s first party PIP and health insurance claims. There are also multiple cases where a release was sufficiently ambiguous as to whether acceptance of a proposal for settlement from one defendant would extinguish claims against other defendants.

We do not believe that it is necessary to include a release within a proposal for settlement—it only heightens the potential for an ambiguity. Language in the proposal to the effect that it is intended to resolve the claims that were or could have been pled and a subsequent voluntary dismissal with prejudice renders the need for a release superfluous.

However, if you insist on including a release, be very careful to ensure that the release precisely delineates what claims and parties are being released, particularly where the lawsuit contains multiple parties or where additional actions or claims are available to the claimant.

4. Be wary of nominal proposals. Many defendants love to send nominal proposals for settlement to “send a message.” This can be problematic. First, a nominal proposal for settlement may cause the opposing party to scoff at such an offer, rather than generate a legitimate discussion between the opposing party and his or her client about exactly where the case is headed.

Second, keep in mind that the purpose of the statute is to encourage settlement. See, e.g., Nat’l Healthcorp Ltd. P’ship v. Close, 787 So. 2d 22, 26 (Fla. 2d DCA 2001). The Fourth District has noted that “trial courts should view with considerable skepticism nominal offers which bear no reasonable relationship to damages and which are not founded upon a reasonable and realistic assessment of liability.” Eagleman v. Eagleman, 673 So. 2d 946, 948 (Fla. 4th DCA 1996). The concern with nominal offers is that they do not advance the statutory purpose of encouraging settlement, but rather do nothing other than lay a predicate for an award of attorney’s fees. Id.

Now, a nominal proposal for settlement is not in any way presumptively invalid. In State Farm Mut. Auto. Ins. Co. v. Sharkey, 928 So.2d 1263, 1264 (Fla. 4th DCA 2006), the Court remarked that a nominal offer may be acceptable if—at the time it was made—it “bear[s] a reasonable relationship to the amount of damages or a realistic assessment of liability.” Indeed, a proposal need not reflect the total amount of damages that might be at issue. Id.

Thus, if you intend to serve a nominal proposal for settlement, do not forget that ultimately, you may be in front of a trial court judge attempting to explain how a $250 proposal for settlement was made in good faith. If there is a viable basis to suggest that a claim had no merit—for example, if there was a § 57.105 filed—the likelihood of enforcing a nominal proposal is enhanced. Otherwise, consider offering something beyond a nominal proposal that will enhance the potential recovery for a fee award.

5. Proposals for settlement cannot be directed to equitable claims. Proposals for settlement are limited to “civil action[s] for damages.” 768.79, Fla. Stat. (2016). Courts have construed this to apply solely to claims seeking monetary relief, and thus inapplicable in cases where the plaintiff is seeking both money damages and equitable relief. Diamond Aircraft Industries, Inc. v. Horowitch, 107 So. 3d 362, 373-74 (Fla. 2013) (citations omitted).

Accordingly, if a claim seeks both money damages and equitable relief, with some limited exceptions, be sure that you carve out the equitable claims from the proposal for settlement. If not, an otherwise valid proposal for settlement will be nullified because you did not exclude the equitable claim.

6. Be aware of the timelines. According to Rule of Civil Procedure 1.442(b), a proposal by a plaintiff to a defendant cannot be served until 90 days after service of process on that defendant; and a proposal by a defendant to a plaintiff cannot be served until 90 days after the action has been commenced. R. Civ. P. 1.442 (b). Any proposal served before the conclusion of that time period is premature and thus invalid. See, e.g., Design Home Remodeling Corp. v. Santana, 146 So. 3d 129 (Fla. 3d DCA 2014).

Similarly, no proposal shall be served later than 45 days before the date set for trial or the first day of the docket. Fla. R. Civ. P. 1.442. Any such proposal is untimely and thus, invalid. See, e.g., Schussel v. Ladd Hairdressers, Inc., 736 So. 2d 776 (Fla. 4th DCA 1999).

Be sure to calendar these deadlines to avoid passing up an opportunity to recover potentially sizeable sums on behalf of your client.

7. Share it with your client—and explain it in writing. The Rules of Professional Conduct require a lawyer to communicate an offer of settlement to his or her client. That much is fairly obvious. However, because of the fee-shifting nature of a statutory proposal for settlement, every lawyer must communicate in writing that a proposal for settlement has been received, and should fully explain to the client the risks associated with rejecting a proposal.

If this is not done in writing and the case goes south, you run the risk that your client later contends either that no discussion was had, or that the effect and consequences of rejecting the proposal were not adequately explained (or explained at all). No lawyer wants to be a defendant in a legal malpractice action where a single “CYA” letter would have saved considerable heartburn.

In conclusion, a proposal for settlement can effectuate seismic impact upon a lawsuit. Given the potential value of such a claim, and on the flip side, substantial risk, you should be fully conversant with the ins-and-outs of the law to ensure that you can take full advantage of this rather unique statute.