Proposals for settlement: more traps for the unwary.

• Author: Pappas, Gary M.
• Position: Florida

The proposal for settlement (PFS) statute, F.S. [section] 768.79 (2001), allows either party to a lawsuit to offer a settlement to the other party before trial and provides for attorneys' fees if the offer is rejected under certain conditions. (1) Thus, the PFS is intended to ease the court's case load by encouraging early resolution of disputes. (2) From the inception of the PFS (formerly called an offer of judgment), procedural irregularities have resulted in confusion regarding the proper method for drafting a PFS, and many good faith offerors have been denied attorneys' fees based on technicalities. (3) In an attempt to aid unwary parties, several articles have already been published in The Florida Bar Journal addressing these technicalities. (4)

Some of the confusion surrounding the PFS appeared to be lifted with the overhaul of Fla. R. Civ. P. 1.442 in 1996. However, offerees continue to come up with creative arguments using the language in the PFS rules and statutes as a shield against attorney fee awards. (5) Many "successful" offerors have thus found themselves embroiled in heated post-judgment litigation regarding their entitlement to attorneys' fees, and the resulting case-by-case interpretation of the PFS rules and statutes continues to deliver fatal blows to offerors. The stakes are high for offerors who must survive challenges to the validity of the PFS at the end of a case in order to be awarded fees under [section] 768.79.

One of the more recent sources of confusion surrounding the PFS is the inclusion of "conditions" therein, as permitted by the 1996 amendment to Rule 1.442. Since the rule was amended to allow for conditions, skillful litigants have convinced Florida appellate courts that certain PFS conditions invalidate the PFS. One such condition that is widely utilized in a PFS is the requirement that a party execute a release upon acceptance of the proposal. Recent case law, however, leaves open the possibility that release conditions could invalidate the entire PFS, and leave a good faith offeror without recourse for attorneys' fees. Another case suggests that, in some instances, a release is a required condition of a PFS.

Another source of great confusion surrounding the PFS is the calculation of the "judgment obtained" for purposes of determining whether an offeror is entitled to attorneys' fees. The Florida Supreme Court has recently clarified that pre-offer taxable costs should be included in that calculation.

A final development in Florida law regarding the PFS is in the area of joint proposals. The 1996 amendment to Rule 1.442 has clarified that joint proposals must state the amount and terms attributable to each party. This rule has been strictly applied to cases involving multiple offerees, whether plaintiffs or defendants. (6) However, some districts have not required strict compliance with Rule 1.442 in cases involving multiple offerors. (7)

Background

F.S. [section] 768.79 (2001) provides for the collection of attorneys' fees and costs as a penalty for the opposing party's failure to accept a PFS. The PFS is designed to encourage parties to resolve cases early so as to avoid incurring excessive court costs and attorneys' fees. (8) As the Florida Supreme Court has observed, the main goal of a PFS is to "terminate all claims, end disputes, and obviate the need for further intervention of the judicial process." (9) There exists an "organic right of parties to contract a settlement, which by definition concludes all claims unless the contract of settlement specifies otherwise." (10)

Fla. R. Civ. P. 1.442 provides the mechanism for implementing [section] 768.79. In 1996, the Florida Supreme Court amended Rule 1.442 to reconcile it with [section] 768.79 and thus end litigation over the procedures for filing a PFS. The June 15, 1993, subcommittee meeting considered a draft rule that at subsection (c)(3) required an offer to "briefly summarize any relevant conditions." During this meeting, it was explained that the word "conditions" set forth in the proposed rule included, but was not limited to, costs, attorneys' fees, interest, and execution of releases. Rule 1.442(2) now requires that the PFS state any relevant conditions with particularity, state the total amount of the proposal, and state all nonmonetary terms of the proposal with particularity.

The same amendment also added the following language regarding joint proposals: "A proposal may be made by or to any party or parties and by or to any combination of parties properly identified in the proposal. A joint proposal shall state the amount and terms attributable to each party." (11)

Allowing for Conditions as Part of PFS

Prior to the 1996 amendment, Rule 1.442 did not provide for conditions to be included in the PFS. (12) In fact, at that time courts routinely held that offers of judgment which contained conditions were invalid. (13) Thus, before the amendment plaintiffs routinely used the absence of a provision for conditions as a shield from liability for attorneys' fees. In McMullen Oil Co., Inc. v. ISS International Service System, Inc., 698 So. 2d 372, 374 (Fla. 2d DCA 1997), the PFS was for "$50,001, `plus interest, costs and attorney fees as the court may award.'" The award of attorneys' fees was thus conditioned on the plaintiff's obtaining an award from the trial court. (14) The Second District found the PFS invalid because it contained a condition that was not authorized by [section] 768.79. (15)

In another pre-amendment case, Martin v. Brousseau, 564 So. 2d 240, 241 (Fla. 4th DCA 1990), the court held that a PFS was invalid because it required the plaintiff to "execute a full and complete release and satisfaction, a hold harmless affidavit, and stipulation for dismissal with prejudice." However, the court's dissatisfaction with this procedural loophole was evidenced by Judge Glickstein's dissent, in which he noted, "No authority nor legislative history is before us to guide us into having the tail, the additional documents, wag the dog, the amount offered and the amount awarded." (16)

Releases: Conditions or Merely a Formality?

Since the amendment to allow for inclusion of...