Prepared by Davis R. Watson, III, Esq.
Vernis & Bowling of St. Petersburg, FL
You, your insured, or your client receives a proposal for settlement from the plaintiff, and the first thing we all do is calculate that “number to beat” at trial based on the statutory 25 percent rule. It is often the primary consideration in weighing whether to accept or reject that plaintiff’s offer of judgment. When that plaintiff has served separate proposals for settlement to multiple defendants simultaneously, the calculations can become more complicated.
In unraveling part of that complexity, a new decision from the First District Court of Appeal clarified the meaning and application of “postoffer settlements” for purposes of calculating entitlement to attorney’s fees under Florida’s offer of judgment statute, section 768.79: Wilcox v. Neville, 2019 Fla. App. LEXIS 16394, 44 Fla. L. Weekly D 2651, 2019 WL 5584878 (Fla. 1st DCA October 30, 2019). Understanding the Wilcox decision is an essential component of calculating the “number to beat,” particularly when there are multiple defendants, vicarious liability issues, and concurrently served proposals for settlement to each defendant.
As any sophisticated Florida defense litigant knows, “[i]f a plaintiff serves an offer which is not accepted by the defendant, and if the judgment obtained by the plaintiff is at least 25 percent more than the amount of the offer, the plaintiff shall be awarded reasonable costs . . . and attorney’s fees . . . incurred from the date the offer was served.” Section 768.79(6)(b), Florida Statutes. An important notation to the statute provides that “the term ‘judgment obtained’ means the amount of the net judgment entered, plus any postoffer settlement amounts by which the verdict was reduced.” The phrase “by which the verdict was reduced” will most often involve a collateral source payment and vicariously liable defendants, e.g. employer/employee or dangerous instrumentality owner/driver.
Here is a classic motor vehicle litigation example involving Plaintiff Paul versus Defendant Oscar (owner) and Defendant David (driver): On January 1, 2019, Paul serves David with a proposal for settlement for $100,000.00. David rejects it by failing to accept within thirty days. On March 1, 2019, Paul serves Oscar with a proposal for settlement for $30,000.00, and Oscar timely accepts. The matter proceeds to trial, and on July 1, 2019, the jury renders its verdict in favor of Paul and against David for $130,000.00. That verdict is then reduced by the $30,000.00 collateral source settlement between Paul and Oscar resulting in a $100,000.00 net judgment entered against David.
Did Paul beat his proposal for settlement to David to entitle him to attorney’s fees against David from January 1, 2019? Yes! The judgment obtained (within the meaning of the offer of judgment statute) is the $100,000.00 net judgment plus the $30,000.00 settlement with Oscar that occurred after the January 1, 2019 offer to David, i.e. $130,000.00, which is greater than at least 25 percent more than the January 1, 2019 offer of $100,000.00. Paul and Oscar’s
$30,000.00 settlement is a postoffer settlement with respect to the January 1, 2019 offer to David.
The reasoning here is a matter of fundamental fairness. The “number to beat” for Plaintiff Paul at trial is at least $125,000.00 for Paul to obtain entitlement to fees. That number does not change simply because Paul reached a settlement with Oscar. If it did, Paul would not be inclined to serve an offer on March 1, 2019 to Oscar, and that defeats the purpose of the offer of judgment statute—to encourage the settlement of lawsuits.
Now, enter the Wilcox decision and a single change to our hypothetical regarding the date of service: Paul serves David and Oscar each with those same proposals for settlement on January 1, 2019 (instead of March 1, 2019 to Oscar). David still rejects his $100,000.00 offer of judgment from Paul. Oscar timely accepts his $30,000.00 offer of judgment from Paul. (The date Oscar accepts is irrelevant so long as it is timely within the statutory thirty-day window.) According to Wilcox, this $30,000.00 settlement between Paul and Oscar is also a postoffer settlement.
As applied to our hypothetical, the losing argument in Wilcox, and reasoning of the Wilcox trial court, is that Oscar’s acceptance of Paul’s proposal for settlement during David’s thirty-day acceptance period is not a postoffer settlement. The Wilcox trial court incorrectly reasoned that if Oscar’s acceptance is a postoffer settlement, then it “would bar a similarly situated Defendant from the statutory opportunity to evaluate a co-defendant’s decision to accept or reject another [proposal for settlement] during the same 30-day statutory period.” Wilcox, 2019 Fla. App. LEXIS 16394, *3.
In discussing this “faulty reasoning” that “ignores and modifies the plain language” of the offer of judgment statute, the First District explains that “postoffer” literally means “after the offer.” Simple. And, “[w]hile a plaintiff’s settlement with a co- defendant likely factors into a defendant’s decision on whether to accept an offer, it has no bearing on the options and timeframes available to him.” Id. at *10.
In other words—turning back to our hypothetical of simultaneous service on January 1, 2019—Oscar’s acceptance of Paul’s proposal for settlement during the same time period David is considering Paul’s proposal for settlement to him is, and always has been, a postoffer settlement because it is a settlement occurring after the offer to David by Paul. The only difference now based on Wilcox is that this situation has likely gone unrecognized by many attorneys, or at least, there was no supporting appellate authority for the argument. The Wilcox decision will bring clarity to calculating the “judgment obtained” under the offer of judgment statute in all Florida trial courts for both sides. Id. at *8 (noting “this issue is one of first impression”); see Pardo v. State, 596 So. 2d 665, 667 (Fla. 1992) (a trial court must follow any decision of first impression by any one of Florida’s five district courts of appeal).
The greatest potential pitfall resulting from the Wilcox Court’s clarity involves the selection of which proposal for settlement to accept in certain circumstances. It is very common that one insurance carrier is affording coverage and the cost of defense for both the owner defendant and driver defendant, which of course means one entity could be making the acceptance/rejection decision for both defendants. When those defendants are concurrently served with separate proposals for settlement, acceptance of the higher amount and rejection of the lower amount can result in disaster.
Again, consider our hypothetical with a simultaneous service date of January 1, 2019 with Defendants Oscar and David, but this time also consider that Oscar is David’s employer. On January 1, 2019, Plaintiff Paul serves proposals for settlement to Oscar for
$30,000.00 and to David for $40,000.00. Perhaps the carrier wants to get the employee/driver, David, out of the suit but also determines the case value is less than $70,000.00.
Consequently, the carrier instructs the $40,000.00 proposal for settlement to be accepted, and the $30,000.00 offer to be rejected. A savvy Plaintiff attorney is now absolutely taking this case to trial because even if the net judgment is $0.00, the judgment obtained is $40,000.00, and that beats the $30,000.00 proposal for settlement to result in Plaintiff’s entitlement to attorney’s fees. In this way, the carrier’s consideration (or defense counsel’s recommendation) should not be with regard to “we want to get the employee/driver out,” but instead, “what is the ‘number to beat’ on the rejected proposal for settlement if we accept this other proposal for settlement creating a postoffer settlement.”
By accepting the $30,000.00 proposal for settlement, and rejecting the $40,000.00 offer, the net judgment “number to beat” for Plaintiff at trial is $20,000.00, i.e. net judgment of $20,000.00 plus the postoffer settlement of $30,000.00 is at least 25 percent greater than an offer of $40,000.00.
The Wilcox decision does not change collateral source reductions, nor does it create or destroy ways to obtain entitlement to attorney’s fees under the offer of judgment statute. It does however highlight how these issues should be thought about based on what has always been in the statutory language. By taking careful attention to proposal for settlement timelines and amounts, any pitfalls in calculating the “number to beat” or the “judgment obtained” are avoidable.
For additional information, please contact Robert Bowling or G. Jeffrey Vernis.