- Proposals for Settlement: A Twisted Set of Teeth
- May 16, 2011
- Law Firm: McCumber, Daniels, Buntz, Hartig & Puig, P.A. - Tampa Office
- Florida’s Proposal For Settlement (“PFS”) Statute has clearly failed to accomplish its intended purpose. Florida Statute §768.79 was initially enacted to discourage litigation by forcing parties to evaluate good faith settlement offers early in the process. To accomplish this intended goal, Florida’s legislature provided the PFS statute with a considerable set of teeth. Under the statute, a substantive right to collect attorney’s fees and costs is created when a party fails to accept a reasonable settlement offer. The Florida Supreme Court further honed these proverbial teeth through the Florida Rules of Civil Procedure which provide the operative mechanism for the statute. Under Rule 1.442, a party may obtain attorney’s fees if that party’s proposal is rejected and a jury later returns a verdict that is either 25% greater than the offer (for a plaintiff) or 25% less than the offer (for a defendant). The reasoning behind the law is that parties will avoid litigation in close cases so they are not held responsible for attorney’s fees. This should ultimately reduce costs, delays and strain upon the parties and court system. Unfortunately, it appears the statute’s implementation has had the opposite effect.
For a PFS to be valid, specific technical requirements must be met. Clever attorneys are often able to avoid fees by arguing for a rigid application of the law. As a result, the rule has been amended frequently and a burgeoning body of case law has arisen over the years.
To rectify this, the Florida Supreme Court has, again, recently amended the rules in an attempt to simplify PFS requirements. This amendment was adopted in September of 2010 and became effective in January of this year. The amended rule addresses settlement offers made to a party which is alleged to be vicariously liable for the acts of another. The new amendment states:
(4) - when a party is alleged to be solely vicariously, constructively, derivatively, or technically liable, whether by operation of law or by contract, a joint proposal made by or served on such a party need not state the apportionment or contribution as to that party. Acceptance by any party shall be without prejudice to rights of contribution or indemnity.
While this amendment appears fairly straight forward, it is actually a complete reversal of recent court decisions. The amendment became necessary because Subsection (c)(3) requires a “joint offer” PFS to specifically state the settlement amount attributable to each party. In a scenario involving vicariously liable parties, confusion arises because the parties are technically distinct but, practically speaking, one in the same. Liability for a vicarious party flows solely from the acts or liability of the actively negligent party or tortfeasor. As a result, there is no practical distinction between the two for purposes of apportionment.
This amendment was necessary, in part, because the apportionment rule was not enforced consistently among the district courts. Eventually, the Florida Supreme Court weighed in on the issue. In Lamb v. Matatzschk, (Fla. 2005), the Court strictly enforced the requirements within Rule 1.442 by requiring apportionment between vicariously liable parties. The court reasoned that the plain language of the rule stated a joint offer must distinguish the amount attributable to each “party.” This decision attempted to clarify the rule’s application in the various districts but the effect of the holding may have actually discouraged settlements. As noted in the dissent by Justice Lewis, there is no practical basis for requiring apportionment among vicariously liable defendants. In fact, Florida’s indemnification law makes it difficult, if not impossible, to do so because a vicariously liable party is entitled to complete recovery from an active tortfeasor. The concurring opinion acknowledged that while the rule’s plain language was clear, the application of that plain language ran afoul of legislative intent.
In January of this year, Florida Rule of Civil Procedure 1.442(c)(4) became effective. This newly amended rule attempts to align the plain language of the rule with the legislative goal of the PFS Statute.
The new “plain language” of the rule clearly reverses Lamb v. Matatzschk but raises new concerns. Under Subsection (c)(4), a Plaintiff is not required to apportion settlement demands between parties which are merely vicariously liable. Therefore, a single offer may be presented to both parties. However, it is unclear if a party must apportion amounts when a defendant is both vicariously and directly liable to a plaintiff. There is no doubt that lawyers will seek to litigate this issue, creating yet another period of uncertainty.
The new rule will likely catch a few attorneys by surprise and it is imperative that defendants evaluate each Proposal For Settlement carefully. The new bright line rule will help in regard to pure vicarious claims. However, the amended rule is unlikely to accomplish the PFS Statute’s ultimate goal of discouraging litigation. In the end, the remaining ambiguities leave the PFS statute with a few loose teeth.