On May 25, 2022, the First District Court of Appeal of Florida recently reversed a final judgment awarding over $1 million in attorney's fees and taxable costs to plaintiff under §768.79, Fla. Stat. State Farm Auto. Ins. Co. v. Lightfoot, Nos. 1D20-2285, 1D20-2303, 2022 Fla. App. LEXIS 3559, at *3 (1st DCA May 25, 2022). In State Farm Auto. Ins. Co. v. Lightfoot the Defendant in an automobile negligence action sought to reverse a final judgment awarding over $1 million in attorney’s fees and taxable costs to Plaintiff. The Defendant appealed asserting the rejected Proposal for Settlement (“Proposal”), which was the basis for the award, was not made in good faith. The Proposal in question required Defendants to pay $1.3 million in cash within 30 days.
The First DCA reasoned the legislature enacted section §768.79, Fla. Stat., to “deter parties from rejecting presumably reasonable settlement offers by imposing sanctions through costs and attorney's fees.” Section 768.79 allows a court to reject fees if it determines that a proposal was not made in good faith. Good faith turns on whether the offeror “had a reasonable foundation to make [his] offer and made it with intent to settle the claim made against [him by the offeree] if the offer had been accepted.” Gawtrey v. Hayward, 50 So. 3d 739, 743 (Fla. 2d DCA 2010). The burden of showing a proposal was not made in good faith falls on the offeree. Id. The First DCA clarified that the holding does not require the offeror to consider the offeree’s finances and ability to pay before tendering a proposal for settlement. The holding in Lightfoot could provide case specific grounds to challenge a successful Proposal for Settlement on the grounds that the proposal was not made in good faith based on the defendant’s inability to pay and restrictive payment conditions.
On May 26, 2022, the Supreme Court of Florida amended Florida Rule of Civil Procedure 1.442, which governs Proposals for Settlement. The amendment to the Rule provides that “nonmonetary terms” are now expressly excluded from Proposals for Settlement. Most significantly, the rule amendment now prevents inclusion of a term that the Plaintiff must execute a General Release as part of the acceptance of the Proposal for Settlement. Setting forth nonmonetary terms in a Proposal will now give the offeree a basis to invalidate it, preventing the offeror from recovering attorney’s fees and removing any settlement leverage. Requiring a General Releases has routinely been included as a term by defendants serving proposals for settlement. The inability to negotiate a General Release as a Proposal for Settlement term similarly means no inclusion of other significant, and often necessary, terms, including but not limited to, confidentiality terms; agreements to defend, indemnify or hold harmless as to hospital/Medicare/other liens; or other case-specific terms that may need to be included in a Release.
While Proposals for Settlement are rarely, if ever, accepted by a plaintiff in personal injury cases, the risk to the plaintiff that they could be forced to pay an award of attorney’s fees sometimes provides helpful settlement leverage. The new amendment makes a seemingly small yet significant change that will impact defendant Proposals for Settlement going forward. The amended rule takes effect on July 1, 2022, but because Florida law provides that Proposals for Settlement are generally to be held open for 30 days, the Rule amendment is already effective as of June 1, 2022. The new Rule amendment may end up eliminating the Proposal for Settlement as a tactical option in many cases for defendants going forward.