Arbitration & Mediation

Calculating a Close-Call on Proposal for Settlement (Costs Must Be Incurred Pre-Proposal for Settlement)

By Christopher B. Hopkins, Esq.

The art of drafting a proposal for settlement involves the delicate balancing of procedural compliance, an educated guess as to the "right" amount, and -- after judgment -- the proper math to confirm whether your client "won" the battle of the fees. Historically, most Proposals for Settlement on appeal end up losing.

The case of Billy Rizal Nilo and Jo Ann Farrington Walker v. Gerald Fugate (First District, Kahn, Benton and Roberts) illustrates the complexities of Proposals for Settlements in close-call situations.

It appears a personal injury plaintiff served a $400k Proposal for Settlement on the defendant. There was no dispute about the format or procedure of the Proposal. The jury awarded $495k. The court entered an order of $32k in taxable costs to the prevailing party (plaintiff). The judgment was $527k, an amount well above the 125% required to award fees under a Proposal for Settlement, thus another $76k in attorney's fees was entered against the defendant.

First, note that Proposals work from the judgment, not the verdict. Second, the taxable costs in the judgment which are used to calculate the entitlement to the Proposal for Settlement must be incurred BEFORE the Proposal was served. In this case, that's where the problems arise.

Under Florida Statute 768.69, the plaintiff gets attorney's fees if the judgment is "an amount at least 25% greater than the offer..." Here, the Proposal was for $400k so the "magic number" needed to trigger fees under the Proposal is $500k.

In this case, the verdict was close -- $495k. The Plaintiff only needed to prove $5 in attributable taxable costs. However, we are not told what percentage of the taxable costs were incurred BEFORE the Proposal was served. Taxable costs spent at trial are recoverable to the prevailing party but are not included when determining the entitlement to attorney's fees under a Proposal for Settlement.

In mathematical terms, the calculation is [verdict - set offs] + [taxable costs pre-Proposal] > [Proposal amount] + [25% of Proposal amount].

Full post as published by Florida Arbitration Law on March 23, 2010 (boomark / email).