Two Seldom Noted Traits of Florida Statutory Proposals for Settlement

Florida – Civil Practice/Settlements

Key Points:

• There are two "clocks" or "faucets" that are critical for statutory proposals for settlement.
• Statutory proposals can be effective, even against the indigent plaintiff.

There are two "clocks" or "faucets" that are critical for statutory proposals for settlement. Most people in our field understand that serving a Florida statutory proposal for settlement (hereinafter referred to as a "proposal") sooner rather than later is preferred from a strategic standpoint. This is because the "clock" can start ticking on defense attorney's fees sooner. However, what many do not understand is that there is a corresponding "clock" that stops. This is the clock on plaintiff's taxable costs for purposes of calculating a net judgment in the event of a plaintiff's verdict.

In order for a defendant to be entitled to a sanction as a result of a proposal, the plaintiff's net judgment is key. Such net judgment must be equal to or less than the proposal threshold. The "proposal threshold" is that number that equals 75% of the defendant's proposal amount. "Net judgment" generally is the sum of two numbers: (1) the dollar verdict figure and (2) the taxable cost award to which plaintiff would have been entitled at the time of the serving of the proposal.

The method of calculating a net judgment, and its importance, is difficult to understand without considering concrete examples. Accordingly, let us consider two scenarios. In each scenario, we will assume that a defendant has served a valid proposal for $100,000 and that the jury returns a verdict for $55,000 against the defendant.

In Scenario 1, the proposal was served very late in the case and, by then, the plaintiff had hired three experts and taken eight depositions, incurring $30,000 in taxable costs. The net judgment in Scenario 1 would be $55,000 + 30,000, or $85,000. Because such $85,000 exceeds $75,000, the defendant would not be entitled to a sanction of attorney's fees and costs pursuant to its proposal. Such lack of a sanction would occur despite the fact that such defendant had done "well" at trial-by obtaining a $55,000 verdict after serving a $100,000 proposal.

In Scenario 2, the proposal was served quite early in the case, when the plaintiff had not retained any experts and had taken only two depositions, incurring only $5,000 in taxable costs. The net judgment in Scenario 2 would be $55,000 + $5,000, or $60,000. Because such $60,000 is less than $75,000, the defendant would be entitled to a sanction pursuant to its proposal. The sanction would be assessed against, or set off against, the plaintiff's award. Such sanction would equal the defendant's reasonable attorney's fees and costs incurred after the date the proposal was served through the end of trial. This sanction can obviously be quite substantial.

Thus, there are two critical "clocks," or "faucets." The first start or open as to the defense attorney's fees and costs. The second stop or close as to the plaintiff's taxable costs for the net judgment calculation. By serving a statutory proposal for settlement as early as reasonably possible in a case, one can use the two "clocks" or "faucets" to maximize one's leverage against the plaintiff as the case progresses. The key Florida cases on these mechanics are the Supreme Court of Florida's White v. Steak & Ale of Florida, Inc., 816 So. 2d 546 (Fla. 2002) and State Farm Mut. Auto. Ins. Co. v. Nichols, 932 So. 2d 1067 (Fla. 2006) cases.

Statutory proposals can be effective, even against the indigent plaintiff. The typical plaintiff has no exposed assets or income prospects. Here is a scenario which gives such a plaintiff something to lose as a result of a proposal.

We will build on Scenario 2 above involving a $100,000 proposal for settlement and a net judgment of $60,000. We will assume that attorney's fees and costs incurred by the defense after the date of service of the proposal equaled $50,000. In such event, the plaintiff would only be entitled to an award of $5,000 (calculated by subtracting the sanction of $50,000 from the $55,000 verdict) plus his or her total taxable costs on the case. The plaintiff attorney's non-taxable costs and contingency fee would eat up most or all of such $5,000. The plaintiff personally would then walk away from the case as a whole with zero dollars. Such plaintiff might even still owe on medical bills from his or her providers. Again, this plaintiff could have had a $100,000 settlement if he or she had accepted the early proposal. Of this $100,000, he or she would have likely walked away with about $25,000 (assuming, for example, a 40 percent contingency fee, $7,500 in costs and $27,500 in medical liens paid). Instead of having $25,000 in hand, the plaintiff would, in reality, under Scenario 2 be left with zero dollars. Thus, even a broke, unrecoverable plaintiff has something to lose ($25,000, in this example) as a result of the proposal mechanics. The $25,000 would be money that was lost, although the plaintiff won a verdict at trial.

As important, a proposal as described in Scenario 2 puts pressure on counsel for the indigent plaintiff. As the case progresses after the proposal, plaintiff's counsel will know that each dollar of expense incurred by both his or her office and by defense counsel's office could be money lost to a sanction arising from a proposal. In light of the great expense associated with bringing appropriate treating physicians and experts to deposition and trial, plaintiff's lawyers will want to get out of a case sooner rather than later with a strong, early proposal.

*John, an associate in our Tampa, Florida, office, can be reached at 813.472.7817 or jwheilman@mdwcg.com.

Defense Digest, Vol. 17, No. 4, December 2011