Proposals for Settlement-Practice Pointers for the Construction Attorney

04.02.12

Much like an old carnival roller coaster, proposals for settlement under Fla. R. Civ. P. 1.442 create an environment of mixed fear and excitement in the bumpy ride of civil litigation. Volumes have been written about proposals for settlement, and an exhaustive treatise is truly impossible to accomplish in any bar journal article, however the following are a few practical pointers.

When to begin. 

One of the big questions we must first consider is when to serve a proposal for settlement (“PFS”). A PFS may not be served on a defendant until 90 days after service of the particular defendant; a plaintiff may not be served with a PFS until 90 days after the action has commenced.[1] It is always a good idea to at least consider a PFS early in the litigation as it can certainly pay dividends after a successful trial or dispositive motion. If you have an early grasp of liability and damages, that may be a good time to serve a solid proposal. On the flip side, if you do not have a good grasp of damages or liability, you should probably hold off. By filing what may seem like a conservative yet uninformed proposal, you may inadvertently prompt your opponent to file a proposal against you. 

The claim game.

Often it is easy to think of proposals only in the global sense, for all claims in the suit. However proposals can be served as to individual counts as well.[2] That can be a helpful option especially in construction cases where it is not uncommon for six or seven legal theories to be raised on essentially the same set of facts, some of which have less merit than others. Thus it may be beneficial to target the less viable claims with a PFS.

Defanging vicarious liability.

Generally speaking, a joint PFS must specify the amount attributable to each party.[3] Recently, however, Rule 1.442 was amended to cover what was typically the almost impossible scenario of vicarious liability. Now an effective joint proposal can be served, without apportionment, against or on behalf of parties that are allegedly vicariously liable for certain claims.[4] The vicarious, constructive or derivative liability can be based on “operation of law or contract.”[5]   If you have a question whether the vicarious liability exception may be applicable to a proposal for settlement you intend to serve, the key is to look at the allegations in the complaint (or attachments which are incorporated as part of the pleadings). A joint proposal served in a vicarious liability scenario can be accepted by either party to whom it is served, without prejudice to the accepting party’s right to indemnity or contribution from the non-accepting party.[6]    

To Release or not to Release.

A PFS can be conditioned on execution of an attached release, and there are many scenarios where a release is appropriate and necessary. If a release must be executed as part of the terms of acceptance of the PFS, the release must either be attached to the PFS or a sufficient summary of the release must be included within the body of the proposal.[7] That said, many a Florida lawyer have been in the disheartening situation of seeing their PFS invalidated by terms of an attached release. What seems like time tested, boilerplate terminology in a release can suddenly become a dangerous fishing grounds for ambiguities after a victory at the trial level. If you know that you are serving a nominal proposal that will likely be rejected by opposing counsel, consider serving a proposal without a release. This accomplishes the goal of preserving your right to fees and costs if you prevail on the proposal, and entirely avoids the enforceability issues which a release can raise.[8]  

Stop the bleeding. 

As construction attorneys, we have all been in the painful position of facing a “prevailing party” contractual provision, knowing the other side has a high likelihood of obtaining at least some measure of award against us. In Fixel Enterprises, Inc. v. Theis, 524 So. 2d 1015 (Fla. 1988), the parties had competing claims and counterclaims involving a contract with a prevailing party clause. The defendant knew the plaintiff’s claims were greater than its counter, so the defendant made two informal offers prior to trial, each in excess $1,000, to settle the case. When the dust settled, the final judgment was for plaintiff in the amount of $1,000. The court refused to follow the same rule as applied to mechanics liens,[9] and deemed plaintiff the prevailing party entitled to fees and costs. So what is the fix to Fixel? While you may never be able to fully avoid the other side’s entitlement to fees and costs if you are in a situation with a known “loser” under a claim for breach of contract, you can “stop the bleeding” by serving a PFS. In Tierra Holdings v. Mercantile Bank, 78 So. 3d 558 (Fla. 1st DCA 2011), the court permitted a PFS to be enforced despite a prevailing party provision under the contract. While the plaintiff in Tierra was entitled to all its fees and costs as the “prevailing party” (because it won a judgment against defendant), defendant was also entitled to all its fees and costs from the date the PFS was served which the defendant ultimately prevailed upon.

Conclusion. 

If properly employed, proposals for settlement can be effectively woven into most if not all construction litigation cases. An early, well-informed PFS can be an excellent negotiating tool at any mediation, in addition to the obvious benefits that come from enforcement if the serving party succeeds at trial or on dispositive motion.