What Is An Offer of Judgment And Can It Really Lower the Cost of or Shorten Litigation?

January 11, 2017

Insurance coverage litigation today is often time-consuming and expensive. Many cases include claims for “bad faith” damages, and some cases seek punitive damages. To support their allegations, litigants will usually seek a wide-array of documents and testimony. Accordingly, litigating such matters can also become expensive. 

One potential method for combating these rising costs and risk is an expense-shifting tool called an “offer of judgment” (“OJ”) (a/k/a “proposal for settlement” (“PFS”) in Florida). Typically, an OJ occurs when a defendant “offers” the plaintiff to have judgment taken against him, but only for a certain amount. If the plaintiff declines and obtains a judgment less favorable than the offer, then he must pay the defendant’s costs and, possibly, his attorney’s fees. In short, an OJ can cause the offeree to think long and hard about continuing the case. Because different states have different laws regarding an OJ, it may (or may not be) worthwhile to make (or accept) one. This blog post briefly discusses Offers of Judgment in Florida, Georgia, and North Carolina and South Carolina, as well as the considerations a party must contemplate before issuing or accepting one. 

FLORIDA

In Florida, Proposals for Settlement are complicated. Among other things, there are strict deadlines (e.g., 30 days to accept or reject a PFS); rigid requirements (i.e., a PFS can be made only when the “true relief” sought is money damages); and PFS’s are carefully construed (i.e., a party must comply with both Florida Statute § 768.79 and Fla. R. Civ. P. 1.442 when making or accepting a PFS).

There are, however, advantages. For example, while Florida Statute § 627.428 permits an insured who obtains a judgment against her insurer to recover her attorney’s fees from that insurer, Florida law allows a successful insurer to recover his attorney’s fees, depending on the level of his “success.” To explain this, the Florida Supreme Court created the following chart in Nichols v. State Farm Mut. Auto. Ins. Co., 932 So. 2d 1067 (Fla. 2008):

As discussed below, Georgia allows a “successful” insurer to recover his attorneys’ fees, but only with certain claims, while North Carolina and South Carolina do not allow a “successful” insurer to recover fees at all.

GEORGIA AND O.C.G.A § 9-11-68

Georgia, much like Florida, has a complicated set of requirements by which an OJ litigant must abide. These include specifically referencing the OJ Statute, O.C.G.A. § 9-11-68; including a certificate of service with the OJ; and heeding certain time constraints. Perhaps most analogous to Florida, but unlike North Carolina and South Carolina, is that Georgia allows for the recovery of attorney’s fees, but only in cases involving tort claims. 

Also like Florida, Georgia employs a sliding scale for successful defendants. For instance, if a defendant issues an OJ that a plaintiff rejects, the prevailing defendant can collect attorney’s fees and expenses incurred from the date of the rejection through the entry of judgment, if the final judgment is less than 75% of the offer. Similarly, if the plaintiff makes an offer which the defendant rejects, a prevailing plaintiff can collect attorney’s fees and expenses, but only if the final judgment is greater than 125% of the offer.

NORTH CAROLINA AND SOUTH CAROLINA

Offers of Judgment in North and South Carolina are governed by their respective State’s Civil Procedure Rule 68. Although each State’s Rule contains different procedural requirements—such as South Carolina permitting only defendants to issue an OJ—both States permit OJ’s in all civil cases; and both permit the recovery of only costs (e.g., witness fees, subpoena fees, and deposition transcripts). Because neither State permits the recovery of attorney’s fees, OJ’s in North and South Carolina are far less useful in facilitating settlement than they are in Georgia and Florida.

CONCLUSION

Obviously, there are a number of considerations a litigant must examine before issuing (or accepting) an OJ or PFS. The following are three that should be given special consideration:

1. Understand the ramifications involved, including what is and is not recoverable.
   Because different States permit the recovery of different expenses, it is imperative to understand what is, and what is not, recoverable. 
2. Craft a clear and timely offer (or acceptance).
   The last thing a litigant wants is to have made the right decision in making, accepting, or rejecting an offer, only to later learn that poor drafting or timing has rendered it ineffective. 
3. Remember, in most cases, acceptance is a judgment. 

Although settlement may curtail expensive litigation or permit the recovery of attorneys’ fees, an accepted OJ/PFS is a judgment. This can be exceptionally meaningful when extra-contractual claims are at issue.

Ultimately, an OJ/PFS may indeed shorten the length or lessen the cost of litigation. However, it is only after careful consideration of all of the consequences involved should a party making such a determination.

For any further questions, please contact Timothy Engelbrecht or T. Nicholas Goanos.