Proposal for Settlement does not “cut-off” contractual attorneys’ fees

The issue of whether a valid Proposal for Settlement, served in compliance with Fla. Stat. s 768.79, “cuts-off” a prevailing party’s claim for attorneys’ fees and costs pursuant to a valid contractual provision, was recently visited as an issue of first impression by the First District Court of Appeals in Tierra Holdings, Ltd. v. Mercantile Bank, a Florida banking corporation.
The issue was decided in the negative.
Mercantile originally sued Tierra for breach of contract and unjust enrichment. The parties’ contact had a provision providing that the prevailing party is entitled to recover its attorneys’ fees and costs expended during the litigation. Prior to the matter proceeding to trial, Tierra served Mercantile with a valid and good faith Proposal for Settlement pursuant to Fla. Stat. s 768.79 in the amount of $178,100. Mercantile rejected the offer and later prevailed on its claim for breach of contract and unjust enrichment. However, after appeal, Mercantile lost on its unjust enrichment claim and only recovered a damages award in the amount of $16,232 for its claim of breach of contract – not enough to avoid triggering the statutory fee shift provided by the proposal for settlement. Tierra argued that since Mercantile rejected the bona fide proposal for settlement and then recovered far less than 25% of the amount offered, then their contractual right to attorneys fees should be cut -ff as of the date of the proposal for settlement. Their rationale, supported by previous DCA opinions was that Mercantile failed to technically prevail by beating the amount of the proposal for settlement.
The First DCA rejected this contention, finding that the fee shifting sanction of a rejected proposal for settlement operated independently from a valid contractual provision providing the prevailing party the right to recover its attorneys’ fees. In making this determination, the First DCA strictly construed Fla. Stat. s 768.79 against Tierra (the moving party) and was persuaded by the fact that the statute lacked any express language exhibiting an intent to “cut-off” or otherwise terminate a contractual attorneys’ fee provision.

Tierra Holdings, Ltd. v. Mercantile Bank, a Florida banking corporation

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