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2012 - September 6 Be Wary of the Effect Substantive Law Provisions Have on Offers of Judgment

2012 - September 6 Be Wary of the Effect Substantive Law Provisions Have on Offers of Judgment

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Published by: JimersonCobb on Sep 07, 2012
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Be Wary of the Effect Substantive Law Provisions have on Offers of JudgmentBy: Matthew F. Havice, Esq.
It is well known that Offers of Judgment and
Florida Courts’
interpretations of the Statuteand Rule governing them are continually changing. Certainly
Florida Rule of Civil Procedure
 1.442 and
Florida Statute
§ 768.79 provide the requirements for the form, language, method andtiming of service of an Offer of Judgment; however, Florida Circuit Courts are still split onvarious issues related to the Offers. We will address these splits in a later entry as in this entrywe will focus on a recent Florida Supreme Court Decision that has answered several questions asto Offers of Judgments that are of particular concern to contractors and sureties. The FloridaSupreme Court in Southeast Floating Docks, Inc., et al. v. Auto-Owners Ins. Co., 82 So.3d 73(Fla. 2012) looked at the status of Fla. Stat § 768.79 as substantive or procedural law, theenforcement of an Offer of Judgment made in a matter in which the parties entered into acontract with a choice-of-law provision applying another states substantive law and the interplayof public policy concerns related to both Offers of Judgment and choice-of-law provisions.Southeast, involved a construction matter in which Auto-Owners, as surety, issued a bondin favor of the general contractor securing performance of a subcontractor, Southeast Floating
Docks, Inc., (“SFD”) for the construction of a floating dock. SFD had contracted with Rivermar Contracting Company (“Rivermar”) for the construction of the floating dock, after which a
dispute arose as to the construction of the dock and Rivermar filed suit against SFD and Auto-Owners for breach of contract. Prior to trial, Auto-Owners entered into a settlement agreementwith Rivermar and settled the underlying action. Auto-Owners then instituted an action againstSFD based on an indemnity clause in the contract with SFD and its president, Alan Simpson,individually. The contract containing the indemnity clause between Auto-Owners, SFD andSimpson included a choice-of-law clause that provided for the substantive law of Michigan toapply to all disputes arising under the contract. At trial, the jury determined that Auto-Ownershad entered into the settlement agreement with Rivermar in bad faith and as a result, negated theindemnity clause of the contract between Auto-Owners, SFD and Simpson. Thereafter, Auto-Owners moved for a new trial which was granted. The retrial was scheduled for ten (10) monthsafter the end of the initial trial. Approximately four (4) months prior to the retrial, SFD servedAuto-Owners with an Offer of Judgment in the amount of $300,000.00 for settlement of allclaims. Auto-Owners did not accept the Offer and the trial court entered summary judgment intheir favor. SFD appealed the order granting a new trial. The granting of the retrial was reversedwith the direction that the jury finding of bad faith in the initial trial be reinstated. SFD then
moved for attorneys’ fees and costs pursuant to their rejected Offer of Judgment served prior to
the entry of summary judgment following the granting of a new trial. The trial court denied
SFD’s motion for fees and costs and the den
ial was appealed. The question as to the status of Fla. Stat. § 768.79 as substantive or procedural law was certified to the Florida Supreme Court.
 
The Court turned to Article V, section 2(a) of the Florida Constitution in determining thestatus of Fla. Stat. § 768.79. The Court noted that Article V, section 2(a) grants the Court theexclusive authority to adopt rules of judicial practice and procedure for state actions brought inFlorida. Alternatively, the Legislature is charged with the responsibility of enacting substantivelaw. Southeast, at 78.
See also
Allen v. Butterworth, 756 So.2d 52, 59 (Fla. 2000); TGI
Friday’s, Inc. v. Dvorak 
, 663 So.2d 606, 611 (Fla. 1995). However, as is the case with Offers of Judgment, both the Legislature and the Court have enacted measures controlling their use andavailability. In situations where two branches of government are both given authority to enactrules and laws on a subject, the Court must look to the requirements placed on the Court by theLegislature in determining the nature of the statute and rule. Massey v. David, 979 So.2d 931(Fla. 2008).The Court had previously determined that the Offer of Judgment statute was bothsubstantive and procedural in nature.
See
Knealing v. Puelo, 675 So.2d 593 (Fla. 1996); TGI
Friday’s
663 So.2 at 611. The Court noted that because the statute sets out the circumstancesunder which a party was entitled to fees and costs under which a court must award fees andcosts, the Legislature had created a substantive right to the fees and costs. Id. Additionally, theCourt relied on its ruling in
TGI Friday’s
, noting that since the Offer of Judgment statue altered
the common law rule that a party is responsible for its own attorney’s fees, it was “clear that thecircumstances under which a party is entitled to costs and attorney’s fees
 
is substantive.”
Southeast, 82 So.3d at 79. Finally, the Court relied on the plain language of the statue in
determining that due to the statute’s express limiting of judicial discretion as to the calculation of 
the fees and costs awarded when the provided requirements are met, the statue is substantive innature as it relates to both constitutional and conflict of law issues. Id.The Court stated
that, “[a]n agreement between parties to be bound by the substantive
laws of another jurisdiction is presumptively valid, and this Court will enforce a choice-of-lawprovision un
less applying the chosen forum’s law would contravene a strong public policy of thisState.”
Id at 80. It is undisputed that there is a public policy concern with the enforcement of theOffer of Judgment statute as it has been widely held that the statue was enacted to deter partiesfrom rejecting reasonable settlement offers by imposing sanctions through a requirement to pay
the opposing party’s fees and costs incurred in
either bringing or defending an action.
See
 
Attorneys’ Title Ins. Fund, Inc. v. Go
rka, 36m So.3d 646 (Fla. 2010); and,
TGI Friday’s
, 663So.2d at 611. However, the public policy at play in the desire for litigants to accept reasonableoffers does not out way the even greater public policy of protecting ones freedom to contract.Southeast, 82 So.3d at 81. Accordingly, the Court determined that the Offer of Judgment statuewas a substantive right and that in an instance where parties mutually agree, through contract, tobe bound by the substantive laws of another jurisdiction, Fla. Stat. § will not apply. Id at 82.

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