What is a Proposal for Settlement?
Proposals for settlement are derived from England and are sometimes referred to as “the modified English rule.” In England, any litigant who loses the case is required to pay the attorneys’ fees and costs for the winning side. In America, however, many states have adopted a different proposal for settlement rule.
Florida’s rule works like this: Assume both sides file proposals to settle the case at a specific dollar amount. If you go to trial as the plaintiff and receive (via judgment) at least twenty-five percent less money than the amount of the proposal, then you are required by the court to pay the defendant’s attorneys’ fees and costs, which accrued from the date of the proposal for settlement through the date of the judgment. This can be a considerable sum of money and increases your risk of losing additional money. Likewise, if you get a net judgment that is twenty-five percent or greater than the amount of the proposal for settlement that you offered to the defendant, then the defendant has to pay your attorneys’ fees and costs.
This is a somewhat complex aspect of your case, and the consequences of your decision to accept or reject a proposal for settlement can be massive. Therefore, you should make sure your attorney explains the proposal to you in a way you can understand it. You absolutely must understand the risks this proposal may be placing on you.
As an example, let’s say the defense sends your attorney a proposal for settlement for $100,000. After trial, a judgment is rendered in an amount less than $75,000; this triggers the proposal for settlement to go into effect because your net judgment is at least twenty-five percent less than the proposal amount. You would then have to pay the defendant’s attorneys’ fees and costs, which would be thousands upon thousands of dollars. If you own multiple homes, businesses, or cars, all of these assets can be taken away in collection of that debt.
Another example is if you send a proposal for settlement to the defendant for $100,000, and the defendant decides not to pay you that amount within thirty days. After trial, your net judgment is more than $125,000. This triggers the proposal going into effect, and the defendant has to pay your attorneys’ fees and costs. This would provide you with an extraordinary amount of money, much more than you would have received had you not filed a proposal for settlement.
Proposals for settlement are important strategic tools that can have a massive impact on your case and your finances. Because of the proposal’s overreaching effects, it is very important to listen to your attorney’s advice regarding the proposal. Your attorney knows how these things work and has seen the good and bad consequences of an effective proposal for settlement. Heed your attorney’s advice regarding what to do about a proposal for settlement.