Courts of Appeal Conflicted Over Rule 1.442(c)(3) When Claims for Damages Involve a Husband and Wife

Section 768.79 is a powerful tool in a Florida litigator's arsenal because it permits the offeror to create a basis for fee-shifting if the offeree does not accept a proposal for settlement, and certain conditions are met. The statute is implemented by Florida Rule of Civil Procedure 1.442, which allows a proposal to be made by or to any party or parties and by or to any combination of parties. Rule 1.442(c)(3) requires a joint proposal—that is, a proposal by or to two or more parties—to state the amount and terms attributable to each party. The sole exception to Rule 1.442(c)(3)'s apportionment requirement is found in Rule 1.442(c)(4), which applies when a party is alleged to be solely vicariously, constructively, derivatively, or technically liable, whether by operation of law or by contract. The Florida Supreme Court has made clear time and again that Section 768.79 and Rule 1.442 must be strictly construed.

This article explores the conflict between the Second District Court of Appeal and the Fourth District Court of Appeal about whether a proposal for settlement must be apportioned when made by or to a husband and wife bringing a claim for damages.

In 2003, the Second District decided Crespo v. Woodland Lakes Creative Retirement Concepts, Inc. In that case, the Crespos sued two defendants for alleged ethnic discrimination arising from the purchase of a home. Both defendants served proposals for settlement on the Crespos, with each proposal offering a single sum of money to the Crespos but not apportioning the amount offered. The Crespos rejected the proposal, and the trial court ultimately awarded the defendants their attorney fees.

On appeal, the Crespos argued the proposals were invalid because neither proposal apportioned the amount offered. The defendants argued the proposals were valid by relying on a line of cases holding, consistent with what is now Rule 1.442(c)(4), that a joint proposal made to two defendants, one of whom is vicariously liable, does not have to apportion. The Second District rejected the defendants' argument because the proposals were made to plaintiffs (the Crespos), not defendants. The Second District also opined that there was no legal theory preventing the defendants from apportioning the amounts offered. In the end, the Second District "decline[d] to create a judicial exception to the rule for claims made by a husband and wife, regardless of whether their claims are pleaded in a single count or in multiple counts." Because the defendants' proposals failed to strictly comply with Rule 1.442(c)(3), the proposals were invalid.

Ten years later, the Second District again addressed Rule 1.442's apportionment requirement in the context of a case involving a husband and wife in Cobb v. Durando. There, a husband and wife (the Durandos) sued a contractor for breach of contract related to roofing services. The Durandos served a single proposal for settlement on the defendant but failed to apportion the amount in their joint proposal. The trial court awarded attorney's fees to the Durandos, and the defendant appealed.

On appeal, the Durandos argued they did not need to apportion because their claim for breach of contract derived from their ownership of real property as tenants by the entireties and thus, their argument went, apportionment was not feasible. The Second District rejected that argument for two reasons. First, the claim did not arise directly from ownership of property by the entireties. Second, "the rule requiring apportionment of proposals for settlement made by multiple plaintiffs does not recognize an exception for joint proposals made by tenants by the entireties."

The Fourth District saw the law differently. But even then, not without its own internal conflict.

In Hall v. Lexington Insurance, the Halls filed a complaint against their insurance company following the denial of their homeowner's insurance claim. After a jury trial, the insurance company prevailed, and the trial court awarded the insurance company its attorney fees. The Halls appealed, arguing in pertinent part that the proposal for settlement did not apportion the amounts attributable to each of them.

The Fourth District reasoned the insurance company was not required to apportion because the Halls filed a unified, single insurance claim. To support its reasoning, the Fourth District noted that the Halls were represented by the same lawyer, there was no conflict of interest between the Halls, the Halls submitted one verdict form, and the judgment entered against the Halls was joint and several. The Fourth District also distinguished Crespo on the basis that Crespo involved separate and distinct claims while the case before the Fourth District involved a unified claim.

In Graham v. Peter K. Yeskel 1996 Irrevocable Trust, the Fourth District took a fundamentally conflicting position. In that case, the Grahams were defendants, and they served a joint proposal that failed to apportion. After the Grahams prevailed at a bench trial, the trial court denied their motion for attorney fees.

On appeal, the Grahams argued they did not need to apportion because they were sued on a single, unified claim directed at their joint ownership of real property. The Fourth District rejected their argument out of hand, stating: "the supreme court has adopted a bright line rule requiring apportionment under Rule 1.442(c)(3). That the husband and wife made their joint proposal for settlement as tenants by the entireties does not alter the bright line rule." Even in its opinion issued after a motion for rehearing, the Fourth District reaffirmed its bright-line approach: "we believe that the supreme court, like Dr. Seuss's Horton the elephant, meant what it said and said what it meant—Rule 1.442(c) applies in all cases where proposals for settlement are authorized by Florida law, without an exception for claims against litigants relating to property they own as tenants by the entirety."

More recently, in 2024, the Fourth District decided MacKensen v. Trace Elements. In this case, a husband and wife, who owned a home together, filed a complaint for breach of contract and unjust enrichment against a professional design company. The design company counterclaimed for breach of contract and tortious interference with a business relationship. The husband and wife served a proposal for settlement but failed to apportion. After a trial resulted in a verdict for the husband and wife, the trial court denied their motion for attorney fees.

On appeal, the husband and wife argued they were a unified party with a single claim and, therefore, they did not need to apportion. With no mention of Graham, the Fourth District relied on Hall to determine that the husband and wife had served a proposal regarding a unified, single claim and, as such, they did not need to comply with Rule 1.442(c)(3).

The conflict between the Second District and Graham, on the one hand, and Fourth District's decision in Hall and MacKensen, on the other hand, stems from a fundamental disagreement. The Second District and the panel in Graham applied Rule 1.442(c)(3) as written. And all of those opinions refused to create a judicial exception to a plainly worded Rule of Civil Procedure that only applied to husbands and wives. By contrast, the Fourth District in Hall and MacKensen looked to factors not expressed in Rule 1.442(c)(3) to create an exception for the rule's applicability.

The Florida Supreme Court should, on its next occasion, take up conflict jurisdiction to resolve the split. If the Florida Supreme Court were to take up a conflict case on the issue of Rule 1.442(c)(3)'s applicability to claims by or against a husband and wife, there is a reasonably strong case for approving the Second District's interpretation of Rule 1.442(c)(3), as well as that of the Fourth District panel in Graham.

It is well-settled that the Rules of Civil Procedure are construed in accordance with principles of statutory construction, and Rule 1.442 must be strictly construed. When the language of a rule is clear and unambiguous and conveys a clear and definite meaning, then a court does not resort to rules of statutory interpretation and construction; rather, the rule must be given its plain and obvious meaning, with a court being powerless to extend, modify, or limit the rules express terms or its reasonable and obvious implications. Furthermore, if the language of a rule is clear and unambiguous, a court cannot look behind the rule's plain language for intent, even when convinced that the Florida Supreme Court really meant and intended something else not expressed in the phraseology of the rule.

With those bedrock principles in place, there is considerable weight to an argument that the Florida Supreme Court said what it meant and meant what it said in promulgating Rule 1.442(c)(3). While joint proposals for settlement are permitted, such a proposal "shall state the amount and terms attributable to each party." There is no wiggle room in "shall." And although the Florida Supreme Court created one exception to the apportionment requirement—i.e., Rule 1.442(c)(4)—the Florida Supreme Court did not create an exception for claims by or against a married couple. The very existence of Rule 1.442(c)(4) demonstrates the Florida Supreme Court knew how to create exceptions to Rule 1.442(c)(3) but chose not to exempt claims involving married couples from Rule 1.442(c)(3). Just as when the Legislature articulates clear exceptions to a statute and no other exceptions may be implied, so too here: the Florida Supreme Court articulated a clear exception to Rule 1.442(c)(3) and, so, no other exception may be implied.

Regardless of whether the Second or Fourth District has the better read of Rule 1.442(c)(3), the Florida Legislature may wish to consider amending Section 786.79 to close the extant loophole in how Section 768.79 applies in cases involving claims by or against a married couple. Take the following example as a use case. A husband and wife jointly own a home and sue their homebuilder for construction defects. The homebuilder wishes to serve a proposal for settlement. Regardless of whether the homebuilder serves separate proposals or a joint proposal, and regardless of whether the proposals are apportioned, the homebuilder cannot require both offerees to accept as a condition of acceptance.

The situation described above leads to the possibility of either the husband or wife accepting the proposal and the other rejecting it and then proceeding to seek the full amount of damages originally sought by both the husband and wife. While a defendant-offeror may argue for a setoff, which could be important to reduce a net judgment obtained for purposes of determining whether Section 768.79's 25% requirement was triggered, neither Section 768.79 nor Rule 1.442 addresses setoff. Whether the setoff statutes would apply is questionable and dependent on the type of claim brought, whether the damages are economic or noneconomic, and whether liability is severally or joint and severally. And there is authority that a court lacks the power to apply a setoff where a proposal for settlement does not include a setoff term, which would likely invalidate a proposal if included therein under Rule 1.442(c)(2)(C). In short, the possibility of a setoff is not sufficiently clear to negate a concern of windfall recoveries unique to married couples.

To simplify this area of the law and to provide uniformity and predictability, the Florida Legislature may wish to amend Section 768.79 to allow an offeror to condition acceptance of a proposal for settlement on all offerees, who are married to each other, accepting the proposal, similar to how the Legislature recently amended Section 768.79 to permit conditions of joint acceptance of proposals served by property insurers in breach of contract actions.

Reprinted with permission from the November 5, 2024 issue of Daily Business Review. © 2024 ALM Media Properties, LLC. Further duplication without permission is prohibited.  All rights reserved.