Calculating Statutory Settlement Offers
Trying to figure out what an opposing party would have to get in a judgment to beat your proposal for settlement? Want to make an offer of judgment under Florida’s statute (Section 768.79) and need to calculate the amount? The math seems pretty straightforward, but in reality it may not be that simple. Here are two calculators for analyzing a PFS. The first set is used to analyze a proposal after you received it. The second calculator is used for preparing a proposal (i.e. you’re trying to figure out how much to offer/demand based on an expected judgment).
While I developed these calculators for my own practice (i.e. to be efficient), I decided to publish them to help others better understand and analyze proposals for settlement under Florida’s statutory offer of judgment law.
Analyze an Offer of Judgment or Proposal for Settlement Made
The math for this enforcement range calculator is pretty simple. It doesn’t involve knowing the final judgment, but instead starts from the offer itself and then calculates what the range of the judgment must be in order for the offer to be enforceable.
The above two calculators also include some rounding to ensure that the penny calculation correctly reflects an enforceable PFS. The defendant’s offer is rounded down to the nearest penny, while the plaintiff’s is rounded up.
Calculate a PFS Based on an Estimated Judgment
Here’s where things get a bit more complex. We work backwards from what a party expects their exposure to be at trial, with or without including attorney’s fees, and calculate what an offer or demand should be. Keep in mind that this is an exact calculation. Thus, if the actual judgment is even a single penny more or less that what it was estimated to be, then offer or demand based on that estimate may not be enforceable. This calculator should be used as a guide, and I recommend building in some cushion into any PFS to try to avoid non-enforcement post-judgment depending on whether you’re a plaintiff or defendant. Again, trying to figure out a judgment is usually not an exact science, and rarely can a lawyer forecast with precision what a judgment will be. I provide this tool as a way to help understand how statutory proposals for settlement work through numerical values.
Stated in plain English, here’s how each calculation works, based on the number input above:
Plaintiff: Divide the estimated judgment by 125% and round down to the nearest penny (if you get a fractional cent). Therefore, a judgment of $ is “at least 25 percent greater than” a demand of $.
Defendant: Divide the estimated judgment by 75% and round up to the nearest penny (if you get a fractional cent). Therefore, a judgment of $ is “at least 25 percent less than” an offer of $.
Background: The Offer of Judgment Statute
Some background on the above calculators. In Florida, Statute 768.79 is the offer of judgment statute. Offers and demands made pursuant to the statute are often referred to as a proposal for settlement, and we lawyers frequently abbreviate that to PFS or OJ.
The goal of the statute is to encourage plaintiffs to take less in a settlement than what they think their case is worth and defendants to pay more than what they think their exposure is. In theory, this should encourage each side towards a middle ground where a settlement can be reached. For example, if both parties think the case value is the same, their proposals based on that value will overlap, and thus if either side makes an offer on that estimated value, the other side should accept it (since it would be over/under what their own proposal would be). So in the above calculator, the range for the plaintiff’s demand and the defendant’s offer overlap. In practice, however, parties rarely agree on a case’s value, and therefore proposals are often used as an offensive weapon that seek to lock in attorney’s fees for a party.
Not surprisingly, the statute itself is worded densely, but the basics are that twenty-five percent is the under/over amount when comparing a judgment with a proposal; let’s call it the twenty five percent rule. It works for either party. For a defendant, the statute reads:
In any civil action for damages . . . if a defendant files an offer of judgment which is not accepted by the plaintiff within 30 days, the defendant shall be entitled to recover reasonable costs and attorney’s fees incurred by her or him . . . if the judgment is one of no liability or the judgment obtained by the plaintiff is at least 25 percent less than such offer . . . .
while for a plaintiff’s PFS, it similarly reads:
In any civil action for damages . . . . If a plaintiff files a demand for judgment which is not accepted by the defendant within 30 days and the plaintiff recovers a judgment in an amount at least 25 percent greater than the offer, she or he shall be entitled to recover reasonable costs and attorney’s fees incurred from the date of the filing of the demand.
Sec. 768.79(1), Fla. Stat. (2018). The cases interpreting this statute are legion, and cover disputes over ambiguities in proposals, offers made in cases having equitable claims, multiple offers, multiple parties, and the timing of when they are made. I may get into these hotly contested issues in future posts, but for now I thought publishing these calculators might better assist litigants and their counsel in understanding and responding to statutory settlement offers.