MIAMI BUSINESS LITIGATION: OFFERS OF JUDGMENT AND SHAREHOLDER DERIVATIVE CASES

Under Florida’s offer of judgment statute, Section 768.79, Florida Statutes, “if a defendant serves an offer which is not accepted by a plaintiff, and if the judgment obtained by the plaintiff is at least 25 percent less than the amount of the offer, the defendant shall be awarded reasonable costs, including investigative expenses, and attorney’s fees” incurred from the date the proposal was served. Precedent from the Supreme Court of Florida in Anderson v. Hilton Hotels Corp., 202 So.3d 846 (Fla. 2016), determined that, “an offer [of judgment] that complies with section 768.79 and Rule 1.442 creates a ‘mandatory right’ to collect attorneys’ fees.” Offers of judgment, however, are limited by a “bad faith” exception that can nullify the offer of judgment when the court determines the offering party conveyed the offer in bad faith. “[O]nce an offer of judgment has been made and rejected and a judgment of no liability has been entered, the defendant has a right to an award of attorney’s fees unless the offer was found to have been made in bad faith.” Transmission Co. v. Lauderdale Sand & Fill, Inc., 813 So.2d 1013 Fla. 4th DCA 2002). Peter Mavrick a Miami business litigation attorney, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment litigation, and other legal disputes in federal and state courts and in arbitration.

Under Section 768.79(2), Florida Statutes, an offer of judgment must:

(1) Be in writing and state that it is being made pursuant to this section;

(3) Name the party making it and the party to whom it is being made;

(4) State with particularity the amount offered to settle a claim for punitive damages, if any; and

(4) State its total amount.

Florida Rule of Civil Procedure 1.442 operates in tandem with the offer of judgment statute, and contains the same basic requirements. In addition, Rule 1.442 requires that the proposal state with particularity “any relevant conditions” and “all nonmonetary terms,” and that a “joint proposal shall state the amount and terms attributable to each party. The Supreme Court of Florida, in State Farm Mut. Auto Ins. Co. v. Nichols, 932 So.2d 1067 (Fla. 2006), explained that: “The rule does not demand the impossible. It merely requires that the settlement proposal be sufficiently clear and definite to allow the offeree to make an informed decision without needing clarification.”

Offers of judgments can be used in most litigation, including shareholder derivative lawsuits. However, under Florida Statutes Section 607.0745(1), settlements in derivative shareholder actions require court approval. Florida courts interpret this shareholder approval requirement to be a post-agreement ratification of the settlement, not a condition of settlement. In Berges v. Infinity, Inc., the Supreme Court of Florida held that “an offer to settle is not invalid simply because there is a requirement of subsequent court approval.” Similarly, Through Bateski v. Ransom, 658 So.2d 630 (Fla. 2d DCA 1995), explained that court approval is “not an essential term” of a settlement but rather is a contingency that does not affect the proposal.

Florida’s Fourth District Court of Appeal, in Spanakos v. Hawk Systems, Inc., 362 So.3d 226 (Fla. 4th DCA 2023), held that shareholder derivative lawsuits are subject to offers of judgment under Section 768.79, Florida Statutes. Spanakos explained in pertinent part: “By its plain terms, section 768.79 applies to ‘any civil action for damages’ and does not contain an exception for shareholder derivative suits…Although rule 1.442 formerly prohibited the use of proposals for settlement in shareholder derivative actions, that prohibition was removed in a 1996 amendment to Rule 1.442…Where the plain language of the statute states that it applies to any civil action for damages, a court cannot judicially exempt shareholder derivative suits from section 768.79.”

Offers of judgment in shareholder derivative cases are properly directed to the plaintiff in his capacity as a derivative plaintiff on behalf of the company. This allows the plaintiff to accept the offer, subject to court approval. Once the plaintiff accepts the offer, the court would then determine the identities of the nonparticipating shareholders for their potential objections at a fairness hearing, in accord with Section 607.0745(2), Florida Statutes.

Peter Mavrick is a Miami business litigation lawyer, and represents clients in Fort Lauderdale, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.