Consider this common scenario: A claimant demands policy limits to be paid in twenty days. Insurance company timely complies but requires a general release to be signed. And money held in escrow. And a hold harmless. And a confidentiality agreement. Do any of these terms result in a counter-offer?

In a short, developing series of cases, the courts – primarily the Fourth District – is trying to make it out like the answers are more obvious than they appear. While the courts are claiming that acceptance must be a “mirror image” of the offer, these cases indicate greater wiggle room – and the potential for confusion. In other words, until others develop the case law for you, wary lawyers may want to be careful with recommendations and opinions about which of these will work, or not, in settlement discussions.
Citations below are cited in Dwight Grant v. Matthew Lyons (Warner, Stevenson, Damoorgian).

GENERAL RELEASE: In Erhardt v. Duff, 729 So. 2d 529 (Fla. 4th DCA 1999), the plaintiff demanded policy limits and the defendant’s insurance company timely agreed to tender and wrote, “upon your acceptance, we are prepared to forward our settlement draft and releases.” The court held this was not a counter-offer since it met the (1) amount and (2) time limit requirements. Signing a release was “implicit as part of the tender, and not an additional element of the agreement… it would have made no sense for [the insurer] to tender its policy limits if there remained a possibility that it could still be liable for further claims […] arising from the same incident.”

The Third DCA tends to agree with Erhardt, holding that “usual settlement documents” are OK to “protect the offeror from unforeseen developments or creative maneuvering by the other party.” “A document releasing an insurance company an insurance company for claims arising from the same incident for which the full policy limits were tendered, particularly where the injured party is permitted to modify such a release, is the kind of usual settlement documents implicit in any settlement agreement.”

NOT THE “USUAL TERMS”: In this new Fourth District case, the insurance company responded to a time-limit demand with a requirement to hold the funds in escrow, resolve liens, and insert various terms into the release. The Panel held this to be a counter-offer. It concluded the following are not the “usual terms” of settlement and, for the rest of us, would likely be a counter-offer: (1) requiring the check to be held in escrow until an unaltered release is signed and returned, (2) release of all persons liable, not just the defendant and insurance company, (3) warranty the medical bills were paid and none outstanding, and (4) non-disclosure / confidentiality clause.

We are anxious to report on the recent Second DCA opinion of Manor Care v. Catherine Stiehl as PR of Estate of Halloran, but we will have to build up to that case. This (other) recent Second DCA case conveniently builds a nice bridge between the Georgia cases in our prior posts and that new Manor Care case.

The Second District tackled, head on, whether an arbitration clause is still enforceable despite the fact that the clause refers matters to the American Arbitration Association -- or any other forum -- which cannot or will not hear the case. According to the Second DCA, the basis for compelling arbitration despite the absence of the forum was in front of us the whole time...

The case is New Port Richey Medical Investors, LLC d/b/a Life Care Center of New Port Richey; Forrest L. Preston Developers; Life Care Centers of American d/b/a Life Care Centers of Tennessee d/b/a; Life Care Center of New Port Richey et al. v. Stern (Wallace, Davis and Silberman).

In this nursing home arbitration case, the resident apparently signed an admission agreement with an arbitration clause which referred any disputes to the AAA and stated that the arbitrators "shall apply the applicanle rules of procedure of the AAA." Of note, the opinion reports, but does not quote, that the agreement says that the AAA was to "administer" the arbitration. We'll get back to that later.

At the hearing, plaintiff's counsel sought to avoid arbitration by claiming that the AAA was an "essential, material term" since there was a choice of arbitrators and choice of procedural rules. That issue too we'll address below.

The court held that the Florida Administrative Code, section 682.04, holds that "...if the agreed method fails or for any reason cannot be followed, the court, on application of party to such agreement or provision shall appoint one or more arbitrators." In short, according to this Panel, if the intended forum is unavailable, the court will appoint a replacement.

Let's get back to the issues noted above. First, for lawyers who draft these agreements, the preferred language is that the AAA (or whatever forum) should not necessarily "administer" the arbitration since you do not know if that entity will exist or be willing to do so. Instead, the better wording for your clause is that the arbitration shall proceed according to their rules. It arguably is not foolproof, but it has worked in Idaho and Florida.

Next, note that the decision describes the situation where the lawyer seeking to avoid arbitration brought up that the AAA no longer accepts pre-injury arbitration agreements, citing the AAA's Healthcare Policy Statement, indicating that the AAA no longer takes such cases after January 1, 2003 (no word in the opinion how it was authenticated). Meanwhile, at least one website reports that the AAA has actually heard cases where a pre-injury agreement was later disputed... (caveat: it's unclear whether all the facts are known regarding the procedure which lead to that Duke case being arbitrated)

Of note, the question of whether something is an "essential material term" likely collides with a frequent tactic to avoid arbitration. Often, the plaintiff claims they did not know what they were signing and did not realize the arbitration clause existed until litigation. Arguably, then, the forum selection language was not such an "essential, material" term if the signor did not even know it was there. No indication whether that was an issue in this case but it is a solid tip for practitioners.

We travel across the Florida-Georgia border to take a quick look at two nursing home arbitration decisions with differing outcomes... and to examine the argument regarding arbitration being "impossible" since, as a policy, the AAA will not hear tort cases where a pre-injury trial waiver was signed (and now disputed).

As if this issue has not been beaten to death, a Georgia court in Triad Health Management of Georgia v Johnson (June 3, 2009), the court held that a spouse's general power of attorney provided authority to sign an arbitration clause for the other spouse being admitted to a facility. On the heels of that case, another Georgia court handed down Life Care Centers of America d/b/a Life Care Center of Gwinnett v. Smith, which held that a "durable power of attorney for health care" was insufficient to provide authority to sign an arbitration clause. In both cases, the courts acknowledged this was a case-by-case decision based upon the wording of the POA. For a Georgia lawyer's perspective, see this site.

The Smith case also brings up an interesting, albeit not-so-new argument against arbitration premised upon the fact that the American Arbitration Association currently declines to hear cases where the arbitration agreement is disputed and signed prior to the alleged injury. This same issue dates back to 2006 where the American Health Lawyers Association (AHLA) took the same position. Since the Georgia appellate court did not get past the issue of the signor's authority, it was not addressed in the opinion. We've previously explained how an arbitration agreement can be drafted to avoid this problem.

An interesting side note in Smith is the discussion about the defendant's motion directed towards disqualifying plaintiff's counsel. This sounds vaguely like a similar Florida dispute between a former nursing home defense lawyer (turned plaintiff counsel) and a large nursing home corporation. Neither court disqualified plaintiff's counsel.

It is common to have a time-limit demand and a settlement agreement which states that failure to pay on time results in the defendant/payor consenting to a judgment of a (higher) amount. This is known as an escalation clause.

In Lawrence Reznik v. FRCC Products, Inc., this issue arose in the context of a construction dispute. FRCC develops generators and its plans passed Broward and Palm Beach County building departments. Reznik, apparently a competitor, reportedly copied the plans. Suit was filed and the parties agreed to settle it for only $2,000 as long as it was paid at a certain time and place. The settlement agreement contained an escalation clause which said that failure to pay exposed the defendant to a consent judgment of $40,000 plus attorney’s fees and costs. It further stated that FRCC only had to file an affidavit of failure to pay “without the necessity of hearing, notice or any further proceeding.” The defendant failed to timely pay $2,000 and the plaintiff sought to collect on the $40,000.

At the trial level, the defendant argued that, when he signed the agreement, he was not a lawyer and therefore his company could not be bound by it since he signed it individually and on behalf of his company. Since he was not a lawyer, he could not sign for the company and therefore the letter agreement was a nullity. Trial court was not convinced.

On appeal, defense counsel argued, for the first time, that the amount was unconscionable and an impermissible penalty. Whether or not the Panel (Ciklin, Gross and Warner) was sympathetic, we’ll never know. They flatly concluded that the issue was not raised or preserved below so they could not consider it.

Lessons? We maintain that way too much construction business is done with incomplete written agreements/terms and without even scant legal consult. This may be one of those cases. Whether or not there was a loophole in the signor’s competency was, at a minimum, an incomplete argument.

A cruise ship waiter trips, spills coffee on himself, and the result is an outpouring of U.S. and international confusion, swirling the Federal Arbitration Act, Jones Act, Seaman's Wage Act, and the Convention on the Recognition and Enforcement of Foreign Arbitral Awards into one steaming brew.

The case is Puliyurumpil Mathew Thomas v. Carnival Corporation d/b/a Carnival Cruise Lines Inc. and the Eleventh Circuit (Barkett, Fay, and Trager) reversed a district court – potentially creating a stir which the U.S. Supreme Court may ultimately review.

We'll leave a lot of the maritime / arbitration details to lawyers devoted to that area of practice and, instead, address some of the interesting issues of the Convention, public policy, retroactivity and waiver of rights.

Only a brief overview of the facts is necessary to set the stage: the waiter suffered his coffee incident in November 2004, returned to work a few times, and ultimately signed a Seafarer's Agreement a year later which included an arbitration clause. Because his vessel (Carnival's Imagination) flew under a flag of convenience, the arbitration was to be held in the Phillipines and apply Panamanian law. The arbitration clause referenced “any and all disputes arising out of or in connection with this Agreement...”

The first question is whether the Convention applied and the challenge was directed at whether there was a written agreement or whether there was a commercial relationship at issue (as pure coincidence, this is the second time in a week where the Convention has come up in a case -- despite the fact we've never covered it on this site in three years). The Court held there was no written agreement since the accident occurred before the Agreement with an arbitration clause was signed; the clause's reference to “this Agreement” limited it to any claims which arose after/under the “new” Agreement. The Panel suggested that if the clause said, “this or any previous Agreement” then the Convention would apply – a point which cruise lines will likely address in future versions of their employment contracts (another alternative would be the broadest language, holding that the arbitration clause applied to any disputes). In short, each time the employee signed an employment contract, it superseded the prior version and was not retroactive – again, because of the limited reference to “this Agreement.”

The Court also made the obvious choice that a maritime employment contract was a commercial relationship.

What concerned the Court overall was the fact that arbitration was to be held in a foreign land using foreign law was a one-two punch of choice-of-law and forum selection which violated public policy since it prevented the plaintiff from claiming rights under statute (in this case, which gave him triple damages). Relying on two prior U.S. Supreme Court opinions, Mitsubishi Motor Corp v. Soler Chrysler Plymouth, Inc. and Vimar Seguros v. M/V Sky Reefer, the Panel followed the precedent that “if the choice-of-forum and choice-of-law clauses operated in tandem as a prospective waiver of a party's right to pursue statutory remedies..., we would have little hesistation in condemning the agreement as against public policy.”

In the case of Suntrust Bank a/k/a Suntrust Banks, Inc. v. Margaret Hodges, an arbitrator concluded the plaintiff tripped and fell while the Fourth DCA concluded defense counsel also tripped and fell, twice. Figuratively, at least.

The underlying case was a personal injury matter which the Broward County trial judge referred to non-binding arbitration under Florida Rule of Civil Procedure 1.820 (a favored mechanism in that circuit). The arbitrator awarded the plaintiff and the defendant failed to seek a trial de novo within twenty (20) days as required under 1.820(h). The plaintiff was awarded judgment per the arbitrator's award. The entry of judgment is important in this procedural tragedy tale.

The defendant filed a motion for relief from judgment under 1.540(b), claiming excusable neglect but it was denied. The defendant then filed a motion for rehearing, which was also denied. By that time, more than thirty (30) days had run from final judgment. The Panel concluded that the passage of time was fatal: “This deprives us of jurisdiction.”

The Fourth District (Hazouri, Farmer, Ciklin) concluded that a motion for rehearing does not toll the 30-day period to appeal and that the prior case of City of Hollywood v. Cordasco provides no assistance to wayward appellants. In Cordasco, rehearing was sought before judgment and the defendant successfully cured its weak motion to vacate default in time – although this Panel questioned why jurisdiction wasn't disputed in that case. Here, however, judgment was entered and the trial court lost the discretion it might have had prior to judgment.

Previously, in Halpern v. Houser, the Fourth DCA held that a 1.540 Motion for Relief from Judgment was the appropriate vehicle if there was a failure to move for trial de novo within 20 days. There, the party had a chance to show excusable neglect (much like the standard for a motion to vacate default). Herein, however, that opportunity was missed since a motion for rehearing does not toll the time – hence, it was untimely.

The Panel sealed the issue by noting that, even if it found everything appropriate and timely, it still would not have found excusable neglect. We do not know exactly what excuse was offered beyond a vague reference to defense counsel apparently having a faulty tickler reminder system.

On the non-binding arbitration / trial de novo issue, note the Fourth District strictly construes it but provides some guidance on how to meet the rules standard in Quarenga v. Healthgrades.

In a tersely phrased three page opinion, Judge Schwartz of the Third District appears to have shrugged off Fourth DCA and Eleventh Circuit precedent while apparently raking the Florida Legislature over the coals for poor writing. Meanwhile, the consumer who won his lemon law automobile claim is stuck with arbitration, trial and appellate attorney fees.

In General Motors Corporation v. Luis Sanchez, the appellant was a consumer who won a Lemon Law vehicle dispute under Florida Statute 681. He then filed suit, per F.S. 681.104(2)(a), claiming entitlement to attorney's fees.

Judge Schwartz, writing for the Panel (Schwartz, Wells, and Rothenberg), noted that there were "several policy arguments" advanced by both sides regarding why a consumer was, or was not, entitled to attorney's fees and that the only "conceivable" basis for fees was based upon the statute. But the Panel didn't like the statute. More specifically, they didn't like how it was phrased since it said that a consumer could file suit to recover "damages" and that the court shall award the prevailing consumer "any pecuniary loss, litigation costs, reasonable attorney's fees, and appropriate equitable relief."

The Panel took the Legislature to task for mixing attorney's fees in with damages. Fees are not a damage. "The legislature is presumed to have been aware of the case law excluding attorney's fees from the recovery of actual or compensatory damages," according to a 1992 Florida Supreme Court case. The Panel decided, "it is therefore clear that the present action which seeks to recover expenses are not damages" and that the sentence providing for fees cannot apply.

The hook is that arbitration panels (like the Lemon law panel) are typically not empowered to award fees. Under those circumstances, the prevailing party should file a court case seeking to confirm the award and further award fees (it is unclear if that is what the plaintiff in this case had done).

Thus, under the Third DCA's reading, attorney's fees are not a damage, attorney's fees can't be awarded by the panel "in such action," and therefore the plaintiff here cannot get his attorney's fees. In short, because the Panel doesn't like the phrasing of the statute, the plaintiff appears to be caught in the middle. Unless you see this a different way? Let us know.

Meanwhile, the Fourth District and 11th Circuit previously upheld the award of fees under this provision; but the Panel averred that those courts never considered this fine point of law and therefore there was no precedent for the Third DCA to follow. As Judge Schwartz concluded, "That authority now exists."

The Fourth District had an interesting ride with the lemon law a few years back, see here.