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Non-Binding Arbitration Fla. Stat. 44.103 (2007) and Built In Proposal for Settlement (June Litigation Quarterly 2009)

June 1, 2009

 

Many Florida courts are utilizing the provisions of Fla. Stat. 44.103 (2007) to order the parties in litigation to a Non-Binding Arbitration proceeding as a method of case management.  The process is a simple one and is quite similar to a Mediation.  In fact, some courts order Arbitration which is then followed by Mediation.  At the time of this writing, an informal survey among the lawyers at Cole, Scott, & Kissane indicated that the following counties were using Arbitration: Dade, Broward, Palm Beach, Martin, Collier, Lee and Union County.  The U.S. District Court of the Middle District for Florida apparently has its own version of a Non-Binding Arbitration rule as well.

Courts often designate an Arbitrator with a provision that the parties may stipulate to a different Arbitrator within a fixed period of time.  Usually, the Court orders that the Arbitration should be completed within sixty days of the Arbitration Order.  Generally, the Arbitrator’s charge for the proceeding is similar to costs for a Mediation.  Although customarily, there is no witness testimony, witness testimony is permissible if desired, and a party wishing the same can petition the Court to authorize the Arbitrator to issue subpoenas for witnesses or for the production of documents.  Most Arbitrations last from between an hour to two hours.

The Arbitrator is required to issue a written opinion.  Once the written opinion has been issued, either party may file a request for a trial de novo within twenty days of the opinion.  “De Novo” is Latin for “new” and is just a fancy way of saying a new trial by a judge or a jury.  It only takes one party to request a trial de novo, and the subsequent trial will take place.

If neither party files a timely request for trial de novo then the Arbitration decision becomes a final decision.  At that point, either party can petition the Court to enter a Final Judgment consistent with the Arbitration Award.

If the party that requests the trial de novo does not receive a more favorable result at trial than through the Arbitration Award, the Court “may” assess arbitration costs, court costs, attorney’s fees, expert witness fees or other witness fees incurred after the Arbitration.  The court may also award such items as investigation expenses as well.  Although the sanction provision is not mandatory, it is difficult to envision circumstances in which a judge would not award the same.

The determining factor for the application of this provision is very similar to that of the Proposal for Settlement rule.  The Plaintiff must receive a jury verdict that is greater than 25% of the Arbitration Award.  If the Arbitrator awarded the sum of $10,000.00, then the Plaintiff would have to receive a jury verdict award in excess of $7,501.00 (i.e. $10,000.00 x 25% = $7,500.00).

Similarly, if a Defendant requests a trial de novo, then the Defendant must pay the aforementioned costs and attorney’s fees if the verdict received by the Plaintiff is 25% greater than the Arbitrator’s Award.  Accordingly, if the Arbitrator awarded $10,000.00, then the Plaintiff would be entitled to recover attorney’s fees and costs from the date of the Arbitration Award if a jury verdict exceeded $12,501.00 (i.e. $10,000.00 x 125% = $12,500.00).

When the Plaintiff seeks fees under the Statute, determination of the Plaintiff’s judgment includes the jury verdict, plus taxable costs, plus any post-Arbitration collateral source payments received or due as of the date of the Judgment.  Should a Co-Defendant settle with the Plaintiff after the Arbitration, the amount of that settlement is also added to determine the “Judgment” within the meaning of the Statute.  For example, if the verdict was $10,000.00, taxable costs were $4,000.00, post Arbitration collateral source was $2,000.00, and settlement with a Co-Defendant was $5,000.00, the judgment would be $21,000.00.  If the Arbitrator awarded $16,000.00, the Defendant might feel comfortable that the Plaintiff could not receive a verdict less than 25% of this figure ($15,750.00) and might seek a trial de novo.  However, the Plaintiff would actually prevail, as the “judgment” after adding the additional items would be 25% greater than the Arbitration Award ($16,000.00 x 125% = $20,000.00).

If the Defendant seeks costs and fees under the Statute, any post-Arbitration settlement with a Co-Defendant that was applied to reduce the verdict would also be added to the verdict to obtain the Judgment figure.  For example, if the verdict was $10,000.00 which was reduced by a collateral source setoff to $5,000.00, a settlement with a Co-Defendant in the amount of $5,000.00 would be added back to determine the Defendant’s entitlement to fees.   Accordingly, the figure to be measured against would be $10,000.00 and the Defendant would be entitled to move for fees as the net judgment would not be greater than 25% of the $16,000.00 Arbitration Award; i.e. $15,750.00.

There are two practical uses for attorney with regards to Fla. Stat. § 44.103.  First, the attorney can use this as a tool for further evaluation of liability issues or damage issues.  If the judge has not ordered arbitration a party may request the same.  This will force Plaintiff to show his hand on these issues.  For example, we recently arbitrated a slip and fall case involving five different Defendants.  As might be expected, most of the lesser Defendants were pointing the finger at one major Defendant who did bear culpability.  The Arbitrator agreed with the lesser Defendants and placed all of the liability on the major Defendant.  He also fixed the damages at a figure that was far less than the Plaintiff had asked for.  This served as a helpful tool for the lesser Defendants to encourage the most culpable Defendant to increase its offer.  At the same time, it served to educate the Plaintiff, who had overly high expectations, as to the true value of the case.

The second value to the attorney is a second bite at the Proposal for Settlement apple.  As discussed above, it can be difficult to compute the proper number for the Proposal for Settlement, and sometimes the Defendant’s Proposal for Settlement becomes too low after discovery unfolds, or as time passes, e.g. unexpected surgery.  If this assessment comes to light within the forty-five day window prior to the start of the jury trial, the Proposal for Settlement cannot be increased during that time.  On the other hand, there is no such forty-five day limitation on the “pseudo” Proposal for Settlement that is contained in the Non-Binding Arbitration Statute.  In other words, if the Arbitration takes place within forty-five days of the beginning of the trial period, the figure set by the Arbitrator would serve as the Proposal for Settlement figure that would potentially expose either the Plaintiff or the Defendant to attorney’s fees incurred subsequent to the Arbitration.

There is a paucity of case law interpreting Fla. Stat. § 44.103.  Wedgewood Holdings, Inc. v. Wilpon, 972 So.2d 1044, is a Fourth District Court of Appeal case, that serves as a warning to the practicing lawyer to carefully read the Court’s Order of Referral to Non-Binding Arbitration.  In Wedgewood, the Order of Referral to Arbitration, directed the Arbitrator to determine the issue of taxable costs in addition to liability and damages.  The Arbitrator, however, did not determine the amount of costs.  Upon completion of the Arbitration proceeding, neither party moved for a trial de novo.  Pursuant to the rule, the Defendant  moved the Court for an entry of Final Judgment in its favor.  The Defendant also requested the Court to award it taxable costs as the prevailing party.  The trial Court entered taxable costs notwithstanding its prior directive to the Arbitrator to do the same.  The Appellate Court reversed the granting of the Defendant’s taxable costs on grounds that the Arbitration Award did not include the same.  It went on to point out that the Defendant could have sought to modify and/or clarify the Arbitration Award pursuant to Fla. §682.10, or §682.13 or §682.14.  The moral of the story is to make sure that the Order Referring the case to Non-Binding Arbitration is read carefully before proceeding to the Arbitration hearing.

Antunez v. Whitfield 980 So.2d.1175 (Fla. 4th DCA 2008), discusses the change of the statute effective October 1, 2007.  The prior version of Fla. Statt. § 44.103 did not use the 25% test, instead, it used a “more favorable” standard.  The prior statute read:

The party having filed for a trial de novo may be assessed the Abitration costs, Court costs, and other reasonable costs of the party, including attorney’s fees, estigation expenses, and expenses for expert or other testimony or evidence incurred after the Arbitration Hearing if the Judgment upon the trial de novo is not more favorable than the Arbitration decision.

In Antunez, an automobile case, the Court referred the case to Arbitration, and a trial de novo was requested by the Defendant thereafter.  The case proceeded to trial, and the Plaintiff received a Final Judgment in its favor on March 1, 2006.  The Plaintiff then moved for an award of attorney’s fees and costs under Fla. Stat. § 44.103.  The Court ruled that the enactment of the 25% test in the amended statute Fla. Stat. § 44.103 was not retroactive, and therefore the Plaintiff was not entitled to fees.  The Court went on to discuss that costs are to be included as part of the “Judgment” when determining application of the 25% rule in comparison of the Arbitration Award and the amount of the final judgment.

In summary, Fla. Stat. § 44.103 can be a useful settlement tool as its “built-in” attorney fees and costs sanction creates another consideration for continued litigation.  The procedure is similar to participation in Mediation and the cost is comparably the same.  Also, the Arbitration can be used as a second bite at a Proposal for Settlement within 45 days of trial, unlike the traditional proposal for settlement.


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