The Strange Case of The Losing Winner
By: Robert S. Tanner, Esq.
Can a contractor obtain a judgment against an owner for unpaid work but still lose? You bet.
In Wolfe v. Culpepper Constructors, Inc., 2012 WL 5935633 (Fla. 2d DCA Nov. 28, 2012), Owner and Contractor had a contract for a large remodeling project. When Contractor submitted its final invoice of $91,261.65, Owners refused to pay. Contractor recorded a claim of lien. Contractor then filed suit to foreclose the lien and alleging breach of contract. Owner counterclaimed alleging defective workmanship.
During the litigation, Owner served what is called an "Offer of Judgment". An Offer of Judgment is a mechanism created in statute by the Florida legislature which allows a party to make a formal offer to another party in attempt to settle the case. The primary purpose of the Offer of Judgment statute is to promote settlement. To advance that purpose, the statute provides that a party who unreasonably rejects a proper offer may have a judgment entered against it for the offering party's attorney's fees.
An Offer of Judgment made by a defendant to a plaintiff is unreasonably rejected when the plaintiff fails to obtain a judgment that is for at least 75% of the offer. This might seem a bit confusing, but it is designed to encourage the person making the offer to offer more than he believes the other person is entitled to receive. Thus, the defendant is more likely to win attorney's fees for the defendant rejecting his Offer of Judgment when he offers more because the higher the offer, the more unlikely it is that the plaintiff will win a judgment that is 75% or more of the offer.
In the Wolfe case, Owner offered $25,000.00 to Contractor to settle the lawsuit. For Contractor's rejection of that offer to be reasonable under the statute, Contractor had to obtain a net judgment of $18,750.00 or more. If Contractor rejected and the net judgment came in at $18,750.00 or less, the plaintiff's rejection would be unreasonable and the defendant would be entitled to recover the attorney's fees it incurred from the date of serving the Offer of Judgment.
Contractor rejected Owner's offer and the case was determined by a jury. Although the jury awarded Contractor the full amount of its claim, $91,261.65, the jury also awarded damages to Owner on its counterclaim. This resulted in a net judgment in favor of Contractor in the amount of $9,074.06. Because the net judgment was less than 75% of Owner's offer, Owner was entitled to recover the attorney's fees it incurred from the date that the offer was served. Undoubtedly, Owner's attorney's fees exceeded the $9,074.06 judgment that Contractor obtained. Thus, undoubtedly Contractor received no payments from Owner but, instead, had to pay both its own attorney's fees and the relevant portion of Owner's attorney's fees.
The decision to enter the fray of litigation must be considered carefully. The decision to reject an opposing party's Offer of Judgment must also be considered carefully. It does not pay to be a losing winner.