24 Fla. L. Weekly Supp. 785a

Online Reference: FLWSUPP 2410GERLInsurance — Personal injury protection — Attorney’s fees — Proposal for settlement — In absence of transcript of pertinent proceedings below, appellate court cannot conclude that trial court abused its discretion in denying motion for attorney’s fees based on finding that insurer’s proposal for settlement, which totaled $500 for medical benefits and attorney’s fees and which was rejected by plaintiff, was not made in good faith, notwithstanding fact that jury ultimately returned verdict for insurer, finding that injuries were not related to accident

UNITED AUTOMOBILE INSURANCE COMPANY, Appellant, v. PARTNERS IN HEALTH CHIROPRACTIC CENTER, (a/a/o Cecilia Yanique Gerlin), Appellee. Circuit Court, 11th Judicial Circuit (Appellate) in and for Miami-Dade County. Case No. 15-017 AP. L.T. Case No. 2005-10682 CC05. January 2, 2017. On Appeal from the County Court for Miami-Dade County, Florida, Teretha Lundy Thomas, Judge. Counsel: Michael J. Neimand, for Appellant. Gregg Pessin, Marlene S. Reiss, and Richard E. Doherty, for Appellee.

AFFIRMED. 42 Fla. L. Weekly D2567a (United Auto. Ins. Co. v. Partners in Health Chiropractic Ctr., 3D17-666, 12/6/2017)

(Before, JOHNSON, MILLAN, and BLOCH, JJ.)

(BLOCH, Judge.) United Automobile Insurance Company (United) appeals the trial court’s denial of its motion to tax attorney’s fees against Partners in Health Chiropractic Center (PHCC). After prevailing at trial United sought fees based on an unaccepted proposal for settlement. The lower court denied the motion, finding that the proposal was not made in good faith.¹ Because we have not been furnished with a sufficient record to review whether the lower court erred, we affirm.

Trial Litigation and Previous Appeals

The litigation commenced with a claim for PIP benefits arising out of an automobile accident in 2003. PHCC provided medical care to, and was the assignee of, United’s insured, Cecilia Yanique Gerlin (Insured). PHCC filed an amended complaint for breach of contract for PIP benefits in 2005. United answered and denied that the treatment was reasonable, related to the accident, or necessary.

In 2006, PHCC filed a motion for summary judgment on the grounds that all treatment was reasonable, related, and necessary and further alleging that there was no dispute since the Insurer’s peer review report was untimely and thus could not be considered. In opposition United relied on a peer review affidavit by Dr. Merrit who indicated that none of the Insured’s treatment was reasonable, related or necessary. The trial court agreed with PHCC, struck Dr. Merrit’s report, and granted summary judgment. On appeal, in 2007, a panel of this Court reversed the trial court and held that the affidavit was not untimely and that United was not barred from contesting reasonableness, relatedness or necessity. In a subsequent order the same panel clarified that, on remand, the trial court should determine the legal and factual validity of Dr. Merrit’s affidavit, and therefore whether summary judgment was appropriate.

On November 16, 2009, the trial court once again entered an order finding Dr. Merrit’s affidavit insufficient as not expressing an opinion on reasonableness, relatedness, and necessity. On appeal from that order the same panel of this Court, in 2011, found that Dr. Merrit’s affidavit was legally sufficient and created a material issue of fact, and reversed the order granting final summary judgment. This Court also reversed the lower court’s order awarding PHCC attorneys’ fees.

After remand this second time, on January 3, 2013, United served PHCC the subject proposal for settlement. United offered PHCC $500.00, to settle the case: $250.00, for attorney’s fees and $250.00, for medical benefits. It was not accepted. At trial the jury returned a verdict for United, finding that the injuries were not related to the accident. PHCC’s motion for new trial was denied and judgment was entered in United’s favor. That judgment has not been appealed.

United’s Motion for Attorney’s Fees

United filed a motion for attorney’s fees based on PHCC’s rejection of its proposal for settlement. The proposal, and motion, were made pursuant to section 768.79 of the Florida Statutes and Rule 1.442 of Florida Rules of Civil Procedure, which provide that a plaintiff may be liable for the defendant’s attorneys’ fees and costs if it fails to recover at least 75% of a rejected valid proposal. However, both the rule and statute also give the court discretion to deny the award if the court finds the offer to not have been made in good faith. See § 768.79(7)(a), Fla. Stat.; Fla. R. Civ. P. 1.442(h)(1). Although it has been stated in various ways, in essence, “the obligation of good faith merely insists that the offeror have some reasonable foundation on which to base an offer.” Peoples Gas Sys., Inc. v. Acme Gas Corp., 689 So. 2d 292, 300 (Fla. 3d DCA 1997) [22 Fla. L. Weekly D205d] (quoting Schmidt v. Fortner, 629 So. 2d 1036, 1039 (Fla. 4th DCA 1993) (quotation marks and brackets by People’s Gas court omitted)). The analysis does not look to the “objective assessment of the positions of both parties[, rather the] issue of ‘good faith,’ is, by its very nature, determined by the subjective motivations and beliefs of the pertinent actor. [S]o long as the offeror has a basis in known or reasonably believed fact to conclude that the offer is justifiable, the ‘good faith’ requirement has been satisfied.” Dep’t of Highway Safety & Motor Vehicles, Florida Highway Patrol v. Weinstein, 747 So. 2d 1019, 1021 (Fla. 3d DCA 1999) [24 Fla. L. Weekly D2799b]. This is true even in the case of so-called “nominal offers:” “Offers are not suspect merely because they are nominal. . . .The rule is that a minimal offer can be made in good faith if the evidence demonstrates that, at the time it was made, the offeror had a reasonable basis to conclude that its exposure was nominal.” E.g., State Farm Mut. Auto. Ins. Co. v. Sharkey, 928 So. 2d 1263, 1264 (Fla. 4th DCA 2006) [31 Fla. L. Weekly D1445a] (citations and quotation marks omitted).

The issue of “Good Faith”

PHCC argued that the proposal for settlement was not made in good faith. It claimed that United did not have a reasonable basis for the offer since the offer was made after the trial court had issued significant unfavorable rulings against United, namely, the previously mentioned judgment against United on the merits as well as an order imposing attorneys’ fees against United. The implication being that those prior adverse rulings created a more significant exposure to United than the nominal offer would suggest. (As noted above, however, these rulings had already been previously reversed on appeal by the time the offer was made.) PHCC additionally argued that the offer was not in good faith since United had no reasonable expectation that it would be accepted.

For its part United argued that although its offer was nominal it had a reasonable basis to believe that it was not liable. It contended, and in this appeal maintains, that PHCC’s own medical records indicate that the Insured’s injuries were work-related, and therefore not related to the subject accident. United cites us to the transcript of the fee hearing where the medical records were referred to. But those records themselves are not in the record on appeal, and based on responses from counsel at oral argument, may not be in the record at all.

United also contends here, as it did below, that more than seven years prior to the service of the proposal for settlement, in November 2005, it obtained Dr. Merrit’s peer review report which opined that none of the treatment was reasonable, related or necessary, providing additional support for its reasonable assessment of minimal exposure.

The parties sharply disagree as to the validity, meaning, and importance of this evidence. As to the discussed medical record which purports to show that the Insured’s injury was work-related, PHCC notes that no one, not even United, brought this proverbial “smoking gun,” to the trial court’s attention until after trial. See Answer Br. at 21 n. 3 (citing May 8, 2014, hearing transcript at 10). If United had been aware of this seemingly dispositive document it surely would have used it sooner to defend itself. Thus, in making its nominal proposal for settlement, United could not have relied on this record that apparently escaped everyone’s attention. More fundamental still, PHCC argues that the pertinent portion that record — which, again, is not before us — is in truth a mistake, and thus does not in fact establish that the injury was work-related. See id.

There is also disagreement as to Dr. Merrit’s affidavit. PHCC argues that his opinion, “that none of the treatment was reasonable, related, or necessary,” is merely conclusory. Moreover, it maintains that that conclusion is not based on any affirmative finding by Dr. Merit that the injuries and treatment were unrelated to the accident. Instead, Dr. Merrit reached this conclusion only because he did not find any records to indicate the converse, that the injuries were related. Thus once again, argues PHCC, this provides no support for United’s assessment of nominal liability.

Ultimately, the trial court agreed with PHCC that the proposal for settlement was not made in good faith and denied United’s motion for fees. The trial court iterated four reasons for its ruling. The first recounted the extensive length of the litigation (over eight, now eleven, years) and noted that the case had been set for trial several times. However, that litigation may be protracted and may require extensive expenditure of resources is not a valid basis for finding that a nominal offer to settle the case is in bad faith — provided, of course, that the defendant has a reasonable basis on which to make its offer. To hold otherwise would require parties to offer settlement amounts which credit the expense and inconvenience of litigation, rather than an assessment of the underlying merits of the claim. It would further have the perverse effect of incentivizing longer and more costly litigation. The statute and rule should not be used to lever higher, or lower, settlements, or thwart the legitimate recovery of fees, simply because litigation can be lengthy and expensive. Such a holding runs exactly counter to the purpose of these provisions, which is to curtail unnecessary and costly litigation, not to encourage it. E.g., Eagleman v. Eagleman, 673 So. 2d 946, 947 (Fla. 4th DCA 1996) [21 Fla. L. Weekly D1192a] (“The spirit of the offer of judgment statute is to encourage litigants to resolve cases early to avoid incurring substantial amounts of court costs and attorney’s fees.”) (citation omitted).

The second reason, urged by PHCC, was that at the time the offer in was made in January 2013, PHCC had already previously “won the case,” i.e., the earlier final judgment on the merits and an award of attorneys’ fees and costs. This too cannot be a valid basis for finding bad faith. As noted, these judgments were reversed on appeal before United made its offer. To the extent PHCC suggests that these temporary victories increased United’s potential exposure, and by implication increased what a good faith offer should be, that circumstance no longer existed once those judgments were overturned. If anything, United’s ultimate victories on these initial judgments may have only vindicated its assessment of minimal exposure. Nor are we prepared to say that a party lacks good faith when assessing its exposure by believing that setbacks, when erroneous, will ultimately be corrected on appeal.

The third reason, also argued by PHCC, was that the offer was not made in good faith because when made, “the Defendant had no reasonable expectation that it would be accepted by the Plaintiff.” However, as the Third District has advised, that argument “been specifically rejected by the supreme court’s . . . decision in Knealing v. Puleo, 675 So. 2d 593 (Fla. 1996) [21 Fla. L. Weekly S263a].” Peoples Gas Sys., Inc. v. Acme Gas Corp., 689 So. 2d 292, 300 (Fla. 3d DCA 1997) [22 Fla. L. Weekly D205d] (belief that offer will not be accepted does not suggest bad faith where the offeror fully intends to conclude a settlement and the amount of the offer is not so widely inconsistent with the known facts of the case as to suggest on its face the sole purpose of creating a right to fees if it is not accepted) Peoples Gas, 689 So. at 300-01 (citing Schmidt v. Fortner, 629 So. 2d 1036, 1040 n.5 (Fla. 4th DCA 1993)).

The final reason was that “the record before the Court at the time of the entitlement hearing failed to show that United Auto had no exposure in the case at the time the Proposal” was made.² The determination of good faith relating to the offerror’s reasonable assessment of exposure is a fact-intensive inquiry and is made on a case by case basis. As the court explained in Fox v. McCaw Cellular Communications of Florida, Inc., 745 So. 2d 330, 333 (Fla. 4th DCA 1998) [23 Fla. L. Weekly D2687a]:

the question of good faith in making an offer under section 768.79 involves an inquiry into the circumstances shown by the entire record of the case. Each case requires its own analysis, and must be considered on its own facts. Whether an offer was made in bad faith involves a matter of discretion reposed in the trial judge to be determined from the facts and circumstances surrounding the offer. That determination is not controlled by a legal imperative requiring a finding of bad faith merely because the offer was nominal. Some nominal offers will have been made in good faith; some not so. The trial judge will have to consider all the surrounding circumstances when the offer was made.

We review the lower court’s ruling of bad faith using the abuse of discretion standard. Laughlin-Alfonso, 118 So. 3d 314, 315 (Fla. 3d DCA 2013) [38 Fla. L. Weekly D1654a] (citation omitted). However, on this ground, we are unable to review the lower court’s ruling or conclude that it erred for the reason that we do have an adequate record of the proceedings below. Although we do have a transcript of the fee hearing, we do not have a transcript of the trial itself, which, based on counsel’s responses at oral argument, may not have been recorded at all.³ As just one example, given the dispute about the import and ambiguity of Dr. Merit’s affidavit, his testimony at trial may have been of monumental importance to the issue of good faith.⁴ See R. 167 ¶ 1, Plaintiff’s Motion for New Trial, (discussing his appearance at trial). At the fee hearing the parties referred to the trial. And obviously, the trial judge was also aware of what transpired at the trial, and thus was able to utilize Dr. Merrit’s testimony and anything else that may have emerged in making her ruling as to good faith. We do not have any of that before us. We also do not have the medical record which purports to establish that the Insured’s injury was work-related, and thus not caused by the accident. Because we do not have the same benefit as the trial court we are simply unable to review or reverse her determination. “When there are issues of fact the appellant necessarily asks the reviewing court to draw conclusions about the evidence. Without a record of the trial proceedings, the appellate court can not properly resolve the underlying factual issues so as to conclude that the trial court’s judgment is not supported by the evidence or by an alternative theory. Without knowing the factual context, neither can an appellate court reasonably conclude that the trial judge so misconceived the law as to require reversal.” Applegate v. Barnett Bank of Tallahassee, 377 So. 2d 1150, 1152 (Fla. 1979). As in Applegate, the trial court must be “affirmed because the record brought forward by the appellant is inadequate to demonstrate reversible error.” Id.⁵ (JOHNSON and MILLAN, JJ., concur.)

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¹However, the court did award costs to United. See § 57.041, Fla. Stat. (providing generally for the award of costs to the prevailing party). That ruling has not been appealed.

²We recognize that the lower court relied on Event Services America, Inc. v. Ragusa, 917 So. 2d 882, 884 (Fla. 3d DCA 2005) [30 Fla. L. Weekly D1913a], which states that “[a] reasonable basis for a nominal offer exists only where ‘the undisputed record strongly indicate[s] that [the defendant] had no exposure’ in the case.” (quoting Peoples Gas, 689 So. 2d at 300). However, it does not appear “that Peoples Gas intended to set a rule that requires an undisputed record, showing no liability, in order to prove that a minimal offer was made in good faith.” Sharaby v. KLV Gems Co., Inc., 45 So. 3d 560, 564 (Fla 4th DCA 2010) [35 Fla. L. Weekly D2300a] (Warner, J., concurring). On the contrary, Peoples Gas, like other established precedent, holds that “the obligation of good faith merely insists that the offeror have some reasonable foundation on which to base an offer.” Peoples Gas, 689 So. 2d at 300 (emphasis added). Nor do we believe that the Third District meant to change the standard either. Perhaps the best evidence of this, and of Event Services’s true holding, is that immediately after the language quoted above the court went on to repeat the established standard: “Therefore, a nominal offer should be stricken unless the offeror had a reasonable basis to conclude that its exposure was nominal.” Event Services, 917 So. 2d at 884 (emphasis added) (citing Dep’t of Highway Safety and Motor Vehicles, Florida Highway Patrol v. Weinstein, 747 So. 2d 1019 (Fla. 3d DCA 2000) [24 Fla. L. Weekly D2799b]). Still more recent cases from the Third District have reaffirmed this standard. E.g., Isaias v. H.T. Hackney Co., 159 So. 3d 1002, 1004-05 (Fla. 3d DCA 2015) [40 Fla. L. Weekly D753a] (The determination of whether a “ ‘nominal’ offer is in good faith requires the trial court to consider whether the offeror had a reasonable basis to conclude, at the time of making the offer, that its exposure was nominal.” (footnote omitted) (citing State Farm Fla. Ins. Co. v. Laughlin-Alfonso, 118 So. 3d 314 (Fla. 3d DCA 2013) [38 Fla. L. Weekly D1654a]. Although we decide this case on other grounds we address this point so that future litigants can avoid the confusion created by the quoted language in Event Services. Of course, it is quite possible that we are ones who are confused, in which case we trust the higher authorities will correct our misunderstanding.

³We are quick to add, however, that not every case will require a trial transcript for appellate review; we expect that many, probably most, will not. But the facts and posture of this case, where the lower court’s rationale is not fully ascertainable from the written order and the fee hearing transcript alone, render the transcript or an adequate substitute essential here.

⁴We are not unmindful of this Court’s prior decision which reversed the lower court’s summary judgment order in favor of the Provider and in so doing also reversed the ruling that Dr. Merrit’s affidavit was legally and factually insufficient, and where we also held that the affidavit was neither conclusory nor based on insufficient information and thus created disputed issues of material fact. However, the inquiry and standard on a motion for summary judgment are quite different from the inquiry and standard before the Court today: whether, considering all of the facts and circumstances, including those which may have come out at and after trial, the lower court abused its discretion in finding the offer to have not been made in good faith. Such additional material, including Dr. Merrit’s testimony, may have significantly altered the factual landscape and quite properly informed the lower court’s view of the question of good faith.

⁵Because of our disposition on these grounds we do not address, and express no opinion, as to PHCC’s argument that that the offer was invalid for failing to indicate, as required by Rule 1.442(c), “whether attorneys’ fees are part of the legal claim,” or whether this argument was preserved for review.

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After consideration, Appellant’s and Appellee’s motions for appellate attorney’s fees, respectively, are hereby denied. Appellee’s request for costs is granted. See Fla. R. App. P. 9.400 (a). (MILLAN, JOHNSON, and BLOCH, JJ. Concur)