An offer of settlement for $3,000.00 on a $40,000.00 claim was found to not be made in good faith despite the defendant in the case arguing that plaintiff lacked standing and had suffered no damages. The Coastal Bank v. Rawlins, A22A0286, 2022 WL 1074090 (Ga. Ct. App. April 11, 2022). In Rawlins, a beneficiary of an estate sued another beneficiary and a bank for writing and honoring $40,000.00 worth of checks written from the deceased person's account. Id. at *2.
The Court of Appeals had an opportunity to walk through the analysis of when an offer of settlement was made in good faith, ultimately affirming the trial court’s decision as a result of Coastal’s counsel admitting its payment on certain checks was improper, Coastal’s counsel demanding repayment of the full amount sought after being sued, Coastal asserting a cross-claim against the writer of the checks for the total amount of the checks plus seven percent interest and attorney fees, the offer of settlement would require not only to dismiss claims against Coastal but other third parties as well (effectively ending the suit entirely), and the court had recently concluded that it had the authority to order the estate administrator to assign the estate’s claims to the beneficiary that was the plaintiff, thereby removing any standing argument that Coastal had.
This opinion blurs the line on what is a good faith offer as Coastal’s standing argument ultimately became meritorious despite not being so at the time the offer of judgment was made. While a trial judge could find that this made the offer more reasonable and based in good faith, the Court of Appeals decided otherwise. This case only makes it more difficult to determine what a good faith offer of settlement is.
The Law:
The offer of settlement statute provides: If a defendant makes an offer of settlement which is rejected by the plaintiff, the defendant shall be entitled to recover reasonable attorney's fees and expenses of litigation incurred by the defendant or on the defendant's behalf from the date of the rejection of the offer of settlement through the entry of judgment if the final judgment is one of no liability or the final judgment obtained by the plaintiff is less than 75 percent of such offer of settlement. OCGA § 9-11-68 (b) (1). “The clear purpose of OCGA § 9-11-68 is to encourage litigants in tort cases to make and accept good faith settlement proposals in order to avoid unnecessary litigation, thereby advancing this State's strong public policy of encouraging negotiations and settlements.” Coastal Bank v. Rawlins, 347 Ga. App. 847, 850, 821 S.E.2d 89 (2018) (Rawlins II).
Once a prevailing party establishes that OCGA § 9-11-68 applies, the trial court “shall order the payment of attorney's fees and expenses of litigation.” OCGA § 9-11-68 (d) (1); Anglin v. Smith, 358 Ga. App. 38, 39, 853 S.E.2d 142 (2020). “Such an award may be disallowed only where the trial court finds the settlement offer was not made in good faith.” Anglin, 358 Ga. App. at 40, 853 S.E.2d 142; see OCGA § 9-11-68 (d) (2).
The reasonableness of an offer to settle under OCGA § 9-11-68 “is a factual determination, based on the trial court's assessment of the case, the parties, the lawyers, and all of the other factors that go into such a determination, which the trial court has gathered during the progress of the case.” Great West Cas. Co. v. Bloomfield, 313 Ga. App. 180, 183 (2), 721 S.E.2d 173 (2011).
Determining whether an offer was made in good faith rests on whether the offeror has a reasonable foundation on which to base the offer[,] and ... so 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. Whether the offeror has a reasonable basis to support the offer is determined solely by the offeror's own subjective motivations and beliefs. Rawlins II, 347 Ga. App. at 850-851 (1), 821 S.E.2d 89. Relevant evidence on the question of good faith includes: (i) whether the offer bore a reasonable relationship to the amount of damages; (ii) whether the offer was premised on a realistic assessment of liability; and (iii) whether the offeror lacked intent to settle the claim. See Richardson, 339 Ga. App. at 460, 793 S.E.2d 640; accord Rawlins II, 347 Ga. App. at 851 (1), 821 S.E.2d 89; Hillman v. Bord, 347 Ga. App. 651, 655-656 (2), 820 S.E.2d 482 (2018) (physical precedent only).
A trial court may not, however, base a ruling exclusively on these objective factors “but is instead required to consider the offeror's explanation and then determine whether, despite consideration of the objective factors[,] the offeror had a subjectively reasonable belief on which to base its offer.” Rawlins II, 347 Ga. App. at 851 (1), 821 S.E.2d 89. The party against whom attorney fees are sought bears the burden of proving the absence of good faith. Hillman, 347 Ga. App. at 655 (2), 820 S.E.2d 482; see Richardson, 339 Ga. App. at 461-462, 793 S.E.2d 640.
The Analysis:
The Court of appeals focused on the fact that at the time the offer of settlement was made, the only ruling on the standing issue presented by Coastal was contrary to its position. Rawlins, 2022 WL 1074090 at *4. The Court of Appeals acknowledged that this was ultimately a meritorious argument for Coastal because they won on appeal but gave this little to no credence stating, “[t]he parties have not cited, and research has not revealed, any authority supporting Coastal's implicit assertion that the probate court lacked the authority to order Metz to assign the estate claims to the Rawlinses.” Id. Likewise, the Court found that despite Coastal being liable for $0.00 in damages, a number far less than the $3,000.00 it offered in the offer of settlement, it was well below the amounts the writer of bad checks paid to settle the matter (the full amount). Id. at *5.
Ultimately, the Court places so much emphasis on the hypothetical that the estate administrator could have assigned claims to the plaintiff, however, they didn’t. This means that Coastal had a defense of lack of standing, asserted it, lost on summary judgment, made an offer of judgment based on their belief that the defense of lack of standing still existed, which was denied, ultimately they prevailed on the defense on appeal, but lost on the offer of settlement recoupment of fees and expenses. This outcome does not seem like it is within the public policy of the statute and has flawed reasoning. The mere potential of a thing to happen should not destroy an offer of settlement if courts actually want them to be a mechanism of reducing litigation. Lastly, litigants now need to weigh the pros and cons of asserting certain defenses, cross-claims,, counterclaims, and making offers of settlements. Again, this seems counterintuitive to the policy of the statute.