The Georgia Supreme Court recently issued an opinion which clarifies how trial courts should calculate the amount of attorney fees owed to a plaintiff after an offer of settlement has been rejected. The case is Georgia Dept. of Corrections v. Couch.
O.C.G.A. § 9-11-68, commonly referred to as the “offer of settlement” statute, provides for attorney’s fees to parties whose settlement offers are rejected. When a defendant makes an offer to settle pursuant to the statute which is then rejected by the plaintiff, the defendant can recover attorney fees from the date of rejection if the verdict obtained by the plaintiff is less than 75% of the offer. For example, if a defendant offers to settle the case for $100,000, then the plaintiff must obtain a verdict of at least $75,000 to avoid paying the defendant’s attorney’s fees. Conversely, a plaintiff may also take advantage of the offer of settlement statute and recover attorney fees if the verdict amounts to more than 125% of the rejected offer amount. Using the previous example, if a plaintiff’s offer to settle the case for $100,000 is rejected, then the plaintiff can recover its attorney’s fees with a verdict of more than $125,000.
A defendant’s attorney’s fees are easily calculated, as defense attorneys are typically paid by an hourly rate. However, a plaintiff’s attorney is usually paid on a contingency arrangement, meaning the attorney receives an agreed-upon percentage of the amount recovered at trial as the fee. Until the decision in Couch, it was unclear how the trial court should calculate attorney fees for a plaintiff whose offer pursuant to the statute was rejected.
In Couch, the plaintiff was entitled to attorney’s fees after the jury returned a verdict greater than 125% of his prior settlement offer. The trial court determined that the fees should be awarded based on the contingency fee agreement between Couch and his attorneys – 40% of Couch’s ultimate recovery.
Instead, the Supreme Court found that the award of attorney fees could not be based solely on the contingency fee agreement. Rather, the trial court should have considered evidence of the reasonable value of the work Couch’s attorneys performed, such as evidence of the amount of hours worked and testimony regarding the hourly rate for attorneys with similar experience.
More importantly, the Supreme Court held that Couch was not entitled to recover all of his attorney fees – only the amount of fees incurred from the date of the rejection of the offer through the entry of judgment. This decision is particularly helpful for defendants. Defendants facing a potential attorney fees award for a rejected settlement offer will not necessarily be bound by the contingency agreement between the plaintiff and the attorney. Defendants also will not be responsible for all of the plaintiff’s attorney fees incurred from the very beginning of the case.
If you have any questions or would like a copy of this opinion, please let us know.