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Settlement offers must account for attorney fees

Nettesheim

“When making an offer of judgment, the defendant is properly held to include [attorney] fees… From that it logically follows that the trial court should also include attorney fees in the judgment when it measures the offer against the judgment.”

Judge Neal Nettesheim
Wisconsin Court of Appeals

When a plaintiff sues pursuant to a statute that allows for attorney’s fees, a defendant’s offer of settlement pursuant to sec. 807.01 is invalid if it does not include an allowance for reasonable attorney fees, the Wisconsin Court of Appeals held on May 28.

Katherina R. LeDoux was a volunteer EMT for the Tess Corners Volunteer Fire Department. In April, 2000, she responded to a 911 call at the home of Julie Lynn Pachowitz regarding a possible overdose.

LeDoux later spoke to a friend, Sally Slocomb, and told her that she had assisted in transporting Pachowitz to the hospital emergency room for a possible overdose.

LeDoux had never met Pachowitz, but knew that Slocomb knew her, because, a couple weeks earlier, she had heard Slocomb and another woman speaking about Pachowitz and her medical condition. During this conversation, LeDoux learned that Slocomb worked with Pachowitz at West Allis Memorial Hospital. LeDoux also gained the impression that Slocomb and Pachowitz were very close friends.

Slocomb drove to West Allis Memorial Hospital where she revealed the incident, and discussed Pachowitz’s situation with other staff. Pachowitz brought suit against LeDoux, the fire department, and its insurer, Continental Western Insurance Company, alleging defamation and violation of her privacy.

In its answer, the fire department raised, as an affirmative defense, that LeDoux’s communication to Slocomb was not made within the scope of her employment. As a result of the adverse positions, Continen-tal retained separate counsel for LeDoux.

LeDoux moved to dismiss, arguing that the statement to only one person did not satisfy the “publicity” element of an invasion of privacy claim under sec. 895.50(2)(c). The trial court denied the motion.

Prior to the summary judgment proceedings, LeDoux had made a timely offer of judgment pursuant to sec. 807.01(1), offering to settle the claim for $5,000.

Pachowitz did not accept the offer, instead, countering with her own offer to settle for $25,000, including statutory attorney fees, as authorized by the invasion of privacy statute. The defendants did not accept the offer.

At the close of the evidence at trial, Continental abandoned the defense that it did not owe coverage to LeDoux. The jury found that LeDoux violated Pachowitz’s right of privacy, and awarded $3,000 in compensatory damages.

The court found that Pachowitz reasonably incurred $30,460 in attorney fees, to which she was entitled, pursuant to the fee shifting provisions of sec. 895.50(1).

In motions after verdict, both sides argued that they were the prevailing party under sec. 807.01. The defendants argued that they were entitled to costs, because the $3,000 jury verdict was less than the $5,000 they had offered.

Pachowitz sought double costs and prejudgment interest, because the jury award, plus the attorney’s fees, exceeded the $25,000 offer that she had made.

Waukesha County Circuit Court Judge J. Mac Davis concluded that LeDoux’s offer of judgment was invalid because it did not include an allowance for attorney’s fees, and awarded double costs to Pachowitz because the combined jury award and attorney’s fees exceeded her settlement offer.

The defendants appealed, and, in a decision by Judge Neal Nettesheim, the court of appeals affirmed on all issues, except that it held Pachowitz was not entitled to double costs, because multiple defendants were involved.

Invasion of Privacy

The court first held that the evidence was sufficient to support the element of publicity in the invasion of privacy claim, even though LeDoux only talked to one person.

The court stated, “whether such a disclosure satisfies the publicity element of an invasion of privacy claim depends upon the particular facts of the case and the nature of plaintiff’s relationship
to the audience who received the information.”

Turning to the facts, the court noted, “LeDoux knew [Slocomb] was one of Pachowitz’s fellow employees at West Allis Memorial Hospital. Pachowitz’s husband’s request to the EMTs that Pachowitz be transported to a different hospital, Waukesha Memorial Hospital, supports an inference that Pachowitz wanted to avoid disclosure of her need for emergency medical care to her fellow employees. Approximately two weeks prior to the April 21 incident, while socializing with Slocomb and other individuals, LeDoux heard Slocomb discuss Pachowitz’s private affairs at length. Thus, LeDoux was on notice as to Slocomb’s ‘loose lips.’ Under such circumstances, the law of invasion of privacy is not served by immunizing one such as LeDoux as a matter of law. Instead, like the trial court, we conclude that the question of LeDoux’s liability was for a jury.”

The court further held that the jury could reasonably find that LeDoux acted recklessly or unreasonably, and that Pachowitz’s $30,460 in attorney’s fees were reasonable.

Settlement Offers

Subsection 807.01(1) addresses offers of judgment by a defendant, and provides in relevant part, “After issue is joined but at least 20 days before the trial, the defendant may serve upon the plaintiff a written offer to allow judgment to be taken against the defendant for the sum, or property, or to the effect therein specified, with costs. … If the offer of judgment is not accepted and the plaintiff fails to recover a more favorable judgment, the plaintiff shall not recover costs but defendant shall recover costs to be computed on the demand of the complaint.”

What the court held

Case: Pachowitz v. LeDoux, No. 02-2100

Issue: In a claim for invasion of privacy, can the plaintiff satisfy the element of “publicity” where the defendant only revealed private information to one person?

Under sec. 807.01, when comparing a settlement offer to a judgment, if the statute under which a plaintiff sues authorizes the award of attorney’s fees to a prevailing plaintiff, should the attorney’s fees be included in the amount of the judgment?

Holding: Yes. Revealing private information to only one person can constitute “publicity,” if the evidence supports an inference that the information would spread to others.

Yes. Attorney’s fees should be added to the jury verdict when comparing the amount of the judgment to the settlement offers.

Counsel: Emile H. Banks Jr., Milwaukee; Vicki L. Arrowood, Milwaukee; Thomas A. Ogorchock, Milwaukee, for appellant; Donald J. Murn, Waukesha; Michelle E. Martin, Waukesha; Jonathan P. Groth, Waukesha, for respondent.

Subsections 807.01(3) and (4) address offers of settlement by a plaintiff. Subsection (3) provides in relevant part, “After issue is joined but at least 20 days before trial, the plaintiff may serve upon the defendant a written offer of settlement for the sum, or property, or to the effect therein specified, with costs. … If the offer of settlement is not accepted and the plaintiff recovers a more favorable judgment, the plaintiff shall recover double the amount of the taxable costs.”

Subsection (4) provides in relevant part, “If there is an offer of settlement by a party under this section which is not accepted and the party recovers a judgment which is greater than or equal to the amount specified in the offer of settlement, the party is entitled to interest at the annual rate of 12% on the amount recovered from the date of the offer of settlement until the amount is paid.”

LeDoux’s Offer

The court first held that LeDoux’s offer of $5,000 did not exceed the judgment, distinguishing Dobbratz Trucking & Excavating, Inc. v. PACCAR, Inc., 2002 WI App 138, 256 Wis. 2d 205, 647 N.W.2d 315.

In Dobbratz, the court of appeals held that attorney’s fees awarded under the fee shifting provisions of the Lemon Law were not embraced by the “amount recovered” language of sec. 807.01(4), and therefore, the plaintiff was not entitled to compute the statutory 12% interest on that portion of the judgment.

Dobbratz is distinguishable, the court concluded, because the only issue was whether prejudgment interest was to accrue on the attorney’s fees, not whether attorney’s fees should be included in determining the amount of the judgment.

The court noted that, in American Motorists Insu
rance Co. v. R & S Meats, Inc., 190 Wis. 2d 196, 214, 526 N.W.2d 791 (Ct.App.1994), and in Nelson v. McLaughlin, 211 Wis.2d 487, 499, 56 N.W.2d 123 (1997), the courts distinguished between “judgment” on the one hand, and “amount recovered” on the other.

The court reasoned, “Here, … we are concerned with comparing Pachowitz’s judgment against LeDoux’s offer of settlement. We are not concerned with the amount upon which Pachowitz is entitled to compute the 12% interest provision of sec. 807.01(4). Under this analysis, the trial court correctly determined that [LeDoux was] not entitled to costs under sec. 807.01(1) because the judgment in the amount of $37,909.86 far exceeded LeDoux’s $5000 offer of judgment.”

The court also distinguished Northridge Co. v. W.R. Grace & Co., 205 Wis.2d 267, 556 N.W.2d 345 (Ct.App.1996), which held that an offer of settlement and the final judgment must be compared exclusive of costs.

The court concluded, “when a defendant is sued under a fee shifting statute, that party is on notice that the plaintiff is seeking not only damages but also reasonable attorney fees. Accordingly, when making an offer of judgment, the defendant is properly held to include such fees and to so inform the plaintiff. From that it logically follows that the trial court should also include attorney fees in the judgment when it measures the offer against the judgment. Here, LeDoux’s offer of judgment said nothing of attorney fees. (emphasis in original).”

Links

Wisconsin Court of Appeals

Related Article

Case Analysis

Pachowitz’s Offer

The court also held that Pachowitz’s offer was invalid, however, citing Wilber v. Fuchs, 158 Wis.2d 158, 160, 461 N.W.2d 803 (Ct.App.1990), which excludes from the statute’s operation single settlements made to multiple defendants.

Even though Continental eventually dropped its argument that it was not liable for LeDoux’s acts, there was still a coverage dispute at the time of Pachowitz’s offer.
As a result, the court concluded “In light of the coverage dispute at the time of Pachowitz’s offer, it would have been impossible for Continental (or LeDoux) to evaluate Pachowitz’s offer from an independent perspective and to intelligently assess each party’s degree of exposure.”

Accordingly, the court reversed that portion of the judgment awarding Pachowitz double costs and 12% taxable interest.

Click here for Case Analysis.

David Ziemer can be reached by email.

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