Southeast Floating Docks v. Auto-Owners Case Analysis

In Southeast Floating Docks, Inc. v. Auto-Owners Insurance Co., 82 So. 3d 73 (Fla. 2012), the Florida Supreme Court held that Florida’s offer-of-judgment statute creates a substantive right to attorney’s fees. Because the right is substantive, section 768.79 does not apply where the parties agreed that another state’s substantive law governs their contract.

The holding rests on Mazzoni Farms, Inc. v. E.I. DuPont De Nemours & Co., 761 So. 2d 306 (Fla. 2000). A contractual choice-of-law provision is presumptively valid, and Florida courts enforce it unless the chosen law contravenes a strong public policy of Florida. Routine policy considerations do not qualify, and the party fighting the clause bears the burden of proving why it should not be enforced.

The Bond Dispute Behind the Fee Claim

Auto-Owners Insurance Company issued a performance bond backing Southeast Floating Docks’ contract to build a floating dock for Rivermar Contracting Company. When the project fell into dispute, Rivermar sued both companies for breach of contract. Auto-Owners settled with Rivermar for $956,987. It then sued Southeast and its president in a Florida federal court to enforce their written indemnity agreement. That agreement provided that Michigan substantive law would govern every dispute under the contract.

A jury sided with Southeast in June 2006, finding that Auto-Owners had settled with Rivermar in bad faith and that Southeast owed no indemnification. The district court set the verdict aside and ordered a new trial. In December 2006, while the retrial was pending, Southeast served a section 768.79 offer: it would pay Auto-Owners $300,000, and every claim would be dismissed with prejudice. Auto-Owners rejected the offer.

In March 2007 the district court granted Auto-Owners summary judgment for $1,135,658.98. On appeal, the Eleventh Circuit reversed and reinstated the original jury verdict for Southeast in 2009. Southeast now held a judgment of no liability, and it moved for attorney’s fees under section 768.79 based on the rejected $300,000 offer.

The district court denied the fee motion as untimely because the offer had not been served at least 45 days before trial, as Florida’s proposal-for-settlement rule requires, measuring from the first trial rather than the scheduled retrial. On the fee appeal, the Eleventh Circuit found no definitive answers in Florida law and certified three questions to the Florida Supreme Court.

The Questions the Eleventh Circuit Certified

The Eleventh Circuit asked three questions about the offer-of-judgment statute. First, whether section 768.79 allows a valid offer before a second trial, and whether such an offer survives when an appellate court later reinstates the first trial’s judgment. Second, whether conditioning an offer on dismissal of the offeree’s claims against a third party makes it a joint proposal under the settlement rule. Third, whether section 768.79 applies when another jurisdiction’s substantive law governs the case, including when the parties chose that law by contract.

The Florida Supreme Court began with the third question because the other two arose only if the statute applied. Its negative answer mooted the first two questions, which the court declined to address, and the case returned to the Eleventh Circuit.

Why Section 768.79 Is Substantive Law

Section 768.79 awards attorney’s fees against a party who rejects a reasonable settlement offer and then does worse in the final judgment. A defendant whose offer the plaintiff does not accept within 30 days is entitled to fees and costs if the judgment is one of no liability or falls 25 percent or more below the offer. The statute says the defendant “shall” be entitled and the court “shall” set off the award, language the court read as a deliberate choice to limit judicial discretion.

The Florida Constitution splits authority over litigation: the Legislature enacts substantive law, and the supreme court adopts the rules of practice and procedure. The court had already held, in upholding the statute’s constitutionality, that entitlement to fees under section 768.79 is substantive because it modifies the American rule that each side pays its own lawyers. The new step in this case was holding that the statute is substantive for conflict-of-law purposes as well.

That answer decided the dispute. Southeast and Auto-Owners had agreed that Michigan substantive law governed, the parties stipulated that Michigan has no comparable fee statute, and a Florida fee entitlement could not come into the case as mere procedure. Southeast recovered nothing under section 768.79.

The holding also resolved a conflict among Florida’s appellate courts. Two districts had read the statute’s opening clause, “in any civil action for damages filed in the courts of this state,” to require a fee award no matter what law the parties chose. The supreme court called that reasoning erroneous and disapproved BDO Seidman v. British Car Auctions and Bennett v. Morales to the extent they conflict with its holding.

The Strong Public Policy Exception

Florida courts enforce a contractual choice-of-law provision unless applying the chosen state’s law would contravene a strong public policy of Florida. The exception is narrow. The competing policy must rise above routine policy considerations and be important enough to outweigh the policy protecting freedom of contract.

The court’s earlier decisions show how demanding the test is. Florida’s policy against usurious interest rates did not defeat a clause chosen to escape Florida’s usury law. A contract term shortening the statutory limitations period survived the same challenge. Two Florida appellate courts had held that the reciprocal fee statute, section 57.105, embodies no policy strong enough to displace a chosen law, with one warning that disregarding a commercial choice-of-law clause “would do violence to the concept of commercial comity.”

An entitlement to fees under section 768.79, the court concluded, is not substantially different from one under section 57.105. Neither advances a public policy sufficient to override freedom of contract, so the Michigan clause stood and the statute did not apply.

Justice Perry dissented alone. He read the statute’s opening words to reach every civil action filed in a Florida court, whatever law the parties chose. In the alternative, he would have held that encouraging settlement and conserving Florida’s judicial resources is a strong public policy that outweighs freedom of contract. Six justices held otherwise.

What Mazzoni Farms Decided

The court in Mazzoni Farms enforced a Delaware choice-of-law clause against plant nurseries who claimed the settlements containing it were fraudulently induced. DuPont had settled the nurseries’ product-liability claims over its Benlate fungicide, and the settlement releases designated Delaware law. The nurseries later came to believe DuPont had concealed evidence showing their claims were worth far more, and they sued for fraudulent inducement.

The Delaware clause controlled even that claim. Fraudulent inducement makes a contract voidable, not void, so the defrauded party must elect a remedy: rescind the settlement and return the money, or keep the money, affirm the contract, and sue for damages. The nurseries kept their settlement proceeds, and affirming the contract ratified all of its terms, including the choice-of-law provision.

The decision also fixed who must prove what. A choice-of-law provision is presumed valid, and the party seeking to avoid it must show that the chosen law contravenes the forum’s public policy. Florida’s policy against fraud, which the court recognized and reaffirmed, did not carry that burden, because the law permits parties to settle claims for past intentional wrongs.

Three nurseries had signed releases without a Delaware clause, so Florida law governed their cases. Their releases covered only claims arising from the use or application of the product, and a claim that DuPont misrepresented the value of a lawsuit does not arise from using a fungicide. Those fraudulent-inducement claims survived.

What the Decision Means for Trust Planning

A settlor who designates Cook Islands, Nevada, or Belize law in a trust agreement is making the same choice the contracting parties made in this case, and a Florida court tests it the same way. The designation is honored until it runs into a strong Florida public policy, and Florida treats its rule against self-settled trusts as exactly that.

The bankruptcy court in In re Rensin, 600 B.R. 870 (Bankr. S.D. Fla. 2019), cited Southeast Floating Docks for the rule that a contract’s chosen law binds unless it offends a strong Florida public policy. It then refused to apply Belize law to a Belize trust the debtor had created for his own benefit. Florida law governed the trust, and his creditors could reach every asset in it from the trust’s inception.

The Florida Trust Code states the same limit for trusts. Under section 736.0107, the law designated in a trust’s terms controls its meaning and effect when a sufficient connection to that jurisdiction exists. The designation is not controlling, however, on any matter where it would be contrary to a strong Florida public policy.

No Florida court has yet ruled on an out-of-state asset protection trust created by a Florida resident, and the law points against protection. A domestic asset protection trust depends on a chosen law that the settlor’s home state can decline to apply. The same pattern holds offshore: in the American decisions on offshore asset protection trusts, the forum court applied the law of the debtor’s own jurisdiction rather than the law the trust deed chose.

Florida law lets a judgment creditor reach whatever a trustee could distribute to a person who settled a Florida asset protection trust for himself, and no governing-law clause changes that result in a Florida courtroom. Among the Florida asset protection case law decisions, Southeast Floating Docks supplies the test that determines which state’s law a Florida court will actually apply.