Opinion ID: 1092897
Heading Depth: 1
Heading Rank: 10

Heading: Informal Settlement Negotiations

Text: Extrajudicial efforts, such as informal settlement negotiations between the parties, have uniformly been held to be insufficient to constitute a step for purposes of interrupting abandonment. Maraist & Lemmon, supra § 10.4 at 242. To distinguish such informal actions, which were insufficient to prevent abandonment, the jurisprudence crafted the requirement of `some formal action before the court.' DeClouet, 176 So.2d at 475 (Tate, J., dissenting in denial of reh'g). Applying that requirement, the jurisprudence has required certainty of formal action in the judicial proceedings themselves, rather than the uncertainty of informal action by counsel outside thereof, as necessary to interrupt the running of the [legislatively ordained abandonment period] during which action is required. Sanders v. Luke, 92 So.2d at 159. The purpose of this formal action requirement has been summarized as follows: [T]he courts have refused to characterize matters outside the record as steps in the prosecution of the suit because: (a) of the uncertainty of accepting informal non-legal proceedings as a step preventing abandonment; or (b) of the ex parte, informal nature of the action, without formal notice to the opposing party, as being an insufficient step in the advancement of the suit. DeClouet, 176 So.2d at 476 (emphasis supplied). The rationale for the judicial engraftment of a formal action requirement onto Article 561 was that allowing informal, ex parte actions to serve as a step in the prosecution might interrupt prescription against abandonment without the opposing parties formally learning of them for months or years, to their possible prejudice. Id. [16] Those policy considerations, however, only apply to defendants against whom a suit is lingering. [17] The rule requiring a party's action be on the record is designed to protect a defendant. The rule is intended to ensure notice to the defendant of actions taken that interrupt abandonment. The purpose underlying the rule is not present when, as here, it is the defendant taking action and doing so in defense of plaintiffs suit to avoid penalties and attorney's fees. Based on this rationale, we concluded earlier in this opinion that the remark in Melancon precluding the consideration of conduct not on the record in determining if defendant's conduct constituted a waiver was mistaken. Repeating, we conclude that to the extent a defendant's conduct would amount to a waiver as an acknowledgment if taken after the abandonment period has elapsed, such pre-abandonment acknowledgment can also be established by evidence outside the record to be a waiver, which serves to recommence the abandonment period running anew. If the defendant's conduct in this case was simply informal settlement negotiations, as defendant contends and the court of appeal concluded, then the waiver exception would not apply, and the general rule requiring formal action would apply. [18] This case, however, presents an entirely different factual scenario: an unconditional tender. An unconditional tender is made to a plaintiff not in settlement of the case, but to show [the insurer's] good faith in the matter and to comply with the duties imposed upon them under their contract of insurance with the insured. McDill v. Utica Mutual Insurance Co., 475 So.2d 1085, 1091-92 (La.1985). A tender made to satisfy the requirements of La.Rev.Stat. 22:658(A)(1) must be unconditional, i.e., with no strings attached, and thus, by definition, cannot be a settlement offer. The court of appeal's characterization of the tender as part of informal negotiations was thus erroneous. A similar mischaracterization of an unconditional tender as a settlement offer was made by the trial court in Johnson v. Protective Casualty Insurance Co., 572 So.2d 355 (La.App. 1st Cir.1990). Reversing, the appellate court in Johnson explained the difference between a tender and a settlement offer as follows: For a tender to be valid as such it must be unconditional. An insurer may avoid the imposition of penalties and attorneys' fees by unconditionally tendering part of the claim which is undisputed, when there is a reasonable dispute as to the amount of loss. However, an offer of payment in exchange for a complete release of the plaintiff's claim is not a tender within the contemplation of LSA-R.S. 22:658. Instead, an accord and satisfaction is present when a debtor tenders a check with a written notation indicating it is in full settlement of all claims and the claimant accepts the offer. 572 So.2d at 357 (emphasis supplied) (citations omitted). Applying this principle, the court concluded that the trial court erred in finding the insurer's unconditional tender to be an attempted compromise given the unambiguous language used in the transmittal letter and the notation on the check. The court emphasized that the insurer's purpose in making the tender was to avoid penalties and attorney's fees; simply stated, the insurer was merely protecting its interests under LSA-R.S. 22:658. Id. By analogy, defendant's purpose in making the tender was to protect its interest under La.Rev.Stat. 22:658, and the court of appeal's characterization of the tender as part of informal negotiations was erroneous.