Opinion ID: 78090
Heading Depth: 2
Heading Rank: 1

Heading: The District Court Correctly Applied Section 768.79 in This Bankruptcy Proceeding.

Text: A Florida statute provides, In any civil action for damages filed in the courts of this state, if a defendant files an offer of judgment which is not accepted by the plaintiff within 30 days, the defendant shall be entitled to recover reasonable costs and attorney's fees ... if the judgment is one of no liability.... Fla. Stat. § 768.79(1). The record establishes that Akerman, as a defendant against a complaint of malpractice governed by Florida law, filed an offer of settlement that Steffen rejected, and a judgment of no liability was entered later in favor of Akerman. The main question in this appeal is whether the district court was bound to apply section 768.79 in this non-core bankruptcy proceeding. Steffen argues that section 768.79 is inapplicable for two reasons. First, Steffen argues that section 768.79 does not apply in bankruptcy proceedings. Second, Steffen argues that section 768.79 is preempted by Federal Rule of Civil Procedure 68. These arguments fail.
Steffen argues that section 768.79 is not substantive law in bankruptcy proceedings, but we disagree. We have held that section 768.79 is substantive law in diversity cases, Jones v. United Space Alliance, L.L.C., 494 F.3d 1306, 1309 (11th Cir.2007), and we have concluded that the substantive law of the forum state governs issues of state law that arise in bankruptcy proceedings. See Colwell v. Royal Int'l Trading Corp. (In re Colwell), 196 F.3d 1225, 1226 (11th Cir.1999); Fruehauf Corp. v. Revitz (In re Transystems, Inc.), 569 F.2d 1364, 1366 (5th Cir.1978). Steffen's malpractice claim is governed by Florida law in the bankruptcy court, and section 768.79 applies to this appeal. Steffen also argues that the plain language of section 768.79 precludes its application to actions filed in federal court. Section 768.79(1) applies to any civil action for damages filed in the courts of Florida. Fla. Stat. § 768.79. Because the text reads courts of this state instead of courts in this state, Steffen argues that the statute applies only to actions filed in Florida courts, not to actions filed in federal courts, and Steffen cites two decisions of a district court in support of her argument. See Yossifon v. City of Cocoa Beach, 2006 WL 2130909, at  (M.D.Fla. July 28, 2006) (finding that section 768.69 refers only to cases filed in Florida state courts and does not include suits filed in federal courts in the state of Florida); Keesee v. Bank of Am., NA, 371 F.Supp.2d 1370, 1376 n. 3 (M.D.Fla.2005) (Although [the] Florida legislature may have a strong policy favoring the reduction of court case loads [evident from the enactment of section 768.79], that policy appears self-evidently limited to Florida courts. (citation omitted)). This argument fails for two reasons. First, the language of section 768.79 does not bar its application to claims based on state law that are filed in federal court. The district and bankruptcy courts of our Circuit that are located in Florida are courts of Florida because they adjudicate claims under Florida law and are a part of the judicial system in that state. At least one Florida court has explained that section 768.79 applies to all civil actions for damages brought in Florida. Marcy v. Daimlerchrysler Corp., 921 So.2d 781, 785 (Fla.Dist.Ct.App.2006). Second, even if we were to read filed in the courts of [Florida] as an attempt by the Florida Legislature to limit the application of section 768.79 to actions brought in Florida courts, that attempt would fail because Florida cannot discriminate against a federal forum. Under the Supremacy Clause of the Constitution, a state can discriminate neither against a federal cause of action, Testa v. Katt, 330 U.S. 386, 394, 67 S.Ct. 810, 815, 91 L.Ed. 967 (1947); Mondou v. N.Y, New Haven & Hartford R.R. Co., 223 U.S. 1, 58-59, 32 S.Ct. 169, 178-79, 56 L.Ed. 327 (1912); see also Burnett v. Grattan, 468 U.S. 42, 60-61, 104 S.Ct. 2924, 2935, 82 L.Ed.2d 36 (1984) (Rehnquist, J., concurring in the judgment) (Plainly, if the statute of limitations discriminates against federal claims, such that a federal claim would be time-barred, while an equivalent state claim would not, then the state law is inconsistent with federal law.), nor against a party's resort to a federal forum, NAACP v. Alabama ex. rel. Patterson, 357 U.S. 449, 457, 78 S.Ct. 1163, 1169, 2 L.Ed.2d 1488 (1958) (Novelty in procedural requirements [under state law] cannot be permitted to thwart review in this Court ....). When federal courts apply state law, whether in bankruptcy or diversity, they do so as a matter of federal policy that cannot be disfavored by a state. As Justice Brandeis several decades ago wrote for a unanimous Court, [a] state may not discriminate against rights arising under federal laws. McKnett v. St. Louis & S.F. Ry. Co., 292 U.S. 230, 234, 54 S.Ct. 690, 692, 78 L.Ed. 1227 (1934). Steffen argues that the application of section 768.79 would frustrate the purpose of the Bankruptcy Code because it would punish a debtor's estate for the pursuit of a claim in a bankruptcy proceeding. We disagree. The Supreme Court recently ruled that the Bankruptcy Code does not disallow contract-based claims for attorney's fees based solely on the fact that the fees at issue were incurred litigating issues of bankruptcy law. Travelers Cas. & Sur. Co. of Am. v. Pac. Gas & Elec. Co., ___ U.S. ___, 127 S.Ct. 1199, 1204, 167 L.Ed.2d 178 (2007). The Court described the basic federal rule in bankruptcy that state law governs the substance of claims, Congress having generally left the determination of property rights in the assets of a bankrupt's estate to state law. Id. at 1205 (quoting Raleigh v. Ill. Dep't of Revenue, 530 U.S. 15, 20, 120 S.Ct. 1951, 1955, 147 L.Ed.2d 13 (2000)) (internal quotation marks omitted). The Travelers Court reversed a decision of the Ninth Circuit, which had not followed its general rule that a prevailing party in a bankruptcy proceeding may be entitled to an award of attorney fees in accordance with applicable state law if state law governs the substantive issues raised in the proceedings. Ford v. Baroff (In re Baroff), 105 F.3d 439, 441 (9th Cir.1997); see also Cadle Co. v. Martinez (In re Martinez), 416 F.3d 1286, 1288 (11th Cir.2005) (affirming an award of fees in a bankruptcy proceeding under the reciprocal attorney's fees statute in Florida, Fla. Stat. § 57.105(6)). Steffen's argument that the application of section 768.79 in a bankruptcy case subjects bankruptcy estates to penalties for unsuccessfully pursuing claims authorized by a bankruptcy court is unpersuasive. The statute would penalize the estate only if the estate did not accept a reasonable settlement offer made in good faith. Fla. Stat. § 768.79. The main purposes of bankruptcy law are to collect all of the assets and liabilities of an entity, to pay the creditors of the bankrupt to the fullest extent possible, and to give the debtor a fresh start. St. Laurent v. Ambrose (In re St. Laurent), 991 F.2d 672, 680 (11th Cir.1993). The goal of the statute, which is to make whole a party forced to litigate after a reasonable settlement offer is rejected, does not conflict with the purposes of the Bankruptcy Code. The statute seeks to encourage settlement and to conserve judicial resources.
Steffen also argues that Rule 68 preempts section 768.79. Steffen argues that both the federal rule and the state statute were designed to encourage early settlement and they directly conflict. Again, we disagree. Federal law preempts a state statute when the two directly conflict, N.Y. State Conference of Blue Cross & Blue Shield Plans v. Travelers Ins. Co., 514 U.S. 645, 654, 115 S.Ct. 1671, 1676, 131 L.Ed.2d 695 (1995), but section 768.79 and Rule 68 do not conflict. Section 768.79 provides for the recovery of attorney's fees and other costs, but Rule 68 provides for an award of only costs. Compare Fla. Stat. § 768.79 with Fed.R.Civ.P. 68. Section 768.79 also addresses offers of judgment, demands for judgment, and offers of settlement and does not require the entry of a judgment as a prerequisite. Fla. Stat. § 768.79; see also Abbott & Purdy Group, Inc. v. Bell, 738 So.2d 1024, 1027 (Fla.Dist. Ct.App.1999). Rule 68 applies only to offers of judgment, so a judgment [against the defendant] on specified terms is required. Fed.R.Civ.P. 68; see also Bell, 738 So.2d at 1027. Eighteen years ago, we concluded that the predecessor to the current version of section 768.79 was not preempted by Rule 68, Tanker Mgmt., Inc. v. Brunson, 918 F.2d 1524, 1528-29 (11th Cir.1990), and that decision controls our resolution of this issue. In Tanker, the defendant made three offers that the plaintiff rejected: a proposal for settlement under section 45.061 of the Florida Statutes, an offer of judgment under an earlier version of section 768.79, and an offer of judgment under Rule 68. Id. at 1526. The district court directed a verdict in favor of the defendant and awarded the defendant costs and attorney's fees, but the court did not specify the statute under which it awarded attorney's fees. Id. We examined each provision to determine which of them, if any, could support the award of attorney's fees. Id. at 1527. We concluded that Rule 68 did not support the award because it allowed an award of only costs unless the underlying statute that creates the cause of action expressly provides that attorney's fees are recoverable as costs. Id. We concluded that the earlier version of section 768.79 did not support the award because that version did not apply to a prevailing defendant. Id. We examined section 45.061, which provided that a prevailing defendant who had served either an offer of judgment or an offer of settlement could recover attorney's fees if the plaintiff rejected the offer. Id. at 1528. We held that Rule 68 did not preempt section 45.061 because the two provisions were not in direct collision. Id. Rule 68 concerns only [costs] and offers of judgment, while [section 45.061] concerns attorney's fees, offers of judgment and settlement offers. Id. We explained that Rule 68 was in no way applicable to settlement offers. Id. at 1529. In 1990, the Florida Legislature consolidated sections 768.79 and 45.061 into the current version of section 768.79, and this new provision addresses offers of judgment, demands for judgment, and offers of settlement and provides for awards of costs and attorney's fees to either party. Akerman made offers of settlement to Steffen like the offers in Tanker. Steffen insists that Akerman made offers of judgment, not offers of settlement, because the documents she received were titled offer of judgment, but neither offer provided for an entry of judgment against Akerman. The offers instead proposed a settlement of all claims with Steffen for $10,000 if she would dismiss her claims against [Akerman] with prejudice. An offer of judgment, as contemplated by Rule 68, requires that a judgment be entered in favor of the offeree. Fed.R.Civ.P. 68; see also Bell, 738 So.2d at 1027. The offers by Akerman were like the settlement offers in Tanker, so the reasoning in Tanker compels our conclusion that Rule 68 does not preempt section 768.79.