A recent Georgia Court of Appeals opinion furthers a disturbing trend of requiring exact mirror image acceptance and performance of settlement terms by defendants. In states requiring extreme detail when consummating a settlement, failure to replicate the offer’s terms may be viewed as a setup to a bad faith claim. Some courts have pushed back on this trend and recognized the public policy need to encourage and facilitate the settlement of disputed claims and lawsuits. The Pierce v. Banks, No. A23A0394, 2023 WL 4227923 (Ga. Ct. App. June 28, 2023) decision does exactly the opposite by encouraging expensive, complicated, and protracted litigation.
Pierce v. Banks
In Pierce v. Banks issued last month, the Georgia Court of Appeals took a stringent approach to the old adage that the offeror is the master of their offer. The question concerned whether the parties had a binding pre-suit settlement agreement pursuant to OCGA § 9-11-67.1. In determining that there was not, the court made two surprising findings: (1) language printed on the check that the payment could be “void[ed] after 180 days” constituted an “expiration” that did not mirror the offer and (2) Appellant’s receipt of the settlement payment before the fifteenth day also did not conform to the offer’s terms, which required that payment be received “15 days after written acceptance.” (Emphasis added). The court relied primarily on general contract case law to reach this illogical conclusion, stating that failure to comply with the “precise terms of an offer is generally fatal to the formation of a contract.” However, by expanding this rule to encompass acceptances by act, the court almost entirely ignored OCGA § 9-11-67.1, which required “acceptance of material terms” only.
This slight change in analysis takes the concept of the “mirror image” of an offer too far, providing vigilant offerors the opportunity to reject an otherwise binding agreement if the acceptance is not a replica of the offer’s terms. Strikingly, a similar issue recently arose in Eres v. Progressive Am. Ins. Co., 998 F.3d 1273 (11th Cir. 2021), leading the plaintiff to file a bad-faith action against the defendant-insurer. The plaintiff specifically argued that the defendant acted in bad faith when attempting to settle the plaintiff’s claims because their acceptance letter contained a carve-out allegedly prohibited by the offer. Although this argument was ultimately rejected by the Florida Supreme Court, decisions such as Pierce encourage picky plaintiffs to assert similarly unfounded claims against defendants who are simply agreeing to the plaintiff’s stated terms of the settlement. Such encouragement only serves to promote bad policy, while the Pierce decision as a whole contravenes the very purpose of settlement agreements: to effectively resolve a dispute by reaching a mutually agreed-upon outcome without litigation.
An Opposing Analysis
The South Carolina Court of Appeals dealt with a related issue in two recent unpublished opinions. But rather than strictly construing specific settlement terms, the South Carolina court approached the question holistically, focusing instead on whether the parties’ intent was met by agreement of all “essential and material terms” of the settlement. Using this analysis, the court concluded that the form of a check issued as settlement payment was an immaterial term of the offer, and acceptance was, therefore, binding. This analysis is more consistent with the contractual concept of a “meeting of the minds” since two people can agree to a contract’s essential or material terms even if one party accepts those terms in a form disfavored by the other party. Similarly, the use of the phrase “essential” or “material terms” is consistent with other jurisdictions’ interpretations of settlement agreements. See, e.g., TNT Properties, Ltd. v. Tri-Star Devs. LLC, 677 N.W.2d 94, 101 (Minn. Ct. App. 2004) (stating that an enforceable settlement must contain an acceptance with a “meeting of the minds on the essential terms of the agreement); Beverly v. Abbott Lab’ys, 817 F.3d 328, 333 (7th Cir. 2016) (holding that a settlement agreement is enforceable if there is a “meeting of the minds or mutual assent to all material terms”). In fact, the Florida Supreme Court recently interpreted a statute similar to § 9-11-67.1 and found it inconsequential that “the precise words of the requested promise were repeated” in the notice of acceptance. Finally, the South Carolina court’s opinions better promote the goals of settlement agreements than the Pierce decision because they encourage parties to continue making and maintaining settlement agreements rather than producing illogical and inefficient results.
Implications of Pierce to post-July 1, 2021 Settlement Disputes
OCGA § 9-11-67.1, the statutory provision cited by the Georgia Court of Appeals in Pierce was amended on July 1, 2021, and applies only to settlements purportedly reached before that date. However, whether the Pierce decision is binding on settlement agreement disputes arising after July 1, 2021, is unclear. The amended statute contains an added provision, which provides that “[u]nless otherwise agreed by both the offeror and the recipients in writing, the terms outlined in subsection (a) of this Code section shall be the only terms which can be included in an offer to settle made under this Code section.” This provision lends credit to the idea that Pierce would not be binding on post-amendment settlement disputes because, had the Georgia court been required to apply the provision, it likely would have reached the opposite conclusion. On the other hand, the court rested its decision primarily on case law, rarely mentioning § 9-11-67.1. Therefore, one could reasonably argue that Pierce v. Banks merely interpreted previous judicial opinions, and the decision, therefore, should be binding on settlement disputes arising after July 1, 2021.
Summary
In the wake of the Pierce decision, defendants should exercise great care when attempting to accept a settlement offer by act, such as delivery of payment. Defendants should ensure that each term in the offer is met exactly as written, even if it seems inconsequential or inconvenient for the opposing party. However, the Pierce court drew a distinction between acceptance by act and acceptance by communication and targets their holding on acts. Therefore, defendants may be able to avoid a brutal analysis under the Pierce standard if they accept a settlement offer by communication to the offeror, as long as communication is included as an allowable form of acceptance in the offer.
Jim L. Pattillo has more than 20 years of litigation experience in both state and federal courts in Alabama and more than 70 trials to verdict. It goes without saying that Jim Pattillo is comfortable in the courtroom. He focuses his practice on matters involving insurance coverage and bad faith liability, business and commercial litigation, and professional and product liability.
Claire Epps is 3L and taking part in the Christian & Small Summer Associate Program. She is from Huntsville, Alabama, and is a graduate of the University of Alabama. While at Alabama, she took a law-related class, mostly for fun, and discovered she really enjoys learning about the law and decided to pursue her J.D. at the University of Alabama School of Law. She is a member of the Law and Psychology Review and the Moot Court Board where she continues to hone her skills as a writer and oral advocate.
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