Attorneys who sued “Despacito” artist Daddy Yankee for defamation should have heeded the song’s title and drafted their settlement offer slowly, a federal appellate court ruled.
The Puerto Rican reggaeton star, his record company and manager will not have to pay about $900,000 in attorney fees and costs after losing the Miami case because opposing counsel’s pretrial settlement offer was ambiguous, the U.S. Court of Appeals for the Eleventh Circuit ruled in an unpublished opinion. Five for Entertainment S.A. v. El Cartel Records Inc., 17-11491.
The case serves as a cautionary tale for attorneys drafting settlement offers in cases where circumstances might change based on pending motions before the court.
Promoter Diego Hernan de Iraola and his company Five for Entertainment sued after a series of Daddy Yankee concerts in Argentina was canceled. The singer-rapper, his record company El Cartel Records Inc. and manager Edgar Baldiri Martinez were slapped with a $6.4 million verdict for publicly blaming the cancellations on the promoter, known as Five Live.
The award was reduced to $2.2 million — still significantly higher than a $100,000 settlement offer Five Live made before trial. Because the defendants never responded to the offer, plaintiffs’ attorneys from Winston & Strawn and Assouline & Berlowe argued they were entitled to attorney fees under Florida law.
Federal Magistrate Judge William Turnoff in Miami agreed and recommended the district judge sign off on a fee award of about $871,000, plus $28,000 in costs. But U.S. District Judge Patricia Seitz declined, finding the settlement offer was ambiguous because of new claims introduced while the offer was pending.
A general release in the settlement stated it would end: “[A]ny and all manner of action and actions … which said Releasor ever had, now has, or shall or may have against said Releasee for, upon, or by reason of any matter, cause, thing, event, occurrence or fact whatsoever, known or unknown, foreseen or unforeseen from the beginning of the world to the day of this Release, regarding or relating to any claims or cause of action asserted in, or which arises from any of the facts or transactions that form the basis for all claims asserted in the action[.]”
Before the November 2013 trial and while the settlement offer was pending, Five Live moved to supplement the record with evidence of a Daddy Yankee radio interview that included additional allegedly defamatory statements. Seitz granted the motion and three statements from the interview were later included on the jury form.
The Eleventh Circuit explained: “Under Florida law, a plaintiff who makes an offer of judgment that is not accepted by the defendant within thirty days is entitled to recover his attorney’s fees and costs if he ultimately recovers a judgment at least twenty-five percent greater than the offer. Fla. Stat. §768.79.” The appeals court added: “As the statute imposes a sanction, Florida courts have held that settlement proposals under the offer of judgment statute must be ‘as specific as possible, leaving no ambiguities so that the recipient can fully evaluate its terms and conditions.’”
“At the time the offer was served, it was clear that the claims ‘asserted in the action’ referred to those defamation claims included in the original complaint,” Eleventh Circuit Judges Charles Wilson, Jill Pryor and Frank Hull found. “But when the district court allowed Five Live and De Iraola to rely on the newly discovered recording at trial, days before the offer of judgment would expire, it became ambiguous as to whether the release included those newly added claims.”
That ambiguity as to which claims would be released could reasonably affect the defendants’ decision on whether to accept the proposal, the panel ruled, affirming the district court’s denial of the fee award.
In a footnote, the appellate judges offered advice on how careful wording might have saved the attorneys from a costly mistake: “De Iraola could have written the release more clearly to cover pending claims as well those that might arise later, rather than limiting the included claims to those arising from or related to those pled in the original complaint,” they wrote.
Eric Bloom, Tomas Leonard and Margaret Ciavarella served as plaintiffs’ attorneys from Winston & Strawn. South Florida firm Assouline & Berlowe was local counsel on the underlying case. The attorneys did not plan to challenge the attorney fees decision. “We have nothing to say about it,” Leonard commented. The defamation judgment has been paid in full, he added.
The defendants were represented by Jon Polenberg and Yasin Daneshfar of Becker & Poliakoff in Fort Lauderdale. Polenberg called the court’s opinion “instructive” for lawyers looking to make use of the attorney-fees statute. “The law is a sanction against a party who unreasonably rejects a proposal to settle,” he said. “Courts construe the offer, including the release, carefully to be sure that any rejection of that offer is reasonable — and it’s reasonable [to reject] if it’s ambiguous.”
Celia Ampel is a reporter for Entertainment Law & Finance’s Florida-based ALM sibling Daily Business Review.
The views expressed in the article are those of the authors and not necessarily the views of their clients or other attorneys in their firm.