Share your knowledge and expertise: Be a speaker at Legal Summit. CLICK TO SUBMIT YOUR PROGRAM BY JAN 31!

It is not uncommon for litigants to continue settlement negotiations after trial has begun. Demands, offers, and counteroffers are often discussed during recesses and breaks, and are sometimes left open when court reconvenes. The perils of proceeding in this fashion were made clear in Moore v. Donegal Mutual Insurance Company (No. 778, Sept. Term 2019) (9/30/20), where the Maryland Court of Special Appeals determined that in the absence of a deadline for acceptance, whether and for how long an offer remains open is ordinarily a question of fact. To reach this conclusion, the court refused to find, as a matter of law, that an in-trial offer will lapse merely because the trial resumed before the offer was accepted. 

Trina Moore sued a Donegal insured for negligence. Prior to trial, a Donegal claims adjuster offered to settle the case for $18,000. Moore rejected the offer, and the case proceeded to trial. On the morning of the second day of trial, Moore’s attorney called the adjuster and said that Moore would settle for $21,500. The adjuster held firm at $18,000, an offer, she acknowledged, that was “still on the table.” Id. at 2. No time limit for acceptance was suggested. The parties returned to court and continued with the trial.

After Moore rested, Donegal’s insured moved unsuccessfully for judgment. During an ensuing lunch break, and just two hours after being told that the settlement offer was still on the table, Moore’s attorney advised defense counsel that Moore accepted the $18,000. Donegal’s adjuster then advised the attorneys that the offer was no longer open, and refused to settle the case. Id. at 3. Moore’s attorney brought this to the trial judge’s attention, “but the court refused to address it.” Id. The trial resumed, and on day 3, the jury returned a defense verdict.

Shortly thereafter, Moore filed a district court complaint against Donegal to enforce what she claimed was an agreement to settle the case for $18,000. The case was transferred to the circuit court after the insurance company requested a jury trial. At the circuit court, Moore moved for summary judgment, arguing that there was no issue of material fact and that based on the undisputed facts, the parties had agreed to settle the case. Donegal filed a cross-motion for summary judgment, also arguing that there was no issue of material fact, and that on the undisputed facts, no such agreement had been reached. Id. at 3.

For her part, Moore argued simply that because she had accepted the adjustor’s open-ended offer within a reasonable period of time, it became an enforceable settlement agreement. Donegal, on the other hand, argued that the circumstances changed when Moore rested her case and the defendant moved for judgment, so the offer lapsed and could not thereafter be accepted. Id. at 4.  

The circuit court agreed with Donegal. It found that the circumstances had changed, i.e., the trial resumed, so the offer lapsed. Judgment was entered for the insurer. Id. at 8. On appeal, both parties continued to argue that the case should be resolved as a matter of law on the undisputed facts. The Court of Special Appeals was unaccommodating, finding that whether the time between offer and acceptance was reasonable under the circumstances was itself a fact in dispute and, therefore, for the jury to determine.

There was no dispute on the underlying legal principles:

Settlement agreements are enforceable as independent contracts, subject to the same general rules of construction that apply to other contracts. In contract law, an offer is always a conditional promise and the offeree has the power to accept the offer and create a contract. It is horn book law however, that when an offer provides no specified time for acceptance, it must be accepted within a time reasonable under the circumstances or the offer will lapse and a subsequent attempt to accept will be of no effect. Barnes v. Euster, 240 Md. 603, 607 (1965). Whether a party accepted an offer within a reasonable amount of time generally is a question of fact for the trier of fact to decide. Id. at 607-08. If the facts and permissible inferences are undisputed, however, a court can decide the issue as a matter of law. Id. at 608. 

Slip Op. at 7 (some citations and internal quotations omitted).

Barnes concerned an offer to purchase land, contingent on getting it rezoned within six months. When the property had not been rezoned after six months, the seller advised the purchaser that the contract was terminated. Two years later, the purchaser said that it would waive the contingency, and sought to enforce the contract. The Court of Appeals had no problem concluding that the two-year delay, coupled with the seller’s notice of termination, was unreasonable as a matter of law. Barnes, 240 Md. at 607.

In Moore, the interval between offer and putative acceptance was two hours rather than two years, and the only change in circumstance was the resumption of trial and an unsuccessful motion for judgment. The appeals court found no Maryland case that stood for the proposition that the resumption of trial after a settlement offer is made terminates the offer. After looking at a few cases from other jurisdictions, it expressly refused Donegal’s invitation to establish “a bright line rule that a reasonable period of time to accept [a settlement] offer made during trial would end at the time the trial is resumed….” Slip Op. at 8. While it did say that “[t]o be sure, the reasonable time to accept an offer would end if there was a final judgment entered against the plaintiff,” when an offer failed to specify a deadline for acceptance during trial, “the issue whether the offer was accepted in a reasonable amount of time is an issue to be determined by the trier of fact.” Id. at 8-9.

The court found support for this conclusion in Yaros v. Trustees of Univ. of Pennsylvania, 742 A.2d 1118 (Pa. Super. Ct. 1999). In Yaros, the defense offered $750,000 to settle a case at the close of all evidence, saying only “you’ve got to get back to me.” Seventy minutes later, after closing argument but before verdict, the plaintiff accepted the offer. The defendant balked, the court initially demurred, and the jury returned the next day with a defense verdict. 

The plaintiff immediately filed a post-trial motion to enforce the settlement agreement, which the trial court granted after rejecting the defendant’s argument that the offer lapsed because it was not accepted in a reasonable amount of time. Slip Op. at 9. The trial court, with the approval by the appellate court, treated the question as one of fact and found in favor of the plaintiff. In Moore, the court determined, the two-hour delay between Donegal’s offer and Moore’s acceptance was also a question of fact. Since Donegal had requested a jury trial, the question of fact should have gone to the jury. 

It is not entirely clear from Moore how the matter would have been handled had Moore, like the plaintiff in Yaros, filed a motion to enforce the settlement agreement with the trial court rather than pursuing it as a separate cause of action in the district court. The court mentioned that Moore’s attorney did, in fact, bring the issue to the original trial judge before verdict, “but the court refused to address it.” Slip Op. at 3. Had it been handled by motion (rather than by mention) and determined by the original trial court, presumably as a matter of fact as in Yaros, Donegal’s right to have the matter tried to a jury might have been defeated. See David v. Warwell, 86 Md. App. 306 (1991) (“It is well established that this Court has inherent power to summarily enforce settlement agreements entered into in an action pending before it…,” quoting Mungin v. Calmar Steamship Corp., 342 F. Supp. 484 (D. Md. 1972)). What is clear from Moore is that in-trial offers and demands, perhaps even all offers and demands, should be time limited so as to avoid having a jury determine whether an open-ended offer was accepted before it lapsed.