McMahan  v. Toto, U.S. Federal Circuit, 11th District (2001)
Author: Bram

Cause of action: The following is a diversity cause of action by one limited partner against another limited partner for tortious interference with contractual relations.

Procedural History: DF made an offer of judgment under FL law for $100, which PL rejected.  Trial court found under FL's Choice of Law rule that NY substantive law governed this case and granted summary judgment to DF's. This court first reversed the damages award, then reversed itself upon a decision from an actual FL court.

Facts: DF's sought and were awarded attorney's fees under FL section 768 and PL's appealed.

Issue(s): Under FRCP, when the substantive law of another state is used to render a verdict in FL state court, do the rules on offers of judgment still apply to the litigants?

Court's Rationale/Reasoning: If the case was procedural, the court would apply the federal law; if substantive, then court would apply the law of the forum state. These two steps are independent of each other.  All statutes allowing for recovery of attorney's fees are substantive for Erie purposes.

Rule: In an ordinary diversity case where the state law does not run counter to a valid federal statute or rule of court, and usually it will not, state law denying the right to attorney's fees or giving a right hereto, which reflects a substantial policy of the state, should be followed.

Absent a decision from the state supreme court on an issue of state law, we (district court) are bound to follow decisions of the state's intermediate appellate courts unless there is some persuasive indication that the highest court of the state would decide the issue differently.

Holding: Yes.  Florida's offer of judgment statute is applicable to cases that are tried in the State of FL even though the substantive law that governs the case is that of another state  FL supreme court would not feel differently.