Daddy Yankee. Christopher Nagy/Shutterstock.com

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pretrial settlement offer was ambiguous, the U.S. Court of Appeals for the Eleventh Circuit ruled Feb. 14 in an unpublished opinion.

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.

U.S. 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.

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.

“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 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.

The plaintiffs attorneys are Eric Bloom, Tomas Leonard and Margaret Ciavarella of Winston & Strawn in Washington. Local counsel on the underlying case was South Florida firm Assouline & Berlowe. The attorneys  do not plan to challenge the decision.

“We have nothing to say about it,” Leonard said.

The defamation judgment has been paid in full, he added. Daddy Yankee, whose real name is Ramon Luis Ayala Rodriguez, is certainly making bank: “Despacito,” his 2017 collaboration with Puerto Rican singer Luis Fonsi, is tied for the longest streak at the top of the Billboard 100.

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-fee 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 if it's ambiguous.”