This episode is about offers of judgment under Federal Rule of Civil Procedure 68. I focus on the practical application of Rule 68.
Civil procedure podcast. I am your host Thomas Maine. This episode is about offers of judgment under rule 68. This is one of the original federal rules of civil procedure. It's essentially in a form unchanged from where it was 80 plus years ago. This is not one of the most important rules of procedure. That's because it's not something that shows up frequently in practice. However, it's an odd rule with some characteristics that are not intuitive and therefore are a little bit dangerous if we don't have some sense of where those surprises lurk, though, we're able to cover it in a relatively short episode. Rule 68 is fundamentally about encouraging parties to settle and rule 68 contemplates defendants serving plaintiffs with an offer of settlement of a particular kind. It's a subset of an offer of settlement. This is an offer of judgment. A judgment is a formal declaration of the parties, rights and responsibilities. So this is something that in the ordinary course would issue from the court after one of the parties has one. So it would be a judgment for the plaintiff or a judgment for the defendant rule 68 contemplates defendants, serving plaintiff with an offer of judgment against them against defendant on terms that are offered by the defendant. So the defendant might say, for example, I hear a buy off her judgment in your favor, upon my payment of$50,000 or$500,000. That's the offer of judgment. Now plaintiff might accept that offer and if they did, then the case would be over. But if plaintiff doesn't accept an offer of judgment under rule 68, and if the plaintiff fails to do better than that at trial, then rule 68 says that the plaintiff is on the hook for the defendants costs from the date of the offer of judgment all the way through. So that's where the rule has its bite. Again, the offer or makes the offer of judgment. The offer re receives that offer failing to accept that offer of judgment can be consequential. And the consequence is that if the offeree doesn't get a more favorable judgment than what was offered to them, then the offeree has to pay the offer roars costs. So that's the big picture. Let's get into the weeds a little bit in order to understand where rule 68 fits. You need to see the backdrop because rule 68 is doing something in light of an environment that exists around rule 68. So let's talk about that backdrop or that environment. There's a statute. The statute is 28, USC, 1920, and there's another federal rule, federal rule, 54 D. And those two mandates combine to create a situation where the prevailing party in litigation, prevailing plaintiffs or prevailing defendants, prevailing parties usually get their costs paid for by the losing party. Again, that's a combination of section 1920 of the civil code and federal rule 54 D. Now somewhat strangely, neither of those is mentioned in federal rule 68. That's not very helpful for the student trying to master this, but that's why lectures like this, give you the context. So that's the context. There are mandates where prevailing parties usually get their costs paid for by the losing party. Now costs tend not to be a big deal. If you look at 1920 of the civil code, you'll see that while it includes some printing and witness costs and some docket fees and maybe interpreters. So what is included in costs sometimes might just be, you know, a thousand dollars or a few thousand dollars, relatively small dollars. I remember we're not talking about rule 68 here. We're talking about section 1920 and 54 D we're not to rule 68 yet. We're talking about this backdrop where in the ordinary course, judges use their discretion and award costs to the prevailing party. Now sometimes rather than being a few thousand dollars, it might be an order of magnitude higher than that. In some cases it's tens of thousands of dollars where maybe there's some extra printing and witness costs or some audio and video depositions that had some expensive transcription fees associated with them. So it might be an order of magnitude higher than thousands. And instead in the 10 thousands, in fact, there are some cases where it's yet another order of magnitude higher sometimes because of the unique technology involved and the magnitude of the case itself. It is hundreds of thousands of dollars. In fact, there's a 2013 case from the ninth circuit where the costs were$600,000. Now the Supreme court has narrowed what costs can include, but as with so many things involving trial court discretion, some judges are a little looser in applying the mandate than others. So the idea is whether it's a few thousand or a few hundred thousand, we have these mandates and rule 54 and section 1920 that allow prevailing parties to recover their costs and in a world without rule 68. So if we don't add rule 68 to the mix yet in circumstances where the defendant made a strong settlement offer, that the plaintiff declined well, then a plaintiff who wins that case in a world without rule 68, a plaintiff who wins that case is a prevailing party. And as I just said, with the backdrop could be awarded costs. That's the scenario that rule 68 is trying to address because it flips that result because rule 68 comes into that scenario where a plaintiff wins at trial, but did not get a result that was more favorable than what they were offered by the defendant. So rule 68 says in that circumstance that plaintiff can't get costs. And in fact has to pay the defendants costs. Now, remember that this rule only applies if the defendant complies with the offer of judgment procedures, outlined in rule 68, this doesn't apply to just any old settlement. In the ordinary case, when a defendant offers something to settle a case, it would lead to a settlement agreement. It would lead to a contract. And as part of the contract, the plaintiff would voluntarily dismiss their case. This is a different than an ordinary settlement agreement. This is for a defendant who serves an offer of judgment, which is a surrender of the judgment in favor of the plaintiff on terms that are offered by the defendant. According to the rule, the plaintiff only has 14 days to respond to an offer of judgment. And that winds up being important for two different reasons. It's important first because it's a relatively short time period. And that's one reason that critics say this rule doesn't do as much to actually promote settlements as it could. Those critics say that if you wanted a rule that actually promoted settlements, you give plaintiffs a longer period of time to consider that offer. I said that there were two reasons that the 14 day response requirement was important. The second reason is that the offer of judgment is generally thought to be irrevocable during the 14 day period. So the defendant can't withdraw their offer, that irrevocability in turn leads some to criticize the 14 day period as to all because a lie can happen in 14 days. One of the strangest things that can happen and has happened is that during that 14 day period, the judge might grant a summary judgment or a motion to dismiss in favor of the defendant. So the plaintiff having just faced an unfavorable motion to dismiss having lost that or lost a summary judgment motion is never the less holding an offer of judgment from the defendant. So naturally plaintiff then accepts the offer of judgment and avoids the unfavorable motion to dismiss or a motion for summary judgment. Now, the reason that can happen is that if you look at rule 68, the offer of judgment is not filed with the court. So typically the judge would have no idea that there is an outstanding or a pending offer of judgment when she rules on a motion to dismiss or a motion for summary judgment. So that's one of the strangest things that can happen because the offer is irrevocable. And because it lasts for 14 days next, I want to cover three mistakes that students make on rule 68. And then I want to flag three profundities about rule 68 for you. And then I want to talk about a strange and controversial application of rule 68. So let's start with the three mistakes, and I'm going to frame these in terms of things to remember. So rather than listing the mistakes, I want to list the things that you need to remember to avoid making the mistake. So, first thing you want to remember only defendants can make an offer of judgment. The mistake that we're trying to avoid is treating every settlement offer like an offer of judgment. It isn't, this rule is not applicable to every settlement offer. It's only applicable to offers of judgment and only a defendant can make an offer of judgment. So item number one, to remember only defendants can make offers of judgment item. Number two costs do not include fees in the ordinary course. Our discussion of costs means those items listed in section 1920 of the civil code. And importantly, the biggest real-world cost of all attorney's fees is not on that list. So this is a defined term costs and costs do not include attorney fees. Item number three, to remember rule 68 is irrelevant in cases where the plaintiff loses. This is not at all obvious. This is the situation where the defendant made an offer of judgment. And not only did the plaintiff not recover as favorable a judgment as what was offered to them by the defendant, they outright lost yet rule 68 does not apply in those circumstances. Rule 68 and offers of judgment are only relevant if the plaintiff wins, but wins a judgment that is not more favorable than the terms that were offered by the defendant. That's because rule 68 was not intended to impose adverse consequences on plaintiffs, unless the plaintiff rejected an offer. That would be reasonable assuming that the plaintiff prevailed in the litigation. So rule 68, isn't trying to do anything in circumstances where plaintiffs lose at trial rule 68 is trying to step in and reverse engineer. Those cases where plaintiffs win at trial, but aren't going to recover more than what the defendants offered them. So that's the kind of trial that rule 68 is trying to prevent. So those are our three mistakes that I want you to avoid. Now let's quickly flag three. Profundities about rule 68 so that you can be sophisticated in a discussion about it. Profound insight. Number one, rule 68, at least arguably assumes that there is a duty to settle underlying rule. 68 is the notion that a plaintiff who rejects a settlement offer and then goes to trial and gets that same are not quite as good of a result at trial has done something wrong or has done something that should be discouraged. That's a debatable proposition because plaintiffs might want more from litigation than just the piece of paper, the judgment declaring their victory. They might want their day in court. The counter to that is the argument that dispute resolution is a shared limited public resource and using trials under circumstances like those, that rule 68 is trying to prevent is an extravagant use of those resources that we can't afford. Hence what might be characterized here as a duty to settle that is embedded in rule 68. And that's our profound insight. Number one, the second profundity I want to put in your backpack is rule 68 is an area where there is tremendous variation in state procedure, where in other respects states have modeled the federal rules of civil procedure. Yet right here, it's this rule where many states tinker with the federal rule, many states, for example, allow plaintiffs to make offers of judgment. Some states also sneak in attorney's fees as part of the consequences of these offers of judgment. The profundity here is that there's something going on with this federal rule, because we see a lot of states who otherwise model the federal rules. Nevertheless, experimenting right here, that experimentation and deviation from the federal model in state courts in turn leads to the third profundity, which is rule 68 issues are wonderful possibilities for Erie problems on an exam or in practice. I am referring to the Erie doctrine, E R I E. If you've already studied the Erie doctrine, that's great. If you haven't studied the Erie doctrine, just make a note. This is something that you can return to later on. So if you have studied the Erie doctrine or once you have studied the Erie doctrine watch for a fun Erie question involving rule 68, because in diversity cases, when parties are in federal court, that state rule on offers of judgment creates a wonderful hypothetical or an eerie issue. Imagine for example, that the state rule allows plaintiffs to make offers of judgment. Well, the federal rule is kind of silent on that point or maybe the rule isn't silent on the point, but as instead, excluding that possibility by authorizing offers of judgment by defendants and not mentioning offers of judgment by plaintiffs. That's what would be discussed in the resolution of the eerie issue. Finally, I promised a strange and controversial application of rule 68. This situation involves circumstances where you're doing a rule 68 situation, which necessarily means the defendant made an offer of judgment. The plaintiff declined that offer the plaintiff then won at trial, but didn't win a more favorable judgment than was offered in the offer of judgment. So we're doing a rule 68 situation. However, we have a twist in circumstances where there is also an attorney fee shifting statute in the mix. When that attorney fee shifting statute that's in the mix defines fees as part of costs. Now, remember, first of all, rule 68 is not about attorney's fees in the ordinary course, costs are not fees, how Webb or many statutes allow plaintiffs to recover their attorney's fees. And those statutes sometimes refer to attorney's fees. As part of costs. These statutes were not written with rule 68 in mind. However, when one of these situations was litigated, the Supreme court said, well, wait a minute, this plaintiff should not be able to recover their attorney's fees that they otherwise would be entitled to. Under that attorney's fees shifting statute, they shouldn't be able to recover their attorney's fees after the date of the offer of judgment because this plaintiff isn't recovering costs after the offer of judgment. And because they're not recovering costs after the date of the offer of judgment. Well, didn't that statute say that fees were part of costs. I said it was strange and controversial. It's strange because in the ordinary course, it's a huge mistake to be talking about fees in the context of costs. But this is a strange situation. What triggers the strange situation. It's an attorney's fees shifting statute where that statute defines costs to include attorney's fees. So that's the strange and limited application of it. I referred to it as a strange and controversial application. It's controversial because this is a very textualist formalist application of the text in these regimes of the fee shifting statute and rule 68. So this case involving the strange and controversial application of rule 68 in cases involving statutes that have fee shifting provisions that refer to fees as part of costs can be characterized as a way of undermining the social purpose of fee shifting statutes, which is to encourage certain types of litigation, namely civil rights suits. So in conclusion, this rule 68 is an odd rule. On the one hand, it's relatively insignificant in practice, but there are several traps for the unwary. You needn't worry of course, because you now have what you need to avoid those pitfalls. Gregg concludes our episode on rule 68 offers of judgment. Thank you for your attention. Thank you for listening to this episode of the civil procedure podcast. Check out your podcast, feed or civil procedure.com for a list of related episodes. Have a[inaudible].