All federal litigators should know about Offers of Judgment under Rule 68. The defendant offers to settle the case, and if plaintiff wins the case but recovers less than the Rule 68 offer, then plaintiff pays the defendants' costs and forfeits certain attorneys' fees. A shrewd Rule 68 offer makes the plaintiff think twice about litigating the case any further. Of course, this all requires that the defendant's lawyer serve a proper Rule 68 offer.
The case is Barbour v. City of White Plains, 07 Civ. 3014 (RPP), 2011 WL 2022884, decided by district judge Patterson on May 24. Three plaintiffs sued police officers under 42 U.S.C. sec. 1983 for civil rights abuses. Shortly before trial, defense counsel served on plaintiffs a Rule 68 offer, amounting to $10,000 for each plaintiff. Plaintiffs took the money, and their attorneys moved for attorneys' fees as prevailing parties. They recover nearly $300,000 in fees. How did this happen?
Most Rule 68 offers state that the settlement offer includes attorneys' fees. Not this one. The offer also did not specify that it included costs. It should have, if that was the defendants' intent. Citing Marek v. Chesny, 473 U.S. 1 (1985), Judge Patterson writes, "if defendants had intended its offers to include costs and attorneys fees, it offers of judgment should have so stated." Not only that, but the judgment signed by Judge Patterson said that judgment was entered in each plaintiffs' favor, "with the costs accrued, including reasonable attorneys' fees, in an amount to be determined by the Court."
Defendants' counsel claimed to be surprised when plaintiffs next moved for attorneys' fees. He argued that the Rule 68 offer was not intended to compensate plaintiffs for all their time expended on the case, and that, at best, the attorneys' fees should have come out of the $10,000 judgment for each plaintiff. No dice, Judge Patterson says. That's an unreasonable interpretation of the Rule 68 offer, all the more so because defendants' counsel drafted the offer. He should have been more careful. Judge Patterson cites a SDNY case from 1989 that's on all fours: "Defendant's counsel simply erred in failing to protect against an acceptance of the offer followed by a request for costs, including attorneys' fees."
This amounts to a poorly-drafted Rule 68 offer that costs the defendants nearly $300,000, in part due to the huge expenditure of time that plaintiffs' counsel reasonably spent in litigating the case and preparing for trial that was only weeks away from the offer. What should have been a $30,000 settlement costs defendants nearly ten times that amount. If defense lawyers are reading this, let this be a lesson to ya. Be careful in writing up those Rule 68 offers.