Rule 68: live it, learn it or pay the price

Rule 68 is tricky because if the defendant makes a shrewd Rule 68 settlement offer, the plaintiff has to think long and hard about whether to settle the case or roll the dice. If the plaintiff rejects the offer and wins the case but recovers less money than the Rule 68 offer, then his attorneys fees entitlement stops on the day the Rule 68 offer was made. Yes, the rule is tricky, which is why lawyers have to read the rule carefully and really understand what it means.

The case is Barbour v. City of White Plains, decided on November 14. In this case, things went awry. Which is why the City of White Plains's Rule 68 offer was defective, costing it nearly $300,000 in attorneys fees and costs on a civil rights case valued at $30,000.

Rule 68 says the defendant can offer judgment to the plaintiff as well as a dollar amount. The plaintiff has 10 days to accept that offer. There's a penalty flowing from the rejection. Let's say the Rule 68 offer is in the amount of $30,000. If the plaintiff rejects it and goes to trial but only recovers $20,000, her attorneys fees are cut off from the date of the Rule 68 offer. But that Rule 68 offer should say that the plaintiff recovers $30,000 inclusive of attorneys' fees. The Supreme Court said so in Marek v. Chesny, 473 U.S. 1 (1985):

If an offer recites that costs are included or specifies an amount for costs, and the plaintiff accepts the offer, the judgment will necessarily include costs; if the offer does not state that costs are included and an amount for costs is not specified, the court will be obliged by the terms of the Rule to include in its judgment an additional amount which in its discretion, it determines to be sufficient to cover the costs.

In this case, defendant served a Rule 68 Offer of Judgment on three police misconduct plaintiffs in the amount of $10,000 each. The offer did not say that this amount included plaintiffs' attorneys fees entitlement. It only said the offer covered "all claims pending against defendants in this action." Although plaintiffs did seek attorneys fees in this case, attorneys fees are not a claim. The Section 1983 action against the City is the claim. So plaintiffs accepted the offer and moved for attorneys fees in the amount of about $267,000 plus another $13,000 in costs. The district court granted the fees motion. Rejecting defendants' argument that the Rule 68 offer impliedly included attorneys fees, the Court of Appeals (Raggi, Hall and Carney) affirms on authority of Marek v. Chesny.

The Court of Appeals further says that plaintiffs' settlement, $30,000 total, is not trivial or inconsequential such that full attorneys fees are warranted.

I would guess that defendants' counsel thought his Rule 68 offer covered attorneys fees and was surprised when plaintiffs' counsel moved for attorneys fees. The courts don't care. ou have to read the rules and then read the cases interpreting those rules. Reading is free. Not reading may cost you about $300,000.