Rule 68 Offers of Judgment — a Useful Tool
This article originally by Gentry Locke attorneys David Paxton and Michael Finney appeared in Vol. 24, No. 4 of the Journal of Civil Litigation,a publication of the Virginia Association of Defense Attorneys. It appears here with permission. Read the full article as a PDF attached to this article.
Most civil cases resolve by settlement, rather than trial. Accordingly, significant time and effort are often devoted to strategy underlying the familiar back-and-forth negotiation process. When is the best time to engage in settlement discussions? Does it show weakness to be the first to raise the subject? How should offers be framed? Would use of a mediator be helpful?
When a case is pending in federal court, a sometimes overlooked consideration is whether a defendant should make an “offer of judgment,” pursuant to Rule 68 of the Federal Rules of Civil Procedure. A Rule 68 offer is somewhat of a hybrid between a settlement and a decision on the merits. Although if the offer is accepted, judgment is entered against the defendant, a Rule 68 offer is best understood as a way to bring settlement pressure to bear on a plaintiff.
Defendants must of course understand the mechanics and potential pitfalls of a Rule 68 offer. Once conveyed, however, a well-calculated Rule 68 offer places litigation risks on a plaintiff. For example, an unaccepted Rule 68 offer can shift subsequent litigation costs and cut-off a plaintiff’s right to attorneys’ fees. It can even moot a plaintiff’s entire claim. These significant consequences mean that a plaintiff must carefully consider a Rule 68 offer. As such, the offer is a powerful tool for defendants.
This article first explores the basics of a Rule 68 offer: what it is, what it must include, how it will be construed, and what it will be compared to if not accepted. It then discusses some strategic considerations in deploying and structuring the terms of a Rule 68 offer, using a hypothetical to illustrate pros and cons.
As a general rule, whenever a prevailing plaintiff’s recovery of attorneys’ fees can be a driving litigation factor, defendants should evaluate making a Rule 68 offer as early in the process as practical.