OFFER OF JUDGMENT

Should attorneys and their clients who go to trial on cases that should have settled be punished? Should attorneys who make a reasonable offer to settle be rewarded with attorney’s fees, if the opposing side refuses the offer? Given that negotiations are considered confidential and not to be used against anyone in trial, how can the court even know what a settlement offer was? There is a Federal Rule of Civil Procedure, Rule 68, that covers this situation.

FRCP Title VIII Rule 68 (d) states: “Paying Costs After an Unaccepted Offer. If the judgment that the offeree finally obtains is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made.”  It seems many states have a similar rule as well. This is a huge incentive to settle cases without going to trial.

For example, you are suing someone for $50,000. Let’s say they damaged your house when their tree fell on it, and you feel the value is that amount. They offer you $20,000, which is more than your out-of-pocket expenses, but still feels like too little, considering the discomfort, and inconvenience, and your overall desire to punish the neighbor whose tree fell on your house. You can refuse the offer and take it to trial. Up to you.

But if at the end of the trial, your judgment comes back at $20,000 or anything less, the defendant will be allowed, through this rule, to show proof of their Offer of Judgment, and have the judge order you to pay for all the defense attorney’s fees and costs accrued from the moment the offer of judgment was made until the moment the case ends.

A lawyer’s time at say $300 dollars an hour is $12,000 a week. Expert witnesses often take a straight fee in the thousands of dollars to review a case, whether they end up testifying or not. There could be all kinds of other costs and fees from document production to paralegal wages and beyond.  You could end up in the hole, even if you “win” the case.  How much of that risk will you take on in the hopes of getting $50,000 instead of $20,000?

I understand the purpose of this rule – to encourage settlement. To avoid frivolous lawsuits where people with a willing personal injury lawyer (who will only get attorney’s fees if they win your case) have nothing to lose by just taking any old case to trial, regardless of the merits. I know the legal system can be misused to harass people, and cause them to pay to defend themselves on a case without merit.

This rule aside, lawyers are free to demand attorney’s fees in all kinds of situations. But something about this rule seems to me like part of a poker game. Do you fold? Do you raise them? Do you play it out to the end and maybe lose your shirt? Of course, in this scenario, both sides have attorneys, the evidence is on the table, and there should be no hidden cards. But knowing how a jury will rule is not a given. So there is a certain element of gambling involved.

I just know as a plaintiff, I would be more likely to settle for something well below the value of the case, and it would not be based on the relative merits, but on my personality.  I am not a gambler.  I am extremely risk-averse.  I love – love – love the feeling of safety that comes from predictability and stability and “knowing” what is going to happen.  So the fear of losing my shirt – my house – my financial stability – would allow a defendant to essentially bully me into an early settlement for a fraction of what I might get.

I don’t know how many large corporations use this rule as a way to pressure plaintiffs into settling cases.  But I can see how the rule could be used to settle cases short of trial.  And it won’t always be based strictly on the merits of the case.  The so-called justice system has all kinds of pitfalls and factors to juggle in deciding how to go forward with any given case.  How willing the plaintiff is to take on the risk of paying for the attorney who is defending the opposing party, should they lose, is a double-edged factor to throw into the mix.