Rule 68 has a reputation of being “among the most enigmatic”[1] and “underutilized”[2] of the Federal Rules of Civil Procedure. An attorney’s failure to understand and effectively use Rule 68 could be costly. Indeed, if your business is entrenched in lengthy, expensive litigation and your attorney overlooks Federal Rule 68 or its Rhode Island counterpart, they may be doing so at your peril.
Although it can be difficult to voluntarily submit to a judgment, Rule 68 can provide a variety of benefits for a defendant. It can help resolve your lawsuit when all other methods of dispute resolution have failed and trial seems inevitable. And if your matter does proceed to trial, Rule 68 can reduce your exposure—even if a judge or jury returns a verdict against you.
How Does Rule 68 Work?
Rule 68 is designed to penalize a plaintiff for failing to accept a reasonable settlement offer. To enjoy the benefits of Rule 68, a defendant must serve the plaintiff with a written settlement offer by a certain number of days prior to trial (at least 14 days and 10 days for cases in federal court and Rhode Island Superior Court, respectively). The plaintiff then has a certain period of time (14 days and 10 days for cases in federal court and Rhode Island Superior Court, respectively)
to provide a written response. If the plaintiff accepts the offer, then either party may file both the offer and notice of acceptance, which the court will enter. These filings provide the court with the ability to enforce the terms of the agreement.
If the plaintiff either (1) declines the offer; or (2) fails to respond to the offer by the deadline, then the offer is considered withdrawn. A withdrawn offer does not preclude the defendant from making a subsequent offer. If the plaintiff declines the offer, prevails at trial, but the amount awarded is less than the defendant’s earlier offer, the plaintiff must pay the defendant’s costs incurred from the time the defendant had made the offer.
For example, if a defendant issues a written offer of judgment of $30,000 and the plaintiff chooses to let that offer lapse and to go to trial, the plaintiff must receive a judgment in excess of $30,000 to avoid having to pay the defendant’s court costs. A reasonable offer of judgment should warrant consideration, given that even the smallest cases can entail thousands in court costs alone. Notably, the plaintiff would not be responsible for costs if he or she did not prevail at trial.
Do “Costs” Include Attorney’s Fees?
It depends. The recoverable costs include attorney’s fees when the underlying statute of the plaintiff’s claims defines “costs” to include attorney’s fees. For example, if a plaintiff raises a claim in federal court under Title VII of the Civil Rights Act,[3] the defendant could recover attorney’s fees as costs under because Title VII’s enforcement provision expressly includes attorney’s fees in its definition of “costs.”[4] The same could very well hold true in an action brought in Rhode Island Superior Court under the State Fair Employment Practices Act.[5]
Should you choose to issue an offer of judgment in a lawsuit in which the plaintiff raised a federal or state statute-based claim, your attorney should carefully review the language of that statute. In particular, the attorney should look for (1) an enforcement provision that describes costs; or (2) a provision that otherwise defines “costs.” If the term encompasses attorney’s fees, the amount recoverable resulting from a denied offer of judgment could be even more substantial.
Reducing Interest Owed with Rhode Island’s “Part Payment” Provision.
The Ocean State’s Rule 68 is fairly unique. Indeed, unlike most jurisdictions, Rhode Island allows a plaintiff to accept an offer of judgment “as part payment only,” allowing the action to proceed solely on the issue of damages.[6] Should the plaintiff accept the part payment, they may not recover any interest on that payment from the date the defendant deposits those funds into the Registry of the Superior Court.[7] In light of the 12% per annum prejudgment interest rate imposed in Rhode Island civil actions,[8] this provision affords a defendant the opportunity to substantially reduce their owed interest, depending on (1) the amount the defendant offers; and (2) how early in the litigation the defendant makes the offer.
A Cautionary Tale in Offer Drafting.
Just last year, the Rhode Island Superior Court issued a cautionary tale to those drafting offers of judgment.[9] In Taylor v. Scott Motors, Inc., the defendant issued a Rule 68 offer of judgment in which it offered a sum of $29,443.75, “plus . . . the amount of costs (including reasonable attorney’s fees) incurred in connection with this action” through the date of the offer.[10] The plaintiff accepted the offer, requesting more than $300,000 in attorney’s fees and costs.[11]
Determining that the plain language of the offer included costs and attorney’s fees that the plaintiff incurred in connection with the lawsuit, the Superior Court ultimately awarded over $210,000 in costs and fees.[12] To prevent such a costly mistake, always confirm that the language of your Rule 68 letter clarifies that the lump sum offered is inclusive of all cost and fees.
[1] Crossman v. Marcoccio, 806 F.2d 329, 331 (1st Cir. 1986)
[2] Rothman v. City of New York, No. 19 CIV. 225 (CM), 2020 WL 7022502, at *5 (S.D.N.Y. Nov. 30, 2020)
[3] Codified as 42 U.S.C. § 2000e, et seq.
[4] 42 U.S.C. § 2000e-5(k) (providing that “. . . the court, in its discretion, may allow the prevailing party . . . a reasonable attorney’s fee (including expert fees) as part of the costs); see also Furcon v. Mail Centers Plus, LLC, 776 F. App’x 622, 624 (11th Cir. 2019) (recognizing that the Title VII’s enforcement provision “defines costs to include attorneys’ fees”).
[5] Codified as R.I. Gen. Laws § 28-5-1, et seq. The Act provides, in relevant part, that “[i]n appropriate circumstances attorney’s fees, including expert fees and other litigation expenses, may be granted to the attorney for the plaintiff.” § 28-5-24 (emphasis added).
[6] See Raiche v. Scott, 101 A.3d 1244, 1249 n.7 (R.I. 2014) (citing R.I. Super. Ct. R. Civ. P. 68(b)(3).
[7] See id. at 1249.
[8] See R.I. Gen. Laws § 9-21-10(a).
[9] See Taylor v. Scott Motors, Inc., No. PC-2015-4284, 2021 WL 507729 (R.I. Super. Feb. 04, 2021).
[10] Id. at *5.
[11] Id. at *7.
[12] Id. at *16.
