Settlement Perspectives

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6 PerspectivesSeptember 30, 2008

Rule 68 and Offers of Judgment, Part III: 9 Situations Where They Just Might Work

Following my posts about how Rule 68 works in Part I of this series and why it works in Part II, I had spirited discussions with a few of you about when offers of judgment can be most effectively used.  This post will highlight 9 situations where Rule 68 offers are more likely than most to be successful.  As always, this is a nonexhaustive list based on my own experience; I welcome additional situations you’ve witnessed.

Nine cases and situations where I believe Rule 68 offers are the most likely to be successful include:

(i) Hindsight Avoiders. I have litigated against several trustees, and they know their judgment will someday be second-guessed — with 20/20 hindsight — if they lose at trial.  Trustees and other fiduciary representatives are a bit different than individual plaintiffs who can “bet it all” on a bad case; like it or not, trustees may someday have to answer the question:  “The Rule 68 offer was unconditional; how could you have left it on the table?”  Or:  “How could you not have understood how bad our case was when you had an offer of judgment in front of you?”  Go ahead and use Rule 68 to make it hard for them to walk away.

(ii) The Bird in the Hand. Cases with natural breaks in damages are ripe for Rule 68 offers.  Cases with contractual damage caps and cases where a back pay award is probable but additional damages are more speculative are just 2 examples.  In these cases the defendant can offer the amount most likely to be awarded at trial, plus a few extra dollars to cover incidentals. These Rule 68 offers can force the plaintiff into the classic “bird in the hand” quandary — is the plaintiff so confident in her case for damages beyond the natural “break” that she will take on additional Rule 68 exposure to pursue those additional claims?

(iii) Upcoming Expenses. Plaintiffs and their lawyers have to invest in their cases, and they expect a return on that investment.  One way for defendants to increase plaintiffs’ ROI is to simply pay them more; but since most of us don’t like that option, another is to settle the case before the plaintiff and her counsel invest any more in it.  As a defendant, you should consider a Rule 68 offer 10 days before the plaintiff and her lawyer will have to fly to Berlin to take that deposition, just before they will have to ramp up with their expert, or while they budget for their upcoming e-discovery costs.

(iv) Upcoming Uncertainty. Sometimes plaintiffs would rather accept your offer than take a chance on a summary judgment hearing, an upcoming deposition that may hurt their case, a document production that may reveal harmful facts, or some other major case uncertainty.  Take advantage of that discomfort to get your case settled.

(v) On the Heels of Bad News. Bad things happen, and occasionally they even happen to the other side.  The plaintiff gives a bad deposition, your case is transferred to the “hanging judge,” or you finally find that document that will embarrass the plaintiff.  Before your opponent can rationalize away their troubles, make a Rule 68 offer.

(vi) Nonsettlers’ Remorse. At least a few parties who fail to settle at mediation wish they could have a “do over”; they decide the next morning they didn’t really have the power to walk away, or they need a few days to imagine life with litigation for the next 2 years.  Don’t be afraid to take advantage of nonsettlers’ remorse.

(vii) 10 Days Is a Long Time. You’ve seen Deal or No Deal.  A contestant must respond to the bank’s cash offer and the clock ticks; spouses, “friends,” and the occasional brother-in-law give conflicting advice.  Contestants make irrational decisions.  In your case, 10 days is a long time and you have no idea who is pushing for settlement on the other side — particularly when there are multiple plaintiffs, corporate plaintiffs with competing coalitions, or unseen stakeholders.  Take advantage of the fact that your offer is irrevocable for 10 days.  You never know what might happen.

(viii) The Defendant Is Ready. Sometimes a defendant wants (or needs) to settle but he needs a way to start settlement discussions without appearing weak.  Because Rule 68 can be seen as an offensive tool, defendants can use it when they need to open settlement talks.

(ix) When Your Plaintiff’s Lawyer Needs A Little Help. Occasionally your opponent needs to have that “tough discussion” with her client.  Whether it’s before that next big expense, after that terrible deposition, or during pretrial preparation, sometimes opposing counsel needs a little help getting discussions started.  If you want to settle the case, give the lawyer on the other side the excuse she needs to have that tough discussion.

You’ll be happy you did.

[In case you want links to all the posts in Settlement Perspectives' Rule 68 and Offers of Judgment Series, here they are:

Categories: Mediation,Rule 68,Settlement,Strategy,Tactics

6 Perspectives:

linda — Monday, July 13, 2009 2:15 pm

All that you talk about is in favor of the defendant.
What about the plantiff.
I could use some help there.

John DeGrooteSaturday, July 25, 2009 2:00 pm

Linda–

Thanks for your comment. I’m not sure if you saw my first post on Rule 68, but I note there that (for some reason) Rule 68 was deliberately drafted so that the defendant has the choice of whether to make an offer under the rule. Unfortunately, plaintiffs can only react once defendants make an offer under Rule 68 — a move that I have recommended defendants strongly consider throughout my series on Rule 68 and offers of judgment.

If, however, you live in California, Texas or one of the other States where offers of judgment can be made by plaintiffs, much of the advice in this series can be used to your advantage.

I hope this helps, and thanks for reaching out–

John DeGroote

Alison — Monday, January 3, 2011 8:07 pm

The problem with CR 68 is that the defendant ends up with a judgment against him if the offer is accepted. Do you have any tips for using CR 68 as a bargaining tool, without taking on the risk of a judgment?

John DeGrooteMonday, January 10, 2011 1:12 pm

Alison–

You raise an interesting issue, and one that I have wrestled with. To some defendants, having a judgment taken against them is a problem; to others, it is not. There are a few things to think about here:

(i) Often an offer of judgment does not settle the case, but prompts additional settlement negotiations; a settlement is ultimately achieved at a few dollars higher than the Rule 68 offer — and that settlement is outside the confines of the applicable rule or statute, so no judgment is entered; or

(ii) Immediately after formal acceptance, a communication with the other side, and a payment of the settlement amount, can eliminate the formal entry of a judgment in some areas.

Thanks for your comment, Alison, and please let us know if you have additional thoughts on how to realize the benefits of an offer of judgment while avoiding the downside of an actual judgment–

John DeGroote

Patrick — Tuesday, May 29, 2012 9:58 am

All,
Thanks for the incredibly informative advice on Rule 68. A question: does anyone know if Rule 68 can be effective for a defendant, prior to the actual filing of a suit? i.e. does Rule 68 only take effect after the lawsuit has begun?

Thanks,
Patrick

John DeGrooteWednesday, May 30, 2012 4:24 pm

Patrick–

Thanks for your kind words — I hope the post helps. Although I haven’t researched it, I don’t believe Rule 68 would apply prior to when suit is filed, but I do believe that a written settlement offer can really focus the other side’s attention at any point in the process, and as we have discussed here before, there may be times when you might just send the soon-to-be plaintiff a check.

Let us know if that works, and thanks again for your comment–

John DeGroote

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I created this site to help clients and their counsel navigate the challenges that inevitably result from disputes, settlement efforts, impasse, and negotiation in general. The perspectives I bring are based on my experience, summarized in this abbreviated bio. If you have any questions or thoughts about this site, or an issue you’d like to see addressed, please email me at:

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