2 PerspectivesFebruary 6, 2009

Claims for Attorneys’ Fees: How Rule 68 Can (Sometimes) Help

Most lawyers in federal court believe that Rule 68 isn’t much of a threat, and for the most part they’re right. We discussed why this is true previously, but in that same post we highlighted one noteworthy exception: Rule 68 can cut off plaintiffs’ claims for attorneys’ fees in some cases. Today we’ll discuss when that might be, and how you can make Rule 68 work for you.

Rule 68 and Attorneys’ Fees: The Law

The General Rule. As we discussed more fully in Part I of this series, the text of Federal Rule of Civil Procedure 68 imposes a penalty on a plaintiff who refuses a settlement offer, in the form of a written offer of judgment, and doesn’t beat that offer at trial. Once he refuses the defendant’s offer, the plaintiff risks responsibility for the defendant’s court costs, like copying charges, transcripts and other nits that usually don’t pose a significant financial risk. In Part II of this series we explored how even this small threat can get cases settled — but when the stakes are raised to include the plaintiff’s attorneys’ fees, people begin to notice.

When Attorneys’ Fees Come into Play. In 1985 the Supreme Court added the plaintiffs’ attorneys’ fees to the Rule 68 mix in Marek v. Chesny. Professors Harold S. Lewis Jr. and Thomas A. Eaton explain it best:

In its 1985 opinion in Marek v. Chesny, the Supreme Court melded the Rule 68 term “costs” with the phrase “fees as part of the costs” that appears in 42 U.S.C. § 1988 . . .. Under Marek, a plaintiff who rejects a Rule 68 offer and prevails at trial for an amount not exceeding the offer forfeits not only the modest costs discussed above but also all post-offer attorneys’ fees that a prevailing civil rights plaintiff would otherwise receive by virtue of a federal statute.

Professors Lewis and Eaton tell us in Rule 68 Offers of Judgment: The Practices and Opinions of Experienced Civil Rights and Employment Discrimination Attorneys that this rule applies to all claims for fees when the plaintiff has sued under a statute that allows for the recovery of “fees” as “a part of costs.” In a companion article at 241 F.R.D. 332, which is well worth the trip to the library, Lewis and Eaton tell us that “the great bulk of contemporary federal question litigation is founded on statutes that . . . award fees as part of costs.”

Rule 68 can therefore be used to cap plaintiffs’ claims for attorneys’ fees in federal question cases like:

• most civil rights litigation,
• employment cases brought under Title VII of the Civil Rights Act of 1964, and
• many environmental statutes
  

just to name a few.

4 Tips to Maximize Rule 68′s Impact on Attorneys’ Fees Claims

In Part III of this series we discussed 9 situations when Rule 68 might just work — even without threatening the plaintiff’s claim for attorneys’ fees. But attorneys’ fees often eclipse other claims in employment discrimination and other federal question cases; when Rule 68 puts these fees at risk, defendants enjoy even more strategic leverage.  Below are 4 tips to help you put that leverage to work.

Make an Offer at the Beginning of the Case. In Rule 68: The Often-Overlooked Defense Tool authors Mary Clare Bonaccorsi and Brian A. Sher give us two helpful timing hints: (i) fees and costs incurred before a Rule 68 offer are never at risk; and (ii) there is no limit to the number of Rule 68 offers a party can send. Under this logic, a defendant may want to consider an immediate offer when the case comes in, even if it’s a relatively low offer, to maximize the amount of fees and costs at risk.  An early Rule 68 offer will require the plaintiff’s lawyer to visualize a judgment that would include almost no attorneys’ fees. Since she hasn’t invested heavily in the case yet, there’s a chance you’ll resolve it quickly.

Make an Offer Right After Your Early Case Assessment. If you don’t want to make an immediate offer, there is another option.  It’s no secret that I’m a big fan of Early Case Assessments, and ECAs have a major benefit we haven’t yet discussed — they allow for realistic realistic Rule 68 offers early in the case. Imagine a Rule 68 offer:

• Served just 30 days into the case;
• For a realistic number;
• With a credible letter explaining the logic behind the offer;
• Attaching significant supporting documents;
• Before the plaintiff’s counsel has invested much in the case;
• When the plaintiff’s counsel knows that her most significant claim will be for attorneys’ fees, which are now at risk.

Does that Rule 68 offer have a chance? You bet it does.

Make It a Hard Decision. Once upon a time Gary McGowan mediated a case of mine, and needed my client to make a real offer. To get us moving he said something like: “[y]ou’ve got to hang the meat low enough to get the dog to jump for it.”  Daniel S. Strick brings McGowan’s sentiment to Rule 68 in To Offer or Not to Offer Judgment: A Brief Look at Federal Rule 68 — he reminds us that an offer a plaintiff knows he can beat if he prevails in the case isn’t a real threat to the plaintiff under Rule 68. Since that’s true, once you’ve done your homework and know what the case is really worth, is $1,500 still a reasonable offer? Probably not.

Be Explicit in Your Offer About What Happens to Attorneys’ Fees. I have a theory about attorneys’ fees and Rule 68 that no one wants to admit, so I’ll put it down here at the end of the post. Whether attorneys’ fees are recoverable under Rule 68 isn’t subject to a quick and easy rule, and I believe many lawyers don’t know exactly when Rule 68 might apply to more than copying charges and transcripts.  I hope I’m wrong, but just in case I’m not, I suggest you send a companion note with your Rule 68 offer that says:

IF THIS OFFER IS REJECTED AND YOU DO NOT BEAT IT AT TRIAL, YOUR ATTORNEYS’ FEE CLAIM WILL BE CAPPED AS OF TODAY.

Is the red font necessary?  You decide.  Either way, put the plaintiff’s attorneys’ fee claim at risk with Rule 68.  You’ll be glad you did.

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

• Rule 68 and Offers of Judgment, Part I:  How They Work and Why You Should Care;
  
• Rule 68 and Offers of Judgment, Part II:  Why They Work and How to Use Them;
  
• Rule 68 and Offers of Judgment, Part III:  9 Situations Where They Just Might Work;
  
• Claims for Attorneys' Fees: How Rule 68 Can (Sometimes) Help (this post);
  
• Ambiguities in Rule 68:  Why Are They Relevant to You?; and
  
• Rule 68 Offers:  A Few Sample Forms to Get You Started.]

Categories: Negotiation,Rule 68,Strategy

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