Settlement Perspectives

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2 PerspectivesJuly 18, 2009

Ambiguities in Rule 68: Why Are They Relevant to You?

If you see an ambiguity in a rule, is it your job to fix it? Maybe it is, maybe it isn’t, but one thing’s for sure: until the rule changes, you have to deal with it as it is. Like it or not, uncertainty creates risk as well as opportunities — for you and for the other side. Whether you react to either is up to you.

This isn’t the Rule 68 Blog (despite our introduction to Rule 68 and an entire series on the rule already), but a recent article in the Minnesota Law Review merits a return to one of our favorite topics. Danielle M. Shelton’s recent article, “Rewriting Rule 68: Realizing the Benefits of the Federal Settlement Rule by Injecting Certainty into Offers of Judgment,” suggests how we can fix Rule 68 like our Civil Procedure professor might have wanted — but along the way it thoroughly explores uncertainties created by Rule 68 that litigators ignore at their peril.

Can Rule 68′s Ambiguities Drive Settlements?

Professor Shelton makes a few critical points about the uncertainties created by Rule 68 — and why lawyers for both sides should care:

Because the rule is cursory in form and does not alert the parties to its many nuances, defendants often are uncertain or misguided about how to draft a Rule 68 offer. Defendants often end up drafting offers that carry unintended consequences. Similarly, plaintiffs who receive Rule 68 offers face uncertainty. A plaintiff must decide whether to accept or reject a given offer, knowing that either decision carries consequences that hinge upon how a court will construe the offer or how a court will compare the offer to the judgment received at trial. (See pages 867-68; the emphasis is mine.)

Shelton then makes it clear why these ambiguities can drive settlements:

Because a plaintiff’s decision to accept or to reject the offer depends on how a court will construe the non-negotiable Rule 68 offer, any uncertainty about the court’s interpretation of the offer creates risk for the plaintiff. A risk-averse plaintiff will be particularly susceptible to the pressure of accepting a Rule 68 offer, even if the offer is unclear, lest she otherwise risk losing attorneys’ fees and paying the defendant’s costs later. (See page 875; the emphasis is mine.)

Thus the risk averse plaintiff’s lawyer may look long and hard at a Rule 68 offer of judgment for more reasons than we first outlined — the offer itself produces risk to her client, but uncertainties resulting from the underlying rule can reinforce the lawyer’s own need to settle, as well.

What Are the Uncertainties Created By Rule 68?

While Shelton goes into greater detail than we’ll go into here — with plenty of examples and case law to support her points — specific ambiguities she highlights include:

  • Whether an offer of “$1,000, with costs” will result in a total payment of $1,000 or $1,000 plus costs if it’s accepted (page 879);
  • Whether the offer includes costs when the offer makes no mention of costs at all (pages 888 – 91);
  • Whether the offer includes attorneys’ fees (pages 896-908);
  • What, exactly, those costs include (pages 879);
  • Whether the offer may disclaim liability (pages 881);
  • Whether the offer may be revoked (pages 883)
  • How a rejected offer compares to the actual judgment (pages 911-16); and
  • more.

Where Do We Go From Here?

To be clear, this isn’t a post about how to write an ambiguous Rule 68 offer; many of the gaps in the rule have been decided, and ancillary litigation over what an offer of judgment actually covers and whether it is operative does no one any good. But if Shelton is right — if Rule 68 offers create risk for those who receive them — perhaps the uncertainty and downside they create for plaintiffs and their counsel really can drive settlements.  At the very least, as we have discussed before, a Rule 68 offer is more likely to spark actual settlement discussions than no effort at all.

If you are a defendant, it’s time to master the uncertainties of FRCP 68 and offers of judgment to see if one would make sense in your case, and Professor Shelton’s article can help you get there.  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:

Categories: Rule 68,Settlement,Tactics

2 Perspectives:

Jorge MafudSunday, September 13, 2009 12:35 pm

Hi there John,

Just double checking… is this post suggesting that, as a defendant, it ‘s a better way to go if you write the offer ambigously? Thus, making that plaintiff nervous as to what the offer includes and what it doesn’t?

Thanks…. this has been a really interesting series… best regards,

Jorge Mafud
Mafud Abogados.

John DeGrooteSunday, September 13, 2009 8:38 pm

Jorge–

You have seized on one of the issues I struggled with as I wrote this post. Ultimately I decided that “ancillary litigation over what an offer of judgment actually covers and whether it is operative does no one any good.” And more to Professor Shelton’s point, the rule and cases construing it have produced significant ambiguities already.

That said, a defendant may want to exploit the uncertainties created by a Rule 68 offer to drive her opponent to settlement. I’ll leave the determination of whether strategic exploitation of the rule’s ambiguities is “right” or “wrong” to others.

Thank you for your perceptive comment, Jorge–

JD

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