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Rule 68: The Often-Overlooked Defense Tool
The often-overlooked offer of judgment rule ' Federal Rule of Civil Procedure (FRCP) 68 ' may be a valuable tool for defendants if carefully employed. An offer of judgment's primary benefit is its obvious risk-shifting effect. Rule 68 forces plaintiffs, particularly small plaintiffs, to proceed cautiously in the face of mounting costs and uncertainty. FRCP 68 provides, in pertinent part, that:
[a]t any time more than 10 days before the trial begins, a party defending against a claim may serve upon the adverse party an offer to allow judgment to be taken against the defending party for the money or property or to the effect specified in the offer, with costs then accrued … An offer not accepted shall be deemed withdrawn and evidence thereof is not admissible except in a proceeding to determine costs. If the judgment finally obtained by the offeree is not more favorable than the offer, the offeree must pay the costs incurred after the making of the offer.
The Supreme Court has found Rule 68 to express a clear policy of favoring the settlement of lawsuits.
Ian H. Fisher, Federal Rule 68, A Defendant's Subtle Weapon: Its Use and Pitfalls, 14 DePaul Bus. L.J. 89, 91 (2001) (citing Marek v. Chesny, 473 U.S. 1, 6 (1985)). Where a plaintiff rejects an offer of judgment, it is thereafter faced with the possibility of: 1) paying a defendant's post-offer costs; and 2) being precluded from recovering its own post-offer costs. Moreover, Rule 68 may be particularly effective against the contingency fee plaintiff. Plaintiffs who have retained counsel on a contingency fee basis are especially sensitive to Rule 68 offers of judgment. Until a Rule 68 offer is made, the contingency fee plaintiff faces no real direct financial risk in pursuing the litigation. A Rule 68 offer, however, forces the contingency fee plaintiff to weigh the possibility of having to pay the defendant's costs against the likelihood of obtaining a judgment more favorable than the Rule 68 offer. (This article does not address the application of Rule 68 in the class action and multiple plaintiff contexts. Some of the suggestions contained in this article may not be applicable in those contexts.) In product liability cases 'particularly damages cases involving years of discovery and expensive experts ' Rule 68 may be an invaluable defense weapon.
Using Rule 68 to Drive Settlement Negotiations
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