Federal Rules of Civil Procedure 68 encourages settlement by providing a disincentive to a plaintiff from continuing to litigate after being presented with a reasonable offer. See Payne v. Milwaukee Cty., 288 F.3d 1021, 1024 (7th Cir. 2002) (“Rule 68 is designed to provide a disincentive for plaintiffs from continuing to litigate a case after being presented with a reasonable offer.”).

The disincentive is the risk of paying the defendant's subsequent post-offer litigation costs if the Rule 68 is not accepted and the plaintiff wins less than the amount of the offer. “Costs” would include court and court reporter fees, witness fees, and copying and printing costs incurred subsequent to the Rule 68 offer. 28 U.S.C. § 1920. Absent a specific statute, however, costs typically would not include attorneys' fees.

While Rule 68 offer of judgment is a cost-shifting mechanism intended to encourage settlement, its bite may depend on how the offer is worded and the specific underlying claim in suit.

Costs

Under Rule 68, a defendant may serve “an offer to allow judgment on specified terms, with the costs then accrued.” A proper Rule 68 offer cannot exclude costs. Utility Automation 2000, Inc. v. Choctawhatchee Elec. Cooperative, Inc., 298 F.3d 1238, 1241 (11th Cir. 2002) (“as long as an offer does not explicitly exclude costs, it is proper under the Rule”).

A Rule 68 offer can expressly include costs as part of the offered amount, or leave the amount to be decided by the court later. Bosley v. Mineral Cnty. Comm'n, 650 F.3d 408, 413 (4th Cir. 2011) (noting a Rule 68 offer can be drafted as “either reciting that recoverable costs were included in the sum or specifying an amount for such costs”); Utility Automation 2000, Inc. v. Choctawhatchee Elec. Cooperative, Inc., 298 F.3d 1238, 1239 (11th Cir. 2002) (discussing an offer of judgment “with costs then accrued”); Le v. Univ. of Penn., 321 F.3d 403, 409 (3rd Cir. 2003) (discussing an offer of judgment “for the total amount of $50,000.00, plus costs then accrued”).

If the inclusion of costs is not expressly stated in the offer of judgment, then a plaintiff who accepts such an offer may seek an award of costs separately in addition to the amount of the offer. Marek v. Chesny, 473 U.S. 1, 6, 105 S. Ct. 3012, 87 L. Ed. 2d 1 (1985) (“if the offer does not state that costs are included and an amount for costs is not specified, the court will be obliged [to determine] the costs”); McCain v. Detroit II Auto Fin. Ctr., 378 F.3d 561, 564 (6th Cir. 2004); Webb v. James, 147 F.3d 617, 622 (7th Cir.1998); Erdman v. Cochise Cnty., 926 F.2d 877, 879–81 (9th Cir. 1991); Arencibia v. Miami Shoes, Inc., 113 F.3d 1212, 1214 (11th Cir. 1997) (“The Supreme Court has held that when a Rule 68 offer is silent as to costs, the district court should award appropriate costs in addition to the amount of the offer.”).

Attorneys' Fees

For attorneys' fees to be considered part of an offer for judgment, the Rule 68 offer typically must clearly state that it is inclusive of fees. See Nusom v. COMH Woodburn, Inc., 122 F.3d 830, 834 (9th Cir. 1997) (“it is incumbent on the defendant making a Rule 68 offer to state clearly that attorney fees are included as part of the total sum for which judgment may be entered if the defendant wishes to avoid exposure to attorney fees in addition to the sum offered plus costs”); Sanchez v. Prudential Pizza, Inc., 709 F.3d 689, 692-93 (7th Cir. 2013) (holding that a Rule 68 offer using the term “claims for relief” was ambiguous as to whether it included fees); Lima v. Newark Police Dep't, 658 F.3d 324, 332 (3d Cir. 2011) (holding that the phrase “all of Plaintiff's claims for relief” was ambiguous); Patel v. Shah, No. 5:15-cv-01959-MHH, 2018 WL 741370, *3-4 (N.D. Ala. Feb. 7, 2018) (finding that the defendant's offer of judgment in FLSA case, which stated “in complete resolution of all claims stated by [plaintiff]” but was silent with respect to fees, did not cover attorneys' fees and concluding that the plaintiff was entitled to an award of reasonable attorney fees under the FLSA).

When the Underlying Statute Defines Fees as Part of Costs

Attorneys' fees, however, typically are not awarded unless authorized by statute. If the underlying statute authorizing attorneys' fees states that such fees are part of “costs,” then such fees are to be included as costs for purposes of Rule 68. Marek v. Chesny, 473 U.S. 1, 105 S. Ct. 3012, 87 L. Ed. 2d 1 (1985); Jordan v. Time, Inc., 111 F.3d 102, 105 (11th Cir. 1997) (“Rule 68 ‘costs' include attorneys' fees when the underlying statute so prescribes”). For example, the Copyright Act states that costs may include attorneys' fees. 17 U.S.C. § 505 (“the court may also award a reasonable attorney's fee to the prevailing party as part of the costs”).

The Third Circuit in Lima v. Newark Police Department, characterized this as “a trap for the unwary” which “manifests itself most frequently when a defendant erroneously believes that an accepted Rule 68 offer of judgment finally resolves a civil action, only to be assessed substantial attorney's fees and costs thereafter by the court.” Id., 658 F.3d at 326. The Lima case was a federal civil rights action where the statute awards attorneys' fees as part of costs. Because the offer of judgment had not explicitly included costs in the offer, the plaintiff could later seek statutory attorneys' fees as part of those costs.

But if the Rule 68 offer of judgment unambiguously included costs, and the underlying statute sets forth that attorneys' fees “are part of the costs that the plaintiff is seeking then they are covered by the part of the offer that refers to costs.” Nordby v. Anchor Hocking Packaging Co., 199 F.3d 390, 393 (7th Cir. 1999) (emphasis added).

Accordingly, a party may seek attorneys' fees after accepting a Rule 68 offer of judgment that expressly includes costs but not attorneys' fees, except where the underlying statute would award attorneys' fees as part of costs because such fees would be covered by the part of the offer that expressly includes costs.

Thomas P. Howard, LLC litigates nationwide including in Colorado.