Advantages And Disadvantages Of A Rule 68 Offer Of Judgment

• Published date: 21 September 2023
• Subject Matter: Litigation, Mediation & Arbitration, Court Procedure
• Law Firm: Romano Law
• Author: Andrew Ramstad and Jari Wilson

When you are a defendant in a complex federal case, you can find yourself in a position where you have to make tough decisions. Depending on the nature of the lawsuit and its likelihood of success, you may wonder whether it is worth spending money defending against those claims or negotiating a favorable settlement. You may also consider the ramifications that this lawsuit could have on you, your family, your business or your employees. There is a settlement tool that is designed to put the ball back in the plaintiff's court and alleviate some of the pressure on you: a Rule 68 Offer of Judgment.

What Is Rule 68?

Federal Rule of Civil Procedure 68 allows a defendant to make an offer of judgment at any point at least 14 days before trial. After receiving the offer, the plaintiff then has a 14-day window to serve written notice accepting the offer. If the offer is rejected, the case will move forward with one major caveat: if the plaintiff obtains a final judgment that is less favorable than the rejected offer, the plaintiff must pay all of the defendant's costs incurred after the offer was made.

As the name suggests, a Rule 68 Offer of Judgment is, in fact, an offer permitting a plaintiff to accept and enter a judgment against a defendant on specified terms, subject to the court's approval of the settlement via Rule 68. Given the legal consequences flowing from a final monetary judgment against you as a defendant, a Rule 68 Offer must be carefully drafted to specify (a) what claims are being resolved and (b) what damages are included in the settlement amount, including whether costs and attorneys' fees are part of that final offer. "[T]he responsibility for clarity and precision in the offer must reside with the offeror." Util. Automation 2000, Inc. v. Choctawhatchee Elec. Coop., Inc., 298 F.3d 1238, 1244 (11th Cir. 2002).

Consider, for example, the following offer:

"to Plaintiffs collectively to take a judgment against Defendants in the amount of $82,500.00, inclusive of interest, costs and attorneys' fees, and without any admission of liability, on each of the Causes of Action contained in the Complaint." Toth v. 59 Murray Enterprises, Inc., 2017 WL 3605493, at *1 (S.D.N.Y. Jul. 26, 2017) (emphasis added).

Is the offer for $82,500 or $82,500 on each of the causes of action (in that case, a $660,000 total offer)? The District Court for the Southern District of New York found that the word "collectively" contradicted "on each of the Causes of Action"...