Opinion
2007
Rule 68 Offers of Judgment: The Practices and Opinions of Experienced Civil Rights and Employment Discrimination Attorneys
I. INTRODUCTION
As structured by Rule 68 of the Federal Rules of Civil Procedure, offers of judgment are intended to encourage settlement, but are widely thought to be ineffective in doing so. The primary explanation for this impotence is that Rule 68 does not provide enough of a carrot or stick to move the parties to the prompt resolution of their dispute.
Fed.R.Civ.P., Rule 68. Approximately 30 states have offer of judgment rules modeled on Federal Rule 68. See Michael E. Solimine and Bryan Pacheco, State Court Regulation of Offers of Judgment and Its Lessons for Federal Practice, 13 Ohio St. J. on Disp. Resol. 51, 79-81, App. A (1997).
E.g., Albert Yoon and Tom Baker, Offer-of-Judgment Rules and Civil Litigation: An Empirical Study of Automobile Insurance Litigation in the East, 59 Vand. L. Rev. 155, 158 (2006) (Rule 68 "has long been regarded by practitioners and jurists as largely inconsequential."); Danielle M. Shelton, Rewriting Rule 68: Realizing the Benefits of the Federal Settlement Rules By Injecting Certainty Into Offers of Judgment, 91 Minn. L. Rev. 865, 872 (2007) ("the anecdotal and empirical research on Rule 68 demonstrates that the rule is used infrequently."); Julie Davies, Federal Civil Rights Practice in the 1990's: The Dichotomy Between Reality and Theory, 48 Hastings L. J. 197 223 (1997) (Rule 68 "does not appear to be a major factor in the practices of civil rights lawyers 1 interviewed, whether they represented plaintiffs or defendants."); Roy D. Simon, Jr., Rule 68 at the Crossroads: The Relationship Between Offers of Judgment and Statutory Attorneys Fees, 53 U. Cin. L. Rev. 889, 891 (1984) ("Rule 68 is seldom used and is widely considered a failure.").
See John E. Shapard, Likely Consequences of Amendments to Rule 68, Federal Rules of Civil Procedure 1 (Federal Judicial Center 1995) (Rule 68 is ineffective because "incentives for defendants to make offers of judgment and for plaintiffs to accept them are weak."); Roy D. Simon, Jr., The Riddle of Rule 68, 54 Geo. Wash. L. Rev. 1, 7-8 (1985) (the two principal reasons Rule 68 is ineffective are that only defendants can make offers and the sanction of post-offer costs is too small to motivate parties to settle).
The views expressed are those of the author and do not necessarily reflect the views of the publisher. June 2007.
In broad terms, offers of judgment impose a price on one party's refusal to accept a reasonable offer. More specifically, a plaintiff who refuses to accept an offer of judgment and fails to improve upon that offer at trial incurs a financial penalty. Under the text of Federal Rule of Civil Procedure 68, the penalty is a forfeiture of the relatively modest "costs" described by 28 U.S.C. § 1920 that would otherwise be recoverable by a prevailing party (usually a plaintiff, for reasons identified below), as well as payment of the defendant's post-offer costs of the same kinds. Significantly, the costs put in play by the bare text of Rule 68 do not include attorneys' fees and in most cases will, even in the aggregate, be so modest that they will not create a significant incentive for a defendant to make, or a plaintiff to be fearful of rejecting, an offer of judgment. In light of the weak incentives, it is not surprising that Rule 68 has played only a minor role in federal civil litigation since its enactment in 1937.
These costs include fees charged for the clerk, marshal, court reporter, printing, witnesses, copying, docketing, and court appointed experts listed in 28 U.S.C. § 1920.
There are, however, certain classes of claims in which Rule 68 has the potential to be a much greater influence on dispute resolution-claims under statutes that include attorneys' fees as part of recoverable costs. 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, which codifies the Civil Rights Attorney's Fees Awards Act of 1976. That statute authorizes awards of attorneys' fees to plaintiffs who prevail in claims brought under certain civil rights statutes, as well as to the rare prevailing defendant that can demonstrate plaintiff's claim was frivolous or without foundation. 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. While a significant number of federal fee-shifting statutes do not employ the "fees as part of costs" language to which Marek accorded magical Rule 68 significance, the great bulk of contemporary federal question litigation is founded on statutes that do award fees as part of costs. Notably, this latter group includes litigation under most civil rights legislation, Title VII of the Civil Rights Act of 1964, and a significant number of environmental statutes.
473 U.S. 1, 105 S.Ct. 3012, 87 L.Ed.2d 1 (1985).
Justice Brennan describes sixty-three then extant federal "fee-shifting" statutes as linguistically providing for attorneys' fees as "part of" costs; another forty-nine as authorizing fees separately from, including "in addition to" costs; and another seven as referring to fees and costs in a manner that leaves it unclear if the fees are awardable as part of the costs, and as such are forfeited by insufficiently prevailing plaintiffs via the Marek majority's reading of Rule 68. Marek, 473 U.S. at 43-45, 105 S.Ct. 3012 (Brennan, J., dissenting).
Governed by the Civil Rights Attorney's Fees Awards Act of 1976, 42 U.S.C. § 1988(b).
See 42 U.S.C. § 2000e-5(k) (2005). But the Age Discrimination in Employment Act ("ADEA"), a parallel national employment discrimination statute, awards fees in addition to, rather than as part of, costs. 29 U.S.C. § 626(b) (2005). Thus, under the Marek reasoning, if a Rule 68 offer is triggered in an action under ADEA, the Rule would not force plaintiff to forfeit post-offer attorneys' fees, only post-offer Section 1920 "costs." Marek, 473 U.S. at 25-27 n. 36, 105 S.Ct. 3012. The exclusion of claims under ADEA from the principal consequence of Rule 68 offers will presumably assume increasing importance with the graying of the American workforce.
See, e.g., Endangered Species Act of 1973, 16 U.S.C. § 1540(g)(4) (2005); Federal Water Pollution Control Act, 33 U.S.C. § 1365(d) (2005); Safe Drinking Water Act, 42 U.S.C. §§ 300j-8(d), 300j-9(2)(B)(i), (ii) (2005); Resource Conservation and Recovery Act of 1976, 42 U.S.C. § 6972(e) (2005); Clean Air Act and Clean Air Act Amendments of 1977, 42 U.S.C. §§ 7413(b), 7604(d), 7607(f), 7622(e)(2) (2005).
At the time Marek was decided, many commentators feared that Rule 68 would give civil rights defendants so much leverage that Rule 68 offers would effectively coerce premature and unfair settlements. Specifically, it was speculated that defendants in actions under statutes authorizing pre-vailing plaintiffs to recover fees as part of costs would routinely make early, low-ball offers of judgment; plaintiffs, fearful of forfeiting what is often the largest part of their recovery (attorneys' fees), would feel compelled to accept many such offers without having had the opportunity to conduct sufficient discovery to evaluate with care the probability and magnitude of success; and the federal policies underlying these fee-authorization statutes would be seriously undermined as a result.
See generally Richard W. Swope Samuel J. Webster, The Defense Goes on the Offense: Use of Rule 68 in Civil Rights Litigation, 55 DEF. COUNS. J. 153, 154 (1988); Jay H. Krulewitch, Note, Anatomy of a Double Whammy: The Application of Rule 68 Offers and Fee Waivers of Civil Rights Attorneys' Fees under Section 1988, 37 DRAKE L. REV. 103, 114-15 (1987-88); Gale C. Shumaker, Case Note, Marek v. Chesny: Civil Rights Attorney's Fees and Federal Rule of Civil Procedure 68: The Conflict Resolved, 12 OHIO N.U. L. REV. 287, 299-300 (1985). One author summarizes:
After Marek was decided, commentators predicted that Rule 68 would provide a strong incentive for plaintiffs to accept settlement offers in civil rights cases. . . . [P]laintiffs might potentially be deterred from prosecuting claims that had the potential to expand civil rights protection when such claims were not clearly going to prevail or to result in a predictable monetary award. In addition, Rule 68 offers might be made at such an early date in litigation that plaintiffs might be led to make uninformed settlement decisions. Thus, the consensus was that Rule 68's primary effect would be to give defendants litigating under many civil rights statutes leverage that they would not have under other statutes. Julie Davies, supra, note 2, at 222-223 (citations omitted).
For the most part, however, it appears that these concerns did not materialize. To be sure, one cannot be confident that Rule 68 is only rarely utilized, even in fee-shifting litigation where it could garner defendants the biggest payoff, relief from fees. Unaccepted offers are not filed with the court, and even defendants who have made offers of judgment may ulti-mately prefer to settle privately. Further, the federal litigation statistics maintained by the Administrative Office of the U.S. Courts have not been coded to denote which lawsuits were terminated by means of a Rule 68 offer. But in the two decades following Marek, there have been only occasional reported decisions construing Rule 68, and these decisions mostly grapple with basic issues that likely would already have been resolved if the Rule were being used on a regular basis. In addition, anecdotal reports from both plaintiffs' and defense counsel whose practices are devoted to employment discrimination and civil rights confirm the rarity of Rule 68 offers.
Ian H. Fisher, Federal Rule 68, A Defendant's Subtle Weapon: Its Use and Pitfalls, 14 DEPAUL Bus. L.J. 89, 89-90 (2001). Fisher observes that the plaintiff is usually agreeable to settling privately, even if negotiations were initiated by means of a defendant's Rule 68 offer, and may gain additional concessions from the defendant in the process. Id.
See, e.g., FED R. CIV. P. 68 advisory committee's Preliminary Draft of Proposed Amendments To the Federal Rules Of Civil Procedure, 98 F.R.D. 337, 363 (1983) (asserting that Rule 68 "has rarely been invoked and has been considered largely ineffective as a means of achieving its goals."). See also JOHN E. SHAPARD, LIKELY CONSEQUENCES OF AMENDMENTS TO RULE 68, FEDERAL RULES OF CIVIL PROCEDURE 1 (1995). The author of an article summarizing interviews with thirty-five San Francisco Bay Area civil rights attorneys reports:
Despite Rule 68's potential to reduce attorneys' fees and induce settlements, in reality, it does not appear to be a major factor in the practices of the civil rights lawyers I interviewed, whether they represent plaintiffs or defendants. Many plaintiffs' attorneys were surprised that they had not received more Rule 68 offers and could count the number of times they had on one hand. Defense attorneys like Rule 68 in theory, but most do not use it frequently in practice.
Davies, supra note 2, at 223. She adds, however, "There is some evidence that City Attorneys' offices have awakened to the possibilities inherent in Rule 68 offers in handling police misconduct cases, and that when civil rights plaintiffs receive these offers, they are forced to evaluate their cases in a very conservative fashion." Id. at 225. See also Robert W. Erb, Offers of Judgment: An Underrated Tactic; Surprisingly Few Intellectual Property Litigants Use Rule 68, NAT'L L.J. 530-32 (Nov. 1, 1993).
Despite the widespread belief that Rule 68 has had little practical effect on civil litigation, there is a resurgence of interest in offers of judgment. States have enacted new offer of judgment statutes, or modified existing ones, as part of civil litigation reform efforts. Some scholars propose theoretical models that might improve the effectiveness of offers of judgment. Other researchers have employed experimental designs to assess the impact of offers of judgment on negotiations. Professors Yoon and Baker have examined the actual impact of the New Jersey rule through a statistical analysis of data from a large national insurer. In a recent article, Professor Shelton offers specific practical suggestions on how Federal Rule 68 might be amended so as to increase its efficacy. At the core of this resurgence of legislative and scholarly interest is the belief that something can and should be done to bring about the faster, less costly resolution of federal civil litigation without undue sacrifice of fairness to parties.
E.g., Official Code of Georgia Annotated § 9-11-68 (2006); Vernon's Texas Statutes and Codes Annotated § 42.004 (2004). For a discussion of state offer of judgment rules and the lessons they may provide for amending federal Rule 68, see Lesley S. Bonney et. al., Rule 68: Awakening a Sleeping Giant, 65 Geo. Wash. L. Rev 379 (1997); Anna Aven Sumner, Note, Is the Gummy Rule of Today Truly Better Than the Toothy Rule of Tomorrow? How Federal Rule 68 Should Be Modified, 52 Duke L. J. 1055 (2003).
E.g., Lucian Bebchuk and Howard Chang, The Effect of Offer-of-Settlement Rules on the Terms of Settlement, 28 J. Legal Stud. 489 (1999); Tai-Yeong Chung, Settlement of Litigation Under Rule 68: An Economic Analysis, 25 J. Legal Stud. 261 (1996).
E.g., Brian G.M. Main and Andrew Park, The Impact of Defendant Offers into Court on Negotiation in the Shadow of the Law: Experimental Evidence, 22 Int'l Rev. L. Econ. 177 (2002); David A. Anderson and Thomas D. Rowe, Jr., Empirical Evidence on Settlement Devices: Does Rule 68 Encourage Settlement?, 71 U. Chi.-Kent L. Rev. 519 (1995).
Yoon and Baker, supra note 2.
Danielle M. Shelton, supra, note 2.
We were interested in learning why Rule 68 is not a more prominent feature of civil rights and employment discrimination litigation. Why is it not used more frequently in the very types of cases in which defendants have the greatest economic incentive to make offers and plaintiffs have the most to lose if they refuse them? We harbor no illusion that Rule 68 is a panacea for dispute resolution. But it is one tool for racheting up the pressures for an early settlement with a measure of legal compulsion. Our interest in Rule 68 is not driven by the belief that too many cases go to trial. Indeed, it appears that the civil trial has become a notable rarity — by one respected account, more than 98% of federal civil litigation is resolved by means other than trials. Nevertheless, Rule 68 may harbor the potential to speed up the settlement process and thereby produce significant economic savings to the parties, with correlative savings to the courts and the taxpayers who fund them.
Marc Galanter, The Hundred-Year Decline of Trials and the Thirty Years War, 57 Stan. L. Rev. 1255, 1257 (2005) (in 2003, only 1.7% of civil terminations occurred during or after federal trial); Marc Galanter, A World Without Trials, 2006 J. Disp. Res. 7 (in 1962, federal civil trials accounted for 11.5% of case terminations; in 2004, civil trials made up 1.7% of terminations).
State courts have concurrent jurisdiction over both Title Vll and Civil Rights claims. See Yellow Freight Sys., Inc. v. Donnelly, 494 U.S. 820, 110 S.Ct. 1566, 108 L.Ed.2d 834 (1990) (Title VII); Howlett v. Rose, 496 U.S. 356, 110 S.Ct. 2430, 110 L.Ed.2d 332 (1990) (claims under Section 1983). In recent decades, plaintiffs have increasingly filed federal employment discrimination and civil rights claims in state court for numerous reasons, including the perception that the federal district courts are increasingly suspicious of or even hostile to these claims, or perhaps to take advantage of differences in state procedural or evidence rules, or to avoid in a Section 1983 action the individual officer defendant's interlocutory appeal to a federal court of appeals from certain district court orders denying the officer qualified immunity. See, on the latter point, Johnson v. Fankell, 520 U.S. 911, 117 S.Ct. 1800, 138 L.Ed.2d 108 (1997). On occasion, actions filed in state court remain there because, for case-specific tactical reasons, or as the result of oversight, the defendant does not remove the action to federal district court as is its right under 28 U.S.C. § 1441(a).
By its own terms, of course, Rule 68 would not, even if strengthened, produce savings in actions tried in state court, because the Federal Rules of Civil Procedure govern only federal court proceedings. On the other hand, when a federal court entertaining a federal civil rights or employment discrimination claim also hears one or more parallel state law claims in the exercise of its supplemental jurisdiction under 28 U.S.C. § 1367(a), it may conclude that a forum state offer of judgment rule is "substantive" for Erie R.R. purposes and thus applicable to the state law claims. Indeed some federal district courts have applied state offer of judgment provisions to state law claims in this situation even when they impose on plaintiffs with nonfrivolous claims the obligation to pay defense attorneys' fees — an obligation federal statutory policy, as elaborated in Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 421, 98 S.Ct. 694, 54 L.Ed.2d 648 (1978), precludes the federal judge from imposing on the plaintiff with respect to the federal law claims. Conflicting federal district court authority on the applicability of state offer of judgment rules to supplemental state law claims in this situation is collected in Keesee v. Bank of America, N.A., 371 F. Supp. 2d 1370, 1377 (M.D. Fla. 2005) (denying prevailing defendant fee sanctions under Florida's offer of judgment rule against a plaintiff with nonfrivolous claims in mixed Title VII/Florida state discrimination law case, but citing contrary Florida district court authority).
Our contribution to the policy discussion is to report the views of experienced practicing attorneys who decide on a daily basis whether to make or accept offers of judgment. We conducted in-person, in-depth interviews with sixty-four experienced litigators who prosecute and defend civil rights and employment discrimination claims. This is the first such nationwide empirical inquiry into the incidence of practitioner use of Rule 68 in the federal fee-authorization cases where, after Marek, one would expect its use to be most common. We concentrated on civil rights and employment discrimination cases for two reasons. First, after Marek, these are the types of claims in which a Rule 68 offer carries the greatest economic incentives. In part because of the typically long duration of these cases, and in part because of legal and practical limitations on available relief, statutory attorneys' fees are often the largest component of an award to a prevailing plaintiff in civil rights and employment discrimination cases. Because Rule 68, after Marek, places plaintiffs' post-offer attorneys' fees at risk, civil rights and employment discrimination defendants have the most to gain by making a Rule 68 offer, and plaintiffs in these cases have the most to lose if they reject an offer and fail to beat it at trial. Second, civil rights and employment discrimination cases are the largest discrete categories of privately initiated lawsuits in the United States District Courts. Thus, experienced attorneys in civil rights and employment discrimination cases are likely to have significant insights into the factors that influence the decisions whether to make a Rule 68 offer and whether to accept or reject such an offer when made. These insights, in turn, can inform policymakers about the kind of amendments to Rule 68 that are likely to render it more attractive to parties and consequently more effective.
Table C-2, "U.S. District Courts — Civil Cases Commenced, by Basis of Jurisdiction and Nature of Suit, During the Twelve-Month Period Ending September 30, 2004," available at http://www.uscourts.gov/judbus2004/appendices1c2.pdf.
Part II describes the methodology we used in constructing this study. Part III discusses the technical aspects of Rule 68 and how they might contribute to use or non-use of offers of judgment. Part IV confirms the anecdotal evidence that Rule 68 plays little role in civil rights or employment discrimination litigation throughout most of the nation's federal courts. However, there are a few districts where Rule 68 has become a more than occasional part of evaluating and processing civil rights, although not employment discrimination, cases. Part IV also summarizes the primary reasons advanced by experienced attorneys for the infrequent use of Rule 68. Part V reports on the reactions of these attorneys to various proposals for reform.
II. RESEARCH DESIGN
Our research involved in-depth interviews with experienced employment discrimination and civil rights attorneys throughout the country. In-depth interviews are a form of qualitative empirical research well recognized by social scientists. We interviewed cohorts of four attorneys in each of sixteen cities. Each cohort consisted of attorneys who represent civil rights plaintiffs, civil rights defendants, employment discrimination plaintiffs, and employment discrimination defendants. We selected at least one city in each of twelve federal appellate circuits, with additional cities in circuits that have the greatest number of civil rights and employment discrimination cases.
Earl Babbie, The Basics of Social Research 260 (1999) (" In-depth interviewing is a mainstay of field research . . ."); GARY KING, ROBERT O. KEOHANE SIDNEY VERBA. DESIGNING SOCIAL INQUIRY: SCIENTIFIC INFERENCE IN QUALITATIVE RESEARCH 4 (1994) ("Qualitative research . . . covers a wide range of approaches [including] intensive interviews. . . ."). For a thorough description and critique of both quantitative and qualitative empirical legal scholarship, see Lee Epstein Gary King, Empirical Research and the Goals of Legal Scholarship, 69 U. CHI L. REV 1 (2002).
First Circuit (Boston); Second Circuit (New York); Third Circuit (Philadelphia); Fourth Circuit (Charlotte); Fifth Circuit (Houston and New Orleans); Sixth Circuit (Memphis); Seventh Circuit (Chicago); Eighth Circuit (Minneapolis); Ninth Circuit (Seattle, San Francisco, and San Diego); Tenth Circuit (Denver); Eleventh Circuit (Atlanta and Miami); and the District of Columbia Circuit (Washington, D.C.).
A. Selecting the Attorneys for Interview
The identification and selection of attorneys posed greater difficulty. We wanted subjects with considerable experience in civil rights or employment discrimination litigation. We viewed experience to be an important selection criterion because lawyers who had practiced in the relevant fields for a significant period of time were those most likely to know about Marek and to have made or received Rule 68 offers. Attorneys with relatively less experience would be less likely to have made or received a Rule 68 offer or have given serious thought to the Rule's tactical and practical consequences. Our concentration on experienced employment discrimination and civil rights attorneys involved a trade off. Our pool of subjects was not a random sample of lawyers. Thus, the observations of these attorneys are not representative of federal civil litigators as a whole. Moreover, the total number of attorneys interviewed is not sufficiently large to yield conclusions that can be expressed in terms of statistical significance. These limitations are more than offset, in our view, by the quality and depth of the attorneys' observations. We believe that the perceptions of a smaller group of attorneys who are most likely to have encountered Rule 68 over the course of their practices have yielded more valuable insights than would have resulted from a random sampling of a larger group of lawyers, most of whom would probably not have made or received a Rule 68 offer.
To identify a pool of experienced attorneys, we solicited referrals from national legal professional organizations, especially those concentrating on civil rights and employment discrimination; state bar committees; individual attorneys; and law professors. The lawyers we approached about participating in our project often identified adversaries whom they respected and thought were appropriate individuals to interview. This process produced a group of lawyers rich in experience and varied in perspective.
B. The Experience Level and Type of Practice of the Attorneys Interviewed
Collectively the sixty-four lawyers we interviewed had more than one thousand six hundred years of practice experience. The least experienced attorney we interviewed had been practicing in the area for ten years; the most senior lawyer had been in practice for over forty years; and the average level of experience in our pool was more than twenty-five years. Our sixty-four lawyers collectively had worked on more than thirteen thousand employment discrimination or civil rights cases in the last five years. Given this degree of experience, we are confident that our subjects were in a position to provide meaningful insights into how Rule 68 has worked in civil rights and employment discrimination cases. Assured of confidentiality, they were also extremely candid, occasionally even confessing matters that reflected less than nobly on their competence or professionalism.
Most of the employment discrimination lawyers, both plaintiff and defendant, were in private practice. For some, employment discrimination was part of a broader labor law practice. One of the employment discrimination defense lawyers served as in-house counsel for a Fortune 500 corporation. All these attorneys handled sex, race, age, and disability discrimination cases. A couple of the employment discrimination plaintiffs' attorneys also did defense work on behalf of unions. Most of their work involved representing individuals with disputes against private corporations, but sometimes they defended unions against claims brought by union members.
Our civil rights plaintiffs' attorneys were mostly in private practice, although some had a current or former affiliation with the American Civil Liberties Union. Most of their cases involved police misconduct, such as false arrest, search and seizure, and excessive force. Some attorneys had a significant amount of experience in litigation involving jail and prison conditions, inmate suicides, physical attacks on inmates, or medical care in confinement. A few civil rights plaintiffs' attorneys also handled First Amendment employment cases — as, for example, when a "whistleblower" claims to have been retaliated against because she exercised First Amendment rights. More commonly, however, that type of civil rights claim was handled by attorneys engaged in a specialized employment discrimination practice.
The sixteen civil rights defense lawyers we interviewed were mostly salaried government attorneys representing cities, counties, and, in one case, a state. However, several defense counsel were in private practice and were retained either directly by a government unit or by a risk pool insuring several local governments.
C. The Structure of the Interview
Each attorney who agreed to be interviewed received a written summary of the research project and a set of reform proposals. We did not, however, provide them with a list of questions we would ask. This approach gave the lawyers the opportunity to reflect upon their experiences with Rule 68 yet then provide unscripted responses to specific questions.
The interviews were structured to cover four broad topics: the background and experience of the attorneys; their understanding of Rule 68; their experience with Rule 68 in particular cases; and their reaction to various reform proposals. The questions were drafted prior to the interview to ensure that the same topics would be addressed by every lawyer. A significant advantage of an interview over a survey is the opportunity for follow up. Each interview lasted between one and two hours, depending on the number of follow-up questions and detail of the responses. Each interview was audiotaped and transcribed.
The in-depth interview is structured more to cover specific topics than to elicit specific answers to particular questions.
A qualitative interview is an interaction between an interviewer and a respondent in which the interviewer has a general plan of inquiry but not a specific set of questions that must be asked in particular words and in a particular order. It is essentially a conversation in which the interviewer establishes a general direction for the conversation and pursues specific topics raised by the respondent. Ideally, the respondent does most of the talking.Babbie, supra note 21, at 268-69.
The in-depth interview "is especially effective for studying the subtle nuances of attitudes and behaviors. . . ." Id. at 280.
The project was approved by the Institutional Review Boards (IRB) of Mercer University and the University of Georgia. IRBs oversee research involving human subjects, protecting, among other things, the confidentiality of subjects' responses.
III. FRAMEWORK, MECHANICS, AND RECENT HISTORY OF THE RULE
A. Fed. Rule Civ. Pro. 68 Before MAREK V. CHESNY : Offers Easily RefusedFederal Rule of Civil Procedure 68 allows defendants to offer plaintiffs a judgment in a particular form; affords plaintiffs ten days to accept or reject; and provides that if a judgment finally obtained (months or years later after a trial) fails to exceed a rejected offer, the insufficiently prevailing plaintiff-offeree has to pay the "costs incurred after the making of the offer." Rule 68 creates two categorical exceptions to Federal Rule of Civil Procedure 54(d), which authorizes "costs other than attorneys' fees . . . as of course to the prevailing party unless the court otherwise directs. . . ." First, Rule 68 requires the insufficiently prevailing plaintiff to bear his own post-offer costs, which any other prevailing party would ordinarily recover under Rule 54(d). Second, such a plaintiff also has to pay the defendant's post-offer costs, which Rule 54(d) would usually not assign to a prevailing party.
Marek v. Chesny, 473 U.S. 1, 21 n. 14, 105 S.Ct. 3012 (1985). See also Pouillon v. Little, 326 F.3d 713, 718 (6th Cir. 2003); Tunison v. Cont'l Airlines Corp., 162 F.3d 1187, 1193-94 (D.C. Cir. 1998); O'Brien v. City of Greers Ferry, 873 F.2d 1115, 1120 (8th Cir. 1989); Crossman v. Marcoccio, 806 F.2d 329, 333 (1st Cir. 1986); Liberty Mutual Ins. Co. v. EEOC, 691 F.2d 438, 442 (9th Cir. 1982).
A reader of the bare text of Rule 68 would conclude that the post-offer "costs" a plaintiff might forfeit under Rule 68, and those she would have to pay the defendant, are so modest as to render the Rule virtually toothless. Prior to 1985, it was generally assumed that in all cases the costs the Rule put into play were identical to the costs taxable under Rule 54(d); and the latter refer mainly to the fees charged for the clerk, marshal, court reporter, printing, witnesses, copying, docketing, and court-appointed experts listed in 28 U.S.C. § 1920. Most important, as the text of Rule 54(d) states, those costs did not, and standing alone still do not, include the bigticket item of attorney fees. Consequently, a federal civil defendant who anticipated some risk of liability, whether in diversity litigation or actions under various federal statutes that authorize fees to a prevailing plaintiff, had little incentive to make a Rule 68 offer; the rare plaintiff who received an offer felt little compulsion to accept it. Even when an offer triggered the Rule's consequences — that is, when the plaintiff's ultimate judgment failed to exceed the defendant's rejected offer — the defendant would not be relieved of paying the plaintiffs' attorneys' fees, only the relatively modest Section 1920 costs that the plaintiff incurred after rejecting defendant's offer.
28 U.S.C. § 1920 (2005).
FED. R. CIV. P. 54(d)(1) is entitled "Costs Other than Attorneys' Fees." See generally Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975).
Rule 68 would, and still does, also give the defendant a judgment for its own relatively modest post-offer section 1920 costs.
Moreover, a federal civil defendant who was highly confident of defeating liability was given even less incentive to make a Rule 68 offer. The Rule allows offers to be made only by "a party defending against a claim" and is triggered when there is a "judgment finally obtained by the offeree [that] is not more favorable than the offer. . . ." In 1981 the Supreme Court held, in Delta Air Lines, Inc. v. August, that when the above two quoted phrases are read together, Rule 68's "cost" consequences can be triggered only when the plaintiff obtains a judgment on liability (albeit one that is less favorable than, or equally favorable as, the offer she had rejected). Under this construction of the Rule, only an extremely humble or shrewd defendant has an incentive to make a Rule 68 offer in a case where it is extremely confident of a no-liability judgment. A humble defendant, assuming it views the making of a Rule 68 offer as cost-free and is represented by ethical counsel not concerned with lengthening the litigation, might make an offer on the long-shot possibility that its own estimate of victory might be wrong. The less humble but shrewd defendant who is supremely confident of ultimate victory might nevertheless make an almost nominal offer in the hope that the plaintiff (erroneously in the defendant's view) reckons she will prevail but at a level even lower than the defendant's offer. The defendant's hope would be that the plaintiff would fear that by rejecting the defendant's offer she would suffer the consequences of the Rule. But the Rule 68 consequences to a prevailing plaintiff of forfeiting her own post-offer costs and having to pay defendant's post-offer costs were de minimis — only the Section 1920 costs taxable under Rule 54(d) were in play — until the Supreme Court decided Marek v. Chesny
450 U.S. 346, 101 S.Ct. 1146, 67 L.Ed. 2d 287 (1981).
Id. at 351-52, 101 S.Ct. 1146. Dissenting Justice Rehnquist would have considered a defense judgment on liability a species of judgment obtained by the plaintiff-offeree that is not more favorable than the rejected offer. Id. at 369-72, 101 S.Ct. 1146 (Rehnquist, J., dissenting). On this view, a defendant could obtain the benefit of Rule 68 and would have an incentive to make an offer of judgment, not only in cases where it anticipates losing at a level lower than the plaintiff estimates, but also where it anticipates winning altogether.
B. Upping the Ante: Marek v. Chesny
In 1985 the Supreme Court put teeth in Rule 68, in actions under statutes that awarded prevailing plaintiffs fees as part of costs, with its decision in Marek v. Chesny. The Marek defendants made a $100,000 Rule 68 offer of judgment in the plaintiff's action under 42 U.S.C. § 1983. The sum of the plaintiff's judgment on the merits, plus his pre-offer costs and pre-offer attorneys' fees as determined by the trial court, totaled only $92,000. In the Supreme Court's view, therefore, the final judgment the plaintiff obtained failed to exceed the defendants' offer. In deciding what adverse consequences the insufficiently prevailing plaintiff should bear, the Court enlarged the meaning of Rule 68 "costs" to include attorneys' fees in federal statutory cases governed by Section 1988, because that statute authorizes "fees as part of the costs" to plaintiffs who prevail under, among other statutes, Section 1983. A variation of the quoted Section 1988 phrase is commonly (but not invariably) used in other statutes that authorize courts to award attorneys' fees to parties who prevail on a host of other federal question claims. This interpretation meant that the Marek plaintiff would forfeit post-offer attorneys' fees, not just post-offer Section 1920 costs.
In an appendix to his dissent in Marek, Justice Brennan observed that Congress had enacted over 100 such "fee-shifting" statutes, only about half of which unequivocally provided for fees "as part of" costs. 473 U.S. at 43, 105 S.Ct. 3012 (Brennan, J., dissenting).
Chief Justice Burger reasoned for the majority that even as early as 1938, when Rule 68 was included as part of the original Federal Rules of Civil Procedure, "the term 'costs' in Rule 68 was intended to refer to all costs properly awardable under the relevant substantive statute. . . ." As a result,
Id. at 9, 105 S.Ct. 3012.
[A]ll costs properly awardable in an action are to be considered within the scope of Rule 68 "costs." Thus, absent congressional expressions to the contrary, where the underlying ["fee-shifting"] statute defines "costs" to include attorney's fees, we are satisfied such fees are to be included as costs for purposes of Rule 68.
Id. (citations omitted).
The Civil Rights Attorney's Fees Act of 1976, codified in section 1988, authorized fees to prevailing plaintiffs "as part of" the costs in actions under a number of federal civil rights statutes, including section 1983. Accordingly, the plaintiff in Marek, having failed to obtain a judgment exceeding the defendants' offer, suffered a Rule 68 forfeiture of $139,692 in claimed post-offer costs, which now included the post-offer attorneys' fees the defendants would otherwise have been ordered to pay him.
42 U.S.C. § 1988(b) (2005).
Id.
The potential practical significance of this expansive interpretation of Rule 68 "costs" is enormous. A plaintiff who prevails in an action based on a federal statute that authorizes attorneys' fees as part of costs, but who obtains a judgment that is less than or equal to the Rule 68 offer he rejected, not only forfeits Rule 54(d) post-offer costs and must pay the defendant's post-offer costs; he also forfeits post-offer attorneys' fees, almost always a far more substantial component of recovery. In brief, Rule 68 "costs" still include only Section 1920 costs in diversity litigation and in federal question cases where fees are not authorized, or are authorized separately from or in addition to rather than "as part of" costs. But after Marek, the costs potentially forfeitable under Rule 68 also include attorneys' fees in the more numerous subset of federal question cases where a statute authorizes the recovery of attorneys' fees "as part of" costs.
The competing policies that form the grist for post- Marek debate were succinctly foreshadowed in the majority's opinion. "Rule 68's policy of encouraging settlements is neutral, favoring neither plaintiffs nor defendants; it expresses a clear policy of favoring settlement of all lawsuits." The majority specifically rejected the dissent's argument that the Marek view of the interplay between the civil rights fee-shifting statute and Rule 68 "will frustrate Congress' objective in § 1988 of ensuring that civil rights plaintiffs obtain 'effective access to the judicial process.'" Indeed the Court observed that the Rule so construed could be advantageous to plaintiffs: "Civil rights plaintiffs — along with [certain] other plaintiffs — who reject an offer more favorable than what is thereafter recovered at trial will not recover attorney's fees for services performed after the offer is rejected [in fact, after the offer is made]. But, since the Rule is neutral, many civil rights plaintiffs will benefit from the offers of settlement [sic] encouraged by [our reading of] Rule 68. . . . And, even for those who would prevail at trial, settlement will provide them with compensation at an earlier date without the burdens, stress, and time of litigation."
Marek, 473 U.S. at 10, 105 S.Ct. 3012.
Id. (quoting Hensley v. Eckerhart, 461 U.S. 424, 429 (1983)).
Id.
Henceforth, wrote the Court,
[a]pplication of Rule 68 will serve as a disincentive for the plaintiff's attorney to continue litigation after the defendant makes a settlement offer. There is no evidence . . . that Congress, in considering § 1988, had any thought that civil rights claims were to be on any different footing from other civil claims insofar as settlement is concerned. Indeed, Congress made clear its concern that civil rights plaintiffs not be penalized for "helping to lessen docket congestion" by settling their cases out of court.
Id. (citing H.R. Rep. No. 94-1588 (1976), at 7).
As expressed by Justice Powell in his concurrence, "The purpose of Rule 68 is to 'facilitat[e] the early resolution of marginal suits in which the defendant perceives the claim to be without merit, and the plaintiff recognizes its speculative nature.'"
Id. at 12-13, 105 S.Ct. 3012 (quoting Delta Air Lines, Inc. v. August, 450 U.S. 346, 363 n. 1, 101 S.Ct. 1146 (1981) (Powell, J., concurring)).
C. The Loose Ends and Limits of Marek and the Text of Rule 68
An irony of the Court's opinion, immediately pointed out in Justice Brennan's dissent, is that while the majority purports to derive its holding from the intersection of recoverable Rule 68 "costs" and the Section 1988 phrase authorizing a reasonable attorneys' fee "as part of the costs," it draws back from applying this "plain text" approach to other situations implicated by the term "costs" as used in Rules 68 and 54(d). Rule 68, for example, requires the insufficiently prevailing offeree to "pay the costs incurred after the making of the offer." Read literally, this text should mean that if costs in an action governed by section 1988 include attorneys' fees, Rule 68 would require the insufficiently prevailing plaintiff not only to forfeit her own post-offer fees, as Marek holds, but also to pay the losing defendant's post-offer attorneys' fees, not just its Section 1920 costs. Similarly, because Rule 54(d) ordinarily allows "costs" to the prevailing party, one might expect that the plaintiff who loses altogether on a federal statutory claim governed by Section 1988 or by another statute authorizing fees as part of costs might be liable to pay as part of those "costs" the defendant's attorneys' fees, pre-as well as post-offer.
Marek v. Chesny, 473 U.S. 1, 21-22, 105 S.Ct. 3012 (1985) (Brennan, J., dissenting).
Id.
Yet both of these consequences would fly in the face of Congressional intent as reflected in the Senate Report accompanying the Attorney's Fee Award Act of 1976. The Report accompanying the Senate Bill, which was the version ultimately passed, states explicitly that a prevailing plaintiff "should ordinarily recover an attorney's fee unless special circumstances would render such an award unjust." This was needed for civil rights plaintiffs to secure competent counsel to perform the function of a "private attorney general" in enforcing civil rights laws. Moreover, although the statutory language does not distinguish between prevailing plaintiffs and prevailing defendants, the Senate Report expresses the view that prevailing defendants should not be awarded attorney fees as a matter of course. Civil rights plaintiffs "should not be deterred from bringing good faith actions to vindicate the fundamental rights here involved by the prospect of having to pay their opponent's counsel fees should they lose." Prevailing defendants should be awarded attorneys' fees only when the "suit was clearly frivolous, vexatious, or brought for harassment purposes." Prior to its decision in Marek, the Supreme Court had embraced this sharp limitation on awards of attorneys' fees to prevailing defendants in both civil rights and employment discrimination suits.
S. REP. NO. 94-1011 (1976), reprinted in 1976 U.S.C.C.A.N. 5908, 5909.
42 U.S.C. § 1988 (2005).
S. REP. NO. 94-1011, at 4 (quoting Newman v. Piggie Park Enters., Inc., 390 U.S. 400, 402, 88 S.Ct. 964, 19 L.Ed.2d 1263 (1968)).
Id. at 3.
Id. at 4-5.
Id. at 5 (citing Richardson v. Hotel Corp. of Am., 332 F. Supp. 519, 522 (E.D. La. 1971)).
Id. (citing U.S. Steel Corp. v. United States, 385 F. Supp. 346, 347 (W.D. Pa. 1974)).
See e.g., Hensley v. Eckerhart, 461 U.S. 424, 429 n. 2, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983) (civil rights action governed by section 1988); Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 421, 98 S.Ct. 694, 54 L.Ed.2d 648 (1978) (interpreting Title VII's "fees as part of the costs" provision, section 706(k)).
A careful reading of the Court's opinion in Marek reflects the majority's recognition of the tension between the party-neutral language of the feeshifting statutes and their policy, found in both the legislative history and later judicial opinions, of not deterring civil rights and employment discrimination plaintiffs from filing good faith claims. In two successive sentences, the majority in Marek implicitly recognizes this limitation on the circumstances under which Rule 68 costs may include fees, by stating that only costs "properly awardable" under the relevant substantive or fee-authorizing statute should be viewed as part of Rule 68 "costs."
Marek, 473 U.S. at 9, 105 S.Ct. 3012 (citations omitted).
In subsequent civil rights and employment discrimination cases governed by statutes that the Supreme Court has construed to authorize fees principally to prevailing plaintiffs, the federal circuit courts have attended to this Marek limitation. They have held that when Rule 68 is triggered by a judgment in favor of a plaintiff that fails to exceed the defendant's offer, it relieves the defendant of what would otherwise be its liability for the plaintiff's post-offer attorneys' fees and costs; entitles the defendant to an award of its own post-offer Section 1920 costs; but never renders the defendant eligible for an award of its own post-offer fees. In fact, this last conclusion is effectively dictated by the Supreme Court opinions that have construed civil rights, employment discrimination, and other statutes to authorize fee awards against only those few plaintiffs whose claims are frivolous or asserted in bad faith. By hypothesis, no plaintiff against whom Rule 68 is applied brought a frivolous (or probably a bad faith) action because, as observed above, even before Marek, the Court had held in Delta Air Lines, Inc. v. August that Rule 68 applies only where the plaintiff to some degree prevails.
See Pouillon v. Little, 326 F.3d 713, 718, 719 (6th Cir. 2003); Tunison v. Cont'l Airlines Corp., 162 F.3d 1187, 1193-94 (D.C. Cir. 1998); O'Brien v. City of Greers Ferry, 873 F.2d 1115, 1120 (8th Cir. 1989); Crossman v. Marcoccio, 806 F.2d 329, 333 (1st Cir. 1986); Liberty Mutual Ins. Co. v. EEOC, 691 F.2d 438, 442 (9th Cir. 1982). Because Rule 68 mandates this payment of the defendant's post-offer costs, exclusive of fees, only when the plaintiff has prevailed (although insufficiently to beat the defendant's rejected offer), it represents a pro tanto exception to Rule 54(d), which presumptively awards such costs (subject to the district court's discretion) only to, and not against, prevailing parties.
See Le v. Univ. of Pennsylvania, 321 F.3d 403, 410-11 (3d Cir. 2003) (Title VII action); Payne v. Milwaukee County, 288 F.3d 1021, 1027 (7th Cir. 2002) (section 1983 action); EEOC v. Bailey Ford, Inc., 26 F.3d 570, 571 (5th Cir. 1994) (section 1983 action); O'Brien, 873 F.2d at 1120 (section 1983 action); Crossman, 806 F.2d at 334 (section 1983 action). But cf. Jordan v. Time, Inc., 111 F.3d 102, 105 (11th Cir. 1997) (awarding fees to the defendant under Rule 68 where underlying fee award statute, the Copyright Act, defined "costs" to include fees but had not been construed by the Supreme Court as ordinarily allowing fees only to the plaintiffs).
450 U.S. 346, 101 S.Ct. 1146 (1981).
Another dangling thread of the opinion in Marek is uncertainty about its scope. The majority's fee-forfeiture interpretation of Rule 68 depends on whether the text of the particular fee-shifting statute at issue authorizes the payment of fees "as part of," rather than in addition to or distinct from, costs. Justice Brennan, dissenting, alludes to the traditional understanding that the Federal Rules are intended to be transsubstantive when he writes, "As with all of the Federal Rules, the drafters intended Rule 68 to have a uniform, consistent application in all proceedings in federal court." The result of the majority's contrary approach, he contends, "is to sanction a senseless patchwork of fee shifting that flies in the face of the fundamental purpose of the Federal Rules — the provision of uniform and consistent procedure in federal courts."
Marek, 473 U.S. at 23, 105 S.Ct. 3012 (Brennan, J., dissenting).
Id. at 24, 105 S.Ct. 3012 (Brennan, J., dissenting).
On the other hand, even in the class of federal statutory litigation where Marek expands Rule 68 costs to compel the forfeiture of plaintiffs' post-offer fees (although not to require them to pay the defendants' fees), the decision in Delta Air Lines restricts the resulting settlement incentives to cases in which a defendant reckons the plaintiff may prevail on liability. This reasoning means that Rule 68, even as made potentially more significant by Marek, will have limited utility in circuits generally hostile to certain federal statutory claims, notably those asserted under civil rights and employment discrimination statutes. In such cases in these circuits, the defendants will be exceedingly confident of an ultimate plaintiff-take-nothing judgment. Consequently, those defendants will seldom benefit from the primary sanction available under Rule 68: relief from an order directing them to pay the post-offer fees of a prevailing plaintiff. Of course, a defendant who is justifiably confident of winning might nevertheless submit a modest Rule 68 offer simply because doing so might cause the plaintiff, fearful of the consequences of rejecting the offer, to accept it. This rationale assumes, however, that the defendant and its hourly paid counsel are both dominantly motivated by a desire to conclude the litigation as quickly and economically as possible, even when one or both of them is overwhelmingly confident of ultimate success.
Delta Air Lines, 450 U.S. at 352, 101 S.Ct. 1146.
Another limit to the Rule's potential utility inheres in its requirement that the offer be in the form of a judgment, coupled with its silence about nonadmission-of-liability clauses like those that are a standard feature of private settlement agreements. Many individual defendants, police officers being a signal example, are understandably loathe to confess formal judgment. Doing so may impair their insurability or creditworthiness, not to mention their prospects for future advancement in employment. Private corporate defendants may have even more general reluctance to consent to the entry of judgment. Even if the actual terms of the Rule 68 offer are not part of the court record following the clerk's entry of judgment after an offer is filed, the bare fact of a publicly visible judgment against the corporation may attract the attention of regulators, generate adverse publicity among customers, or encourage copycat litigation by similarly situated employees. Government defendants in states where the law requires all settlements to be a matter of public record may be less concerned about the necessity of making a Rule 68 offer in the form of a judgment. Yet even they might be more inclined to extend offers if the terms of the Rule expressly authorized liability disclaimers. With these concerns in mind, a number of states have changed the "judgment" terminology of their counterpart rules to the softer language of "settlement" or "agreement."
The defendant's offer in Delta Air Lines did, however, contain such language and was not considered invalid for that reason. Id. at 348 n. 2, 101 S.Ct. 1146. Perhaps in part for that reason, the scant lower court authority on the issue does not invalidate defendants' offers just because they include language disclaiming liability. See infra note 81.
The text of Rule 68 limits its potential utility in another respect by allowing offers to be submitted only by defendants. A growing number of states, in contrast, have enacted or amended Rule 68 counterpart statutes that enable plaintiffs as well as defendants to make offers of judgment, often allowing either type of offeror to recover attorneys' fees and not just costs. Professors Albert Yoon and Tom Baker have studied the effects of one such rule, in New Jersey, which may be invoked by plaintiffs as well as defendants and places each party at risk for the full amount of the opponent's post-offer attorneys' fees. Contrasting New Jersey's experience with similar tort cases brought against the same insurer's policyholders in five neighboring states that did not have such a rule, Yoon and Baker conclude that the statute has probably hastened the resolution of those controversies. We might assume that the states' experience with two-way, fee-shifting offer of judgment rules predicts that similar rules would encourage earlier, cheaper settlements of federal civil rights and employment discrimination litigation. But the plaintiffs in ordinary tort or contract litigation are generally able to attract counsel without the incentive of recovering their attorneys' fees. On average, they may also have less need than federal civil rights and employment discrimination plaintiffs to be protected from paying defendants' attorneys' fees. And the federal statutory policies that have impelled the Supreme Court ordinarily to forbid awards of fees against losing employment discrimination and civil rights plaintiffs make it difficult or impossible to imagine valid amendments of Rule 68 that would simply transplant the two-way offer rules of some states by requiring insufficiently prevailing plaintiffs to pay defendants' post-offer fees.
N.J. Ct. R. 4:58-1 to 4:58-4 (2005).
Yoon and Baker, supra note 2.
One possible reason for underutilization of Rule 68 is that the principal consequence of its successful use, the plaintiff's forfeiture of post-offer attorney fees, appears nowhere in the text of the Rule and requires reference to an extrinsic source, the Court's opinion in Marek. Further, the text of the Rule affords no guidance on how to apply that decision. For example, exactly which components of a final judgment that a plaintiff might obtain in federal statutory fee-shifting cases — pre-offer costs or also pre-offer fees — should be added to his judgment on the merits to yield a total that must then be measured against the defendant's rejected offer? This uncertainty is largely resolvable by a close reading of Part II (A) of the Court's opinion in Marek, which effectively tells the district court to measure against the defendant's offer the sum of the plaintiff's merits recovery plus the amount the court would award her for pre-offer costs and pre-offer fees. But particularly in employment discrimination and civil rights actions, many plaintiffs' counsel may be one-shot or occasional novices in the field who take such cases as byproducts of state tort, domestic, or criminal litigation. The silence on such issues in the text of Rule 68 may therefore fail to afford many of these plaintiffs, whose claims are the object of special federal protection, adequate notice of the risks of rejecting an offer.
There are also practical impediments to the Rule's effectiveness, even assuming counsel on both sides are familiar with the case law construing it. Does private defense counsel, who is paid by the hour, have the same incentive as his client to make a Rule 68 offer in an action under a statute authorizing fees as part of costs? After all, by enlarging forfeitable post-offer "costs" to include fees, Marek endows a defendant's Rule 68 offer of judgment with greater leverage than an ordinary offer of settlement. The making of a Rule 68 offer may accordingly terminate the litigation much sooner, with significantly lower compensation for defense counsel. While one or more local district court rules specifically require counsel to certify that they have discussed Rule 68 with their clients, there is no national mechanism tending to assure those discussions. And in federal judicial districts where early mediation is the norm — either by the parties' consent, a local rule, or orders in a particular case — many actions may be resolved relatively quickly without need or opportunity for the additional legal compulsion supplied by Rule 68.
See, e.g., D. Colo. Local Rules of Practice, Appendix G, "Final Pretrial Order" Item 11 entitled, "Offer of Judgment." Significantly, however, the certification required by that local rule (which, by its terms, apparently applies not only to defendants but also to plaintiffs with respect to counterclaims) need only be included in the final pretrial order. By that late stage of the litigation, relatively few plaintiffs' attorneys' hours remain to be expended, and accordingly the threat to a plaintiff and his lawyer of forfeiting those hours if plaintiff rejects the offer may be relatively mild.
Moreover, even the defendant who is joined by his lawyer in genuinely seeking to formulate the terms of an effective offer of judgment may encounter a practical difficulty. To calculate an amount likely to trigger forfeiture of the plaintiff's post-offer attorneys' fees and thus force the plaintiff to focus on the offer seriously and early, the defendant must estimate more than the likelihood and magnitude of the plaintiff's success on the merits. The defendant will also have to estimate the plaintiff's pre-offer attorneys' fees and costs to calculate the amount of an offer that the plaintiff would worry about rejecting. How is defense counsel to estimate the attorneys' fee liability the plaintiff will have accrued under an agreement with her own counsel at the particular stage of the litigation at which the defendant proposes to make a Rule 68 offer? He might simply inquire of the plaintiff's counsel, but the plaintiff's counsel may choose not to reply. The occasional local federal district court rule addresses this problem by requiring counsel for parties seeking a statutory award of attorneys' fees periodically to file with the court a summary of time records reflecting the fee liability that party has incurred to date. But again, there is no national mechanism to encourage disclosure of the plaintiffs' fees for the purpose of enabling defendants to make offers in tactically advantageous amounts.
See, e.g., N.D. Fla. Local Rule 54.1(B)(1), (2), (4) (2005) (requiring monthly electronic filing of time records with the clerk, but permitting that filing to be made under seal); D. Md. Local Rules, Revised 2004, Appendix B1.c. (requiring parties intending to seek fees under civil rights or employment discrimination statutes to make quarterly statements to opposing counsel showing amount of time spent on a case and total value of time).
The Rule is also silent on how to measure, for Rule 68 purposes, the value of a plaintiff's judgment for prospective, equitable, or other nondamages relief. To state two standard possibilities, one might measure an injunction's value to the plaintiff or take its value as the cost of compliance to the defendant. In the relatively few reported nondamages cases in which defendants have made Rule 68 offers, the problem of measuring the value of a plaintiff's judgment has proven intractable in the absence of any textual guidance from the Rule.
See Thomas L. Cubbage III, Federal Rule 68 Offers of Judgment and Equitable Relief: Where Angels Fear to Tread, 70 TEX L. REV. 465, 484-94 (1991). See text accompanying notes 73 and 74, infra.
IV. HOW FREQUENTLY ARE RULE 68 OFFERS MADE IN CIVIL RIGHTS AND EMPLOYMENT DISCRIMINATION CASES AND WHY AREN'T MORE OFFERS MADE AND ACCEPTED?
A. The Frequency of Rule 68 Offers in Civil Rights and Employment Discrimination CasesThe first research question we explored was whether the anecdotes were true: is Rule 68 largely ignored? Our interviews confirmed that in federal districts throughout the United States, Rule 68 offers of judgment are rarely used in either employment discrimination or civil rights cases.
A New York employment discrimination plaintiff's attorney who had been in practice for thirty-three years reported that he had received three offers — one every eleven years. An employment discrimination defense lawyer in New Orleans said that he had made ten to fifteen offers in thirty years of practice. That works out to one offer made every two or three years. A Chicago employment defense lawyer said he had not made any Rule 68 offers in the past five years. In-house corporate counsel who supervises employment discrimination cases for one Fortune 500 company said that his client had not made an offer of judgment in the past ten years.
On the civil rights side, one defense lawyer stated that he had made no more than ten offers over a thirty-year career in which he and his firm have processed ten thousand cases on behalf of the state's largest city and various sheriff's departments. Civil rights defense attorneys in Memphis and Houston, who between them had more than forty years of experience, had never made a Rule 68 offer. These stories tend to confirm the conventional wisdom regarding the infrequent use of Rule 68.
Several employment discrimination and civil rights plaintiff's lawyers expressed both surprise and relief that this was the case. They were glad that Rule 68 is largely ignored and expressed the hope that our project would not change that. One plaintiff's counsel said that he was just "flat mystified." He could not explain why defendants did not use Rule 68 more often because he felt it would put significant pressure on him.
While the general rule is one of non-use or very infrequent use, there were some notable exceptions. Civil rights defense lawyers in New York, Minneapolis, Philadelphia, Oakland, and the greater Seattle area report that they now consider whether to make a Rule 68 offer as a routine part of initial case evaluations. A civil rights defense lawyer in the Pacific Northwest reported that he has made Rule 68 offers in seventy percent of his cases. No one else we interviewed came even close to that figure.
All the reports of systematic use of Rule 68 came from lawyers practicing civil rights defense, not employment discrimination defense. Thus, the lawyers reporting the greatest use of Rule 68 all represented public — not private — defendants. Even in cities in which civil rights defendants make Rule 68 offers with some frequency, we found no evidence of similar use of Rule 68 in employment discrimination cases, where most defendants are private companies.
B. Why Aren't Rule 68 Offers Made More Frequently?
There is no single answer to this question. However, several themes recurred throughout the interviews. We present these themes below and note that they are somewhat overlapping.
1. Problems with the term "Judgment"
The most frequently voiced explanation why Rule 68 is not used more often is that there are problems associated with the word "judgment." Privately negotiated settlements typically include non-admission of liability clauses and confidentiality provisions. Judgments are more formal public declarations of wrongdoing. Many defense lawyers reported that their clients, both public and private, want to avoid making this formal declaration of wrongdoing.
Some defense counsel explained that their clients would not want to make a public declaration of wrongdoing because doing so might encourage others to sue. One defense lawyer commented, "If we make an offer of judgment in this case we may end up with five more like it." Other lawyers reported that their clients were concerned about adverse publicity. They suggested that offering to have a judgment entered for the plaintiff in a police brutality case might yield adverse publicity to a defendant city; and admitting to sexual harassment in the workplace might diminish the public image of a defendant company or attract unwanted attention from regulators or customers.
Some lawyers were concerned about more specific adverse consequences. For example, we were told by several civil rights defense lawyers that a police officer who has a judgment entered against him individually would have more difficulty securing a mortgage and face difficulties in career advancement, such as becoming a member of a SWAT team.
Lawyers for public defendants, and to a lesser extent private defendants, also expressed a need to back up their team: "we're not going to make offers of judgment because it makes it look like we're not backing our police officers," or "we need to support the police," or "we need to support the supervisors in our company, especially when we do not think that they did anything wrong." The term "judgment" was viewed by many attorneys as an admission that the wrongdoing alleged had occurred, while a "settlement" could be explained on grounds other than the merits. Since we identified a few cities where Rule 68 offers are made with greater frequency, the foregoing objections are not universally considered insurmountable.
2. Why Make a Rule 68 Offer When We Are Confident That We Will Ultimately Win the Case?
Many defense counsel explained that they do not make frequent use of Rule 68 because they are confident that they will prevail on the merits, often at the summary judgment stage. As discussed above, Rule 68 provides no specific tangible reward to a defendant for having made an offer if the defendants then wins the case outright on the merits. Some defense attorneys described Rule 68 as providing, at most, a kind of insurance policy against paying further fees if they guessed wrong about winning on the merits.
The reasons for this confidence are discussed in the text accompanying notes 75-78, infra.
Interestingly, some employment discrimination defense lawyers who do not make Rule 68 offers in federal court said they do make offers under corresponding state rules where the state rules allow their clients to recover attorneys' fees from the plaintiff. Thus, there appears to be something to the proposition that if court rules hold out to defendants the prospect not just of relief from plaintiffs' fees but an affirmative award of their own fees, they might make more Rule 68 offers.
Some municipal attorneys commented that there are transaction costs associated with making an offer. Specifically, lawyers who represent public defendants may have to secure some bureaucratic approval at one or more levels of a local government before making a Rule 68 offer above a specified dollar amount. These lawyers said the approval process is an inconvenience they do not want to endure, especially if "we're going to win anyway."
3. 'Not a Penny for Tribute'
The reluctance to make a Rule 68 offer may be part of a broader, hardball litigation strategy. Several defense lawyers commented that their clients would rather pay thousands for defense and not a penny for tribute. This suggests that clients would rather pay more money litigating than it would take to resolve the dispute under Rule 68. Why would that be so? Discouraging other claims, avoiding adverse publicity, and supporting government and corporate officials whose actions are being challenged may all play a part.
One civil rights defense lawyer expressed the 'not a penny for tribute' sentiment in terms of morality, saying that it was "just wrong" to spend a dollar of taxpayer money to pay a non-legally deserving plaintiff. That, in his view, is a misuse of public funds. Of course a defendant adopting this stance may be just as averse to a privately negotiated settlement as to a resolution under Rule 68.
4. Economic Conflict of Interests
The fourth common theme is the specter of economic conflict between the defendant and defense counsel. Since the primary leverage that Rule 68, as construed, provides is the forfeiture of plaintiffs' post-offer attorneys' fees, the offer is more effective if made early in the litigation. If a Rule 68 offer is made closer to trial (e.g., after the denial of a defense motion for summary judgment), a lesser amount of the plaintiff's attorneys' fees is at risk after the offer is rejected. Most defense lawyers are paid on the basis of an hourly fee. There is a widespread suspicion among plaintiff's lawyers that one reason more Rule 68 offers are not made early in the litigation is that defense lawyers wish to accrue a certain amount of fees before encouraging their clients to settle. The defense attorney's economic interest in maximizing billable hours may conflict with the client's economic interest in resolving a dispute quickly by making an early Rule 68 offer.
Consider the comments of a plaintiff's employment discrimination attorney:
I had a lawyer once during a trial in a hotly disputed case in which we had taken numerous depositions and in which I had repeatedly said, "Why don't you make me an offer; why don't you make me an offer," who told me he lit a candle to me every night to thank me for the fees that he was incurring in the case. So I do have some cynicism, at least with respect to the private bar, and that is not a condemnation of the private defense bar at all. There are many excellent fair-minded lawyers out there who discuss early dispute resolution with their clients and come up with creative ways to try to resolve cases early. But it is a fact that in the private bar there is a great deal of incentive where people have billable hour goals. Associates in firms have billable hour goals. Partners have to report to their other partners what they are generating in terms of fees, and if you make early offers of judgment that are accepted then, well, a hundred thousand or two hundred thousand dollars or three hundred thousand dollars of fees may vanish.
On this view, one might expect less frequent utilization of Rule 68 by private counsel paid by the hour (as are outside counsel defending a typical litigated employment discrimination case) than by salaried government attorneys whose compensation is constant regardless of how long it takes to resolve a dispute (as with civil rights defense handled "in house" for a government agency). On the other hand, it might be assumed that private (e.g., employment discrimination) defendants, or their shareholders, have more to gain from early, cheaper settlement, as they must bear the expense of protracted litigation internally. Public (e.g., civil rights) defendants may perhaps be able to externalize the economic costs over time by passing them on to taxpayers. If this is true, one might also expect that private defense counsel on regular retainer would recommend Rule 68 offers more frequently than single-engagement private counsel, as the former might place higher priority on minimizing costs for a repeat client.
Most but not all of the plaintiffs' lawyers we interviewed subscribed to the belief that economic conflict between defendants and their lawyers accounts for underutilization of Rule 68. Of course, no defense lawyer admitted to running up his own fees, but some acknowledged that there might be others who do. Other defense lawyers expressed strong disagreement, even outrage, at this suggestion. They pointed out that market forces push them towards efficient resolution of disputes. Competition among the defense bar for clients is such that a lawyer who pads his hours will soon find his client represented by another attorney. And even in single engagement cases where counsel does not expect to represent the client in future matters, there is often an insurance company that is paying the cost of defense. We learned that at least a few insurers that monitor the amount of time attorneys spend on a case focus specifically on Rule 68. This oversight (or, depending on your point of view, micro-managing) helps keep defense attorneys' fees in check. The economic conflict theory is also called into question by the fact that many salaried government attorneys who do not stand to gain financially by increasing the number of hours devoted to resolving a dispute nevertheless also fail to recommend Rule 68 offers.
On the other hand, the only lawyers we found who did make Rule 68 offers with any degree of frequency were those representing public defendants. And they did so despite the bureaucratic obstacles of gaining settlement authority reported by some of those lawyers. To some extent this finding may support the assumption that there is economic conflict between private, hourly paid defense lawyers and their clients. At the same time, however, there is some tension between the greater use of Rule 68 by public defendants represented by salaried lawyers and the assumption that private firms may have greater incentive to use Rule 68, because they must internalize their costs. One available conclusion that synthesizes these observations is that despite the presumably greater incentive of private defendants to use Rule 68, they more frequently may not learn of the advantages the Rule holds for them because of the economic conflict position of their hourly paid lawyers.
5. Are Plaintiffs' Counsel Partly to Blame?
Some defense lawyers suggested that plaintiffs' lawyers bear responsibility for the underutilization of Rule 68. Many civil rights cases are likely to yield small damages, thus yielding a small fee under a typical contingent fee arrangement. A plaintiff's lawyer who thinks his client has a good case on liability but one that is not going to produce a big damage award may want to get more hours into the case to increase the amount of statutory fees. The obvious drawback to this theory is that it does not explain why defendants make so few Rule 68 offers in the first place. Some defense lawyers also opined that in the relatively rare big-damage civil rights or employment discrimination case, where the plaintiff would have agreed to compensate her lawyer with a contingent fee, plaintiffs' lawyers would resist any kind of settlement, via Rule 68 or otherwise, in the hope of gaining a significantly greater fee after an anticipated large judgment following trial.
6. Problems with Placing a Value on a Claim Early in the Litigation
A few defense lawyers said they cannot accurately evaluate a case sufficiently early in the litigation to make Rule 68 an attractive inducement to resolve the dispute. One defense lawyer claimed that he needed a year and a half of discovery before he could ethically evaluate what a case was worth. This problem is compounded by defense uncertainty regarding the amount of plaintiff's pre-offer attorneys' fees. The current Rule makes the amount of those fees critical to calculating whether a plaintiff's ultimate judgment exceeds the defendant's offer, yet it does not require a plaintiff to disclose those fees to facilitate the making of offers effective.
Very few of our interviewees deemed ordinary case valuation to be a significant problem. Plaintiffs' and defense lawyers in both civil rights and employment discrimination practices overwhelmingly agreed that a defense lawyer can value a case in terms of liability and damages fairly early on in the litigation — generally within 4-6 months after the action commences. Employment discrimination defense lawyers in particular acknowledged that their clients generally required little formal discovery because the great bulk of the documentary evidence was in their clients' possession from the outset of litigation. Most thought that one or two depositions are all that would be needed.
Defense counsel voiced a decidedly more mixed response with regard to the importance of knowing the amount of plaintiff's attorneys' fees accrued to date before formulating a Rule 68 offer. Most defense lawyers thought that they could either estimate the plaintiff's pre-offer fees by considering what the defense fees were at that point in the case; or by evaluating how well they thought the plaintiff was prepared at that stage; or simply by asking plaintiff's counsel directly for this information. However, several defense lawyers expressed the view that plaintiffs' fees often do not correspond to defense fees and that plaintiffs' counsel generally refuse to provide this information when requested. The last point was supported by some plaintiffs' attorneys who said they would not voluntarily disclose their fee information because it might provide the defendant a tactical advantage.
The perceived tactical advantages are discussed in Part VB., infra.
7. Are Other Forms of Dispute Resolution More Effective than Rule 68?
Some lawyers commented that other methods of dispute resolution are more effective than Rule 68 at achieving early dispositions, such as early court-ordered mediation or neutral evaluation. A lawyer in Houston commented that he thought that Rule 68 had an adversarial tone to it. To him, it smacked of a tactic or trick that might irritate opposing counsel and perhaps their clients, leading them to adopt more adversarial postures. In his view, truly effective dispute resolution required an ongoing process, such as mediation or early neutral evaluation.
8. Ignorance and Confusion
Other explanations included the assertion that some lawyers who practice in these areas just do not know about Rule 68, and those who do are not aware of Marek v. Chesny. These lawyers may not use Rule 68 because they do not understand how it might create incentives and pressures for early disposition of claims. Others commented that the Rule is very hard to apply in multi-party cases where there is more than one plaintiff or more than one defendant. Defendants are primarily interested in securing finality to all of their financial exposure, and a Rule 68 offer that settles the claims of only one plaintiff is much less attractive than a Rule 68 offer that disposes of the entire controversy. Some employment discrimination and civil rights cases involve significant claims for equitable relief that may dwarf the claims for money damages. Calculating whether relief gained at trial that is primarily equitable exceeds the value of a rejected Rule 68 offer has vexed both courts and commentators. In such cases the Rule's mechanics make it unattractive to the parties.
Reiter v. MTA New York City Transit Authority, 457 F.3d 224 (2006) (recommending that Advisory Committee on Civil Rules and United States Judicial Conference's Standing Committee on Practice and Procedure address the question).
See, e.g., Cubbage, "Federal Rule 68 Offers of Judgment and Equitable Relief: Where Angels Fear to Tread," 70 Texas L. Rev. 465 (1991).
9. Reasons Extrinsic To Rule 68
It is entirely possible that there are independent reasons why the Rule has fallen into virtual desuetude during the very post- Marek years after 1985 in which one would have expected it to thrive. As observed above, the Rule as interpreted by the Court would be expected to have its greatest impact in employment discrimination and civil rights cases, where attorneys' fees to prevailing plaintiffs typically represent a high proportion of the average plaintiff's economic recovery. Yet during these same years, for political and doctrinal reasons extrinsic to the Rule, defendants in these two case categories became justifiably more confident of prevailing than in the years before Marek. Politically, the federal bench in the post- Marek years came to be dominated by appointees of Presidents Reagan and George H.W. Bush. Over time, those judges erected formidable doctrinal impediments in the paths of employment discrimination and civil rights plaintiffs. Of course only one year after Marek the Supreme Court decided the critically important summary judgment trilogy, which appears to have encouraged more defendants to make that motion, and federal judges to grant it more often (although that trend somewhat predated the trilogy, so its role in the phenomenon is difficult to isolate). There is also some evidence that defense motions for summary judgment are even more frequently made and granted in civil rights and employment discrimination litigation than in other federal cases.
See Lewis, "Walking the Walk of Plain Text: The Supreme Court's Markedly More Solicitous Treatment of Title VII Following the Civil Rights Act of 1991," 49 St. Louis Univ. L.J. 1081-1082, text accompanying notes 4-6 (noting doctrinal restrictions on employment discrimination actions) and 1090-1091 (noting doctrinal restrictions on civil rights actions under the Reconstruction statutes) (2005).
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
See Cecil, Miletich Cort, Trends in Summary Judgment Practice: A Preliminary Analysis 1-3, 6 (Federal Judicial Center 2001.)
E.g. Ann C. McGinley, Credulous Courts and the Tortured Trilogy: The Improper Use of Summary Judgment in Title VII and ADEA Cases, 34 B.C. L. Rev. 203, 208 (1993); Arthur R. Miller The Pretrial Rush to Judgment: Are the "Litigation Explosion," "Liability Crisis," and Efficiency Cliches Eroding Our Day in Court and Jury Trial Commitment?, 78 N.Y.U. L. Rev. 982, 1053 nn. 379 and 381 (2003) (identifying civil rights, employment discrimination and age discrimination cases as among a limited number of case types in which summary judgment is granted with "Pavlovian frequency"). Professor Miller also summarizes numerous empirical studies that document the increased use of summary judgment after the 1986 "trilogy" of cases referred to in the immediately preceding text. At the very least, summary judgment "is hardly unknown, or for that matter rare, in employment discrimination cases, more than 90 percent of which are resolved before trial . . ., many of them on the basis of summary judgment for the defendant." Chapman v. A1 Transport, 229 F.3d 1012 (11th Cir. 2000) (en banc). Accord, Wallace v. SMC Pneumatics, 103 F.3d 1394, 1396 (7th Cir. 1997) (citing Administrative Office of the U.S. Courts, Judicial Business of the United States Courts: Report of the Director-1995, p. 163). See also Ambrose v. Summit Polymers, 172 Fed. Appx. 103 (6th Cir. 2006) in which Judge Daughtrey dissented. Judge Daughtrey would have allowed an Equal Pay Act claim to proceed to trial when the plaintiff offered evidence of "enormous" pay raises given to males with little or no relevant prior work experience. "If such evidence does not create at least a genuine issue of material fact concerning the defendant's alleged basis for gross pay disparities, I am unsure what testimony and documentary proof any future plaintiffs could advance to forestall premature dismissal of potentially meritorious claims of discrimination." Id. at 122. (emphasis in the original).
In combination, doctrinal restrictions on civil rights and employment discrimination claims, increasingly generous defenses to individual officers sued in civil rights actions, and the resurgence of summary judgment practice have surely emboldened the average employment discrimination and civil rights defendant since 1985 about its prospects for escaping liability. Because Rule 68, as interpreted in Delta Air Lines, Inc. v. August, gives nothing to a defendant found nonliable, defendants confident of that result at the outset of an action have little reason to use the Rule, other than perhaps as a no-cost insurance policy against having to pay plaintiffs' fees in the unlikely event a plaintiff prevails. Accordingly, the foregoing political and doctrinal developments, coupled with the vanishing federal civil trial, may significantly account for the scant use of the Rule throughout the nation. And in districts or circuits more than usually hostile to those claims, defendants have even less incentive to use the Rule as long as it continues to apply only when a plaintiff wins a judgment.
450 U.S. 346, 101 S.Ct. 1146 (1981).
In summary, with some notable exceptions, it appears that Rule 68 is not much used in the very types of cases in which it might be expected to have the greatest impact. Among the reasons most frequently given by attorneys for the underutilization of Rule 68 are the problems associated with the "formal judgment," the high likelihood of defendants prevailing on the merits, a conscious adoption of "hard ball" litigation strategy, and, perhaps, though this is more disputed, economic incentives for defense attorneys to avoid an early disposition of the case. Moreover, quite a few lawyers continue to see Rule 68 as unimportant because so few cases proceed to trial, making it remote that the Rule's sanctions will ever be triggered. Yet if, as is widely believed, ordinary private settlement negotiations are conducted "in the shadow of the law," one would anticipate that lawyers considering the use of Rule 68 as a lever in those negotiations would also take into account the likely result at a trial.
Mnookin Kornhauser, "Bargaining in the Shadow of the Law: The Case of Divorce," 88 Yale L.J. 950 (1979).
V. LAWYER REACTIONS TO PROPOSALS TO AMEND THE RULE
We asked our respondents about several categories of proposed changes. Here is what they told us.
A. Soften Terminology from "Judgment" to "Settlement/Agreement"
The first proposal was simply a terminology change. Instead of an offer of "judgment," amend the Rule to authorize an offer of "settlement" or "agreement" or "compromise," the language used in rules in several states. In a similar vein, we inquired about having the Rule expressly authorize the defendant to include in the offer a nonadmission of liability clause, which some of our lawyers considered logically inconsistent with a "judgment." Such clauses are in fact sometimes used in Rule 68 offers around the country, and we have not found any reported decision that voids an offer of judgment merely because it contains a nonadmission of liability clause. Nevertheless, given lawyer uncertainty about the practice, we asked their reactions to recognizing such clauses in the express text of the Rule.
The linguistic incoherence of denying wrongdoing in a judgment of liability would disappear, of course, if a Rule 68 amendment softened "judgment" to "settlement" or "agreement." In any event, the only reported decisions on the issue we discovered held that the inclusion of such a clause did not invalidate a Rule 68 offer of judgment. See, e.g., Pigeaud v. McLaren, 699 F.2d 401 (7th Cir. 1983) (alternative holding); Jolly v. Coughlin, 1999 WL 20895 (S.D.N.Y. 1999); Mite v. Falstaff Brewing corp., 106 F.R.D. 434 (N.D. Ill. 1985). In Delta Air Lines, Inc. v. August, 450 U.S. 346, 349 n. 2, 101 S.Ct. 1146 (1981), the Supreme Court specifically observed that the offer contained a nonadmissions clause. The Court made no mention of the effect of that provision, and plaintiff did not argue that its inclusion invalidated the offer. See also FEDERAL PROCEDURE, LAWYER'S ED. CHT. 51.II.A.: "An offer of judgment is not rendered objectionable for purposes of FRCP 68 by virtue of the inclusion of a condition whereby the amount offered is to be in total settlement of the action with no admission of liability and the judgment is to have no effect whatsoever except in settlement of the case."; WRIGHT MILLER, FEDERAL PRACTICE AND PROCEDURE, CHT. 9 § 3002: "The offer . . . can disclaim liability while offering that judgment be entered as so specified. . . ."
There was almost universal support among our plaintiffs' and defense lawyer respondents for softening the Rule's terminology from offer of "judgment" to offer of "settlement" or "agreement." All who expressed a view on the issue agreed that the change had the potential to increase defendants' use of the rule. At least one civil rights and one employment discrimination plaintiffs' lawyer, concurring with this premise, nevertheless opposed the change, contending that an increased use of Rule 68 would do his clients more harm (e.g. lowball offers that might coerce early disposition of meritorious claims) than good (e.g. earlier payment of a reasonable sum). Several plaintiffs' lawyers viewed the Rule in its current one-way form as an unalloyed evil because it is a tool that can be utilized only by defendants and poses only disadvantages to plaintiffs. And a small number of lawyers, mostly representing civil rights plaintiffs, thought that softer language undermined the public vindication of the plaintiff, and condemnation of the defendant, implicit in the latter's confession of a "judgment." For this reason a small number of lawyers also opposed an amendment that would expressly authorize nonadmission of liability clauses, although most who expressed a view supported such a change.
B. Require Plaintiffs To Disclose Accrued Fees
The second change we asked about was whether the plaintiff should be required to disclose his accrued attorney's fees as of the time the defendant considers making a Rule 68 offer so that the defendant — assuming it trusts plaintiff's counsel's certification of fees — may add that amount to its estimate on liability and damages to arrive at a total offer. This would address the stated concern of some defense lawyers that one reason they cannot make well informed Rule 68 offers is their ignorance about plaintiffs' accrued legal fees. There is some precedent for requiring plaintiffs to disclose their hours. A few local district court rules around the country require plaintiffs' lawyers in fee-recovery litigation periodically to disclose to the court or opposing counsel the dollar amount of their fees, hours or both.
See supra note 68.
Our respondents as a group were moderately supportive of this change. Many defendants' lawyers, unsurprisingly, were strongly supportive, pre-sumably because the change would cost them nothing and would give them potentially useful information. However, a fair number of plaintiffs' lawyers were strongly opposed. They observed that if they had to disclose their current fees, a defense lawyer could guess how many hours a plaintiff's lawyer had invested in the case and might learn as a result if the plaintiff were underprepared. And there were some who responded that if they had to disclose plaintiffs' fees, defendants should have to disclose their own counsel's fees. Defendants' counsel responded that defendants have a genuine need to know what a plaintiff's fees are because under these fee recovery statutes, defendants are going to have to pay those fees if a plaintiff prevails. They argue that plaintiffs have no corresponding legitimate need to know what the defense lawyer is billing per hour. Of course that information is of potential tactical benefit to the plaintiff. If there is a fee petition years later, and the defendant argues that the plaintiff's lawyer is not worth three hundred dollars an hour, the plaintiff could reply by disclosing defense counsel's hourly fee. While that information might not be strictly relevant to the "reasonable hourly rate" component of the standard lodestar formula for awarding fees to the plaintiff's lawyer, it does as a practical matter take some of the steam out of the defendant's argument.
C. Give Defendants Incentive To Make An Offer Even When They Are Convinced They Will Ultimately Defeat Liability
The third proposal sought to respond to the Supreme Court's decision in Delta Air Lines, Inc. v. August, which robs the defendant of any substantial incentive to make a Rule 68 offer in a case where the defendant is strongly convinced that it will eventually win on liability. Rule 68 gives the defendant relief from having to pay the plaintiff's future fees but only, according to the Court, if the plaintiff wins, although at a level not exceeding the offer. Delta Air Lines thus creates an irony. If the defendant loses, but loses small, Rule 68 gives it relief from fees. If the defendant does better than that and wins outright on liability, it gets nothing from Rule 68. Instead, Federal Rule 54(d) kicks in and the defendant, a prevailing party because of the no-liability judgment, would be eligible to recover its own full costs, pre-offer and post-offer, from the plaintiff. And the plaintiff, of course, would have to bear its own full costs in the action.
Most defense counsel, especially employment discrimination defense counsel, moderately to strongly favored a Rule 68 amendment overturning Delta Air Lines so that their clients would have an incentive to make offers even in cases they are confident they are going to win. Most plaintiffs' counsel, and especially employment discrimination counsel, were moderately to strongly opposed. Much of this opposition proceeded from the view, generally supported by both civil rights and employment discrimination counsel, that the typical employment discrimination plaintiff — who at least until recently had a job — is more solvent, and hence less judgment proof, than the typical civil rights plaintiff. If that belief is correct, employment discrimination plaintiffs as a group would be more vulnerable than civil rights plaintiffs to any new Rule 68 sanctions requiring them, when they lost on liability, to make payments to defendants beyond the relatively modest Section 1920 costs they may owe under Rule 54(d).
There were indications, however, that some civil rights plaintiffs in New York and Philadelphia might be better heeled than typical Section 1983 police misconduct plaintiffs in other federal districts and that they would therefore be realistically threatened by a Rule 68 amendment requiring them to pay defendants more than Rule 54 costs if they lost on liability.
A number of plaintiffs' counsel tried to bargain on this one. They said they might be amenable to giving the defendant some sanction in the event that the plaintiff who had rejected a defense offer then suffered a judgment of no liability. Plaintiffs already pay full costs in this situation under Rule 54, and plaintiffs' counsel certainly did not like a proposed sanction of double or triple costs, arguing that such a sanction (which would add $10,000 or $20,000 to what they said was typically about $10,000 in costs) could be economically ruinous to an employed person who is working at a low wage. But plaintiffs' counsel said those double or triple cost sanctions might be acceptable if they were made discretionary with the judge, or were capped in amount, provided Rule 68 were also amended so that plaintiffs as well as defendants could make an offer.
D. Incorporate Rule 68 Into Early Judicial Interventions and Mediating
The fourth proposal suggested integrating the sledge hammer of Rule 68 with the milder processes of early neutral evaluation and mediation. For example, Rule 68 could be placed on the checklists of magistrates and district judges presiding at early litigation conferences. This proposal originated not with us but with our lawyer respondents. Fortunately, the suggestion was made in the first several interviews so that we could then ask other lawyers about it. There were several variants of this proposal. One was that Rule 26(f), which outlines the parties' initial discovery plan, might specifically require lawyers to discuss Rule 68, not just "the possibilities for a prompt settlement. . . ." At least one defense lawyer said this would give him a lever or justification to discuss Rule 68 with his clients without appearing weak. Another variant was that Rule 68 offers would be explicitly added to the list of subjects to be considered at the Rule 16 scheduling conference that the federal judge or magistrate conducts shortly after the parties' Rule 26(f) conference, at least in statutory fee-recovery cases where Rule 68, if triggered, would threaten the loss of fees, not just Section 1920 costs. Currently Rule 16(c)(9) refers only to "settlement and the use of special procedures to assist in resolving the dispute when authorized by statute or local rule."
Alternatively, when a case is sent to a mediator, especially by the judge, local court rules could provide that Rule 68 be part of the mediator's checklist. This presupposes that mediator training would cover the potential utility of Rule 68 in fee-recovery situations where Marek fee forfeiture is available. Lawyers told us they were interested in this to cut through the perceived economic conflicts of interest between defendants and hourly paid, nonrepeat defense counsel, and between plaintiffs and contingent fee plaintiff's counsel. That is, if a defense lawyer inclined to continue billing by the hour for another year or two were reluctant for that reason to recommend making a Rule 68 offer, she would have nowhere to hide if, in caucus with the defendant, the mediator asks, "Have you considered how a Rule 68 offer might strengthen your hand?" By the same token, assume the defendant decides during mediation to extend an offer to the plaintiff and convey it through the mediator. A plaintiff would then learn of the offer even if his lawyer would be reluctant to relay it for fear it might be accepted, with a smaller resulting contingent fee than the lawyer might hope to recover from a large verdict after trial.
A couple of defense counsel reported that they had learned while taking a plaintiff's deposition that the plaintiffs had never been told by their own lawyers about Rule 68 offers that defendants had transmitted — an evident violation of the rules of ethics and of professional responsibility. Raising Rule 68 in mediation would tend to pretermit that failure because plaintiff as well as plaintiff's counsel would be present when the mediator presented a Rule 68 offer, or a defense proposal to make such an offer.
How did the lawyers respond to incorporating Rule 68 into early, judicially supervised conferences or mediation? As a whole the group was moderately to strongly supportive, even the defense counsel. However, some plaintiffs' counsel conditioned their support on the Rule being made two-way, that is amended so that plaintiffs as well as defendants could make "offers" (in more familiar litigation parlance, "demands") that defendants would refuse at their peril. And some on both sides thought that injecting Rule 68 into the mix should be optional with the mediator on a case by case basis, to be mentioned only when the mediator concluded it would more likely bring the parties together than drive them apart. A requirement that the mediator raise the issue, some contended, might interfere with the mediator's judgment, flexibility or perceived neutrality.
E. Explain the Marek Consequence In the Text of the Rule, and Specify The Federal Fee-Recovery Statutes To Which That Consequence Would Apply
Fifth, we asked our respondents if it would increase utilization of the Rule, or at least improve lawyer understanding of its meaning in operation, if the Marek v. Chesny holding — that in a federal fee recovery case, the plaintiff forfeits not only post-offer costs but also post-offer fees when the Rule is triggered — were spelled out textually. A lawyer reading the unannotated Rule today, more than a quarter century after Marek, would be uninformed of its principal consequence. Indeed more than one defense lawyer, including several prominent lawyers at large firms specializing in employment discrimination defense, professed ignorance that the Rule could relieve their clients of fees. Some, after being informed of Marek, asserted that henceforth they would consider using the Rule.
If the text were amended, not only could defense lawyers ascertain at a glance that the Rule might relieve their clients from fee, rather than just cost liability; plaintiffs' counsel would understand the full, perhaps ominous import of a Rule 68 offer in a fee-recovery case. On average, the lawyers were moderately supportive of this change. But some plaintiffs' lawyers were opposed to textual transparency if the Rule remained a one-way tool that only defendants can initiate, arguing that greater defense awareness of the power of the Rule would result in their clients facing the threat of Rule 68 offers more frequently, with no offsetting advantage for plaintiffs. Our respondents also generally favored an amendment that would spell out which federal fee-recovery statutes called for Marek fee forfeiture, rather than continuing to hope that lawyers will attend to fine linguistic distinctions between statutes authorizing fees "as part of" rather than "in addition to" costs.
F. Require Defense Lawyers to Certify That They Had Discussed the Rule with Clients
The sixth proposal would require defense lawyers to certify that they had discussed Rule 68 with their clients and considered its use. This proposal was driven by the suspicion, to some degree confirmed by the interviews, that certain hourly paid defense lawyers — principally employment discrimination, rather than civil rights lawyers, and mainly those with no ongoing relationship with the client — might not advise defendants about the Rule's advantages because of the lawyers' economic interest in protracted litigation. On average, plaintiffs' and defense lawyers were neutral to moderately supportive of this change. Perhaps surprisingly, a few plaintiffs' lawyers were strongly opposed, considering it demeaning for their counterparts to have to make the certification. Of course, even more defense lawyers were strongly opposed.
G. Retain the "One Way" Feature of Current Rule 68 and Increase The "Pressure" on Plaintiffs to Accept an Offer By Requiring them to Beat the Offer by a Specified Percentage.
The seventh proposal involved tweaking the current one-way rule so that it would be triggered more frequently after trial. Under the current Rule, plaintiff is at risk if her recovery fails to exceed the defendant's offer by even a penny. The proposal would retain the current one-way nature of the Rule but require the plaintiff, in order to preserve the right to post-offer costs and fees, to recover fifteen percent more than the amount of the offer. Plaintiffs would accordingly perceive greater risk in rejecting an offer. Most plaintiffs' lawyers were strongly opposed to this proposal, which had no countervailing benefit for them or their clients. Most defense lawyers were moderately supportive to strongly supportive, although a few said they thought plaintiffs have a tough enough time in civil rights and employment discrimination cases as it is and the proposal amounted to unfair piling on.
We refer to this proposal as a "pressure" model because it increases the pressure on plaintiffs to accept Rule 68 offers by creating a greater risk of fee forfeiture.
H. Fundamentally Reformulating The Rule to Be Two-Way, So That Plaintiffs as Well as Defendants Could Initiate the Offer Process
1. The General Concept of a Two-Way Rule
Although several states empower plaintiffs to make Rule 68 offers, the current federal rule allows only defendants to do so. Initially we asked the lawyers about their general attitude, without getting into the details, toward allowing plaintiffs, as well as defendants, to initiate the offer. That is, for the first time, federal court plaintiffs would have the option of submitting an offer (really, a demand) of judgment or settlement that would put defendants at risk for some sanction, probably a fee multiplier, beyond the damages and fee liability defendants currently incur if they are found liable in an action under a federal fee-recovery statute.
Plaintiffs' counsel overwhelmingly and strongly supported this change. If the Rule were made two-way, they said, plaintiffs would use it early and routinely as a way of dynamiting earlier offers out of recalcitrant defendants, particularly those whose liability was backed by an insurer. Plaintiffs' counsel further speculated that defendants would likely respond with their own early counter-offers of judgment. Indeed they believed that the defendants themselves, once informed of a plaintiff's "offer," would insist that their lawyers put similar pressure on plaintiffs. And the plaintiffs' lawyers also asserted that a plaintiff's offer (demand) followed by a defendant's offer would establish a more reasonable range for settlement at an earlier time in the litigation than in ordinary settlement negotiations. This assertion was premised on the belief that Rule 68 offers are of potential value to offerors only if they represent predictions of trial outcomes that are credible to offerees.
Many defense counsel were strongly opposed, although a significant number were either moderately or strongly supportive. We should not underestimate the intensity of the opposition on the part of many defense lawyers. Some adamantly objected to giving the plaintiff an opportunity to submit an early demand with legally compelled consequences if the defendant rejected the offer (the demand) and guessed wrong. In general, they reasoned that defendants who lost at trial were already liable to pay the plaintiffs' attorneys' fees and that any additional sanction was excessive. Or they pointed out that defendants who make offers and plaintiffs who make demands are not similarly situated, in that offers are underwritten by a defendant's real resources while demands cost plaintiffs nothing.
We then asked the respondents about different variations of a two-way approach.
2. A Two-Way "Pressure" Model: Requiring Either Party That Rejects An Offer to Achieve A Better Outcome After Trial
We asked the lawyers how they would react to a "pressure" model, one that has no apparent precedent in federal or state law. Under this model, each side would, in effect, have to improve its position over the offer or demand it rejected by ten or fifteen percent. Thus the plaintiff, to avoid fee forfeiture under Marek, would have to recover a hundred and fifteen percent or more of the defense offer that it had rejected; and the defendant would be subjected to additional sanctions beyond the full payment of a plaintiff's fees whenever the plaintiff recovered eighty-five percent or more of the demand that the defendant had rejected. So instead of having to beat an offer by a penny, as under current law, a plaintiff would have to beat it by fifteen percent to avoid losing fees. And a defendant would be at risk for a multiplier on the fees a plaintiff incurs after the defendant rejected a plaintiff's demand — a sanction that is not available under current law — even if the plaintiff recovered only eighty-five percent or more of the amount of that demand. In effect, the "pressure" model builds in mutual deterrence through symmetrical nuclear armament on both sides.
Many plaintiffs' lawyers were strongly supportive of the two-way pressure model. But one reason for that support may have been that the particular variant of the proposal we asked them about did not subject plaintiffs to any new sanction apart from Marek forfeiture of their post-offer fees and costs. Under the proposal, the only difference for plaintiffs would be that they would forfeit those fees and costs more frequently than under the current "one penny" trigger, namely when a judgment failed to exceed a defense offer by fifteen percent. Plaintiffs' counsel may therefore have reasoned, "We may forfeit fees and costs slightly more often under this proposal, but we get to initiate pressure against the defendant and we're not going to have to dig into our pockets for anything beyond the costs that the law already requires us to pay."
In contrast, defendants under this proposal would be subject to a new form of liability, a multiplier on fees that is generally unavailable under federal fee recovery statutes because of a Supreme Court environmental law decision, City of Burlington v. Dague. Any proposal for saddling defendants with multipliers on a plaintiff's fee when a defendant guesses wrong in rejecting a plaintiff's Rule 68 demand would have to overcome objections that the Rule as so amended would conflict with that decision. Burlington expresses the Court's view that the underlying statutes authorizing prevailing parties to recover a fee based on a reasonable hourly rate do not intend to reward plaintiffs or their counsel for "contingency," that is the risk of losing. But presumably an amended Rule 68 that imposed fee multipliers on defendants who, at least in hindsight, wrongly rejected a plaintiff's offer of judgment would not be rewarding plaintiffs for contingency, but rather would be sanctioning defendants for unreasonable or at least excessively litigious conduct.
505 U.S. 557, 112 S.Ct. 2638, 120 L.Ed.2d 449 (1992).
Unsurprisingly, most defense lawyers were moderately to strongly opposed to this two-way pressure model that could magnify their clients' fee liability, even though it could also cause Marek fee forfeiture to be triggered against plaintiffs more frequently. Defense lawyers in general disliked the idea of their clients' having to pay additional fees if the Rule were triggered against them. And they observed that their clients' superior resources meant that fee judgments against defendants would usually have to be satisfied, whereas monetary sanctions against many civil rights and some employment discrimination plaintiffs would ultimately prove hollow. Nonetheless, a significant number of defense lawyers were moderately to strongly supportive, opining that this sort of mutual pressure would induce their clients, as well as plaintiffs, to adopt more realistic bargaining positions earlier in the litigation.
3. A Two-Way "Cushion" Approach: Permitting Either Party To Avoid The Rule's Sanctions By Attaining A Trial Result Almost As Good As the Offer It Rejected
Last, we asked the lawyers about a kinder, gentler version of a two-way rule that gives both parties, or at least the defendant, a percentage cushion. In contrast to the pressure model, it gives a party leeway to guess a little bit wrong about the result at trial without being subjected to sanctions. This two-way "cushion" approach is reflected in some of the state statutes — those of Florida, Texas, and Georgia, among others. It works as follows. If a defendant issues an offer for a hundred thousand dollars, and the plaintiff after rejecting it recovers at trial only ninety thousand, the plaintiff would not face the forfeiture of post-offer fees under Marek because, although she had guessed wrong, she had not guessed too wrong — specifically, she had gained more than 75% or 80% of the relief offered by the defendant.
See Florida Statutes § 768.79 (1991) (75%/125% cushion); Vernon's Texas Statutes and Codes Annotated, § 42.004 (2004) (80%/120% cushion); Official Code of Georgia Annotated § 9-11-68 (2006) (75%/125% cushion).
The state cushion models are symmetrical. Each side enjoys a cushion in the same percentage amount, typically 20% or 25% above or below the opponent's offer. The proposal we put to the lawyers, however, departed from that model by granting the cushion only to the defendant, i.e., after it rejected a plaintiff's demand. We felt that there are so few defense offers now, even though plaintiffs under the current Rule 68 must beat those offers by a penny to avoid adverse consequences, that defendants would utilize the Rule even less frequently if we gave plaintiffs a sanction-avoiding percentage cushion. So we proposed that while the defendant would face a fee multiplier only if the plaintiff's recovery exceeded the plaintiff's rejected demand by fifteen percent, the defendant would be relieved from having to pay post-offer fees and costs to the plaintiff under the Rule's existing trigger, that is whenever the plaintiff failed to beat defendant's offer by at least one penny.
The support of plaintiff's lawyers, which was strong for the symmetrical two-way pressure model, waned considerably for a two-way rule that afforded a cushion only for defendants. A distinct objection by some plaintiffs' lawyers was that under this model their clients would face extra cost sanctions. Our rough equitable sense was that it seemed fairer to hit plaintiffs with some extra costs when they guessed "really" wrong in rejecting an offer — i.e., not just by a penny but by ten or fifteen percent. Most defense counsel, who were moderately to strongly opposed to the two-way symmetrical pressure model, were less opposed to this model, but they still strongly objected to the fee multiplier sanction defendants would face if the Rule were triggered despite the cushion. Defense counsel are perhaps best described as moderately opposed to this variant of a two-way rule.
4. A Summary of Attorneys' Reactions to Two-Way Reform Proposals
The particular attractions or threats that our "pressure" or "cushion" approaches posed for individual respondents may have obscured somewhat greater support by both plaintiffs' and defense lawyers for the general concept of some kind of two-way rule. More than a few lawyers who objected to specific details of proposed "pressure" or "cushion" models nevertheless embraced the broad suppositions underlying a two-way Rule 68.
These suppositions are that defense lawyers who might not now counsel their clients to consider the Rule — out of ignorance of Marek; or to avoid administrative delays, in the case of government lawyers in civil rights cases; or for personal economic reasons, in the case of certain hourly billing, nonrepeat lawyers representing private employment discrimination defendants; or for other reasons — would routinely and quickly do so if their clients were to receive a plaintiff's offer of judgment (demand) under a two-way regime. Indeed, principals of the defendant, having received such a demand, might ask their lawyers, "Is there something similar we can do to them [i.e., the plaintiff]?" There would then be two offers (really, a plaintiff's demand and a defendant's counteroffer) on the table. If each were made thoughtfully, those offers might be pegged at a somewhat more realistic level than the customarily extreme initial demands and responses in standard positional bargaining. That is because the benefits under the Rule for a plaintiff offeror-demander would not be triggered unless she could beat her own offer after trial by at least a penny, or perhaps by a modest percentage; and the benefits for a defendant offeror would not be triggered if the plaintiff could exceed or come close to meeting its offer.
Further, those somewhat more realistic demands and offers would presumably be made earlier than the opening salvos in ordinary private settlement negotiations. Unlike the defendant, who has sole control over initiation of Rule 68 today, the plaintiff and plaintiff's lawyer are typically desirous of resolving litigation and being compensated as soon as possible. They therefore have every incentive to consider making a Rule 68 offer (demand) quickly. Finally, the Rule's deadline for acceptance or rejection of an offer/demand, currently 10 days but often 30 days in state practice, might result in both sides focusing on settlement and, mindful of probable trial outcomes, doing so earlier than in ordinary bargaining uninfluenced by the Rule.
Several respondents offered an opinion about whether this "realism" dynamic is implicit in a two-way rule and would speed the pace of settlements. Civil rights plaintiffs' lawyers told us that at least in theory a two-way rule would lead to earlier resolutions and would not have any more negative effects on their clients than the current Rule. They reasoned that because so few cases are tried, there would be very few fee forfeitures. They added that a two-way mutual pressure rule would accelerate the settlement process; if one side made an offer, the other would follow suit, with quick resolution resulting if the differences in amounts between demand and offer were not extreme; a two-way rule on the pressure model would encourage earlier resolutions, principally because government defendants would be concerned about the sanction of a fee multiplier, while civil rights plaintiffs would seldom be deterred by increased sanctions because few have any assets or stakes in the game and would therefore be judgment proof; and either the pressure or cushion approach would stimulate early, fairly reasonable plaintiffs' offers.
Many employment discrimination plaintiffs, as well as the atypical civil rights plaintiff who has significant assets or future income prospects, supra note 83, would feel the heat from heightened sanctions if they failed to recover a judgment large enough to avoid them.
Civil rights defense lawyers responded diversely on the general utility of a two-way rule. Some said it would not have much effect because plaintiffs' typical demands are (and implicitly would remain) outrageous; others stated that it would generate an insurmountable rush to settle, but only immediately after summary judgment; that it would not work because plaintiffs' lawyers are risk takers seeking large contingency fees and accordingly would gamble on an outsized judgment after trial far larger than what they might expect via Rule 68 settlement; and that the pressure model would not lead plaintiffs to be more reasonable and might even make them less realistic in their demands. Other defense counsel, in contrast, believed that a two-way approach would elicit early, more reasonable plaintiff demands; that the pressure approach would encourage earlier resolution of conflicts by providing pressure well before trial is imminent; that a mutual rule would be palatable if coupled with required disclosure by plaintiffs of their accrued fees, in which event demands/offers would come "the next day"; that the pressure model would force hourly paid defense counsel and insurance adjustors to get realistic earlier; and that a Rule with a cushion feature could prompt negotiations and give impetus for settlement.
The most widespread enthusiasm for a two-way rule was found among our plaintiffs' employment discrimination lawyers. One opined that such a rule would lead the parties to take reasonable positions and that defendants would make offers after plaintiffs made demands under the Rule. Three others said a two-way pressure rule would produce earlier settlements. Another indirectly supported the underlying realism dynamic by asserting that the proposal would create dialogue by means of opposing offers. One believed that a two-way option would increase use of Rule 68 by clients with experienced counsel, that even defendants in districts where offers are rare would make them after plaintiffs made demands, and that the parties would reach earlier settlement somewhere near the mid-point of their opposing offers. Still another asserted that a two-way pressure model would lead parties' offers to converge towards reasonableness. One expressed skepticism, logically addressed to any version of the Rule, by noting that only a tiny percentage of cases will be tried. This lawyer also observed that the Rule's threat to plaintiffs' fees was illusory and that defendants take numbers seriously only when a mediator or other neutral is involved. Another, an employment discrimination plaintiffs' lawyer and mediator, strongly favored the rule, observing that it would give him leverage as a mediator to encourage settlement and as a plaintiffs' lawyer to persuade his clients to appraise their prospects realistically. And another, for reasons not expressed, found mutuality of use attractive under either the pressure or cushion models. This degree of support for a two-way rule among employment discrimination plaintiffs' lawyers was somewhat surprising given the view held by many of them that the threat of increased costs sanctions on their clients might well deter the initiation or continued prosecution of viable claims.
One plaintiffs' lawyer did observe, however, that the impact of two-way sanctions is asymmetrical as between the opposing clients and lawyers. That is, the price for erroneously (in hindsight) rejecting plaintiffs' demands is paid by defendants, rather than their counsel; in contrast, at least as a practical although not a legal matter, it is plaintiffs' lawyers, rather than plaintiffs, who pay the price for their clients' "erroneous" (in hindsight) rejection of offers from defendants.
The Supreme Court has been clear that the attorneys' fees component of a judgment in an action under a fee-recovery statute like 42 U.S.C. § 1988 belongs to the plaintiff, rather than the plaintiff's counsel. See Blanchard v. Bergeron, 489 U.S. 87, 109 S.Ct. 939, 103 L.Ed.2d 67 (1989) (plaintiff's statutory attorney's fee award from the defendant may not be limited by a contractual contingent-fee agreement calling for lesser sum). By the same token, the plaintiff remains contractually liable for an agreed, lawful fee even if she recovers a lesser amount of statutory fees from a civil rights defendant. See Venegas v. Mitchell, 495 U.S. 82, 110 S.Ct. 1679, 109 L.Ed.2d 74 (1990) (the contractual fee agreement between plaintiff and plaintiff's counsel may call for payment of fees substantially in excess of the reasonable statutory fee plaintiff recovers from the defendant). See also Gobert v. U.S. Dept. of the Interior, 323 F. 3d 1099 (5th Cir. 2003) (applying the Venegas principle in case under Title VII). As a practical matter, however, the plaintiff's judgment, including its statutory fee component, is in most cases the principal or sole fund that enables a civil rights or employment discrimination plaintiff to discharge her contractual fee obligation to her lawyer. If Rule 68 operates substantially to reduce that judgment, by working a partial forfeiture of plaintiff's statutory fees, it pro tanto reduces the plaintiff's ability to pay the full fee to which her lawyer is entitled by contract.
Few employment discrimination defense counsel — the lawyer group probably most threatened economically by successful use of the Rule — opined on a two-way rule, but most who did were, perhaps surprisingly, somewhat supportive, at least in the abstract. One expressed concern that the defendant would have to evaluate cases too quickly because plaintiffs would make the offers (demands) immediately after commencing an action. Another apparently confused the "pressure" and "cushion" approaches, saying he preferred the latter because only when plaintiffs know they must exceed their own demands by a percentage will their early demands be reasonable. Another recognized the virtue of a two-way pressure model, despite objecting to the fee multiplier sanction that model contemplates, because the proposal would ratchet up the pressure on both parties to settle. A large firm defense lawyer, although acknowledging that the mutual pressure model would put pressure on defendants, and noting that "certainly the defendant needs . . . some pressure," opposed any two-way proposal. And a lawyer with a medium-sized defense firm predicted that the two-way pressure approach would generate more offers, without specifying why or when they would be made or at what level.
VI. DILEMMAS FOR THE AMENDMENT PROCESS
History suggests that would-be reformers of Rule 68 should approach the task with considerable caution. In 1983 an attempt was made in the Advisory Committee on Civil Rules to amend Rule 68 to make it a two-way rule and automatically require prevailing or losing plaintiffs, as well as the defendants who had "erroneously" (with the hindsight of a judgment) rejected an opponent's offer of judgment, to pay an opponent-offeror's full costs, including attorneys' fees. This proposal closely resembled the "loser pays" English Rule on attorney fees, to which federal statutes authorizing fees for prevailing parties have stood as exceptions. "In the face of [an] onslaught of criticism, the Advisory Committee withdrew the 1983 proposal. . . ." A 1984 Advisory Committee proposal entitled "Offer of Settlement; Sanctions" would have authorized a district court, after judgment, to impose a range of discretionary sanctions if it "determines that an offer was rejected unreasonably, resulting in unnecessary delay and needless increase in the costs of the litigation. . . ." The determination would have been based on "all of the relevant circumstances at the time of rejection. . . ." This proposal, too, met substantial opposition, much of it centered on concerns about excessive collateral litigation over whether rejection of an offer was unreasonable, and was also rejected. Marek followed a year later. In 1992 Senior U.S. District Judge William W Schwarzer, then Director of the Federal Judicial Center, proposed a model for capped and limited two-way fee shifting that would have exempted claims under civil rights statutes. An attempt to amend the Rule along the lines of this more moderate proposal also failed. Indeed, the ensuing discussion evidently excited sufficient residual controversy that the Advisory Committee's October 1994 minutes recite: "A motion to abrogate Rule 68 was made and seconded twice. Brief discussion suggested that there was support for this view. . . ." That, however, did not happen. Instead, Rule 68 survives unamended, apparently underutilized, yet still subject to the Supreme Court's interpretation in Marek.
Committee on Rules of Practice and Procedure of the Judicial Conference of the United States, Preliminary Draft of Proposed Amendments to the Federal Rules of Appellate Procedure, Federal Rules of Civil Procedure, Federal Rules of Criminal Procedure and Rules Governing Section 2254 Cases and Section 2255 Proceedings in the United States, District Courts, reprinted in 102 F.R.D. 407, 433 (1984).
Id.
Simon, supra note 90, at 17-19.
William W Schwarzer, Fee-Shifting Offers of Judgment — An Approach to Reducing the Cost of Litigation, 76 JUDICATURE 147 (1992).
Minutes of the Advisory Comm. on Federal Rules of Civil Procedure (Oct. 1994), in 1994 WL 880348 at 18, cited in Merenstein, More Proposals to Amend Rule 68; Time to Sink the Ship, 184 F.R.D. 149, 167 n. 32 (1999).
The lawyer reactions reported here present evident dilemmas about the desirable direction of any change. Here's a brief outline of the challenges confronting any Federal Civil Rules Advisory Committee intrepid enough to undertake the process of amendment.
There does seem to be consensus favoring a few essentially "procedural" amendments that would not alter the basic dimensions of the current Rule 68. For example, there is a fair bit of agreement that defendants would use the Rule more often if the terminology were softened from "judgment" to "settlement" and if plaintiffs were required to disclose their counsel's fees to assist defendants in formulating a sensible offer. It is also generally agreed that if judges or mediators, early in a lawsuit, were to suggest consideration of an offer under the Rule in the presence of defendants, defendants would likely make more offers even if some of their lawyers were reluctant to mention the possibility. And many lawyers thought it sensible if the text of the Rule would be changed to alert parties to its major potential consequence — forfeiture of the plaintiff's post-offer fees — and to specify the feeshifting statutes under which that consequence would apply. But it is precisely because such changes might spur more offers that some plaintiffs' lawyers, who along with their clients have little to gain from the current one-way Rule other than perhaps receiving offers earlier, are adamantly opposed to this kind of tinkering.
An intermediate class of proposals would retain the one-way nature of the Rule, perhaps making the kind of procedural changes described above, but more controversially giving the Rule a quicker trigger, imposing sanctions on plaintiffs when defendants win outright at trial, and in any event levying heavier sanctions on plaintiffs who guess wrong in rejecting an offer. While this approach had obvious appeal to some defense lawyers, and likely would result in more frequent use of the Rule, it was even more obnoxious to the plaintiffs' bar than merely changing the Rule terminologically and procedurally. Certain specific aspects of this approach — e.g., overturning Delta Air Lines by giving defendants an incentive to make an offer even in cases they are confident they will ultimately win — are fraught with practical difficulties when applied to a statutory fee regime that frowns on penalizing plaintiffs except when their claims are frivolous. On the other hand, overturning Delta will often mean imposing sanctions on plaintiffs who lack substantial resources and have no fund created by a judgment. That may be emotionally satisfying to some defendants but would leave them without the ability to collect.
The most fundamental reformulation of the Rule would make it available to plaintiffs as well as defendants. Defendants who would not now make offers might well do so as counter-offers to demands by plaintiffs, yielding an extra increment of defense offers as well as a previously nonexistent set of plaintiffs' demands. But the Rule would be triggered in a plaintiff's favor, after a defendant rejected her demand, only if she were to prevail; and by hypothesis that means the plaintiff would already receive full pre- and post-offer attorney's fees under the Civil Rights Attorney's Fees Act or some other applicable fee provision of a federal statute prohibiting employment discrimination. That raises the question of what additional sanction on defendants Rule 68 might authorize that would stimulate plaintiffs' offers. The only such sanction our lawyer respondents could identify that would give plaintiffs sufficient incentive to use the Rule was a multiple on the full lodestar fees they recover currently. And it is precisely that prospect that terrifies, indeed infuriates, a considerable number of counsel for defendants.
In brief, it is not difficult to envision that amendments designed simply to increase the use of the current Rule by defendants could work. Even without changing the current sanctions, for example, the Rule could simply trigger those sanctions more frequently by effectively requiring plaintiffs who reject offers to exceed them at trial by a stated percentage. Or, with or without altering the trigger, the Rule could intensify the sanctions on rejecting plaintiffs. It might, for instance, command not only that plaintiffs whose recovery falls short must forfeit their post-offer statutory attorneys' fees, a la Marek. It might also require them to pay (if they can) the post-offer fees of the defendant. But both of these changes aggravate the one-sidedness of the current Rule 68. And the second is not only impractical, in the case of impecunious plaintiffs. More fundamentally it is flatly inconsistent with the bedrock policy of the major fee-recovery statutes: to enable plaintiffs with nonfrivolous claims to attract counsel to assert them.
Alternatively, it is self-evident that making the Rule two-way, i.e, also available to plaintiffs, would increase the total number of offers under the Rule (provided there were no changes that would reduce the small number of offers made by defendants under the existing version). But if the Rule were to be triggered simply by a defendant's rejection, erroneous in hindsight, of a plaintiff's offer (i.e, demand), what additional sanction beyond the full costs and statutory attorneys' fees the defendant owes under existing law would incentivize plaintiffs to make offers without unduly penalizing defendants who insist on their day in court? Surely a percentage multiplier on the fees the defendant must pay, if significant, would serve as an adequate incentive for many plaintiffs to use the Rule. But most defense counsel we interviewed considered the penalty of additional fees draconian, especially when overlaid on a statutory scheme that awards fees routinely to prevailing plaintiffs, yet only in the most exceptional circumstances to prevailing defendants. And even if such an amendment were deemed fair by the Advisory Committee, the Judicial Conference, the Supreme Court and the Congress, there remains the question — framed in somewhat different terms by the Court in Burlington — whether a Federal Rule of Civil Procedure may validly require payment of attorneys' fees in excess of 100% of the reasonable fees expressly authorized in the underlying fee-recovery statutes.
Our second and concluding article in this series will address these dilemmas and venture tentative proposals for amending Rule 68 as applied to civil rights, employment discrimination and other federal fee-recovery cases in which its potential impact is greatest.