A Very Short Study of Rule 68, Federal Rules of Civil Procedure

By: Victor Israel Fleitas

Federal Rule of Civil Procedure 68 provides in relevant part that a defendant may offer to allow judgment to be taken against it “with costs then accrued.”[i]  If the offer is refused and the judgment obtained by the plaintiff is less favorable than the offer, “the [plaintiff] must pay the costs incurred after the making of the offer.”[ii]  If the offer is accepted by the plaintiff, “the [defendant] must pay the costs accrued to the date of the offer.”[iii]

Since its inception in 1937, Rule 68 was designed as a mechanism to promote the early resolution of disputes by shifting the costs of litigation onto plaintiffs who failed to accept “reasonable” settlement offers.  However, commentators and practitioners alike are virtually unanimous in the opinion that Rule 68 has been largely ineffective in promoting early resolutions of disputes because it “does not provide enough of a carrot or stick” to motivate the parties to resolve the dispute quickly.[iv]

Despite the general consensus that Rule 68 is ineffective and its infrequent invocation by defendants,[v] the plaintiff’s attorney must be cognizant of the full implications of any Rule 68 Offer of Judgment in order to adequately assess the potential risks and rewards associated with the offer and to render an informed recommendation to the client regarding accepting the offer or the consequences of rejecting the offer.  In order to make that informed recommendation, plaintiff’s counsel must be able to ascertain what the actual value of the offer is by considering the proposed judgment and the costs involved.

1.         What Constitute “Costs” in a Rule 68 Offer of Judgment?

Rule 54(d) provides that “costs other than attorneys’ fees shall be allowed as of course to the prevailing party unless the court otherwise directs.”[vi]  Note that in the “typical” tort action attorneys’ fees are never an element of the recoverable costs.  Costs recoverable to a prevailing party pursuant to Rule 54(d) include:

(1) Fees of the clerk and marshal;

(2) Fees of the court reporter for all or any part of the stenographic transcript necessarily obtained for use in the cause;

(3) Fees and disbursements for printing and witnesses;

(4) Fees for exemplification and copies of papers necessarily obtained for use in the case;

(5) Docket fees under section 1923 of this title;

(6) Compensation of court appointed experts, compensation of interpreters, and salaries, fees, expenses, and costs of special interpretation services under section 1828 of this title.[vii]

It should be readily apparent that limiting costs to the items enumerated in §1920 will rarely, if ever, motivate parties to settle disputes in “high” value cases because the total amount of recoverable costs involved will generally constitute a small percentage of the overall offer of judgment.[viii]  However, in cases with smaller settlement values, recoverable costs under §1920 could easily constitute over 10 percent of the total value of the offer.

For example, assume a “standard” tort claim, in federal court based on diversity of citizenship, where counsel for the plaintiff makes a good faith assessment that the value of the case is $50,000.  Assume further, that counsel for the defendant makes a similar assessment of the value of the case but wants to motivate, or cram down, a smaller settlement by making an offer of judgment in the amount of $30,000 early in the litigation.  Should the plaintiff refuse the offer and proceed to trial and recover less than $30,000, say $25,000, the “cost” to the plaintiff could be significant.  Not only will the plaintiff be precluded from recovering all post-offer costs for depositions, witness fees (a significant expense in federal litigation for appearance and mileage) and copy costs (a significant expense at 10-25 cents a page in a paper rich case), but will be liable to the defendant for its similar costs from the date of the offer.

It is not unreasonable to estimate that recoverable costs under § 1920 could amount to $2,500 in a standard case with a $350 filing fee, two to four depositions, two to four witnesses under subpoena and an ordinary pile of photocopied paperwork.  In our example the defendant not only deprived the plaintiff of $2,500 in expenses to which he or she would ordinarily be entitled to as a “prevailing party,” in addition to the judgment, but also recovered, as an offset to the judgment, $2,500 for his or her client.  Consequently, the offer of judgment cost the plaintiff $5,000 or 20 percent of the total amount recovered.  In a worst case scenario, where the jury returns a defense verdict, the plaintiff would find him or herself in the unenviable position of becoming a judgment debtor to the defendant for the $2,500 in costs.

The message is clear; plaintiff’s counsel must assess all of the potential consequences of Rule 68 offer of judgment and be prepared to advise the client completely of all possible ramifications of accepting or rejecting the offer.  This message resounds in the “typical” tort case but must be adhered to even more stringently in any case where a fee shifting statute is involved.

2.         When do Attorneys’ Fees Constitute Costs Under Rule 68?

As previously noted, Rule 68 by incorporating Rule 54(d) does not by its terms define costs to include attorneys’ fees.  However, in the seminal case of Marek v. Chesny, the Court held that recoverable costs under Rule 68 included attorneys’ fees in cases where a federal fee shifting statute defined attorneys’ fees as part of the costs recoverable to a prevailing plaintiff.[ix]  This holding makes the analysis and consideration of Rule 68 offers in federal civil rights and employment discrimination cases of acute importance.

In Marek, the defendant made an offer of judgment of $100,000 including liability, costs and attorney’s fees then accrued.[x]  At the time the offer was made the plaintiff had accrued $32,000 in costs and attorney’s fees.[xi]  The case was tried to a jury and the plaintiff was awarded $60,000.[xii]  The plaintiff then claimed approximately $140,000 in post-offer costs and attorney’s fees.[xiii] The Court reasoned that the plaintiff’s recovery of $92,000 ($60,000 + $32,000) was less favorable than the defendant’s $100,000 offer and denied the plaintiff attorney’s fees from the date of the offer through trial.[xiv]

The holding in Marek deprives a plaintiff of any costs and attorney’s fees accrued after the date of an offer of judgment where the plaintiff ultimately recovers less than the offer at trial.  It is clear that the implications of an offer of judgment for a plaintiff in litigation involving a federal fee-shifting statute are more grave than in the “typical” tort claim.  Consequently, the plaintiff’s counsel must as the Court advised “‘think very hard’ about whether continued litigation is worthwhile.”[xv]  On the bright side, however, the Circuit Courts are virtually unanimous in concluding that a plaintiff who ultimately recovers less than an offer of judgment in a fee-shifting case is not liable for the attorneys’ fees of the defendant.[xvi]

                                                                       Conclusion

The purpose of this very short review of Rule 68 is to familiarize the practitioner with the basics of the rule in order to adequately address the implications arising from the invocation of the rule to the plaintiff’s claim.  It is precisely because Rule 68 is so rarely invoked that plaintiff’s counsel may sometimes be at a loss to assess the offer of judgment in purely objective terms free from concern about dealing with some unknown or unaccustomed to practice.  Simply stated, the offer of judgment may serve to focus plaintiff’s counsel’s attention on the merits of the claim at a specific point in the litigation, but the resolution of the question will depend on the same factors which go into assessing any settlement offer once all of the “costs” and benefits are known.


[i].  Fed. R. Civ. P. 68.  The Mississippi Rules of Civil Procedure contain an identical  provision.  See Miss. R. Civ. P. 68.

[ii]Id.

[iii]Id.

[iv]See Harold S. Lewis, Jr. & Thomas A. Eaton, Rule 68 Offers of Judgment: The Practices & Opinions of Experienced Civil Rights & Employment Discrimination Attorney’s 1 (Univ. of Ga. Sch. of Law 2007); see also John E. Shapard, Likely Consequences of Amendments to Rule 68, Federal Rules of Civil Procedure 1 (Federal Judicial Center 1995).

[v].  Lewis & Eaton, supra at 17-18 (providing anecdotal evidence of how infrequently Rule 68 offers are made in practice).

[vi].  Fed. R. Civ. P. 54(d) (emphasis added).

[vii].  28 U.S.C. § 1920.

[viii].  Shapard, supra at 1.

[ix]. Marek v. Chesny, 473 U.S. 1, 9 (1985)

[x]Marek, 473 U.S. at 3-4.

[xi]Id. at 4.

[xii]Id.

[xiii]Id.

[xiv]Id. at 11-12.

[xv]Marek, 473 U.S. at 11.

[xvi]EEOC v. Bailey Ford, Inc., 26 F.3d 570, 571 (5th Cir. 1994).