Four Corners Theory Applies to Offer of Judgment - Injury & Tort Law - U.S. Third Circuit
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Four Corners Theory Applies to Offer of Judgment

After years of hypnotherapy, you finally suppressed the painful memories of law professors droning incessantly that an agreement is governed by the "four corners" of the document. But, if you're planning to negotiate a Rule 68 offer of judgment in the Third Circuit, it's time to drag that phrase out of the inner recesses of your subconscious.

The Third Circuit Court of Appeals ruled on Tuesday that a Rule 68 offer of judgment is restricted to the terms that are memorialized - you guessed it - in the four corners of the agreement.

The case, Lima v. Newark Police Department, originated out of 2007 incident in which a photographer working for Roberto Lima’s Portuguese-language newspaper, Brazilian Voice, discovered and photographed a decomposed body in the Ironbound section of Newark, New Jersey. Lima alleged that, after he reported the incident and showed Newark police officers the crime scene, he and the photographer were harassed and intimidated by police until they turned over all copies of the photographs.

In 2008, Lima sued the Newark Police Department for compensatory and consequential damages, punitive damages, attorney’s fees and costs, and any other costs the court deemed appropriate.

Before discovery commenced, Lima and Newark began negotiating an offer of judgment via email. Lima wanted attorney’s fees and costs in addition to the settlement amount; Newark wanted to give Lima a lump sum. The email to which Newark’s offer to Lima was attached stated, “This offer is, however, as to all defendants and all claims. The City makes this offer with the intention and expectation that, if accepted, the litigation will be resolved in its entirety.” The problem in this case arose because the actual offer only stated that Newark was offering Lima “$55,000, including all of Plaintiff’s claims for relief against all of the defendants.”

Lima accepted the offer and simultaneously filed a request for judgment in the amount of $55,000, with costs. When Newark clarified to the magistrate judge that the $55,000 offer was an all-inclusive deal, Lima’s attorneys responded that the offer and acceptance were binding, so attorneys’ fees and costs were the only unresolved issues.

The District Court sided with Newark in light of the city’s email that accompanied the offer of judgment, but the Third Circuit disagreed, declaring that the courts must not consider extrinsic evidence of the parties’ intentions when interpreting a Rule 68 offer of judgment. Because the offer was valid and silent to fees and costs, the court remanded the case.

Law professors responded to the decision with a smug, collective “I told you so.”

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