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Federal Rule of Civil Procedure (FRCP) 68 permits a party defending a claim to serve on an opposing party "an offer to allow judgment on specified terms, with the costs then accrued." If the suit was brought under a statute that provides for an attorney fee award to the prevailing plaintiff, the relevant "costs" include attorney fees.
If the defendant wants the offer of judgment to include costs and fees, the offer must specifically state so.
Let's look at two examples from the federal appellate courts that drive this point home.
In Lima v. Newark Police Department, a Third Circuit ruling from 2011, Roberto Lima and Newark had negotiated an offer of judgment over 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 actual offer, however, only stated that Newark was offering Lima "$55,000, including all of Plaintiff's claims for relief against all of the defendants."
The Third Circuit concluded that the offer didn't include fees and costs because it was valid and silent as to fees and costs.
The Seventh Circuit Court of Appeals reached a similar conclusion this week in a Title VII harassment suit.
Juana Sanchez sued Prudential Pizza for sex discrimination and harassment. Before the case went to trial, Sanchez accepted Prudential Pizza's offer of judgment under Rule 68. The offer included "all of Plaintiff's claims for relief," but it didn't specifically refer to costs or attorney fees.
The district court concluded that the offer was unambiguous and included attorney fees. The Seventh Circuit Court of Appeals, however, reversed that decision.
Here, Sanchez argued that the offer was silent regarding costs and fees, and that she was entitled to attorney fees as a Title VII prevailing party. Prudential Pizza countered that its offer wasn't silent regarding fees because it referred to Sanchez's "claims for relief" and Sanchez had requested attorney fees and costs in her amended complaint.
The Seventh Circuit rejected that contention, noting:
If Prudential Pizza's offer was meant to include attorney fees and costs, the offer was not specific. It simply did not refer to Sanchez's attorney fees or costs. It referred to Sanchez's "claims" but failed to specify what those claims were, such as whether they included her claim against the other defendant ... If Prudential Pizza intended its offer to include attorney fees, its chosen language was insufficient.
A blanket statement that the offer satisfies the plaintiff's claims for relief is unlikely to absolve your company of responsibility for costs and fees. Avoid prolonged litigation. If your company makes an offer of judgment to satisfy a lawsuit, make sure that the offer explicitly addresses attorney's fees and costs.