«Too Late to Stipulate: Reconciling Rule 68 with Summary Judgments Channing J. Turner† INTRODUCTION Imagine a typical lawsuit between two parties, ...»
Too Late to Stipulate: Reconciling Rule 68
with Summary Judgments
Channing J. Turner†
Imagine a typical lawsuit between two parties, plaintiff and
defendant. The litigants have reached the final days of pretrial
litigation, and like any good defense counsel, the defendant’s
lawyer hopes to dismiss the case before going to trial. He moves for summary judgment—increasingly common in modern litiga- tion1—and raises the possibility of settlement with the plaintiff.
Hoping to strong-arm an end to the case, he decides to send the plaintiff a special settlement offer under Federal Rule of Civil Procedure 68 called an “offer of judgment.” If the plaintiff ac- cepts this offer, the court will automatically enter judgment against the defendant according to the offer’s terms. The case will end. But if the plaintiff declines the offer, Rule 68 may make the plaintiff liable for costs that the defendant incurs dur- ing subsequent litigation.2 This risk of increased costs means the plaintiff should think seriously about accepting the offer.
Before the plaintiff makes a decision, however, the judge grants full summary judgment for the defendant. The plaintiff has lost—at least in the eyes of the court. But plaintiff’s counsel sees an opportunity to turn things around. As soon as he learns of the summary judgment ruling, the plaintiff contacts the de- fendant to accept his offer of judgment. The defendant protests, but the plaintiff points out that the Rule makes no exception for † BA 2011, Arizona State University; MMC 2011, Arizona State University; JD Candidate 2014, The University of Chicago Law School.
1 See Paul W. Mollica, Federal Summary Judgment at High Tide, 84 Marq L Rev 141, 143–44 (2000) (reporting that, in a limited sample of twenty volumes of the Federal Reporter from 1973 and 1997–98, the proportion of cases terminating in summary judg- ment increased from about fourteen per volume in 1973 to forty-seven per volume in 1997–98).
2 FRCP 68(d).
361 362 The University of Chicago Law Review [81:361 a grant of summary judgment. At the same time, plaintiff sends the court notification of the offer and his acceptance, along with a motion to amend the entry of summary judgment and enter fi- nal judgment against the defendant. If the court grants his mo- tion, the plaintiff has succeeded in turning a certain defeat into a victory.
This hypothetical illustrates the dilemma facing courts that grant summary judgment during a pending offer of judgment.
Rule 68 is a rigid procedural mechanism. Once made, the liti- gants cannot revoke a Rule 68 offer. And once accepted, the Rule appears to mandate entry of judgment. The plaintiff3 has four- teen days to accept an offer before it is considered withdrawn,4 and if the plaintiff accepts during this period, the court clerk “must” enter judgment according to the defendant’s terms.5 This language has caused a split in federal and state courts as to whether a grant of summary judgment during the fourteen-day acceptance period ends the plaintiff’s power to accept an offer or whether a plaintiff can still accept even after summary judgment has been granted. The implications of this issue for litigants and our adversarial system are significant. If a plaintiff can accept an offer of judgment even after the case would otherwise end in summary judgment, then he can essentially win his case despite having lost on the merits.
This Comment begins with the intuition that something about the entry of judgments makes it different from all other events that might occur during an outstanding Rule 68 offer.
Unlike, say, the death of a witness or a ruling on the exclusion of evidence, the operation and purposes of Rule 68 suggest that it should afford special significance to an order disposing of the case.
Accordingly, this Comment advances two ideas: First, offer and acceptance in Rule 68 should be viewed as procedural, rather than contractual. And second, entry of final judgment, but not necessarily summary judgment, should abrogate the operation of Rule 68. To get there, Part I introduces Rule 68 by explaining its operation and its drafters’ possible intent. Part II introduces the conflict between Rule 68 and summary judgment 3 Rule 68 uses the terms “party defending against a claim” and “opposing party” in order to include counterclaims, cross claims, and third-party claims. FRCP 68(a). Consistent with the existing literature, this Comment simply refers to “plaintiff” and “defendant” to distinguish between the party bringing a claim and the party defending a claim, whether or not that party would be the actual plaintiff or defendant at trial.
4 FRCP 68(b).
5 FRCP 68(a).
2014] Reconciling Rule 68 with Summary Judgments 363 and charts the approaches courts take in interpreting Rule 68 and similar state rules. Part III proposes a new procedural conception of offer and acceptance in the context of Rule 68. It shines a finer light on the ubiquitous yet easily confused court orders called “judgments” in order to distinguish summary judgment from its more procedurally significant counterpart, final judgment. It then leverages the standard for amending judgments to argue that final judgment nullifies a Rule 68 offer.
Finally, Part III ends by explaining how this interpretation promotes the purposes and operation of Rule 68.
I. RULE 68’S PURPOSE AND PROBLEMS Before launching into interpretation, it’s important to understand why Rule 68 comes into conflict with the law of judgments. This Part begins by explaining Rule 68’s operation and the historical context that guides courts in interpreting it. Then, it describes Rule 68’s doctrine of irrevocability and how courts have conceptualized the Rule’s offer-acceptance procedure in light of the Rule’s textual ambiguity.
A. “The Most Enigmatic of the Federal Rules”6 At first glance, Rule 68 appears fairly simple.7 Rule 68 allows a defendant—but not a plaintiff8—to serve an offer on the plaintiff to settle a case for a certain dollar amount or other relief. If the plaintiff decides to accept the offer within fourteen days, either party can file the offer, notice of acceptance, and proof of the original service with the court.9 Until this point, the court has no involvement in—and may not even know about— the offer. Once filed, the court then enters judgment according to the offer’s terms.10 However, if the plaintiff does not accept the offer and subsequently wins a judgment “not more favorable 6 Crossman v Marcoccio, 806 F2d 329, 331 (1st Cir 1986).
7 FRCP 68(a) states:
At least 14 days before the date set for trial, a party defending against a claim may serve on an opposing party an offer to allow judgment on specified terms, with the costs then accrued. If, within 14 days after being served, the opposing party serves written notice accepting the offer, either party may then file the offer and notice of acceptance, plus proof of service. The clerk must then enter judgment.
8 See FRCP 68(a) (allowing “a party defending against a claim” to make an offer of judgment but giving no comparable power to a party bringing a claim).
9 FRCP 68(a).
10 FRCP 68(a).
364 The University of Chicago Law Review [81:361 than the unaccepted offer,” the plaintiff must pay all costs incurred by the defendant after the offer was made.11 Despite this apparent simplicity, Rule 68 has been described as “among the most enigmatic of the Federal Rules of Civil Procedure,”12 in large part because it leaves many basic questions unanswered. For example, what expenses qualify as “costs”? For the most part, the costs of litigation in Rule 68 have been interpreted similarly to other areas of the Federal Rules.13 However, the Supreme Court significantly upped the ante in Marek v Chesny14 by holding that costs under Rule 68 also include any expense labeled as “costs” in the substantive statute underlying a lawsuit, making those costs orders of magnitude higher in cases that involve a substantive fee-shifting statute.15 Plenty of other questions surrounding Rule 68 still have no clear answer. For example, are offers that disclaim liability invalid?16 May a defendant ever revoke an offer before the fourteen-day acceptance period lapses?17 Must offers provide for the relief requested in the plaintiff’s complaint?18 And how should courts construe offers when the defendant leaves the scope of proffered recovery ambiguous?19 History provides good reason to think that these ambiguities will not be easily resolved through revision or amendment.
11 FRCP 68(d).
12 Crossman, 806 F2d at 331. See also Danielle M. Shelton, Rewriting Rule 68: Realizing the Benefits of the Federal Settlement Rule by Injecting Certainty into Offers of Judgment, 91 Minn L Rev 865, 876–921 (2007) (canvassing the many areas of uncertainty in interpreting and applying Rule 68).
13 See Marek v Chesny, 473 US 1, 13–14 (1985) (Brennan dissenting) (asserting that “costs” under Rule 68 have traditionally been interpreted as those taxable costs defined in 28 USC § 1920, including “court fees, printing expenses, and the like”).
14 473 US 1 (1985).
15 Id at 9. See also Christopher W. Carmichael, Encouraging Settlements Using Federal Rule 68: Why Non-prevailing Defendants Should Be Awarded Attorney’s Fees, Even in Civil Rights Cases, 48 Wayne L Rev 1449, 1455–58 (2003) (describing the interaction between Rule 68 and substantive statutes that include a shifted duty to pay attorney’s fees).
16 See Shelton, 91 Minn L Rev at 881–83 (cited in note 12) (finding that, despite near uniformity of agreement that a valid offer of judgment can disclaim liability, some courts continue to reject such offers, creating “continuing uncertainty and resulting [in] collateral litigation”).
17 See id at 883–86 (outlining the split between cases that find Rule 68 offers “categorically” irrevocable and cases that leave open the possibility of revocation under limited circumstances).
18 See id at 886–88 (describing confusion over whether an offer that provides only injunctive relief when money damages are sought is valid).
19 See id at 888–915 (canvassing cases in which confusion exists over whether the defendant intended to include attorney’s fees and whether the amount of the defendant’s offer includes costs then accrued).
2014] Reconciling Rule 68 with Summary Judgments 365 Multiple efforts to amend the Rule have failed. In 1983–84, an effort to change the Rule provoked intense controversy that ultimately led to abandonment of the suggested amendments.20 Another effort in 1992–93 fared no better.21 In the face of all this uncertainty, it’s natural to turn to Rule 68’s purpose as a guide for interpretation. However, understanding Rule 68’s purpose presents problems of its own. The Supreme Court has said that Rule 68 was adopted to “encourage settlement and avoid litigation” by “prompt[ing] both parties to a suit to evaluate the risks and costs of litigation, and to balance them against the likelihood of success upon trial on the merits.”22 Thus, courts have universally accepted settlement promotion as the Rule’s guiding principle.23 Yet, judges, lawyers, and commentators alike doubt the Rule’s ability to actually promote settlement.24 When the Advisory Committee on the Civil Rules proposed amendments to the Rule in 1983, it acknowledged that the Rule “rarely has been invoked and has been considered largely ineffective as a means of achieving its goals.”25 Commentators have speculated that the ambiguities left unresolved by the Rule’s text undermine its purpose by discouraging litigants from utilizing it.26 A survey of 20 See Roy D. Simon Jr, The Riddle of Rule 68, 54 Geo Wash L Rev 1, 12–19 (1985) (describing the efforts of defense lawyers to promote the proposed amendment and opposition from the plaintiff’s bar and civil rights lawyers).
21 See Lesley S. Bonney, Robert J. Tribeck, and James S. Wrona, Rule 68: Awakening a Sleeping Giant, 65 Geo Wash L Rev 379, 380–81 (1997) (describing Rule 68’s descent into obscurity and the renewed attention it received from efforts to revise it in the 1990s); David A. Anderson and Thomas D. Rowe Jr, Empirical Evidence on Settlement Devices: Does Rule 68 Encourage Settlement?, 71 Chi Kent L Rev 519, 519 n 2 (1995).
22 Marek, 473 US at 5 (describing the Court’s interpretation of Rule 68’s purpose).
See also Delta Air Lines, Inc v August, 450 US 346, 352 (1981) (“The purpose of Rule 68 is to encourage the settlement of litigation.”). But see Robert G. Bone, “To Encourage Settlement”: Rule 68, Offers of Judgment, and the History of the Federal Rules of Civil Procedure, 102 Nw U L Rev 1561, 1566 (2008) (“[T]here is a serious problem with this view of Rule 68.”).
23 See, for example, Perkins v US West Communications, 138 F3d 336, 338 (8th Cir 1998) (stating that “[t]he purpose of Rule 68 is to promote the compromise and settlement of litigation”), citing Delta Air Lines, 450 US at 352 n 8.
24 See Simon, 54 Geo Wash L Rev at 6–7 (cited in note 20) (“Many lawyers and judges believe that rule 68 has failed to encourage settlement.”). For an empirical study of whether Rule 68 encourages settlement, see generally Anderson and Rowe, 71 Chi Kent L Rev 519 (cited in note 21).
25 Committee on Rules of Practice & 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, 102 FRD 407, 433 (1984).
26 See Shelton, 91 Minn L Rev at 921 (cited in note 12) (“[T]he rule’s lack of clarity with regard to offers undermines its very purpose.”); Keith N. Hylton, Rule 68, the Modified 366 The University of Chicago Law Review [81:361 practicing civil rights and employment-discrimination attorneys published in 2007 provides anecdotal confirmation that uncertainties can make Rule 68 unattractive.27 Notwithstanding its critics, there is reason to think Rule 68 has evolved into a potent strategic tool in specific situations.