The Federal Rules of Civil Procedure (FRCP) outlines Rule 68, which may grant a stay of proceedings, although used rarely. Under this rule, a federal court defendant of lawsuit can make an Offer of Judgment. An Offer of Judgment is a written proposal submitted to opposing parties to settle the plaintiff's claims and reimburse their legal costs and expenses.
There are significant advantages to an Offer of Judgment as well as important considerations. This article helps business owners understand how they work and may benefit their civil litigation cases.
How Offers of Judgment Work
Offers of Judgment are similar to placing a bet on the case's value. Once the plaintiff receives the offer, they must carefully consider whether the claim is ultimately worth more than the offer. They might accept the offer for an amount much lower than a potential judgment, which can save defendants significantly.
Upon acceptance, the court enters the Offer of Judgment and the case closers. However, the plaintiff could also ignore the offer during the prescribed 14-day acceptance window. The case will continue through civil litigation in this instance.
Offers of Judgment Provide Key Advantages
Even if the plaintiff rejects the offer, it maintains inadmissibility and confidentiality advantages of standard settlement offers used in many civil cases. Notably, the rule states that if the plaintiff obtains a less favorable judgment than the conditions in the Offer of Judgment, the company may recover costs after making the offer.
These costs can include:
- Administrative expenses
- Attorneys' fees
- Court reporter fees
- Filing fees
- Service of process fees
- Trial transcripts
- Witness fees
- Oher expenses allowed by law
Reimbursement of these costs can help defray some of the high costs associated with defending the suit. The governing statute defines costs to include attorneys' fees, which means the defendant may also recover all reasonable attorneys' fees incurred after the offer of judgment was delivered.
Be Aware of the Legal Drawbacks
Parties must file an accepted Offer of Judgment with the court, and the court will enter the judgment into the public record. Thus, an Offer of Judgment would jeopardize the confidentiality of settlement negotiations.
Consequently, this situation could negatively affect the company's credit or reputation and imply that the company is willing to settle such claims. Companies do not always want to entertain these risks, especially when the benefit does not outweigh the associated costs.
Final Thoughts and Considerations
Every case is unique, and parties should use Offers of Judgment carefully. However, if your business is going through expensive litigation proceedings, you may want to consider using Rule 68 Offer of judgment, and doing so could save you time and money while also protecting your company's profitability.
Connect with the our team Today
The business litigation practice group at HAN LLP has years of experience representing NYC and LA businesses. We offer leading-edge legal services across a wide range of issues corporations face. Get in touch with us today for more information here.