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Newsletter -
Fall 2007
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New Jersey Court Rules provide an“Offer of Judgment” rule under R.4:58-1. The Rule allows any party involved in litigation to file an offer of monetary judgment with the Court and serve on any party an offer in favor of the offeror or to allow judgment to be taken against the offeror for a sum stated therein. The offer of judgment must be served by the offeror at least 20 days before the trial date. The offeree is permitted to accept the offer of judgment either 10 days before the trial date or within 90 days of its service, whichever expires first. If the offer is not accepted, then it is deemed withdrawn and evidence of the offer of judgment is inadmissible until a proceeding after the completion of the trial.
If an offer of judgment is not accepted within the aforementioned time frames, the offeree can face severe consequences if the offeror eventually prevails at trial. If the offer of judgment is not timely accepted and the offeror obtains a monetary judgment in an amount that is 120 percent of the offer or more, or 80 percent, of the offer or less (if the offeror is the defendant), the offeree is responsible for the offeror’s costs of suit; reasonable litigation expenses incurred following non-acceptance; prejudgment interest in the amount of eight percent on the amount of any money recovery from the date of offer or the date of completion of discovery (whichever is later), and reasonable attorney’s fees incurred as a result of non-acceptance. This Rule was created to promote early settlement by creating disincentives for litigants to reject good faith offers of compromise resulting from the use of the Rule. Schettino v. Roizman Dev. Inc., 158 N.J. 476, 482 (1999).
A recent Appellate Division decision, Palmer v. Kovacs, 385 N.J. Super. 419 (App. Div. 2006), discussed the issue of what consequences flow from the tender of multiple offers of judgment. In Palmer, the Plaintiff filed and served an offer of judgment with the court in the amount of $20,000 on March 6, 2002. The Defendant did not accept the offer within the 90 day time period. Following the court’s denial of defendant’s summary judgment, the Plaintiff filed a second Offer of Judgment in the amount of $10,000. Again, the offer was rejected by the Defendant and the matter proceeded to trial.
Following a jury verdict at trial, the Court determined that the Plaintiff had obtained damages in an amount that was more than 120 percent of the pretrial offer of judgment. In a post-trial proceeding to determine the Plaintiff’s allowance for costs, counsel fees and litigation expenses, an issue arose as to which offer of judgment date controlled the calculation of fees, costs and expenses under the Rule. After hearing agreements from both sides, the Court determined that the second offer of judgment date controlled. The matter was appealed.
In its analysis, the Appellate Division noted that the offer of judgment rule is “designed to promote settlement by creating disincentives for litigants to reject reasonable offers of compromise tendered under the Rule.” The Court emphasized that the only way to advance the policy governing the Offer of Judgment Rule was to require the recipient to react in a prompt manner. The policy allowing subsequent offers of judgment only furthers the underlying policy of the Rule which promotes settlement.
The Appellate Division concluded that a party can make as many subsequent offers as they wish up until 20 days before the actual trial date. The Appellate Division noted that as a case progresses, a litigant is in a better position to ascertain the weaknesses and strengths of his case through discovery, motion practice and arbitration. If a litigant makes an offer without conducting an analysis of damages when facts remain unknown because discovery is incomplete, a subsequent offer of judgment can allow a party to reassess its position and make a more informative subsequent offer.
The Appellate Division overruled the trial court’s decision and held that a plaintiff should not be worse off under the Rule for making a second offer to settle. Accordingly, the defendant faced two different fee shifting consequences at trial for their failure to accept either offer and settle the case.
The Palmer decision provides guidance to litigants with respect to case management and strategy. If an attorney has not had the opportunity to complete discovery, but analyzed the case enough to make an informed estimate of damages, an attorney can advise his client to file and serve an offer of judgment as soon as possible to get an early trigger date for fee shifting purposes. Then once discovery is completed, a more thorough subsequent offer can be made that would likely invoke settlement.
The Rule is a powerful tool, when appropriate, that if used by an attorney and litigant can result in an expedient disposition of the case as well as substantial recovery in attorney fees and ligation expenses.
Ayesha Rashid
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