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Offers of Judgment: A Tool for Early Resolution

18 September 2019

Lee M. Thomas

Claim professionals and defense attorneys often review cases in which liability of the insured/client is beyond dispute.  What is less clear, however, is the methodology (or lack thereof) utilized by plaintiff attorneys in calculating wildly exorbitant pre-suit or post-litigation demands.  Plaintiff attorneys may argue the case is a “limits case” based solely upon minimal personal injuries or physical damage.  In this situation, a useful but little known tool known as an “offer of judgment” can be used by defense attorneys to encourage a plaintiff to take a realistic view of their damages or risk certain consequences if the litigation proceeds.

North Carolina – N.C. Gen. Stat. 1A-1, Rule 68

An offer of judgment is, in essence, a formal written offer to settle the case for a certain amount of money or property.  In North Carolina, only a defendant may serve an offer of judgment (or any “party defending against a claim,” i.e., a counterclaim).  It must be served at least ten days before trial, but there is no bar to serving it upon receipt of a complaint (or any time after service of process is completed).  The offer “allow[s] judgment to be taken against [the offeror] for the money or property or to the effect specified in [the] offer, with costs then accrued.”  N.C. Gen. Stat. 1A-1, Rule 68.  The plaintiff then has ten days after service of the offer of judgment in which or he or she may serve “written notice that the offer is accepted.”  If the plaintiff does so, either party then files with the court the offer of judgment, and the written acceptance, and “thereupon the clerk shall enter judgment.”  If the plaintiff does not accept the offer of judgment within ten days of service (which is usually accomplished simply by ignoring it), the offer is “deemed withdrawn” and the offer cannot be used against the offeror (defendant) at trial.  Pretty straightforward, right?  You may be wondering, “How is this different from having the defense attorney extend an offer to the plaintiff’s attorney in an e-mail or telephone call?”

Now for the good part: the consequences of non-acceptance.  If the defendant either (a) prevails on a dispositive motion, such as summary judgment or judgment on the pleadings,[1] (b) prevails at trial,[2] or (c) loses at trial but the jury awards to the plaintiff less than, or equal to the amount of the offer of judgment, the defendant can recover all of his or her “costs incurred after the making of the offer.”  Let’s look at an example.

Paula Plaintiff files suit against Dave Defendant for injuries arising out of a minor automobile accident.  Paula’s attorney made a pre-suit demand on Dave’s carrier for $50,000.  Dave’s defense attorney thinks the damages, realistically, are closer to $15,000.  Dave’s defense attorney serves an offer of judgment of $15,000 upon Paula’s attorney.  Paula’s attorney ignores the offer.  The parties engage in two years of costly discovery, and Dave incurs $2,000 in costs (e.g., court reporters, transcripts, mediation, etc.).  The case proceeds to trial, and the jury finds in Paula’s favor, but awards her only $12,000 in damages.  This is less than the $15,000 offer of judgment that Dave’s defense attorney served.  Therefore, Dave is entitled to recover $2,000 in defense costs.  As a practical matter, this may be applied as a set-off from the judgment (i.e., $12,000 in damages – $2,000 in costs payable to Dave = $10,000 judgment).

South Carolina – Rule 68, SCRCP

            In South Carolina, “any party” may file and serve an offer of judgment – even a plaintiff.[3]  In contrast with North Carolina, the offer of judgment is served on the plaintiff and filed with the clerk.  Additionally, instead of only a ten-day window to accept, the plaintiff has twenty days to accept it.  If the plaintiff decides to accept the offer, the mechanics of the rule are the same as in North Carolina.  But if a plaintiff rejects the offer, the consequences of non-acceptance are more severe.  Let’s use Paula Plaintiff and Dave Defendant as an example.  If Dave prevails on a dispositive motion or at trial, or the jury awards Paula less than the amount of the offer of judgment, Dave can recover “all administrative, filing, or other court costs from the date of the offer until the entry of the judgment” plus “a reduction from the judgment or award of eight percent interest computed on the amount of the verdict or award from the date of the offer to the entry of the judgment.”  Rule 68, SCRCP.

This is important advantage.  A plaintiff’s refusal of the offer may cost her interest in the end.  Remember the offer of judgment was $15,000, the parties litigated for two years, and let’s assume the jury awards Paula $12,000.  Dave is entitled to a reduction from the $12,000 of 8% interest.  Paula’s judgment will be reduced by $1,920, for a total of $10,080 (Interest = Principal x Interest Rate x Time / $12,000 x 8% x 2 years = $1,920 interest).  This represents a 16% reduction of the judgment.  No doubt a plaintiff who waits years for a judgment will not be thrilled when the judge reduces it by several thousand dollars as a penalty for not accepting the earlier offer.

Summary

Dealing with an unrealistic plaintiff or plaintiff’s attorney is a common situation in litigation.  By using the offer of judgment, however, defense attorneys can encourage early resolution by forcing a plaintiff to do the math and weigh the consequences of litigating a case in the face of a reasonable offer of judgment.

About the Author: Lee Thomas is an associate with Martineau King PLLC and focuses his practice on construction litigation and serious personal injury defense.  Comments and feedback are welcome.  Lee can be contacted by email at [email protected].

Important Disclaimer: The above is not legal advice and is made available for educational purposes only.  You should not act upon this information without seeking advice from a lawyer licensed in your own state or jurisdiction.  This article should not be used as a substitute for competent legal advice from a licensed professional attorney in your state or jurisdiction.  The presentation of this information does not form a lawyer/client relationship.

[1] See Gay v. Peoples Bank, 2016 NCBC LEXIS 70 (N.C. Super. Ct. Sept. 16, 2016) (awarding costs to defendant under Rule 68 after defendant prevailed on motion for summary judgment).

[2] See Griffis v. Lazarovich, 164 N.C. App. 329, 595 S.E.2d 797 (2004).

[3] This can be a useful tool for a carrier seeking to recover from an at-fault party via a subrogation action.  For purposes of this article, however, we discuss only the situation in which a defendant is making the offer of judgment.

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