UNIVERSITY OF GEORGIA SCHOOL OF LAW

RESEARCH PAPER SERIES

Paper No. 08-012 December 2008

The Contours of a New FRCP, Rule 68.1: A Proposed Two-Way Offer of Settlement Provision for Federal Fee-Shifting Cases
Walter F. George Professor of Law Mercer University School of Law J. Alton Hosch Professor of Law University of Georgia School of Law teaton@uga.edu

HAROLD S. LEWIS, JR.

THOMAS A. EATON

This paper can be downloaded without charge from the Social Science Research Network electronic library at http://ssrn.com/abstract=1318251

The Contours of a New FRCP, Rule 68.1: A Proposed Two-Way Offer of Settlement Provision for Federal Fee-Shifting Cases Harold S. Lewis, Jr.* Thomas A. Eaton** Introduction Our research began with interviews of experienced attorneys who prosecute and defend civil rights and employment discrimination cases. We set out to determine the extent to which offers of judgment under Federal Rule of Civil Procedure 68 (FRCP 68" or Rule 68") are made in these type of cases and the reasons why that Rule is or is not used. We focused on civil rights and employment discrimination litigation because it is in those cases where Rule 68 has the greatest potential to stimulate an early resolution of the dispute. Rule 68 provides the offeror greater leverage in civil rights and employment discrimination cases than in most other types of civil litigation, because the potential sanction to the prevailing offeree who turns down and fails to improve upon the offer includes the forfeiture of post-offer statutory attorneys fees. And in these cases, fees often constitute the greater part of a plaintiffs recovery. Our first report1 confirmed what many had suspected: with some notable exceptions,2

* Walter F. George Professor of Law, Mercer University, Walter F. George School of Law. Columbia College (B.A., 1969); Stanford University School of Law (J.D., 1972). ** J. Alton Hosch Professor of Law, University of Georgia School of Law. University of Texas (B.A., 1972); (J.D., 1975). The authors express their gratitude to the Walter F. George Foundation of Mercer Law School for underwriting the initial research and lawyer interviews, as well as to Mercers Dean Daisy Hurst Floyd and Dean Rebecca Hanner White of the University of Georgia School of Law for their ongoing support. Our thanks also to Kate Bridges, a student at the University of Georgia School of Law, for her research assistance on state offer of judgment rules. Finally, we greatly appreciate the cautions about would-be reforms of the Federal Rules of Civil Procedure from Edward H. Cooper, Thomas M. Cooley Professor at the University of Michigan Law School.

Lewis and Eaton, Rule 68 Offers of Judgment: The Practices and Opinions of Experienced Civil Rights and Employment Discrimination Attorneys, 241 F.R.D. 332 (2007). For a more extended discussion of these interviews and the comments of lawyers, judges, and academics, see Symposium, Revitalizing FRCP 68: Can Offers of Judgment Provide Adequate Incentives for Fair, Early Settlement of Fee-Recovery Disputes, 57 Mercer L. Rev. 717 (2006). Lewis and Eaton, supra note 1, 421 F.R.D. at 349 (civil rights defendants in Seattle, Minneapolis, Philadelphia, Oakland and New York made more than usual use of Rule 68 offers of judgment. Interestingly, employment discrimination defense attorneys in the same areas did not report the same). -12

experienced attorneys report that Rule 68 offers of judgment are rarely made in the very types of cases in which they, theoretically, would be most effective.3 The attorneys provided a variety of explanations for why Rule 68 appears to be underutilized, most of which are explored in this paper.4

In this, our second report, we discuss how Rule 68 might be amended to make it a more effective tool for stimulating the prompt and fair resolution of civil rights and employment discrimination actions. Our suggested potential amendments are drawn largely, but not entirely, from two sources: the comments and suggestions made by the attorneys we interviewed, and the practices that have evolved in states that have similar provisions in their respective rules of civil procedure. In very broad terms, we discuss (1) having a separately numbered subdivision of the Rule for cases arising under federal fee-shifting statutes; (2) modifying the terminology of Rule 68 to describe more explicitly the mechanics and sanctions of the Rule; (3) allowing plaintiffs, not just defendants, to initiate offers under a two-way rule; (4) devising a set of incentives and sanctions calculated to promote the timely and fair resolution of disputes without unduly threatening either party; and (5) incorporating time frames for making and responding to offers. At the outset, we wish to state clearly that we do not view Rule 68, amended or unamended, as even remotely resembling a panacea. It is likely not as powerful or productive as more informal devices like pre- or post-dispute mediation or, as discussed below, early neutral evaluation. The Rule is only one of several procedural devices that can help speed up the resolution of litigated disputes. What we offer here are the broad contours of how Rule 68 could be reshaped to deal with the distinctive challenges posed by its application in litigation pursued under federal fee shifting statutes, especially over claims asserting violations of civil rights and employment discrimination statutes. Our goal is to spark a conversation about how to make Rule 68 a more useful and effective tool to bring about the earlier yet still fair resolution of these claims. Part I of our paper begins with a discussion of the scope and sources of our proposals. In Part II we address the specific problems that the lawyers we interviewed identified as impediments to the effective use of Rule 68 offers of judgment in civil rights and employment discrimination litigation. Part III discusses specific proposals that respond to the problems identified in Part II. Part IV explains why, in our view, the proposed changes could be made

Id., 241 F.R.D. at 349. Id., 241 F.R.D. at 350-56. -2-

through the federal civil rules amendment process without any additional statutory action. I. Scope of the Proposed Amendment A. A Separate Rule for Offers Made in Fee-Shifting Litigation

We propose a new numbered subdivision of Rule 68 limited in application to the federal fee-shifting litigation we studied. The application of Rule 68 in cases where attorneys fees are awarded to prevailing parties present common considerations that set them apart from others. The critical distinguishing factor is that statutory awards of attorneys fees to prevailing plaintiffs often reflect a Congressional policy to encourage litigation under those statutes. By far the greater number of the fee-shifting statutes to which the Rules new subdivision would apply are of the Christiansburg Garment variety. The Civil Rights Attorneys Fees Awards Act of 1976, 42 U.S.C. 1988, and its Title VII counterpart, Section 706(k), direct the award of attorneys fees to prevailing parties. But the Supreme Court in Christiansburg Garment v. EEOC5 interpreted Section 706(k), and by extension Section 1988, to forbid the award of fees to prevailing defendants, except in the rare case that a plaintiffs claim is frivolous or utterly without foundation. The asymmetrical treatment of prevailing plaintiffs and defendants with regard to attorneys fees embodies two important Congressional policies. First, civil rights laws depend heavily upon private enforcement, and fee awards have proved an essential remedy if private citizens are to have a meaningful opportunity to vindicate the important Congressional policies which these laws contain.6 Civil rights and employment discrimination plaintiffs are often referred to as private attorneys general in that they advance public policy through private litigation. Second, Congress has recognized that these private attorneys general should not be deterred from bringing good faith actions to vindicate the fundamental rights here involved by the prospect of having to pay their opponents counsel fees should they lose...7 Because of these legislative policies, the sanctions against civil rights and employment discrimination plaintiffs we propose for a new subdivision are necessarily constrained in ways not applicable in other types of civil litigation. In particular, FRCP 68 cannot simply mimic state offer of judgment rules that routinely shift defense attorneys fees to losing plaintiffs, at least for federal statutory claims subject to the Christiansburg Garment principle.8
5

461 U.S. 412 (1983).

The Civil Rights Attorneys Fees Awards Act of 1976, Senate Report No. 94-1011 at 2, as reprinted in 1976 U.S.C.C.A.N. 5908, 5910.
7

Id. at 5, as reprinted in 1976 U.S.C.C.A.N. 5908, 5912.

On occasion, a lower federal court has interpreted a federal fee-shifting statute to permit the assessment of fees against a losing plaintiff, even when the plaintiffs claims did not -3-

B.

Sources of Our Proposed Amendments

In proposing these amendments, we rely heavily on the observations of the experienced civil rights and employment discrimination lawyers we interviewed. These attorneys not only offer the insights gleaned through collective decades of experience, but, we believe they may also reflect what sort of amendments could be acceptable to the greatest number of attorneys.9 We also borrow from the collective experience of the states that have rules similar to Federal Rule 68. In particular, we recommend adopting the feature included in many state rules that allow plaintiffs, as well as defendants, to make rule-based offers. As explained in more detail below, we expect that Rule 68 would be used more frequentlyand hence, would harbor greater potential to stimulate earlier resolution of disputes-- if plaintiffs were allowed to initiate offers. But we should also point out that we do not propose adopting any particular state provision in its entirety. We felt constrained to reject certain key provisions from state statutesnotably the provisions of two-way rules that would frequently require a plaintiff to pay a prevailing defendants attorneys fees even when the plaintiffs claim was not frivolousas conflicting with the overriding contrary policy embedded in federal fee-recovery statutes.10 fall to the Christiansburg Garment floor of frivolous or without foundation. See, e.g, Jordan v. Time, Inc., 111 F.3d 102, 105 (11th Cir. 1997) (awarding fees to the defendant under Rule 68 where underlying fee award statute, the Copyright Act, defined costs to include fees but had not been construed by the Supreme Court as ordinarily precluding fees against losing plaintiffs). A few important reasons suggested by lawyers as to why Rule 68 is not used with greater frequency apply more generally to all forms of compromise before or during litigation, not simply to Rule-based inducements to settle once litigation has commenced. For example, some clients and attorneys simply prefer to employ in many cases a hardball litigation strategy that dictates withholding all offers of settlement, before or during litigation. See Lewis and Eaton, supra note 1, 241 F.R.D. at 351. There are other cases in which a defense team otherwise inclined to consider settlement may have good reason not to, including the very real possibility of copycat litigation by others similarly situated. Id. at 346. We cannot conceive of how Rule 68 might be amended to respond to a determined hardball approach. In that respect Rule 68 is neither more nor less effective than any other settlement device, including mediation. Nor do we have reason to believe that our proposal below to change the terminology of a Rule 68 offer from one of judgment to settlement would overcome the reluctance of some defendants to settle a federal lawsuit where other plaintiffs are waiting in the wings. It could be that the mere filing of an offer of settlement in a federal district court clerks office, even shorn of its substantive terms, may inspire a putative plaintiff or her counsel. Some of our respondents indicated that state two-way rules are used more frequently in the trial of ordinary common law claims than for state statutory claims that authorize prevailing party attorneys fees. In part that may be because some states that ordinarily require each side to bear an opponents post-offer fees when their rule is triggered make an exception for claims under state civil rights or employment discrimination statutes that adopt the usual Christiansburg -410 9

C.

Why a Separate Rule for Fee Shifting Cases is Significant

Carving out a separate rule for fee shifting cases is important for two reasons. First, it would apply to the largest categories of privately initiated federal court civil actions.11 If a separate rule for federal fee shifting cases proves to encourage earlier and fair resolution of civil rights and employment discrimination cases, the collective cost and time savings to the federal judicial system and litigants could be substantial. Second, if the experience under this first set of amendments were successful, it would suggest that further, less constrained amendments for diversity and non-feeshifting federal question cases might be even more conducive to earlier settlement. As suggested above, most federal fee-shifting litigation poses special challenges to the successful implementation of the Rule. The fundamental challenge is to devise a set of incentives that encourages the early resolution of disputes without deterring civil rights and employment discrimination plaintiffs from fulfilling their Congressionally charged roles as private attorneys general. Under the numerically most important federal fee-authorization statutesincluding the civil rights and employment discrimination statutes that together generate the greatest number of privately initiated federal question cases Christiansburg Garment precludes fee awards against plaintiffs, leaving defendants without the single most attractive incentive to make Rule 68 offers. Even apart from the legal prohibition against awards of defense fees, as a practical matter few civil rights or employment discrimination plaintiffs have the assets or income potential to satisfy judgments requiring them to pay the fees of lawyers defending local governments or private employers. Even lesser, nonfee sanctions like costs will often be uncollectible given the scant resources of many civil rights or employment discrimination plaintiffs. So if our more modest amendments limited to fee-shifting cases prove successful, it augurs well for future amendments stipulating the more expansive sanctions against plaintiffs that might be crafted for diversity actions or for federal question cases where there are no statutory impediments to awarding fees against plaintiffs with nonfrivolous claims. II. Actual or Asserted Problems With Current Practice Under Rule 68

This portion of our paper will briefly summarize ten factors identified by the lawyers we interviewed that shed light on why Rule 68 is not used with greater frequency. Understanding

Garment federal statutory prohibition against imposing defense fees on any plaintiffs except those whose claims are adjudged frivolous. See, e.g., Yoder Brothers, Inc. v. Weygant, __So.2d__, 2008 WL 199897 (Fla.App. 2 Dist.2008)(holding fee awards against plaintiffs under Floridas offer of judgment rule barred by provision of Florida Civil Rights Act expressly incorporating federal law restrictions on those awards); Jones v. United Space Alliance, L.L.C., 494 F.3d 1306 (11th Cir. 2007)(construing Florida law to the same effect).
11

Lewis and Eaton, supra note 1, 241 F.R.D. at 337 n. 20. -5-

the perceived obstacles to the effective use of Rule 68 is the pathway for any possible reform. A. Terminology

Federal Rule 68 speaks of offers of judgment. Acceding to a judgment poses problems for a large number of defendants. Many defendants are not willing to make a formal, public admission of wrongdoing that the term judgment implies. Such a formal declaration of wrongdoing may encourage other law suits, create unfavorable publicity, or impose more tangible adverse consequences for individuals.12 These concerns would be ameliorated if Rule 68 were amended to substitute or add the terms offer of settlement or offer of compromise that are used in the laws of several states.13

B.

Amplification and Clarification of the Text of Current Rule 68

1.

Some Lawyers Are Ignorant of Rule 68's Major Sanction, Declared By A Supreme Court Decision But Not Apparent From the Text of the Rule

In fee-shifting cases, the most important potential sanction for refusing to accept a Rule 68 offer of judgment is the forfeiture of post-offer attorneys fees. This sanction is not set forth in the text of Rule 68. It stems from the linkage of the term costs in the Rule and the language of fee-shifting statutes characterizing attorneys fees as costs. The sanction of forfeiting costs under Rule 68 has existed since the Rules inception in 1938. The inclusion of a fee award as part of costs is part of The Civil Rights Attorneys Fees Award Act enacted in 1976. The conclusion that the costs subject to forfeiture under Rule 68 could include statutory attorneys

Lewis and Eaton, supra note 1, 241 F.R.D. at 350. For example, an attorney who defends law enforcement officials in civil rights cases commented that policemen who have a judgment entered against them may encounter more difficulty in securing a mortgage or in career advancement. See, e.g., Colorado Rev. Stats. Annotated 13-17-202 (2003)(offer of settlement; Connecticut General Stats. Annotated 52-192a (2007)(offer of compromise); Florida Stats. Annotated 768.79(2007)(offer styled one of judgment but text of statute refers to offer of settlement); Ga. Code Ann. 9-11-68 ((2006)(offers to settle tort claims); Hawaii Rule of Civ. Procedure 68 (1999)(Offer of Settlement or Judgment); Minn. Rule of Civ. Procedure 68 (1989)(Offer of Judgment or Settlement); New Mexico Rule of Civil Proc. 1-068 (2003)(settlement); North Dakota Rule of Civ. Procedure 68 (2007)(Offer of Settlement or Confession of Judgment); Texas Rule of Civ. Procedure 167.2 (2004)(settlement offer); Utah Rule of Civ. Procedure 68(2006)(settlement offers); Wisconsin Statutes Annotated , Chapter 807, 807.01 (2007)(Settlement offers). -613

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fees was not definitively drawn until the Supreme Courts 1985 opinion in Marek v. Chesney.14 When we interviewed our lawyer respondents fully two decades after Marek, we did not anticipate that the absence of an explicit textual statement regarding potential forfeiture of postoffer attorneys fees would be a major problem. Most lawyers are expected to be familiar with important Supreme Court opinions in the areas of law in which they practice. Indeed, civil rights and employment discrimination cases are typically defended by large defense firms (particularly in employment discrimination cases) or by government attorneys offices or outside counsel that have developed significant experience and expertise on behalf of repeat defendants. We discovered, however, that even a few senior partners at large, big-city defense firms professed to be unaware of Marekthat is, that an offer, if triggered, could relieve their clients not only of minimal post-offer costs but also of very substantial post-offer fees.15 Indeed some said that now that they were aware that Rule 68 gave their clients leverage as to plaintiffs fees, they would be more inclined to recommend Rule 68 offers. By the same token, many plaintiffs attorneys who receive an offer of judgment and read the text of the Rule, but who are not familiar with Marek, might later learn that by refusing the offer they put their post-offer statutory fees at risk. We assumed, and our respondents mostly confirmed, that a high percentage of plaintiffs lawyers in these cases are novices, either to law practice generally or to employment discrimination or civil rights cases. Many are tort, criminal or family lawyers who take a federal fee-shifting case as an outgrowth of their regular practices. As a result, unless they conduct case law research about Rule 68 after receiving an offer, many would not appreciate the risk the offer poses to their clients, at least not within the 10 days during which the current Rule deems an offer rejected unless accepted in writing. 2. The Text of the Rule Fails to Specify the Statutory Cases to Which Marek Fee Forfeiture Applies

In our first article, we observed how the Marek majoritys principal innovationthat Rule 68 may result in forfeiture of a plaintiffs post-offer attorneys feesapplies only where a particular fee-shifting statute authorizes fees to prevailing parties as part of rather than in

14

473 U.S. 1 (1985).

Similarly, some defendants have not realized that, by logical extension of the Marek reasoning, their unrestricted offers to pay plaintiffs costs might later be held to include, or at least not preclude, an additional award of plaintiffs attorneys fees. Erdman v. Cochise County, 926 F.2d 877, 879 (9th Cir. 1991) furnishes an example. Cochise County offered to submit to an offer of judgment of $7,500 with costs respecting a claim under 1983. The plaintiff accepted the offer, after which the plaintiffs attorney submitted a separate statement for fees. The County argued that it did not understand that costs included attorneys fees. The court of appeals rejected this argument, ordering the defendant to pay the plaintiffs reasonable fees in addition to the $7,500 plus costs. -7-

15

addition to or altogether distinctly from costs. In the words of Justice Brennans dissent, by limiting Rule 68 plaintiff fee forfeiture to actions under statutes that linguistically tie fee availability to the Rule 68 term costs, Marek produces a senseless patchwork of fee shifting that flies in the face of the fundamental purpose of the Federal Rules to foster uniform procedure for federal courts.16 We accordingly propose below that the Rule be amended to specify that absent statutory text to the contrary, Rule 68 plaintiff fee forfeiture, together with our proposed new Rule 68 sanctions against defendants, be available in actions under any statute authorizing fees to prevailing parties17 C. So Few Cases Go To Trial That The Prospect of the Rule Being Triggered Is Remote

Rule 68's sanctions are triggered only if there is a trial and a particular trial result: a plaintiffs total recovery, including pre-offer court-calculated attorneys fees, that fails to exceed the amount of a defendants offer. Yet roughly 98% of civil cases filed in federal courts do not go to trial.18 Of the 98% resolved before trial, many are thrown out on dispositive motions, most commonly summary judgment19 but also motions to dismiss for failure to state a claim.20 Many

16

Lewis and Eaton, supra note 1, 241 F.R.D. at 345.

For a more detailed treatment of the need for greater textual clarity, see 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 (2007).
18

17

Lewis and Eaton, supra note 1, 241 F.R.D. at 336& n.18.

We documented the prevalence of summary judgment in employment discrimination and civil rights cases in Lewis and Eaton, supra note 1, 241 F.R.D. at 355, text accompanying notes 76-78. While relatively few motions to dismiss for failure to state a claim for relief have been granted in an era dominated by the rhetoric of Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), it may be anticipated that the motion will enjoy a revival in the wake of the Supreme Courts decision in the antitrust case of Bell Atlantic Corp. v. Twombly, ___U.S.___, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). The Court in Bell Atlantic Corp. maintains its longstanding position that the Federal Rules do not require detailed or heightened pleading of facts. However, the Court also holds that in order to satisfy the far more broadly applicable F.R.C.P. 8(a)(2) requirement of pleading a short and plain statement of the claim, the plaintiff must allege some factsenough to make the element she must ultimately prove at trial not merely possible but plausible. 127 S.Ct. at 1965 &n.3. This latter ruling may spur a more aggressive evaluation of the sufficiency of the plaintiffs factual allegations and lead to the granting of more motions to dismiss. Lower federal courts have wrestled with whether to apply the Bell Atlantic interpretation of F.R.C.P. 8(a)(2) to issues arising under claims other than the particular Sherman Act 1 claim -820

19

more are resolved by privately negotiated settlement before any dispositive motion has been decided or, perhaps, even filed. Accordingly, defense lawyers, aware that the chances of a trial are remote, may well not think it advantageous to recommend a Rule 68 offer, even if the costs of doing so are minimal. 21 A related lawyer observation about the scant use of Rule 68 is that in some federal districts, a high percentage of negotiated settlements are reached relatively soon after a case is filed through one or another alternative dispute resolution devicetypically mediation or early neutral evaluationor by prompt judicial intervention during a Rule 16 conference or otherwise. Indeed FRCP 16(a)(5) specifically lists facilitating the settlement of the case as a permissible purpose of a pretrial conference. These lawyers imply that the prompt resolution of a case in effect moots the use of Rule 68. Underlying this view is the further implication, addressed below, that while the terms of the Rule permit an offer to be made as soon as an action commences, as a practical matter the Rule will seldom be used until after a considerable amount of discovery. Despite these concerns, a number of our lawyer respondents opined that if the added leverage of Rule 68 can speed the settlement of purely private negotiations, it could also aid negotiations conducted shortly after the outset of an action under the auspices of a mediator or judge. Because the principal sanction in the current Rule is forfeiture of post-offer attorneys fees by a prevailing party in a federal fee-shifting action, all our respondents agreed that a defendants Rule 68 offer will not seriously trouble a plaintiff unless it is made early in the

considered in Bell Atlantic, including claims under federal fee-shifting statutes. See, e.g., EEOC v. Concentra Health Services, Inc., 496 F.3d 773 (7th Cir. 2007)(dismissing claim under Title VII of the Civil Rights Act of 1964); Watts v. Florida International University, 495 F.3d 1289 (11th Cir. 2007)(declining to dismiss claim under Section 1983); Iqbal v. Hasty, 490 F.3d 143 (2d Cir. 2007), cert. granted sub nom Ashcroft v. Iqbal, __U.S.__, 128 S.Ct. 2931 (2008) (declining to dismiss Bivens claim asserting deprivation of constitutional rights under color of federal law). Preliminary research suggests that lower courts have applied Bell Atlantic most vigorously to dismiss federal civil rights claims (a category excluding federal employment discrimination claims). Hannon, Much Ado About Twombly? A Study On the Impact Of Bell Atlantic Corp. v. Twombly On 12(b )(6) Motions, 83 Notre Dame L. Rev. 1810, 1836-38 (2008). It is widely believed that in private negotiations, where no Rule 68 offer is typically made, the terms of the parties bargain are shaped by their predictions of trial outcomes, however statistically remote the prospects of a trial may be. Lewis and Eaton, supra note 1, 241 F.R.D. at 356. Since Rule 68 is merely a source of additional leverage for private bargaining supplied by federal procedural law, its reasonable to suppose that negotiations in which a Rule 68 offer is made are also conducted based on predictions of trial outcomes. Indeed, that may be even more true of negotiation conducted after a Rule 68 offer is made, since its terms focus the parties on a very specific outcome that compares the level of plaintiffs anticipated trial recovery with the amount of a defendants offer. -921

actionfor example, in a Rule 16 pretrial conference or court-ordered mediation session before the bulk of the plaintiffs attorneys work has been done. This might be accomplished by explicitly cross-referencing the use of Rule 68 into the text of other Federal Rules like Rule 16, local court rules, or ADR process descriptions. Another advantage of injecting Rule 68 into conferences or caucuses conducted by trial courts or mediators is that direct discussion with the defendant may cut through the sometimes unjustified reluctance of defense counsel to recommend the use of Rule 68 to clients, because among other reasons it might terminate the litigation sooner and accordingly diminish counsels hourly fees. Similarly, direct court or mediator discussion with plaintiffs in discovery scheduling conferences or caucuses could overcome the reluctance of some plaintiffs counsel to recommend acceptance of a Rule 68 offer, borne of the hope of garnering a greater contingent fee after trial. In theory, the objection that Rule 68 is irrelevant because it is triggered only after the conclusion of a trialan event that has virtually vanished from the federal court landscape--could be addressed by rewriting the Rule so that the gamble created by an offer (that plaintiffs recovery will not exceed the offer) would be assessed before trial. For example, if, as suggested in D. immediately below, Delta Air Lines, Inc. v. August22 were effectively overruled by amendments to Rule 68, defendants could benefit from having made an offer not only if a plaintiff failed to exceed the offer after a trial but also if defendant defeated liability altogether at any stage of the litigation, including, for example, on summary judgment. But a pretrial trigger strikes us as fundamentally unjust and plainly inconsistent with the legislative policies underlying fee shifting statutes. As construed, the fee shifting statutes governing civil rights and employment discrimination cases are intended to aid plaintiffs in attracting counsel, not only by holding out the prospect of a fee if they prevail, but also by insulating them, under Christiansburg Garment, from fee liability to the defendant (provided their claim was nonfrivolous). Creating a pretrial trigger would undermine these policies by increasing the plaintiffs exposure to Rule 68 sanctions.23 D. The Rule Offers Nothing to the Defendant Who Wins Outright on Liability

Even assuming that other circumstances, especially potential copycat litigants, do not suggest that any offer is ill advised, the Supreme Courts Delta Air Lines decision blunts the

22

450 U.S. 346, 101 S.Ct. 1146 (1981), discussed at F.R.D. I, 241 F.R.D. at 341, 345.

As discussed in footnote 20 above, the Courts recent decision in Bell Atlantic may signal a resurgence of motions to dismiss for failure to state a claim for relief. More frequent granting of such motions could lead judges to label a greater number of plaintiffs claims as frivolous. A defendant could couple its F.R.C.P. 12(b)(6) motion with a Rule 68 offer to put significant pressure on plaintiffs counsel new to the field who made a pleading error, or even on experienced counsel who bring a claim on a novel legal theory more vulnerable to dismissal on the pleadings. -10-

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incentive to make a Rule 68 offer if a defendant is confident of ultimate victory at trial. In quite a few districts, including apparently most districts in the Fourth, Fifth, and Eleventh Circuits, todays civil rights and employment discrimination defendants justifiably enjoy that confidence in many if not most of the cases brought against them.24 If a defendant extends an offer that the plaintiff rejects, and defendant then defeats liability at summary judgment or trial, defendant will have gained nothing from Rule 68 (although it will, as a prevailing party, likely receive full preand post-offer costs under FRCP 54(d)). Any remaining incentive to make an offer when the defendant is convinced of ultimate victory at trial depends on an ideal construct of both defendant and defense counsel. The defendant must be willing to cast aside the desire to win at all costs to achieve the most cost-effective resolution of the particular case by making a nominal or minimal offer as insurance against the unlikely event of a loss at trial. And defense counsels desire to help his client achieve that resolution must be sufficient to trump the reality that the lawyer will earn larger compensation if the litigation is protracted. The reports from our lawyer respondents suggest that the confluence of these ideals is rare.

E.

Why Defendants Disposed to Make Offers Find it Difficult to Do So Early Enough For the Offers to be Effective

Because the principal sanction under the current Rule is forfeiture of plaintiffs post-offer attorneys fees should she prevail in a federal fee-shifting action, all our respondents agreed that a defendants Rule 68 offer needs to be made relatively early in the litigation to provide maximum leverage. Unfortunately, our respondents also indicated that the few Rule 68 offers actually made often come later, too close to trial to put much pressure on the plaintiff.25 They identified three factors that in the aggregate lead to tardy offers, offers unlikely to put serious pressure on plaintiffs. First, defense lawyer economicsthe hourly fee-- may work against early counseling of the defendant to consider a Rule 68 offer, even in cases where an offer is otherwise appropriate. Many plaintiffs lawyers, and even a few defense counsel, believed that some defense lawyers (particularly those without a history or prospect of long-term client relationships or engagements) would be reluctant to advise defendants of the potential settlement-leverage or fee-

We previously identified some of the reasons extrinsic to Rule 68 that may account for much of that confidence, which of course will vary in intensity with the ideological bent of the bench and the congestion of the calendar in different federal judicial districts. Lewis and Eaton, supra note 1, 241 F.R.D. at 354-55. Many defense lawyers told us that they do not consider any sort of resolutiontraditional settlement or Rule 68 offersuntil after a trial court has ruled on a defense motion for summary judgment. -1125

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avoidance advantages of an early offer of judgment.26 This despite the fact that contemporary ethical and professionalism norms routinely demand that counsel take affirmative steps to help clients achieve the economical and expeditious, not merely favorable, resolution of controversies. 27 A small number of civil rights and employment discrimination defense lawyers reported that they cannot conscientiously evaluate the probability of liability or the magnitude of a potential damage award , or therefore recommend a Rule 68 offer, before extensive discovery has been conducted. But the large majority of both the defense and plaintiffs attorneys we interviewed opined that in most casesand especially in employment discrimination cases where the defendant is in possession of much of the relevant information before the action commences this purported obstacle is simply an excuse by defense lawyers to continue litigating and hence billing. The dominant view was that in most of the fee-shifting cases at issue, a defendant could evaluate potential liability and damages sufficiently to calculate a reasonable offer within four to six months after an action commences. Yet all agreed that there are some significant number of cases where a key component of liability or, even more commonly, damages will remain unknown until at least after the taking of plaintiffs deposition. An offer made a year or two after commencement of the action is unlikely to put significant pressure on the plaintiff to accept, except in the unusual case where the plaintiff anticipates that substantial additional plaintiffs attorneys hours, including trial hours, remain to be expended and those hours represent a substantial proportion of the damages at stake. Some defense lawyers reported a related difficulty in recommending early offers: uncertainty about the amount of plaintiffs attorneys fees incurred to date. That is relevant to determining the amount of a defense offer because the amount of that offer will be measured against plaintiffs complete economic trial recoverynot just damages but also court-ordered attorneys fees for pre-offer work. A number of defense lawyers discounted this difficulty, observing that they usually succeeded in inducing plaintiffs lawyers whose word they trusted to disclose that amount. But others indicated that plaintiffs lawyers refused to respond to informal requests for fees accrued to date, or that they did not trust the responses they would receive from certain plaintiffs counsel. No national rule currently requires plaintiffs to disclose attorneys

To be sure, several defense lawyers we interviewed strongly denied that any so-called economic conflict of interest impedes the making of Rule 68 offers. Lewis and Eaton, supra note 1, at 352. See, e.g., the Georgia State Bars Aspirational Statement on Professionalism, General Aspirational Ideals, and Specific Aspirational Ideals. These recommend, among other things, that lawyers work towards the expeditious and economical achievement of all client objectives, in the spirit of putting fidelity to clients and the common good before selfish interests. They also urge lawyers to represent clients in a manner consistent with the efficient, not just fair, functioning of justice, including exploring settlement of all litigated matters. -1227

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fees to defense counsel for purposes of enabling defendant to make a Rule 68 offer or otherwise. As we discuss below, a smattering of local district rules do, although sometimes too late in a litigation for a Rule 68 offer to be effective. F. The Timing and Mechanics of the Rule May Discourage Its Use

Current Rule 68 has three express or implied time periods that are at variance with many state counterpart rules and may marginally contribute to lesser use of the Federal Rule. Sentence one of paragraph (a) of the Rule sets no waiting period after commencement of a federal civil action before an offer may be made. Some respondents opined that if, as we recommend below, the Rule were amended to permit offers by plaintiffs, the absence of a required delay would permit plaintiffs to force defendants to consider an offer while defendants are busy responding to the complaint under other court rules and before defendants have had a reasonable opportunity to investigate the claims. Sentence two of paragraph (a) of the Rule, coupled with paragraph (d), in effect gives an offeree only 10 days to accept an offer in writing, failing which the offer is deemed rejected (unaccepted). Some respondents suggested that this was too short a time for parties and their counsel to give meaningful consideration to an offer.28 Finally, sentence one of paragraph (a) permits offers to be made up until the eleventh day before trial. Some respondents believed that it would be preferable to set a deadline for making an offer of no later than 30 days before trial, again to permit meaningful consideration of offers at an especially busy time for plaintiffs and their counsel. Our proposed changes respecting these time periods are influenced by a study of counterpart rules of the approximately twenty three states that have two-way rules. Another difference between Rule 68 and state counterparts is that its sanctions against plaintiffs kick in mechanically, with no discretionary consideration by the court. In contrast, several state counterpart rules allow such discretion, directing the court to consider, among other factors, the resources and ability to pay of the offeree.29 It is understandable that discretion would be a feature of the state rules, since many of themunlike Rule 68, which at worst forces plaintiffs to forfeit fee awardsauthorize affirmative awards against plaintiffs of defendants attorneys fees. Some of our plaintiffs lawyer respondents indicated that the additional cost sanctions against plaintiff-offerees that might be part of an amended Rule would be more

In fact one defense lawyer indicated that he makes offers not so that they will be accepted, but in the hope that they will be overlooked or misunderstood by plaintiffs counsel until after the 10 day period expires, and therefore rejected by operation of the Rule. He then tells plaintiffs lawyers about the effect of Marek, concluding From now on youll be working for me. See, e.g., West Ann. Cal. C.C.P. 998(2005); Conn.G.S.A.52-192a ((2007); Wests Fla.S.A. 768.79 (2007); Ga. Code Ann. 9-11-68 (2006); Mich. Court Rules of 1985, Rule 2.405 ((2003); Wests Nev. R.S.A. 17.115 (2005); N.J. Stats. Annotated Rule 4:58-1 (2006); Wests Utah Code Ann., Rule of Civil Procedure 68 (2006). -1329

28

palatable if the judge had discretion to deny them. Some defense lawyer respondents countered that such discretion would undermine the pressure that an offer under the Rule is designed to generate. G. The Sanctions Available to Defendants Are Insufficient to Spur Offers

A significant number of defense counsel told us that even the totality of the benefits their clients might reap under current Rule 68relief from post-offer costs, relief from post-offer attorneys fees, and an award of post-offer costs30creates insufficient monetary incentive for an offer. These lawyers typically asserted that the only sanction sufficiently meaningful for them to recommend an offer, or for their clients to make one, would be an award against the plaintiff of the defendants post-offer attorneys fees. But that is a sanction that our lawyer respondents reported most plaintiffs in these kinds of cases cannot afford to pay. In any event, it is a sanction that almost surely cannot validly be added by an amendment to the Federal Rules of Civil Procedure, at least as respects claims under federal employment discrimination and civil rights fee-authorizing statutes. Thats because the general Christiansburg Garment prohibition on fee awards against plaintiffs in these cases flows from commands of statutes (including Title VII of the 1964 Civil Rights Act and the Civil Rights Attorneys Fees Awards Act of 1976), and it has long been understood that the terms of Federal Rules must not conflict with valid statutory commands. H. The Rule Poses Logistical Problems in Cases Where Offers Are Made to By Multiple Plaintiffs or Defendants

A few lawyers said that Rule 68 is difficult to apply in cases involving multiple plaintiffs. The problematic application of Rule 68 in multiple plaintiff cases stems from two sources. First, the defendant often desires to resolve the claims of all the plaintiffs and thus avoid the costs and risks of trial. An offer that disposes of some, but not all, the claims fails to meet this objective. Second, having multiple plaintiffs compounds the difficulty of calculating the probability of liability and the magnitude of likely damages that is needed to formulate an offer that will approximate the result at trial and therefore potentially benefit the offeror by inducing the offeree to accept it. These are real but surmountable problems. A defendant who wants to condition an offer to one on acceptance by all of the plaintiffs may do so. Moreover, if the offer clearly states how much the defendant is offering to each plaintiff, a court can discern whether the judgment

See Lewis and Eaton, supra note 1, 241 F.R.D. at 342. When Rule 68 awards the defendant its post-offer costs, the defendant, by hypothesis, must have lost: a defendant benefits from Rule 68, as interpreted by Delta Air Lines, only when the defendant is not a prevailing party. So in that event the defendant could not receive those costs by virtue of FRCP 54(d), which authorizes full costs, pre- and post-offer, but only to prevailing parties. -14-

30

obtained by a particular plaintiff is more or less favorable than the offer.31 In short, attention to detail and careful drafting can address many of these problems. I. The Rule is Unworkable And Undermines Constitutional Policy As Applied To Plaintiffs Prayers for Equitable Relief

The Rule is also silent on how to measure, for Rule 68 purposes, the value of a plaintiff's judgment for prospective, equitable, or other nondamages relief. To state the possibilities most broadly, one might calculate an injunction's value to the plaintiff, or one might take its value as the cost of compliance to the defendant. In the relatively few reported nondamages cases in which the defendants have made Rule 68 offers, the problem of measuring the value of a plaintiff's judgment has proven intractable in the absence of any textual guidance from the Rule.32 Apart from the limited practical value of Rule 68 offers respecting declaratory or injunctive relief because of the difficulty of valuing those remedies, using the Rule in that context raises serious policy concerns. Historically, declaratory and injunctive relief was central to the enforcement of modern federal civil rights claims. Indeed such equitable relief was available in actions against school boards to enforce the requirements of equal protection announced by Brown v. Board of Education33 long before the Supreme Court, years later, overruled intervening precedent to recognize constitutional claims against local government entities under Section 1983, with its full panoply of damages and other legal remedies.34 Only E.g., Sharpe v. Cureton, 319 F.3d 259 (6th Cir. 2003) (upholding the imposition of sanctions under Rule 68 when most of the individual plaintiffs failed to obtain an award more favorable than the offer). See generally Teresa Rider Bult, Practical Use and Risky Consequences of Rule 68 Offers of Judgment, 33 Litigation 26, 30 (Spring 2007). Nevadas statute is unusual in specifying when sanctions do and do not apply where offers are extended to multiple parties, see Wests Nev. R.S.A. 17.115(7)(2005), with specific limitations on the effectiveness of offers made to multiple defendants, Wests Nev. R.S.A. 17.115(9)(2005). See e.g., Reiter v. MTA New York City Transit Authority, 457 F.3d 224, 230 (2d Cir. 2006) (we recognize that it is difficult to compare monetary relief with non-monetary relief quoting 12 Charles Alan Wright, et al, Federal Practice and Procedure 3006.1, 127 (2d ed. 1997); but concluding that the value of the equitable and monetary relief obtained was greater than the Rule 68 offer made by the defendant); see generally Thomas L. Cubbage III, Federal Rule 68 Offers of Judgment and Equitable Relief: Where Angels Fear to Tread, 70 TEX. L. REV. 465, 484-94 (1991).
33 31

32.

347 U.S. 483, 74 S.Ct. 686, 98 L.Ed. 873 (1954).

Monell v. Dept of Social Services of the City of New York, 436 U.S. 658, 98 S.Ct. 2018, 56 L.Ed.2d 611 (1978). The opinion in Monell cites a large number of these school board cases, noting that in only some of them was Section 1983 and its jurisdictional counterpart, 28 -15-

34

equitable relief can compel local governments to come into compliance with the Constitution

U.S.C. 1343, the sole apparent source of a claim and jurisdiction. 436 U.S. at 658n.5. Later in the opinion the Court, in the course of overruling the holding of Monroe v. Pape, 365 U.S. 167, 81 S.Ct. 473, 5 L.Ed.2d 492 (1961) that immunized government entities from Section 1983 damages liability, observed that the Courts decisions both before and after Monroe had held local governments liable for constitutional violations in Section 1983 actions. The Court acknowledged, however, that in many of these cases jurisdiction was not questioned.... It concluded that Monroe was inconsistent with those cases, especially as Monroes immunizing principle was extended to suits for injunctive relief.... 436 U.S. at 696 (citation omitted). Justice Powell, concurring in Monell, observed that the precise question whether a municipality can be liable in damages for injuries caused by local governmental policies (that is to say under Section 1983) as opposed to whether local government is subject to equitable relief requiring its conduct to conform to the Constitution prospectively had not been briefed or argued in any case before Monell itself. 436 U.S. at 708. Monell thus recognizes, admittedly backhandedly, that local governments had in fact been held to account for constitutional violations, on an unclear jurisdictional basis and without a clearly applicable claim-creating statute, before the Court in Monroe reached its short-lived conclusion that Section 1983 was not a vehicle for asserting those claims. The Court in Monell recognizes the primacy of equitable remedies in civil rights actions by observing that the Monroe error of immunizing local governments from constitutional damages claims under Section 1983 was compounded when the Court, in a post-Monroe decision, extended that principle to injunctive relief. The Monell opinion thus reveals that 28 U.S.C. 1343, the jurisdictional counterpart for Section 1983 and other Reconstruction-era claims, was not the basis of pre-Monroe federal court jurisdiction over post-Brown v. Board of Education constitutional claims seeking injunctive relief against local school boards and municipalities. Instead, the courts simply extended the federal court authority to enjoin constitutional violations by states that it had long exercised under Ex Parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed.714 (1908). Despite the states ordinary Eleventh Amendment immunity from any unconsented suit in federal court, Ex Parte Young subjected them to federal court jurisdiction for equitable, but not legal, relief in claims alleging federal constitutional violations, provided the plaintiff formally seeks that relief against individual state officials and not against the state in its own name. It was an even smaller step for federal courts (after Brown, yet before Monell authoritatively held Section 1983 to be the statutory source of a constitutional damages claim against local governments) to extend Young by exercising equitable jurisdiction in suits against school boards and municipalities to enforce constitutional mandates, since those local entities never enjoyed the states Eleventh Amendment immunity to which Ex Parte Young was a limited exception. Thus Justice Rehnquist, dissenting in Monell, observed that suits against local school board members in their official capacities had long been maintained under either 1983 or Ex Parte Young...., provided they were limited to injunctive relief. 98 S.Ct. at 2049n.2 (emphasis added). -16-

prospectively. Federal judicial precedent has therefore long found a way to make that relief available not only against states, as an exception to their ordinary Eleventh Amendment immunity, but also against local governments, even in the absence of an affirmative statutory claim for relief like Section 1983.35 Declaratory and injunctive relief remain indispensable today for the numerically less common but nevertheless critical structural suits that seek to compel large government institutions like prisons or hospitals to conform to constitutional requirements. It is true that these massive injunction suits are typically brought by nonprofit advocacy organizations, and that their budgets rely not solely on the prospect of attorneys fees (when the suits succeed) but also on contributions and grants. Nevertheless, it is undeniable that fewer such suits could be brought if organizational and private plaintiffs could not count on fees to offset their costs in undertaking these complex and lengthy litigations. It also seems clear that virtually no private attorneys would launch such expensive, purely equitable suits without the dependable prospect of recovering court-ordered fees from defendants, as their clients in these cases typically lack the means to pay fees themselves. Ironically, while prospective equitable relief is essential to the enforcement of civil rights, more recent decisions of the Court have made it more difficult for plaintiffs to obtain those remedies. Despite the historic role and vital importance of prospective relief to vindicate constitutional claims, the Court in the past two decades has raised special barriers to those claims, barriers that do not impede Section 1983 claims for damages. In City of Los Angeles v. Lyons,36 the Court erected often insurmountable standing requirements for plaintiffs seeking to enjoin unconstitutional practices. And after Buckhannon Bd. and Care Home, Inc. v. West Va. Dept of Health and Human Services,37 even plaintiffs with the requisite standing may be discouraged from seeking injunctive relief. Suppose a government defendant concludes in the midst of litigation that its policy or practice challenged by the plaintiffs suit will be struck down as unconstitutional if the suit proceeds to final judgment. Buckhannon permits that defendant to voluntarily abandon the practice at any time before a final judgment or order, thereby destroying plaintiffs eligibility for attorneys fees. The linchpin of the Courts reasoning was that a formal judgment or order is prerequisite to a plaintiffs attaining the status of a fee-eligible prevailing party that is required by most fee-authorization statutes. To the degree that, despite the valuation problem described above, Rule 68 serves as a separate threat to the civil rights or employment discrimination plaintiffs recovery of post-offer attorneys fees in cases seeking injunctive relief, it constitutes an additional, although admittedly uncertain deterrent to the important claims seeking that vital relief. On the other hand, defendants considering making offers of judgment in response to prayers for injunctive relief will have even
35

See footnote 34, supra. 461 U.S. 95, 103 S.Ct. 1660, 75 L.Ed.2d 675 (1983). 532 U.S. 598, 121 S.Ct. 1835, 149 L.Ed.2d 855 (2001). -17-

36

37

less than usual confidence that the offer will do them any good, given the greater difficulty they will experience in predicting if the value of any injunctive relief the plaintiff might obtain by judgment would fall short of any particular offer. For these reasons, we propose below that the Rule be made expressly unavailable with respect to prayers for injunctive or declaratory relief. That change would also eliminate any concern that the proposed substitution of offer of settlement for offer of judgment would, under Buckhannon, operate to render plaintiffs seeking equitable relief ineligible for attorneys fees when they accept a defendants Rule 68 offer that leaves the fee question for later determination by the court. J. The Rule Will Not Be Frequently Utilized Unless Plaintiffs, Too, Can Make Offers

Many plaintiffs attorneys expressed the view that the most effective way to stimulate more frequent use of Rule 68 is to follow the lead of several states and authorize plaintiffs to submit offersin common negotiation parlance, demandsto defendants. If the defendant rejected the offer and the litigation progressed to trial, the Rule would then be triggered if the plaintiff prevailed at some level in excess of its rejected demand. The underlying civil rights and employment discrimination statutes would already provide awards of full fees to the prevailing plaintiff, so the amended Rule would provide some additional sanction against defendants who in hindsight guessed wrong in rejecting the plaintiffs demand. In support of such a change, plaintiffs lawyers argued, and some defense lawyers agreed, that the submission of a plaintiffs demand would stimulate responsive Rule 68 offers by defendants who would not consider making an offer under the current one-way rule. Further, unlike standard positional bargaining characterized by extreme opening demands and responses, both the plaintiffs initial monetary demands and the defendants counteroffers would be tempered by the parties knowledge that they could benefit under the Rule only if they could realistically anticipate doing better than the demand or counteroffer at trial. What is better, of course, depends on the trigger point stipulated by the proposed amended Rule. Suppose, for example, that the trigger point for the new offers that plaintiffs would be authorized to make under an amended rule is the total of plaintiffs monetary trial judgment on the merits plus the amount of the fees the court orders for the work done by plaintiffs counsel before the offer was made. A plaintiff would then receive sanctions only if a defendant rejects his offer (demand) and plaintiff ultimately receives more than that total after trial. Better then means that a plaintiffs initial rational offer or demandone that is likely to put realistic pressure on, while still being fairly attractive to the defendant--should be approximately the same as, and in any event not much more than the amount of that total, taking into account the pretrial and trial costs the defendant will save if defendant accepts the demand. Suppose, similarly, that the trigger point for offers or counteroffers by defendants remains what it is under the current rule: a defendant gets the Rules relief from post-offer fees and costs, plus an award of his own post-offer costs, only if plaintiffs recovery fails to exceed the sum of -18-

plaintiffs monetary judgment at trial and the amount of the fees the court orders for the work done by plaintiffs counsel before the offer was made. Better in this context therefore means that a defendants initial rational counterofferone that is likely to put pressure on, while still being fairly attractive to the plaintiff-- should be approximately the same as, and in any event not much less than the amount of the same total, taking into account any pretrial and trial costs the plaintiff will save by accepting the counteroffer. Needless to say, the parties perceptions of what, if anything, a plaintiff would likely recover after trial, and of the amount of any award for pre-offer attorneys fees, may differ greatly. To the extent that they do, the initial offers and counteroffers may leave the parties far apart. Nevertheless, because their bargaining is shaped by the trigger point of the Rule, negotiating under the Rule may conduce towards somewhat more realistic opening demands and responsive offers than in ordinary settlement negotiations uninfluenced by the Rules incentives and sanctions. That, in turn, may result in a greater aggregate number of earlier settlements. As we discuss below, the Rule may induce compromise even more frequently if the benchmark against which the ultimate trial result is tested were an average of the counteroffers made by both parties (under a two-way rule), rather than, as now, against the defendants offer alone.

III.

A Proposed New Rule 68.1: A Separate Rule for Offers of Settlement in Federal FeeShifting Cases

We advance with hesitation the proposals suggested below for improving the efficacy of Rule 68 in cases under federal fee-shifting statutes, as none as been field tested in selected federal districts. The proposals draw on, but are not invariably supported by, the responses of our lawyer-respondents and by the features of state counterpart rules we consider most appropriate and promising for facilitating the goal of encouraging speedier settlement of federal fee-shifting litigation. We identify the degree to which each proposed change is supported by a lawyer-respondent consensus, by state counterpart rules, by the logic of related provisions, or by little more than the authors experience as long-time students and sometime practitioners of employment discrimination (Lewis) or civil rights law (Eaton and Lewis).38

For the most part, the proposals in the lettered subdivisions of this article that follow do not track the sequence of the current Rule 68 practice problems identified in Part II. immediately above. The first two proposalssoftening terminology to permit defendants to make offers of settlement, not just judgment, and specifying in the Rules text its principal sanctions and the kinds of federal lawsuits in which those sanctions might be imposed deserve primacy of place because they enjoyed the strongest consensus among lawyer respondents for improving the Rule in its current one-way mode (under which only defendants may extend offers and thereby exert settlement leverage over plaintiffs). The third proposal--expanding the Rule to permit plaintiffs to extend offers-- if adopted, is likely to change bargaining dynamics so fundamentally when either side avails itself of the Rule that it would necessarily alter the considerations pertinent to shaping the remaining issues of an amended Rules scope and mechanics. -19-

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A.

Terminology

Suppose that the Advisory Committee on Civil Rules were to reaffirm the value of the current Rules objective and structure but determine that no substantive change in the Rule is sufficiently well supported to be worthy. We would in that event still suggest that the Committee consider the strong lawyer consensus in favor of expanding the Rules terminology to permit defendants to make offers of settlement or compromise in addition to offers of judgment. The change would alleviate the concern expressed by defense lawyers practicing in quite a number of states that their clients are reluctant effectively to confess judgment because of public relations concerns, attracting the attention of regulators, or saddling individual defendants with ongoing adverse consequences to their careers, reputations, or ability to obtain credit. The lone objection to this proposal, voiced by only a very few plaintiffs lawyers, was that if adopted it would make the current one-way Rule more attractive to defendants. But it is difficult to credit that objection if the Committee continues to view as sound the current Rules objective of facilitating compromise, as elaborated by the Supreme Court in Marek, as well as its defendantonly structure. B. Amplification and Clarification of the Text of Current Rule 68 1. Specify in the Rules Text Rule 68's Major Sanction, Forfeiture of Plaintiffs Post-Offer Attorneys Fees

As indicated above, we were surprised to learn from our respondents that roughly twenty years after Marek, many plaintiffs lawyers and even some experienced defense lawyers remained unaware of its holding: that in the vast majority of actions under federal statutes authorizing fees, the principal consequence to a plaintiff who rejects an offer and fails to recover more at trial is forfeiture of the usually substantial post-offer statutory attorneys fees the plaintiff would otherwise be awarded, and not merely forfeiture of her relatively minor post-offer costs. The text of the current Rule makes no mention of fees. Accordingly, it fails adequately to advertise the potential value of the Rule to a defendant contemplating an offer and to warn a plaintiff offeree of the consequences of rejecting that offer. Some defense counsel indicated that they tried to capitalize on this textual silence by making bare-bones offers without further written or oral communication with opposing counsel about the fees thereby put at risk, in the hope that plaintiffs would fail to accept them during the brief 10-day period stipulated by the current Rule. These defense counsel would then call Marek to the attention of inexperienced or ignorant plaintiffs counsel and argue that henceforth plaintiffs counsel would be working for free. While we dont suggest that this settlement tactic is improper, we see no good reason why a Federal Rule of Civil Procedure should not alert counsel on both sides to its principal potential advantages and perils. Again, the most pointed objection to this proposal came from plaintiffs lawyers fearful that the change would educate defense lawyers and in turn encourage more Rule 68 offers by -20-

defendants. Our response to this objection is again that if the Rules objective and structure are sound, changes that encourage its fair use by explaining to both sides what is at stake should be welcomed. A few other lawyers who were aware of Marek viewed this proposed change as needless, opining that clients always take the risk of their lawyers incompetence. Without questioning that general proposition, we believe that a clear statement of Rule 68's principal sanction is sufficiently important that there is no good reason to leave the matter to happenstance or gamesmanship.39 2. Specify in Text the Statutory Cases to Which Marek Fee Forfeiture Applies A similar proposal, also offered to improve disclosure, would clarify in the text of the Rule which federal fee-shifting statutory actions entail Marek fee forfeiture. As observed above, the Courts opinion generated uncertainty on that subject. It held plaintiff fee forfeitureas opposed to merely forfeiture of costs, plus the obligation to pay defendants costsapplies in actions under statutes with language authorizing fees to prevailing parties as part of costs, but not in addition to or altogether distinctly from costs. We propose that Rule 68 be amended to provide for fee as well as cost sanctions in actions under any federal statute that authorizes fees to prevailing parties, unless a particular such statute specifies to the contrary. That change would affect relatively few federal statutory actions, the great majority of which are brought under statutes like Title VII or Section 1983 that authorize fees as part of costs and therefore, under the Courts opinion in Marek, contemplate fee forfeiture when a Rule 68 offer is made the sanctions are triggered. But the change would eliminate uncertainty under the few statutes in which fees are authorized in language different from the prototypes discussed by the court. Thus it would, unless Congress were to specify otherwise, allow fee forfeiture, and thereby expand the potential utility of the Rule, in actions under statutes like the Fair Labor Standards Act and the Age Discrimination in Employment Act that currently authorize fees in addition to costs. Under Marek, Rule 68 could currently impose only limited costs sanctions in actions under those statutes. In this regard we find persuasive the reasoning of Justice Brennans Marek dissent, even if that reasoning leads us to a result he might well have disapproved. Justice Brennan doubted that Congress, in approving varying linguistic linkages between costs and fees in different statutes, ever contemplated that a particular formulation would govern whether fees, as well as costs, might be put at risk through an offer under FRCP 68. He also noted that the majoritys contrary approach undermined the generally transsubstantive application of the Federal Rules of Civil Procedure. Naturally, Congress has the last word on whether Rule 68 may be used to reduce or enhance the amount of fees that would otherwise be awarded under a particular statute. But it has

Our recommendation that the potential sanctions be clearly identified in the text of the rule applies to the proposed new sanctions discussed in subsections 5 and 6 below. -21-

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not disturbed Marek itself, and has therefore effectively acquiesced in a regime that makes Rule 68 fee forfeiture the rule, rather than the exception. So it may reasonably be contended that Congress has acceded to the possibility of fee forfeiture by the large numbers of prevailing plaintiffs who bring civil rights actions under Section 1983 and, more particularly, actions under Title VII alleging employment discrimination based on sex, race, religion, national origin and color. That being the case, it is hard to imagine that in 1970, by adopting the Fair Labor Standards Acts in addition to language in the remedies provision of the Age Discrimination in Employment Act, Congress was prescient about the significance that the Court would ascribe to such a choice many years later in Marek, still less that it was making a conscious choice to reject fee forfeiture in the far less numerous category of actions alleging age discrimination. Put simply, unless Congress says otherwise, it makes little sense to interpret Rule 68 to work fee forfeiture in Title VII actions but only costs forfeiture (as well as liability for costs) in actions under the ADEA. C. Allow Plaintiffs, as well as Defendants, To Extend Rule 68 Offers In Order to Stimulate More, Earlier and More Realistic Offers and Counteroffers By All Parties

Unlike the two previous proposals, this one fundamentally alters the structure of current Rule 68 and does not enjoy consensus support from our lawyer respondents. While a great majority of our respondents from the plaintiffs side strongly supported the idea, most defense counsel opposed the notion, at least as strongly. The proposal is informed by the two-way rules on the books of approximately twenty three states. The proposal departs from the sanctions approach of the state rules, however, by retaining the practice under the current Rule of denying defendants awards of their own fees, consistent with Christiansburg Garments general ban on ordering fees against federal civil rights and employment discrimination plaintiffs presenting nonfrivolous claims. The essential features of a two-way rule, as exemplified by the twenty three states that apparently use one,40 are simpler than the mechanics needed to make it work. Defense offers are

See, e.g., Alaska Statutes Annotated, 09.30.065 (1986); Arizona Rule of Civil Procedure 68 (2007); West Ann. Cal. C.C.P. 998(2005); Colorado Rev. Stats. Annotated 1317-202 (2003); Connecticut General Stats. Annotated 52-192a (2007); Florida Stats. Annotated 768.79(2007); Ga. Code Ann. 9-11-68 (2006); Hawaii Rule of Civ. Procedure 68 (1999); Louisiana Rule of Civ. Procedure (1997); Mich. Court Rules of 1985, Rule 2.405 ((2003); Minn. Rule of Civ. Procedure 68 (1989); Wests Nev. R.S.A. 17.115 (2005); N.J. Stats. Annotated Rule 4:58-1 (2006); New Mexico Rule of Civil Proc. 1-068 (2003); North Dakota Rule of Civ. Procedure 68 (2007); Oklahoma Rule of Civ. Procedure (1995); South Carolina Rule of Civil Procedure 68 (2006); South Dakota Civ. Procedure 68 (2005); Tennessee Rules of Procedure 68 (1984); Texas Rule of Civ. Procedure 167.2 (2004); Utah Rule of Civ. Procedure 68(2006); Wisconsin Statutes Annotated , Chapter 807, 807.01 (2007); Wyoming Rules of Civ. Procedure (2007). It would appear from the text and 1970 Staff Notes accompanying Ohios Civ. Rule 68 -22-

40

treated roughly as they are under FRCP 68. A plaintiff who rejects a defense offer and then fails at trial to exceed some defined trigger (under the current Rule, an amount exceeding by at least 1 cent the sum total of his or her merits recovery plus any court-ordered pre-offer costs and attorneys fees), is subjected to sanctions. Similarly, a defendant who rejects the offer (really, demand) that we propose plaintiffs be permitted to submit, would be subjected to rule-based sanctionsabove and beyond all types of recovery authorized by the underlying statute--when the plaintiff at trial recovers an amount or percentage exceeding a different defined trigger. The sanctions awarded when the state two-way rules are triggered vary widely. In the typical state court common law and even statutory action, the American rule applies and each party bears its own attorneys fees. A number of two-way states limit sanctions under the rule to post-offer costs, sometimes with expert witness fees, but without attorneys fees.41 Others, that require the rejecting offeree to pay an offerors post-offer attorneys fees, make that sanction mandatory,42 while still others confer discretion on the court to decline a fee award under various standards or listed criteria.43 When a two-way regime is transplanted to the setting of federal statutory fee-shifting litigation, a mere costs sanction is unlikely to motivate the making or acceptance of an offer of settlement. Costs are typically a very small fraction of the total recovery in a civil rights or employment discrimination action, and a prevailing plaintiff will already be receiving a statutory award for pre- and post-offer attorneys fees. Merely doubling or even tripling the costs awardable under Federal Rule 54 to prevailing parties would motivate few plaintiffs to use an that formal offers of judgment have been abandoned in that state in favor of voluntary offers of settlement made by any party, and that the quoted phrase refers to ordinary settlement offers in private negotiation occurring outside the framework of any rule of procedure. This national stateby-state survey was conducted between October 10, 2007 and November 15, 2007 via a Westlaw search using the database Statutes by State and employing the search terms offer of judgment, offer of settlement, and offer of compromise. See, e.g., Arizona Rule of Civil Proc. 68 (2003)(rejecting the Marek construction of FRCP costs, the Arizona Supreme Court construed this rulescosts sanction not to include attorneys fees, even if fees are recoverable in the action, 148 Ariz. 361, 714 P.2d 854 (App. 1985)); Colo. Rev. Stats. Annotated 13-17-202 (2003); La. Code of Civ. Proc. Art. 970 (1997); New Mexico Rules of Civ. Proc, Rule 1-068 (2003)(even if fees are recoverable in the action). Cf. Conn. General Stats. Annotated, Chapter 900, 52-192a (2007)(limiting attorneys fee sanction to $350). See, e.g., Alaska Statutes 009.30.065 (1997); Oklahoma Rule of Civ. Procedure (1995); Texas Rules of Civil Procedure, Rule 167.4(a), (b)(3)(eff. Jan. 2004). See, e.g. Florida Stats. Annotated 768.79(2007); Ga. Code Ann. 9-11-68 (2006); Wests Nev. R.S.A. 17.115(4)(d)(3)(2005); Wests Utah Code Annotated, Rule of Civil Procedure 68 (2006). -2343 42 41

offer of settlement rule. We therefore agree with our lawyer respondents that most plaintiffs will likely have incentive to use Rule 68 in a two-way system only if the sanction they receive is an additional percentage of the award of attorneys fees. But this creates an equitable quandary in civil rights and employment discrimination actionstogether composing the great bulk of federal fee-shifting litigationbecause the overriding statutory command as construed by the Supreme Court in Christiansburg Garment precludes awards of attorneys fees against plaintiffs, except those very few whose claims are truly frivolous or without legal or factual foundation. Indeed, Christiansburg Garment aside, our respondents were mostly agreed that very few employment discrimination plaintiffs, and even fewer civil rights plaintiffs, could as a practical matter pay an award of attorneys fees measured by the hourly rates of defense lawyers in these cases. Our respondents generally believed that the heaviest sanction most plaintiffs could afford to pay would be an award requiring them to pay some multiple of Rule 54 costs. This disparity of legal and practical position between the typical individual plaintiff and corporate or governmental defendant in these cases in large part accounted for the intense controversy among our respondents about the fairness of a two-way rule. Defendants lawyers argued that a rule is unfair that requires their clients to pay attorneys fees when they lose the predictive gamble after rejecting a plaintiffs offer, but penalizes plaintiffs only with additional costs when the shoe is on the other foot. Plaintiffs lawyers countered that the existing Rule 68 unfairly affords settlement leverage to defendants alone; that only the sanction of an additional percentage award of attorneys fees will encourage defendants to consider plaintiffs offers seriously; and that the private attorney general statutory policy articulated in Christiansburg Garment precludes rule-based attorneys fees sanctions against all but the most irresponsible plaintiffs. Some plaintiffs counsel contended that additional fees via an offer of settlement rule would merely compensate for stingy statutory fee awards unfairly trimmed by district judges applying the standard lodestar fee formula that multiplies the hours reasonably expended on successful claims times a reasonable hourly rate. In a similar vein, other plaintiffs counsel asserted that they should have a tool to potentially enhance a fee award because in order to prevail in todays hostile doctrinal and judicial climate, their clients must have made an extraordinary showing of a civil rights or employment discrimination law violation sufficient to overcome the long-standing obstacle of summary judgment. We do not venture to gauge the relative equitable merits of these arguments. We do acknowledge the facial awkwardness of a rule that penalizes one party, the defendant, who guesses wrong in rejecting an offer with what is generally a significant penalty (an additional percentage of attorneys fees) yet penalizes its opponent, the plaintiff, with what is usually a much lighter one (a multiple of costs) for a similar wrong guess. Of course the frequency with which any penalties will be imposed on plaintiffs and defendants will in part be a function of the rigidity or flexibility of the trigger point; and the magnitude of inequality will in part be a function of the particular percentage of additional attorneys fees or additional costs selected by the rule. The mechanics of a two-way rule, that is, may to some degree ameliorate the monetary disparity between the costs sanctions imposed on plaintiffs, and the heavier fee sanctions -24-

imposed on defendants. We also propose three admittedly minor compensations for defendants, as outlined in the numbered subparts that follow. First, we recommend that the Rule also be amended to authorize sanctions in favor of defendants who win outright on liability, not just those who lose at a level less than the amount of their rejected offers. Second, we recommend that plaintiffs be required, on defendants request, to disclose periodically their accrued attorneys fees, for the purpose of enabling defendants better to gauge the level at which to peg their own offers. Third, we follow the approach of some states that make the payment of attorneys fees discretionary with the court, although defendants would have to overcome a presumption that they must pay a percentage multiplier on fees if they reject a plaintiffs offer and sanctions are triggered. In the end, however, our recommendation of a two-way rule is driven not by an assessment of the competing equities but by our belief, confirmed by many of our respondents, that such a rule will generate considerably more offers than does the current Rule 68, as well as a bargaining dynamic more likely to lead the parties to moderate their positions and reach earlier settlement. Those, after all, are the purposes of the current Rule, as explicated by the majority in Marek, yet our research and interviews strongly suggest that the Rule in its present form seldom provides the incentives needed to attain those ends. For example, defense lawyers asserted that merely relieving their clients from post-offer costs and fees, or awarding them their own postoffer costs, is usually insufficient to motivate a defense offer. If, however, a plaintiff, in a twoway regime is motivated to get the offer process going by the prospect of a percentage multiplier on attorneys fees, a good number of our respondents on both sides suggest that the defendant is likely to extend a counteroffer in response. That would mean that two offers under an amended Rule would be on the table in many cases where the defendant would have made none under the current Rule. We recognize that the devil lies in details considered below like the particular triggers for sanctions, types of sanctions, severity of sanctions, and deadlines for making and responding to offers. Not only may those features of an amended two-way rule lessen the unfairness of imposing different types of sanctions on plaintiffs and defendants; they may also make the rule more attractive to parties contemplating making an offer, and less threatening to parties receiving one, as illustrated in the discussion below.

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D.

Relax the Trigger For Sanctions By Establishing A 10% Cushion Bracketing The Dollar Amount of a Single Partys Offer, or Bracketing the Average of Offers and Counteroffers Where Both Parties Invoke the Rule

Seventeen of the twenty three two-way state statutes or rules effectively require offerors and offerees to forecast trial results to the penny, as does current FRCP 68. To avoid sanctions, in other words, the offerees trial result (merits recovery plus court-ordered award of fees and costs for pre-offer work) must be just slightly better than the offer she rejected. But five two-way states cushion the risks by either 25% or 20%. With that trigger, a plaintiff avoids sanctions if her recovery exceeds only 75% or 80% of the defense offer she rejected; a defendant who rejected a plaintiffs offer avoids sanctions if the plaintiffs trial recovery fails to exceed that offer by 120% or 125%. Still another two-way rule state employs a 5% cushion. Our respondents, focused on Rule 68's current one-way rule, opined that the use of a percentage cushion surrounding the amount of an offer would somewhat reduce the speculation inherent in predicting whether the sum of plaintiffs merits recovery, plus pre-offer court-ordered costs and fees, will exceed by a penny the amount of a defendants offer. While most lawyers felt reasonably confident about predicting the approximate range of a plaintiffs merits recovery after a few months of discovery, all recognized that there remained significant imponderables: plaintiffs chances of surviving summary judgment; the strength of the parties evidence of liability and damages at a trial to be held many months or years down the road; and in particular the amount of attorneys fees the court might award a prevailing plaintiff for work performed before a defendants offer.44 A percentage cushion in a two-way regime would reduce the required precision of the prediction a plaintiff or a defendant must make in deciding whether to make an offer, accept an adversarys offer or reject it and risk sanctions under the rule. On the other hand, our respondents also told us that if the percentage cushion is too high, an offer loses its bite. With a 25% or 20% cushion, for example, a plaintiff offeree desirous of gambling at trial on a large verdict, and her lawyer eying a correspondingly large contingency fee,

Our proposal in G. below that plaintiffs, on request, be required periodically to inform defendants of plaintiffs accrued attorneys fees might somewhat lessen the speculation on this last factor. But the calculation of pre-offer fees on which sanctions may depend is not the amount of fees the plaintiff lawyer asserts the plaintiff has incurred to that point, or even the actual amount of fees the plaintiff has incurred to that point in accordance with her fee agreement. Rather, the critical sum for Rule 68 purposes is the amount of an award a judge fixes months or years later, after trial, for a reasonable attorneys fee based upon its own highly discretionary determinations of how many hours plaintiffs counsel reasonably expended in advancing claims on which plaintiff prevailed, and of a reasonable hourly rate for that work. Therefore even disclosure of accrued fees by a plaintiffs lawyer the defendants lawyer trusts will give the defendant only a rough idea of the amount a court might later award plaintiff for pre-offer work. -26-

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could in most cases safely reject most defense offers out of hand without serious concern about sanctions under the Rule whenever the plaintiff had confidence that she would recover more than75% or 80% of the offer. And that might well be most of the time when it is realized that defendants initial offers under the current Rule were generally viewed by our respondent plaintiffs counsel, and even by many of the defense counsel, as unrealistically low. We believe that a 10% cushion around an offer by either party strikes a reasonable balance. It should relieve the offeree of impossibly precise prediction about the result at trial without relieving him or her from having to consider an offer seriously. While none of the twoway states uses a 10% cushion, Michigan uses that percentage in its widely used and reportedly successful case evaluation procedure that has all but supplanted that state=s offer of judgment rule.45 If the proposed two-way approach to the Rule works as intended, plaintiffs would frequently extend initial offers (in substance, demands), and defendants would frequently counteroffer. If they do, we would borrow another apparently distinctive feature of Michigan law, the Aaverage of counteroffers@ trigger from its (seldom used) offer of judgment rule. That trigger is defined in Michigan=s rule as Athe sum of an offer and a counteroffer, divided by two.@ 46

See MCR 2.405(E), the subsection of Michigan=s offer of judgment rule that precludes the award of costs and fees under that rule in cases submitted to case evaluation under MCR 2.403. The authors are grateful to Charles Hegarty, Esq., of the Michigan bar for an explanation of case evaluation in that state and its relation to offers of judgment. Mr. Hegarty=s description of the alternative methods of placing the force of law behind private negotiations reveals two or possibly three advantages of Michigan=s case evaluation scheme over the current version of Rule 68 offers of judgment. First, the parties= negotiate after receiving an evaluation of the worth of the case from an independent, professional panel, which should generate more realistic forecasts of trial outcome than is typical in purely partisan positional bargaining. Second, sanctions are not triggered when the trial result varies trivially from the panel=s award, only when it exceeds or falls short of it by more than 10%. Third, the panel is typically not convened until nine months or a year after commencement of the action. This gives the parties an extended opportunity to gauge the strengths and weaknesses of their respective positions. Perhaps more important, given the suspicions of some of our respondents, the delay affords defense counsel a substantial period of time to generate billable hours, after which counsel may be more receptive to recommending a settlement that may terminate the litigation. Our proposals to amend Rule 68 incorporate to some degree the second and third of these advantages. But we have not found a way to address the first: absent a new federal Rule mandating neutral evaluation of civil cases, the starting point for the bargaining prompted by an offer of judgment rule will still be the usually extreme positions of the opposing parties.
46

45

MCR 2.405(A)(3). -27-

The 10% cushion would then surround the average of the opponents offers. Here=s how the Michigan average-of-counteroffers trigger, bracketed by a 10% cushion, would advance the purposes of FRCP 68 in federal fee-shifting cases. Suppose a plaintiffs $200,000 demand produces a defendant's counteroffer of $100,000. We might use the one-penny trigger of current Rule 68, applied separately to each offer. Then no plaintiff's trial recovery (including pre-offer fees and costs) in any amount between $100,000.01 and $200,000.00 would trigger sanctions. Plaintiff wouldnt be sanctioned because her judgment within that range exceeded $100,000; Defendant wouldnt be sanctioned because Plaintiff's judgment did not exceed $200,000. Given the chasm between the parties= offers, neither has great reason to believe that the Rule and its sanctions would be triggered. Thus neither feels pressure from the Rule to moderate his/her position. But suppose, with an initial offer and counteroffer in the same amounts, we use triggers that are 10% on either side of $150,000, the average of the parties= counteroffers. Then any plaintiff's trial judgment of $165,000.01 or more (including pre-offer costs and fees) imposes sanctions on the defendant, and any plaintiff's trial judgment totaling $134,999.99 or less (including pre-offer costs and fees) subjects plaintiff to sanctions (other than the sanction of paying defendant=s attorneys= fees, because that is forbidden by Christiansburg Garment). Put differently, the average-of-counteroffers trigger results in sanctions whenever the plaintiff recovers less than $135,000 or more than $165,000. This represents 70% of the $100,000.01 to $200,000.00 range created by the opponents counteroffers, a range that is a complete Adead zone@ under current FRCP 68. Because many more trial results could trigger sanctions, the average-of-counteroffers approach may well contribute to more compromise and earlier settlement. In this way the mechanics of an amended, two-way FRCP 68 could be shaped not only to induce defendants to make counteroffers in response to initial offers/demands by plaintiffs, but also to encourage further compromise by both parties once those initial (colorably realistic, yet presumably still extreme) demands/offers are made. E. Sanctions for Prevailing Plaintiffs: A Presumptive but Discretionary 12% Multiplier on Fees When the Rule is Triggered After Rejection of a Plaintiffs Offer

Our respondents who considered any fee multiplier for prevailing plaintiffs to be fair (mostly plaintiffs lawyers) offered a variety of opinions about what percentage add-on would give plaintiffs sufficient incentive to make offers. Our view is that a relatively small percentage should suffice. The attorneys fee award represents the largest single component of recovery in many employment discrimination and civil rights cases. It is not uncommon for a fee award to total $200,000 or more after protracted litigation, even if plaintiffs recovery on the merits is only several thousand dollars. In such cases, a 12% fee multiplier for the plaintiff on the post-offer plaintiffs fees would generate an additional award of $24,000. That should motivate a substantial number of plaintiffs to initiate the offer process under the Rulenot just because the leverage created by a plaintiffs offer may be the only way to induce a defendant to make an offer, -28-

but also because the plaintiff need not put any money on the table to make an offer of her own.47 Many of the two-way states, like the federal system under Rule 68, make sanctions mandatory, but those that include attorneys fees in the sanctions typically leave the judge some degree of discretion to deny that penalty. There are several variants for the exercise of that discretion, authorizing courts to deny the sanction of fees when or to the extent that they are unreasonableas to which Florida law specifies six factors-- or will impose undue hardship. Georgias discretion to deny fees to the prevailing party is limited to the undefined but presumably rare circumstance where the court determines that the offer was made in bad faith, but Georgias percentage cushion is a high one (25%) that will often prevent the rule from being triggered in the first place. Utah will relieve the offeree of attorneys fees to prevent manifest injustice. In federal fee-shifting cases, most of which will be governed by Christiansburg Garment, the sanction of paying the opponents attorneys fees will almost invariably run against defendantsusually corporations in employment discrimination cases, and governments (or customarily indemnified government officials) in civil rights cases. The defendants ability to pa the fee award plus a 12% multiplier on the post-offer portion of the award should therefore rarely be an issue. Nevertheless, we can envision circumstances in which a judge should have equitable

We readily acknowledge that predictions about bargaining behavior are notoriously slippery, and that the circumstances of individual cases defy even probabilistically sound generalizations. A recent study by DecisionSet, a litigation consulting firm, concludes that the civil plaintiffs canvassed had guessed wrong 61 percent of the time that they had proceeded to trial after rejecting a settlement offer, with defendants guessing wrong 24% of the time. The Cost of Not Settling a Lawsuit, NY Times , August 8, 2008, p.C1. Under our proposed amendments, including the sanctions discussed below, guessing wrong by more than 10% about a trial outcome might be more costly to a prevailing plaintiff than simply recovering less at trial than the defendant offered, and even more costly than guessing wrong by a penny under the current version of Rule 68. Plaintiffs would also for the first time face monetary sanctions under Rule 68 if they lost on liability, unlike the practice under Rule 68 in its present form. In this connection a comment attributed to Martin Asher, an economist and co-author of the study, may be pertinent. The Times article paraphrased his view that psychologists have found that people [here, plaintiffs] are more averse to taking a risk when they are expecting to gain something [in our context, attorneys fees], and more willing to take a risk when they have something to lose [here, single or multiple costs sanctions]. If true, that would suggest that the existing Marek fee forfeiture sanction, and the prospect of an additional 12% add-on to fees under our proposal, should be more potent in inducing plaintiffs to accept defense offers, and to make offers of their own, than the threat of their having to pay our proposed new cost sanctions. On the other hand, the same view would suggest that the proposed 12% add-on to the award of attorneys fees against defendants who guess wrong by more than 10% in rejecting a plaintiffs offer, while significantly increasing defendants potential out of pocket costs, may be relatively less effective in inducing them to accept offers by plaintiffs. -29-

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discretion to deny the plaintiff all or part of the multiplier. These include cases where the plaintiffs trial recovery only trivially exceeds 10% more than plaintiffs rejected offer or the average of the parties counteroffers; or where an individual civil rights defendantprototypically a police officerwho has not committed a willful or intentional constitutional violation is nevertheless not eligible for indemnity from his employing government and is relatively impecunious; or where the judgment threatens an employer or small local government with insolvency. We therefore propose that the 12% attorneys fee multiplier be made presumptive but subject to the courts equitable discretion to deny it in such cases, in whole or in part. That of course would have to be spelled out in greater detail in an amended rule or accompanying note. F. Sanctions for Defendants: 1. Award Defendants Mandatory Double Costs Against Prevailing Plaintiffs

Under the current Rule 68, civil rights and Title VII defendants who lose at trial but whose offer triggers the Rule are relieved of liability for post-offer costs and, per the Marek interpretation, attorneys fees. In addition, the Rule provides that the offeree [currently just a plaintiff] must pay the costs incurred after the offer was made,48 which courts have construed to exclude defendants attorneys fees but include all the kinds of costs specified in 28 U.S.C.1920. Many of our defense respondents asserted that relieving a defendant from paying a plaintiffs post-offer costs and fees, even with the affirmative award to the defendant of these limited postoffer costs, provided insufficient incentive for a defendant to make a Rule 68 offer. Many of those respondents asserted that only an affirmative award of defense attorneys fees would provide that incentive, an award that Christiansburg usually precludes and that most plaintiffs in any event would be unable to pay. The vexing question, then, is what additional affirmative monetary award to defendants that is both practical and legally permissible would encourage defendants to initiate offers. Experts fees are usually relatively minor in most of the kinds of cases in question. Whats left would be awarding defendants some multiple of the Section 1920 costs to which they are currently entitled when the Rule is triggered. Our respondents indicated that defense costs recoverable under Section 1920 in an average employment discrimination case were typically no more than $10,000 to $20,000. Still, plaintiffs lawyers contended that a doubling of that award would pose a real problem for their clients, particularly those who, like most employment discrimination plaintiffs, have more than nominal income or assets. Yet our defendants respondents indicated that the prospect of an additional award of that magnitude to their clients would probably not motivate them to make an offer, especially if the court retained discretion to deny it. Given these seemingly intractable opposing considerations, we suggest that when the Rule is triggered, defendants receive an additional mandatory award of their Section 1920 post-offer costs in an amount equal to the basic costs award. We propose double costs as a sanction not

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FRCP 68(d). -30-

because we believe they will stimulate a significant number of additional defense-initiated offers, but because our most knowledgeable respondents on the issue, plaintiffs lawyers, believe the prospect of that penalty would induce plaintiff offerees to give more serious consideration to the offers defendants do make for other reasons. We observe also that in a two-way regime, the problem of stimulating defendants to initiate the offer process should diminish if, as anticipated, defendants will commonly make counteroffers in response to initial offers submitted by plaintiffs. We further believe it unnecessary to recommend that courts be given discretion to deny this award of additional costs. The practice of employers and government defendants, as related by our respondents, has been to forgo enforcement of costs awards against plaintiffs who lack the means to pay them. 2. Effectively Overrule Delta Air Lines by Awarding Prevailing Defendants Additional Costs

Defendants respondents persuasively argue that the Supreme Courts Delta Air Lines interpretation of the existing Rule leads to a perverse result. As we have seen, when plaintiffs prevail, but at a level below a defense offer, defendants are entitled to relief from paying plaintiffs post-offer costs and attorneys fees and to an affirmative award of their own post-offer costs. Yet when the defendant defeats liability altogether, it gets nothing from Rule 68, which the Court construed as applicable only when the plaintiff prevails. But how is the Rule to give defendants a practical incentive to make nominal or minimal offers (in the hope of avoiding litigation expenses) under Rule 68 in cases in which they are confident that they will prevail? Where a defendant prevails, Rule 54(d) already promises it a presumptive award of all its costs, incurred both before and after an offer, unless an unusual statute, rule of procedure, or court order provides otherwise.49 With Christiansburg ordinarily standing in the way of awarding defendants their attorneys fees, and with experts fees usually minimal in the kinds of cases under consideration, whats left to consider is the appropriateness of awarding the defendant a multiple of the Section 1920 costs it will almost surely receive under Rule 54(d). Plaintiffs counsel bridled at the prospect of a costs multiplier against their clients, viewing that as piling on against parties who had already lost. But several expressed the view that double or triple costs might be acceptable if the judge had discretion to deny them or they were subject to a stated cap. The problem is complicated by our recommendation immediately above that plaintiffs who prevail at trial but are subject to Rule 68 sanctions must pay twice the usual amount of Section 1920 costs. Would it make any sense to amend the Rule to mandate double costs against a plaintiff who wins, yet make an award of double costs discretionary against a plaintiff who loses? Perhaps, since the prevailing plaintiff will at least have recovered some funds with which to pay double costs, and the losing plaintiff may have none. One compromise

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FRCP 54(d)(1). -31-

would be to prescribe a standard award of triple the Section 1920 post-offer costs to be paid to the prevailing defendant, but accord the trial judge discretion, in view of the plaintiffs economic circumstances and the merits of the case, to reduce the amount to double those costs or not to supplement them at all. Another would be to mandate triple costs but cap that additional award at $20,000, an amount plaintiffs lawyers indicated would cause many of their clients real financial pain. We mildly prefer the former option, because over time a dollar cap may require continual readjustment. In any event, the choice between these options, or others we havent envisioned, turns more on pragmatism than principle. G. Encourage Defense Offers By Requiring Plaintiffs Periodically To Disclose Their Accrued Attorneys Fees

A number of defense counsel reported difficulty gauging the amount of plaintiffs preoffer fees and therefore in calculating the level of an offer approximating an estimate of trial results. To alleviate this possible obstacle to defense offers, we would amend the Rule to require plaintiffs counsel, no more frequently than every two months, to disclose plaintiffs accrued fees and costs on request. This change alone would surely not produce a significant number of additional defense offers, so we would not propose it if we thought it saddled plaintiffs with any significant or unreasonable burden. But plaintiffs counsel advanced only two reasons for opposing this change. First, they objected that if they had to disclose fees periodically, defense counsel should have to disclose defense fees. But there is no sanction that would require employment discrimination or civil rights plaintiffs to pay defense fees under the existing or proposed Rule; accordingly, plaintiffs have no Rule-based need to know those amounts. In contrast, defendants routinely must pay the fees of prevailing plaintiffs by statute, and our suggested amendment to Rule 68 would sometimes require them to pay an additional 12% on the post-offer part of a fee award. Most important, in considering what offer amount might exceed a plaintiffs total trial recovery by 10%, defendants need to know plaintiffs accrued pre-offer fees. Second, plaintiffs counsel objected that disclosing their accrued fees would give defense counsel an insight into the degree of investigation and research already undertaken, or not undertaken, on behalf of the plaintiff. A plaintiffs settlement posture would be weaker if the defendant gathered that plaintiffs counsel was relatively uninformed or unprepared. But the very purpose of Rule 68 is to encourage settlement, and all our respondents agreed that the Marek sanction of plaintiff forfeiture of post-offer fees means that offers under the Rule exert significant pressure only if they are made early. Consequently, we are skeptical that avoiding disclosure of the degree of plaintiffs diligence at the outset of litigation is a meritorious concern. Indeed one or two plaintiffs counsel, in the unusual districts where Rule 68 is invoked more than occasionally, reported that a major reason they frontload a significant part of their investigation before filing an action is precisely to reduce the threat level of a defendants early offer.

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On balance, we think it better to nationalize the approach of a few federal districts50 by requiring periodic disclosure of plaintiffs accrued fees on request. Should a defendant request and receive that information yet fail to make an offer, plaintiff would be free to argue to the court that the request represented mere gamesmanship, or an effort to impose an unnecessary burden on plaintiff. In an era of electronically recorded time records, however, we note that the burden on plaintiffs counsel of responding to such a request no more frequently than every two months should not be substantial. H. Preclude Submission of Offers By Either Party Until After Service of an Answer; Extend The Time for Accepting Offers from 10 to 30 Days; Set a Deadline For Submitting Offers Of 40 Days Before Trial 1. A Brief Delay Before Offers May Be Submitted

A few of the two-way rule states, unlike FRCP 68, preclude the submission of offers until a specified number of days after commencement of the action. In theoryalthough our respondents did not mention this problema defendant under the current Rule could submit an immediate offer as soon as a case is filed, and the plaintiff may be so unaware of key facts, evidence or law as to be unable conscientiously to evaluate the offer. On the other hand, as observed above, some respondents opined that if the Rule were amended to permit offers by plaintiffs, the absence of a required delay would commonly permit plaintiffs to force defendants to consider an offer while defendants are busy responding to the complaint under other court rules and before defendants have had a reasonable opportunity to investigate the claims. We suspect that the defense concern about the need for more time to investigate in order to respond to a very early offer is more acute in civil rights casesparticularly those involving police misconductthan in employment discrimination cases, where the defendant employer is in possession of most of the documentary evidence. Nevertheless, prevailing federal court rules impose significant burdens on counsel for both parties almost immediately after the filing of a complaint. These include Rule 26(a) compulsory disclosure and preparation for and attendance at the Rule 26(f) discovery planning conference between the parties, followed by a Rule 16(b) scheduling conference with the court. During this same time defendants not previously well acquainted with the facts must do intensive investigation and legal research in order to draft a comprehensive answer. Alternatively, they may be preparing a dispositive Rule 12(b) preanswer motion. An immediate plaintiffs offer under a two-way rule would therefore pose a substantial potential for ambush, at least in the presumably significant number of cases in which defendants are genuinely surprised by the allegations of a complaint. Some required delay in submitting offers therefore seems desirable. A balance must be struck, however, because, as our respondents who opined on the issue unanimously observed, only offers made relatively early in the litigation are likely to put

See, e.g., the district rules cited at Lewis and Eaton, supra note 1, 241 F.R.D. at 348n.68 (2007). -33-

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significant pressure on an opponent under a rule that assesses fee and cost sanctions by reference to post-offer activity. In some cases, a defendant might have to submit an answer as early as the 20-day deadline of FRCP 12(a) after service of the summons and complaint. In many others, however, the answer would not have to be served for several months after service of the summons and complaint, either because the parties have stipulated to, or the court has ordered, an extension of the time to answer, or because the defendant has made a dispositive motion under Rule 12(b). In the latter case, if the motion is denied, the defendant will not be required by Rule 12(a)(4)(A) to serve an answer until 10 days after receiving notice from the court of that denial, weeks or months after commencement of the action. But we are also concerned that the state two-way rules that specify a number of days before an offer may be submitted are too rigid to account for these variable deadlines for a defendant to answer a complaint under the Federal Rules. We suggest instead that neither party be permitted to submit an offer until after the defendant has served an answer.51 In many cases, while this may mean a delay of a number of months after the action was commenced, it should still be sufficiently early in the case for Rule 68's sanctions to remain potent, in view of the predominant number of total attorneys hours still to be devoted to discovery, subsequent motions, pretrial preparation, and trial. 2. Afford the Parties 30 Days To Accept or Reject Offers

Of the twenty three states with apparently active two-way rules, the average deadline for accepting or rejecting an opponents offer is 20.4 days, double the 10 days allowed under FRCP 68. Several of these states prescribe longer periods, including 30, 60, or 90 days. In a federal court two-way regime, rulemakers must consider when in a civil action an offer would be received. That would often be several months after commencement if, as proposed immediately above, neither party may submit an offer before the defendant serves an answer. Another relevant consideration emerged from our respondents, some of whom observed that the current 10-day deadline did not permit sufficient opportunity for evaluation, which in turn led to express rejection, or rejection under the terms of the Rule because of the plaintiffs failure to respond. Our conclusion is that 30 days would provide an offeree sufficient time not only to evaluate an opponents offer but to formulate a counteroffereven taking into account that formulating a counteroffer may need to await a response from plaintiffs counsel to a request for a statement of plaintiffs fees and costs accrued to date. Allowing more than 30 days to respond to an offer, when that period is tacked on to the many months that may have elapsed before an offer may be made, threatens to erode the force of offers by further contracting the postoffer work remaining to be done.

Here, as elsewhere, additional drafting would be required. On occasion, a defendant might, before answering, move under FRCP 12(e) for a more definite statement of the complaint, rather than move to dismiss the complaint under Rule 12(b). In that case, if the court were to order plaintiff to serve a more definite statement, the defendant would not be required to answer until 20 days after service of an amended complaint. -34-

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3.

Require the Parties To Submit Their Final Rule 68 Offer By the 40th Day Before Trial

The current Rule permits offers and subsequent offers to be made up until the eleventh day before trial. That is clearly too late if the Rule were amended to afford the parties 30 days to consider acceptance or rejection of an offer. Twenty-one of the two-way states set an average deadline of 19.86 days before trial, which would still be too late under an amended federal rule allowing offerees 30 days to consider an offer.52 It would be plausible to shrink the time permitted for consideration of an offer coming very late in the lawsuit, on the theory that the offeree at this stage of the action would or should be very well acquainted with the evidence, the law, and other considerations shaping a prediction of trial outcome. But we think this adds complexity to an already complex Rule with no significant countervailing advantage. If a final offer had to be submitted no later than 40 days before trial, the offeree would have until 10 days before trial to accept or reject.53 We are not troubled that this end date on submitting offers under the Rule would seriously undermine its purposes or efficacy. For one thing, in the vast majority of federal civil actions, more attorneys work will have been completed by that deadline than remains to be done, so that a Rule 68 offer made sooner than 40 days before trial would exert minimal settlement leverage. For another, the parties would remain free, as always, to negotiate outside the Rule. I. Limit Scope of Rule To Exclude Offers Respecting Equitable or Declaratory Relief

For the reasons discussed above in Part II., subpart I., we would follow the practice of the nine two-way state rules that expressly limit the operation of the Rule to claims for money. That amendment would obviate the necessity for parties and courts to struggle over the essentially unknowable monetary value of declaratory and injunctive relief. Further, even if the parties, under an amended Rule, entered into an offer of settlement, the amended Rules limitation to damage claims means that plaintiffs seeking both damages and an injunction could use the Rule without running afoul of the Courts decision in Buckhannon precluding attorneys fees when defendants voluntarily modify or abandon a challenged practice short of final judgment. The Rule 68 settlement would resolve only damages, as well as the plaintiffs attorneys fees attributable to the recovery of those damages. Accordingly, the plaintiff could still meet the Courts prerequisite for prevailing party status, and hence

Another state has no express deadline, and another simply requires the offer to be made at an unspecified time before trial. Perhaps for this late stage of the case, the text of the amendment should limit the offerees options to accepting or rejecting, rather than counteroffering under the Rule, because as few as 10 days before trial would remain for a counterofferee to consider a counteroffer. Of course such a provision would not preclude a last-minute settlement before trial outside the scheme of the Rule. -3553

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attorneys fees, related to the injunctive relief by litigating that relief to judgment. Alternatively, when a Rule 68 offer limited to damages is not accepted, it could nevertheless result in the parties reaching a comprehensive, purely private settlement of all requested relief, including an injunction and attorneys fees, outside the confines of the Rule. In negotiating that settlement, plaintiffs counsel would naturally have to take care to avoid fee denial under Buckhannon by seeking attorneys fees on behalf of the plaintiff and, to the extent ethically permissible, recommending rejection of an agreement that does not adequately include them. J. Cross-Reference Rule 68 In Other Federal Rules That Encourage Settlement and in Protocols for Mediation Conducted Under Federal Court or Private Auspices

In a sense, this final proposal recognizes the limited potential utility of Rule 68 even if the Rule were to be amended in the venturesome respects proposed above. The experience of our lawyer respondents suggests that mediation and early judicial intervention present greater promise for early dispute resolution. Yet some of them also told us that the use of Rule 68 as an adjunct to those processes could make them even more effective by providing additional incentive for the parties to compromise relatively soon after the commencement of a federal civil action. To this end, we recommend that Federal Rule 16, and all local court rules implementing that Rule, explicitly cross-reference Rule 68. For example, Rule 16(a)(5), which simply lists facilitating settlement as one of the purposes of the pretrial conference, could be expanded to provide , including consideration of the parties use of one or more offers of settlement under Rule 68. We would also recommend some reference to Rule 68 in existing local district rules and orders, and in any future Federal Rule of Civil Procedure, that require the parties to mediate. As discussed above, the mediators ability to communicate directly with the parties in the presence of their lawyers can readily cut through a lawyers reluctance, prompted by an unjustified personal economic motivation, to recommend that a client make or accept a Rule 68 offer. IV. Possible Statutory Impediments to Proposed Amendments to Rule 68

There are at least two potential statutory impediments to some of the features of our proposed new Rule 68 subdivision. The first and perhaps more substantial is that the proposed enhanced attorney fee sanction against defendants in a two-way regime raises at least surface tension with the Supreme Court's Burlington v. Dague54 interpretation of fee recovery statutes. Burlington held that awards of fees under federal statutes authorizing reasonable attorneys fees to prevailing parties may never be enhanced for "contingency," that is to account for the possibility that plaintiffs lawyers working on a contingent fee might receive no compensation for

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505 U.S. 557, 562, 112 S.Ct. 2638, 120 L.Ed.2d 449 (1992). -36-

their services in the event of a plaintiff's loss.55 The Court reasoned that an enhancement for risk of loss would largely duplicate two factors already accounted for in the basic lodestar amount of hours reasonably expended on successful claims times a reasonable hourly rate. It explained that the plaintiffs risk of loss, and in turn her attorneys contingent risk, are products of the merits of a plaintiffs claim and the difficulty of establishing those merits. It would be illegitimate for a district court to take into account the relative strength or weakness of the merits, the Court concluded, because there is some risk of a loss in any case. Accordingly, to enhance an award based on that possibility would contradict the Courts previous admonition56 that enhancements are proper only in rare or exceptional cases. And from a policy standpoint, the Court added, awarding enhancements based on the riskiness of a case would give plaintiffs lawyers the same incentive to bring relatively meritless claims as relatively meritorious ones. 57 The Court also objected to considering the difficulty of establishing the merits as a basis for enhancement, deeming that a factor ordinarily [already] reflected in the lodestar-either in the higher number of hours expended to overcome the difficulty, or in the higher hourly rate of the attorney skilled and experienced enough to do so.58 But our proposal that civil rights and employment discrimination defendants face a fee award 12% greater than the lodestar if the plaintiff secures a judgment 10% greater than an offer defendant had rejected does not enhance fees because of contingency. Rather, it enhances fees because of what might be considered excessive litigiousness. That position is bolstered by the companion proposal for a 10% cushion before sanctions are triggered. Because a defendantofferee would face sanctions only if plaintiff has recovered more than 110% of the amount defendant turned down, the defendants rejection of the offer looks at least somewhat unreasonable. Theres a different potential statutory obstacle to our proposed double or triple cost

505 U.S. at 565, 112 S.Ct. at 2643. The fee award in Dague was authorized under Section 7002(e) of the Solid Waste Disposal Act, 42 U.S.C.6972(e) and Section 505(d) of the Clean Water Act, 33 U.S.C.1365(d). 505 U.S. at 559, 112 S.Ct. at 2639. Nevertheless, the Supreme Court there held, as it had in Pennsylvania v. Del. Valley Citizens Council for Clean Air, 478 U.S. 546, 562, 106 S.Ct. 3088, 92 L.Ed.2d 439 (1986)(Delaware Valley I), that the language of the fee award provisions of these environmental statutes are similar to that of many other federal fee-shifting statutes; our case law construing what is a reasonable fee applies uniformly to all of them. Dague, 505 U.S. at 562, 112 S.Ct. at 2641 (citing 42 U.S.C. 1988, the Civil Rights Attorneys Fees Awards Act of 1976 that authorizes fee awards for actions under, among other statutes, Section 1983).
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Delaware Valley I, 478 U.S. at 565-566, 106 S.Ct. at 3098. Dague, 505 U.S. at 563, 112 S.Ct. at 2641. Id. -37-

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sanctions against plaintiffs. Theoretically, cost sanctions cut against the thrust of the Section 1988 statutory policy elaborated in Christiansburg Garment by indirectly deterring plaintiffs lawyers, as private attorneys general, from bringing potentially meritorious claims. These enhanced cost sanctions could kick in either against losing plaintiffs, if the Rule were amended to overturn Delta Air Lines; or against a prevailing plaintiff whose recovery was less than 90% of a rejected defense offer, or one who recovered less than 90% of the average of counteroffers. But in each case, one key distinction from Christiansburg is that these additional sanctions would not require any such plaintiffs to pay the defendants attorneys fees. Further, the assessment of these additional costs against plaintiffs would tend to encourage plaintiffs with claims that were weak at the outset, or begin to appear so early in the litigation, to compromise, a result consistent with, not contrary to, the concern expressed by the Court in Dague about relatively meritless claims. Perhaps most salient is a structural response. To our knowledge, no one has suggested that the existing Rule 68 sanctions against plaintiffs violate the Title VII 706(k) or Section 1988 statutory policies as elaborated in Christiansburg Garment. The current Rule 68 sanctions include mandatory forfeiture of a prevailing plaintiff's post-offer costs, payment of defendant's post-offer costs, and, most significantly, forfeiture of all of plaintiffs post-offer fees. If that last, high-dollar fee forfeituretriggered by a one cent wrong guess-doesn't pose a Section 706(k) or Section 1988 problem under Christiansburg, it's hard to imagine that Section 1988 would be offended by saddling plaintiffs with additional costs usually totaling far less when they reject a defense offer and then lose altogether, or recover less than 90% of a rejected offer or the average of the parties counteroffers. In brief, we do not believe that the statutory arguments against these proposed amendments to Rule 68, even in a subdivision limited to civil rights and employment discrimination cases, are formidable. Conclusion The policies underlying civil rights and employment discrimination fee shifting statutes create unique problems for Rule 68. The fundamental challenge is to structure incentives that encourage earlier resolution of these disputes without unduly compromising plaintiffs meaningful opportunity to vindicate ...important Congressional policies....59 The new Rule 68.1 we propose is designed to address the demonstrated inadequacy of the current Rule to generate settlements of these cases, while remaining sensitive to the distinctive private attorney general feature of litigation under these statutes. Our proposal would apply to claims seeking monetary, but not equitable, relief. It would soften the terminology of Rule 68 by authorizing offers of settlement, not just judgment.

The Civil Rights Attorney's Fees Award Act of 1976, S. Rep. No. 94-1011, at 2, as reprinted in 1976 U.S.C.C.A.N. 5908, 5910. -38-

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Unless a federal civil rights or employment discrimination statute authorizing fees to prevailing parties expressly provided otherwise, the amended rule would extend Marek fee forfeiture to federal court actions under all such statutes, regardless of how a particular statute links fees and costs. But the Christiansburg Garment interpretation of Sections 706(k) and 1988 and similar fee authorizing statutes would be rigorously preserved, so that the amended Rule would not require plaintiffs to pay defendants attorneys fees, only costs. Following the lead of almost half the states, we believe Rule 68 should allow plaintiffs as well as defendants to make offers of settlement. Allowing plaintiffs to initiate offers of settlement harbors the greatest potential for stimulating more offers and jump starting the settlement process. We suggest incorporating specific time parameters to ensure that the parties have ample time to evaluate and respond to offers. Periodic mandatory disclosure of the plaintiffs incurred fees may facilitate the formulation of more offers by defendants. The most delicate, and undoubtedly the most controversial, aspects of our proposal concern the proposed sanctions. Prevailing plaintiffs would be subject to a new mandatory sanction of double costs should they reject an offer of settlement and fall more than 10% short of that offer (or an average of counteroffers) at trial. They would also be subject to a discretionary sanction of double or triple costs if the defendant prevailed outright. Defendants who reject a plaintiffs settlement offer that the plaintiff then exceeds by 10% at trial would be subject to a presumptive but discretionary sanction of a 12% multiplier on fees. We have tried to propose sanctions that encourage the earlier resolution of civil rights and employment discrimination damages claims in federal court, without hanging the sword of Damocles over any party. Our proposals may or may not garner substantial support. But we earnestly hope that they stimulate renewed interest in crafting procedural devices conducive to the faster, yet still fair dispositions of these numerically predominant and important categories of federal question cases.

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