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

HAROLD S. LEWIS, JR.

Walter F. George Professor of Law Mercer University School of Law

THOMAS A. EATON

J. Alton Hosch Professor of Law University of Georgia School of Law

teaton@uga.edu

This paper can be downloaded without charge from the Social Science Research Network electronic library at

http://ssrn.com/abstract=1318251

1 Lewis and Eaton, “Rule 68 Offers of Judgment: The Practices and Opinions ofExperienced 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, andacademics, see Symposium, “Revitalizing FRCP 68: Can Offers of Judgment Provide AdequateIncentives for Fair, Early Settlement of Fee-Recovery Disputes, 57 Mercer L. Rev. 717 (2006).

2Lewis 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 offersof judgment. Interestingly, employment discrimination defense attorneys in the same areas didnot report the same).

-1-

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 defendcivil rights and employment discrimination cases. We set out to determine the extent to whichoffers of judgment under Federal Rule of Civil Procedure 68 (“FRCP 68" or “Rule 68") are madein these type of cases and the reasons why that Rule is or is not used. We focused on civil rightsand employment discrimination litigation because it is in those cases where Rule 68 has thegreatest potential to stimulate an early resolution of the dispute. Rule 68 provides the offerorgreater leverage in civil rights and employment discrimination cases than in most other types ofcivil litigation, because the potential sanction to the prevailing offeree who turns down and failsto improve upon the offer includes the forfeiture of post-offer statutory attorneys’ fees. And inthese cases, fees often constitute the greater part of a plaintiff’s 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 forunderwriting the initial research and lawyer interviews, as well as to Mercer’s Dean Daisy Hurst Floyd and DeanRebecca Hanner White of the University of Georgia School of Law for their ongoing support. Our thanks also toKate Bridges, a student at the University of Georgia School of Law, for her research assistance on state offer ofjudgment rules. Finally, we greatly appreciate the cautions about would-be “reforms” of the Federal Rules of CivilProcedure from Edward H. Cooper, Thomas M. Cooley Professor at the University of Michigan Law School.

3Id., 241 F.R.D. at 349.

4 Id., 241 F.R.D. at 350-56.

-2-

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

In this, our second report, we discuss how Rule 68 might be amended to make it a moreeffective 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 thepractices that have evolved in states that have similar provisions in their respective rules of civilprocedure. In very broad terms, we discuss (1) having a separately numbered subdivision of theRule for cases arising under federal fee-shifting statutes; (2) modifying the terminology of Rule68 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 andsanctions calculated to promote the timely and fair resolution of disputes without undulythreatening 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 orunamended, as even remotely resembling a panacea. It is likely not as powerful or productive asmore informal devices like pre- or post-dispute mediation or, as discussed below, early neutralevaluation. The Rule is only one of several procedural devices that can help speed up theresolution of litigated disputes. What we offer here are the broad contours of how Rule 68 couldbe reshaped to deal with the distinctive challenges posed by its application in litigation pursuedunder federal fee shifting statutes, especially over claims asserting violations of civil rights andemployment discrimination statutes. Our goal is to spark a conversation about how to makeRule 68 a more useful and effective tool to bring about the earlier yet still fair resolution of theseclaims.

Part I of our paper begins with a discussion of the scope and sources of our proposals. InPart II we address the specific problems that the lawyers we interviewed identified asimpediments to the effective use of Rule 68 offers of judgment in civil rights and employmentdiscrimination litigation. Part III discusses specific proposals that respond to the problemsidentified in Part II. Part IV explains why, in our view, the proposed changes could be made

5461 U.S. 412 (1983).

6The Civil Rights Attorney’s 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.

8 On occasion, a lower federal court has interpreted a federal fee-shifting statute topermit the assessment of fees against a losing plaintiff, even when the plaintiff’s claims did not

-3-

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 federalfee-shifting litigation we studied. The application of Rule 68 in cases where attorneys’ fees areawarded to prevailing parties present common considerations that set them apart from others.The critical distinguishing factor is that statutory awards of attorneys’ fees to prevailingplaintiffs often reflect a Congressional policy to encourage litigation under those statutes.

By far the greater number of the fee-shifting statutes to which the Rule’s newsubdivision would apply are of the “Christiansburg Garment” variety. The Civil RightsAttorney’s Fees Awards Act of 1976, 42 U.S.C. § 1988, and its Title VII counterpart, Section706(k), direct the award of attorneys’ fees to prevailing parties. But the Supreme Court inChristiansburg Garment v. EEOC5 interpreted Section 706(k), and by extension Section 1988, toforbid the award of fees to prevailing defendants, except in the rare case that a plaintiff’s claimis frivolous or utterly without foundation. The asymmetrical treatment of prevailing plaintiffsand 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 anessential remedy if private citizens are to have a meaningful opportunity to vindicate theimportant Congressional policies which these laws contain.”6 Civil rights and employmentdiscrimination plaintiffs are often referred to as “private attorneys general” in that they advancepublic policy through private litigation. Second, Congress has recognized that these “privateattorneys general should not be deterred from bringing good faith actions to vindicate thefundamental rights here involved by the prospect of having to pay their opponent’s counsel feesshould they lose...”7

Because of these legislative policies, the sanctions against civil rights and employmentdiscrimination plaintiffs we propose for a new subdivision are necessarily constrained in waysnot applicable in other types of civil litigation. In particular, FRCP 68 cannot simply mimicstate offer of judgment rules that routinely shift defense attorneys’ fees to losing plaintiffs, atleast for federal statutory claims subject to the Christiansburg Garment principle.8

fall to the Christiansburg Garment floor of “frivolous” or “without foundation.” See, e.g, Jordanv. Time, Inc., 111 F.3d 102, 105 (11th Cir. 1997) (awarding fees to the defendant under Rule 68where underlying fee award statute, the Copyright Act, defined “costs” to include fees but hadnot been construed by the Supreme Court as ordinarily precluding fees against losing plaintiffs).

9 A few important reasons suggested by lawyers as to why Rule 68 is not used withgreater 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 strategythat dictates withholding all offers of settlement, before or during litigation. See Lewis andEaton, supra note 1, 241 F.R.D. at 351. There are other cases in which a defense team otherwiseinclined to consider settlement may have good reason not to, including the very real possibilityof copycat litigation by others similarly situated. Id. at 346. We cannot conceive of how Rule68 might be amended to respond to a determined hardball approach. In that respect Rule 68 isneither more nor less effective than any other settlement device, including mediation. Nor do wehave reason to believe that our proposal below to change the terminology of a Rule 68 offerfrom one of “judgment” to “settlement” would overcome the reluctance of some defendants tosettle a federal lawsuit where other plaintiffs are waiting in the wings. It could be that the merefiling of an offer of “settlement” in a federal district court clerk’s office, even shorn of itssubstantive terms, may inspire a putative plaintiff or her counsel.

10Some of our respondents indicated that state two-way rules are used more frequently inthe trial of ordinary common law claims than for state statutory claims that authorize prevailingparty attorneys’ fees. In part that may be because some states that ordinarily require each side tobear an opponent’s post-offer fees when their rule is triggered make an exception for claimsunder state civil rights or employment discrimination statutes that adopt the usual Christiansburg

-4-

B. Sources of Our Proposed Amendments

In proposing these amendments, we rely heavily on the observations of the experiencedcivil rights and employment discrimination lawyers we interviewed. These attorneys not onlyoffer the insights gleaned through collective decades of experience, but, we believe they mayalso 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 toFederal Rule 68. In particular, we recommend adopting the feature included in many state rulesthat allow plaintiffs, as well as defendants, to make rule-based offers. As explained in moredetail below, we expect that Rule 68 would be used more frequently–and hence, would harborgreater potential to stimulate earlier resolution of disputes-- if plaintiffs were allowed to initiateoffers. But we should also point out that we do not propose adopting any particular stateprovision in its entirety. We felt constrained to reject certain key provisions from statestatutes–notably the provisions of two-way rules that would frequently require a plaintiff to pay aprevailing defendant’s attorneys’ fees even when the plaintiff’s claim was not frivolous–asconflicting with the overriding contrary policy embedded in federal fee-recovery statutes.10

Garment federal statutory prohibition against imposing defense fees on any plaintiffs exceptthose 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 underFlorida’s offer of judgment rule barred by provision of Florida Civil Rights Act expresslyincorporating 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-

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, itwould apply to the largest categories of privately initiated federal court civil actions.11 If aseparate rule for federal fee shifting cases proves to encourage earlier and fair resolution of civilrights and employment discrimination cases, the collective cost and time savings to the federaljudicial system and litigants could be substantial.

Second, if the experience under this first set of amendments were successful, it wouldsuggest that further, less constrained amendments for diversity and non-feeshifting federalquestion cases might be even more conducive to earlier settlement. As suggested above, mostfederal fee-shifting litigation poses special challenges to the successful implementation of theRule. The fundamental challenge is to devise a set of incentives that encourages the earlyresolution of disputes without deterring civil rights and employment discrimination plaintiffsfrom fulfilling their Congressionally charged roles as private attorneys general. Under thenumerically most important federal fee-authorization statutes–including the civil rights andemployment discrimination statutes that together generate the greatest number of privatelyinitiated federal question cases– Christiansburg Garment precludes fee awards against plaintiffs,leaving defendants without the single most attractive incentive to make Rule 68 offers. Evenapart from the legal prohibition against awards of defense fees, as a practical matter few civilrights or employment discrimination plaintiffs have the assets or income potential to satisfyjudgments requiring them to pay the fees of lawyers defending local governments or privateemployers. 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 modestamendments limited to fee-shifting cases prove successful, it augurs well for future amendmentsstipulating the more expansive sanctions against plaintiffs that might be crafted for diversityactions or for federal question cases where there are no statutory impediments to awarding feesagainst 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 weinterviewed that shed light on why Rule 68 is not used with greater frequency. Understanding

12Lewis and Eaton, supra note 1, 241 F.R.D. at 350. For example, an attorney whodefends 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 incareer advancement.

13 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 ofsettlement”); 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 orConfession of Judgment”); Texas Rule of Civ. Procedure 167.2 (2004)(“settlement offer”); UtahRule of Civ. Procedure 68(2006)(“settlement offers”); Wisconsin Statutes Annotated , Chapter807, §807.01 (2007)(“Settlement offers”).

-6-

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” posesproblems 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 ofwrongdoing may encourage other law suits, create unfavorable publicity, or impose moretangible adverse consequences for individuals.12 These concerns would be ameliorated if Rule68 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 ASupreme 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 Rule68 offer of judgment is the forfeiture of post-offer attorneys’ fees. This sanction is not set forthin the text of Rule 68. It stems from the linkage of the term “costs” in the Rule and the languageof fee-shifting statutes characterizing attorneys’ fees as “costs.” The sanction of forfeiting costsunder Rule 68 has existed since the Rule’s inception in 1938. The inclusion of a fee award “aspart of costs” is part of The Civil Rights Attorney’s Fees Award Act enacted in 1976. Theconclusion that the “costs” subject to forfeiture under Rule 68 could include statutory attorneys’

14 473 U.S. 1 (1985).

15 Similarly, some defendants have not realized that, by logical extension of the Marekreasoning, their unrestricted offers to pay plaintiffs’ “costs” might later be held to include, or atleast not preclude, an additional award of plaintiff’s attorney’s fees. Erdman v. Cochise County,926 F.2d 877, 879 (9th Cir. 1991) furnishes an example. Cochise County offered to submit to anoffer of judgment of $7,500 “with costs” respecting a claim under §1983. The plaintiff acceptedthe offer, after which the plaintiff’s attorney submitted a separate statement for fees. The Countyargued that it did not understand that “costs” included attorneys’ fees. The court of appealsrejected this argument, ordering the defendant to pay the plaintiff’s reasonable fees in additionto the $7,500 plus costs.

-7-

fees was not definitively drawn until the Supreme Court’s 1985 opinion in Marek v. Chesney.14

When we interviewed our lawyer respondents fully two decades after Marek, we did notanticipate that the absence of an explicit textual statement regarding potential forfeiture of post-offer attorneys’ fees would be a major problem. Most lawyers are expected to be familiar withimportant Supreme Court opinions in the areas of law in which they practice. Indeed, civilrights and employment discrimination cases are typically defended by large defense firms(particularly in employment discrimination cases) or by government attorneys’ offices or outsidecounsel 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 firmsprofessed to be unaware of Marek–that is, that an offer, if triggered, could relieve their clientsnot only of minimal post-offer “costs” but also of very substantial post-offer fees.15 Indeed somesaid 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 readthe text of the Rule, but who are not familiar with Marek, might later learn that by refusing theoffer they put their post-offer statutory fees at risk. We assumed, and our respondents mostlyconfirmed, that a high percentage of plaintiffs’ lawyers in these cases are novices, either to lawpractice generally or to employment discrimination or civil rights cases. Many are tort, criminalor 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, manywould not appreciate the risk the offer poses to their clients, at least not within the 10 daysduring 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 MarekFee Forfeiture Applies

In our first article, we observed how the Marek majority’s principal innovation–that Rule68 may result in forfeiture of a plaintiff’s post-offer attorneys’ fees–applies only where aparticular fee-shifting statute authorizes fees to prevailing parties as “part of” rather than “in

16Lewis and Eaton, supra note 1, 241 F.R.D. at 345.

17For 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 InjectingCertainty Into Offers of Judgment, 91 Minn. L. Rev. 865 (2007).

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

19 We documented the prevalence of summary judgment in employment discriminationand civil rights cases in Lewis and Eaton, supra note 1, 241 F.R.D. at 355, text accompanyingnotes 76-78.

20 While relatively few motions to dismiss for failure to state a claim for relief have beengranted in an era dominated by the rhetoric of Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2L.Ed.2d 80 (1957), it may be anticipated that the motion will enjoy a revival in the wake of theSupreme Court’s 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 long-standing position that the Federal Rules do not require detailed or “heightened” pleading offacts. However, the Court also holds that in order to satisfy the far more broadly applicableF.R.C.P. 8(a)(2) requirement of pleading a “short and plain statement of the claim,” the plaintiffmust allege some facts–enough to make the element she must ultimately prove at trial not merelypossible but plausible. 127 S.Ct. at 1965 &n.3. This latter ruling may spur a more aggressiveevaluation of the sufficiency of the plaintiff’s factual allegations and lead to the granting of moremotions to dismiss.

Lower federal courts have wrestled with whether to apply the Bell Atlantic interpretationof F.R.C.P. 8(a)(2) to issues arising under claims other than the particular Sherman Act §1 claim

-8-

addition to” or altogether distinctly from “costs.” In the words of Justice Brennan’s dissent, bylimiting Rule 68 plaintiff fee forfeiture to actions under statutes that linguistically tie feeavailability to the Rule 68 term “costs, ” Marek produces “a senseless patchwork of fee shiftingthat flies in the face of the fundamental purpose of the Federal Rules” to foster uniformprocedure for federal courts.16 We accordingly propose below that the Rule be amended tospecify that absent statutory text to the contrary, Rule 68 plaintiff fee forfeiture, together withour proposed new Rule 68 sanctions against defendants, be available in actions under any statuteauthorizing fees to prevailing parties17

C. So Few Cases Go To Trial That The Prospect of the Rule Being Triggered IsRemote

Rule 68's sanctions are triggered only if there is a trial and a particular trial result: aplaintiff’s total recovery, including pre-offer court-calculated attorneys’ fees, that fails to exceedthe amount of a defendant’s offer. Yet roughly 98% of civil cases filed in federal courts do notgo to trial.18 Of the 98% resolved before trial, many are thrown out on dispositive motions, mostcommonly summary judgment19 but also motions to dismiss for failure to state a claim.20 Many

considered in Bell Atlantic, including claims under federal fee-shifting statutes. See, e.g., EEOCv. Concentra Health Services, Inc., 496 F.3d 773 (7th Cir. 2007)(dismissing claim under Title VIIof 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 todismiss Bivens claim asserting deprivation of constitutional rights under color of federal law). Preliminary research suggests that lower courts have applied Bell Atlantic most vigorously todismiss federal civil rights claims (a category excluding federal employment discriminationclaims). 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).

21 It is widely believed that in private negotiations, where no Rule 68 offer is typicallymade, 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, 241F.R.D. at 356. Since Rule 68 is merely a source of additional leverage for private bargainingsupplied by federal procedural law, it’s reasonable to suppose that negotiations in which a Rule68 offer is made are also conducted based on predictions of trial outcomes. Indeed, that may beeven more true of negotiation conducted after a Rule 68 offer is made, since its terms focus theparties on a very specific outcome that compares the level of plaintiff’s anticipated trial recoverywith the amount of a defendant’s offer.

-9-

more are resolved by privately negotiated settlement before any dispositive motion has beendecided or, perhaps, even filed. Accordingly, defense lawyers, aware that the chances of a trialare remote, may well not think it advantageous to recommend a Rule 68 offer, even if the costsof doing so are minimal. 21

A related lawyer observation about the scant use of Rule 68 is that in some federaldistricts, a high percentage of negotiated settlements are reached relatively soon after a case isfiled through one or another alternative dispute resolution device–typically mediation or earlyneutral evaluation–or 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 permissiblepurpose of a pretrial conference. These lawyers imply that the prompt resolution of a case ineffect moots the use of Rule 68. Underlying this view is the further implication, addressedbelow, that while the terms of the Rule permit an offer to be made as soon as an actioncommences, as a practical matter the Rule will seldom be used until after a considerable amountof discovery.

Despite these concerns, a number of our lawyer respondents opined that if the addedleverage of Rule 68 can speed the settlement of purely private negotiations, it could also aidnegotiations conducted shortly after the outset of an action under the auspices of a mediator orjudge. 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 adefendant’s Rule 68 offer will not seriously trouble a plaintiff unless it is made early in the

22 450 U.S. 346, 101 S.Ct. 1146 (1981), discussed at F.R.D. I, 241 F.R.D. at 341, 345.

23 As discussed in footnote 20 above, the Court’s recent decision in Bell Atlantic maysignal a resurgence of motions to dismiss for failure to state a claim for relief. More frequentgranting of such motions could lead judges to label a greater number of plaintiff’s claims as“frivolous.” A defendant could couple its F.R.C.P. 12(b)(6) motion with a Rule 68 offer to putsignificant pressure on plaintiff’s counsel new to the field who made a pleading error, or even onexperienced counsel who bring a claim on a novel legal theory more vulnerable to dismissal onthe pleadings.

-10-

action–for example, in a Rule 16 pretrial conference or court-ordered mediation session– beforethe bulk of the plaintiff’s attorneys’ work has been done. This might be accomplished byexplicitly 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 intoconferences or caucuses conducted by trial courts or mediators is that direct discussion with thedefendant may cut through the sometimes unjustified reluctance of defense counsel torecommend the use of Rule 68 to clients, because among other reasons it might terminate thelitigation sooner and accordingly diminish counsel’s hourly fees. Similarly, direct court ormediator discussion with plaintiffs in discovery scheduling conferences or caucuses couldovercome 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 theconclusion of a trial–an event that has virtually vanished from the federal court landscape--couldbe addressed by rewriting the Rule so that the gamble created by an offer (that plaintiff’srecovery will not exceed the offer) would be assessed before trial. For example, if, as suggestedin “D.” immediately below, Delta Air Lines, Inc. v. August22 were effectively overruled byamendments to Rule 68, defendants could benefit from having made an offer not only if aplaintiff failed to exceed the offer after a trial but also if defendant defeated liability altogetherat any stage of the litigation, including, for example, on summary judgment. But a pretrialtrigger strikes us as fundamentally unjust and plainly inconsistent with the legislative policiesunderlying fee shifting statutes. As construed, the fee shifting statutes governing civil rights andemployment discrimination cases are intended to aid plaintiffs in attracting counsel, not only byholding out the prospect of a fee if they prevail, but also by insulating them, underChristiansburg Garment, from fee liability to the defendant (provided their claim wasnonfrivolous). Creating a pretrial trigger would undermine these policies by increasing theplaintiff’s 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 notsuggest that any offer is ill advised, the Supreme Court’s Delta Air Lines decision blunts the

24 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 ofthe bench and the congestion of the calendar in different federal judicial districts. Lewis andEaton, supra note 1, 241 F.R.D. at 354-55.

25Many defense lawyers told us that they do not consider any sort ofresolution–traditional settlement or Rule 68 offers–until after a trial court has ruled on a defensemotion for summary judgment.

-11-

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

E. Why Defendants Disposed to Make Offers Find it Difficult to Do So EarlyEnough For the Offers to be Effective

Because the principal sanction under the current Rule is forfeiture of plaintiff’s post-offerattorneys’ fees should she prevail in a federal fee-shifting action, all our respondents agreed thata defendant’s Rule 68 offer needs to be made relatively early in the litigation to providemaximum leverage. Unfortunately, our respondents also indicated that the few Rule 68 offersactually made often come later, too close to trial to put much pressure on the plaintiff.25 Theyidentified three factors that in the aggregate lead to tardy offers, offers unlikely to put seriouspressure on plaintiffs.

First, defense lawyer economics–the hourly fee-- may work against early counseling ofthe 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 orengagements) would be reluctant to advise defendants of the potential settlement-leverage or fee-

26To 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, supranote 1, at 352.

27 See, e.g., the Georgia State Bar’s “Aspirational Statement on Professionalism,”“General Aspirational Ideals,” and “Specific Aspirational Ideals.” These recommend, amongother things, that lawyers work towards the “expeditious and economical” achievement of allclient objectives, in the spirit of putting fidelity to clients and the common good before selfishinterests. 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.

-12-

avoidance advantages of an early offer of judgment.26 This despite the fact that contemporaryethical and professionalism norms routinely demand that counsel take affirmative steps to helpclients achieve the economical and expeditious, not merely favorable, resolution ofcontroversies. 27

A small number of civil rights and employment discrimination defense lawyers reportedthat they cannot conscientiously evaluate the probability of liability or the magnitude of apotential damage award , or therefore recommend a Rule 68 offer, before extensive discoveryhas been conducted. But the large majority of both the defense and plaintiff’s attorneys weinterviewed opined that in most cases–and especially in employment discrimination cases wherethe 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 hencebilling. The dominant view was that in most of the fee-shifting cases at issue, a defendant couldevaluate potential liability and damages sufficiently to calculate a reasonable offer within four tosix months after an action commences. Yet all agreed that there are some significant number ofcases where a key component of liability or, even more commonly, damages will remainunknown until at least after the taking of plaintiff’s deposition. An offer made a year or twoafter commencement of the action is unlikely to put significant pressure on the plaintiff toaccept, except in the unusual case where the plaintiff anticipates that substantial additionalplaintiffs’ attorneys’ hours, including trial hours, remain to be expended and those hoursrepresent a substantial proportion of the damages at stake.

Some defense lawyers reported a related difficulty in recommending early offers: uncertainty about the amount of plaintiff’s attorneys’ fees incurred to date. That is relevant todetermining the amount of a defense offer because the amount of that offer will be measuredagainst plaintiff’s complete economic trial recovery–not just damages but also court-orderedattorneys’ fees for pre-offer work. A number of defense lawyers discounted this difficulty,observing that they usually succeeded in inducing plaintiff’s lawyers whose word they trusted todisclose that amount. But others indicated that plaintiff’s lawyers refused to respond to informalrequests for fees accrued to date, or that they did not trust the responses they would receive fromcertain plaintiff’s counsel. No national rule currently requires plaintiffs to disclose attorneys’

28 In fact one defense lawyer indicated that he makes offers not so that they will beaccepted, but in the hope that they will be overlooked or misunderstood by plaintiff’s counsel until after the 10 day period expires, and therefore rejected by operation of the Rule. He thentells plaintiffs’ lawyers about the effect of Marek, concluding “From now on you’ll be workingfor me.”

29 See, e.g., West Ann. Cal. C.C.P. §998(2005); Conn.G.S.A.§52-192a ((2007); West’sFla.S.A. §768.79 (2007); Ga. Code Ann. §9-11-68 (2006); Mich. Court Rules of 1985, Rule2.405 ((2003); West’s Nev. R.S.A. §17.115 (2005); N.J. Stats. Annotated Rule 4:58-1 (2006);West’s Utah Code Ann., Rule of Civil Procedure 68 (2006).

-13-

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 alitigation 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 manystate counterpart rules and may marginally contribute to lesser use of the Federal Rule. Sentenceone of paragraph (a) of the Rule sets no waiting period after commencement of a federal civilaction 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 wouldpermit plaintiffs to force defendants to consider an offer while defendants are busy respondingto the complaint under other court rules and before defendants have had a reasonable opportunityto 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 isdeemed rejected (“unaccepted”). Some respondents suggested that this was too short a time forparties and their counsel to give meaningful consideration to an offer.28 Finally, sentence one ofparagraph (a) permits offers to be made up until the eleventh day before trial. Some respondentsbelieved that it would be preferable to set a deadline for making an offer of no later than 30 daysbefore trial, again to permit meaningful consideration of offers at an especially busy time forplaintiffs and their counsel. Our proposed changes respecting these time periods are influencedby 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 againstplaintiffs 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 otherfactors, the resources and ability to pay of the offeree.29 It is understandable that discretionwould be a feature of the state rules, since many of them–unlike Rule 68, which at worst forcesplaintiffs to forfeit fee awards–authorize affirmative awards against plaintiffs of defendants’attorneys’ fees. Some of our plaintiffs’ lawyer respondents indicated that the additional costsanctions against plaintiff-offerees that might be part of an amended Rule would be more

30 See Lewis and Eaton, supra note 1, 241 F.R.D. at 342. When Rule 68 awards thedefendant its post-offer costs, the defendant, by hypothesis, must have lost: a defendant benefitsfrom Rule 68, as interpreted by Delta Air Lines, only when the defendant is not a prevailingparty. 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-

palatable if the judge had discretion to deny them. Some defense lawyer respondents counteredthat such discretion would undermine the pressure that an offer under the Rule is designed togenerate.

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 theirclients might reap under current Rule 68–relief from post-offer costs, relief from post-offerattorneys’ fees, and an award of post-offer costs30–creates insufficient monetary incentive for anoffer. These lawyers typically asserted that the only sanction sufficiently meaningful for them torecommend an offer, or for their clients to make one, would be an award against the plaintiff ofthe defendant’s post-offer attorneys’ fees. But that is a sanction that our lawyer respondentsreported most plaintiffs in these kinds of cases cannot afford to pay. In any event, it is asanction that almost surely cannot validly be added by an amendment to the Federal Rules ofCivil Procedure, at least as respects claims under federal employment discrimination and civilrights fee-authorizing statutes. That’s because the general Christiansburg Garment prohibitionon fee awards against plaintiffs in these cases flows from commands of statutes (including TitleVII of the 1964 Civil Rights Act and the Civil Rights Attorney’s Fees Awards Act of 1976), andit has long been understood that the terms of Federal Rules must not conflict with valid statutorycommands.

H. The Rule Poses Logistical Problems in Cases Where Offers Are Made to ByMultiple 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 andrisks 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 ofliability and the magnitude of likely damages that is needed to formulate an offer that willapproximate the result at trial and therefore potentially benefit the offeror by inducing the offereeto accept it.

These are real but surmountable problems. A defendant who wants to condition an offerto one on acceptance by all of the plaintiffs may do so. Moreover, if the offer clearly states howmuch the defendant is offering to each plaintiff, a court can discern whether the judgment

31E.g., Sharpe v. Cureton, 319 F.3d 259 (6th Cir. 2003) (upholding the imposition ofsanctions under Rule 68 when most of the individual plaintiffs failed to obtain an award morefavorable than the offer). See generally Teresa Rider Bult, “Practical Use and RiskyConsequences of Rule 68 Offers of Judgment,” 33 Litigation 26, 30 (Spring 2007). Nevada’sstatute is unusual in specifying when sanctions do and do not apply where offers are extended tomultiple parties, see West’s Nev. R.S.A. §17.115(7)(2005), with specific limitations on theeffectiveness of offers made to multiple defendants, West’s Nev. R.S.A. §17.115(9)(2005).

32. 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’” quoting12 Charles Alan Wright, et al, Federal Practice and Procedure § 3006.1, 127 (2d ed. 1997); butconcluding that the value of the equitable and monetary relief obtained was greater than the Rule68 offer made by the defendant); see generally Thomas L. Cubbage III, Federal Rule 68 Offersof Judgment and Equitable Relief: Where Angels Fear to Tread, 70 TEX. L. REV. 465, 484-94(1991).

33 347 U.S. 483, 74 S.Ct. 686, 98 L.Ed. 873 (1954).

34 Monell v. Dep’t 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 boardcases, noting that in only “some” of them was Section 1983 and its jurisdictional counterpart, 28

-15-

obtained by a particular plaintiff is more or less favorable than the offer.31 In short, attention todetail and careful drafting can address many of these problems.

I. The Rule is Unworkable And Undermines Constitutional Policy As Applied ToPlaintiffs’ Prayers for Equitable Relief

The Rule is also silent on how to measure, for Rule 68 purposes, the value of a plaintiff'sjudgment for prospective, equitable, or other nondamages relief. To state the possibilities mostbroadly, one might calculate an injunction's value to the plaintiff, or one might take its value asthe cost of compliance to the defendant. In the relatively few reported nondamages cases inwhich the defendants have made Rule 68 offers, the problem of measuring the value of aplaintiff's judgment has proven intractable in the absence of any textual guidance from theRule.32

Apart from the limited practical value of Rule 68 offers respecting declaratory orinjunctive relief because of the difficulty of valuing those remedies, using the Rule in thatcontext raises serious policy concerns. Historically, declaratory and injunctive relief was centralto the enforcement of modern federal civil rights claims. Indeed such equitable relief wasavailable in actions against school boards to enforce the requirements of equal protectionannounced by Brown v. Board of Education33 long before the Supreme Court, years later,overruled intervening precedent to recognize constitutional claims against local governmententities under Section 1983, with its full panoply of damages and other legal remedies.34 Only

U.S.C. § 1343, the sole apparent source of a claim and jurisdiction. 436 U.S. at 658n.5. Later inthe 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 1983damages liability, observed that the Court’s decisions “both before and after Monroe” had heldlocal governments liable for constitutional violations in Section 1983 actions. The Courtacknowledged, however, that “in many of these cases jurisdiction was not questioned....” Itconcluded that Monroe was inconsistent with those cases, “especially as Monroe’s immunizingprinciple 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 municipalitycan be liable “in damages” for injuries caused by local governmental policies (that is to sayunder Section 1983)– as opposed to whether local government is subject to equitable reliefrequiring its conduct to conform to the Constitution prospectively– had not been briefed orargued in any case before Monell itself. 436 U.S. at 708.

Monell thus recognizes, admittedly backhandedly, that local governments had in factbeen held to account for constitutional violations, on an unclear jurisdictional basis and without aclearly applicable claim-creating statute, before the Court in Monroe reached its short-livedconclusion 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 Monroeerror of immunizing local governments from constitutional damages claims under Section 1983was compounded when the Court, in a post-Monroe decision, extended that principle toinjunctive relief.

The Monell opinion thus reveals that 28 U.S.C. § 1343, the jurisdictional counterpart forSection 1983 and other Reconstruction-era claims, was not the basis of pre-Monroe federalcourt jurisdiction over post-Brown v. Board of Education constitutional claims seekinginjunctive relief against local school boards and municipalities. Instead, the courts simplyextended the federal court authority to enjoin constitutional violations by states that it had longexercised under Ex Parte Young, 209 U.S. 123, 28 S.Ct. 441, 52 L.Ed.714 (1908). Despite thestates’ ordinary Eleventh Amendment immunity from any unconsented suit in federal court, ExParte Young subjected them to federal court jurisdiction for equitable, but not legal, relief inclaims alleging federal constitutional violations, provided the plaintiff formally seeks that reliefagainst individual state officials and not against the state in its own name. It was an even smallerstep for federal courts (after Brown, yet before Monell authoritatively held Section 1983 to be thestatutory source of a constitutional damages claim against local governments) to extend Youngby exercising equitable jurisdiction in suits against school boards and municipalities to enforceconstitutional mandates, since those local entities never enjoyed the states’ EleventhAmendment immunity to which Ex Parte Young was a limited exception. Thus JusticeRehnquist, dissenting in Monell, observed that suits against local school board members in theirofficial 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-

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

35 See footnote 34, supra.

36 461 U.S. 95, 103 S.Ct. 1660, 75 L.Ed.2d 675 (1983).

37 532 U.S. 598, 121 S.Ct. 1835, 149 L.Ed.2d 855 (2001).

-17-

prospectively. Federal judicial precedent has therefore long found a way to make that reliefavailable not only against states, as an exception to their ordinary Eleventh Amendmentimmunity, but also against local governments, even in the absence of an affirmative statutoryclaim for relief like Section 1983.35

Declaratory and injunctive relief remain indispensable today for the numerically lesscommon but nevertheless critical “structural” suits that seek to compel large governmentinstitutions like prisons or hospitals to conform to constitutional requirements. It is true thatthese massive injunction suits are typically brought by nonprofit advocacy organizations, andthat their budgets rely not solely on the prospect of attorneys’ fees (when the suits succeed) butalso on contributions and grants. Nevertheless, it is undeniable that fewer such suits could bebrought if organizational and private plaintiffs could not count on fees to offset their costs inundertaking these complex and lengthy litigations. It also seems clear that virtually no privateattorneys would launch such expensive, purely equitable suits without the dependable prospectof recovering court-ordered fees from defendants, as their clients in these cases typically lackthe 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 thoseremedies. Despite the historic role and vital importance of prospective relief to vindicateconstitutional 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 enjoinunconstitutional practices. And after Buckhannon Bd. and Care Home, Inc. v. West Va. Dept ofHealth and Human Services,37 even plaintiffs with the requisite standing may be discouragedfrom seeking injunctive relief. Suppose a government defendant concludes in the midst oflitigation that its policy or practice challenged by the plaintiff’s suit will be struck down asunconstitutional 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, therebydestroying plaintiff’s eligibility for attorneys’ fees. The linchpin of the Court’s reasoning was thata formal judgment or order is prerequisite to a plaintiff’s 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 aseparate threat to the civil rights or employment discrimination plaintiff’s recovery of post-offerattorneys’ fees in cases seeking injunctive relief, it constitutes an additional, although admittedlyuncertain deterrent to the important claims seeking that vital relief. On the other hand, defendantsconsidering making offers of judgment in response to prayers for injunctive relief will have even

-18-

less than usual confidence that the offer will do them any good, given the greater difficulty theywill experience in predicting if the value of any injunctive relief the plaintiff might obtain byjudgment would fall short of any particular offer.

For these reasons, we propose below that the Rule be made expressly unavailable withrespect to prayers for injunctive or declaratory relief. That change would also eliminate anyconcern 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 defendant’s Rule 68 offer that leaves the fee question for laterdetermination 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 stimulatemore frequent use of Rule 68 is to follow the lead of several states and authorize plaintiffs tosubmit “offers”–in common negotiation parlance, “demands”–to defendants. If the defendantrejected the offer and the litigation progressed to trial, the Rule would then be triggered if theplaintiff prevailed at some level in excess of its rejected demand. The underlying civil rights andemployment discrimination statutes would already provide awards of full fees to the prevailingplaintiff, so the amended Rule would provide some additional sanction against defendants who inhindsight guessed wrong in rejecting the plaintiff’s demand.

In support of such a change, plaintiff’s lawyers argued, and some defense lawyers agreed,that the submission of a plaintiff’s demand would stimulate responsive Rule 68 offers bydefendants 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 plaintiff’s initial monetary demands and the defendant’s counteroffers would betempered by the parties’ knowledge that they could benefit under the Rule only if they couldrealistically anticipate doing better than the demand or counteroffer at trial. What is “better,” ofcourse, 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 beauthorized to make under an amended rule is the total of plaintiff’s monetary trial judgment onthe merits plus the amount of the fees the court orders for the work done by plaintiff’s counselbefore the offer was made. A plaintiff would then receive sanctions only if a defendant rejects hisoffer (demand) and plaintiff ultimately receives more than that total after trial. “Better” thenmeans that a plaintiff’s initial rational offer or demand–one that is likely to put realistic pressureon, while still being fairly attractive to the defendant--should be approximately the same as, andin any event not much more than the amount of that total, taking into account the pretrial and trialcosts the defendant will save if defendant accepts the demand.

Suppose, similarly, that the trigger point for offers or counteroffers by defendants remainswhat it is under the current rule: a defendant gets the Rule’s relief from post-offer fees and costs, plus an award of his own post-offer costs, only if plaintiff’s recovery fails to exceed the sum of

38 For the most part, the proposals in the lettered subdivisions of this article that follow donot track the sequence of the current Rule 68 practice problems identified in Part II. immediatelyabove. The first two proposals–softening terminology to permit defendants to make offers of“settlement,” not just “judgment,” and specifying in the Rule’s text its principal sanctions andthe kinds of federal lawsuits in which those sanctions might be imposed– deserve primacy ofplace because they enjoyed the strongest consensus among lawyer respondents for improving theRule in its current one-way mode (under which only defendants may extend offers and therebyexert settlement leverage over plaintiffs). The third proposal--expanding the Rule to permitplaintiffs to extend offers-- if adopted, is likely to change bargaining dynamics so fundamentallywhen either side avails itself of the Rule that it would necessarily alter the considerationspertinent to shaping the remaining issues of an amended Rule’s scope and mechanics.

-19-

plaintiff’s monetary judgment at trial and the amount of the fees the court orders for the workdone by plaintiff’s counsel before the offer was made. “Better” in this context therefore meansthat a defendant’s initial rational counteroffer–one that is likely to put pressure on, while stillbeing fairly attractive to the plaintiff-- should be approximately the same as, and in any event notmuch less than the amount of the same total, taking into account any pretrial and trial costs theplaintiff will save by accepting the counteroffer.

Needless to say, the parties’ perceptions of what, if anything, a plaintiff would likelyrecover after trial, and of the amount of any award for pre-offer attorneys’ fees, may differgreatly. To the extent that they do, the initial offers and counteroffers may leave the parties farapart. 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 andresponsive offers than in ordinary settlement negotiations uninfluenced by the Rule’s incentivesand sanctions. That, in turn, may result in a greater aggregate number of earlier settlements. Aswe discuss below, the Rule may induce compromise even more frequently if the benchmarkagainst which the ultimate trial result is tested were an average of the counteroffers made by bothparties (under a two-way rule), rather than, as now, against the defendant’s offer alone.

III. A Proposed New Rule 68.1: A Separate Rule for Offers of Settlement in Federal Fee-Shifting Cases

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

-20-

A. Terminology

Suppose that the Advisory Committee on Civil Rules were to reaffirm the value of thecurrent Rule’s objective and structure but determine that no substantive change in the Rule issufficiently well supported to be worthy. We would in that event still suggest that the Committeeconsider the strong lawyer consensus in favor of expanding the Rule’s terminology to permitdefendants 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 anumber of states that their clients are reluctant effectively to confess “judgment” because ofpublic relations concerns, attracting the attention of regulators, or saddling individual defendantswith ongoing adverse consequences to their careers, reputations, or ability to obtain credit. Thelone objection to this proposal, voiced by only a very few plaintiffs’ lawyers, was that if adoptedit would make the current one-way Rule more attractive to defendants. But it is difficult to creditthat objection if the Committee continues to view as sound the current Rule’s objective offacilitating compromise, as elaborated by the Supreme Court in Marek, as well as its defendant-only structure.

B. Amplification and Clarification of the Text of Current Rule 68

1. Specify in the Rule’s Text Rule 68's Major Sanction, Forfeiture ofPlaintiffs’ Post-Offer Attorneys’ Fees

As indicated above, we were surprised to learn from our respondents that roughly twentyyears after Marek, many plaintiffs’ lawyers and even some experienced defense lawyersremained unaware of its holding: that in the vast majority of actions under federal statutesauthorizing fees, the principal consequence to a plaintiff who rejects an offer and fails to recovermore at trial is forfeiture of the usually substantial post-offer statutory attorneys’ fees the plaintiffwould 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 toadvertise the potential value of the Rule to a defendant contemplating an offer and to warn aplaintiff offeree of the consequences of rejecting that offer.

Some defense counsel indicated that they tried to capitalize on this textual silence bymaking bare-bones offers without further written or oral communication with opposing counselabout the fees thereby put at risk, in the hope that plaintiffs would fail to accept them during thebrief 10-day period stipulated by the current Rule. These defense counsel would then call Marekto the attention of inexperienced or ignorant plaintiffs’ counsel and argue that henceforthplaintiffs’ counsel would be working for free. While we don’t suggest that this settlement tactic isimproper, we see no good reason why a Federal Rule of Civil Procedure should not alert counselon both sides to its principal potential advantages and perils.

Again, the most pointed objection to this proposal came from plaintiffs’ lawyers fearfulthat the change would educate defense lawyers and in turn encourage more Rule 68 offers by

39Our recommendation that the potential sanctions be clearly identified in the text of therule applies to the proposed new sanctions discussed in subsections 5 and 6 below.

-21-

defendants. Our response to this objection is again that if the Rule’s objective and structure aresound, changes that encourage its fair use by explaining to both sides what is at stake should bewelcomed. A few other lawyers who were aware of Marek viewed this proposed change asneedless, opining that clients always take the risk of their lawyers’ incompetence. Withoutquestioning that general proposition, we believe that a clear statement of Rule 68's principalsanction is sufficiently important that there is no good reason to leave the matter to happenstanceor 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 theRule which federal fee-shifting statutory actions entail Marek fee forfeiture. As observed above,the Court’s opinion generated uncertainty on that subject. It held plaintiff fee forfeiture–asopposed to merely forfeiture of costs, plus the obligation to pay defendants’ costs–applies inactions under statutes with language authorizing fees to prevailing parties as “part of” costs, butnot “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 actionsunder any federal statute that authorizes fees to prevailing parties, unless a particular such statutespecifies to the contrary. That change would affect relatively few federal statutory actions, thegreat majority of which are brought under statutes like Title VII or Section 1983 that authorizefees “as part of” costs and therefore, under the Court’s opinion in Marek, contemplate feeforfeiture when a Rule 68 offer is made the sanctions are triggered. But the change wouldeliminate uncertainty under the few statutes in which fees are authorized in language differentfrom the prototypes discussed by the court. Thus it would, unless Congress were to specifyotherwise, allow fee forfeiture, and thereby expand the potential utility of the Rule, in actionsunder statutes like the Fair Labor Standards Act and the Age Discrimination in Employment Actthat currently authorize fees “in addition to” costs. Under Marek, Rule 68 could currentlyimpose only limited costs sanctions in actions under those statutes.

In this regard we find persuasive the reasoning of Justice Brennan’s Marek dissent, evenif that reasoning leads us to a result he might well have disapproved. Justice Brennan doubtedthat Congress, in approving varying linguistic linkages between costs and fees in differentstatutes, ever contemplated that a particular formulation would govern whether fees, as well ascosts, might be put at risk through an offer under FRCP 68. He also noted that the majority’scontrary approach undermined the generally transsubstantive application of the Federal Rules ofCivil Procedure.

Naturally, Congress has the last word on whether Rule 68 may be used to reduce orenhance the amount of fees that would otherwise be awarded under a particular statute. But it has

40 See, e.g., Alaska Statutes Annotated, §09.30.065 (1986); Arizona Rule of CivilProcedure 68 (2007); West Ann. Cal. C.C.P. §998(2005); Colorado Rev. Stats. Annotated §13-17-202 (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); West’s Nev. R.S.A. §17.115 (2005); N.J. Stats. AnnotatedRule 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 CivilProcedure 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 Ohio’s Civ. Rule 68

-22-

not disturbed Marek itself, and has therefore effectively acquiesced in a regime that makes Rule68 fee forfeiture the rule, rather than the exception. So it may reasonably be contended thatCongress has acceded to the possibility of fee forfeiture by the large numbers of prevailingplaintiffs who bring civil rights actions under Section 1983 and, more particularly, actions underTitle VII alleging employment discrimination based on sex, race, religion, national origin andcolor. That being the case, it is hard to imagine that in 1970, by adopting the Fair LaborStandards Act’s “in addition to” language in the remedies provision of the Age Discrimination inEmployment Act, Congress was prescient about the significance that the Court would ascribe tosuch a choice many years later in Marek, still less that it was making a conscious choice to rejectfee 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 inTitle VII actions but only costs forfeiture (as well as liability for costs) in actions under theADEA.

C. Allow Plaintiffs, as well as Defendants, To Extend Rule 68 Offers In Order toStimulate More, Earlier and More Realistic Offers and Counteroffers By AllParties

Unlike the two previous proposals, this one fundamentally alters the structure of currentRule 68 and does not enjoy consensus support from our lawyer respondents. While a greatmajority of our respondents from the plaintiffs’ side strongly supported the idea, most defensecounsel opposed the notion, at least as strongly. The proposal is informed by the two-way ruleson the books of approximately twenty three states. The proposal departs from the sanctionsapproach of the state rules, however, by retaining the practice under the current Rule of denyingdefendants awards of their own fees, consistent with Christiansburg Garment’s general ban onordering fees against federal civil rights and employment discrimination plaintiffs presentingnonfrivolous claims.

The essential features of a two-way rule, as exemplified by the twenty three states thatapparently use one,40 are simpler than the mechanics needed to make it work. Defense offers are

that formal offers of judgment have been abandoned in that state in favor of “voluntary offers ofsettlement made by any party,” and that the quoted phrase refers to ordinary settlement offers inprivate negotiation occurring outside the framework of any rule of procedure. This national state-by-state survey was conducted between October 10, 2007 and November 15, 2007 via a Westlawsearch using the database “Statutes by State” and employing the search terms “offer ofjudgment,” “offer of settlement,” and “offer of compromise.”

41 See, e.g., Arizona Rule of Civil Proc. 68 (2003)(rejecting the Marek construction of FRCP “costs,” the Arizona Supreme Court construed this rule’s“costs” sanction not to includeattorneys’ 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’ feesanction to $350).

42 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).

43 See, e.g. Florida Stats. Annotated §768.79(2007); Ga. Code Ann. §9-11-68 (2006);West’s Nev. R.S.A. §17.115(4)(d)(3)(2005); West’s Utah Code Annotated, Rule of CivilProcedure 68 (2006).

-23-

treated roughly as they are under FRCP 68. A plaintiff who rejects a defense offer and then failsat trial to exceed some defined trigger (under the current Rule, an amount exceeding by at least 1cent the sum total of his or her merits recovery plus any court-ordered pre-offer costs andattorneys’ 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-basedsanctions–above and beyond all types of recovery authorized by the underlying statute--when theplaintiff 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 thetypical state court common law and even statutory action, the “American rule” applies and eachparty bears its own attorneys’ fees. A number of two-way states limit sanctions under the rule topost-offer costs, sometimes with expert witness fees, but without attorneys’ fees.41 Others, thatrequire the rejecting offeree to pay an offeror’s post-offer attorneys’ fees, make that sanctionmandatory,42 while still others confer discretion on the court to decline a fee award under variousstandards or listed criteria.43

When a two-way regime is transplanted to the setting of federal statutory fee-shiftinglitigation, a mere costs sanction is unlikely to motivate the making or acceptance of an offer ofsettlement. Costs are typically a very small fraction of the total recovery in a civil rights oremployment discrimination action, and a prevailing plaintiff will already be receiving a statutoryaward for pre- and post-offer attorneys’ fees. Merely doubling or even tripling the costsawardable under Federal Rule 54 to prevailing parties would motivate few plaintiffs to use an

-24-

offer of settlement rule. We therefore agree with our lawyer respondents that most plaintiffs willlikely have incentive to use Rule 68 in a two-way system only if the sanction they receive is anadditional percentage of the award of attorneys’ fees.

But this creates an equitable quandary in civil rights and employment discriminationactions–together composing the great bulk of federal fee-shifting litigation–because theoverriding statutory command as construed by the Supreme Court in Christiansburg Garmentprecludes awards of attorneys’ fees against plaintiffs, except those very few whose claims aretruly frivolous or without legal or factual foundation. Indeed, Christiansburg Garment aside, ourrespondents were mostly agreed that very few employment discrimination plaintiffs, and evenfewer civil rights plaintiffs, could as a practical matter pay an award of attorneys’ fees measuredby the hourly rates of defense lawyers in these cases. Our respondents generally believed that theheaviest sanction most plaintiffs could afford to pay would be an award requiring them to paysome multiple of Rule 54 costs.

This disparity of legal and practical position between the typical individual plaintiff andcorporate or governmental defendant in these cases in large part accounted for the intensecontroversy among our respondents about the fairness of a two-way rule. Defendants’ lawyersargued that a rule is unfair that requires their clients to pay attorneys’ fees when they lose thepredictive gamble after rejecting a plaintiff’s offer, but penalizes plaintiffs only with additionalcosts when the shoe is on the other foot. Plaintiffs’ lawyers countered that the existing Rule 68unfairly affords settlement leverage to defendants alone; that only the sanction of an additionalpercentage award of attorneys’ fees will encourage defendants to consider plaintiffs’ offersseriously; and that the “private attorney general” statutory policy articulated in ChristiansburgGarment precludes rule-based attorneys’ fees sanctions against all but the most irresponsibleplaintiffs. Some plaintiffs’ counsel contended that additional fees via an offer of settlement rulewould merely compensate for stingy statutory fee awards unfairly trimmed by district judgesapplying the standard “lodestar” fee formula that multiplies the hours “reasonably” expended onsuccessful claims times a “reasonable” hourly rate. In a similar vein, other plaintiff’s counselasserted that they should have a tool to potentially enhance a fee award because in order to prevailin today’s hostile doctrinal and judicial climate, their clients must have made an extraordinaryshowing of a civil rights or employment discrimination law violation sufficient to overcome thelong-standing obstacle of summary judgment.

We do not venture to gauge the relative equitable merits of these arguments. We doacknowledge the facial awkwardness of a rule that penalizes one party, the defendant, whoguesses wrong in rejecting an offer with what is generally a significant penalty (an additionalpercentage of attorneys’ fees) yet penalizes its opponent, the plaintiff, with what is usually amuch lighter one (a multiple of costs) for a similar wrong guess. Of course the frequency withwhich any penalties will be imposed on plaintiffs and defendants will in part be a function of therigidity or flexibility of the trigger point; and the magnitude of inequality will in part be afunction of the particular percentage of additional attorneys’ fees or additional costs selected bythe rule. The mechanics of a two-way rule, that is, may to some degree ameliorate the monetarydisparity between the costs sanctions imposed on plaintiffs, and the heavier fee sanctions

-25-

imposed on defendants.

We also propose three admittedly minor compensations for defendants, as outlined in thenumbered subparts that follow. First, we recommend that the Rule also be amended to authorizesanctions in favor of defendants who win outright on liability, not just those who lose at a levelless 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 ofenabling defendants better to gauge the level at which to peg their own offers. Third, we followthe 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 percentagemultiplier on fees if they reject a plaintiff’s offer and sanctions are triggered.

In the end, however, our recommendation of a two-way rule is driven not by anassessment 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 abargaining dynamic more likely to lead the parties to moderate their positions and reach earliersettlement. Those, after all, are the purposes of the current Rule, as explicated by the majority inMarek, yet our research and interviews strongly suggest that the Rule in its present form seldomprovides the incentives needed to attain those ends. For example, defense lawyers asserted thatmerely relieving their clients from post-offer costs and fees, or awarding them their own post-offer costs, is usually insufficient to motivate a defense offer. If, however, a plaintiff, in a two-way regime is motivated to get the offer process going by the prospect of a percentage multiplieron attorneys’ fees, a good number of our respondents on both sides suggest that the defendant islikely to extend a counteroffer in response. That would mean that two offers under an amendedRule would be on the table in many cases where the defendant would have made none under thecurrent Rule.

We recognize that the devil lies in details considered below like the particular triggers forsanctions, types of sanctions, severity of sanctions, and deadlines for making and responding tooffers. Not only may those features of an amended two-way rule lessen the unfairness ofimposing different types of sanctions on plaintiffs and defendants; they may also make the rulemore attractive to parties contemplating making an offer, and less threatening to parties receivingone, as illustrated in the discussion below.

44 Our proposal in G. below that plaintiffs, on request, be required periodically to informdefendants of plaintiffs’ accrued attorneys’ fees might somewhat lessen the speculation on thislast factor. But the calculation of pre-offer fees on which sanctions may depend is not theamount of fees the plaintiff lawyer asserts the plaintiff has incurred to that point, or even theactual amount of fees the plaintiff has incurred to that point in accordance with her feeagreement. Rather, the critical sum for Rule 68 purposes is the amount of an award a judge fixesmonths or years later, after trial, for a reasonable attorneys’ fee based upon its own highlydiscretionary determinations of how many hours plaintiff’s counsel reasonably expended inadvancing claims on which plaintiff prevailed, and of a reasonable hourly rate for that work.Therefore even disclosure of accrued fees by a plaintiff’s lawyer the defendant’s lawyer trustswill give the defendant only a rough idea of the amount a court might later award plaintiff for pre-offer work.

-26-

D. Relax the Trigger For Sanctions By Establishing A 10% Cushion Bracketing The DollarAmount of a Single Party’s 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 offerorsand offerees to forecast trial results to the penny, as does current FRCP 68. To avoid sanctions, inother words, the offeree’s trial result (merits recovery plus court-ordered award of fees and costsfor pre-offer work) must be just slightly better than the offer she rejected. But five two-waystates cushion the risks by either 25% or 20%. With that trigger, a plaintiff avoids sanctions if herrecovery exceeds only 75% or 80% of the defense offer she rejected; a defendant who rejected aplaintiff’s “offer” avoids sanctions if the plaintiff’s trial recovery fails to exceed that offer by120% 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 apercentage cushion surrounding the amount of an offer would somewhat reduce the speculationinherent in predicting whether the sum of plaintiff’s merits recovery, plus pre-offer court-orderedcosts and fees, will exceed by a penny the amount of a defendant’s offer. While most lawyers feltreasonably confident about predicting the approximate range of a plaintiff’s merits recovery aftera few months of discovery, all recognized that there remained significant imponderables:plaintiff’s chances of surviving summary judgment; the strength of the parties’ evidence ofliability and damages at a trial to be held many months or years down the road; and in particularthe amount of attorneys’ fees the court might award a prevailing plaintiff for work performedbefore a defendant’s offer.44 A percentage cushion in a two-way regime would reduce therequired precision of the prediction a plaintiff or a defendant must make in deciding whether tomake an offer, accept an adversary’s 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 ofgambling at trial on a large verdict, and her lawyer eying a correspondingly large contingency fee,

45 See MCR 2.405(E), the subsection of Michigan=s offer of judgment rule thatprecludes the award of costs and fees under that rule in cases submitted to case evaluation underMCR 2.403. The authors are grateful to Charles Hegarty, Esq., of the Michigan bar for anexplanation of case evaluation in that state and its relation to offers of judgment. Mr. Hegarty=sdescription of the alternative methods of placing the force of law behind private negotiationsreveals two or possibly three advantages of Michigan=s case evaluation scheme over the currentversion of Rule 68 offers of judgment.

First, the parties= negotiate after receiving an evaluation of the worth of the case from anindependent, professional panel, which should generate more realistic forecasts of trial outcomethan is typical in purely partisan positional bargaining. Second, sanctions are not triggered whenthe trial result varies trivially from the panel=s award, only when it exceeds or falls short of it bymore than 10%. Third, the panel is typically not convened until nine months or a year aftercommencement of the action. This gives the parties an extended opportunity to gauge thestrengths and weaknesses of their respective positions. Perhaps more important, given thesuspicions of some of our respondents, the delay affords defense counsel a substantial period oftime to generate billable hours, after which counsel may be more receptive to recommending asettlement that may terminate the litigation.

Our proposals to amend Rule 68 incorporate to some degree the second and third of theseadvantages. But we have not found a way to address the first: absent a new federal Rulemandating neutral evaluation of civil cases, the starting point for the bargaining prompted by anoffer of judgment rule will still be the usually extreme positions of the opposing parties.

46

MCR 2.405(A)(3).

-27-

could in most cases safely reject most defense offers out of hand without serious concern aboutsanctions under the Rule whenever the plaintiff had confidence that she would recover morethan75% or 80% of the offer. And that might well be most of the time when it is realized thatdefendants’ initial offers under the current Rule were generally viewed by our respondentplaintiffs’ 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 reasonablebalance. It should relieve the offeree of impossibly precise prediction about the result at trialwithout relieving him or her from having to consider an offer seriously. While none of the two-way states uses a 10% cushion, Michigan uses that percentage in its widely used and reportedlysuccessful case evaluation procedure that has all but supplanted that state=s offer of judgmentrule.45

If the proposed two-way approach to the Rule works as intended, plaintiffs wouldfrequently extend initial offers (in substance, demands), and defendants would frequently counteroffer. If they do, we would borrow another apparently distinctive feature of Michiganlaw, the Aaverage of counteroffers@ trigger from its (seldom used) offer of judgment rule. Thattrigger is defined in Michigan=s rule as Athe sum of an offer and a counteroffer, divided by two.@ 46

-28-

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 plaintiff’s$200,000 demand produces a defendant's counteroffer of $100,000. We might use the one-pennytrigger 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 wouldtrigger sanctions. Plaintiff wouldn’t be sanctioned because her judgment within that rangeexceeded $100,000; Defendant wouldn’t be sanctioned because Plaintiff's judgment did notexceed $200,000. Given the chasm between the parties= offers, neither has great reason to believethat the Rule and its sanctions would be triggered. Thus neither feels pressure from the Rule tomoderate his/her position.

But suppose, with an initial offer and counteroffer in the same amounts, we use triggersthat are 10% on either side of $150,000, the average of the parties= counteroffers. Then anyplaintiff's trial judgment of $165,000.01 or more (including pre-offer costs and fees) imposessanctions 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 ofpaying defendant=s attorneys= fees, because that is forbidden by Christiansburg Garment). Putdifferently, the average-of-counteroffers trigger results in sanctions whenever the plaintiffrecovers 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 Adeadzone@ 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 themechanics of an amended, two-way FRCP 68 could be shaped not only to induce defendants tomake counteroffers in response to initial offers/demands by plaintiffs, but also to encouragefurther compromise by both parties once those initial (colorably realistic, yet presumably stillextreme) demands/offers are made.

E. Sanctions for Prevailing Plaintiffs: A Presumptive but Discretionary 12% Multiplier onFees When the Rule is Triggered After Rejection of a Plaintiff’s 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 wouldgive plaintiffs sufficient incentive to make offers. Our view is that a relatively small percentageshould suffice. The attorneys’ fee award represents the largest single component of recovery inmany employment discrimination and civil rights cases. It is not uncommon for a fee award tototal $200,000 or more after protracted litigation, even if plaintiff’s recovery on the merits is onlyseveral thousand dollars. In such cases, a 12% fee multiplier for the plaintiff on the post-offerplaintiff’s fees would generate an additional award of $24,000. That should motivate asubstantial number of plaintiffs to initiate the offer process under the Rule–not just because theleverage created by a plaintiff’s offer may be the only way to induce a defendant to make an offer,

47 We readily acknowledge that predictions about bargaining behavior are notoriouslyslippery, and that the circumstances of individual cases defy even probabilistically soundgeneralizations. A recent study by DecisionSet, a litigation consulting firm, concludes that thecivil plaintiffs canvassed had guessed “wrong” 61 percent of the time that they had proceeded totrial after rejecting a settlement offer, with defendants guessing wrong 24% of the time. “TheCost of Not Settling a Lawsuit,” NY Times , August 8, 2008, p.C1. Under our proposedamendments, 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 attrial than the defendant offered, and even more costly than guessing wrong by a penny under thecurrent version of Rule 68. Plaintiffs would also for the first time face monetary sanctions underRule 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 ofthe study, may be pertinent. The Times article paraphrased his view that “psychologists havefound that people [here, plaintiffs] are more averse to taking a risk when they are expecting togain something [in our context, attorneys’ fees], and more willing to take a risk when they havesomething to lose [here, single or multiple costs sanctions]. If true, that would suggest that theexisting Marek fee forfeiture sanction, and the prospect of an additional 12% add-on to feesunder our proposal, should be more potent in inducing plaintiffs to accept defense offers, and tomake 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 attorney’s fees against defendants who guess wrong by more than 10% in rejecting a plaintiff’soffer, while significantly increasing defendants’ potential out of pocket costs, may be relativelyless effective in inducing them to accept offers by plaintiffs.

-29-

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 sanctionsmandatory, but those that include attorneys’ fees in the sanctions typically leave the judge somedegree of discretion to deny that penalty. There are several variants for the exercise of thatdiscretion, authorizing courts to deny the sanction of fees when or to the extent that they are“unreasonable”–as to which Florida law specifies six factors-- or will impose “undue hardship.” Georgia’s discretion to deny fees to the prevailing party is limited to the undefined butpresumably rare circumstance where the court determines that the offer was made in “bad faith,”but Georgia’s percentage cushion is a high one (25%) that will often prevent the rule from beingtriggered in the first place. Utah will relieve the offeree of attorneys’ fees “to prevent manifestinjustice.”

In federal fee-shifting cases, most of which will be governed by Christiansburg Garment,the sanction of paying the opponent’s attorneys’ fees will almost invariably run againstdefendants–usually corporations in employment discrimination cases, and governments (orcustomarily indemnified government officials) in civil rights cases. The defendant’s ability to pathe fee award plus a 12% multiplier on the post-offer portion of the award should therefore rarelybe an issue. Nevertheless, we can envision circumstances in which a judge should have equitable

48 FRCP 68(d).-30-

discretion to deny the plaintiff all or part of the multiplier. These include cases where theplaintiff’s trial recovery only trivially exceeds 10% more than plaintiff’s rejected offer or theaverage of the parties’ counteroffers; or where an individual civil rights defendant–prototypicallya police officer–who has not committed a willful or intentional constitutional violation isnevertheless not eligible for indemnity from his employing government and is relativelyimpecunious; or where the judgment threatens an employer or small local government withinsolvency. We therefore propose that the 12% attorneys’ fee multiplier be made presumptive butsubject to the court’s equitable discretion to deny it in such cases, in whole or in part. That ofcourse 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 whoseoffer triggers the Rule are relieved of liability for post-offer costs and, per the Marekinterpretation, attorneys’ fees. In addition, the Rule provides that the “offeree [currently just aplaintiff] must pay the costs incurred after the offer was made,”48 which courts have construed toexclude defendant’s 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 plaintiff’spost-offer costs and fees, even with the affirmative award to the defendant of these limited post-offer costs, provided insufficient incentive for a defendant to make a Rule 68 offer. Many ofthose respondents asserted that only an affirmative award of defense attorney’s fees wouldprovide that incentive, an award that Christiansburg usually precludes and that most plaintiffs inany event would be unable to pay.

The vexing question, then, is what additional affirmative monetary award to defendantsthat is both practical and legally permissible would encourage defendants to initiate offers.Expert’s fees are usually relatively minor in most of the kinds of cases in question. What’s leftwould be awarding defendants some multiple of the Section 1920 costs to which they arecurrently entitled when the Rule is triggered. Our respondents indicated that defense costsrecoverable under Section 1920 in an average employment discrimination case were typically nomore than $10,000 to $20,000. Still, plaintiff’s lawyers contended that a doubling of that awardwould pose a real problem for their clients, particularly those who, like most employmentdiscrimination plaintiffs, have more than nominal income or assets. Yet our defendant’srespondents indicated that the prospect of an additional award of that magnitude to their clientswould probably not motivate them to make an offer, especially if the court retained discretion todeny it.

Given these seemingly intractable opposing considerations, we suggest that when the Ruleis triggered, defendants receive an additional mandatory award of their Section 1920 post-offercosts in an amount equal to the basic costs award. We propose double costs as a sanction not

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

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 theprospect of that penalty would induce plaintiff offerees to give more serious consideration to theoffers defendants do make for other reasons. We observe also that in a two-way regime, theproblem 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 denythis award of additional costs. The practice of employers and government defendants, as relatedby our respondents, has been to forgo enforcement of costs awards against plaintiffs who lack themeans to pay them.

2. Effectively Overrule Delta Air Lines by Awarding Prevailing DefendantsAdditional Costs

Defendants’ respondents persuasively argue that the Supreme Court’s Delta Air Linesinterpretation of the existing Rule leads to a perverse result. As we have seen, when plaintiffsprevail, but at a level below a defense offer, defendants are entitled to relief from payingplaintiff’s post-offer costs and attorneys’ fees and to an affirmative award of their own post-offercosts. Yet when the defendant defeats liability altogether, it gets nothing from Rule 68, which theCourt construed as applicable only when the plaintiff prevails.

But how is the Rule to give defendants a practical incentive to make nominal or minimaloffers (in the hope of avoiding litigation expenses) under Rule 68 in cases in which they areconfident that they will prevail? Where a defendant prevails, Rule 54(d) already promises it apresumptive award of all its costs, incurred both before and after an offer, unless an unusualstatute, rule of procedure, or court order provides otherwise.49 With Christiansburg ordinarilystanding in the way of awarding defendants their attorneys’ fees, and with expert’s fees usuallyminimal in the kinds of cases under consideration, what’s left to consider is the appropriateness ofawarding the defendant a multiple of the Section 1920 costs it will almost surely receive underRule 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 viewthat double or triple costs might be acceptable if the judge had discretion to deny them or theywere subject to a stated cap. The problem is complicated by our recommendation immediatelyabove that plaintiffs who prevail at trial but are subject to Rule 68 sanctions must pay twice theusual amount of Section 1920 costs. Would it make any sense to amend the Rule to mandatedouble costs against a plaintiff who wins, yet make an award of double costs discretionary againsta plaintiff who loses? Perhaps, since the prevailing plaintiff will at least have recovered somefunds with which to pay double costs, and the losing plaintiff may have none. One compromise

-32-

would be to prescribe a standard award of triple the Section 1920 post-offer costs to be paid to theprevailing defendant, but accord the trial judge discretion, in view of the plaintiff’s economiccircumstances and the merits of the case, to reduce the amount to double those costs or not tosupplement them at all. Another would be to mandate triple costs but cap that additional award at$20,000, an amount plaintiff’s lawyers indicated would cause many of their clients real financialpain. We mildly prefer the former option, because over time a dollar cap may require continualreadjustment. In any event, the choice between these options, or others we haven’t envisioned,turns more on pragmatism than principle.

G. Encourage Defense Offers By Requiring Plaintiffs Periodically To Disclose TheirAccrued Attorneys’ Fees

A number of defense counsel reported difficulty gauging the amount of plaintiffs’ pre-offer fees and therefore in calculating the level of an offer approximating an estimate of trialresults. To alleviate this possible obstacle to defense offers, we would amend the Rule to requireplaintiff’s counsel, no more frequently than every two months, to disclose plaintiff’s accrued feesand costs on request.

This change alone would surely not produce a significant number of additional defenseoffers, 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 thischange. First, they objected that if they had to disclose fees periodically, defense counsel shouldhave to disclose defense fees. But there is no sanction that would require employmentdiscrimination 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, defendantsroutinely must pay the fees of prevailing plaintiffs by statute, and our suggested amendment toRule 68 would sometimes require them to pay an additional 12% on the post-offer part of a feeaward. Most important, in considering what offer amount might exceed a plaintiff’s total trialrecovery by 10%, defendants need to know plaintiff’s accrued pre-offer fees.

Second, plaintiffs’ counsel objected that disclosing their accrued fees would givedefense counsel an insight into the degree of investigation and research already undertaken, or notundertaken, on behalf of the plaintiff. A plaintiff’s settlement posture would be weaker if thedefendant gathered that plaintiff’s counsel was relatively uninformed or unprepared. But the verypurpose of Rule 68 is to encourage settlement, and all our respondents agreed that the Mareksanction of plaintiff forfeiture of post-offer fees means that offers under the Rule exert significantpressure only if they are made early. Consequently, we are skeptical that avoiding disclosure ofthe degree of plaintiff’s diligence at the outset of litigation is a meritorious concern. Indeed oneor two plaintiff’s counsel, in the unusual districts where Rule 68 is invoked more thanoccasionally, reported that a major reason they frontload a significant part of their investigationbefore filing an action is precisely to reduce the threat level of a defendant’s early offer.

50 See, e.g., the district rules cited at Lewis and Eaton, supra note 1, 241 F.R.D. at348n.68 (2007).

-33-

On balance, we think it better to nationalize the approach of a few federal districts50 byrequiring periodic disclosure of plaintiffs’ accrued fees on request. Should a defendant requestand receive that information yet fail to make an offer, plaintiff would be free to argue to the courtthat the request represented mere gamesmanship, or an effort to impose an unnecessary burden onplaintiff. In an era of electronically recorded time records, however, we note that the burden onplaintiff’s counsel of responding to such a request no more frequently than every two monthsshould not be substantial.

H. Preclude Submission of Offers By Either Party Until After Service of an Answer; ExtendThe Time for Accepting Offers from 10 to 30 Days; Set a Deadline For Submitting OffersOf 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 untila specified number of days after commencement of the action. In theory–although ourrespondents did not mention this problem–a defendant under the current Rule could submit animmediate 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, asobserved above, some respondents opined that if the Rule were amended to permit offers byplaintiffs, the absence of a required delay would commonly permit plaintiffs to force defendantsto consider an offer while defendants are busy responding to the complaint under other court rulesand 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 orderto respond to a very early offer is more acute in civil rights cases–particularly those involvingpolice misconduct–than in employment discrimination cases, where the defendant employer is inpossession of most of the documentary evidence. Nevertheless, prevailing federal court rulesimpose significant burdens on counsel for both parties almost immediately after the filing of acomplaint. These include Rule 26(a) compulsory disclosure and preparation for and attendance atthe 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 wellacquainted with the facts must do intensive investigation and legal research in order to draft acomprehensive answer. Alternatively, they may be preparing a dispositive Rule 12(b) pre-answer motion. An immediate plaintiff’s offer under a two-way rule would therefore pose asubstantial potential for ambush, at least in the presumably significant number of cases in whichdefendants are genuinely surprised by the allegations of a complaint. Some required delay insubmitting offers therefore seems desirable.

A balance must be struck, however, because, as our respondents who opined on the issueunanimously observed, only offers made relatively early in the litigation are likely to put

51 Here, as elsewhere, additional drafting would be required. On occasion, a defendantmight, 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 toorder plaintiff to serve a more definite statement, the defendant would not be required to answeruntil 20 days after service of an amended complaint.

-34-

significant pressure on an opponent under a rule that assesses fee and cost sanctions by referenceto post-offer activity. In some cases, a defendant might have to submit an answer as early as the20-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 summonsand complaint, either because the parties have stipulated to, or the court has ordered, an extensionof 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 ormonths after commencement of the action.

But we are also concerned that the state two-way rules that specify a number of daysbefore an offer may be submitted are too rigid to account for these variable deadlines for adefendant to answer a complaint under the Federal Rules. We suggest instead that neither partybe 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 shouldstill be sufficiently early in the case for Rule 68's sanctions to remain potent, in view of thepredominant number of total attorneys’ hours still to be devoted to discovery, subsequentmotions, 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 foraccepting or rejecting an opponent’s offer is 20.4 days, double the 10 days allowed under FRCP68. Several of these states prescribe longer periods, including 30, 60, or 90 days. In a federalcourt two-way regime, rulemakers must consider when in a civil action an offer would bereceived. That would often be several months after commencement if, as proposed immediatelyabove, neither party may submit an offer before the defendant serves an answer. Another relevantconsideration emerged from our respondents, some of whom observed that the current 10-daydeadline did not permit sufficient opportunity for evaluation, which in turn led to expressrejection, or rejection under the terms of the Rule because of the plaintiff’s failure to respond. Our conclusion is that 30 days would provide an offeree sufficient time not only to evaluate anopponent’s offer but to formulate a counteroffer–even taking into account that formulating acounteroffer may need to await a response from plaintiff’s counsel to a request for a statement ofplaintiff’s 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 elapsedbefore an offer may be made, threatens to erode the force of offers by further contracting the post-offer work remaining to be done.

52 Another state has no express deadline, and another simply requires the offer to be madeat an unspecified time before trial.

53 Perhaps for this late stage of the case, the text of the amendment should limit theofferee’s options to accepting or rejecting, rather than counteroffering under the Rule, because asfew as 10 days before trial would remain for a counterofferee to consider a counteroffer. Ofcourse such a provision would not preclude a last-minute settlement before trial outside thescheme of the Rule.

-35-

3. Require the Parties To Submit Their Final Rule 68 Offer By the 40th DayBefore Trial

The current Rule permits offers and subsequent offers to be made up until the eleventhday before trial. That is clearly too late if the Rule were amended to afford the parties 30 days toconsider acceptance or rejection of an offer. Twenty-one of the two-way states set an averagedeadline of 19.86 days before trial, which would still be too late under an amended federal ruleallowing offerees 30 days to consider an offer.52 It would be plausible to shrink the timepermitted for consideration of an offer coming very late in the lawsuit, on the theory that theofferee at this stage of the action would or should be very well acquainted with the evidence, thelaw, and other considerations shaping a prediction of trial outcome. But we think this addscomplexity 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 wouldhave until 10 days before trial to accept or reject.53 We are not troubled that this end date onsubmitting offers under the Rule would seriously undermine its purposes or efficacy. For onething, in the vast majority of federal civil actions, more attorneys’ work will have been completedby that deadline than remains to be done, so that a Rule 68 offer made sooner than 40 days beforetrial would exert minimal settlement leverage. For another, the parties would remain free, asalways, 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 thenine two-way state rules that expressly limit the operation of the Rule to claims for money. Thatamendment would obviate the necessity for parties and courts to struggle over the essentiallyunknowable monetary value of declaratory and injunctive relief.

Further, even if the parties, under an amended Rule, entered into an offer of “settlement,” the amended Rule’s limitation to damage claims means that plaintiffs seeking both damages andan injunction could use the Rule without running afoul of the Court’s decision in Buckhannonprecluding attorney’s fees when defendants “voluntarily” modify or abandon a challengedpractice short of final “judgment.” The Rule 68 “settlement” would resolve only damages, aswell as the plaintiffs’ attorneys’ fees attributable to the recovery of those damages. Accordingly,the plaintiff could still meet the Court’s prerequisite for prevailing party status, and hence

54 505 U.S. 557, 562, 112 S.Ct. 2638, 120 L.Ed.2d 449 (1992).-36-

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 neverthelessresult 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 thatsettlement, plaintiff’s counsel would naturally have to take care to avoid fee denial underBuckhannon by seeking attorneys’ fees on behalf of the plaintiff and, to the extent ethicallypermissible, recommending rejection of an agreement that does not adequately include them.

J. Cross-Reference Rule 68 In Other Federal Rules That Encourage Settlement and inProtocols 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 theRule were to be amended in the venturesome respects proposed above. The experience of ourlawyer respondents suggests that mediation and early judicial intervention present greater promisefor early dispute resolution. Yet some of them also told us that the use of Rule 68 as an adjunct tothose processes could make them even more effective by providing additional incentive for theparties 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 implementingthat 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 toprovide “, including consideration of the parties’ use of one or more offers of settlement underRule 68.”

We would also recommend some reference to Rule 68 in existing local district rules andorders, and in any future Federal Rule of Civil Procedure, that require the parties to mediate. Asdiscussed above, the mediator’s ability to communicate directly with the parties in the presence oftheir lawyers can readily cut through a lawyer’s reluctance, prompted by an unjustified personaleconomic 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 ourproposed new Rule 68 subdivision. The first and perhaps more substantial is that the proposedenhanced attorney fee sanction against defendants in a two-way regime raises at least surfacetension 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 thepossibility that plaintiff’s lawyers working on a contingent fee might receive no compensation for

55 505 U.S. at 565, 112 S.Ct. at 2643. The fee award in Dague was authorized underSection 7002(e) of the Solid Waste Disposal Act, 42 U.S.C.§6972(e) and Section 505(d) of theClean Water Act, 33 U.S.C.§1365(d). 505 U.S. at 559, 112 S.Ct. at 2639. Nevertheless, theSupreme Court there held, as it had in Pennsylvania v. Del. Valley Citizens’ Council for CleanAir, 478 U.S. 546, 562, 106 S.Ct. 3088, 92 L.Ed.2d 439 (1986)(“Delaware Valley I”), that thelanguage of the fee award provisions of these environmental statutes are “similar to that of manyother federal fee-shifting statutes; our case law construing what is a ‘reasonable’ fee appliesuniformly to all of them.” Dague, 505 U.S. at 562, 112 S.Ct. at 2641 (citing 42 U.S.C. §1988,the Civil Rights Attorney’s Fees Awards Act of 1976 that authorizes fee awards for actionsunder, among other statutes, Section 1983).

56 Delaware Valley I, 478 U.S. at 565-566, 106 S.Ct. at 3098.

57 Dague, 505 U.S. at 563, 112 S.Ct. at 2641.

58 Id.-37-

their services in the event of a plaintiff's loss.55

The Court reasoned that an enhancement for risk of loss would largely duplicate twofactors already accounted for in the basic “lodestar” amount of hours reasonably expended onsuccessful claims times a reasonable hourly rate. It explained that the plaintiff’s risk of loss, andin turn her attorneys’ contingent risk, are products of the merits of a plaintiff’s claim and thedifficulty of establishing those merits. It would be illegitimate for a district court to take intoaccount the relative strength or weakness of the merits, the Court concluded, because there issome risk of a loss in any case. Accordingly, to enhance an award based on that possibility wouldcontradict the Court’s previous admonition56 that enhancements are proper only in “rare” or“exceptional” cases. And from a policy standpoint, the Court added, awarding enhancementsbased on the riskiness of a case would give plaintiff’s lawyers “the same incentive to bringrelatively meritless claims as relatively meritorious ones.” 57 The Court also objected toconsidering the difficulty of establishing the merits as a basis for enhancement, deeming that afactor “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 andexperienced enough to do so.”58

But our proposal that civil rights and employment discrimination defendants face a feeaward 12% greater than the lodestar if the plaintiff secures a judgment 10% greater than an offerdefendant had rejected does not enhance fees because of contingency. Rather, it enhances feesbecause of what might be considered excessive litigiousness. That position is bolstered by thecompanion proposal for a 10% cushion before sanctions are triggered. Because a defendant-offeree would face sanctions only if plaintiff has recovered more than 110% of the amountdefendant turned down, the defendant’s rejection of the offer looks at least somewhatunreasonable. There’s a different potential statutory obstacle to our proposed double or triple cost

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

-38-

sanctions against plaintiffs. Theoretically, cost sanctions cut against the thrust of the Section1988 statutory policy elaborated in Christiansburg Garment by indirectly deterring plaintiffs’lawyers, as “private attorneys general,” from bringing potentially meritorious claims. Theseenhanced cost sanctions could kick in either against losing plaintiffs, if the Rule were amended tooverturn Delta Air Lines; or against a prevailing plaintiff whose recovery was less than 90% of arejected defense offer, or one who recovered less than 90% of the average of counteroffers. Butin each case, one key distinction from Christiansburg is that these additional sanctions would notrequire any such plaintiffs to pay the defendant’s attorney’s fees. Further, the assessment ofthese additional costs against plaintiffs would tend to encourage plaintiffs with claims that wereweak at the outset, or begin to appear so early in the litigation, to compromise, a resultconsistent with, not contrary to, the concern expressed by the Court in Dague about “relativelymeritless claims.”

Perhaps most salient is a structural response. To our knowledge, no one has suggestedthat the existing Rule 68 sanctions against plaintiffs violate the Title VII §706(k) or Section 1988statutory policies as elaborated in Christiansburg Garment. The current Rule 68 sanctionsinclude mandatory forfeiture of a prevailing plaintiff's post-offer costs, payment of defendant'spost-offer costs, and, most significantly, forfeiture of all of plaintiff’s post-offer fees. If that last,high-dollar fee forfeiture–triggered by a one cent wrong guess–-doesn't pose a Section 706(k) orSection 1988 problem under Christiansburg, it's hard to imagine that Section 1988 would beoffended by saddling plaintiffs with additional costs usually totaling far less when they reject adefense offer and then lose altogether, or recover less than 90% of a rejected offer or the averageof the parties’ counteroffers.

In brief, we do not believe that the statutory arguments against these proposedamendments to Rule 68, even in a subdivision limited to civil rights and employmentdiscrimination cases, are formidable.

Conclusion

The policies underlying civil rights and employment discrimination fee shifting statutescreate unique problems for Rule 68. The fundamental challenge is to structure incentives thatencourage earlier resolution of these disputes without unduly compromising plaintiffs’“meaningful opportunity to vindicate ...important Congressional policies....”59 The new Rule68.1 we propose is designed to address the demonstrated inadequacy of the current Rule togenerate settlements of these cases, while remaining sensitive to the distinctive “private attorneygeneral” feature of litigation under these statutes.

Our proposal would apply to claims seeking monetary, but not equitable, relief. It wouldsoften the terminology of Rule 68 by authorizing offers of “settlement,” not just “judgment.”

-39-

Unless a federal civil rights or employment discrimination statute authorizing fees to prevailingparties expressly provided otherwise, the amended rule would extend Marek fee forfeiture tofederal 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 similarfee authorizing statutes would be rigorously preserved, so that the amended Rule would notrequire plaintiffs to pay defendant’s attorneys’ fees, only costs.

Following the lead of almost half the states, we believe Rule 68 should allow plaintiffs aswell as defendants to make offers of settlement. Allowing plaintiffs to initiate offers of settlementharbors 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 toevaluate and respond to offers. Periodic mandatory disclosure of the plaintiff’s incurred feesmay facilitate the formulation of more offers by defendants.

The most delicate, and undoubtedly the most controversial, aspects of our proposalconcern the proposed sanctions. Prevailing plaintiffs would be subject to a new mandatorysanction of double costs should they reject an offer of settlement and fall more than 10% short ofthat offer (or an average of counteroffers) at trial. They would also be subject to a discretionarysanction of double or triple costs if the defendant prevailed outright. Defendants who reject aplaintiff’s settlement offer that the plaintiff then exceeds by 10% at trial would be subject to apresumptive but discretionary sanction of a 12% multiplier on fees.

We have tried to propose sanctions that encourage the earlier resolution of civil rights andemployment discrimination damages claims in federal court, without hanging the sword ofDamocles over any party. Our proposals may or may not garner substantial support. But weearnestly hope that they stimulate renewed interest in crafting procedural devices conducive to thefaster, yet still fair dispositions of these numerically predominant and important categories offederal question cases.