reversing Rule 68 fee award based on defendant’s one dollar offer of judgment and stating that to obtain protection and benefit of Rule 68, "a defendant must make a good faith offer, or in other words, an offer sufficient to compel the plaintiff to reassess his or her case. It is difficult to imagine any circumstances under which an offer of one dollar would compel a plaintiff to seriously consider settling a case”
How later courts described this case
- reversing Rule 68 fee award based on defendant’s one dollar offer of judgment and stating that to obtain protection and benefit of Rule 68, "a defendant must make a good faith offer, or in other words, an offer sufficient to compel the plaintiff to reassess his or her case. It is difficult to imagine any circumstances under which an offer of one dollar would compel a plaintiff to seriously consider settling a case”
- holding that we will affirm the circuit court when it has reached the right result even though it was based on the wrong reason
- asking rhetorically whether a $200,000 offer of judgment would be a bona fide offer in a case “where millions of dollars are at stake”
- affirming trial court’s decision not to impose Rule 11 sanctions based on defendant’s $1.00 offer of judgment
Written by the judges who cited it.
The opinion
Annabelle Clinton Imber, Justice, concurring. I concur with the that Williamson’s one-dollar offer of judgment under Ark. R. Civ. P. 68 (2004) was not a good faith, bona fide offer as required by our case law. Notwithstanding my agreement with the majority, I feel compelled to point out that the one-dollar offer of judgment would not be an issue if it were not for our court’s interpretation of Rule 68 in Darragh Poultry & Livestock Equipment Co. v. Piney Creek Sales, Inc., 294 Ark. 427 , 743 S.W.2d 804 (1988). As the majority correctly notes, neither party has asked us to reconsider our decision in Darragh. However, I agree with the United States Supreme Court in Delta Air Lines, Inc. v. August, 450 U.S. 346 (1981), that a prevailing defendant should not be entitled to recover costs incurred under Rule 68.
Rule 68 of the Arkansas Rules of Civil Procedure states in part:
[A] party defending against a claim may serve upon the adverse party an offer to allow judgment to be taken against him for the money or property or to the effect specified in his offer, with costs then accrued . . . [I]f the judgment. . .finally obtained by the offeree is not more favorable than the offer, the offeree must pay the costs incurred after the making of the offer. .. For purposes of this rule, the term “costs” is defined as reasonable litigation expenses, excluding attorney’s fees.
Ark. R. Civ. P. 68 (2004)(emphasis added). In refusing to apply Rule 68 to a prevailing defendant, Delta Air Lines prevented frivolous settlement offers, such as the one-dollar offer here. In Darragh, however, this court declined to follow Delta Air Lines, but instead ruled that a prevailing defendant can still recover costs under Rule 68. As a result, we abandoned an opportunity to prevent the very issue on appeal; rather, our holding in Darragh extended Rule 68 beyond , judgments obtained by the offeree to encompass judgments obtained by the offeror. In so holding, this court instituted a bona fide offer requirement. Such a requirement now forces our court to become involved in determining what is, or is not, a bona fide offer when awarding a prevailing defendant costs under Rule 68. Darragh Poultry & Livestock Equipment Co., supra. In this case, it is not difficult to determine that a one-dollar offer is not bona fide offer, but what amount of money makes an offer bona fide? For example, is a $200,000 offer always a bona fide offer in a case where millions of dollars are at stake? By following the federal interpretation of Rule 68, this court would eliminate the need to determine whether there has been a bona fide offer because a prevailing defendant cannot benefit from the rule.
In addition, a literal interpretation of Rule 68 eliminates any bona fide offer requirement when a judgment is obtained by the offeree; that is, when there is a judgment in favor of the plaintiff. As noted in Delta Air Lines, if the plaintiff rejects a realistic offer made by the defendant, then under Rule 68, the defendant will receive costs should the plaintiff gamble and receive a judgment less than or equal to the amount offered. Delta Air Lines v. August, 450 U.S. at 355-356 . Under the plain language of the rule, an off eror will only receive costs when there is a realistic offer made to a plaintiff who prevails:
But the plain language of the Rule makes it unnecessary to read a reasonableness requirement into the Rule. A literal interpretation totally avoids the problem of sham offers, because such an offer will serve no purpose, and a defendant will be encouraged to make only realistic settlement offers.
Id. Furthermore, as pointed out by the Supreme Court “[if] interpreted to require that the plaintiff secure at least some relief, the rule would insure that token offers will not be made because nothing would be gained by them.” Id. (Fn. 15)(citing Note, Rule 68: A “New” Tool for Litigation, 1978 Duke L. J. 889, 895 (1978)).
Moreover, this court’s interpretation of Rule 68 in Darragh circumvents the intent and application of Ark. R. Civ. P. 54. As recognized by the majority, the purpose of Rule 68 is to provide a defendant the means to compel a plaintiff to reassess the merits of the case at the time the offer is made and determine whether continued litigation is appropriate. Jones v. Abraham, 341 Ark. 66 , 15 S.W.3d 310 (2000). Under Rule 68, a trial court has no discretion in awarding costs if the, “judgment. . . obtained by the offeree is not more favorable than the offer.” Ark. R. Civ. P. 68. In contrast, Rule 54(d) gives the trial court discretion in awarding costs to the prevailing party. 1 Our precedent interpreting Rule 68 enables a prevailing defendant who has made an offer to mandatorily recover costs, and, as a result, we have lessened the trial court’s discretionary authority to award costs to a prevailing party under Rule 54(d). As the Supreme Court noted in Delta Air Lines, the general rule of discretion established in Rule 54(d) is best protected by limiting the application of Rule 68 “only to offers made by the defendant and only to judgments obtained by the plaintiff.” Delta Air Lines, Inc. v. August, 450 U.S. at 352 . The scope of Rule 68 is set forth succinctly by the Supreme Court in Delta:
Rule 68 could conceivably alter the Rule 54(d) presumption in favor of the prevailing party after three different kinds of judgments are entered: (1) a judgment in favor of the defendant; (2) a judgment in favor of the plaintiff but for an amount less than the defendant’s settlement offer; or (3) a judgment for the plaintiff for an amount greater than the settlement offer. The question presented by this case is which of these three situations is described by the words “judgment finally obtained by the offeree . . . not more favorable than the offer.” Obviously those words do not encompass the third situation— a judgment in favor of the offeree that is more favorable than the offer. Those words just as clearly do encompass the second, for there can be no doubt that a judgment in favor of the plaintiff has been “obtained by the offeree.” But inasmuch as the words “judgment. . . obtained by the offeree” — rather than words like “any judgment” — would not normally be read by a lawyer to describe a judgment in favor of the other party, the plain language of Rule 68 confines its effect to the second type of case — one in which the plaintiff has obtained a judgment for an amount less favorable than the defendant’s settlement offer.
Delta Air Lines, Inc. v. August, 450 U.S. at 351 .
Glaze, J., joins. Ark. R. Civ.P. 54(d)(1) (2004) provides that“[c]osts shall be allowed to the prevailing party if the court so directs, unless a statute or rule makes the award mandatory.”