Amicus Curiae Brief — Marek v. Chesny

_

No. 83-1437

4 SEP 12 1934

IN THE

Supreme Court of the United States

OCTOBER TERM, 1984

~

JEFFREY MAREK, THOMAS WADYCKI and

LAWRENCE RHODE, .

Petitioners,

—

ALFRED W. CHESNY, INDIVIDUALLY, AND AS ADMINISTRATOR

OF THE ESTATE OF STEVEN CHESNY, DECEASED,

Respondent.

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SEVENTH CIRCUIT

BRIEF BY THE COMMITTEE ON THE FEDERAL

COURTS ON BEHALF OF THE ASSOCIATION

OF THE BAR OF THE CITY OF NEW YORK

AS AMICUS CURIAE SUPPORTING RESPONDENT

SHELDON H. ELSEN*

MICHAEL W. SCHWARTZ

SIDNEY S. ROSDEITCHER

EDMUND H. KERR

JOHN G. KOELTL

The Association of the Bar

of the City of New York

42 West 44th Street

New York, New York 10036

(212) 382-6600

Attorneys for The Association of

the Bar of the City of New York,

amicus curiae

*Counsel of Record

for amicus curiae

’ ‘ —~

27 \%0

TABLE OF CONTENTS

I er a

cad oe eee une d heknned mass

RR PUN lal Bu ng eee Anse y

Statement

Summary

Argument

Point |

a ek 8 a Ad Soe

ova cad ecg een ddl cubes bees

THE WORD “COSTS” IN RULE 68 IS IN-

TENDED TO BE CONSTRUED UNIFORMLY

TO

ENCOMPASS ONLY THOSE ITEMS TAXA-

BLE AS COSTS IN ALL CIVIL ACTIONS.....

A.

The language and purpose of Rule 68 establish

that the term “costs” was intended to encom-

pass only those items traditionally taxable as

costs by the clerk of the court under Rule

DE ci dewn se savkekakeseawikestebeasuns

The various statutes allowing awards of attor-

neys’ fees were not intended to define “costs”

EG ee kee the 4b shade kes eu ecbedes ed

The recent Advisory Committee proposal to

amend Rule 68 confirms that present Rule 68

does not restrict statutory fee awards........

. The Rules Enabling Act precludes a construc-

tion of Rule 68 that would bar an otherwise

appropriate award of attorneys’ fees under

Section 1988 and similarly worded statutes...

17

21

23

Point II

THE FUNDAMENTAL CIVIL RIGHTS POLI-

CIES SERVED BY SECTION 1988 WERE NOT

INTENDED TO BE OVERRIDDEN BY THE

MANDATORY “COSTS”-SHIFTING PROVI-

Ee Ee CEE Ge sve ccewcecccnccsscceceses

a a a a

PAGE

TABLE OF AUTHORITIES

Cases PAGE

Albemarle Paper Co. v. Moody, 422 U.S. 405 (1975)... 26

Alyeska Pipeline Co. v. The Wilderness Society, 421

CS Re ee 14, 17fn, 27

American Tobacco Co. v. Patterson, 456 U.S. 63 (1982)... .7,

13, 17

Blum v. Stenson, 52 U.S.L.W. 4377 (1984) ........... 27

Chesny v. Marek, 547 F.Supp. 542 (N.D. Ill. 1982).... = 3fn

Chesny v. Marek, 720 F.2d 474 (7th Cir. 1983). ..... 3fn, 26fn

Christiansburg Garment Co. v. EEOC, 434 U.S. 412

ett heen ke hacayeeecuekeuseeedeves 26

Delta Air Lines, Inc. v. August, 450 U.S. 346 (1981). .5, 6, 7,

10, 11, 16, 25

Dodwell v. City of Apopka, 698 F.2d 1181 (11th Cir.

ti stiateedh ies idence osheseeecendecences lifn

Fitzpatrick v. Bitzer, 427 U.S. 445 (1976). ............ 23

Fulps v. City of Springfield, 715 F.2d 1088 (6th Cir.

ee eee ie ba ib6 6660006 ch ebeen see 4fn

Hensley v. Eckerhart, 51 U.S.L.W. 4552 (1983) .......25, 27

Hutto v. Finney, 437 U.S. 678 (1978) ................ 6, 15

Jones v. Alfred H. Mayer Co., 392 U.S. 409 (1968).... 20fn

Maine v. Thiboutot, 448 U.S. 1 (1980)............... 25

Newman v. Piggie Park Enterprises, Inc., 390 U.S. 400

Lee eeee ee See eee bere ses éévseodousees 26

Northcross v. Memphis Board of Education, 412 U.S.

ceed nciinedagkiennsnesadeacens< 26

iv

PAGE

Roadway Express Inc. v. Piper, 477 U.S. 752 (1980) 4, 5, 12,

13, 14, 16

Sibbach v. Wilson & Co., 312 U.S. 1 (1941) .......... 23fn

White v. New Hampshire Department of Employment

SE, GE Sis Gee GED oo bc ccccscecsséseseus lifn

White v. New Hampshire Department of Employment

Security, 629 F.2d 697 (ist Cir. 1980), rev’d on other

erate, Gao UB. GED GIG 6 oc he eccccccccscccces lifn

Statutes

Agricultural Fair Practices Act of 1967, 7 U.S.C.

INT 4.00 Gin ne dearer wigd eat macid amicus 17fn

Bank Holding Company Act Amendments of 1970, 12

as OF Sab abdasaesunsasseeonnaedenensues 17fn

Civil Rights Act of 1964, 42 U.S.C. § 2000a-3(b) (Title

Il), 42 U.S.C. § 2000e-(k) (Title VII) .............. 14

The Civil Rights Attorneys’ Fees Awards Act of 1976, 42

Sees GE, SN I co cctcddeneduectececuwad passim

The Clean Air Act, 42 U.S.C. § 7622(e)(2) ........... 17fn

Commodity Futures Trading Commission Act of 1974, 7

See Sen bd ch dhnonuneenuseeeeaanenessbeas 17fn

Consumer Product Safety Act, 15 U.S.C. §§ 2051-2083 18

Equal Credit Opportunity Act, 15 U.S.C. § 169le(d)... 17fn

Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692a-

Se caneseunssdinnedebnedbieuseoateaueahaake 19fn

Fair Housing Act, Title VIII, Civil Rights Act of 1968,

Gr Gn: SP sc cuvuédecaddaceuneessenusenas 7,19

Fair Labor Standards Act of 1938, 29 U.S.C. § 216(b) 20, 21

Federal Mine Safety and Health Act of 1977, 30 U.S.C.

I eS ak die i el eS 7 eee 18fn

PAGE

Magnuson-Moss Warranty—Federal Trade Commission

Improvement Act, 15 U.S.C. §§ 2301-2312 ......... 19fn

Motor Vehicle Information and Cost Savings Act, 15

ee, eben eesededds es 18

National Mobile Home Construction and Safety Stan-

dards Act of 1974, 42 U.S.C. § 5412(b) ............ 17fn

National Traffic and Motor Vehicle Safety Act, 15

ec cnddvdbedudtdecenedinseceneans 17fn

Outer Continental Shelf Lands Act, 43 U.S.C.

PE ici cdnébsed sensed esesopesedunteces 18fn

Outer Continental Shelf Lands Act, 43 U.S.C.

PR ks ee emeh enneheketnenKes 18fn

Railway Labor Act of 1926, 45 U.S.C. § 153 ......... 20, 21

Real Estate Settlement Procedures Act of 1974, 12

Oe ois ie cndcenoedeceaseeeseses 13, 17fn

Rules Enabling Act, 28 U.S.C. § 2072........... 5, 8, 23, 24

Toxic Substances Control Act, 15 U.S.C. §§ 2618(d),

BERTIE, FE oo cccccccccccccecccccesees 17fn

Voting Rights Act amendments of 1975, 42 U.S.C.

Dn cidccudadWdbdé’dscensedéndscvesteteedees 15

OPE os dn Se dkGbb dees dndes dates denceedes 11, 21

EL, ED bo cddddawddeteddedbeocdsesetenctind 12, 13

ee SE on ic ceenddabadeuespaenseateons 20

Ge OF ED in dddwetesduedecnsesn cbdesctessnns 3

Rules

NS RS | a rere Tre re 5, 12

i OM Min os on eens enueeeweeedeneeeaeedanes 11

en on re . ceeded deeeeoedeauesseondees 11

vi

PAGE

re Or Ey 6 ode bubble endéencdccedeeeuacdes 11

i oc cinicigadencatbusbinadaeastes 11

Oe Oe ei netenneunseseedcdhideeshheus 11

Pe is es Oe an encencnccnsece 5, 6, 10, 11, 12, 17, 23

Ce, CE cece lie eeicednséedeeccsbeatual passim

Committee on Rules of Practice and Procedure, Prelimi-

nary Draft of Proposed Amendments to the Federal

Rules of Civil Procedure, 98 F.R.D. 339 (1983) ...2, 21, 22

Legislative Reports

S. Rep. No. 872, 88th Cong. 2d Sess. (1964).......... 15

H.R. Rep. No. 914, 88th Cong. 2d Sess. (1964) ....... 15

S. Rep. No. 835, 92d Cong. 2d Sess. (1972) .......... 19

H.R. Rep. No. 1158, 92d Cong. 2d Sess. (1972)....... 19

S. Rep. No. 985, 92d Cong. 2d Sess. (1972) .......... 19

H.R. Rep. No. 1198, 92d Cong. 2d Sess. (1972)....... 19

S. Kep. No. 151, 93d Cong. Ist Sess. (1974) .......... 19fn

H.R. Rep. No. 1107, 93d Cong. Ist Sess. (1974)....... 19fn

S. Rep. No. 295, 94th Cong. Ist Sess. (1975). ......... 15

H.R. Rep. No. 196, 94th Cong. Ist Sess. (1975)....... 15

S. Rep. No. 1011, 94th Cong. 2d Sess. (1976) . .14, 25, 26, 27

H.R. Rep. No 1588, 94th Cong. 2d Sess. (1976) ...... 14

S. Rep. No. 382, 95th Cong. Ist Sess. (1977).......... 19in

H.R. Rep. No. 131, 95th Cong. Ist Sess. (1977)....... 19fn

Vil

Other Authorities

3 Derfner & Wolf, Court Awarded Attorney Fees (1983)

Ely, The Irrepressible Myth of Erie, 87 Harv. L. Rev.

Di schateeeadkeubattouehunscedhedetetuans

Ethics Opinion No. 80-94, Ethics Committee, Associa-

tion of the Bar of the City of New York............

7 J. Moore, Moore’s Federal Practice, € 68.01 (2d ed.

eS os ca neuennenedadnddecesaness

Letter of the Acting Deputy Attorney General to the

Chairman of the Committee on Rules of Practice and

Procedure (February 28, 1984) ............2e-eeee-

PAGE

17fn

27fn

IN THE

Supreme Court of the United States

OCTOBER TERM, 1984

No. 83-1437

—>-

JEFFREY MAREK, THOMAS WADYCKI and

LAWRENCE RHODE, we

Petitioners,

—_—V—

ALFRED W. CHESNY, INDIVIDUALLY, AND AS ADMINISTRATOR

OF THE ESTATE OF STEVEN CHESNY, DECEASED,

Respondent.

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE SEVENTH CIRCUIT

<—_>—

BRIEF BY THE COMMITTEE ON THE FEDERAL

COURTS ON BEHALF OF THE ASSOCIATION

OF THE BAR OF THE CITY OF NEW YORK

AS AMICUS CURIAE SUPPORTING RESPONDENT

Preliminary Statement

This brief is respectfully submitted by the Committee on the

Federal Courts of the Association of the Bar of the City of

New York (the “Association”), on behalf of the Association as

amicus curiae, in support of affirmance of the Court of

Appeals’ decision below. The Association believes that the

Court of Appeals correctly held that the mandatory “costs”-

shifting provision of Rule 68, Fed. R. Civ. P., was not intended

to deprive the District Courts of their discretion to determine

the amount of a reasonable attorneys’ fee under The Civil

Rights Attorneys’ Fees Awards Act of 1976, 42 U.S.C. (Supp.

V) § 1988 (“Section 1988”). .

Interest of the Amicus

The Association was established in 1871 “for the purposes of

cultivating the science of jurisprudence, promoting reforms in

the law, facilitating the administration of justice, [and] elevat-

ing the standard of integrity, honor and courtesy in the legal

profession. . . .” (Charter, April 28, 1871). The Committee

on the Federal Courts is one of the Association’s standing

committees. It monitors developments affecting the adminis-

tration of the federal courts and develops proposals for im-

provements.

The Committee has recently studied Rule 68 in reviewing

amendments to it proposed by the Committee on Rules of

Practice and Procedure. 98 F.R.D. 339, 361-67 (1983). Those

proposals would change Rule 68 by, among other things,

empowering the District Courts to award attorneys’ fees as

well as “costs” against a litigant or defendant who rejects an

offer of settkement which proves superior to the ultimate

judgment. Because the power to shift fees—rather than only

“costs,” as at present—would substantially raise the “stakes”

under Rule 68, the proposal would also eliminate the manda-

tory character of the present Rule; fee-shifting would be

subject to consideration of various discretionary factors, to

avoid what the Advisory Committee called “the Draconian

impact of an ‘all-or-nothing’ rule.” /d. at 365.

The Association’s review of the Advisory Committee pro-

posals gave il an Opportunity to study in depth a number of the

Rule 68 issues r: ised by the First Question Presented in the

petition herein.' The Association believes that its views may be

helpful to the Court in resolving those Rule 68 issues, and this

brief is being filed with the consent of the parties.’

I This brief does not address, and the Association does not take a

position with respect to, the Second Question Presented by the petitioners.

2 The parties’ letters of consent to the filing of this brief have been

filed with the Clerk of this Court.

Statement of Facts”

Petitioners Marek, Wadycki and Rhode, police officers in

the Village of Berkley, Illinois, shot and killed respondent’s

son, Steven. Respondent brought this action against the police-

men, the Village, and others, under 42 U.S.C. § 1983.

Thereafter petitioners submitted an offer of judgment which

offered to settle three elements of the case: liability, “costs”

and attorneys’ fees. The offer read:

Pursuant to Federal Rule of Civil Procedure 68, the

defendants [Marek, Wadycki and Rhode] hereby offer to

allow judgment to be taken against them by the plaintiff

for a sum, including costs now accrued and attorneys’

fees, of One Hundred Thousand ($!00,000) Dollars.

Respondent rejected the offer. The record does not reflect the

reasons for respondent’s rejection. There has been no judicial

determination as to the reasons why the offer was rejected.

After a three-week trial, the jury returned a verdict for

respondent. The jury awarded compensatory damages and

punitive damages against the police officer defendants. The

total amount of the verdict was $60,000, the jury having

decided not to award any amount as compensation for loss of

the decedent’s future earnings, notwithstanding uncontradicted

expert testimony that he would have left his parents an estate

having a present value in excess of $500,000.

Pursuant to Section 1988, the District Court awarded re-

spondent attorneys’ fees of $32,000, for legal services rendered

prior to the offer of judgment. The District Court refused to

consider any award of fees for services rendered after the date

of the Rule 68 offer. The District Court held that Rule 68’s

requirement that respondent pay all “costs” incurred subse-

quent to rejection of the offer precluded the award of attor-

3 This Statement of Facts is based on the record and on the decisions

below. They are reported at 547 F. Supp. 542 (N.D. Ill. 1982) and 720 F.2d

474 (7th Cir. 1983).

4

neys’ fees to which respondent might otherwise have been

entitled under Section 1988.*

The Court of Appeals for the Seventh Circuit reversed,

holding that Rule 68 did not preclude an award of fees

otherwise appropriate. It ordered the case remanded to the

District Court for determination under Section 1988 of a

reasonable fee for services rendered after the Rule 68 offer.°

The Court of Appeals reasoned that Rule 68 is not intended

to cut off the possibility of a Section 1988 fee award. Relying

upon this Court’s recent decision in Roadway Express Inc. v.

Piper, 447 U.S. 752 (1980), the Court of Appeals held that

proper construction of the word “costs” depends upon the

context in which the word is used.° With reference to the

4 Section 1988 provides, in pertinent part:

In any action or proceeding to enforce a provision of Section 1981,

1982, 1983, 1985 and 1986 of this Title, Title 9 of Public Law 92-318,

or Title 6 of the Civil Rights Act of 1964, the Court in its discretion

may allow the prevailing party, other than the United States, a

reasonable attorneys’ fee as part of the costs.

5 A threshold issue considered by the Court of Appeals was whether

petitioners’ offer of judgment for a liquidated sum, “including costs now

accrued and attorneys’ fees,” was valid under Rule 68. The Court of Appeals

concluded that the form of petitioners’ offer was proper. The issue of the

validity of the offer is not raised in the petition for certiorari. However, it

may be noted that the language of the offer was directly at odds with the

position petitioners now take, that “costs” includes attorneys’ fees: the offer

separated those two items out and treated them as if fees were not included in

“costs.” See page 3, supra.

6 The Court of Appeals distinguished the decision of the Court of

Appeals for the Sixth Circuit in Fulps v. City of Springfield, 715 F.2d 1088

(6th Cir. 1983). Fulps did not involve the issue presented here, whether a

plaintiff who rejects a Rule 68 offer is barred from receiving any award for

fees incurred after rejection of the offer. In Fulps, plaintiff had accepted the

offer of judgment which, unlike petitioners’ here, was silent on the subject of

fees. The Court of Appeals for the Sixth Circuit held that the acceptance of

the offer did not preclude a further application for fees by the plaintiff.

Some of its reasoning towards this conclusion is contrary to that of the Court

of Appeals below.

5

particular context in which “costs” must be construed here, the

Court of Appeals reasoned that allowing the automatic, man-

datory “costs”-shifting provisions uf Rule 68 to be used to

preclude a fee award under Section 1988 would be inconsistent

with the Congressional policy underlying Section 1988, which

grants the District Courts broad discretion over fee awards.

The Court also noted that, if Rule 68 were construed to

produce a result which would differ from that produced by

Section 1988, a question of the Rule’s validity might arise

under the Rules Enabling Act, 28 U.S.C. § 2072.

Thereafter, before any further proceedings could be had in

the District Court under Section 1988, petitioners sought re-

view of the Rule 68 issue in this Court.

Summary of Argument

1. A. The Court of Appeals correctly held that “costs” in

Rule 68 is limited to the items traditionally taxable by the clerk

of the court under Rule 54(d), Fed. R. Civ. P. As this Court

made clear in Delta Air Lines, Inc. v. August, 450 U.S. 346

(1981), Rule 68 deters rejection of settlement offers by denial

of Rule 54(d) “costs” to a prevailing plaintiff. “Costs” in Rules

54(d) and 68 was not meant to be construed one way if a fee

award statute is involved and another way if one is not. The

Rules themselves make no such distinction and the Federal

Rules should be construed uniformly as to “every civil action.”

Fed. R. Civ. P. 1.

This Court’s recent decision in Roadway Express Inc. v.

Piper, 447 U.S. 752 (1980), precludes subjecting lawyers in

different areas of practice to differing sanctions for dilatory

conduct. /d. at 763. This would be the result of a reversal here:

rejection of a settlement offer in a commercial case would

result in the relatively modest sanction of denial of Rule 54(d)

costs, while similar rejection in a civil rights action would

result in a Draconian forfeiture of fees. Compare id. at 762-63.

Petitioners (and the Government as amicus curiae) confuse

two different issues: whether Rule 68 precludes any award of

fees after rejection of a Rule 68 offer and, on the other hand,

6

whether Section 1988 permits a District Court to diminish a fee

award for services rendered after a reasonable settlement offer

has been rejected in bad faith. These are two entirely different

questions, analytically and practically. De/ta Air Lines teaches

that Rule 68 involves no concept of “reasonableness” or “good

faith”—if a defendant’s settlkement offer was more than the

plaintiff’s verdict, the plaintiff must bear the costs, while if his

offer turns out to be less, the defendant must bear the costs.

Thus petitioners’ (and the Government’s) repeated refei-

ences to the need to encourage “good faith” consideration of

“reasonable” settlement offers are really arguments that bad

faith rejection of a reasonable settlement offer should be a

factor which the District Courts may consider under Section

1988 in deciding on the amount of a reasonable fee. However,

that question is not presented on the present record in this

Court. As noted above, the District Court never considered the

matter under Section 1988, having ruled that Rule 68 precluded

any consideration of an award of post-offer fees.

The wording of Section 1988 was not intended to change the

operation of Rule 68. The legislative history of Section 1988

makes it clear where the phrase “as part of the costs” comes

from: Congress simply “tracked” the language of earlier civil

rights fee award statutes. It adopted the language to promote

uniformity among the civil rights statutes and, as this Court

explained in Hutto v. Finney, 437 U.S. 678 (1978), to assure

that attorneys’ fees could be recovered against a state notwith-

standing the Eleventh Amendment. There is no indication in

the history of Section 1988 that it was intended to define

“costs” for purposes of Rules 54(d) and 68.

B. The existence of numerous other fee award statutes,

some worded like Section 1988, some worded differently,

confirms that “costs” in Rules 54(d) and 68 cannot be con-

strued by reference to such statutes. In enacting fee-award

statutes, Congress’ practice has been sometimes to describe

attorneys’ fees as “costs” in fee award statutes, sometimes not

to do so, sometimes to. use different such formulations even in

a single statute, and sometimes to use language which omits the

word “costs” altogether—all according to no consistent pat-

tern. Thus attorneys’ fees are said to be “part of the costs”

under Section 1988, but not, for example, under the Fair

Housing Act, Title VIII, Civil Rights Act of 1968, 42 U.S.C.

§ 3612(c). Petitioners have suggested no reason why fees

should be at risk under Section 1988 but not under the latter

Statute (and dozens of others which are similarly worded).

Adoption of petitioners’ proposed construction of Rule 68

would lead to untenable distinctions between and among cases

arising under the numerous fee award statutes. It would

contravene basic principles of statutory construction to read

Rule 68 as producing such “untenable distinctions.” American

Tobacco Co. v. Patterson, 456 U.S. 63, 71 (1982).

Petitioners (and the Government) miss the point by their

emphasis upon those statutes which (like Section 1988) are

worded to authorize a fee award “as part of the costs.” To

sustain their proposed construction of Rule 68, they would

have to show that Congress had some reason to distinguish

between, for example, the Fair Housing Act, 42 U.S.C.

§ 3612(c) and Section 1988, and to punish non-settling plain-

tiffs in Section 1988 cases far more severely than non-settling

plaintiffs in cases under the Fair Housing Act or the numerous

other statutes which are worded to allow an award of fees in

addition to costs. They have made no such showing. It defies

common sense that Congress had any such intention.

C. The recent Advisory Committee proposals to amend

Rule 68 underscore how inappropriate it would be to single out

cases under Section 1988 (and similarly-worded fee award

statutes) for the application of present Rule 68 in the manner

contended for by petitioners (and the Government). The Advi-

sory Committee proposals seek to increase materially the

incentives for settlement by using fee-shifting as a punishment

for rejection of a settlement offer. But the Advisory Committee

would do so only after supplying safeguards absent from the

present Rule and, under Delta Air Lines, not to be implied

into it.

Thus, even advocates of these proposals recognize that the

present Rule cannot fairly be used to change the incidence of

attorneys’ fees. This should be no less true in cases where a

reasonable fee award would otherwise be appropriate than in

cases not arising under a fee award statute.

D. Finally, a construction of the Federal Rules which pre-

cluded an award of fees under Section 1988 and similarly

worded statutes would raise the most serious questions under

the Rules Enabling Act, 28 U.S.C. § 2072. The Court of

Appeals below was correct in construing Rule 68 to avoid such

questions.

Il. The Court of Appeals also correctly held that the District

Courts’ discretion under Section 1988 was not intended to be

ousted by Rule 68. The legislative history of Section 1988

makes clear that the District Courts were entrusted with broad

discretion to award reasonable fees, and contains no indication

that the mandatory “costs”-shifting provisions of Rule 68 were

intended to deprive them of that discretion.

This point goes only to the proper construction of Rule 68.

It may be that under Section 1988 or other particular fee award

statutes, a court can properly consider bad faith rejection of a

reasonable settlement offer in deciding what is a “reasonable

fee.” But that result cannot be reached by applying the me-

chanical cut-off of “costs” effected by Rule 68, and that issue

cannot be resolved on the record in this case, where no

determination under Section 1988 was ever made by the Dis-

trict Court.

9

Argument

Point I

THE WORD “COSTS” IN RULE 68 IS INTENDED TO BE

CONSTRUED UNIFORMLY TO ENCOMPASS ONLY

THOSE ITEMS TAXABLE AS COSTS IN ALL CIVIL

ACTIONS

A. The language and purpose of Rule 68 establish that the

term “costs” was intended to encompass only those items

traditionally taxable as costs by the clerk of the court

under Rule 54(d).

Rule 68 provides that if a defending party makes an offer of

judgment that is refused, and the plaintiff thereafter obtains a

judgment “not more favorable than the offer,” the plaintiff

must pay post-offer costs.’ The Rule is automatic and me-

7 Rule 68: Offer of Judgment.

At any time more than 10 days before the trial begins, the 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. If within ten

days after service of the offer the adverse party serves written notice

that the offer is accepted, either party may then file the offer and

notice of acceptance together with proof of service thereof and

thereupon the clerk shall enter judgment. An offer not accepted shall

be deemed withdrawn and evidence thereof is not admissible except in

a proceeding to determine costs. If 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. The fact that an offer

is made but not accepted does not preclude a subsequent offer. When

the liability of one party to another has been determined by verdict or

order or judgment, but the amount or extent of the liability remains to

be determined by further proceedings, the party adjudged liable may

make an offer of judgment, which shall have the same effect as an

offer made before trial if it is served within a reasonable time not less

than ten days prior to the commencement of hearings to determine the

amount or extent of liability.

The Rule has been amended only twice in its 46-year history, and remains

largely unchanged from its original form. See 7 J. Moore, Moore's Federal

Practice, ¢ 68.01 (2d ed. 1983 & Supp. 1984).

10

chanical in its operation; it looks solely to the respective

amounts of the offer and the verdict. If the offer exceeds the

verdict, the plaintiff “must pay the costs incurred after the

making of the offer.” Although the Advisory Committee's

brief note to the Rule contains no express statement of its

purpose, Rule 68 has been understood to encourage plaintiffs

to accept settlement by supplying a modest deterrent to rejec-

tions of a defendant’s offer. Delta Air Lines, Inc. v. August,

450 U.S. 346, 352 (1981).

In Delta Air Lines, this Court’s first consideration of Rule

68 since its adoption in 1938, this Court made several rulings

which are of importance to the present case. First, this Court

held that Rule 68 must be construed in pari materia with Rule

54(d), Fed. R. Civ. P., and indeed that failure so to construe it

would be “to attribute a schizophrenic intent to the drafters.”

Id. at 353-56. This Court stated that Rule 68 was intended to

“alter the Rule 54(d) presumption” that a prevailing party

recovers the “costs” referred to in Rule 54(d). /d. at 351. It was

in part based on this holding that this Court concluded that the

Rule denies “costs” only where the plaintiff recovers a judg-

ment and has no application where the plaintiff recovers

nothing. /d. at 354-55.

Second, this Court held that Rule 68 did not contain “a

reasonableness requirement.” The lower court decision re-

versed by this Court had held that “only reasonable offers

trigger the operation of Rule 68.” This Court rejected that

interpretation, and declined to “read a reasonableness require-

ment into the Rule.” /d. at 355.

In sum, this Court stated that the purpose of Rule 68 is the

relatively narrow one of “provid[ing] an additional inducement

to settle in those cases in which there is a strong probability

that plaintiff will obtain a judgment but the amount of

recovery is uncertain.” Jd. at 352.* The particular “additional

8 This Court’s reference to “an additional inducement” reflected its

recognition of the fact that, “In all litigation, the adverse consequences of

potential defeat provide both parties with an incentive to settle in advance of

trial.” Delta Air Lines, 450 U.S. at 352.

inducement” which Rule 68 supplies is the relatively narrow

one of depriving the plaintiff of Rule 54(d) costs.

It is clear from the language and structure of Rules 54(d) and

68 that the “costs” to which they refer do not include attor-

neys’ fees in cases arising under the fee award statutes.” Rule

54(d) provides that costs may be taxed by the clerk of the court

on one day’s notice. This provision clearly refers to “costs” of

the sort specified in 28 U.S.C. § 1920—routine, readily deter-

minable charges which it would be appropriate to leave to a

clerk, and as to which a single day’s notice of settlement is

appropriate."” The conclusion that “costs” refers only to

charges taxable by a clerk is confirmed by the fact that when

particular Federal Rules are meant to provide for attorneys’

fees as expenses, the inclusion is explicit and the authority to

award fees is expressly granted to the Court, not the clerk. See

Rules 11, 16(f), 26(g), 30(g), 37, Fed. R. Civ. P.'' The Court of

Appeals correctly adopted a construction of “costs” which

respects this clear, consistent usage in the Federal Rules. It

correctly rejected a proposed construction which, because of

the interrelation of Rules 68 and 54(d) explained in this Court’s

Delta Air Lines decision, would lead to the result that the

9 This Court has expressly reserved the question whether “costs” in

Rule 54(d) incorporates Section 1988. White v. New Hampshire Department

of Employment Security, 455 U.S. 445, 454-55 n.17 (1982). That question

must be decided here. It should be decided against such incorporation.

10 In applying Rule 54(d), the lower Federal Courts have consistently

used the particular fees and other items listed in § 1920 as the definition of

the term. See, e.g., White v. New Hampshire Dep't of Employment Security,

629 F.2d 697, 701-03 (ist Cir. 1980), rev'd on other grounds, 455 U.S. 445

(1982); Dodwell v. City of Apopka, 698 F.2d 1181, 1188-89 & n.12 (ith. Cir.

1983). This reliance on § 1920 is consistent with the “uniform structure

established by the 1853 Act” which adopted § 1920. Roadway Express, 447

U.S. at 761.

11 These rules all involve sanctions for deliberate misconduct, and are

penal in nature. By contrast, Rule 68, although designed to encourage

settlement and avoid the needless expense of a trial, does not apply only

where misconduct or bad faith has been shown.

12

C lerk of the Court could rule on fee applications on one day’s

notice.

As the Court of Appeals correctly stated, this Court’s recent

decision in Roadway Express Inc. v. Piper, 447 U.S. 759

(1980), strongly supports the decision below. In Roadway

Express this Court was faced with determining Congress’

intent in enacting 28 U.S.C. § 1927 which also uses the term

“costs” without further definition. There, too, petitioner con-

tended that “costs” should be read to include attorneys’ fees

where a fee award statute provides that fees should be awarded

“as part of the costs,” but not be so read where a fee statute

did not apply.

Rejecting that position, this Court held that the word

“costs” should be construed uniformly:

. . . Roadway’s statutory construction would create a

two-tier system of attorney sanctions. A number of fed-

eral statutes permit the award of attorneys’ fees. See

Alveska Pipeline Co. v. Wilderness Society, 421 U.S. at

200, n. 33. Under Roadway’s view of § 1927, lawyers in

cases brought under those statutes would face stiffer

penalties for prolonging litigation than would other attor-

neys. There is no persuasive justification for subjecting

lawyers in different areas of practice to differing sanc-

tions for dilatory conduct. A court’s processes may be as

abused in a commercial case as in a civil rights action.

Without an express indication of congressional intent, we

must hesitate to reach the imaginative outcome urged by

Roadway, particularly when a more plausible construction

flows from the original enactments in 1813 and 1853.

—447 U.S. at 762-63

(emphasis added).

This ruling is directly germane here. Federal Rules 54(d) and

68, like § 1927, are meant to be applied uniformly to all civil

actions. Like all the Federal Rules, they are expressly intended

to “secure the just, speedy, and inexpensive determination of

every action.” Fed. R. Civ. P. | (emphasis added). A construc-

tion of Rules 54(d) and 68 that would include attorneys’ fees as

ee ee

13

“costs” where Section 1988 or a similarly-worded fee award

statute was involved, but not include them where no such

statute was involved, would abrogate the uniform application

of Rule 68 to all civil actions. Indeed, the relatively modest

impact which Rule 68 has “in a commercial case” —to use the

example mentioned by this Court in the passage quoted

above—would stand in starkest contrast to the life-or-death

effect it could have “in a civil rights case” or certain other

fee-award cases. The “imaginative outcome” rejected in Road-

way Express must likewise be rejected here.

Like the argument rejected in Roadway Express, petitioners’

(and the Government’s) construction of Rule 68 would create a

“two-tier system” of cost-shifting. Indeed, closer analysis of

the fee award statutes reveals that a fhree-tier system would

result: for while cases arising under some fee-award statutes

would be affected—those which use the phrase “as part of the

costs”—cases arising under dozens of other fee award stat-

utes—those which use a different form of words, such as the

Real Estate Settlement Procedures Act, 12 U.S.C.

§ 2607(d)(5)—would not be so affected. See Point 1.B., infra.

Introducing these kinds of “untenable distinctions” into the

construction of the Federal Rules of Civil Procedure would

violate first principles of statutory construction. American

Tobacco Co. v. Patterson, 456 U.S. 63, 71 (1982).

Roadway Express is directly relevant for another reason as

well. In that decision, this Court specifically addressed the

question whether Section 1988 made any change in the mean-

ing of the word “costs” in § 1927 or in the Congressional

policy of uniformity in defining “costs.” This Court held that

it did not:

[Petitioner] insists, however, that its recovery should

not be restricted to the costs listed in § 1920. It argues

that since courts look to § 1920 to determine the costs

taxable under § 1927, they should be equally free to

define costs according to other statutes that may be

involved in a lawsuit. [Petitioner] emphasizes that the civil

rights statutes allow the award of attorneys’ fees “as part

14

of the costs” of the litigation . . . . This superficially

appealing argument cannot survive careful consideration.

. * .

[Petitioner] offers no evidence that Congress intended

to incorporate those attorneys’ fee provisions into § 1927.

[Section 1988] makes [no] mention of attorney liability

for costs and fees. [Petitioner] identifies nothing in the

legislative records of those provisions that suggests that

Congress meant to control the conduct of litigation.

—447 U.S. at 758, 761

(footnote and citations

omitted)(emphasis

added).

The “superficially appealing argument” from the language

of Section 1988 that was rejected in Roadway Express likewise

“cannot survive careful consideration” in this case. Here, too,

petitioners “identify nothing” in the legislative history of

Section 1988 indicating that Congress even considered Rule 68

when it included attorneys’ fees “as part of the costs” in

enacting Section 1988. There is no reference to Rule 68 in the

Senate Report on Section 1988, S. Rep. No. 1011, 94th Cong.

2d Sess. (1976), reprinted in 1976 U.S. Code Congressional

and Administrative News 5908, or the House Report, H.R.

Rep. No. 1588, 94th Cong. 2d Sess. (1976). The House Report

does not even mention the phrase “attorneys’ fee as part of the

costs” in its description of the “key features” of Section 1988.

H.R. Rep. No. 1588, 94th Cong. 2d Sess. 6 (1976).

The legislative history of Section 1988 indicates that the use

of the phrase “attorneys’ fee as part of the costs” had nothing

to do with Rule 68. Rather, Section 1988 was designed to foster

uniformity in the fee award process and to overcome A/yeska

Pipeline Service Co. v. The Wilderness Society, 421 U.S. 240

(1975), which had precluded an award of attorneys’ fees

without express Congressional authorization. The specific lan-

guage which Congress chose therefore “tracked” the explicit

fee award provisions already included in Titles I] and VII of

the 1964 Civil Rights Act, 42 U.S.C. § 2000a-3(b) (Title II), 42

15

U.S.C. § 2000e-5(k) (Title VII), and § 402 of the 1975 Voting

Rights Act amendments, 42 U.S.C. § 1973(e), whose vatidity

this Court had consistently upheld. The House Report states:

Existing «‘atutes allowing fees in certain civil rights cases

[provide for] discretionary awards for any prevailing

party. Keeping with that pattern, section 1988 tracks the

language of the counsel fee provisions of [the statutes

cited in text above].

H.R. Rep. No. 1588, 94th Cong. 2d Sess. 5 (1976) (emphasis

added). The legislative history of those earlier statutes likewise

contains no reference to Rule 68. S. Rep. No. 872, 88th Cong.

2d Sess. (1964), H.R. Rep. No. 914, 88th Cong. 2d Sess.

(1964), reprinted in 1964 U.S. Code Congressional and Ad-

ministrative News 2355; S. Rep. No. 295, 94th Cong. Ist Sess.

(1975), H.R. Rep. No. 196, 94th Cong. Ist Sess. (1975),

reprinted in 1975 U.S. Code Congressional and Administrative

News 774.

In Hutto v. Finney, 437 U.S. 678 (1978), this Court held that

Congress described attorneys’ fees as “costs” under Section

1988 not for any reason associated with Rule 68, but rather to

permit an award of such fees against a state notwithstanding

the Eleventh Amendment. This Court stated:

Just as a federal court may treat a state like any other

litigant when it assesses costs, so also may Congress

amend its definition of taxable costs and have the

amended class of costs apply to the states, as it does to all

other litigants, without expressly stating that it intends to

abrogate the states’ Eleventh Amendment immunity.

—437 US. at 696.

Moreover, this Court in Hutto attached significance to the

phrase “as part of the costs” only after finding clear, affirma-

tive indications in the legislative history of Section 1988 sup-

porting that interpretation. See 437 U.S. at 693-95. However,

as set forth above, there is no indication in the legislative

history that Congress’ use of the phrase “as part of the costs”

was intended to bring the mandatory “costs”-shifting provi-

sions of Rule 68 into play.

16

Neither petitioners nor the Government comes to grips with

the holding of Delta Air Lines, with the inter-relationship

between Rules 54(d) and 68, with the Roadway Express deci-

sion, or with the fact that there is no legislative history to

support their argument that Section 1988 was meant to define

“costs” in Rule 68. Instead, they argue repeatedly the “policy”

contention that their construction would foster “good faith”

consideration of “reasonable” settlement offers. E.g., Peti-

tioner’s Brief at 24-26; Brief of the United States at 18-19. But

these contentions simply ignore that this Court held in Delta

Air Lines that Rule 68 contains no “reasonableness require-

ment” and that one should not be read into it. See Delta Air

Lines, 450 U.S. at 355-56. Such judicial legislation would be

equally inappropriate here.

Equally misplaced is the Government’s reliance on cases in

the lower courts that have apparently held that Section 1988

permits consideration of whether a plaintiff has in bad faith

rejected a reasonable settlement offer. E.g., Brief of the United

States at 22. The issue of whether Section 1988 permits such

consideration in determining a “reasonable” fee is not pre-

sented in this case: neither the District Court nor the Court of

Appeals ever addressed that question, and no determination

has been made that respondent acted in bad faith in rejecting

petitioners’ offer.'’ The only issue in this case is whether Ru/e

68 precludes any consideration of a fee award for services

rendered after rejection of an offer, even if that rejection was

perfectly justified by the facts at the time. Rule 68 has no such

preciusive effect.

12 The Court of Appeals had remanded the case for determination of a

reasonable tee for services rendered :fter the Rule 68 offer was made, and

the circumstances of the settlement offer, and of its rejection, might have

been litigated in making that determination. But the petition filed in this

Court prevented that determination. There is thus no way to tell from the

present record what factors existed at the time the Rule 68 offer was rejected,

nor what conditions might have changed from that date to the date of the

verdict.

17

B. The various statutes allowing awards of attorneys’ fees

were not intended to define “costs” in Rule 68.

Congress did not intend that the various statutes authorizing

the award of attorneys’ fees would govern the definition of

“costs” in Rules 54(d) and 68. As is clear from review of the

fee award statutes, which now number over 100, if these

statutes (including Section 1988) were used to define “costs” in

Rule 68, Congress would have created an inconsistent, irra-

tional scheme based upon “untenable distinctions.” Rule 68

must be interpreted to avoid such a result. American Tobacco

Co. v. Patterson, 456 U.S. 63, 71 (1982).

Congress has enacted numercus statutes expressly authoriz-

ing the award of attorneys’ fees." What is especially important

here is that some of these statutes define “costs” to include

attorneys’ fees,'* while others authorize attorneys’ fees in

addition to “costs.”'* Even within distinct legislative areas,

such as consumer safety and environmental protection, Con-

gress has been inconsistent as to whether attorneys’ fees are or

are not a part of “costs.”'° Further, some fee award statutes do

13 There are presently over 100 such fee award statutes. A compilation

is found in 3 Derfner & Wolf, Court Awarded Attorney Fees, chs. 29-45

(1983). The number of these statutes proliferated after this Court's decision

in Alveska Pipeline Service Company v. The Wilderness Society, 421 U.S.

240 (1975), which held that the federal courts could not award attorneys’ fees

absent express statutory authorization.

14 See, e.g., The Clean Air Act, 42 U.S.C. § 7622(e2); Commodity

Futures Trading Commission Act of 1974, 7 U.S.C. § 18(f); Agricultural Fair

Practices Act of 1967, 7 U.S.C. § 2305(a); and the Bank Holding Company

Act Amendments of 1970, 12 U.S.C. § 1975.

15 See, e.g., Fair Labor Standards Act of 1938, 29 U.S.C. § 216(b);

The Real Estate Settlement Procedures Act of 1974, 12 U.S.C. § 2607(d)(2);

Equal Credit Opportunity Act, 15 U.S.C. § 169le(d); National Traftic and

Motor Vehicle Safety Act, 15 U.S.C. § 1400(b); National Mobile Home

Construction and Safety Standards Act of 1974, 42 U.S.C. § 5412(b); Toxic

Substances Control Act, 15 U.S.C. §§ 2618(d), 2619(c)(2), 2620(b)4)(C).

16 Compare the Fair Labor Standards Act of 1938, 29 U.S.C. § 216(b)

(“a reasonable attorneys’ fee to be paid by the defendant, and costs of the

18

not use the word “costs” at all;'’ and in at least one instance, a

single statute uses both a “costs” and a non-“costs” formula-

tion.'* Consequently, a senseless scheme would result from

attempting to define “costs” in Rule 68 by reference to the

various fee award statutes. A few examples make the point.

Two consumer safety statutes, the Motor Vehicle Informa-

tion and Cost Savings Act, 15 U.S.C. §§ 1901-2012 (the “Mo-

tor Vehicle Act”), and the Consumer Product Safety Act, 15

U.S.C. §§ 2051-2083, are similar in purpose and structure.

Both authorize the promulgation of safety standards—bumper

standards under the Motor Vehicle Act, and consumer product

safety standards under the Consumer Product Safety Act.

Both were enacted in the same Congressional session. Both

expressly authorize private causes of action for violations of

the statute. And both contain provisions granting attorneys’

fees to prevailing plaintiffs. The Motor Vehicle Act, however,

authorizes the recovery of “costs and reasonable attorneys’

fees. . .” (15 U.S.C. § 1918(a)) while the Consumer Product

Safety Act authorizes the recovery of “the costs of suit,

including reasonable attorneys’ fees.” 15 U.S.C. §§ 2072(a),

2073.

If the fee award statutes were deemed to define “costs” for

Rule 68 purposes, a successful plaintiff would, where the

requirements of Rule 68 were otherwise met, be barred from

recovering attorneys’ fees for a defective toaster (under the

Consumer Product Safety Act), but not for a defective bumper

(under the Motor Vehicle Act). Nothing in the legislative

action”) with the Federal Mine Safety and Health Act of 1977, 30 U.S.C.

§ 815(c)(3) (“a sum equal to the aggregate amount of all costs and expenses

(including attorneys’ fees)”). Compare also the Toxic Substances Control

Act, 15 U.S.C. § 2619%c)(2) (“costs of suit and reasonable fees for attorneys

and expert witnesses”) with Outer Continental Shelf Lands Act, 43 U.S.C.

§ 1349(a)(S) (“costs of litigation, including reasonable attorney and expert

witness fees”).

17 E.g., Outer Continental Shelf Lands Act, 43 U.S.C. § 1349(b)(2).

18 Compare Outer Continental Shelf Lands Act, 43 U.S.C.

§ 1349(b)(2), with id., § 1349(a)(5).

|

t

1

:

-

:

19

history of either Act indicates a Congressional intent to pro-

duce this anomalous result. S. Rep. No. 835, 92d Cong. 2d

Sess. (1972), H.R. Rep. No. 1158, 92d Cong. 2d Sess. (1972),

reprinted in 1972 U.S. Code Congressional and Administrative

News 4573, 4596; S. Rep. No. 985, 92d Cong. 2d Sess. (1972),

H.R. Rep. No. 1198, 92d Cong. 2d Sess. (1972), reprinted in

1972 U.S. Code Congressional and Administrative News

4472."

Moreover, if Rule 68 significance were attached to the phrase

“as part of the costs” in Section 1988, the anomalous situa-

tions just described would also exist among the civil rights

statutes. Thus, while Section 1988 follows some civil rights

statutes in including attorneys’ fees “as part of the costs,” the

Fair Housing Act, Title VIII, Civil Rights Act of 1968, 42

U.S.C. § 3612(c), allows the court to award court costs and

reasonable attorneys’ fees to a prevailing plaintiff under cer-

tain circumstances. If the variously worded fee award statutes

governed the definition of “costs” under Rule 68, a plaintiff

who brought a fair housing claim under the Fair Housing Act

would not risk his attorneys’ fees by the operation of Rule 68,

19 Likewise, inexplicably inconsistent results would result under the

Magnuson-Moss Warranty—Federal Trade Commission Improvement Act,

15 U.S.C. §§ 2301-2312 and the Fair Debt Collection Practices Act, 15

U.S.C. §§ 1692a-16920. Both Acts protect the consumer from deceptive

practices, the former by prescribing standards governing the content and

appearance of warranties, the latter by prohibiting abusive, deceptive and

unfair debt collection practices. Both also create an express cause of action

for injured consumers and grant the courts discretion to award attorneys’

fees to a prevailing plaintiff. The Acts differ, however, in their phrasing of

this right. The Magnuson-Moss Act allows “costs and expenses (including

attorneys’ fees),” 15 U.S.C. § 2310(d)(2), while the Fair Debt Collection Act

grants a prevailing plaintiff the “costs of the action, together with a

reasonable attorneys’ fee.” 15 U.S.C. § 1682(k)(a)(3). There is nothing in the

legislative history to justify the conclusion that Congress intended to pre-

clude a Magnuson-Moss Act plaintiff from an award of fees in the face of a

valid Rule 68 offer, but to allow such an award to a Fair Debt Collection Act

plaintiff. S. Rep. No. 151, 93d Cong. Ist Sess. (1974), H.R. Rep. No. 1107,

93d Cong. Sess. (1974), reprinted in 1974 U.S. Code Congressional and

Administrative News 7702; S. Rep. No. 382, 95th Cong. Ist Sess. (1977),

H.R. Rep. No. 131, 95th Cong. Ist Sess. (1977), reprinted in 1977 U.S. Code

Congressional and Administrative News 1695.

20

while, if he brought the same claim under 42 U.S.C. § 1982. he

would run that risk.’

The Government points to the existence of fee award stat-

utes in 1938 when Rule 68 was adopted to show that Congress

intended the word “costs” in the Rule to be construed accord-

ing to those statutes. Brief of the United States at 12-13, and

Appendix. But the same senseless scheme that would result

under different fee award statutes adopted since 1938 would

exist under the statutes cited by the Government. For example

the Railway Labor Act of 1926, 45 U.S.C. § 153, and the Fair

Labor Standards Act of 1938, 29 U.S.C. § 216,?' are both

designed to protect employees. The Fair Labor Standards Act

establishes maximum hour and minimum wage guidelines,

whereas the Railway Labor Act creates the National Railway

Adjustment Board to mediate disputes between carriers and

railroad employees concerning rates of pay, rules, or working

conditions. Both Acts expressly authorize private causes of

action for violations of the statute. Both Acts also contain

provisions granting attorneys’ fees to prevailing plaintiffs. But

the Fair Labor Standards Act awards prevailing plaintiffs “a

reasonable attorney’s fee and costs of the action,”

20 42 U.S.C. § 1982 provides: “All citizens of the United States shall

have the same right, in every state and territory, as is enjoyed by white

citizens thereof to inherit, purchase, lease, sell, hold, and convey real and

personal property.” In Jones v. Alfred H. Mayer Co., 392 U.S. 409 (1968)

this Court noted that while the coverage of Section 1982 differs from that of

Title VIII, both Acts prohibit all racial discrimination, private as well as

public, in the sale of rental property. As a consequence, litigants can bring

housing discrimination suits under both statutes. Giving substance to the

otherwise inexplicable differences in phrasing could, in an action which

raised claims under both statutes, lead to the result that a plaintiff could be

denied post-offer fees if he prevailed under the Section 1982 claim—because

fee awards would then be governed by Section 1988—but be awarded fees if

he prevailed under the Title VIII claim.

21 The Government indicates that this statute was enacted prior to Rule

68. In fact the statute was enacted on June 25, 1938, whereas Rule 68 became

effective in January, 1938. In any event, it is plain that at the time Congress

was considering Rule 68, it had before it statutes that were inconsistent

concerning whether awards of attorneys’ fees were a part of costs.

~

21

whereas the Railway Labor Act awards a prevailing plaintiff

“a reasonable attorney’s fee to be taxed and collected as part

of the costs of the suit.”

To argue that Rule 68 should be construed by reference to

existing fee award statutes is to suggest that Congress intended

that a successful Railway Labor Act plaintiff would be barred

from recovering his post-offer fees where the requirements of

Rule 68 were otherwise met, while a successful Fair Labor

Standards Act plaintiff could recover all of his fees. Such a

distinction is untenable.

In sum, careful analysis of the fee award statutes shows that,

in approving Rule 68, Congress did not intend that the Rule

would be construed differently depending on the different

language of the different fee award statutes.” Certainly it

makes more sense to think that Congress intended Rule 68 to

be construed by reference to 28 U.S.C. § 1920, thereby pro-

ducing a consistent and uniform statutory scheme.

C. The recent Advisory Committee proposal to amend Rule

68 confirms that present Rule 68 does not restrict statu-

tory fee awards.

That present Rule 68 does nor affect the incidence of

attorneys’ fees is also evident from the recent proposals to

amend the Rule advanced by the Committee on Rules of

Practice and Procedure. See 98 F.R.D. 339, 361-67 (1983). As

the Court of Appeals below correctly noted, the very making

of those proposals suggests that the Advisory Committee was

22 It is no answer to say, as the Government repeatedly does, that the

fee award statutes using the phrase “as part of the costs” are “important,”

the implication being that the other statutes that do not use the phrase are

less “important.” E.g., Brief of the United States at 11. The Government

suggests no criterion by which the determination of “importance” should or

could be made by the District Courts. It bears emphasis that among the

statutes that do not use the “as part of the costs” formulation are the Fair

Labor Standards Act of 1938, 29 U.S.C. § 216(b), and the National Traffic

and Motor Vehicle Safety Act of 1966, 15 U.S.C. § 1400(b). It would

certainly come as a surprise to Congress that the Government is suggesting tv

this Court that those statutes are in some sense not “important.”

22

at least uncertain that present Rule 68 could properly be

construed to produce the result sought by petitioners (and the

Government).”°

Indeed, it is evident from the Advisory Committee’s pro-

posals that it did not consider the present Rule well-adapted to

fee-shifting. Thus, as noted above, the Advisory Committee

was concerned about what it called the “Draconian impact of

an ‘all-or-nothing’ [fee-shifting] rule,” id. at 365, and therefore

would eliminate the mandatory character of the Rule in its

present form and give the District Courts discretion not to shift

fees. Id. at 365-66. The Advisory Committee would also make

the Rule apply even-handedly to plaintiffs and defendants

alike. Id. at 364.

Including attorneys’ fees as part of “costs” under the present

rule would rave the “Draconian impact of an ‘all-or-nothing’

rule” in cases under those fee award statutes worded like

Section 1988. Because present Rule 68 is mandatory—‘“the

plaintiff must bear the costs” —a District Court would have no

discretion to award the plaintiff any post-offer fees even if the

circumstances clearly indicated that plaintiff was not reckless,

or even blameworthy, in rejecting the offer.

Moreover, the Advisory Committee proposals would change

the present Rule to make it a “two-way street” —defendants

who reject settlement offers would be liable to the fee-award

23 After full consideration by the Committee on the Federal Courts,

the Association has recommended against the Advisory Committee’s pro-

posals, because, among other reasons, the Association believes that the

shifting of attorneys’ fees to penalize non-settling litigants seems too severe a

sanction for failing accurately to predict the outcome of a trial. Moreover,

the Association concluded that the proposals would tend unduly to dis-

courage novel theories of law and have an unfair impact on less affluent

litigants. The Association also believes that the proposals would foster

collateral litigation over the reasonableness of a settlement rejection, which

would be undesirable in itself and would almost certainly force the District

Courts to inquire into confidential attorney-client discussions.

In light of the Government's decision to participate on the side of

petitioners in this case, it should be noted that the Government also opposed

the Advisory Committee proposals, for many of the same reasons. See Letter

of the Acting Deputy Attorney General to the Chairman of the Committee

on Rules of Practice and Procedure (February 28, 1984).

7

23

sanction as much as non-settling plaintiffs. But the present

Rule is a “one-way street”—only plaintiffs are at risk. It is

inconsistent and unfair, as the Advisory Committee implicitly

recognized, to raise the “stakes” by including fees in the

“costs” covered by Rule 68 but subject only one party, the

plaintiff, to the risk of this sanction. This is, of course,

particularly true where only a “sub-class” of plaintiffs—those

otherwise entitled to fee awards under particular fee award

statutes which are worded to make attorneys’ fees “part of the

costs” —would be affected.

D. The Rules Enabling Act precludes a construction of Rule

68 that would bar an otherwise appropriate award of

attorneys’ fees under Section 1988 and similarly worded

Statutes.

Finally, as the Court of Appeals below properly noted, an

interpretation of “costs” in Rule 68 to deny fees which a

prevailing civil rights plaintiff would otherwise receive might

put Rule 68 beyond the rule-making power granted by the

Rules Enabling Act, 28 U.S.C. § 2072. That statute provides in

part that the Rules “shall not abridge, enlarge or modify any

substantive right.”

Rule 68 is procedural in that its aim is to contribute to more

efficient litigation; conventionally applied to deny Rule 54(d)

“costs” to a prevailing plaintiff, it is sanctioned by the Rules

Enabling Act.** However, to apply it to preclude a fee award

expressly authorized by Congress in legislation adopted under

Section 5 of the Fourteenth Amendment would, at the very

least, raise a serious question whether it abridged or modified a

substantive right. It would be hard to think of a policy area of

greater national importance than the civil rights area, and it is

well-settled that Congress’ powers under Section 5 are the

broadest legislative powers it possesses. Fitzpatrick v. Bitzer,

427 U.S. 445, 455-56 (1976). Accordingly, if the “substantive

24 See Sibbach v. Wilson & Co., 312 U.S. 1 (1941), which has for many

years been the leading case on the validity of federal rules under this

provision of the Act.

24

rights” limitation in the Rules Enabling Act has any meaning

at all, it must at the least raise a serious question under the

Enabling Act if a Rule would be in direct conflict with a

Section 5 statute—i.e., foreclosing a Section 1988 fee awaid

that might otherwise be appropriate.”

Any construction raising a question of compliance with the

Rules Enabling Act should be avoided. Given the absence of a

clear indication—or any indication—that Congress understood

that its Section 5-based statute, and the fee awards which it

authorized, would be cut off by Rule 68, the Court of Appeals

was correct in holding that Rule 68 should not be construed as

petitioners contend.

Point ll

THE FUNDAMENTAL CIVIL RIGHTS POLICIES

SERVED BY SECTION 1988 WERE NOT INTENDED TO

BE OVERRIDDEN BY THE MANDATORY “COSTS”-

SHIFTING PROVISION OF RULE 68

The Court of Appeals was also correct that the legislative

history of Section 1988, and the policies underlying it, indicate

that the phrase “as part of the costs” in Section 1988 was not

intended to bring into play the mandatory “costs”-shifting

provision of Rule 68. The broad discretion which Section 1988

expressly confers on the District Courts to award a reasonable

attorneys’ fee “[i]n any action or proceeding” was not intended

to be ousted by the defendant’s conduct in making a settlement

offer which proves, in hindsight, to have been more advan-

tageous than the ultimate judgment. The Court of Appeals

correctly held that Congress did not intend the fundamental

25 See Ely, The irrepressible Myth of Erie, 87 Harv. L. Rev. 693.

724-25 (1974): “The most helpful way, it seems to me, of defining a

substantive rule—or more particularly a substantive right, which is what the

Act refers to—is as @ right granted for one or more nonprocedural reasons,

for some purpose or purposes not having to do with the fairness or efficiency

of the litigation process.” (Citations omitted; emphasis added.) This, of

course, is precisely what Section 1988 is about.

25

national civil rights policies which Section 1988 fee awards

advance to be subjected to the automatic “costs”-shifting

effect of Rule 68.

Congress’ clear purpose in Section 1988 was to foster private

civil rights litigation in order to complement Government

enforcement. By contrast, Rule 68’s purpose is “to encourage

settlement of litigation.” Delta Air Lines, Inc., 450 U.S. at

352. Thus, Section 1988 and Rule 68 are aimed at different

objectives: the former aims at facilitating suit by private

plaintiffs in an area of fundamental national policy while the

latter raises the stakes for any plaintiff who presses his case,

regardless of its nature. Congress deemed Section 1988 “essen-

tial” to the enforcement of constitutional rights. S. Rep. No.

1011, 94th Cong. Ist Sess. 2 (1976), reprinted in 1976 U.S.

Code Congressional and Administrative News 5910. As fully

set forth at pp. 13-15 above, the legislative history contains no

reference whatever to Rule 68.

This Court has repeatedly recognized that Section 1988 is

intended to “ensure effective access to the judicial process.”

Hensley v. Eckerhart, 51 U.S.L.W. 4552 (1983). To the same

effect, in Maine v. Thiboutot, 448 U.S. 1, 11 (1980), this Court

stated that “Congress viewed the fees authorized by § 1988 as

‘an integral part of the remedies necessary to obtain’ com-

pliance” with the civil rights laws (citing S. Rep. No. 1011,

94th Cong. 2d Sess. 5 (1976)).

Application of Rule 68 as contended for by petitioners

would penalize plaintiffs who prevail in protecting their civil

rights, simply because the defendant has forced them to a guess

as to the amount of his liability and they prove to have guessed

incorrectly. Such a penalty is entirely inappropriate in civil

rights cases and would frustrate the purpose of Section 1988.

As this Court has recognized:

No matter how honest one’s belief that he has been a

victim of discrimination, no matter how meritorious one’s

claim may appear at the outset, the course of litigation is

rarely predictable. Decisive facts may not emerge until

discovery or trial. The law may change or clarify in the

26

midst of litigation. Even when the law or the facts appear

questionable or unfavorable at the outset, a party may

have an entirely reasonable ground for bringing suit.

Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 422

(1978). Because of the mechanical, mandatory operation of

Rule 68, the reading of Rule 68 contended for by petitioners

(and the Government) would place in the hands of civil rights

defendants, subject to no judicial review, the power to subvert

important litigation by making offers which indigent plaintiffs

(or their attorneys) might well hesitate to reject.

Recognizing Congress’ important goal in fee-award statutes,

this Court has declared repeatedly that a prevailing civil rights

plaintiff “should ordinarily recover an attorney’s fee unless

special circumstances would render such an award unjust.”

Newman v. Piggie Park Enterprises, Inc., 390 U.S. 400, 402

(1968) (awards under Title II of the 1964 Civil Rights Act);

Northcross v. Memphis Board of Education, 412 U.S. 427

(1974) (the Emergency School Aid Act of 1972); Albemarle

Paper Co. v. Moody, 422 U.S. 405 (1975) (Title VII of the 1964

Civil Rights Act); Hensley v. Eckerhart, 51 U.S.L.W. 4552

(1983) (Section 1988). Such “special circumstances,” which are

unusual in successful civil rights suits, can only be determined

by the District Courts in reviewing a fee application: but Rule

68, if construed as petitioners (and the Government) read it,

would preclude any such judicial determination, just as has

_ happened in this case.

Further, to an unusual degree, the rights of third parties

hang in the balance in civil rights cases. As this Court and

Congress have agreed, when a civil rights plaintiff prevails, “he

does so not only for himself but also as a ‘private attorney

general’ vindicating a policy that Congress considered of

h@&hest importance.” Newman v. Piggie Park Enterprises, Inc.,

390 U.S. at 402, cited in S. Rep. No. 1011, 94th Cong. Ist Sess.

3 (1976). The application of Rule 68 in the manner contended

for by petitioners (and the Government) would separate the

named plaintiff's interests from those of other unnamed par-

ties who could benefit from a full prosecution of the case. (It is

=u

27

noteworthy in this connection that the Advisory Committee’s

proposals to amend Rule 68, see Point 1.C., supra, would not

apply Rule 68 to class or derivative actions, where the rights of

absent parties are also in the balance. See 98 F.R.D. 339, 367.)

Moreover, if Rule 68 barred the award of post-offer fees in

civil rights cases, it would tend to create a conflict between the

interests of the plaintiff’s attorney and those of his client. This

would be particularly inappropriate in the civil rights context,

where as this Court recently affirmed, the need to “attract

competent counsel” was one of Congress’ concerns in drafting

Section 1988. Blum v. Stenson, 52 U.S.L.W. 4377 (1984) (citing

S. Rep. No. 1011, 94th Cong. 2d Sess. 6 (1976)). The Court of

Appeals’ decision in this case properly avoids subjecting coun-

sel to the ethical problems that would tend to result.”

Finally, the mandatory nature of Rule 68 is fundamentally

incompatible with the discretionary nature of Section 1988. As

this Court has noted, “the range of discretion of the courts in

making [attorneys’ fees] awards are matters for Congress to

determine [footnote omitted].” Alveska Pipeline Co. v. The

Wilderness Society, 421 U.S. 240, 262 (1975). Under Section

1988, that discretion is very broad, as this Court recently

stressed in discussing the factors which the District Courts

should consider in determining the amount of fee awards.

Hensley v. Eckerhart, 51 U.S.L.W. 4552 (1983). In the Con-

gressional scheme of broad discretion over fee awards, the

automatic, non-discretionary operation of Rule 68 has no

place.

26 The Court of Appeals did not consider these ethical problems

particularly serious. Chesny v. Marek, 720 F.2d 474, 477-78. However, it is

surely anomalous to adopt a reading of Rule 68 which would create any

ethical problem for lawyers who bring a class of cases which Congress

specifically intended to foster and encourage. Moreover, in its Ethics Opinion

No. 80-94, this Association concluded that it would be unethical to require a

plaintiff's attorney to forgo as part of a settlement a statutorily-authorized

fee award. The Association’s Ethics Committee reasoned that this would

place the attorney in an untenable position, having to bargain over his own

fee while bargaining over a settlement for his client. Any interpretation of

Rule 68 that allows fees to be precluded would create the same problems.

28

Conclusion

The judgment and mandate of the Court of Appeals should

be affirmed.

Dated: New York, New York

September 11, 1984

Respectfully submitted,

SHELDON H. ELSEN

(Counsel of Record)

MICHAEL W. SCHWARTZ

SIDNEY S. ROSDEITCHER

EDMUND H. KERR

JOHN G. KOELTL

The Association of the Bar

of the City of New York

42 West 44th Street

New York, New York 10036

(212) 382-6600

Attorneys for The Association of

the Bar of the City of New York,

amicus curiae