Saturday, November 23, 2013

How to Respond to an Offer of Judgment

By Michael Fuller, Portland Trial Attorney

Debt collectors intimidate consumers in Fair Debt Collection Practices Act (FDCPA) lawsuits by making low-ball offers of judgment.

This Wells Fargo offer of judgment for $19,000 denied all wrongdoing. For more about refusing to admit liability in an offer of judgment, read this great Northwestern University Law Review Article.

Large-scale repeat offenders use offers of judgment to force quick settlements without apologizing or admitting liability.

How a Rule 68 'Offer of Judgment' Works

If you filed an FDCPA lawsuit in federal court, Federal Rule of Civil Procedure 68 allows the debt collector to make you an offer of judgment to settle your case before trial.

What Happens If You Reject the Offer?

If you don't obtain compensation at trial that exceeds the dollar amount of the offer, you must reimburse the debt collector certain "costs" it incurred after making its offer of judgment.

The "Costs" Are Usually Very Small

What debt collectors don't want you to know is that the "costs" covered under Rule 68 are usually very small and may not even exceed the $1,000 statutory damages available to you at trial.

Under Rule 68, debt collectors can only recover the very limited "costs" provided for under 28 USC § 1920. These limited costs include transcript, paper and printing costs, and court fees.

Does an Unaccepted Offer Cut Off Your Right to Attorney Fees?

If you don't "beat" the amount of the offer of judgment at trial, the debt collector may not be required to pay your attorney fees incurred after the offer was made.

In Marek v. Chesny (1985), the Supreme Court held that an offer of judgment can cut off the right to attorney fees under statutes that provide fees as "costs." For example, in Marek, the 42 USC section 1988 civil rights statute at issue provided for "a reasonable attorney's fee as part of [a consumer's] costs". However, under the FDCPA, 15 USC section 1692k provides for "the costs of the action, together with a reasonable attorney’s fee."

If you have an attorney, be sure to raise this issue when evaluating an offer of judgment.

Could the Court Dismiss Your Case?

In limited circumstances, some courts hold that an unaccepted offer of judgment could result in dismissal of your FDCPA lawsuit. Read more about dismissal under the mootness doctrine here.

In October, I wrote about the Ninth Circuit's Diaz opinion, which adopted Judge Kagen's dissent in Genesis Healthcare Corp. v. Symczyk (2013) in holding that an unaccepted Rule 68 offer does not result in a lawsuit's dismissal.

New FDCPA Opinion Helps Shape Circuit Split over Mootness Issue

A new opinion from the Second Circuit Court of Appeals helps define a growing circuit split regarding when, if ever, an unaccepted offer of judgment can result in a dismissal based on mootness.

In its November 19, 2013 opinion in Cabala v Crowley (2nd Cir. 2013), the second circuit acknowledged the circuit split and affirmed its prior treatment of the issue.

The opinion reaffirmed McCauley v. Trans Union (2nd Cir. 2005), which held that an unaccepted offer does not moot an otherwise satisfied claim when liability is disputed.

The McCauley Case

In McCauley, a consumer represented himself against Trans Union in a $240 lawsuit over false credit reporting.

Trans Union offered the consumer $240 to settle, but only if the consumer kept the settlement confidential and acknowledged that Trans Union did nothing wrong.

The Second Circuit Court of Appeals denied Trans Union's request to dismiss McCauley's lawsuit because it reasoned that he was entitled to a public judgment against Tran Union.

Click here to read about how the mootness issue is treated in the Sixth, Seventh, and Ninth Circuits.

Final Thoughts

You must carefully consider whether or not to accept a Rule 68 offer of judgment. An experienced trial attorney can advice you of your rights.

Click here to find National Association of Consumer Advocates attorneys near you.

Federal Rule of Civil Procedure 68. Offer of Judgment

(a) Making an Offer; Judgment on an Accepted Offer. At least 14 days before the date set for trial, a party defending against a claim may serve on an opposing party an offer to allow judgment on specified terms, with the costs then accrued. If, within 14 days after being served, the opposing party serves written notice accepting the offer, either party may then file the offer and notice of acceptance, plus proof of service. The clerk must then enter judgment.

(b) Unaccepted Offer. An unaccepted offer is considered withdrawn, but it does not preclude a later offer. Evidence of an unaccepted offer is not admissible except in a proceeding to determine costs.

(c) Offer After Liability is Determined. When one party's liability to another has been determined but the extent of liability remains to be determined by further proceedings, the party held liable may make an offer of judgment. It must be served within a reasonable time—but at least 14 days—before the date set for a hearing to determine the extent of liability.

(d) Paying Costs After an Unaccepted Offer. If the judgment that the offeree finally obtains is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made.


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