Application of the Offer of Settlement Statute: Less Than Legislative Intent?

• Publication year: 1995
• Pages: 2557

24 Colo.Law. 2557 Colorado Lawyer 1995.

1995, November, Pg. 2557. Application of the Offer of Settlement Statute: Less Than Legislative Intent?

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Vol. 24, No. 11, Pg. 2557

Application of the "Offer of Settlement" Statute Less Than Legislative Intent

by Kevin F. Amatuzio and Joyce L. Jenkins

CRS § 13-17-202 is commonly known as the "offer of settlement statute." It became effective May 31, 1990.(fn1) Its enactment eliminated the need for Colorado Rule of Civil Procedure ("C.R.C.P.") 68 (Offer of Judgment), and that Rule was repealed July 12, 1990. Under Rule 68, only a defendant could make an offer of settlement. Further, the case law construing Rule 68 had so limited the type of costs recoverable that the expressed purpose of the Rule, to encourage settlements, was largely frustrated.(fn2) On the other hand, CRS § 13-17-202 made the offer of judgment concept available to both the plaintiff and the defendant and provided for the recovery of a party's "actual costs," not merely "costs." These expansive changes reflected a legislative intent to expand the costs recoverable to a party under the statute and thereby increase the use and coercive force of the cost-shifting risk as a settlement inducement.

However, interpretations of the statute appear to allow for substantial discretion in the trial court to disallow and limit claimed actual costs. It is suggested that the likelihood of the recovery of actual costs under CRS § 13-17-202 will increase substantially if counsel makes use of the legislative history of the statute. Arguably, the use of the legislative history also can support a modification of the restrictive case law that has so far developed on the issue.

The offer of settlement statute was one of the few survivors of Colorado Senate Bill ("S.B.") 90-150, which had initially proposed sweeping changes to the legal system, including adoption of the English Rule of awarding attorney fees to the prevailing party in most civil litigation. As enacted, the statute mandates an award of actual costs to a plaintiff or defendant who has made a settlement offer pursuant to the terms of the statute, which is rejected, and who thereafter ultimately fares better than the offer at trial. The words "actual costs" are not defined in the statute, thereby leading to judicial interpretation of the phrase.

Armed with the legislative history, counsel can make a persuasive argument that the intended scope of recoverable costs under CRS § 13-17-202 is broader than current judicial construction and prior authorities allow, and perhaps thereby obtain a more inclusive award for his or her client. In this regard, CRS § 2-4-201 (1)(c) and (g) authorize a Colorado court to consider legislative history, including the legislative declaration of purpose, in determining the intent of an ambiguous statute.

Legislative History

S.B. 90-150, entitled "Concerning Changes to the Legal System," was sponsored by Senators Considine and Owens and House Representative Schauer. While many of the proposed judicial reforms, including adoption of the English Rule, were ultimately rejected or deferred for further study, the floor debate and testimony provide insight into the lawmakers' intent with respect to CRS § 13-17-202.

In explaining his original proposal to the Senate Judiciary Committee at a hearing on February 7, 1990, Senator Considine said, "We have a legal system where our costs are disproportionate to the gains," and, so, the goal of the proposal is to "place [the] cost on those causing the problem." Disapproving of the American Rule (each party pays its own attorney fees), he instead favored the assessment of reasonable attorney fees as costs to make a party whole. He envisioned that attorney fees should be "borne by the person who insisted, instead of by the person found innocent," believing that the proposed provision would reduce the volume and life-span of cases in line with the overall goals of S.B. 90-150 as expressed in the legislative declaration,(fn3) to "provide dispute resolution at a lower cost and sooner."

However, testimony presented to the Senate Judiciary Committee on February 7, 1990, regarding S.B. 90-150 was uniformly critical of a sudden switch to the English Rule in the absence of careful study of the anticipated effects of such a fundamental change. This viewpoint won the day, and the Committee voted to amend the Bill by removing the English Rule from its provisions.

On February 28, 1990, a second hearing on S.B. 90-150 was held before the Senate Judiciary Committee, where Senator Considine attempted to revive the idea of awarding attorney fees when an offer of settlement was rejected and the outcome at trial was less favorable to the rejecting party. A lobbyist for the Colorado Trial Lawyers Association ("CTLA") testified that Senator Considine's proposal

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had already been rejected by the Committee and that he agreed with those who had testified at the initial hearing that a shift to the English Rule needed study. However, he suggested that the Senator rewrite his renewed proposal to speak to "actual costs," specifically including reasonable deposition expenses and costs of investigation

CTLA: Our trial lawyers ... would suggest that this amendment be rewritten so that it does not include attorneys' fees but includes costs, but goes beyond what the courts now call taxable costs, to all actual costs of the litigation. Taxable costs translate to witness fees expert witness fees, docket fees, things of that nature. Actual costs would include deposition expenses, investigative expenses, things of that nature which... are far more expensive than the $2 or $3 you pay a witness to come in or the $75 or whatever... it is to...