Interpreting rule 68 to conform with the Rules Enabling Act.

Author:Barbero, Megan

INTRODUCTION I. FEDERAL COURTS' INTERPRETATION OF MAREK A. The Majority of Circuits Read Marek Narrowly to Prohibit the Prevailing Plaintiff from Recovering Its Attorney's Fees but Not to Require the Plaintiff to Pay the Nonprevailing Defendant's Fees B. The Eleventh Circuit Interprets Marek Broadly to Shift the Nonprevailing Defendant's Attorney's Fees to the Plaintiff II. THE INVALIDITY OF A BROAD INTERPRETATION OF RULE 68 UNDER THE RULES ENABLING ACT A. The Hanna Framework B. Attorney's Fees as a Substantive Right Under the Rules Enabling Act C. Policy Considerations and Previous Efforts to Amend Rule 68 CONCLUSION INTRODUCTION

Federal Rule of Civil Procedure 68 allows a party "defending against a claim," at "any time more than 10 days before the trial begins," to make an offer to settle the case and allow judgment to be taken against it. (1) If the offer is accepted, either party can file the offer and acceptance with the clerk of court, and judgment will be entered against the defending party. (2) However, if the opposing party does not accept the Rule 68 offer and "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." (3) Thus, Rule 68 shifts postoffer costs from a nonprevailing defendant to a prevailing plaintiff who obtained a judgment smaller than the settlement offer. The purpose of Rule 68 is "to encourage settlement and avoid protracted litigation" (4) by taxing the offeree with costs if it rejects a more favorable offer than the final judgment. (5)

Rule 68 does not define the term "costs." (6) In Marek v. Chesny, (7) the Supreme Court held that "costs" for Rule 68 purposes included "all costs properly awardable under the relevant substantive statute." (8) Plaintiff Chesny sued under 42 U.S.C. [section] 1983 after the defendant police officers allegedly unlawfully shot and killed Chesny's son. (9) The defendants offered Chesny $100,000 to settle the case pursuant to Rule 68. Chesny rejected this offer and eventually obtained a jury verdict for $60,000. (10) The district court held that Chesny could not collect attorney's fees from the defendants since he had rejected a Rule 68 offer of settlement and won a judgment less than the offer. (11) The district court reasoned that the Civil Rights Attorney's Fees Awards Act of 1976, 42 U.S.C. [section] 1988, included attorney's fees in its definition of costs that could be awarded to a prevailing party and that Rule 68 "costs" thus included attorney's fees. (12) Judge Posner, writing for the Seventh Circuit, rejected this "rather mechanical linking up of Rule 68 and section 1988." (13) Judge Posner noted that the district court's approach, "though in a sense logical, puts Rule 68 into conflict with the policy behind section 1988." (14) In reversing the district court, the Seventh Circuit reasoned that the attorney's fees provision of [section] 1988 was "substantive" in the context of encouraging "compliance with the civil rights laws" (15) and that to avoid violating the Rules Enabling Act, (16) Rule 68 should not be interpreted to abridge a plaintiff's substantive right to attorney's fees in civil rights cases. (17) The court concluded, "The legislators who enacted section 1988 would not have wanted its effectiveness blunted because of a little known rule of court promulgated almost 40 years earlier." (18)

The Supreme Court reversed the Seventh Circuit and held that absent an expression of congressional intent to the contrary,

the most reasonable inference is that the term "costs" in Rule 68 was intended to refer to all costs properly awardable under the relevant substantive statute or other authority. In other words, all costs properly awardable in an action are to be considered within the scope of Rule 68 "costs." (19) The Court concluded that since [section] 1988 provided that a prevailing party may be awarded attorney's fees as part of costs, the original defendants were not responsible for paying the plaintiff's attorney's fees because "[t]he plain language of Rule 68 and [section] 1988 subject such fees to the cost-shifting provision of Rule 68." (20) Since the Court did not find that the Rule and statute conflicted, there was no need to conduct a Rules Enabling Act analysis.

The Court's holding in Marek is nevertheless difficult to reconcile with the Rules Enabling Act's provision that the Federal Rules "shall not abridge, enlarge or modify any substantive right." (21) Congress created the right to attorney's fees under [section] 1988 to encourage private enforcement of civil rights laws by relieving the resource inequalities often faced by individual civil rights plaintiffs. (22) This section has the substantive goals of assisting the enforcement of civil rights laws and ensuring that plaintiffs have equal access to courts. Section 1988 significantly increases a defendant's statutory liability and grants a successful plaintiff the right, subject to the court's discretion, (23) to have its attorney's fees paid by the defendant. It is difficult to reconcile the substantive nature of [section] 1988 attorney's fees with the implicit conclusion in Marek that interpreting Rule 68 to require the prevailing plaintiff to bear its own postoffer attorney's fees despite the plaintiff's right to [section] 1988 fees does not violate the Rules Enabling Act's abridge, enlarge, or modify provision. (24) In Marek, Rule 68 arguably modified the plaintiff's right to [section] 1988 attorney's fees by disallowing those fees whenever Rule 68 is triggered. The Court could have obtained the same result--the plaintiff does not receive attorney's fees, and the plaintiff pays the defendant's costs, excluding attorney's fees--and avoided any potential conflict with the Rules Enabling Act by holding that attorney's fees are not included in Rule 68 "costs," but that the plaintiff still cannot receive attorney's fees because such fees are not reasonable under [section] 1988 when the plaintiff obtains a less favorable judgment than a Rule 68 offer of settlement. (25)

Marek explicitly left open the question of whether Rule 68 operates to shift a defendant's postoffer attorney's fees to the prevailing plaintiff when the plaintiff obtains a judgment smaller than the Rule 68 offer and the underlying statute defines "costs" as including attorney's fees. (26) The circuit courts have struggled to answer this important question. The majority of circuits that have addressed this issue have answered in the negative, focusing primarily on the Supreme Court's definition of Rule 68 costs as those "properly awardable" under the substantive statute. (27) However, the Eleventh Circuit has held that Rule 68 requires the plaintiff to pay the defendant's attorney's fees when the underlying statute defines attorney's fees as part of costs. (28) The Eleventh Circuit's decision interprets Rule 68 in a way that almost certainly violates the Rules Enabling Act because it creates a right to attorney's fees for the nonprevailing defendant that would not exist in the absence of Rule 68 and that is indistinguishable from the arguably substantive right to attorney's fees created by Congress in fee-shifting statutes such as [section] 1988.

Part I of this Note analyzes the circuit court conflict on whether Rule 68 should shift a nonprevailing defendant's attorney's fees to the plaintiff and concludes that Rule 68 should not be read broadly to include nonprevailing defendant's attorney's fees. Part II analyzes the meaning of "substantive" right under the Rules Enabling Act and argues that the fight to attorney's fees under [section] 1988 is such a substantive right. This second Part considers whether the Marek interpretation of Rule 68 or the broader interpretation of Rule 68, which shifts the nonprevailing defendant's attorney's fees to the plaintiff, violates the Rules Enabling Act because it abridges, enlarges, or modifies a substantive right. Part II also examines the relevant policy arguments and past efforts to amend Rule 68 to include attorney's fees.

  1. FEDERAL COURTS' INTERPRETATION OF MAREK

    1. The Majority of Circuits Read Marek Narrowly to Prohibit the Prevailing Plaintiff from Recovering Its Attorney's Fees but Not to Require the Plaintiff to Pay the Nonprevailing Defendant's Fees

      Since the Supreme Court decided Marek, lower federal courts have consistently held that Rule 68 means the prevailing plaintiff cannot recover its own postoffer attorney's fees if the judgment for the plaintiff is smaller than the Rule 68 offer, even if the plaintiff would have been entitled to postoffer attorney's fees under the applicable state or federal substantive statute in the absence of Rule 68. (29) The courts have explained that the holding in Marek is grounded in the Supreme Court's implicit finding that Rule 68 is procedural for Erie and Rules Enabling Act purposes, (30) and thus should be applied in federal court whether the underlying statute is a state or federal statute. (31) Federal courts also readily apply Rule 68 to shift the defendant's postoffer "costs" to the plaintiff, as the term "costs" is traditionally understood and defined in 28 U.S.C. [section] 1920. (32) The Rule 68 "costs" that have been unproblematic include filing fees, witness fees, and copying costs, but not attorney's fees.

      The circuit courts have struggled to determine the open question of whether Rule 68 "costs" include the defendant's attorney's fees. The First, Seventh, and Ninth Circuits have declined to award a nonprevailing defendant attorney's fees when Rule 68 is triggered if the underlying statute awards attorney's fees as "costs" to the prevailing party. (33) These courts reason that Rule 68 is only triggered when the plaintiff has obtained a judgment against the defendant; this, they say, means that the plaintiff is the "prevailing party." (34) Accordingly, even if the underlying statute operates in both...

To continue reading

FREE SIGN UP