In New Jersey, the Offer of Judgment Rule flies under the legal radar of many litigants. The Offer of Judgement Rule exists to foster settlement by forcing litigants to take a good, hard look at the strength of their case. And miscalculating the strength or value of one’s case when faced with an offer of judgment can have costly consequences.
The Offer of Judgment Rule – New Jersey Court Rule 4:58 – provides that in any action (other than a matrimonial action), a party may serve on any adverse party an offer to take a monetary judgment in the offering party’s favor (or, on the other hand, to allow judgment to be taken against it) for a specific stated amount, including costs.
The party receiving the offer has until 10 days before trial date or 90 days from service of the offer to accept the offer of judgment, whichever expires first. If the offeree does not accept the offer within those time parameters, it is deemed rejected.
There are potential consequences for non-acceptance of the offer. If the offer of a claimant, i.e., the party making the claim and seeking to be compensated, is not accepted and the claimant obtains a money judgment in an amount that is 120% or more of the offer (excluding prejudgment interest and counsel fees), then the claimant is entitled to, in addition to costs of suit: (1) all reasonable litigation expenses incurred following non-acceptance; (2) prejudgment interest of eight percent on the amount of any money recovery from the date of the offer or the date of completion of discovery, whichever is later; and (3) reasonable attorney’s fees for services provided after the non-acceptance of the offer.
For example, if a plaintiff offers to settle a case for $100,000.00, the offer is rejected, and the plaintiff is ultimately awarded 120% or more of the offer, the plaintiff is also entitled to litigation expenses, interest, and attorney’s fees accruing after the offer’s rejection.
On the other hand, if an offer of a non-claimant, i.e., typically a defendant, is not accepted, and the claimant obtains a monetary judgment that is favorable to the offering non-claimant, then the offering non-claimant shall be entitled to litigation expenses and attorney’s fees. A “favorable determination” in these circumstances is a money judgment in an amount (excluding allowable prejudgment interest and counsel fees,) that is 80% or less of the offer.
For example, if a defendant offers to pay a plaintiff $100,000 to settle a case, the offer is rejected, and the plaintiff ultimately receives only $80,000.00 or less, the defendant would be entitled to its expenses and attorney’s fees accruing after rejection of the offer.
In practice, the Offer of Judgment Rule can have rather drastic consequences, and the Appellate Division has recently reinforced that the Offer of Judgment Rule does, in fact, have teeth. In Feliciano v. Faldetta, 434 N.J. Super. 543 (App. Div. 2014), the Appellate Division upheld a trial court’s award of attorney’s fees pursuant to a valid offer of judgment. In Feliciano, which arose out a car accident, the plaintiff served and filed an offer to take judgment in the amount of $15,000.00. The defendant rejected the offer and, following a three-day trial, the jury returned a verdict in favor of the plaintiff and awarding her $50,000 in damages, well above the 120% threshold provided by the Offer of Judgment Rule. The plaintiff subsequently filed a motion seeking attorney’s fees, litigation expenses, and interest pursuant to the Offer of Judgment Rule, and the trial judge awarded $42,230.00 in attorney’s fees, $6,831.09 in litigation expenses, $6,998.67 in interest, and entered judgment against the defendant for nearly $110,000.00.
The Appellate Division affirmed the trial court, recognizing that the Offer of Judgment Rule “accords the judge no discretion regarding whether or not to award attorney’s fees and costs of suit in an offer of judgment case.” Only the amount of the assessment is discretionary.
The Feliciano decision is a potent reminder of the possible consequences of misreading the strength of one’s case when faced with an offer of judgment. Although the defendant could have settled the litigation for $15,000.00, the defendant is instead on the hook for more than seven times that original offer.