Likely Consequences of Amendments to

Rule 68, Federal Rules of Civil Procedure

John E. Shapard

Federal Judicial Center, 1995

This Federal Judicial Center publication was undertaken in furtherance of

the Center’s statutory mission to conduct and stimulate research and development for the improvement of judicial administration. The views expressed are those of the author and not necessarily those of the Federal

Judicial Center.

iii

Contents

Introduction, 1

Summary, 2

Survey Design, 3

Questionnaires, 3

Sample, 4

Survey Results, 5

How Much Does Litigation Cost?, 6

What Proportion of Cases That Go to Trial Could Have Settled?, 8

What Proportion of Settled Cases Might Settle Earlier with Less

Expense?, 11

What Proportion of Litigation Expenses Might Be Saved Whether or

Not Cases Settle?, 12

Would an Offer-of-Judgment Rule Hurt the Risk-Averse Litigant?, 14

What Are Attorneys’ Views About Offer-of-Judgment Rules?, 19

General (Non–Civil Rights) Cases, 19

Civil Rights Cases, 21

Other Findings, 23

Other Offer-of-Judgment Rules, 25

Michigan Rules of Court, Rule 2.405, 25

Florida Statutes, Section 768.79, 25

Nevada Rules of Civil Procedure, Rule 68, 26

California Code of Civil Procedure, Sections 998 and 3291, 26

Wisconsin Statutes, Section 807.01, 26

Pennsylvania Rules of Civil Procedure, Rule 238, 26

U.S. District Court for the Eastern District of Texas, General Order

No. 93-13, 27

Elective Arbitration Combined with Recovery of Expenses, 27

Appendix A: Cover Letter and Questionnaire Sent to Counsel in

Contract, Tort, and “Other” Cases, 29

Appendix B: Questionnaire Sent to Counsel in

Civil Rights Cases, 41

Appendix C: Tabulations of Questionnaire Responses, 51

1

Introduction

This is the report of a 1994 Federal Judicial Center survey intended to assist the Advisory Committee on Civil Rules of the Judicial Conference of

the United States in its consideration of possible amendments to Federal

Rule of Civil Procedure 68. A number of possible alternatives have been

suggested, including abolition of the current rule.

Rule 68 is an offer-of-judgment provision that seeks to encourage settlement and to avoid unneeded trials. It permits a defendant to make a

settlement offer1 that raises the stakes for the plaintiff who would continue the litigation: If the offer is not accepted within ten days and the ultimate judgment is not greater than the offer, the plaintiff must pay the

statutory costs2 incurred by the defendant after the offer is made.

Critics of Rule 68 claim it is ineffective for two reasons. First, attorneys’

fees, which account for the bulk of litigation expenses, are not usually

included in statutory costs. Statutory costs are usually far lower than the

amount at stake in the case; thus the incentives for defendants to make

offers of judgment and for plaintiffs to accept them are weak.3 Second,

Rule 68 is available only to defendants—it is a one-way rule.

In light of the perceived flaws in the current rule’s operation, various

proposals have been made to amend Rule 68. Possible amendments would

allow any party to make an offer of judgment4 and would increase the

incentive for making and accepting offers by allowing the offeror to re1. The offer is phrased as an offer to “allow judgment to be entered” on the specified

terms; hence the offer of judgment moniker. Although settlement is here often used as

shorthand for offer of judgment, it is important to recognize that the two are not identical.

Settlements often include provisions that prohibit the parties from revealing the settlement

terms to others. An offer of judgment, on the other hand, is an offer to allow entry of judgment on the record of the case, which would ordinarily be a public record.

2. 28 U.S.C. § 1920, Taxation of Costs.

3. However, where the costs recoverable pursuant to Rule 68 include statutory attorneys’

fees for a prevailing plaintiff “as part of costs,” Rule 68 may provide significant incentives

for making and accepting settlement offers. By far the most numerous such cases are civil

rights actions, primarily employment discrimination cases and cases covered under the

Civil Rights Attorney’s Fees Awards Act of 1976 (42 U.S.C. § 1988). In these cases, a defendant’s Rule 68 offer, if not accepted and not improved on by an eventual judgment for a

plaintiff, operates to cut off a plaintiff’s entitlement to recovery of post-offer attorneys’ fees

(as well as to require that a plaintiff pay all other post-offer statutory costs). Marek v.

Chesny, 473 U.S. 1 (1985). These cases afford an opportunity to assess how a fee-shifting offer-of-judgment provision—albeit a one-way provision—operates in current federal civil litigation.

4. Because prevailing plaintiffs usually receive an award for statutory costs (although

judges retain discretion to deny costs under Rule 54(d)), amending the one-way nature of

Rule 68 to permit offers by plaintiffs would simply convert the routine discretionary award

of costs into a mandatory award in the cases in which plaintiffs win a judgment more favorable than the unaccepted offer.
Amendments to Rule 68

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cover some portion of its post-offer attorneys’ fees5 or other expenses not

now allowed as “costs.” Before the Federal Judicial Center’s survey there

existed only anecdotal evidence and abstract theory on which to base an

assessment of the proposed amendments’ effects. The Center’s survey

sought to obtain objective empirical information relevant to the principal

issues of theoretical debate about probable effects of the proposed

amendments.

The survey results suggest that amending Rule 68 to permit offers to be

made by any party and to provide more significant incentives for making

or accepting reasonable offers could contribute significantly to more

speedy and inexpensive case determinations.

Summary

The key findings of the survey are as follows:

• The median expense of litigation in federal civil cases of the type in

our sample was about $35,000 per party in cases that went to trial,

and about $10,000 per party in cases that were disposed of by settlement.

• Settlement was not a feasible alternative in all cases, owing to the

nature of or significant differences in the parties’ interests, but

about 40% of all tried cases could have settled, and 15%–20% very

likely would have settled if the parties simply had engaged in more

negotiation.

• Nearly one-third of cases that were disposed of by pretrial settlement could have settled earlier and saved about 50% of litigation

expenses.

• About 20% of all litigation expenses were a result of perceived unreasonable or abusive practices, and it is generally feasible to use

pretrial procedures to drive up an opponent’s expenses. On average,

for every dollar a party spent initiating a motion or discovery request, the opposing party had to spend more than two dollars to respond.

• About 9% of all litigants in the sampled cases—both plaintiffs and

defendants—were forced to accept settlements inferior to what they

would have achieved if they could afford the risk of continued litigation.

• Nearly 75% of the attorneys who responded to our survey favored

amending Rule 68 to permit offers from both parties and to include

more significant incentives. Most of the responding attorneys, re5. The phrase post-offer attorneys’ fees is used here as shorthand for the reasonable attorneys’ fees incurred by the offeror subsequent to the date of the offer, or, when the relevant

provision so provides, subsequent to the expiration of some grace period (e.g., thirty days)

following the date of the offer. Attorneys’ fees also may encompass other reasonable litigation expenses (e.g., expert witness fees) if the rule so provides.
Amendments to Rule 68

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gardless of whether they represented plaintiffs or defendants, favored an amendment that would allow recovery of at least some

portion of the offering party’s post-offer attorney’s fees.

• Even in civil rights cases, in which Rule 68 is often said to operate

entirely to the benefit of defendants, almost 50% of plaintiffs’ attorneys favored retaining the basic approach of the existing rule,

while only 27% favored abolishing the current rule. Twenty-three

percent preferred a rule that would permit offers by both parties but

limit the incentive to expenses other than attorneys’ fees.

In spite of the dominance of opinion supporting an amendment to

strengthen Rule 68 by allowing any party to make an offer of judgment

and allowing the offeror to recover at least some portion of its post-offer

attorneys’ fees, it is important to recognize that attorneys have strong

opinions on both sides of the issue. The majority believe strongly that a

strengthened Rule 68 would enhance access to the courts, increase fairness, and reduce litigation expenses and delay. A minority believe just as

strongly, however, that such a rule would penalize those seeking access

to the courts; produce unfair results; and increase the costs, delay, and

complexity of litigation.

The objective results, however, suggest that a strengthened Rule 68

may produce more fairness and achieve a sizable reduction in litigation

expenses that are unnecessary, abusive, or at least avoidable by encouraging settlement of cases instead of trial or by encouraging earlier settlements. Such a rule could also expedite disposition for settled cases that

could have settled earlier and for tried cases that could reasonably settle

rather than go to trial. A strengthened Rule 68 that precludes an award of

expenses in excess of the amount of a plaintiff’s judgment would most

likely increase the incidence of risk aversion only slightly while encouraging litigation of small but strong claims and discouraging pursuit of

weak but high-stakes cases.

Survey Design

Questionnaires

Questionnaires were sent in March 1994 to 1,951 attorneys from a sample

of 800 federal civil cases drawn from the population of all federal district

court civil cases that had terminated in the first six months of 1993 (the

most recent six months for which we had the relevant data at the time

the case sample was selected). The sample represents all attorneys whose

names appeared on the dockets of those cases (including all pro se litigants). When more than one attorney from the same firm appeared, we

randomly chose only one of those attorneys to receive the questionnaire.

The survey sought information about specific features of the cases in

which the attorneys had been involved, as well as the respondents’ views
Amendments to Rule 68

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on the existing Rule 68 and possible amendments. Two versions of the

questionnaire were used. One version was designed for attorneys involved

in federal civil rights cases, in which Rule 68 is thought to operate more

frequently and more effectively than in other kinds of litigation (see Appendix B). The second version was designed for attorneys in the other

kinds of federal litigation studied, which are described more fully below

(see Appendix A).

Sample

An offer-of-judgment rule comes into play only when cases reach the

stage at which it is reasonable for the parties to choose between settlement and trial.6 We eliminated from the sample the large proportion

(about 70%)7 of civil cases that were disposed of before they reached that

stage.

Of the 70% of civil cases that we eliminated, about 10% were

“terminated” by the district court without necessarily reaching actual

disposition: by remand to state court or to an administrative agency or by

transfer to another district. Nearly one-third were disposed of in a manner

that implies little likelihood that trial or settlement were possibilities: by

default judgment, by dismissal on motion (e.g., for failure to state a claim

or for lack of jurisdiction), or by sua sponte dismissal for lack of prosecution. Although some of these cases may in fact have settled, presumably

most did not. Another 15% were disposed of by motion for summary

judgment, a form of disposition that does not preclude settlement (e.g.,

the parties may consider settlement before the motion is decided), but

again presumably most were disposed of before the point at which settlement was considered. Finally, about 15% were excluded because they

were of a type in which settlement is rarely contemplated by one or both

parties. The most obvious of these are prisoner actions for habeas corpus

or mandamus relief, appeals from Social Security benefits decisions, and

appeals from bankruptcy court decisions. This category also includes

prisoner-civil-rights actions (alleging constitutional infirmity in conditions of imprisonment), since only about 10% of these cases reach either

trial or settlement, in contrast to 35% of all civil cases.

6. An offer-of-judgment rule may also influence the decision whether to file a lawsuit or

to undertake the defense of one. Weak cases that are now nonetheless economically sound

gambles might go unfiled if a routine and prompt offer of judgment would eliminate any

prospect of economic gain. On the other hand, an offer-of-judgment rule might encourage

filing of strong cases involving modest money damages that are not economical to pursue if

there is no prospect of recovering attorney’s fees from a recalcitrant opponent.

7. Of the 113,928 civil cases terminated in the first half of 1993, 79,443 were excluded,

which left 34,485 from which to select the sample.
Amendments to Rule 68

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Among the remaining cases, we sampled from four case types: contract,

tort, civil rights, and other.8 Within each group, we selected 100 cases

that ended in trial and 100 that ended in settlement.9

Survey Results

Of the 1,951 questionnaires mailed, 954 were completed and returned;

860 were never returned. Seventy-eight attorneys (4%) returned the questionnaire but indicated they had not been sufficiently involved in the

sample case to complete it. Fifty-nine (3%) of the questionnaires were returned by the post office as undeliverable. Thus, the response rate was

55%, which is typical of the response rate obtained in other Federal Judicial Center surveys of counsel (i.e., it is neither high nor low).

The discussion that follows includes frequent footnote references to tables in Appendix C, in which the questionnaire responses are presented in

detail. The tables that accompany the text are summaries of the tables

that appear in Appendix C. However, because this survey was not designed to quantify precisely the variables addressed, but instead to reveal

general patterns, the reader should not assume that differences in averages or proportions are meaningful unless their significance is specifically

noted in the text. Differences of a few percentage points in average litigation expenses, for instance, are most likely due to chance and should not

be assumed to reflect real differences.

In this section we discuss the survey results as they relate to the policy

debate over the likely consequences of potential variations on the standard offer-of-judgment provision. The following questions frame the debate:

1. How much does litigation cost?

2. What proportion of cases that go to trial could have settled?

3. What proportion of settled cases might settle earlier with less expense?

4. What proportion of litigation expenses might be saved whether or

not cases settle?

8. In the population of cases from which the sample was drawn, 26% were contract cases,

27% tort, 16% civil rights, and 31% other. Sampling evenly from the four groups ensured

an adequate number of civil rights cases and avoided an excess number in the “other” category. The “other” category is especially problematic to understand in the Rule 68 context,

because it includes many types of cases for which conventional litigation—discovery and

motions practice followed by either settlement or trial—may often be inapposite. These include land condemnation cases, U.S.-plaintiff forfeiture and penalty cases, labor cases of

various types, actions under environmental and agricultural acts, and a large group of

“other” statutory actions.

9. The separate sampling of tried and nontried cases was used to ensure that the sample

contained an adequate number of tried cases while remaining manageable in size. Because

tried cases accounted for only about 9% of the cases remaining after the exclusions mentioned above, a total sample of more than 4,000 cases would have been required to obtain

400 tried cases.
Amendments to Rule 68

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5. Would an offer-of-judgment rule hurt the risk-averse litigant?

6. What are the attorneys’ views about offer-of-judgment rules?

How Much Does Litigation Cost?

The potential benefits of an offer-of-judgment rule involve reducing the

expense of litigation (1) by leading the parties to settle cases that would

otherwise go to trial, (2) by leading the parties to settle earlier than they

otherwise would have, or (3) by reducing the incidence of abusive or unreasonable discovery and motions practice in settled or tried cases.10

Before considering any of these specific possible effects, it is useful to understand the nature of litigation expenses.

We asked counsel two questions that reveal the general magnitude of

litigation expenses. First, we asked what litigation expenses were incurred on behalf of the client if “litigation expenses” included attorneys’

fees or, in cases not billed on an hourly basis, the money value of counsel’s time expenditures (see Table 1). The median estimated litigation expense in cases that went to trial was about $40,000 for plaintiffs and

$30,000 for defendants; about 20% of the parties incurred expenses of less

than $10,000 to $15,000, and 20% incurred expenses of $100,000 or

more.11 In cases that settled before trial, the median estimated expense

was about $10,000 for both plaintiffs and defendants;12 20% incurred

expenses below $3,000, and 20% incurred expenses exceeding $35,000.13

Among all cases, attorneys’ fees accounted for an average of 80% of

expenses (median was 85%); there was little variation by type of case,

case disposition, or type of party. These figures must be viewed in light of

10. The third possibility arises because the existence of an unaccepted offer of settlement

and the consequent possibility that the offeree may have to pay a portion of the offeror’s litigation expenses may mitigate discovery or motions that impose costs on an opponent

without significant promise of benefit to the initiating party.

11. All reported percentages were computed by excluding from consideration those respondents who did not answer the relevant question(s). Hence a statement that 10% of respondents chose Answer a means that 10% of those who gave any answer chose Answer a.

Where responses are reported separately for tried cases and for settled cases, these refer to

the separate samples of cases—those that reached trial and those that were disposed of in a

manner that suggested settlement. For many cases it is not possible to characterize the disposition with a single term, such as settled. For example, in a multiparty case, one party

may be removed from a case by dismissal, another by summary judgment, and a third by

settlement before the case is finally tried by the remaining parties. Nonetheless, at least

80% of respondents in each sample agreed with the characterization of the case as tried or

settled.

12. For some items, responses are tabulated separately for plaintiffs and defendants. This

distinction is based on the responses to a question that asked the respondent what type of

party he or she represented. Counsel were characterized as neither plaintiffs’ nor defendants’

counsel if they indicated that their party was not simply a plaintiff or a defendant but instead both (i.e., a counterclaim was filed), a third-party defendant, not a real party in interest, and the like. This accounts for the apparent anomaly that in some tabulations, the percentage of all respondents giving a particular answer differs from the average of the percentages given for plaintiffs and defendants (e.g., it is possible for 12% of all respondents to have

given a particular answer, but only 10% of plaintiffs and 10% of defendants).

13. See Appendix C, Table 17 for detailed tabulations.
Amendments to Rule 68

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the amount of money—or the money value of other matters—at stake in

the litigation. If the amount at stake is $500,000, $40,000 in litigation

expenses is not as significant as it is when the amount at stake is

$50,000.

Second, we asked counsel to indicate the “bottom-line” settlement offer they would have advised their client to make or accept. The answer

provides a rough measure of the amount at stake. The median amount

plaintiffs’ attorneys would have recommended to their clients in settlement of tried cases varied from $50,000 in civil rights cases to $150,000

in tort cases. The median amount defendants’ attorneys would have recommended to their clients ranged from $15,000 in civil rights cases to

$75,000 in the “other” category of cases.14

Table 1. Litigation Expenses Incurred and Bottom-Line

Settlement Offer Recommended by Counsel

Type of case Party represented

Median litigation

expenses

Median bottom-line

settlement offer

Contract, tort, and “other” cases

Tried Plaintiff $40,000 $100,000

Defendant $30,000 $40,000

Settled Plaintiff $10,000 $45,000

Defendant $10,000 $25,000

Civil rights cases

Tried Plaintiff $39,000 $52,500

Defendant $26,000 $15,000

Settled Plaintiff $10,000 $32,000

Defendant $12,500 $35,000

Although the litigation expenses in tried cases in our sample tended to

be three or four times the expenses in settled cases, we cannot conclude

that settlement typically saves that much in litigation expenses. It may

be that even if our tried cases had settled, they might have involved

greater litigation expenses than are characteristic of all settled cases. A

better estimate of savings achieved by settlement is based on counsel’s

estimates; we asked those in settled cases how much additional expense

would have been required to take the case to trial. The median ratio of

14. See Appendix C, Table 17. These figures are notably lower than is often thought. It is

a common impression that federal civil cases involve at least $250,000 and expenses of at

least $100,000 per side. But this scale of stakes and expenses is in fact more characteristic of

the top 20% of the sampled cases, whether tried or settled (note further that since the sampled cases represent only about 30% of all federal civil actions, it may be that fewer than

6% of all federal civil cases involve stakes of more than $250,000). Note in Table 17 the

anomaly that the median settlement offer for defendants in the “other” case category is

slightly greater than the median of plaintiffs’ demands. This may be because for many cases

we have responses from only one party. The responding defendants’ counsel in the “other”

cases were probably involved in cases of higher average stakes than the cases of the responding plaintiffs’ counsel.
Amendments to Rule 68

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estimated additional expenses to actual expenses was 81%, which suggests that settlement typically results in a 45% saving in litigation expenses.15 Although this affords a general idea of the expenses saved by

settlements, we cannot assume that the same level of saving would be

achieved in cases induced to settle by virtue of an amended Rule 68. The

level of saving could be higher or lower than 45%, depending on whether

cases that settled because of an amended rule tended to settle comparatively early or late. Average saving would probably exceed 25% of expenses, however, inasmuch as 80% of respondents indicated that at least

that proportion of expenses was saved by settlement.

What Proportion of Cases That Go to Trial Could Have

Settled?

Our results suggest that between 20% and 40% of tried cases of the types

in our sample could have settled before trial and might have been moved

toward settlement by a strengthened offer-of-judgment rule.

First, we asked counsel in non–civil rights cases that went to trial how

a fee-shifting offer-of-judgment rule would have influenced the case.16

Specifically, we asked counsel how they thought a two-way offer-ofjudgment rule that provides awards of 50% of reasonable post-offer attorneys’ fees (a compromise between stronger and weaker incentive provisions outlined earlier in the questionnaire) would have affected the case.

Not surprisingly, given that all these cases had reached trial, most respondents (55% of plaintiffs’ counsel and 65% of defendants’ counsel)

said that the rule would have made no difference in the case. A sizable

proportion, however, thought that the rule would have made settlement

more likely (32% of plaintiffs’ counsel and 23% of defendants’ counsel).17

We asked counsel in civil rights cases what role Rule 68 had played in

the identified case (see Table 2).18 Rule 68 offers had been made and accepted in 4% of settled cases, and made but not accepted in 20% of settled cases (these cases settled other than by acceptance of the Rule 68 offer). In another 15% of the settled cases, counsel indicated that a Rule 68

offer had not been made, but that settlement negotiations had been

influenced by the possibility of such an offer. Hence it appears that Rule

68 was invoked in or played some role in settlement for almost 40% of

the civil rights cases that settled. Rule 68 offers had been made in 12% of

tried cases,19 and the rule had influenced settlement negotiations in another 3%. Counsel indicated that the rule had had no influence in 61% of

settled cases and 85% of tried cases.

15. The 81% figure implies that total expenses to try the case would have been 181% of

reported expenses; the reduction from 181 to 100 is a 45% decrease.

16. See Appendix A, Question 13.

17. See Appendix C, Table 18.

18. See Appendix B, Questions 13 and 14.

19. In all but one or two of these cases, the trial judgment was for the defendant, in one

case the judgment was for the plaintiff for an amount greater than the Rule 68 offer, and in
Amendments to Rule 68

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Table 2. Role of Rule 68 in Sample Civil Rights Cases

Response Settled cases Tried cases

Rule 68 offer made and accepted. 4% —

Rule 68 offer made but not accepted. 20% 12%

Rule 68 influenced settlement negotiations

(no offer made). 15% 3%

Rule 68 had no effect. 61% 85%

Counsel in civil rights cases were also asked how Rule 68 influences

cases similar to the sampled case.20 Thirty-one percent of plaintiffs’

counsel and 47% of defendants’ counsel said they believe that Rule 68

leads more cases to reach settlement.21

For both civil rights and non–civil rights cases that were tried, we asked

counsel to indicate why the case did not settle. The objective of this

question was to distinguish cases that could have been settled (e.g., if the

parties had been less recalcitrant, more reasonable, or simply closer in

their assessments of the likely outcome) from those that would not have

settled even if there had been more reasonable settlement offers or more

incentive afforded by an offer-of-judgment rule. The responses are summarized in Table 3. The most common response, given by roughly 50% of

respondents, was “Had one or both sides been more reasonable or realistic, settlement might have occurred.” The answers deemed most likely to

indicate that settlement was possible were e, g , and h. If we count those

cases for which answers e, g, and h were the only answers given, about

40% apparently might have settled (44% of plaintiffs’ counsel and 36% of

defendants’ counsel).22

Finally, we asked counsel to indicate the “bottom-line” settlement they

would have recommended that their client make or accept. By comparing

those amounts as reported by plaintiffs’ and defendants’ counsel in the

same case, we could identify cases that apparently should have settled

but did not. Both plaintiffs’ and defendants’ counsel provided answers to

the relevant questions for sixty-eight tried cases.23 The amount the de

one case, counsel did not indicate what effect the Rule 68 offer had vis-à-vis the trial verdict. Hence the Rule 68 cost-recovery provision came into play in at most one case.

20. See Appendix B, Question 15.

21. See Appendix C, Table 20.

22. See Appendix C, Table 13.

23. See Appendix A, Question 12, and Appendix B, Question 11.
Amendments to Rule 68

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fendant was willing to pay equaled or exceeded the plaintiff’s minimum

demand in 13% of these cases and came very close in another 12%,24

suggesting that 25% of these cases would have settled if the parties had

made settlement offers close to their bottom-line positions (or if, given

counsel’s recommendation to make or accept such an offer, the client had

more incentive to do so).

Table 3. Reasons Tried Sample Cases Failed to Settle

Response

Plaintiffs’

counsel

(n = 211)

Defendants’

counsel

(n = 216)

a. The matters at stake extended beyond the relief

sought in this particular case (e.g., one or both parties

sought to establish legal precedent, or were concerned

that a settlement in this case would encourage or discourage other litigation). 9% 18%

b. One or both parties were more concerned about matters of principle or were too emotionally invested in

the case to accept a compromise resolution. 21% 29%

c. The stakes in the case were so great that the costs of

litigation were relatively insignificant, so that there

was little incentive for settlement on the part of at

least one party. 9% 10%

d. The outcome of the case was so highly unpredictable

that there really was no way to find a satisfactory

compromise. 15% 7%

e. The parties (and/or counsel) were simply too far apart

in their assessment of the likely outcome of the case.

Had one or both sides been more reasonable or realistic, settlement might have occurred. 45% 50%

f. This was a multiparty case in which the multiple interests involved made it very difficult, if not impossible, to fashion a satisfactory settlement. 2% 4%

g. No serious settlement offers were made. I don’t understand why. 24% 5%

h. Serious settlement negotiations occurred, but failed. I

don’t understand why they failed. 2% 2%

i. Other. 14% 18%

24. The close cases were as follows (some numbers have been rounded to protect the

confidentiality of responses):

Defendant would

have paid

Plaintiff

demanded

$175,000 $200,000

$25,000 $30,000

$35,000 $40,000

$30,000 $35,000

$45,000 $50,000

$5,000 $8,000

$5,000 $6,000
Amendments to Rule 68

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What Proportion of Settled Cases Might Settle Earlier with

Less Expense?

Settlement of a civil case is often motivated by a desire to avoid the expense and delay associated with taking the case to trial, or to avoid the

risk of a trial outcome significantly more adverse than the outcome

achievable through settlement. These factors are time-dependent. The

avoidable expense and delay of litigation are at their maximum at the

outset of a case and diminish as time progresses and expenses are actually

incurred. Only expenses yet to be incurred are avoidable by settlement,

so, in general, there is more incentive to settle early in a case than there

is after significant expenses have been incurred.25 This does not necessarily mean that we should expect settlements to occur at the outset of

litigation. In many cases, including the kinds of cases in which a feeshifting provision is likely to operate, some discovery is needed before

both parties can estimate the likely outcome of the case, and both discovery and motions activity may be necessary before the parties’ estimates of

likely outcome are sufficiently close to make settlement possible.26

We asked counsel in cases that reached settlement whether they could

have settled earlier and with significant savings in litigation expenses.

Overall, about 40% thought they had settled “as soon as the parties had

adequate information to evaluate the case.” Thirty-two percent said they

could have settled earlier, but not with significant savings in litigation

expenses. The 28% of respondents who thought they could have settled

earlier and with reduced litigation expenses estimated potential savings

25. This is not strictly true with respect to expenses that may or will be borne by the opponent, as occurs in a civil rights case if a plaintiff prevails or in a case in which an offer of

judgment may result in one party paying a portion of the other’s expenses. Some critics

claim that an offer-of-judgment rule would deter settlement and increase litigation expenses

when a party is confident of recovering expenses by virtue of an offer made by that party;

however, this supposes an unusual degree of confidence in the outcome of a case bound for

trial. Only 11% of counsel in tried cases indicated that they thought there was “not much

uncertainty” about either liability or damages. (See Appendix C, Table 16.) Further, feeshifting provisions generally allow recovery only of “reasonable” litigation expenses (or just

reasonable attorneys’ fees). Unnecessary or excessive expenses are not likely to be allowed

as reasonable, but expenses incurred in necessary response to such activity will probably be

readily allowed as reasonable. So, for instance, a party betting on recovery of expenses who

engages in excessive discovery not only may be disallowed his or her own expenses for that

activity but also may be held accountable for an opponent’s expenses of responding to excessive discovery requests if an opponent’s offer of judgment is vindicated by a trial verdict.

Given the level of risk entailed, counsel would have an incentive to run up the litigation bill

only when counsel are extraordinarily confident that the judgment will better the offer

amount.

26. Theorists have argued that discovery and motions activity should naturally bring the

parties closer together in their estimates of likely outcome. In the majority of cases, however, both parties probably have a fairly accurate estimate of outcome probabilities early in

the litigation, and further pretrial activity most often serves to confirm the expected and so

enhance confidence in outcome probabilities without necessarily changing the estimates or

reducing the uncertainty. Thus, counsel who initially estimate that a plaintiff has a 50%

chance of winning $100,000 and a 50% chance of losing may alter that view little if at all as

discovery and motions yield more information, but they may become increasingly confident

in the correctness of that estimate.
Amendments to Rule 68

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of 50%.27 This suggests that a fee-shifting offer-of-judgment rule might

lead the parties in about 60% of the cases that would settle anyway to

settle more quickly and might save up to 50% of expenses in half those

cases.

The actual time cases took to be terminated correlated with the attorneys’ answers about whether the cases could have settled earlier. Cases

that settled “as soon as the parties had adequate information” had a median age of ten months (mean was thirteen months). Cases that could

have settled earlier but without significant savings had a median age of

thirteen months (mean was fifteen), while those that an attorney said

could have settled earlier with reduced litigation expenses had a median

age of eighteen months (mean was twenty-two). Not surprisingly, tried

cases had the highest median age: twenty months (mean was twentythree). This does not necessarily mean that delay in resolution by itself

leads to greater expenses, but it does lend support to the respondents’

judgments about whether they could have settled earlier than they did.

What Proportion of Litigation Expenses Might Be Saved

Whether or Not Cases Settle?

An offer-of-judgment rule may reduce litigation expenses by creating

risks associated with imposing unnecessary expenses in the course of litigation. Although a party who has rejected a realistic settlement offer proceeds at the risk of having to pay reasonable post-offer expenses incurred

by the opponent,28 the risk probably will not reduce litigation expenses

that are necessary or not feasibly avoidable. Discovery or motions activity

that is necessary to the litigation will most likely continue with little

hindrance, but expenses that are questionable or that are unnecessarily

imposed on the other party might be considerably reduced. Thus the

significance of possible reductions in expenses depends heavily on

whether significant expenses are now incurred in responding to actions

that are unnecessary or unreasonable.

To probe the character of litigation expenses, we asked counsel to apportion their clients’ litigation expenses into categories that distinguished

expenses incurred at counsels’ own initiative (e.g., making a discovery request) from those incurred in response to opponents’ initiatives (e.g., responding to a discovery request), and, within the latter category, to characterize expenses resulting from opponents’ actions as abusive, merely

unreasonable, or reasonable. “Abusive” expenses were described as those

“incurred in necessary response to actions of an opponent that were probably taken primarily for the purpose of increasing my client’s expenses,

and/or delaying or complicating the litigation.” “Unreasonable” expenses

were “incurred in necessary response to actions of an opponent that were

27. See Appendix C, Table 14A.

28. Whether an offer must be realistic to create such a risk depends on the nature of the

rule. For instance, an offer to settle for an amount that is less than any possible judgment for

a plaintiff will create no risk to a plaintiff if the rule precludes recovery of fees from a losing

plaintiff.
Amendments to Rule 68

13

unreasonable or ill-considered, although probably not undertaken primarily to increase my client’s expenses or to delay or complicate the litigation.”29

Overall, about 20% of litigation expenses were characterized as incurred in response to unreasonable or abusive actions of opposing counsel—each category accounting for about 10%—and some expenses were

attributed to at least one of those categories by about 60% of respondents.

The figures varied little by case type or party represented. The low for expenses deemed unreasonable or abusive was 12% in tort cases, and the

high was 28% in the “other” cases. This suggests that between 10% and

20% of all litigation expenses might be eliminated if counsel who make

such abusive or unreasonable requests realize that their clients may ultimately have to pay those expenses.

Another observation concerning the apportionment of expenses lends

considerable additional weight to the proposition that expenses can be

significantly reduced. Overall, counsel attributed about 15%–20% of their

clients’ litigation expenses to actions undertaken on their part that did

not result in expenses for opponents, another 25% to actions they initiated and that required the opponents to incur expenses in response, and

55%–60% to actions initiated by opponents. What is noteworthy is the

ratio of the percentages attributed to the last two categories, which deal

with all expenses arising in the various activities of litigation wherein

one party demands something of another, such as by filing a motion or

initiating a deposition. The respondents indicated that the expenses incurred in responding to opponents were more than twice as great as the

expenses incurred in actions that required a response from the opponent.

This cannot be written off as an obvious bias in perception, on the view

that these two categories of expenses should naturally be equal; logically

they could be disproportionate in either direction. Serving an opponent

with a set of standard interrogatories is an activity for which the expenses

for the party serving the interrogatories are naturally much less than

those for the party who must respond to them. Moreover, these figures

are not mere generalizations about the sad or mean state of litigation;

they are instead the aggregate of responses about expenses in particular

cases.30

29. See Appendix A, Question 9, and Appendix B, Question 8. See also Appendix C, Table

18.

30. It may be argued that the responses to this question exaggerate the expenses associated with unreasonable or abusive practices in litigation because of a natural tendency to

see others’ actions—but not one’s own—as unreasonable or abusive. This may be true, and

the extent of expenses attributable to truly unreasonable or abusive actions may be less than

20%. It is difficult, however, to doubt the general proposition that there is an imbalance between the costs of responding to an initiative and the costs of making an initiative that requires the opponent to respond. Even among counsel who attributed none of their expenses

to abusive or unreasonable initiatives by their opponents, expenses incurred in responding

to opponents’ reasonable initiatives were about 2.5 times those incurred in initiatives that

required opponents to respond (52% versus 21%). This imbalance unavoidably provides an

incentive to take actions—whether reasonable or not—if they will cost the opponent much

more than they will cost the initiator.
Amendments to Rule 68

14

The data on apportionment of expenses suggest that, on average, for

each dollar spent by one party in actions requiring a response from the

opponent, the opponent will spend more than two dollars in responding.

This implies that a clear incentive exists for the often-alleged battle of

bank accounts that can occur in civil litigation. The survey results suggest that a party can generally succeed in driving up an opponent’s expenses at comparably modest expense on its part if the party thinks that

mounting expenses may lead an opponent to withdraw or at least accept a

settlement biased in the party’s favor.31 An offer-of-judgment rule may be

most effective against actions motivated by a desire to impose costs on

one’s opponent, because the expenses that a court is most likely to allow

as reasonable and recoverable are those incurred in response to an opponent’s unreasonable actions. Hence the existence of an unaccepted but

realistic offer may put an abrupt end to any thought the offeree may have

of using discovery or motions to drive up the offeror’s expenses.

Would an Offer-of-Judgment Rule Hurt the Risk-Averse

Litigant?

Perhaps the most significant concern about an offer-of-judgment rule is

that the prospect of paying opponents’ attorneys’ fees may coerce “riskaverse” parties into accepting unfair settlements. Risk aversion is most

often understood as the tendency to choose an affordable loss rather than

accept even a slight chance of a disastrous loss. If a defendant anticipates

a 30% chance that the plaintiff will win a judgment for $1,000,000 and a

70% chance of a judgment for the defendant, on strictly mathematical

grounds, it would be economically rational to settle the case for

$300,000.32 However, if the defendant can afford a loss of $400,000 but

would be severely harmed by a $1,000,000 loss, the defendant may agree

to settle the case for the unreasonable sum of $400,000 rather than run

the 30% risk of financial ruin.

Risk aversion is not limited to concerns about financial losses; it also

plays a part in evaluating possible financial gains. For a plaintiff of modest means with a 30% chance of winning $1,000,000 and a 70% chance of

winning nothing, a settlement for even $200,000 might be far more attractive than the 70% risk of winning nothing, even though the reason31. If each party can drive up the other’s litigation expenses with equal ease, a mutualthreat deterrent effect may inhibit the practice. However, if one party is better situated than

the other to drive up expenses, the threat is not mutual and there is no deterrent to the incentive to drive up the opponent’s expenses.

32. The “expected” outcome of $300,000 is the average loss to a defendant who faces a

large number of lawsuits with these outcome possibilities (30% chance of losing $1,000,000

and 70% chance of no loss). Insurance companies presumably adhere fairly closely to expected outcome as the standard for acceptable settlement terms, since to pay more than expected outcome is in the long run a losing proposition. But it is a mistake to assume that

only insurance companies and other repeat players in litigation should operate in this riskneutral manner. Adherence to expected outcome is the economically rational approach for

any litigant—repeat player or one-timer—who can readily afford the worst possible outcome. Risk aversion affects all parties, including repeat players, when the worst possible

outcome is economically drastic, but the expected outcome is not.
Amendments to Rule 68

15

able settlement value of the case would be $300,000. Any of these sums—

$200,000, $300,000, or $1,000,000—would represent a very large increase

in the plaintiff’s wealth, and a settlement of $200,000 might seem far

more attractive than a mere 30% chance of winning $1,000,000. A plaintiff’s modest means evoke risk aversion in this context and might lead to

the acceptance of an inadequate settlement.

The respondents were asked to indicate which of several propositions

they agreed with concerning the nature and existence of risk aversion in

civil litigation. Their responses suggest widespread awareness of risk

aversion but imply either that counsel do not fully understand the phenomenon or that there is a notable measure of irrationality in litigation

expenditures. Although the two “correct” responses—aversion to

financially ruinous outcomes and aversion to loss of an inadequate but

nonetheless wealth-enhancing settlement—were chosen by 58% and 33%

of respondents, respectively,33 even more respondents (63%) indicated,

incorrectly, that wealthier parties are always at an advantage in litigation,

regardless of possible case outcomes. This is not an economically rational

position for parties who are wealthy enough to afford all possible outcomes, because no outcome would make a large difference in their overall

wealth. Although it may be true that a party willing and able to spend

enough money can obtain better results, it does not generally make sense

to spend more on a lawsuit than the amount of the expected judgment.

The level of agreement with this proposition may reflect a perception

that bank account battles are common or that litigation expenses are frequently out of proportion to the amount at stake.34

To assess the actual incidence of risk aversion, we asked counsel to indicate whether their clients had accepted an inadequate settlement because of risk aversion (namely, whether “[the] settlement in this case

provided my client with a less favorable outcome than he (or she or it)

would have accepted had he been financially able to accept the risks of

going to trial, and hence able to insist on better settlement terms”).35

Overall, about 9% of respondents said “yes,” and the proportions were

about equal for plaintiffs and defendants except among civil rights cases,

in which about 27% of plaintiffs and no defendants were disadvantaged

by risk aversion. In addition, plaintiffs represented on an hourly-fee basis

were significantly more risk averse than those represented on a

contingent-fee basis.

To see how an offer-of-judgment rule might affect risk aversion, we

looked at the varying incidence of risk aversion among the types of parties in settled cases (see Table 4). Contingent-fee plaintiffs are the least

subject to risk aversion (4%), which makes sense for two reasons. First,

the typical percentage-of-judgment contingent-fee arrangement protects

33. See Appendix C, Table 21.

34. Theoretical analysis of settlement behavior assumes economically rational behavior,

but evidence of some irrational behavior on the part of litigants does not make the theoretical analysis irrelevant. Instead, it serves to remind us that the analysis applies only insofar

as decisions to make or accept settlement offers are influenced by financial concerns.

35. See Appendix C, Table 14B.
Amendments to Rule 68

16

the plaintiff from incurring attorneys’ fees in the event of an adverse trial

verdict or other judgment: Plaintiffs pay their attorneys only if they win.

Second, counsel are unlikely to accept a case on a contingent-fee basis unless they believe it has a good chance of producing a favorable verdict

with a damage award high enough to yield an adequate contingent fee.

Hence risk aversion is mitigated by both the character of the fee arrangement and the requirement that the case be relatively strong and able to

yield an ample judgment. Contingent-fee plaintiffs can be risk averse, not

for fear of having to pay attorneys’ fees, but for fear of gaining nothing if

they do not accept a settlement offer. In contrast, hourly- or flat-fee litigants must pay their attorneys whether they win or lose; thus they face

some risk that the result may be a large out-of-pocket expense.

Table 4. Incidence of Risk Aversion in Settled Sample Cases

Contract, tort, and other cases Civil rights cases

Response

Contingentfee

plaintiffs’

counsel

(n = 73)

Hourlyfee

plaintiffs’

counsel

(n = 41)

Hourly-fee

defendants’

counsel

(n = 119)

Plaintiffs’

counsel

(n = 44)

Defendants’

counsel

(n = 50)

Settlement provided a

less favorable outcome

than would have been

accepted had client

been able to accept the

risks of going to trial. 4% 10% 7% 27% 0%

Defendants are also less likely to experience risk aversion for reasons

similar to those in contingent-fee cases; that is, because a plaintiff ordinarily will not sue a defendant who has insufficient means to pay an adequate judgment or settlement, potential defendants most likely to be risk

averse are weeded out before a suit is filed. Some defendants are still risk

averse, such as those who can afford a $30,000 settlement but cannot risk

even a 20% chance of a $100,000 verdict. Hourly- or flat-fee plaintiffs, on

the other hand, need only enough money to pay attorneys’ fees for a case

to be a financially viable proposition; thus they generally need less wealth

than those they elect to sue. In sum, this analysis suggests that hourly-fee

plaintiffs are more frequently risk averse than hourly-fee defendants, and

contingent-fee plaintiffs exhibit the lowest risk aversion.

In fact, however, risk aversion is common among civil rights plaintiffs,

nearly all of whom are represented on a contingent-fee basis. There are

two apparent reasons for this. First, plaintiffs’ counsel who accept contingent-fee civil rights cases do not have to limit themselves to cases likely

to yield money damages sufficient to support adequate attorneys’ fees.

Because a prevailing plaintiff’s attorneys’ fees are paid by the defendant, a

case need only have good prospects for a favorable verdict to be worth accepting; the likely amount of money damages is not crucial as it is in
Amendments to Rule 68

17

other cases. This, of course, is the intention of such statutes as 42 U.S.C.

§ 1988—to make economical the pursuit of claims that would be uneconomical to pursue absent recovery of attorneys’ fees. The effectiveness of

Section 1988 is evident from the fact that the median amount at stake in

civil rights cases is the lowest of the amounts in the four case categories

in the study, and from the frequency with which plaintiff’s litigation expenses equal or exceed the amount at stake in these cases. Plaintiff’s litigation expenses exceeded 80% of the amount at stake (plaintiff’s bottomline settlement demand) in 47% of civil rights cases, but in only 12% of

all other cases.

The comparatively modest stakes in civil rights cases may reflect the

comparatively modest means of most civil rights plaintiffs. Victims of

employment discrimination or other civil rights violations are more

likely to be from society’s lower economic strata and thus more prone to

risk aversion. The purpose and success of Section 1988 might then be understood as allowing pursuit of claims by people whose risk aversion and

limited resources would preclude access to legal remedy without the

prospect of recovering attorneys’ fees. In other words, risk aversion comes

with the territory. For these plaintiffs, however, risk aversion is presumably preferable to the inability to pursue their claims in the first instance.

Although the existing Rule 68 may exacerbate the risk aversion of civil

rights plaintiffs, this should occur only in limited circumstances. An unaccepted Rule 68 offer affects the plaintiff’s recovery only if the plaintiff

obtains a judgment but fails to obtain a judgment superior to the terms of

the Rule 68 offer; the rule has no consequence if the plaintiff loses the

case.

36 Hence the Rule 68 offer must be greater than the smallest feasible

plaintiff’s judgment to be useful (a lower offer may be accepted by the

plaintiff, but the fact that it is a Rule 68 offer should make no difference

in the plaintiff’s decision).

When liability is seriously at issue, a reasonable settlement offer is

likely to be less than any feasible plaintiff’s judgment, while an offer

sufficient to put Rule 68 into play will most likely be acceptable to the

plaintiff even if it is made outside of Rule 68 (as a conventional settlement offer). If the odds of a plaintiff’s judgment were 50–50 and damages

for such a judgment would fall between $30,000 and $70,000, with

$50,000 most likely, an economically rational settlement figure for such a

case—if it were to settle—would be $25,000. However, Rule 68 would

have no force if the defendant made an offer of less than $30,000, because

the plaintiff would either lose altogether or win at least $30,000, and Rule

68 would have no consequence in either event. An offer of $30,000 or

more would most likely be acceptable whether or not it was made under

Rule 68.

In contrast, if in the same case liability were fairly clear, then a rational

settlement would be close to $50,000, but a Rule 68 offer of $35,000 could

result in the plaintiff’s winning a judgment of $30,000 while forfeiting

36. See Delta Airlines, Inc. v. August, 450 U.S. 346 (1981).
Amendments to Rule 68

18

post-offer attorneys’ fees. Only in this kind of circumstance can Rule 68

pressure a risk-averse plaintiff into accepting an inadequate settlement.

Apparently, Rule 68 does not often exacerbate the risk aversion of civil

rights plaintiffs. We asked counsel to characterize the uncertainty in the

case by indicating whether liability, damages, both liability and damages,

or neither were the principal matters at issue. In cases in which liability

was uncertain—and Rule 68 was unlikely to influence risk aversion—

26% of counsel indicated that their clients had accepted an inadequate

settlement because of risk aversion. Among cases in which liability was

fairly clear, 29% of plaintiffs were risk averse. The number of responses is

not sufficient to conclude that Rule 68 leads to inadequate settlements in

only 3% of civil rights cases. However, it does appear that Rule 68 does

little to exacerbate the risk aversion characteristic of many civil rights

plaintiffs.

How, then, can we estimate the effects of a fee-shifting offer-of-judgment rule on risk aversion in non–civil rights cases? Given the apparently

modest influence of the existing rule in civil rights cases, we would generally anticipate comparatively modest effects in other types of cases;

however, much depends on whether the offer-of-judgment rule would put

plaintiffs at risk of an out-of-pocket loss (i.e., paying some of a

defendant’s attorneys’ fees even when a defendant obtains judgment). Recall that hourly-fee plaintiffs are about twice as likely to be risk averse as

are contingent-fee plaintiffs, and the likely reason for the difference is

that hourly-fee plaintiffs are at risk of paying their attorneys’ fees even if

they lose, whereas contingent-fee plaintiffs are usually protected from all

but modest out-of-pocket losses. An offer-of-judgment rule that protects

plaintiffs from any sizable net loss would have much less influence on

risk aversion than a rule that puts a plaintiff at risk of paying all of a defendant’s post-offer fees even when the plaintiff loses the case. A rule that

puts plaintiffs at risk might increase the incidence of risk aversion to

10% for contingent-fee plaintiffs and to somewhat more than 10% for

hourly-fee plaintiffs. A rule that protects plaintiffs might have a much

smaller influence on risk aversion for all plaintiffs. There is less basis for

estimating the effect of an offer-of-judgment rule on risk aversion among

defendants, but the variation among plaintiffs suggests that it would be

quite modest, increasing from the current level of about 7% to a level of

probably less than 12%.

However, the likely influence of an offer-of-judgment rule on cases such

as those currently litigated in the federal courts is only part of the story.

An offer-of-judgment rule would undoubtedly have some of the same

influence that fee recovery has had on civil rights cases: It would make

economical the pursuit of some claims that are not economical without

the prospect of recovering at least some attorneys’ fees. This includes

cases similar to civil rights cases—cases with modest stakes but good

prospects for success—as well as defenses against weak claims. A

“nuisance value” settlement can be the financially realistic course when

the cost to defend a claim would exceed the amount of the settlement,

and this may be the unavoidable course for a risk-averse defendant who
Amendments to Rule 68

19

cannot afford the expense of litigation. An offer-of-judgment rule will

make such cases more feasible to defend, although the benefit will be

limited if the rule protects losing plaintiffs from liability for defendants’

fees. As with civil rights cases, the fee recovery afforded by an offer-ofjudgment rule will encourage filing of small but strong claims (and the

pursuit of strong defenses), and the parties in these cases will be more

risk averse than is now typical of civil litigants. But again, these parties

surely would rather accept settlement terms inferior to those a richer

party might accept than be precluded from pursuing their claim or defense

altogether.

Finally, an offer-of-judgment rule will probably drive a small proportion

of cases out of the courts. As the prospect of fee recovery attracts small

but strong claims, it also repels marginal claims that are weak but

nonetheless worth pursuing either for nuisance value or because a favorable judgment will be large even if unlikely. (On strictly economic terms,

a 10% chance of a judgment for $1,000,000 is worth pursuing if the anticipated total litigation expenses are less than $100,000, but a risk of paying

some of an opponent’s attorneys’ fees can tilt the balance, making such a

case not worth pursuing.)

What Are Attorneys’ Views About Offer-of-Judgment Rules?

Although theoretical analysis of variations on the offer-of-judgment rule

may help predict how they would influence civil litigation, it is also useful to understand how attorneys believe such rules would or do affect

civil litigation in general, and the cases in the sample in particular. To

this end, we asked counsel three questions: (1) How might a fee-shifting

offer-of-judgment rule (or, for civil rights cases, how did Rule 68) affect

the specific case in the sample? (2) How might (or does) such a rule affect

civil cases in general? and (3) What, if any, amendments to Rule 68 would

generally lead to the fairest outcomes for all parties in civil litigation?

The responses reflect substantial support for making Rule 68 a two-way

provision with more “teeth” than mere recovery of statutory costs. Because the potential influence of offer-of-judgment rules on cases in which

prevailing plaintiffs ordinarily recover attorneys’ fees can differ markedly

from their influence on cases without routine fee recovery, the two

groups are discussed separately.

General (Non–Civil Rights) Cases

When we asked counsel about potential amendments to Rule 68, nearly

three-fourths from the contract, tort, and “other” case samples indicated

a preference for some form of two-way offer-of-judgment provision that

would allow recovery of something more than mere statutory costs by an

offeror whose offer was not accepted and not improved on at trial (see

Table 5). Most respondents (63% overall) favored including at least some

attorneys’ fees in addition to statutory costs; the variation among counsel

by party represented or by type of case was quite modest, ranging from

54% of plaintiffs’ counsel to 71% of defendants’ counsel favoring a two-
Amendments to Rule 68

20

way fee-shifting rule. The percentage of plaintiffs’ counsel who favored

abolishing the rule (25%) was notably higher than the percentage of defendants’ counsel (13%).37

Table 5. Recommended Amendments to Rule 68

Response

All

 respondents

(n = 748)

Plaintiffs’

counsel

(n = 295)

Defendants’

counsel

(n = 289)

Allow offeror to recover at least some

portion of post-offer attorney’s fees. 63% 54% 71%

Allow recovery of post-offer costs plus

expert witness fees or other expenses

not ordinarily taxable as costs (e.g.,

pre-judgment interest, discovery expenses, multiple costs, a percentage of

the judgment). 9% 10% 8%

Abolish Rule 68 altogether. 18% 25% 13%

Leave Rule 68 as it is. 9% 10% 10%

When we asked how the identified case from the sample would have

been affected by a two-way rule providing for recovery of 50% of an offeror’s reasonable attorneys’ fees, 61% indicated that the rule would have

made no difference (e.g., because the case settled early and satisfactorily),

and 27% indicated that it would have made settlement more likely or

made settlement occur earlier and so reduced litigation expenses.38 (See

Table 6.) Seventeen percent indicated that the rule would have affected

the outcome of the case (about two-thirds of those expected a better outcome for their client, and one-third expected a worse outcome). Again,

there was little variation by party represented or by type of case, except

that plaintiffs’ counsel were somewhat more likely to expect more or

earlier settlements (32%) than were defendants’ counsel (23%).

We asked counsel to select from a long list of potential effects of the

50% fee-recovery rule those effects they thought likely to occur in civil

cases generally.39 Nearly 75% indicated that such a rule would result in

more settlements; 60% thought it would lead to earlier settlements; 43%

said it would decrease the expenses of litigation; 35% said it would inhibit abusive tactics; and 23% said it would result in fairer case outcomes. Overall, 50% chose only these positive effects, while 33% indicated that the rule would have both positive and negative effects. The

negative consequences mentioned most frequently were that the rule

might inhibit reasonable and necessary pretrial activity because a party

may be afraid of having to compensate opponents for their expenses of responding (15%) and that the rule would lead to less fair outcomes (25%).

Overall, 12% of respondents anticipated only negative consequences from

the rule, and 6% thought the rule would make no difference.

37. See Appendix C, Table 9.

38. See Appendix C, Table 19.

39. See Appendix C, Table 20.
Amendments to Rule 68

21

Table 6. Likely Effect on the Sample Cases of an Offer-ofJudgment Rule Providing Recovery of 50% of Attorneys’ Fees

Response

All

respondents

(n = 737)

Plaintiffs’

counsel

(n = 296)

Defendants’

counsel

(n = 282)

No difference in this case. 61% 55% 65%

Made settlement more likely or led to

an earlier settlement, and thus probably resulted in significant savings in

litigation expenses. 27% 32% 23%

Delayed settlement, and probably led

to greater litigation expenses. 2% 1% 3%

Made settlement less likely. 3% 2% 3%

Resulted in a less favorable result for

my client. 6% 6% 7%

Resulted in a more favorable result for

my client. 11% 12% 9%

Caused my client never to have

brought or defended the case, or led me

to refuse to accept the case. 2% 4% 1%

A substantial proportion of respondents identified both positive and

negative effects of an amended offer-of-judgment rule. Presumably, respondents predicted positive effects in some cases and negative effects in

others, and thus sometimes chose both of two answers that the author

had meant to be mutually exclusive (e.g., some indicated that the rule

would produce case outcomes unduly generous to defendants but also

that it would lead to case outcomes that are more fair). This impression is

reinforced by the fact that a two-way fee-shifting offer-of-judgment rule

was favored by 50% of respondents who identified negative consequences

from such a rule. This is less than the 63% overall who favored such a

rule, but it is still a fairly high level of endorsement.

Civil Rights Cases

In civil rights cases Rule 68 is often presumed to operate to the exclusive

benefit of defendants. The rule may be invoked only by defendants, and

failure to accept a Rule 68 offer can only work to the detriment of the

plaintiff. However, Rule 68 may benefit a plaintiff by creating an incentive for the defendant to make a realistic offer, and thus lead to an earlier

or more generous settlement than might otherwise occur. We asked

counsel in civil rights cases two questions about Rule 68: (1) what are

their views of it as it now operates? and (2) what, if any, amendments

should be made to the rule? Although plaintiffs’ counsel generally favored

the rule much less than defendants’ counsel did, there was nonetheless a

surprising amount of support among plaintiffs’ counsel for the offer-ofjudgment concept.
Amendments to Rule 68

22

We asked counsel which of several offer-of-judgment provisions would

generally lead to the fairest outcomes for all parties in civil cases in

which a prevailing plaintiff ordinarily recovers its reasonable attorneys’

fees (see Table 7). Forty-nine percent of plaintiffs’ counsel supported retaining the existing one-way fee-shifting structure, either as is (27%),

strengthened to include payment by plaintiff of a defendant’s post-offer

fees (6%), or moderated to limit the forfeiture of a plaintiff’s post-offer

fees (16%).40 Another 29% supported abolition of the rule, and 23%

supported a change to make the rule a two-way provision allowing recovery of statutory costs and other expenses (e.g., expert witness fees) but not

attorneys’ fees. Counsel for defendants were far more supportive of extending the existing rule to provide for payment by plaintiff of

defendant’s reasonable post-offer attorneys’ fees (63%). Only 4% suggested abolishing the rule, and 12% supported the two-way approach.

Table 7. Amendment to Rule 68 That Would Lead to the

Fairest Outcomes for All Parties in Civil Rights Cases

Response

All

respondents

(n = 212)

Plaintiffs’

counsel

(n = 88)

Defendants’

counsel

(n = 116)

Strengthen the existing rule. (Allow a defendant-offeror not only to avoid payment of plaintiff’s fees, but also to recover from plaintiff defendant’s reasonable post-offer fees.) 38% 6% 63%

Leave Rule 68 as it is. 19% 27% 14%

Moderate the existing rule. (Allow defendant-offeror to avoid payment of

plaintiff’s post-offer attorneys’ fees, but

only to the extent that those fees exceed

the difference between the offer and the

judgment.) 11% 16% 8%

Make the rule two-way and allow recovery of significant expenses but not attorneys’ fees. (Allow offers to be made by either plaintiff or defendant, and provide

that a party whose offer is not accepted

and not improved on at trial may recover

some multiple of statutory costs, expert

witness fees, and/or other expenses not

ordinarily taxed as costs (other than attorneys’ fees).) 16% 23% 12%

Abolish Rule 68 altogether. 15% 29% 4%

40. See Appendix C, Table 10.
Amendments to Rule 68

23

We presented counsel in civil rights cases with a list of possible responses to the question, “[H]ow do you believe the existing Rule 68

influences [civil rights cases]?”41 (See Table 8.) Again, plaintiffs’ counsel

offered a surprisingly positive appraisal: 19% indicated only favorable effects, 23% indicated both favorable and unfavorable effects, and 22% indicated only unfavorable effects (36% said the rule makes no difference).

Defendants’ counsel were much more positive: 59% indicated that the

rule has only favorable effects. But the striking result is the level of positive response from plaintiffs’ counsel. Although only 42% had anything

positive to say about the existing rule, the level of favorable assessment is

a clear repudiation of the view that the existing rule can provide only an

unfair advantage to defendants.

Table 8. Effects of Existing Rule 68 on Civil Rights Cases

Response

Plaintiffs’

counsel

(n = 86)

Defendants’

counsel

(n = 113)

Only favorable effects: more or earlier settlements,

fairer outcomes, decreased litigation expenses, inhibits unreasonable or abusive tactics, and/or encourages reasonable litigation (answers a, c, e, l, m,

or p). 19% 59%

Only unfavorable effects: the opposite of any effect

listed above (all other answers except q—makes no

difference). 22% 8%

Both favorable and unfavorable effects. 23% 7%

Makes no difference. 36% 26%

Other Findings

Several of the survey questions yielded unexpected responses.

We asked counsel how they assess the value of a case for purposes of

settlement. The question was meant to determine the extent to which

counsel are familiar with and use the concept of expected value in assessing settlement offers. Assuming that counsel are not generally sophisticated in the explicit mathematical approach to the concept—although

they may be sophisticated in their intuitive or subjective judgments—we

framed the question in elementary terms. The results suggest that we underestimated counsel’s sophistication. Forty percent selected the answer

intended to best represent the way an economist would assess case value,

but an additional 23% selected the “other” response and explained an approach more sophisticated than any we had outlined—either a combination of our proffered responses or a more explicit explanation of the expected value concept. The results suggest that most attorneys are familiar

with the probability concepts that would be made especially relevant to

settlement decisions by an offer-of-judgment rule.

41. See Appendix C, Table 20.
Amendments to Rule 68

24

We asked two questions to gauge the respondents’ experience and to determine whether their views favoring a given type of change to Rule 68

correlated with their experience. The results are confusing. First, we

asked counsel to indicate in how many cases in the past ten years they

had played a major role in advising on decisions to make, accept, or reject

offers of settlement.42 Our scale of responses (3 or fewer, between 4 and

11, between 11 and 25, more than 25) was inadequate. Eighty percent indicated they had played a role in 25 or more cases. Because so few respondents indicated experience in fewer than 25 cases, we had little room to

assess correlations. A strengthened Rule 68 was favored by 70% of 742

counsel with involvement in 25 or more cases, versus 74% of 205 counsel

with involvement in fewer than 25 cases, a difference that is marginal at

best. Second, we asked counsel what percentage of their civil cases are in

federal court. Overall, the average was 41%, and the median was 30%.

Again, the correlation with views about strengthening Rule 68 was

marginal but arguably at odds with the difference noted above. A

strengthened Rule 68 was favored by 74% of 452 counsel with more than

30% of their cases in federal court, and by 67% of 471 counsel with 30%

or less in federal court. Although various explanations for these patterns

might be offered, none is compelling, and the correlations are too weak to

imply much in any event.

We asked what type of relief was sought in the sample case in order to

assess the extent of problems that might be involved in determining

whether a judgment is “not more favorable” than an offer when either a

judgment or an offer involves nonmonetary relief.43 The problem is illustrated by trying to compare an offer to settle for $100,000 with a judgment awarding reinstatement and back pay of $40,000. The percentage of

cases involving exclusively monetary relief varied from 95% in tort cases

to 47% in the “other” category, and the percentage of cases involving

“significant” nonmonetary relief varied from 35% in the “other” category

to 3% in tort cases.

At the end of the questionnaire, we invited respondents to reconsider

Questions 1 and 244 (about what amendment to Rule 68 would be fairest

to all) and provide new answers if their views had changed in the course

of answering other questions. We expected that the attorneys’ responses

to these questions might change after later questions created awareness of

the various potential positive and negative consequences of an offer-ofjudgment rule. Only 3% responded to the invitation to change their answers to Question 1 or 2, and all tabulations of those questions reported

here incorporate the few revised answers.

42. See Appendix A, Question 17.

43. See Appendix A, Question 6, and Appendix B, Question 5; see also Appendix C, Table

15.

44. Only counsel in non–civil rights cases were asked to reconsider Question 2.
Amendments to Rule 68

25

Other Offer-of-Judgment Rules

The respondents identified and recommended a number of other offer-ofjudgment rules that are now in effect in various jurisdictions. This section describes these rules and outlines one additional approach, elective

arbitration combined with recovery of expenses.

Michigan Rules of Court, Rule 2.405

This is a two-way fee-shifting offer-of-judgment rule that has an intriguing feature: If both parties make offers under the rule and neither is accepted, then an award of actual costs (including post-offer attorneys’ fees,

albeit subject to the limitation that the court may refuse to award attorneys’ fees in the interests of justice) is to be made if the verdict is more

favorable to an offeror than the average of the two offers. Thus, for example, if the plaintiff offers to accept $60,000 and the defendant refuses, the

plaintiff is entitled to an award of costs if the verdict is greater than

$60,000; but if the defendant makes a counteroffer of $40,000, the plaintiff will be entitled to costs if the verdict exceeds $50,000, and the defendant will recover costs if the verdict is less than $50,000.

This rule creates a strong incentive to avoid making an unreasonable

offer. Using the average offer and counteroffer as the threshold for determining awards of expenses makes an unreasonable offer work to the disadvantage of the offeror. If, for instance, the plaintiff demands $70,000 to

settle a case in which the verdict is likely to be about $50,000, the defendant can make an offer to settle for $40,000. If the plaintiff rejects the

counteroffer, then any verdict less than $55,000 will result in an award of

actual costs to the defendant. Similarly, an unrealistic counteroffer to a

reasonable offer will only serve (if rejected) to the advantage of the offeree.

Florida Statutes, Section 768.79

This is a two-way rule providing for recovery of post-offer attorneys’ fees,

costs, and investigative expenses in cases in which the verdict is at least

25% below the offer when the offer is made by the defendant, or 25%

above when the offer is made by the plaintiff. For instance, an offer to settle for $100,000 will trigger the award of post-offer expenses if the

plaintiff-offeree fails to obtain a verdict of at least $75,000 or the

defendant-offeree suffers a verdict greater than $125,000. A verdict between $75,000 and $125,000 will not result in an award of expenses. The

Florida rule specifically provides for awards against plaintiffs in excess of

any verdict for the plaintiff; the rule also directs the court to account for a

number of factors in determining the reasonableness of an award of attorneys’ fees.

The 25% margin embodied in this rule has appeal in that it may be

thought to protect an offeree from severe consequences for “missing by a

small margin.” The notion is that a defendant who rejects an offer to set-
Amendments to Rule 68

26

tle for $100,000 and then suffers a $101,000 verdict was wrong by only a

small margin—but that is an illusory notion. We cannot know by what

margin the defendant misestimated the case outcome unless we know

what the defendant was willing to pay in settlement. All we know is that

the defendant was not willing to pay $100,000. If the defendant had been

willing to pay, say, $97,000, or even $90,000, the defendant would almost

certainly have made a counteroffer.

Moreover, the Florida approach has the unfortunate consequence of allowing recovery of expenses by only those parties least likely to have incurred losses because of the offeree’s failure to accept their offer. A plaintiff who offers to settle for $100,000 and obtains a verdict for more than

$125,000 will be better off if the offer is rejected unless the plaintiff’s

post-offer expenses exceed the difference between the offer and the verdict (at least $25,000).

Nevada Rules of Civil Procedure, Rule 68

This is a two-way fee-shifting rule that affords the court discretion to allow recovery of post-offer attorneys’ fees. Apparently, however, awards of

post-offer attorneys’ fees are generally restricted to cases in which rejection of the offer was deemed unreasonable or grossly unreasonable.45

California Code of Civil Procedure, Sections 998 and 3291

Section 998 permits offers to be made by any party. If the offeree does not

obtain a judgment superior to the offer, the court must award post-offer

costs when the offeror is the defendant, and it may, in its discretion,

award pre-offer costs and reasonable expenses for the services of expert

witnesses. Awards against losing plaintiffs are specifically permitted. Section 3291 permits awards to include interest from the date of the offer.

Wisconsin Statutes, Section 807.01

Section 807.01 permits offers to be made by the plaintiff or the defendant.

If an offer is rejected and the offeror obtains a superior result at trial, then

(1) the defendant-offeror recovers costs from the date of the offer, or (2)

the plaintiff-offeror recovers double costs plus 12% post-offer interest on

the judgment. This rule also provides specifically for an offer (by the defendant) to establish the amount of damages to be awarded if a trial verdict establishes the defendant’s liability. If the plaintiff rejects such an offer and obtains a judgment for no more than the amount of the offer, then

neither party may recover costs.

Pennsylvania Rules of Civil Procedure, Rule 238

This rule entitles prevailing plaintiffs in actions for personal injury,

wrongful death, or property damage to recover prejudgment interest

(prime rate plus 1%; termed damages for delay) for the period beginning

45. See Beattie v. Thomas, 99 Nev. 579, 668 P.2d 268 (1983).
Amendments to Rule 68

27

one year after service of the complaint and ending on the date of the verdict. The rule also permits defendants to make offers of judgment and denies post-offer prejudgment interest to a plaintiff who does not accept

such an offer and does not recover at least 25% more than the amount of

the offer.

U.S. District Court for the Eastern District of Texas, General

Order No. 93-13

This is a two-way provision with a 10% margin comparable to the Florida

provision (i.e., the offeror may recover expenses only if the verdict is at

least 10% superior for the offeror than was the offer). The amount awardable includes all reasonable post-offer expenses (including attorney’s fees).

The court may reduce the award to prevent undue hardship to a party,

and the award may not exceed the amount of the final judgment in

contingent-fee cases involving personal injury or civil rights.

Elective Arbitration Combined with Recovery of Expenses

A system to ensure fair offers might mitigate concerns that an offer-ofjudgment provision can place a risk-averse offeree in the position of having to accept an unfair settlement rather than accept the risk of an intolerable out-of-pocket loss. Court-sponsored arbitration and early neutral

evaluation programs suggest a model for such a system; the general idea

is to permit offers of settlement on terms to be established by a neutral

third party. Either or both of the following might be used:

• Allow any party to refer the case for decision by a settlement arbitrator who hears evidence in a comparatively abbreviated and inexpensive hearing and renders an award. The party referring the case

would be bound to accept the award, but the opponent is free to reject the award. If the award is rejected and the eventual judgment in

the case is not more favorable than the award, the rejecting party is

required to pay the full reasonable expenses incurred by the referring party after the date of the award. In effect, the party referring

the case thereby makes an offer of judgment, in which the terms of

the offer are set by the arbitrator.

• Allow a party who has received a conventional offer of judgment to

refer the case for decision by a settlement arbitrator. This referral

would have the same effect as that outlined above and two additional consequences: (1) if the award is more favorable to the offeree

than the offer, the offer is void—the offeror cannot recover any expenses by virtue of that offer; and (2) if the award is less favorable

than the offer, neither party may reject it, but the party referring the

case to arbitration must pay the offeror’s reasonable expenses of the

arbitration proceeding.

29

Appendix A: Cover Letter and Questionnaire

Sent to Counsel in Contract, Tort,

and “Other” Cases
Amendments to Rule 68

30

THE FEDERAL JUDICIAL CENTER

ONE COLUMBUS CIRCLE, N.E.

WASHINGTON, D.C. 20002-8003

Office of the Director Board of the Federal Judicial Center

Telephone: (202) 273-4160 The Chief Justice of the United States

Judge Marvin E. Aspen

Judge Edward R. Becker

Judge Martin L. C. Feldman

Judge Elizabeth L. Perris

Judge Michael A. Telesca

Judge J. Harvie Wilkinson, III

Honorable L. Ralph Mecham

Judge William W Schwarzer, Director

March 3, 1994

RE:[case docket number and caption], U.S. Dist. Ct.,[district]

Dear Counselor,

The Advisory Committee on Civil Rules of the Judicial Conference of the U.S.

is considering amending Rule 68, concerning offers of judgment. The Advisory

Committee is the body responsible for initiating proposed amendments to the

Rules of Civil Procedure. The Federal Judicial Center, which is the research arm

of the federal courts, has undertaken a study to assist the committee in determining how such an amendment might affect federal civil litigation.

I write to you because I understand that you were counsel in the above-referenced case, which is one of a sample of cases selected for the Judicial Center’s

study. I have enclosed a questionnaire that I ask you to complete and return at

your earliest convenience.

Amendments to Rule 68 could have major effects on litigation of civil cases in

the federal courts, and it is crucial that the Advisory Committee understand the

views of trial lawyers concerning those effects. Although the Advisory Committee

always receives public comment on formally proposed amendments, it often hears

only from a limited audience, including legal scholars and organizations

representing particular segments of the bar or particular interests. Responses to

the enclosed questionnaire will provide the committee with the views of a more

representative sample of federal civil trial lawyers, including some from whom

the committee might not otherwise hear.

As you will see from the questionnaire, assessing possible amendments to Rule

68 requires reflection. I recognize that questionnaires are rarely welcome, but

your response will make a valuable contribution to improving the administration

of justice in the federal courts.

Your responses will be kept confidential. The questionnaire is marked with an

identifying code that will allow us to relate your responses to information about

the above-referenced case, but no one outside of the five-member research project

team will be able to associate you or your case to the answers you provide. Your

responses will be released only as part of aggregate statistics, and the questionnaire you complete will be destroyed after it is coded into our database.

The Judicial Center and the Advisory Committee will be very grateful for your

cooperation in completing the questionnaire. You may check the box at the end of

the questionnaire if you wish to receive a copy of the report of this study.

Sincerely,

William W Schwarzer

Established by 28 U.S.C. § 620, the Federal Judicial Center conducts research to further the development and adoption of improved judicial administration in the courts of the United States.
Amendments to Rule 68

31

Questionnaire Concerning Proposed

Amendments to Rule 68, FRCP

Explanation of Rule 68 and Possible Amendments

No proposed amendment has yet been published for comment or otherwise formally entertained by the Advisory Committee on Civil Rules.

The committee wishes to consider a number of possible alternatives, including abolition of the current rule.

As it now stands, the rule allows a party defending against a claim to

serve an offer of judgment. If the offer is not accepted within 10 days and

the judgment finally obtained is not more favorable to the offeree than

was the offer, the offeree must pay the statutory costs incurred after making the offer. The existing rule is thought to have little use or effect, at

least in cases where costs are minor compared to the amount at stake in

the case. The rule may be significant in cases where a statute permits the

prevailing plaintiff to recover attorneys’ fees “as part of the costs” in the

action, since the Rule has been interpreted to include such attorneys’

fees. Hence an unaccepted Rule 68 offer can result in plaintiff failing to

recover the post-offer attorneys’ fees to which plaintiff would ordinarily

be entitled.

The current rule has been criticized not only because the incentive of

cost recovery is thought to be too weak to be effective, but also because it

is available only to defendants—it is a “one-way” rule. Most ideas for

amending the Rule call for making it a “two-way” rule, available to plaintiffs as well as defendants, and increasing the incentives by allowing recovery of sums greater than post-offer costs. Some alternative types of incentive are set forth in question 1, on the next page.

Application of the existing Rule 68 or of possible amended versions of

the rule to cases in which a prevailing party might otherwise be entitled

to recover attorneys’ fees (e.g., class actions, civil rights) raises different

questions than does application to cases in which each side ordinarily

bears its own attorneys’ fees. All questions in this questionnaire pertain

only to the application of an offer of judgment rule to cases in which each

side would ordinarily bear its own litigation expenses, except for taxation

of statutory costs.
Amendments to Rule 68

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Part I

1. Several ideas have been proposed for amending Rule 68 to increase the

incentive to make and accept early and reasonable settlement offers. Another idea, advocated in the belief that the current rule is unfair or pointless, is simply to abolish Rule 68. Which of the following options for

amending Rule 68 do you believe would generally lead to the fairest outcomes for all parties in civil litigation? (Please check one)

❒ a. Allow recovery of the reasonable attorney’s fees incurred by the

offeror after making the offer.

❒ b. Same as a, above, but allow recovery of some percentage of reasonable post-offer attorney’s fees (which could be more or less

than 100%). What percentage?: ______% of reasonable fees.

❒ c. Allow recovery of reasonable attorney’s fees, but only to the extent that they exceed the difference between the offer and the

judgment. The rationale of this idea is that rejection of the offer

has benefited the offeror to the extent that the judgment is superior to the offer. For instance, a judgment for $100,000 is $20,000

better than plaintiff’s offer to accept $80,000 (or defendant’s offer

to pay $120,000).46 In either case, if offeror’s reasonable post-offer

attorney’s fees were $30,000, the offeree would be obliged to pay

only $10,000 in compensation for those fees.

❒ d. Allow recovery of some multiple of statutory costs. What

multiple? ___ times costs.

❒ e. Allow recovery of post-offer costs plus expert witness fees or

other expenses not ordinarily taxable as costs (what other

expenses?:_________________________ ).

❒ f. Allow recovery of a percentage of the amount of the judgment.

What percentage?: _____%

❒ g. Abolish Rule 68 altogether.

❒ h. Leave Rule 68 as it is.

2. Another proposal, that can be added to any of the first six ideas mentioned above, is to preclude recovery in an amount that exceeds the value

of the judgment. If, for instance, plaintiff obtained judgment for $10,000,

the amount of post-offer fees or other expenses recoverable by either party

could not exceed $10,000. Hence a plaintiff could lose the entire amount

of the judgment, but not more. Do you favor or oppose this provision?

❒ a. Favor

❒ b. Oppose

❒ c. Unsure or inapplicable (e.g., because I support abolition of Rule

68)

46. The questionnaire initially contained an error in this sentence: The numbers $80,000

and $120,000 were transposed, inviting confusion about the provision and hence uncertainty

about what Answer c represented. Those who chose this answer were counted only as supporting an offer-of-judgment provision that permits recovery of some portion of post-offer

expenses.
Amendments to Rule 68

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Part II

Note: The questions in this part pertain specifically to the case referenced

in the cover letter. Before answering the following questions, you may

find it helpful to retrieve your files on the referenced case in order to refresh your memory concerning its litigation and the associated expenses.

Please understand that our motive in asking these questions is not to pry

about details of your case, but rather to provide systematic information—

which does not now exist—about factors that may influence the effectiveness of Rule 68.

3. How was this case resolved? (please check only one answer)

❒ a. It has not been resolved (Please indicate “NA” next to any subsequent questions that you are unable to answer because the case

has not been concluded.)

❒ b. By verdict after a jury trial

❒ c. By verdict after a bench trial

❒ d. By summary judgment

❒ e. By dismissal with prejudice

❒ f. By voluntary dismissal without prejudice

❒ g. By a stipulated disposition that amounted to capitulation by

plaintiff or defendant

❒ h. By a compromise settlement or consent judgment entered into before the case reached judgment in the district court

❒ i. By a settlement entered into after verdict or other final judgment

(e.g., pending appeal)

❒ j Other. Please explain:

4. If this case was not settled, why not? Please check each answer that is

applicable to this case. (If the case did settle, skip this question.)

❒ a. The matters at stake extended beyond the relief sought in this

particular case (e.g., one or both parties sought to establish legal

precedent, or were concerned that a settlement in this case would

encourage or discourage other litigation).

❒ b. One or both parties were more concerned about matters of principle or were too emotionally invested in the case to accept a

compromise resolution.

❒ c. The stakes in the case were so great that the costs of litigation

were relatively insignificant, so that there was little incentive for

settlement on the part of at least one party.

❒ d. The outcome of the case was so highly unpredictable that there

really was no way to find a satisfactory compromise.

❒ e. The parties (and/or counsel) were simply too far apart in their assessment of the likely outcome of the case. Had one or both sides
Amendments to Rule 68

34

been more reasonable or realistic, settlement might have occurred.

❒ f. This was a multiparty case in which the multiple interests involved made it very difficult, if not impossible, to fashion a satisfactory settlement.

❒ g. No serious settlement offers were made. I don’t understand why.

❒ h. Serious settlement negotiations occurred, but failed. I don’t understand why they failed.

❒ i. Other. Please explain:

5. Please check each of the following statements that is applicable to the

settlement of this case. (If the case did not settle, skip this question.)

❒ a. This case settled as soon as the parties had adequate information

to evaluate the case. It could not reasonably have settled earlier

than it did.

❒ b. This case could have settled earlier than it did, although not at

significant savings in litigation expenses.

❒ c. This case could have settled earlier than it did, with significant

savings in litigation expenses. About what percentage of total litigation expenses could have been saved?:_________%

❒ d. The settlement in this case provided my client with a less favorable outcome than he (or she or it) would have accepted had he

been financially able to accept the risks of going to trial, and

hence able to insist on better settlement terms.

6. What remedy or remedies were sought in this case? (please check only

one)

❒ a. Monetary relief only

❒ b. Nonmonetary relief only

❒ c. Both monetary and nonmonetary relief, with the monetary relief

much more significant than the nonmonetary relief

❒ d. Both monetary and nonmonetary relief, with the nonmonetary

relief much more significant than the monetary relief

❒ e. Both monetary and nonmonetary relief, with both being of considerable significance (i.e., not c or d)

7. When the outcome of a case is a matter of significant uncertainty, the

uncertainty may be due mainly to: (1) uncertainty about damages (with

liability fairly clear), (2) uncertainty about liability—or at least about liability for some significant component of alleged damages (with the measure of damages relatively clear), or (3) both of these. Please select one of

the following statements to indicate the nature of the uncertainties in

this case.

❒ a. Liability was seriously at issue, but damages were fairly clear

❒ b. Liability was fairly clear, but damages were uncertain

❒ c. Both liability and damages were uncertain

❒ d. There was not much uncertainty about either damages or liability
Amendments to Rule 68

35

8. Litigation expenses for your client. Litigation expenses refers to attorney’s fees, statutory costs, and other actual expenses incurred in representing your client in this case, by all counsel who took part in that representation. If your client was not charged on an hourly basis (e.g., because the arrangement was a contingent fee, flat fee, or you are in-house

counsel), please estimate what the attorney’s fees would have been had

you charged on an hourly basis at rates that are standard in your locality

for counsel of your level of experience and reputation.

❒ a. What was the approximate total litigation expense for your client

in this case? $_______________

❒ b. About what percentage of total litigation expenses was attributable to attorney’s fees? __________%

❒ c. If this case settled, about how much additional litigation expense

would have been required to take the case through trial or other

final disposition (e.g., if the case likely would have been decided

by summary judgment or have been appealed)? $_______________

9. Please estimate what percentage of the total litigation expenses in this

case fell into each of the following categories (The percentages should

sum to 100%.)

a. ________% Expenses incurred in necessary response to actions of an

opponent that were probably taken primarily for the

purpose of increasing my client’s expenses, and/or delaying or complicating the litigation.

b. ________% Expenses incurred in necessary response to actions of an

opponent that were unreasonable or ill-considered, although probably not undertaken primarily to increase

my client’s expenses or to delay or complicate the litigation.

c. ________% Expenses incurred in necessary response to actions of an

opponent that were reasonable in light of the circumstances of the case.

d. ________% Expenses incurred at the initiative of me or my client,

and which did not necessarily require that opponent incur expense in response.

e. ________% Expenses incurred at the initiative of me or my client,

and which probably or clearly required that opponent

incur expense in response.

10. What was the nature of the fee arrangement with your client in this

case?

❒ a. Hourly fee (exclusively or primarily)

❒ b. Contingent fee

❒ c. In-house counsel or other compensation unrelated to time spent

or result achieved

❒ d. Flat fee

❒ e. Other. Please explain:
Amendments to Rule 68

36

11. What type of party was your client in this case?

❒ a. Plaintiff or claimant only

❒ b. Defendant (party against whom a claim is asserted)

❒ c. Both claimant and party defending against a claim (e.g., a counterclaim was at issue)

❒ d. Other real party in interest (e.g., third party defendant)

❒ e. A nominal party (not a real party in interest)

❒ f. Other. Please explain:

12. Approximately what was the final, “bottom line” settlement offer you

would have recommended that your client make or accept in this case—

the offer most favorable to opponent that you thought an acceptable alternative to trial or other court disposition of the case? Please provide a

monetary figure. Answer “NA” if the settlement terms cannot be equated

to a monetary amount or if your client would have been unwilling to settle due to an interest in establishing precedent, vindicating principles, or

the like. (Place answer in the appropriate space to indicate whether the

final offer would have involved paying or accepting a sum in settlement.)

a. Pay $_________ to settle b. Accept $_________ to settle

13. Suppose that Rule 68 were amended to permit offers by plaintiffs as

well as defendants, with 50% of reasonable post-offer attorney’s fees

payable by a party who fails to accept an offer and does not obtain a better

result in the judgment. Please check each of the following statements

that is applicable to this case (whether or not it settled).

Such an amended Rule 68 probably would have:

❒ a. made no difference in this case

❒ b. made settlement more likely or led to an earlier settlement, and

thus probably resulted in significant savings in litigation expenses

❒ c. delayed settlement, and probably led to greater litigation expenses

❒ d. made settlement less likely

❒ e. resulted in a less favorable result for my client

❒ f. resulted in a more favorable result for my client

❒ g. caused my client never to have brought or defended the case, or

led me to refuse to accept the case
Amendments to Rule 68

37

Part III

The questions in this part pertain to your general experience, practice, or

opinions concerning civil litigation.

14. Again suppose that Rule 68 were amended as explained in the previous question. Please check each of the following statements with which

you agree concerning the likely effects of the rule, in civil cases generally.

The amended rule probably would:

❒ a. result in more cases reaching settlement

❒ b. result in fewer cases reaching settlement

❒ c. lead cases to settle earlier than they would in the absence of the

rule

❒ d. delay settlement

❒ e. lead to case outcomes (net outcome from settlement or trial) that

are more fair

❒ f. lead to case outcomes that are unduly generous to plaintiffs

❒ g. lead to case outcomes that are unduly generous to defendants

❒ h. lead to case outcomes that are unduly generous to wealthier litigants

❒ i. lead to case outcomes that are unduly generous to poorer litigants

❒ j. lead to case outcomes that are less fair, although not necessarily

to the advantage or disadvantage of any particular class of litigants

❒ k. increase the expenses of litigation

❒ l. decrease the expenses of litigation

❒ m. inhibit actions taken for the primary purpose of imposing expenses on an opposing party, or delaying or complicating litigation

❒ n. increase the frequency of actions taken for the primary purpose

of imposing expenses on an opposing party, or delaying or complicating litigation

❒ o. inhibit taking reasonable and/or necessary steps in litigation, out

of fear that the party may have to compensate opponent for the

expense of responding to those actions

❒ p. encourage taking reasonable and/or necessary steps in litigation,

owing to the possibility that those expenses will be compensated

by opponent

❒ q. make no difference
Amendments to Rule 68

38

15. For the types of cases you litigate, please check each statement that

you agree with concerning how a party’s financial means affects the fairness of results in these cases.

❒ a. Financially weaker parties are generally at no disadvantage compared to wealthier parties.

❒ b. A party is at a disadvantage compared to a wealthier party when

the worst possible outcome would be financially ruinous to the

poorer party.

❒ c. A party is at a disadvantage compared to a wealthier party when a

settlement offer that is unfair to that party is nonetheless a large

increase in wealth for the poorer party.

❒ d. Financially weaker parties are generally at a disadvantage compared to wealthier parties, regardless of the range of possible outcomes in the case.

❒ e. Financially weaker parties generally have an advantage, or at least

an offset to other disadvantages, because juries are inclined to

render generous verdicts against wealthier parties and/or inadequate verdicts against poorer parties.

16. Please check the statement that best describes how you generally arrive at a final, bottom line settlement offer that you would recommend

your client make or accept. Please check only one answer.

❒ a. I estimate the average or most likely verdict (or other case outcome), and subtract the litigation expenses likely required of my

client for further litigation.

❒ b. I ignore litigation expenses, and consider only the average or most

likely expected judgment.

❒ c. I try to determine how the opponent assesses the case, and thus

estimate the offer most advantageous to my client that the opponent might be willing to make or accept.

❒ d. I simply explain to the client what I see as the likely or possible

outcomes, and let the client decide whether to make or accept an

offer. I usually do not make any specific recommendation.

❒ e. Other. Please explain:

17. Approximately how many civil cases have you handled or worked on

in the past ten years in which you played a major role in advising on decisions to make, accept, or reject offers of settlement?

❒ a. 3 or fewer

❒ b. between 4 and 10

❒ c. between 11 and 25

❒ d. more than 25

18. Approximately what percentage of the civil cases that you handle or

work on are cases in federal district court?

____________%
Amendments to Rule 68

39

19. If your reflections in the course of answering this questionnaire have

led you to change your opinion regarding possible amendments to (or

abolition of) Rule 68, please return to questions 1 and 2 and answer them

again, this time placing the numeral “2” next to the answer you now

prefer.

20. Please provide on the back of this page any additional comments or

suggestions you may have concerning Rule 68.

❒ Please check here if you wish to receive a copy of the report of this

study. If your address is not shown correctly on the cover letter,

please indicate the correct address here:

Thank you for your cooperation and assistance. Please return the questionnaire in the enclosed envelope (or addressed to: Research Division,

The Federal Judicial Center, One Columbus Circle, N.E., Washington,

DC 20002-8003, Attn.: Rule 68). If you have questions concerning the

survey, please contact John Shapard at (202) 273-4070, ext. 357.

41

Appendix B: Questionnaire Sent to Counsel

in Civil Rights Cases
Amendments to Rule 68

42

Questionnaire Concerning Proposed

Amendments to Rule 68, FRCP

Explanation of Rule 68 and Possible Amendments

No proposed amendment has yet been published for comment or otherwise formally entertained by the Advisory Committee on Civil Rules.

The committee wishes to consider a number of possible alternatives, including abolition of the current rule.

As it now stands, the rule allows a party defending against a claim to

serve an offer of judgment. If the offer is not accepted within 10 days and

the judgment finally obtained is not more favorable to the offeree than

was the offer, the offeree must pay the costs incurred after making the

offer. In cases where a prevailing plaintiff is ordinarily entitled to recover

attorney’s fees as part if its costs, Rule 68 can prevent plaintiff from recovering attorney’s fees incurred after the offer was made.

This questionnaire is concerned particularly with the effects of Rule 68

or possible amendments to the rule as applied to cases in which a prevailing plaintiff would ordinarily recover attorney’s fees as part of the costs in

the action.
Amendments to Rule 68

43

Part I

1. Several ideas have been proposed for amending Rule 68 to alter its effects in cases where a prevailing plaintiff ordinarily recovers attorney’s

fees. Another idea, advocated in the belief that the current rule is unfair

or pointless, is simply to abolish Rule 68. Which of the following options

for amending Rule 68 do you believe would generally lead to the fairest

outcomes for all parties in civil cases where a prevailing plaintiff ordinarily recovers its reasonable attorney’s fees? (Please check one)

❒ a. Allow a defendant-offeror not only to avoid payment of plaintiff’s

fees, but also to recover from plaintiff defendant’s reasonable

post-offer fees.

❒ b. Allow defendant-offeror to avoid payment of plaintiff’s post-offer

of attorney’s fees, but only to the extent that those fees exceed

the difference between the offer and the judgment. The rationale

of this idea is that rejection of the offer has benefited the defendant to the extent that the judgment is superior to the offer. For

instance, a judgment for $80,000 is $20,000 better than

defendant’s offer to pay $100,000. Defendant would be liable for

plaintiff’s reasonable post-offer attorney’s fees up to $20,000, but

no more.

❒ c. Allow offers to be made by either plaintiff or defendant, and provide that a party whose offer is not accepted and not improved on

at trial may recover some multiple of statutory costs (other than

attorney’s fees). What multiple? ___ times costs.

❒ d. Allow offers to be made by either plaintiff or defendant, and provide that a party whose offer is not accepted and not improved on

at trial may recover statutory costs (other than attorney’s fees)

plus expert witness fees or other expenses not ordinarily taxable

as costs. What other expenses?: _______ ).

❒ g. Abolish Rule 68 altogether.

❒ h. Leave Rule 68 as it is.

❒ i. Other. Please explain:
Amendments to Rule 68

44

Part II

Note: The questions in this part pertain specifically to the case referenced

in the cover letter. Before answering the following questions, you may

find it helpful to retrieve your files on the referenced case in order to refresh your memory concerning its litigation and the associated expenses.

Please understand that our motive in asking these questions is not to pry

about details of your case, but rather to provide systematic information—

which does not now exist—about factors that may influence the effectiveness of Rule 68.

2. How was this case resolved? (please check only one answer)

❒ a. It has not been resolved (Please indicate “NA” next to any subsequent questions that you are unable to answer because the case

has not been concluded.)

❒ b. By verdict after a jury trial

❒ c. By verdict after a bench trial

❒ d. By summary judgment

❒ e. By dismissal with prejudice

❒ f. By voluntary dismissal without prejudice

❒ g. By a stipulated disposition that amounted to capitulation by

plaintiff or defendant

❒ h. By a compromise settlement or consent judgment entered into before the case reached judgment in the district court

❒ i. By a settlement entered into after verdict or other final judgment

(e.g., pending appeal)

❒ j. Other. Please explain:

3. If this case was not settled, why not? Please check each answer that is

applicable to this case. (If the case did settle, skip this question.)

❒ a. The matters at stake extended beyond the relief sought in this

particular case (e.g., one or both parties sought to establish legal

precedent, or were concerned that a settlement in this case would

encourage or discourage other litigation).

❒ b. One or both parties were more concerned about matters of principle or were too emotionally invested in the case to accept a

compromise resolution.

❒ c. The stakes in the case were so great that the costs of litigation

were relatively insignificant, so that there was little incentive for

settlement on the part of at least one party.

❒ d. The outcome of the case was so highly unpredictable that there

really was no way to find a satisfactory compromise.

❒ e. The parties (and/or counsel) were simply too far apart in their assessment of the likely outcome of the case. Had one or both sides
Amendments to Rule 68

45

been more reasonable or realistic, settlement might have occurred.

❒ f. This was a multiparty case in which the multiple interests involved made it very difficult, if not impossible, to fashion a satisfactory settlement.

❒ g. No serious settlement offers were made. I don’t understand why.

❒ h. Serious settlement negotiations occurred, but failed. I don’t understand why they failed.

❒ i. Other. Please explain:

4. Please check each of the following statements that is applicable to the

settlement of this case. (If the case did not settle, skip this question.)

❒ a. This case settled as soon as the parties had adequate information

to evaluate the case. It could not reasonably have settled earlier

than it did.

❒ b. This case could have settled earlier than it did, although not at

significant savings in litigation expenses.

❒ c. This case could have settled earlier than it did, with significant

savings in litigation expenses. About what percentage of total litigation expenses could have been saved?:__________%

❒ d. The settlement in this case provided my client with a less favorable outcome than he (or she or it) would have accepted had he

been financially able to accept the risks of going to trial, and

hence able to insist on better settlement terms.

5. What remedy or remedies were sought in this case? (please check only

one)

❒ a. Monetary relief only

❒ b. Nonmonetary relief only

❒ c. Both monetary and nonmonetary relief, with the monetary relief

much more significant than the nonmonetary relief

❒ d. Both monetary and nonmonetary relief, with the nonmonetary

relief much more significant than the monetary relief

❒ e. Both monetary and nonmonetary relief, with both being of considerable significance (i.e., not c or d)

6. When the outcome of a case is a matter of significant uncertainty, the

uncertainty may be due mainly to: (1) uncertainty about the extent of

damages or other relief (with liability fairly clear), (2) uncertainty about

liability—or at least about liability for some significant component of alleged damages (with the measure of relief relatively clear), or (3) both of

these. Please select one of the following statements to indicate the nature

of the uncertainties in this case.

❒ a. Liability was seriously at issue, but the measure of damages or

other relief was fairly clear

❒ b. Liability was fairly clear, but relief was uncertain

❒ c. Both liability and relief were uncertain

❒ d. there was not much uncertainty about either relief or liability
Amendments to Rule 68

46

7. Litigation expenses for your client. Litigation expenses refers to attorney fees, statutory costs, and other actual expenses incurred in representing your client in this case, by all counsel who took part in that representation. If your client was not charged on an hourly basis (e.g., because the

arrangement was a contingent fee, flat fee, or you are in-house counsel),

please estimate what the attorney’s fees would have been had you

charged on an hourly basis at rates that are standard in your locality for

counsel of your level of experience and reputation.

a. What was the approximate total litigation expense for your client in

this case? $_______________

b. About what percentage of total litigation expenses was attributable

to attorney’s fees? __________%

c. If this case settled, about how much additional litigation expense

would have been required to take the case through trial or other

final disposition (e.g., if the case likely would have been decided by

summary judgment or have been appealed)? $______________

8. Please estimate what percentage of the total litigation expenses in this

case fell into each of the following categories (The percentages should

sum to 100%.)

a. ________% Expenses incurred in necessary response to actions of an

opponent that were probably taken primarily for the

purpose of increasing my client’s expenses, and/or delaying or complicating the litigation.

b. ________% Expenses incurred in necessary response to actions of an

opponent that were unreasonable or ill-considered, although probably not undertaken primarily to increase

my client’s expenses or to delay or complicate the litigation.

c. ________% Expenses incurred in necessary response to actions of an

opponent that were reasonable in light of the circumstances of the case.

d. ________% Expenses incurred at the initiative of me or my client,

and which did not necessarily require that opponent incur expense in response.

e. ________% Expenses incurred at the initiative of me or my client,

and which probably or clearly required that opponent

incur expense in response.

9. What was the nature of the fee arrangement with your client in this

case?

❒ a. Hourly fee (exclusively or primarily)

❒ b. Contingent fee

❒ c. In-house counsel or other compensation unrelated to time spent

or result achieved

❒ d. Flat fee

❒ e. Other. Please explain:
Amendments to Rule 68

47

10. What type of party was your client in this case?

❒ a. Plaintiff or claimant only

❒ b. Defendant (party against whom a claim is asserted)

❒ c. Both claimant and party defending against a claim (e.g., a counterclaim was at issue)

❒ d. Other real party in interest (e.g., third party defendant)

❒ e. A nominal party (not a real party in interest)

❒ f. Other. Please explain:

11. Approximately what was the final, “bottom line” settlement offer you

would have recommended that your client make or accept in this case—

the offer most favorable to opponent that you thought an acceptable alternative to trial or other court disposition of the case. Please provide a

monetary figure. Answer “NA” if the settlement terms cannot be equated

to a monetary amount or if your client would have been unwilling to settle due to an interest in establishing precedent, vindicating principles, or

the like. (Place answer in the appropriate space to indicate whether the

final offer would have involved paying or accepting a sum in settlement.)

a. Pay $__________ to settle b. Accept $_____________ to settle

12. Was this case one for which a statute provides for recovery of reasonable attorney’s fees by a prevailing party?

❒ a. No.

❒ b. Yes, but only a prevailing plaintiff is normally allowed to recover

attorney’s fees.

❒ c. Yes, the prevailing party—plaintiff or defendant—is normally allowed to recover attorney’s fees.

13. Did the existing Rule 68 play any role in this case? Please check each

of the following statements that apply.

❒ a. A Rule 68 offer was made and accepted in this case.

❒ b. A Rule 68 offer was made but not accepted.

❒ c. No Rule 68 offer was made in this case, but the fact that defendant could make such an offer did have an influence on settlement negotiations.

❒ d. Rule 68 had no influence in this case.

14. If a Rule 68 offer was made but not accepted in this case, please indicate which of the following occurred as a result of that offer.

❒ a. The judgment finally obtained by plaintiff was superior to the

terms of the offer, so the cost-payment provision of Rule 68 was

not invoked.

❒ b. The plaintiff obtained a judgment that was not more favorable

than the offer, and plaintiff therefore was assessed post-offer costs

and did not recover post-offer attorney’s fees.
Amendments to Rule 68

48

❒ c. Judgment was entered for the defendant, so the Rule 68 cost-payment provision was not invoked (by virtue of the holding in Delta

Airlines v. August, 450 U.S. 346).

❒ d. The case settled other than by acceptance of the Rule 68 offer.

Part III

The questions in this part pertain to your general experience, practice, or

opinions concerning civil litigation.

15. Considering your experience concerning litigation of cases like that

referred to in the cover letter, how do you believe the existing Rule 68

influences such cases? Please check each statement with which you

agree.

Rule 68 . . . 

❒ a. results in more cases reaching settlement

❒ b. results in fewer cases reaching settlement

❒ c. leads cases to settle earlier than they would in the absence of the

rule

❒ d. delays settlement

❒ e. leads to case outcomes (net outcome from settlement or trial)

that are more fair

❒ f. leads to case outcomes that are unduly generous to plaintiffs

❒ g. leads to case outcomes that are unduly generous to defendants

❒ h. leads to case outcomes that are unduly generous to wealthier litigants

❒ i. leads to case outcomes that are unduly generous to poorer litigants

❒ j. leads to case outcomes that are less fair, although not necessarily

to the advantage or disadvantage of any particular class of litigants

❒ k. increases the expenses of litigation

❒ l. decreases the expenses of litigation

❒ m. inhibits actions taken for the primary purpose of imposing expenses on an opposing party, or delaying or complicating litigation

❒ n. increases the frequency of actions taken for the primary purpose

of imposing expenses on an opposing party, or delaying or

complicating litigation

❒ o. inhibits taking reasonable and/or necessary steps in litigation,

out of fear that the party may have to compensate opponent for

the expense of responding to those actions

❒ p. encourages taking reasonable and/or necessary steps in litigation,

owing to the possibility that those expenses will be compensated

by opponent

❒ q. makes no difference
Amendments to Rule 68

49

16. For the types of cases you litigate, please check each statement that

you agree with concerning how a party’s financial means affects the fairness of results in these cases.

❒ a. Financially weaker parties are generally at no disadvantage compared to wealthier parties.

❒ b. A party is at a disadvantage compared to a wealthier party when

the worst possible outcome would be financially ruinous to the

poorer party.

❒ c. A party is at a disadvantage compared to a wealthier party when a

settlement offer that is unfair to that party is nonetheless a large

increase in wealth for the poorer party.

❒ d. Financially weaker parties are generally at a disadvantage compared to wealthier parties, regardless of the range of possible outcomes in the case.

❒ e. Financially weaker parties generally have an advantage, or at least

an offset to other disadvantages, because juries are inclined to

render generous verdicts against wealthier parties and/or inadequate verdicts against poorer parties.

17. Please check the statement that best describes how you generally arrive at a final, bottom line settlement offer that you would recommend

your client make or accept. Please check only one answer.

❒ a. I estimate the average or most likely verdict (or other case outcome), and subtract the litigation expenses likely required of my

client for further litigation.

❒ b. I ignore litigation expenses, and consider only the average or most

likely expected judgment.

❒ c. I try to determine how the opponent assesses the case, and thus

estimate the offer most advantageous to my client that the opponent might be willing to make or accept.

❒ d. I simply explain to the client what I see as the likely or possible

outcomes, and let the client decide whether to make or accept an

offer. I usually do not make any specific recommendation.

❒ e. Other. Please explain:

18. Approximately how many civil cases have you handled or worked on

in the past ten years in which you played a major role in advising on decisions to make, accept, or reject offers of settlement?

❒ a. 3 or fewer

❒ b. between 4 and 10

❒ c. between 11 and 25

❒ d. more than 25
Amendments to Rule 68

50

19. Approximately what percentage of the civil cases that you handle or

work on are cases in federal district court?

____________%

20. If your reflections in the course of answering this questionnaire have

led you to change your opinion regarding possible amendments to (or

abolition of) Rule 68, please return to question 1 and answer it again, this

time placing the numeral “2” next to the answer you now prefer.

21. Please provide on the back of this page any additional comments or

suggestions you may have concerning Rule 68.

❒ Please check here if you wish to receive a copy of the report of

this study. If your address is not shown correctly on the cover letter, please indicate the correct address here:

Thank you for your cooperation and assistance. Please return the questionnaire in the enclosed envelope (or addressed to: Research Division,

The Federal Judicial Center, One Columbus Circle, N.E., Washington,

DC 20002-8003, Attn.: Rule 68). If you have questions concerning the

survey, please contact John Shapard at (202) 273-4070, ext. 357.
51

Appendix C: Tabulations

of Questionnaire Responses

The tables that follow generally provide more detailed tabulations of

questionnaire responses than those set out in the body of the report. In

some instances, however, the body mentions results that are not included

in this appendix. Readers interested in more detailed analyses may obtain

the raw data from the author.

In all tables, the number in parentheses in the column headings is the

number of counsel in the particular category responding to the relevant

question or questions. The tables include responses from counsel in civil

rights cases (Civil Rights Questionnaire) and from counsel in contract,

tort, and other cases (General Questionnaire).
Table 9. Options for Amending Rule 68—Responses to General Questionnaire, Question 1

Several ideas have been proposed for amending Rule 68 to increase the incentive to make and accept early and reasonable seAnother idea, advocated in the belief that the current rule is unfair or pointless, is simply to abolish Rule 68. Which of the foptions for amending Rule 68 do you believe would generally lead to the fairest outcomes for all parties in civil litigation?Response

All

respondents

(n = 748)

Plaintiffs’

counsel

(n = 295)

Defendants’

counsel

(n = 289)

Counsel

in contract

cases

(n = 263)

C

i

(n 

a. Allow recovery of the reasonable attorney’s fees incurred by the offeror after

making the offer. 38% 28% 46% 40% 

b. Same as a, above, but allow recovery of some percentage of reasonable post-offer

attorney’s fees (which could be more or less than 100%). What percentage ofreasonable fees?1 7% 7% 7% 6% 

c. Allow recovery of reasonable attorney’s fees, but only to the extent that they

exceed the difference between the offer and the judgment. The rationale of thisidea is that rejection of the offer has benefited the offeror to the extent that thejudgment is superior to the offer. For instance, a judgment for $100,000 is$20,000 better than plaintiff’s offer to accept $80,000 (or defendant’s offer to pay$120,000). In either case, if offeror’s reasonable post-offer attorney’s fees were$30,000, the offeree would be obliged to pay only $10,000 in compensation forthose fees. 18% 19% 18% 19% 

d. Allow recovery of some multiple of statutory costs. What multiple times costs?2 1% 1% 0% 2% e. Allow recovery of post-offer costs plus expert witness fees or other expenses not

ordinarily taxable as costs (what other expenses?).3 6% 7% 7% 6% 

f. Allow recovery of some percentage of the amount of the judgment. What

percentage?4 2% 2% 1% 3% 

g. Abolish Rule 68 altogether. 18% 25% 13% 16% h. Leave Rule 68 as it is. 9% 10% 10% 8% Note: In Question 19 we asked respondents to revise their answers to Question 1. This table presents the data for the revised responses to Question 1. 1Most respondents indicated a percentage of 50%; the range was 25% to 150%.2The suggested multiple ranged from 1 to 5.3Suggestions included prejudgment interest, all discovery costs, expert witness fees, and/or all out-of-pocket expenses.4Suggestions ranged from 10% to 40%; the median was 25%.
Table 10. Options for Amending Rule 68—Responses to Civil Rights Questionnaire, Questio

Several ideas have been proposed for amending Rule 68 to alter its effects in cases where a prevailing plaintiff ordinarily recofees. Another idea, advocated in the belief that the current rule is unfair or pointless, is simply to abolish Rule 68. Which of options for amending Rule 68 do you believe would generally lead to the fairest outcomes for all parties in civil cases where plaintiff ordinarily recovers its reasonable attorney’s fees?Response

All

respondents

(n = 212)

Plaintiffs’

counsel

(n = 88)

D

a. Allow a defendant-offeror not only to avoid payment of plaintiff’s fees, but also to recover

from plaintiff defendant’s reasonable post-offer fees. 38% 6% 

b. Allow defendant-offeror to avoid payment of plaintiff’s post-offer attorney’s fees, but only

to the extent that those fees exceed the difference between the offer and the judgment. Therationale of this idea is that rejection of the offer has benefited the defendant to the extentthat the judgment is superior to the offer. For instance, a judgment for $80,000 is $20,000better than defendant’s offer to pay $100,000. Defendant would be liable for plaintiff’sreasonable post-offer attorney’s fees up to $20,000, but no more. 11% 16% 

c. Allow offers to be made by either plaintiff or defendant, and provide that a party whose

offer is not accepted and not improved on at trial may recover some multiple of statutorycosts (other than attorney’s fees). What multiple times costs.1 5% 8% 

d. Allow offers to be made by either plaintiff or defendant, and provide that a party whose

offer is not accepted and not improved on at trial may recover statutory costs (other thanattorney’s fees) plus expert witness fees or other expenses not ordinarily taxed as costs. 11% 15% 

g. Abolish Rule 68 altogether. 15% 29% h. Leave Rule 68 as it is. 18% 24% i. Other.2 1% 3% 

1Suggestions ranged from 3 to 5 times costs.2Most respondents suggested some variation on a–d; a few noted difficulties with the current rule concerning offers that include statuto

damages in a lump sum, making it problematic to determine how a final judgment compares with an offer.
Table 11. Option of Precluding Recovery in Amount That Exceeds Judgment—Responses to G

Questionnaire, Question 2Another proposal is to preclude recovery in an amount that exceeds the value of the judgment. If, for instance, plaintiffobtained judgment for $10,000, the amount of post-offer fees or other expenses recoverable by either party could notexceed $10,000. Hence a plaintiff could lose the entire amount of the judgment but not more. Do you favor or opposethis provision?Response

All

respondents

(n = 743)

Plaintiffs’

counsel

(n = 291)

Defendants’

counsel

(n = 289)

a. Favor 33% 34% 33%

b. Oppose 49% 43% 54%c. Unsure or inapplicable 18% 23% 13%Note: In Question 19 we asked respondents to revise their answers to Question 2. This table presents the data for the revisedresponses to Question 2.
Table 12. Resolution of Sample Case—Responses to General Questionnaire, Question 3, and 

Rights Questionnaire, Question 2How was this case [the case referenced in the cover letter] resolved?Response

Counsel

in all cases

(n = 958)

Counsel

in tried cases

(n = 534)

Counsel 

nontried c

(n = 424

a. It has not been resolved. 6% 10% 1%

b. By verdict after a jury trial. 24% 43% 0%c. By verdict after a bench trial. 14% 25% 0%d. By summary judgment. 2% 1% 2%e. By dismissal with prejudice. 3% 1% 6%f. By voluntary dismissal without prejudice. 2% 0% 4%g. By a stipulated disposition that amounted to capitulation by plaintiff or

defendant. 4% 1% 8%

h. By a compromise settlement or consent judgment entered into before the

case reached judgment in the district court. 33% 4% 70%

i. By a settlement entered into after verdict or other final judgment (e.g.,

pending appeal). 4% 6% 1%

j. Other.1 8% 10% 7%

Note: This question was included on both questionnaires to check the reliability of the tried/not-tried indicator used to select the sample, discern what proportion of non-tried cases were in fact settlements. Some tried cases were reported as resolved by settlement, dismissal, omary judgment because the respondent answered the question with respect to his or her client—who settled—even though the case later wtrial between non-settling parties.1Most of the “other” responses indicate a pending appeal or a case still active in the courts after appeal and remand.
Table 13. Reasons for Failure to Settle Sample Case—Responses to General Questionnaire, Q

and Civil Rights Questionnaire, Question 3If this case was not settled, why not?Response

All

respondents

(n = 523)

Plaintiffs’

counsel

(n = 211)

Defendants’

counsel

(n = 216)

Counsel

in

contract

cases

(n = 143)

Counsel

in tort

cases

(n = 136)

Councivil 

ca

(n = 

a. The matters at stake extended beyond the relief sought in this

particular case (e.g., one or both parties sought to establish legalprecedent, or were concerned that a settlement in this case wouldencourage or discourage other litigation). 13% 9% 18% 8% 10% 19

b. One or both parties were more concerned about matters of principle or

were too emotionally invested in the case to accept a compromiseresolution. 26% 21% 29% 23% 12% 42

c. The stakes in the case were so great that the costs of litigation were

relatively insignificant, so that there was little incentive forsettlement on the part of at least one party. 11% 9% 10% 13% 13% 

d. The outcome of the case was so highly unpredictable that there really

was no way to find a satisfactory compromise. 11% 15% 7% 10% 18% 

e. The parties (and/or counsel) were simply too far apart in their

assessment of the likely outcome of the case. Had one or bothsides been more reasonable or realistic, settlement might haveoccurred. 50% 45% 50% 53% 60% 39

f. This was a multi-party case in which the multiple interests involved

made it very difficult, if not impossible, to fashion a satisfactorysettlement. 5% 2% 4% 5% 4% 

g. No serious settlement offers were made. I don’t understand why. 14% 24% 5% 17% 14% 1h. Serious settlement negotiations occurred, but failed. I don’t

understand why they failed. 3% 2% 2% 1% 2% 

i. Other. 15% 14% 18% 14% 13% 1
Table 14A. Promptness of Settlement of Sample Case—Responses to General Questionnaire, 

5, and Civil Rights Questionnaire, Question 4Please check each of the following statements that is applicable to the settlement of this case [the case referenced in the covResponse

All

respondents

(n = 433)

Plaintiffs’

counsel

(n = 190)

Defendants’

counsel

(n = 179)

Counsel in

contract cases

(n = 115)

Counsel in

tort cases

(n = 103)

Counsel civil righ

cases

(n = 97)

a. This case settled as soon as the parties

had adequate information to evaluate thecase. It could not reasonably have settledearlier than it did. 40% 39% 42% 38% 42% 44% 

b. This case could have settled earlier than

it did, although not at significant savingsin litigation expenses. 32% 37% 30% 34% 39% 29% 

c. This case could have settled earlier than

it did, with significant savings inlitigation expenses. About whatpercentage of total litigation expensescould have been saved?1 28% 25% 27% 28% 21% 27% 

1Estimates of the percentage of expenses that could have been saved ranged from 15% to 90%; the mean and median were 50%.
Table 14B. Adequacy of Settlement in Sample Case—Responses to General Questionnaire, Q

and Civil Rights Questionnaire, Question 4Please check each of the following statements that is applicable to the settlement of this case [the case referenced in the cov

Contract, tort, and other cases Civil rights c

Response

Contingent-fee

plaintiffs’

counsel(n = 73)

Hourly-fee

plaintiffs’

counsel

(n = 41)

Hourly-fee

defendants’

counsel

(n = 119)

Plaintiffs’

counsel

(n = 44)

d. The settlement in this case provided my

client with a less favorable outcome thanhe (or she or it) would have accepted hadhe been financially able to accept the risksof going to trial, and hence able to insiston better settlement terms. 4% 10% 7% 27% 
Table 15. Relief Sought in Sample Case—Responses to General Questionnaire, Question 6, a

Rights Questionnaire, Question 5What remedy or remedies were sought in this case?Response

Counsel

in contract

cases

(n = 259)

Counsel

in tort

cases

(n = 236)

Counsel

in civil rights

cases

(n = 214)

a. Monetary relief only. 79% 95% 50% 

b. Non-monetary relief only. 2% 0% 0% c. Both monetary and non-monetary relief, with the monetary

relief much more significant than the non-monetary relief. 10% 1% 25% 

d. Both monetary and non-monetary relief, with the non-monetary

relief much more significant than the monetary relief. 3% 1% 10% 

e. Both monetary and non-monetary relief, with both being of

considerable significance (i.e., not c or d). 7% 2% 15% 
Table 16. Nature of Uncertainty in Sample Case—Responses to General Questionnaire, Ques

Civil Rights Questionnaire, Question 6When the outcome of a case is a matter of significant uncertainty, the uncertainty may be due mainly to: (1) uncertainty (with liability fairly clear), (2) uncertainty about liability—or at least about liability for some significant component of a(with the measure of damages relatively clear), or (3) both of these. Please select one of the following statements to indicathe uncertainties in this case.Response

All

respondents

(n = 950)

Plaintiffs’

counsel

(n = 388)

Defendants’

counsel

(n = 399)

Counsel in

tried cases

(n = 527)

Counsel in

settled cases

(n = 423)

Counsel in

contract

cases

(n = 256)

Counsel

in tort

cases

(n = 238)

Counscivil ri

cas

(n = 2

a. Liability was seriously at

issue, but damages werefairly clear. 31% 35% 28% 37% 23% 29% 31% 29% 

b. Liability was fairly clear, but

damages were uncertain. 13% 17% 10% 10% 17% 11% 15% 12% 

c. Both liability and damages

were uncertain. 40% 31% 50% 42% 39% 39% 44% 49% 

d. There was not much

uncertainty about eitherdamages or liability. 15% 18% 13% 11% 21% 21% 11% 10% 
Table 17. Litigation Expenses and Amounts at Stake in Sample Case—Responses to General

Questionnaire, Questions 8 and 12, and Civil Rights Questionnaire, Questions 7 and 11What were the litigation expenses for your client? Approximately what was the final “bottom line” settlement offer you worecommended that your client make or accept in this case?Type of case

Party

represented

Median

litigation

expenses

20% counsel

indicated

expenses less

than

20% counsel

indicated

expenses more

than

Median

percentage

attributable toattorney’s fees

Median

additional

expenses to

try case

Medianratio of

additional to

actual expenses

Contract Tried Plaintiff $40,000 $10,000 $100,000 85% 

Defendant $30,000 $15,000 $230,000 90% 

Settled Plaintiff $10,000 $2,500 $20,000 90% $10,000 88% 

Defendant $10,000 $1,500 $25,000 90% $10,000 133% 

Tort Tried Plaintiff $40,000 $15,000 $90,000 75% 

Defendant $30,000 $10,000 $80,000 80% 

Settled Plaintiff $16,000 $5,000 $95,000 80% $10,000 40% 

Defendant $10,000 $5,000 $35,000 85% $10,000 71% 

Civil rights Tried Plaintiff $39,000 $10,000 $90,000 85% 

Defendant $26,000 $10,000 $50,000 90% 

Settled Plaintiff $10,000 $3,500 $20,000 85% $10,000 75% 

Defendant $12,500 $4,000 $35,000 90% $15,000 125% 

Other Tried Plaintiff $30,000 $13,000 $180,000 80% 

Defendant $75,000 $20,000 $250,000 85% 

Settled Plaintiff $8,300 $2,000 $20,000 81% $10,000 100% 

Defendant $12,000 $5,000 $35,000 90% $20,000 200% 
Table 18. Breakdown of Litigation Expenses in Sample Case—Responses to General Question

Question 9, and Civil Rights Questionnaire, Question 8Please estimate what percentage of the total litigation expenses in this case fell into each of the following categories. (The pshould sum to 100%).

All

respondents

Plaintiffs’

counsel

Defendants’

counsel

Counsel in

tried cases

Counsel in

settled cases

Counsel in

contract

cases

Counsel in

tort cases

Counsecivil rig

cases

Response1

Avg.

% % > 0

Avg.

% % > 0

Avg.

% % > 0

Avg.

% % > 0

Avg.

% % > 0

Avg.

% % > 0

Avg.

% % > 0

Avg.

% % 

a. Responsive: Abusive 10 38% 11 43% 7 28% 10 41% 9 34% 9 39% 5 23% 9 40b. Responsive: Unreasonable 11 48% 7 45% 11 45% 11 51% 11 43% 10 49% 7 35% 13 53c. Responsive: Reasonable 39 35 45 39 39 39 40 42 d. Incurred at own initiative,

no consequence to opponent 17 20 16 18 17 17 24 14 

e. Incurred at own initiative,

consequences to opponent 24 26 21 24 23 24 24 22 

Sum of a and b 20 58% 19 58% 19 52% 20 60% 20 55% 20 58% 12 42% 22 63

Note: Each pair of columns shows the average percentage of expenses attributed to the category and the percentage of respondents who some portion of expenses to that category.1The actual descriptions of the categories of expenses were as follows:

a. Expenses incurred in necessary response to actions of an opponent that were probably taken primarily for the purpose of inc

client’s expenses, and/or delaying or complicating the litigation.

b. Expenses incurred in necessary response to actions of an opponent that were unreasonable or ill-considered, although probably 

taken primarily to increase my client’s expenses or to delay or complicate the litigation.

c. Expenses incurred in necessary response to actions of an opponent that were reasonable in light of the circumstances of the case.d. Expenses incurred at the initiative of me or my client, and which did not necessarily require that opponent incur expense in respone. Expenses incurred at the initiative of me or my client, and which probably or clearly required that opponent incur expense in respo
Table 19. Likely Effects on Sample Case of a Two-Way Offer-of-Judgment Rule Providing for 

50% of Offeror’s Attorney’s Fees—Responses to General Questionnaire, Question 13Suppose that Rule 68 were amended to permit offers by plaintiffs as well as defendants, with 50% of reasonable post-offepayable by a party who fails to accept an offer and does not obtain a better result in the judgment. Such an amended Ruwould have:Response

All

respondents

(n = 737)

Plaintiffs’

counsel

(n = 296)

Defendants’

counsel

(n = 282)

Counsel

in tried

cases

(n = 422)

Plaintiffs’

counsel intried cases

(n = 166)

Defendants’

counsel intried cases

(n = 160)

Counsel

in settled

cases

(n = 315)

Plaintiffs

counsel in

settled cas

(n = 130)

a. Made no difference in this

case. 61% 55% 65% 60% 54% 65% 61% 57% 

b. Made settlement more likely

or led to an earliersettlement, and thus probablyresulted in significant savingsin litigation expenses. 27% 32% 23% 27% 34% 22% 26% 28% 

c. Delayed settlement, and

probably led to greaterlitigation expenses. 2% 1% 3% 1% 0% 2% 4% 3% 

d. Made settlement less likely. 3% 2% 3% 2% 1% 2% 3% 3% e. Resulted in a less favorable

result for my client. 6% 6% 7% 8% 7% 8% 4% 4% 

f. Resulted in a more favorable

result for my client. 11% 12% 9% 12% 14% 9% 11% 9% 

g. Caused my client never to

have brought or defended thecase, or led me to refuse toaccept the case. 2% 4% 1% 3% 4% 1% 2% 3% 
Table 20. Perceived or Anticipated Effects of a Two-Way Offer-of-Judgment Rule—Responses 

Questionnaire, Question 14, and Civil Rights Questionnaire, Question 15Again suppose that Rule 68 were amended as explained in the previous question. Please check each of the following statemeyou agree concerning the likely effects of the rule, in civil cases generally. The amended rule probably would:1

Civil rights cases Al

Response

Plaintiffs’

counsel

Defendants’

counsel

Plaint

coun

a. Result in more cases reaching settlement. 31% 47% 73% b. Result in fewer cases reaching settlement. 1% 1% 3% c. Lead cases to settle earlier than they would in the absence of the rule. 21% 50% 61% d. Delay settlement. 5% 1% 3% e. Lead to case outcomes (net outcome from settlement or trial) that are more fair. 9% 24% 20% f. Lead to case outcomes that are unduly generous to plaintiffs. 0% 4% 1% g. Lead to case outcomes that are unduly generous to defendants. 20% 2% 4% h. Lead to case outcomes that are unduly generous to wealthier litigants. 12% 2% 17% i. Lead to case outcomes that are unduly generous to poorer litigants. 0% 2% 2% j. Lead to case outcomes that are less fair, although not necessarily to the advantage or

disadvantage of any particular class of litigants. 8% 2% 12% 

k. Increase the expenses of litigation. 9% 4% 10% l. Decrease the expenses of litigation. 15% 40% 42% m. Inhibit actions taken for the primary purpose of imposing expenses on an opposing party, or

delaying or complicating litigation. 13% 23% 32% 

n. Increase the frequency of actions taken for the primary purpose of imposing expenses on an

opposing party, or delaying or complicating litigation. 13% 

4% 7% 

o. Inhibit taking reasonable and/or necessary steps in litigation, out of fear that the party may

have to compensate opponent for the expense of responding to those actions. 13% 5% 16% 

p. Encourage taking reasonable and/or necessary steps in litigation, owing to the possibility that

those expenses will be compensated by opponent. 12% 15% 11% 

q. Make no difference. 36% 26% 6% Note: The percentages total more than 100 because multiple responses were allowed. 1Counsel in civil rights cases were asked a question different from that asked of counsel in the other cases, but both were provided with the same response cho
Table 21. Financial Means’ Effect on Fairness of Results—Responses to General Questionnai

Question 15, and Civil Rights Questionnaire, Question 16For the types of cases you litigate, please check each statement that you agree with concerning how a party’s financial mfairness of results in these cases.Response

All

respondents

(n = 913)

Counsel in

contract

cases

(n = 252)

Counsel

in tort

cases

(n = 230)

Counsel incivil rights

cases

(n = 194)

Counsel

in other

cases

(n = 237)

Plaintif

counse

(n = 37

a. Financially weaker parties are generally at no

disadvantage compared to wealthier parties. 17% 14% 23% 23% 11% 11% 

b. A party is at a disadvantage compared to a wealthier

party when the worst possible outcome would befinancially ruinous to the poorer party. 58% 64% 57% 46% 64% 66% 

c. A party is at a disadvantage compared to a wealthier

party when a settlement offer that is unfair to thatparty is nonetheless a large increase in wealth for thepoorer party. 33% 34% 33% 29% 35% 42% 

d. Financially weaker parties are generally at a

disadvantage compared to wealthier parties, regardlessof the range of possible outcomes in the case. 63% 66% 59% 57% 70% 72% 

e. Financially weaker parties generally have an

advantage, or at least an offset to other disadvantages,because juries are inclined to render generous verdictsagainst wealthier parties and/or inadequate verdictsagainst poorer parties. 19% 18% 21% 25% 14% 8% 

Note: The percentages total more than 100 because multiple responses were allowed.