Opinion ID: 556532
Heading Depth: 2
Heading Rank: 1

Heading: The Offer of Judgment

Text: 13 Although issues involving construction of Rule 68 offers are reviewed de novo, disputed factual findings concerning the circumstances under which the offer was made are usually reviewed for clear error. 1 Simon v. Intercontinental Transport B.V., 882 F.2d 1435, 1439 (9th Cir.1989). However, no deference need be accorded in the summary judgment setting where no evidentiary hearing was ever held on the settlement issue. 2 Heiniger v. City of Phoenix, 625 F.2d 842, 843-44 (9th Cir.1980). 14 This case presents an issue of first impression in this circuit: whether a Rule 68 Offer of Judgment may be withdrawn after acceptance based on the offeror's failure to recognize that costs in actions under 42 U.S.C. Sec. 1983 automatically include attorney fees under 42 U.S.C. Sec. 1988. We hold that the City's drafting error should be construed against it, rather than against the plaintiff. 15 Erdman was entitled to rely on the plain language of the offer he accepted, $7,500 with costs now accrued, which under Marek v. Chesny, 473 U.S. 1, 105 S.Ct. 3012, 87 L.Ed.2d 1 (1985), entitles him to a reasonable attorney's fee award in addition to the lump sum named in the offer. 3 The City alleges that plaintiff's counsel somehow laid in waiting to trick the City into offering more than it meant to. It contends that with costs was intended to mean including costs rather than plus costs, and argues that its inartful draftsmanship constitutes grounds for rescission since the opposing attorney should have realized that the offer was misleadingly drafted. 16 Both sides agree that Rule 68's cost-shifting provision is generally intended to encourage settlement by providing both defendants and plaintiffs with strong incentives to end the litigation early. The stakes for a plaintiff who receives an Offer of Judgment under Rule 68 are especially high in civil rights cases, since 42 U.S.C. Sec. 1988 specifically authorizes attorneys' fees to be awarded to prevailing plaintiffs as an element of costs. The effect of Rule 68 in civil rights cases encourages settlements rather than engaging in costly litigation. 17 Marek, the leading case on this issue, confirms this trade-off based on the history and intent behind Rule 68. Application of Rule 68 will serve as a disincentive for the plaintiff's attorney to continue litigation after the defendant makes a settlement offer, and will require plaintiffs to 'think very hard' about whether continued litigation is worthwhile. 473 U.S. at 10-11, 105 S.Ct. at 3017-18. Marek specifically held that the Rule 68 term costs includes attorney fees under 42 U.S.C. Secs. 1983 and 1988, but allowed defendants to choose whether to make all-inclusive lump-sum offers or name a damages figure and allow fees to be added later. 18 If an offer recites that costs are included or specifies an amount for costs, and the plaintiff accepts the offer, the judgment will necessarily include costs; if the offer does not state that costs are included and an amount for costs is not specified, the court will be obliged by the terms of the Rule to include in its judgment an additional amount which in its discretion it determines to be sufficient to cover the costs.... Accordingly, it is immaterial whether the offer recites that costs are included, whether it specifies the amount ... or, for that matter whether it refers to costs at all. 19 Id. at 6, 105 S.Ct. at 3015 (citation omitted). 20 Typically, a settlement agreement is analyzed in the same manner as any contract, i.e., any ambiguities are construed against the drafter. Where necessary, district courts are authorized to look to extrinsic evidence to clarify ambiguities as to the intended meaning of material terms. Callie, 829 F.2d at 890-91. Rule 68 offers, however, differ from contracts with respect to attorney fees. We have held that any waiver or limitation of attorney fees in settlements of Sec. 1983 cases must be clear and unambiguous. Muckleshoot Tribe v. Puget Sound Power & Light Co., 875 F.2d 695, 698 (9th Cir.1989). 21 Muckleshoot was a Sec. 1983 case involving Indian water rights. After four years of negotiations, the parties agreed on a consent decree which said nothing about fees or costs. In resolving the subsequent attorney fee litigation, we stated that any party wishing to foreclose a suit for Sec. 1988 fees must negotiate a provision waiving attorneys' fees. Id. We placed the burden squarely on the defendant to demonstrate by clear language in the release that fees had been waived or otherwise negotiated. 22 [I]f the language in the release is unclear or ambiguous, surrounding circumstances may clearly manifest the intent of the parties that attorneys' fees be waived.... Conversely, if the defendant can provide clear evidence that demonstrates that an ambiguous clause was intended by both parties to provide for the waiver of fees, then the defendant is absolved of liability. 23 Id. We see no reason why the logic of Muckleshoot should not apply to all civil rights settlements, whether settled by negotiated consent decrees or Rule 68 offers. As stated by the Northern District of Illinois when confronted with a similar situation,  'it would be ludicrous and manifestly unjust to allow the Defendants to argue after the fact that their offer really means more than it says.'  Rateree v. Rockett, 668 F.Supp. 1155, 1159 (N.D.Ill.1987), quoting plaintiff's counsel. Accord, Shorter v. Valley Bank and Trust, 678 F.Supp. 714 (N.D.Ill.1988); Blake v. Yackovich, 683 F.Supp. 240 (D.C.Utah 1988); Tyler v. Meola, 113 F.R.D. 184 (N.D.Ohio 1986). Cf. Corder v. Gates, 688 F.Supp. 1418 (C.D.Cal.1988) (rejecting Rule 68 offer because no meeting of the minds). 24 The case relied on by the district court here, Radecki v. Amoco Oil Co., is distinguishable both because it did not involve the civil rights fee statute, 42 U.S.C. Sec. 1988, 4 and because there was no mutual assent in that the plaintiff attempted to accept an offer that did not include attorney fees, rather than the offer actually tendered. Id. at 401-03. We hold that as the terms of the accepted offer here did not clearly exclude an additional attorney fee award as required by Muckleshoot, the City is bound by the letter of its agreement and must pay Erdman's reasonable attorney fees in addition to the amount contained in its offer.