Opinion ID: 873585
Heading Depth: 2
Heading Rank: 3

Heading: Dearlove’s First Offer Of Judgment

Text: Dearlove first offered $18,000 inclusive of interest, attorney’s fees, and costs; this offer required Campbell to pay all outstanding medical liens. The superior court reasoned that this offer would have resulted in a $2,000 net loss to Campbell after paying the $20,000 subrogation claim. Because Campbell received $3,870 at trial, the court concluded that the jury award was more favorable than the first offer of judgment. Dearlove argues the court erred by considering the $20,000 subrogation claim when it assessed the value of her first settlement offer. She notes that on reconsideration the superior court speculated that had the jury considered the subrogation claim, it “likely would have awarded $23,800 in total damages.” She maintains that the correct comparison was between the $18,000 offer, standing alone, and the $3,870 award (plus interest, attorney’s fees, and costs). Although we agree it was error to compare a hypothetical net recovery to the offer, we reject Dearlove’s argument that the $20,000 payment to Campbell’s insurer is irrelevant to the Rule 68(b) analysis. We have refused to label an offer as “worthless” simply because it was for 10 Jaso v. McCarthy, 923 P.2d 795, 801-02 (Alaska 1996) (citing Grow v. Ruggles, 860 P.2d 1225, 1227-28 (Alaska 1993)). 11 Mackie v. Chizmar, 965 P.2d 1202, 1205 (Alaska 1998) (citing Pratt & Whitney Can., Inc. v. Sheehan, 852 P.2d 1173, 1182 (Alaska 1993)). 12 See Alaska R. Civ. P. 68(b). -7- 6785 less than the value of a subrogated claim.13 Simply put, a Rule 68 offer of judgment can be for less than the value of subrogated claims. But contrary to Dearlove’s broader position, requiring courts to consider only the final award is “an overly technical reading” of Rule 68.14 In Progressive Corp. v. Peter ex rel. Peter, the defendant offered the plaintiffs $52,501 plus prejudgment interest, costs, and fees, for a total value of just over $70,000.15 The plaintiffs did not accept the offer.16 The superior court subsequently ruled on a key liability issue against the defendant, and the defendant then voluntarily paid a little more than $75,000 into the court registry for the plaintiffs’ benefit.17 Because the plaintiffs did not recover additional damages and were awarded only $8,555 in attorney’s fees, the defendant sought Rule 68 fees, claiming that “[v]oluntary payments and partial settlements are not the benchmark by which offers of judgment should be evaluated.”18 The superior court disagreed, and we affirmed the superior court’s ruling.19 We looked to the total amount recovered rather than just the amount awarded at trial and held that the superior court did not err by including the defendant’s voluntary payment in its calculation of the “judgment finally rendered.”20 13 Jaso, 923 P.2d at 801-02. 14 Progressive Corp. v. Peter ex rel. Peter, 195 P.3d 1083, 1090 (Alaska 2008). 15 Id. at 1089. 16 Id. at 1086. 17 Id. 18 Id. at 1088 (emphasis in original). 19 Id. at 1090. 20 Id. at 1089 (“Because the amount recovered exceeded the amount that (continued...) -8- 6785 Here the superior court should have included Dearlove’s insurer’s subrogation payment with the jury’s verdict when determining the total amount Campbell recovered. We reach this conclusion because Campbell included her insurer’s subrogation claim in the damages pursued in her lawsuit and Dearlove’s first offer left Campbell responsible for the subrogation claim. Dearlove’s insurer’s direct payment to Campbell’s insurer on its subrogation claim therefore was a part of Campbell’s total recovery, and it should have been considered when the superior court compared Campbell’s “judgment finally rendered” against the first settlement offer. Under Dearlove’s reading, voluntary pre-trial payments would not be included when assessing a preceding Rule 68 offer’s success. Rule 68’s goals could be thwarted by such a narrow interpretation: it would permit a party to make a Rule 68 offer knowing the opposing party is unlikely to accept, make voluntary payments to remove part of the opposing party’s claim from the issues at trial, and then seek Rule 68 attorney’s fees and costs based on the amount awarded in the final verdict. Indeed, in Progressive we cautioned that abusive settlement tactics could result if trial courts were unable to consider partial recoveries not expressly included in the court’s judgment.21 We agreed with the plaintiff that “[t]o hold otherwise would be to create a loophole allowing parties to either escape or create the punitive measures of an offer of judgment by simply making a gratuitous payment prior to the entry of a final judgment. Such a loophole would . . . effectively avoid the rule.”22 We further observed 20 (...continued) would have been paid had the offer been accepted, the amount recovered was necessarily not ‘at least’ five . . . percent ‘less favorable’ to the [plaintiffs] than the offer.” (emphasis added)). 21 Id. at 1091. 22 Id. -9- 6785 that if trial courts could not consider voluntary pre-trial payments when determining whether to award Rule 68 fees, the “unconditional acceptance of an eve-of-trial payment could trigger an unexpected and ruinous penalty.”23 Rule 68 is not intended to benefit an offeror who unilaterally satisfies a portion of the other party’s claim in a way that is not reflected in the final verdict.24 As to Dearlove’s first offer of judgment, the correct comparison is between her $18,000 allinclusive offer and Campbell’s recovery — Dearlove’s $20,000 payment to Campbell’s insurer plus the $3,870 Campbell recovered at trial (plus prejudgment interest, fees, and costs). Dearlove’s first offer was for an amount less than Campbell’s recovery; accordingly, Rule 68 fees and costs were not available to Dearlove.