Court Opinion

ID: 9428222
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:23:11.375463+00
Date Added: 2024-06-11T17:23:12.338653
License: Public Domain

Justice Stevens
delivered the opinion of the Court.
Pursuant to Rule 68 of the Federal Rules of Civil Procedure, if a plaintiff rejects a defendant’s formal settlement offer, and if “the judgment finally obtained by the offeree is *348not more favorable than the offer/' the plaintiff “must pay the costs incurred after the making of the offer.” 1 The narrow question presented by this case is whether the words “judgment finally obtained by the offeree” as used in that Rule should be construed to encompass a judgment against the offeree as well as a judgment in favor of the offeree.
Respondent Rosemary August (plaintiff) filed a complaint against petitioner Delta Air Lines, Inc. (defendant), alleging that she had been discharged from her position as a flight attendant solely because of her race in violation of Title VII of the Civil Rights Act of 1964, 42 U. S. C. § 2000e et seq. She sought reinstatement, approximately $20,000 in backpay, attorney’s fees, and costs. A few months after the complaint was filed, defendant made a formal offer of judgment to plaintiff in the amount of $450.2 The offer was refused, the *349case was tried, and plaintiff lost. The District Court entered judgment in favor of defendant and directed that each party bear its own costs. Defendant then moved for modification of the judgment, contending that under Rule 68 the plaintiff should be required to pay the costs incurred by defendant after the offer of judgment had been refused. The District Court denied the motion on the ground that the $450 offer had not been made in a good-faith attempt to settle the case and therefore did not trigger the cost-shifting provisions of Rule 68.3 The Court of Appeals affirmed on the same ground, 600 F. 2d 699 (CA7 1979), holding that Rule 68 applied only if the defendant’s settlement offer was sufficient “to justify serious consideration by the plaintiff.” 4
*350In finding a reasonableness requirement in the Rule, the Court of Appeals did not confront the threshold question whether Rule 68 has any application to a case in which judgment is entered against the plaintiff-offeree and in favor of the defendant-offeror. Our resolution of the case, however, turns on that threshold question. The answer is dictated by the plain language, the purpose, and the history of Rule 68.
I
Rule 68 prescribes certain consequences for formal settlement offers made by “a party defending against a claim.” 5 The Rule has no application to offers made by the plaintiff. The Rule applies to settlement offers made by the defendant in two situations: (a) before trial, and (b) in a bifurcated proceeding, after the liability of the defendant has been determined “by verdict or order or judgment.” In either situation, if the plaintiff accepts the defendant’s offer, “either party may then file the offer . . . and thereupon the clerk shall enter judgment.” If, however, the offer is not accepted, it is deemed withdrawn “and evidence thereof is not admissible except in a proceeding to determine costs.” The plaintiff’s rejection of the defendant’s offer becomes significant in such a proceeding to determine costs.6
*351Under Rule 54 (d) of the Federal Rules of Civil Procedure, the party prevailing after judgment recovers costs unless the trial court otherwise directs.7 Rule 68 could conceivably alter the Rule 54 (d) presumption in favor of the prevailing party after three different kinds of judgments are entered: (1) a judgment in favor of the defendant; (2) a judgment in favor of the plaintiff but for an amount less than the defendant’s settlement offer; or (3) a judgment for the plaintiff for an amount greater than the settlement offer. The question presented by this case is which of these three situations is described by the words “judgment finally obtained by the of-feree . . . not more favorable than the offer.”
Obviously those words do not encompass the third situation — a judgment in favor of the offeree that is more favorable than the offer. Those words just as clearly do encompass the second, for there can be no doubt that a judgment in favor of the plaintiff has been “obtained by the offeree.” But inasmuch as the words “judgment . . . obtained by the offeree” — rather than words like “any judgment” — would not normally be read by a lawyer to describe a judgment in favor of the other party, the plain language of Rule 68 confines its effect to the second type of case — one in which the plaintiff has obtained a judgment for an amount less favorable than the defendant’s settlement offer.
This reading of the plain language of the Rule is supported by other language contained in the Rule. The Rule applies when the defendant offers to have “judgment . . . taken against him.” Because the Rule obviously contemplates that a “judgment taken” against a defendant is one favorable to the plaintiff; it follows that a judgment “obtained” by the plaintiff is also a favorable one.
*352In sum, if we limit our analysis to the text of the Rule itself, it is clear that it applies only to offers made by the defendant and only to judgments obtained by the plaintiff. It therefore is simply inapplicable to this case because it was the defendant that obtained the judgment.
II
Our interpretation of the Rule is consistent with its purpose. The purpose of Rule 68 is to encourage the settlement of litigation.8 In all litigation, the adverse consequences of potential defeat provide both parties with an incentive to settle in advance of trial. Rule 68 provides an additional inducement to settle in those cases in which there is a strong probability that the plaintiff will obtain a judgment but the amount of recovery is uncertain. Because prevailing plaintiffs presumptively will obtain costs under Rule 54 (d), Rule 68 imposes a special burden on the plaintiff to whom a formal settlement offer is made. If a plaintiff rejects a Rule 68 settlement offer, he will lose some of the benefits of victory if his recovery is less than the offer.9 Because costs are usually assessed against the losing party, liability for costs is a normal incident of defeat. Therefore, a nonsettling plaintiff does not run the risk of suffering additional burdens that do not ordinarily attend a defeat, and Rule 68 would provide little, if any, additional incentive if it were applied when the plaintiff loses.
*353Defendant argues that Rule 68 does provide such an incentive, because it operates to deprive the district judge of the discretion vested in him by Rule 54 (d). According to this reasoning, Rule 68 is mandatory, and a district judge must assess costs against a plaintiff who rejects a settlement offer and then either fails to obtain a judgment or recovers less than the offer. Therefore, nonsettling plaintiffs could not reject settlement offers in the expectation that the judge might exercise his discretion to deny the defendant costs if the defendant wins.10
If we were to accept this reasoning, it would require us to disregard the specific intent expressed in Rule 54 (d) and thereby to attribute a schizophrenic intent to the drafters. If, as defendant argues, Rule 68 applies to defeated plaintiffs, any settlement offer, no matter how small, would apparently trigger the operation of the Rule.11 Thus any defendant, by performing the meaningless act of making a nominal settlement offer, could eliminate the trial judge’s discretion under Rule 54 (d). We cannot reasonably conclude that the drafters of the Federal Rules intended on the one hand affirmatively to grant the district judge discretion to deny costs to the prevailing party under Rule 54 (d) and then on the other hand to give defendants — and only defendants — the power to take away that discretion by performing a token act.12
*354Moreover, if the Rule operated as defendant argues, we cannot conceive of a reason why the drafters would have given only defendants, and not plaintiffs, the power to divest the judge of his Rule 54 (d) discretion. See Simonds v. Guaranty Bank & Trust Co., 480 F. Supp. 1257, 1261 (Mass. 1979). When Rule 68 is read literally, however, it is evenhanded in its operation. As we have already noted, it does not apply to judgments in favor of the defendant or to judgments in favor of the plaintiff for an amount greater than the settlement offer. In both of those extreme situations the trial judge retains his Rule 54 (d) discretion. In the former his discretion survives because the Rule applies only to judgments “obtained by the offeree”; in the latter, it survives because the Rule does not apply to a judgment “more favorable than the offer.” 13 Thus unless we assume that the Federal Rules were intended to be biased in favor of defendants, we can conceive of no reason why defendants — and not plaintiffs— *355should be given an entirely risk-free method of denying trial judges the discretion that Rule 54 (d) confers regardless of the outcome of the litigation.14
The Court of Appeals, perceiving the anomaly of allowing defendants to control the discretion of district judges by making sham offers, resolved the problem by holding that only reasonable offers trigger the operation of Rule 68. But the plain language of the Rule makes it unnecessary to read a reasonableness requirement into the Rule. A literal interpretation totally avoids the problem of sham offers, because such an offer will serve no purpose, and a defendant will be encouraged to make only realistic settlement offers.15 The *356Federal Rules are to be construed to “secure the just, speedy, and inexpensive determination of every action.” Fed. Rule Civ. Proc. 1. If a plaintiff chooses to reject a reasonable offer, then it is fair that he not be allowed to shift the cost of contimiing the litigation to the defendant in the event that his gamble produces an award that is less than or equal to the amount offered. But it is hardly fair or evenhanded to make the plaintiff’s rejection of an utterly frivolous settlement offer a watershed event that transforms a prevailing defendant’s right to costs in the discretion of the trial judge into an absolute right to recover the costs incurred after the offer was made.16
Ill
This interpretation of the language of the Rule and its clear purpose is further compelled by the history of Rule 68. Rule 68 is an outgrowth of the equitable practice of denying costs to a plaintiff “when he sues vexatiously after refusing an offer of settlement.”17 The 1938 Advisory Committee Notes to the original version of the Rule merely cited three state statutes as illustrations of the operation of the Rule.18 These three statutes, from Minnesota, Montana, and New York, *357mandated the imposition of costs on a plaintiff who rejected settlement offers and failed to obtain a judgment more favorable than the offer.19 All three States had other provisions, similar to Rule 54 (d), providing for the recovery of costs by *358a prevailing party.20 Therefore, the only purpose served by these state offer-of-judgment rules was to penalize prevailing plaintiffs who had rejected reasonable settlement offers without good cause.21 As defendant notes, other States have or had similar rules.22 But with one exception all of the cases cited by plaintiff, defendant, and the EEOC as amicus involving state cost-shifting rules were cases in which the plaintiff prevailed.23
*359The commentators, including the members of the Advisory Committee, have agreed with our interpretation of the Rule.24 At a symposium held shortly after the Rules were issued in *3601938, one of the members of the Advisory Committee presented the Rule as “a means for stopping the running of costs where the defendant admits that part of the claim is good but proposes to contest the balance.” 25 The Advisory Committee Notes to the 1946 Amendment to the Rule indicate that the Rule was designed to “save” a defendant from having to reimburse the plaintiff for costs incurred after the offer was made and not to make mandatory the court’s discretionary power to tax costs against the plaintiff in the event the defendant prevails.26 The fact that the defense bar did not develop a practice of seeking costs under Rule 68 by making nominal settlement offers is persuasive evidence that trial lawyers have interpreted the Rule in accordance with its plain language.27 Thus the state rules upon which Rule 68 *361was modeled, the cases interpreting those rules, and the commentators’ view of the Rule are all consistent with, and in fact compel, our reading of its plain language.
*362Although defendant’s petition for certiorari presented the question of the District Judge’s abuse of discretion in denying defendants costs under Rule 54 (d), that question was not raised in the Court of Appeals and is not properly before us. We therefore affirm the judgment of the Court of Appeals.

It is so ordered.

 Rule 68, as amended in 1966, provides:
“At any time more than 10 days before the trial begins, a party defending against a claim may serve upon the adverse party an offer to allow judgment to be taken against him for the money or property or to the effect specified in his offer, with costs then accrued. If within 10 days after the service of the offer the adverse party serves written notice that the offer is accepted, either party may then file the offer and notice of acceptance together with proof of service thereof and thereupon the clerk shall enter judgment. An offer not accepted shall be deemed withdrawn and evidence thereof is not admissible except in a proceeding to determine costs. If the judgment finally obtained by the offeree is not more favorable than the offer, the offeree must pay the costs incurred after the making of the offer. The fact that an offer is made but not accepted does not preclude a subsequent offer. When the liability of one party to another has been determined by verdict or order or judgment, but the amount or extent of the liability remains to be determined by further proceedings, the party adjudged liable may make an offer of judgment, which shall have the same effect as an offer made before trial if it is served within a reasonable time not less than 10 days prior to the commencement of hearings to determine the amount or extent of liability.”

 The formal offer of judgment submitted by the defendant to the attorney for the plaintiff read as follows:
“Pursuant to Rule 68 of the Federal Rules of Civil Procedure, defendant hereby offers to allow judgment to be taken against it in this action, in the *349amount of $450 which shall include attorney’s fees, together with costs accrued to date. This offer of judgment is made for the purposes specified in Rule 68, and is not to be construed either as an admission that the defendant is liable in this action, or that the plaintiff has suffered any damage.” App. 34.

 Senior District Judge Hoffman stated:
“While there is little authority on the point, this Court is satisfied that in order to be effective, a Rule 68 offer must be made in a good faith attempt to settle the parties’ litigation and, thus, must be at least arguably reasonable.
“If the purpose of the rule is to encourage settlement, it is impossible for this Court to concede that this purpose can be furthered or aided by an offer that is not at least arguably reasonable.
“Finally, while the Court did ultimately find itself constrained to enter its judgment for the defendant, the Court certainly did not find the plaintiff’s claim to be wholly specious. In the opinion of this Court and in the particular facts and circumstances of this case, an offer of only the sum of $450 could only have been effective were the plaintiff’s claim totally lacking in merit or were there present additional factors which would mitigate in favor of the defendant.” Id., at 11-12.

 “Against that general background, the Rule 68 offer of judgment of less than $500 before trial is not of such significance in the context of this case to justify serious consideration by the plaintiff. At oral argument the defendant urged that even an offer of $10 would have met the require*350ments of Rule 68 and served the purpose of shifting cost liability. If that were so, a minimal Rule 68 offer made in bad faith could become a routine practice by defendants seeking cheap insurance against costs. The useful vitality of Rule 68 would be damaged. Unrealistic use of the rule would not encourage settlements, avoid protracted litigation or relieve courts of vexatious litigation.” 600 F. 2d, at 701. (Footnote omitted.)

 In multiclaim litigation, such a party may, of course, be defending against a counterclaim or a cross-claim, but the effect of the Rule can most readily be explained by reference to cases involving a single claim by one plaintiff against one defendant. For that reason, as well as the fact that this case involves such a claim, we simply refer to the parties as “plaintiff” and “defendant.”

 No issue is presented in this case concerning the amount or the items of costs that defendant seeks to recover.

 Rule 54 (d) provides, in relevant part:
“(d) Costs
“Except when express provision therefor is made either in a statute of the United States or in these rules, costs shall be allowed as of course to the prevailing party unless the court otherwise directs . . . .”

 Advisory Committee’s Notes on Fed. Rule Civ. Proc. 68, 28 U. S. C. App., p. 499; 12 C. Wright & A. Miller, Federal Practice and Procedure § 3001, p. 56 (1973); 7 J. Moore & J. Lucas, Moore’s Federal Practice ¶ 68.02, p. 68-4 (1979).

 This incentive is most clearly demonstrated by the situation in which the defendant’s liability has been established “by verdict or offer of judgment” — or perhaps by an admission — and the only substantial issue to be tried concerns the amount of the judgment. In that context, the opportunity to avoid the otherwise almost certain liability for costs should motivate realistic settlement offers by the defendant, and the risk of losing the right to recover costs provides the plaintiff with an additional reason for preferring settlement to further litigation.

 Delta argues that this additional incentive provided by Rule 68 is taking on increased importance as more district judges, like the District Judge here, are exercising the discretion granted by Rule 54 (d) to deny costs to prevailing defendants.

 Defendant contended at oral argument that a settlement offer of one penny should trigger the cost-shifting provision of the Rule if the defendant prevails. Tr. of Oral Arg. 5.

 Defendant argues that our construction of the Rule is anomalous because under Rule 68, a defendant who prevails is in a less favorable position than if he had lost the case but for an amount less than the offer. Reply Brief for Petitioner 10. The argument is applicable, however, only in a narrowly limited category of cases. First, because the prevailing defendant normally recovers costs, the argument is relevant *354only in the relatively few cases in which special circumstances may persuade the district judge to exercise his discretion to deny costs to the prevailing party. And second, even within that small category, the argument is only valid if the settlement offer is for an amount less than the recoverable costs. For if the plaintiff obtains a judgment for an amount less than the offer but greater than the cost bill, the net liability of the defendant will be greater than the burden of paying his own costs after a victory on the merits. The fact that a defendant may obtain no benefit from a settlement offer for an amount less than his probable taxable costs is surely not a sufficient reason to disregard the plain language of the Rule, or to question its efficacy in motivating realistic settlement proposals in cases in which the defendant recognizes a significant risk that the plaintiff will obtain a judgment.
In sum, the effect of a literal interpretation of Rule 68 is to attach no practical consequences to a sham or token offer by the defendant. Since there is no reason to encourage such token offers, the Rule quite sensibly leaves the parties in the same position after such an offer as they would have been in if no such offer had been made. See n. 21, infra.

 Moreover, because Rule 68 has no application at all to offers made by the plaintiff, the plaintiff may not divest the district judge of his Rule 54 (d) discretion by making a sham offer.

 Defendant also argues that it should be permitted to use Rule 68 to recover costs in this manner because district judges have recently been exercising their discretion to deny prevailing defendants costs in too many cases. Reply Brief for Petitioner 8; Tr. of Oral Arg. 14. Since Rule 68 was promulgated prior to this alleged misapplication of Rule 54 (d), it surely was not intended to remedy a problem that had not yet surfaced.
Of course, there really is no reason to assume that district judges are repeatedly abusing their Rule 54 (d) discretion. If we make the more probable assumption that they are denying costs to the prevailing party only when there would be an element of injustice in a cost award, the burden of defendant’s argument is not only that a special privilege should be granted to defendants but also that its primary effect will be to thwart the administration of justice.

 See Note, Rule 68: A “New” Tool for Litigation, 1978 Duke L. J. 889, 895:
“An offer by a defendant of ten dollars at the beginning of a difficult and complex case, or of a case based on a novel legal theory, is not likely to produce an . early settlement of the case, which is the purpose of the rule. Yet, if the rule is not limited to cases in which the plaintiff prevails, the ten dollar offer will have the effect of assuring that the defendant is awarded practically all of his costs if he prevails, even if there are good reasons why the defendant should not be awarded his costs. This is clearly not the result that the rulemakers envisioned. If interpreted to require that the plaintiff secure at least some relief, the rule would insure that token offers will not be made because nothing would be gained by them. In most cases, the defendant, as the prevailing party, will be entitled to costs under rule 54 (d). When the defendant is not so entitled, *356he ought not be able to employ rule 68 to override the discretion that the court would otherwise have, in order to compel the awarding of costs.”

 Moreover, because the defendant’s settlement offer is admissible at a proceeding to determine costs, a defendant could use a reasonable settlement offer as a means of influencing the judge’s discretion to award costs under Rule 54 (d).

 12 C. Wright & A. Miller, Federal Practice and Procedure § 3001, p. 56 (1973).

 One of the members of the Advisory Committee, Robert G. Dodge, indicated at a symposium on the new Rules that the Rule was based on “statutes which are widely prevalent in the states . . . .” American Bar Association, Rules of Civil Procedure for the District Court of the United States with Notes as prepared under the direction of the Advisory Committee and Proceedings of the Institute on Federal Rules, Cleveland, Ohio 337 (1938) (hereinafter Institute on Federal Rules).

 2 Minn. Stat. § 9323 (Mason 1927) provided:
“At least ten days before the term at which any civil action shall stand for trial the defendant may serve on the adverse party an offer to allow judgment to be taken against him for the sum, or property, or to the effect therein specified, with costs then accrued. If within ten days thereafter such party shall give notice that the offer is accepted, he may file the same, with proof of such notice, and thereupon the clerk shall enter judgment accordingly. Otherwise the offer shall be deemed withdrawn, and evidence thereof shall not be given; and if a more favorable judgment be not recovered no costs shall be allowed, but those of the defendant shall be taxed in his favor.”
4 Mont. Rev. Codes Ann. § 9770 (1935) provided:
“The defendant may, at any time before the trial or judgment, serve upon the plaintiff an offer to allow judgment to be taken against him for the sum or property, or to the effect therein specified. If the plaintiff accept the offer, and give notice thereof within five days, he may file the offer, with proof of notice of acceptance, and the clerk must thereupon enter judgment accordingly. If the notice of acceptance be not given, the offer is to be deemed withdrawn, and cannot be given in evidence upon the trial; and if the plaintiff fail to obtain a more favorable judgment, he cannot recover costs, but he must pay the defendant’s costs from the time of the offer.”
N. Y. Civ. Prac. Law § 177 (Cahill 1937) provided:
“Before the trial, the defendant may serve upon the plaintiff’s attorney a written offer to allow judgment to be taken against him for a sum, or property, or to the effect, therein specified, with costs. If there be two or more defendants, and the action can be severed, a like offer may be made by one or more defendants against whom a separate judgment may be taken. If the plaintiff, within ten days thereafter, serve upon the defendant’s attorney a written notice that he accepts the offer, he may file the summons, complaint, and offer, with proof of acceptance, and thereupon the clerk must enter judgment accordingly. If notice of acceptance be not thus given, the offer cannot be given in evidence upon the trial; but, if the plaintiff fail to obtain a more favorable judgment, he cannot recover costs from the time of the offer, but must pay costs from that time.”

 See 2 Minn. Stat. §§ 9471-9473 (Mason 1927); 4 Mont. Rev. Codes Ann. §§ 9787, 9788 (1935); N. Y. Civ. Prac. Law §§ 1470-1475 (Cahill 1937).

 In each of these States, the general statute providing for recovery of costs by prevailing defendants was, unlike Rule 54 (d), mandatory. See, e. g., 4 Mont. Rev. Code Ann. §§ 9787-9788 (1935); 2 Minn. Stat. § 9471 (Mason 1927); N. Y. Civ. Prac. Law §§ 1470-1475 (Cahill 1937). Inasmuch as those statutes did not give trial judges discretion to deny costs to prevailing defendants, the state antecedents of Rule 68 did not perform any cost-shifting function in cases in which the defendant prevailed. In those States — as is true under Rule 68 — a sham settlement offer had no practical consequences; it left the parties in the same situation as if no offer had been made. See n. 12, supra. Therefore, the state offer-of-judgment statutes provide support for the view that Rule 68 applies only to prevailing plaintiffs.

 See, e. g., Cal. Civ. Proc. Code Ann. § 998 (West 1980); Yeager v. Campion, 70 Colo. 183, 197 P. 898 (1921); Wordin v. Bemis, 33 Conn. 216 (1866); Prather v. Pritchard, 26 Ind. 65 (1866); West v. Springfield Fire & Marine Ins. Co., 105 Kan. 414, 185 P. 12 (1919); Wachsmuth v. Orient Ins. Co., 49 Neb. 590, 68 N. W. 935 (1896); Herring-Hall-Marvin Safe Co. v. Balliet, 44 Nev. 94, 190 P. 76 (1920); Hammond v. Northern Pacific B. Co., 23 Ore. 157, 31 P. 299 (1892); Sioux Falls Adjustment Co. v. Penn. Soo Oil Co., 53 S. D. 77, 220 N. W. 146 (1928); Newton v. Allis, 16 Wis. 197 (1862).

 See cases cited in n. 22, supra; see also Miklautsch v. Dominick, 452 P. 2d 438 (Alaska 1969); Brown v. Nolan, 98 Cal. App. 3d 445, 159 Cal. Rptr. 469 (1979); Schnute Holtman Co. v. Sweeney, 136 Ky. 773, 125 S. W. 180 (1910); Watkins v. W. E. Neiler Co., 135 Minn. 343, 160 N. W. 864 (1917); Petrosky v. Flanagan, 38 Minn. 26, 35 N. W. 665 (1887); Woolsey v. O’Brien, 23 Minn. 71, 72 (1876); Morris-Turner Live Stock Co. v. Director General of Railroads, 266 F. 600 (Mont. 1920); Margulis *359v. Solomon & Berck Co., 223 App. Div. 634, 229 N. Y. S. 157 (1928); Smith v. New York, O. & W. R. Co., 119 Misc. 506, 196 N. Y. S. 521 (1922); McNally v. Rowan, 101 App. Div. 342, 92 N. Y. S. 250, aff’d, 181 N. Y. 556, 74 N. E. 1120 (1905); Ranney v. Russell, 10 N. Y. Super. 689, 690 (1854); Benda v. Fana, 10 Ohio St. 2d 259, 227 N. E. 2d 197 (1967); but see Terry v. Burger, 6 Ohio App. 2d 53, 216 N. E. 383 (1966).

 Some commentators assume that the Rule, even when applicable, operates to deny costs to a prevailing plaintiff and not to impose liability for defendants’ costs on that plaintiff. Wright and Miller’s treatise indicates:
“Rule 68 is intended to encourage settlements and avoid protracted litigation. It permits a party defending against a claim to make an offer of judgment. If the offer is not accepted, and the ultimate judgment is not more favorable than what was offered, the party who made the offer is not liable for costs accruing after the date of the offer.
“This device was entirely new to the federal courts when the Federal Rules were adopted in 1938. But it was familiar in state practice. And the general principle, that a party may be denied costs when he sues vexatiously after refusing an offer of settlement, and recovers no more than he had been previously offered, has been held to be within the powers of an equity court regardless of the existence of a rule such as this one.
“Although the privilege of an offer of settlement is extended only to the party defending against a claim, it furnishes a just procedure to all parties concerned. It is fair to the claimant because it does the defending party no good to make an offer of judgment that is not what the claimant might reasonably be expected to recover; he will not free himself of the costs if the judgment recovered is more than the offer. It is certainly fair to the defending party because it allows him to free himself of the court costs by offering to make a settlement. It is of great benefit to the court because it encourages settlements and discourages vexatious suits and thus diminishes the burden of litigation.” (Footnotes omitted.) (Emphasis supplied.) 12 C. Wright & A. Miller, Federal Practice and Procedure §3001, p. 56 (1973).
Moore uses similar language in his treatise, stating that an offer of judgment will “operate to save [the defendant] the costs from the time of that offer if the plaintiff ultimately obtains a judgment less than the sum offered!’ 7 J. Moore & J. Lucas, Moore’s Federal Practice ¶ 68.06, p. 68-13 (1979) (emphasis supplied). See also Dobie, The Federal Rules of Civil *360Procedure, 25 Va. L. Rev. 261, 304, n. 195 (1939) (“[I]f the offer is not accepted, it, of course, relieves the offering defendant of the burden of future costs, thereby constituting an inducement to the making of such offers”).

 Mr. Dodge stated:
“This rule is based upon statutes which are widely prevalent in the states, and it affords a means for stopping the running of costs where the defendant admits that part of the claim is good but proposes to contest the balance. He may then make an offer of judgment of the amount which he conceives is due, and unless the plaintiff recovers more than that the plaintiff gets no costs accruing after that offer of judgment.” Institute on Federal Rules 337 (emphasis supplied).

 The Advisory Committee’s Notes state:
“It is implicit, however, that as long as the case continues — whether there be a first, second or third trial — and the defendant makes no further offer, his first and only offer will operate to save him the costs from the time of that offer if the plaintiff ultimately obtains a judgment less than the sum offered. In the case of successive offers not accepted, the offeror is saved the costs incurred after the making of the offer which was equal to or greater than the judgment ultimately obtained.” 28 U. S. C. App., p. 499.

 It was not until 1974 that any federal court even suggested that Rule 68 could be interpreted to apply to a case in which the defendant *361prevails. See Mr. Hanger, Inc. v. Cut Rate Plastic Hangers, Inc., 63 F. R. D. 607 (EDNY 1974).
Apart from the case at bar and Mr. Hanger, Inc., there are only two other reported cases in which a defendant attempted to recover his own costs under Rule 68 after obtaining a judgment in his favor. In Dual v. Cleland, 79 F. R. D. 696 (DC 1978), the court followed Mr. Hanger and reluctantly granted defendant an award of costs under Rule 68, after stating that it would not have allowed costs to defendant as the prevailing party under Rule 54 (d). In Gay v. Waiters’ and Dairy Lunchmen’s Union, Local No. 30, 86 F. R. D. 500, 503-504 (ND Cal. 1980), the court assumed that Rule 68 applied to prevailing defendants but refused to apply the Rule to impose costs on the named plaintiffs in a Title YII class action. The court noted that if Rule 68 applied in class actions, the disproportionate risk imposed on the class representatives would discourage the filing of Title VII suits.
All the other reported cases involving Rule 68 were either cases in which the plaintiff had prevailed or cases in which the court implicitly assumed that the Rule was limited to such a situation. See, e. g., Mason v. Belieu, 177 U. S. App. D. C. 68, 75, 543 F. 2d 215, 222 (plaintiffs not awarded costs because they failed to file a bill of costs and defendant thus did not know which costs to object to as being incurred after the offer was made), cert. denied, 429 U. S. 852 (1976); Home Ins. Co. v. Kirkevold, 160 F. 2d 938, 941 (CA9 1947) (plaintiff still entitled to recover costs where defendant did not prove that its offer of judgment was served within 10 days of trial); Truth Seeker Co, v. Durning, 147 F. 2d 54, 56 (CA2 1945) (“[Defendant could have stopped the running of further costs by an offer of judgment under F. R. C. P. 68”); Cover v. Chicago Eye Shield Co., 136 F. 2d 374 (CA7) (defendant not liable for fees of master and court reporter where plaintiff recovered less than offer), cert. denied, 320 U. S. 749 (1943); Staffend v. Lake Central Airlines, Inc., 47 F. R. D. 218, 220 (ND Ohio 1969) (a defendant may “escape the imposition of further costs where the plaintiff does not eventually secure a judgment exceeding the offer”); Tansey v. Transcontinental & Western Air, Inc., 97 F. Supp. 458, 459 (DC 1949) (an offer that was not for a sum certain will not prevent the court from considering plaintiff’s costs thereafter incurred); Maguire v. Federal Crop Ins. Corp., 9 F. R. D. 240, 242 (WD La. 1949) (defendant cannot “escape” paying the plaintiff’s costs *362because offer was not properly formalized), aff’d in part and rev’d in part, 181 F. 2d 320 (CA5 1950); FDIC v. Fruit Growers Service Co., 2 F. R. D. 131, 133 (ED Wash. 1941) (after taxing certain disputed costs against defendant, court noted that the costs could have been avoided by taking advantage of Rule 68); Nabors v. Texas Co., 32 F. Supp. 91, 92 (WD La. 1940) (a defendant may “save himself in the matter of costs if the recovery does not exceed what was tendered” if he proves that he made an offer of judgment). See also Scheriff v. Beck, 452 F. Supp. 1254 (Colo. 1978); Waters v. Heublein, Inc., 485 F. Supp. 110 (ND Cal. 1979).