Federal Rule of Civil Procedure 68

Rule 68. Offer of Judgment

(a) MAKING AN OFFER; JUDGMENT ON AN ACCEPTED OFFER. At least 14 days before the date set for trial, a party defending against a claim may serve on an opposing party an offer to allow judgment on specified terms, with the costs then accrued. If, within 14 days after being served, the opposing party serves written notice accepting the offer, either party may then file the offer and notice of acceptance, plus proof of service. The clerk must then enter judgment.

(b) UNACCEPTED OFFER. An unaccepted offer is considered withdrawn, but it does not preclude a later offer. Evidence of an unaccepted offer is not admissible except in a proceeding to deter- mine costs.

(c) OFFER AFTER LIABILITY IS DETERMINED. When one party’s liability to another has been determined but the extent of liability remains to be determined by further proceedings, the party held liable may make an offer of judgment. It must be served within a reasonable time—but at least 14 days—before the date set for a hearing to determine the extent of liability.

(d) PAYING COSTS AFTER AN UNACCEPTED OFFER. If the judgment that the offeree finally obtains is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made.

Essential Points

What is a settlement?

Settlement is where parties agree to end the litigation before a trial or before the jury reaches a verdict. In a settlement, one party typically agrees to pay the other litigant a certain sum of money, and in exchange the parties agree to dismiss the case.
  • Rule 68 is intended to encourage settlement by forcing plaintiffs to determine whether it is worth the risk to continue litigating.
  • Pursuant to a Rule 68 offer of judgment, the defendant will offer  a certain amount of money to the plaintiff.  The defendant should specify whether the amount offered excludes attorney fees.  If the plaintiff accepts, fine, judgment is entered against the defendant for that amount of money and, depending on the case, also attorney fees.
  • However, if the plaintiff does not accept the offer of judgment, and after trial the jury awards the plaintiff less than the amount offered, then the plaintiff must pay all costs incurred by the defendant following the offer.  For example, let’s say a defendant presents an offer of judgment to the plaintiff for $20,000 on April 5, 2015.  The plaintiff rejects the offer.  One year later at trial the jury awards the plaintiff only $5,000.  Now, the plaintiff must pay all costs the defendant incurred starting on April 5, 2015.