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University of Cincinnati Law Review

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Rule 68 of the Federal Rules of Civil Procedure is the only rule of procedure devoted exclusively to encouraging settlement. The basic operation of Rule 68 is simple. A defendant (but not a plaintiff) may make an offer under Rule 68 to settle a case for a specified dollar amount or other relief. If the plaintiff accepts the offer, the Rule 68 offer and a notice of acceptance are filed and the clerk enters judgment according to the terms of the offer. If, however, the offer is not accepted, and the judgment obtained by the plaintiff at trial is not more favorable than the offer, the plaintiff "must pay the costs incurred after the making of the offer." In short, if a plaintiff rejects a Rule 68 settlement offer and fails to beat the offer at trial, the plaintiff is responsible for paying the costs accruing after the offer is made. This mandatory sanction deprives a prevailing plaintiff of costs to which he would normally be entitled "as of course" under Rule 54(d).

Unfortunately, despite its unique status as a rule encouraging settlement, Rule 68 is seldom used and is widely considered a failure. There are three major reasons for Rule 68's present ineffectiveness. First, the rule can be invoked only by parties defending against claims. Second, the sanction of costs has generally been considered too small to encourage defendants to make Rule 68 offers or to encourage plaintiffs to accept them. Third, even when Rule 68 has been used, it has not led to early settlements because defendants generally have a greater incentive to earn interest on their money than to avoid plaintiffs' costs. Thus, many Rule 68 offers are not made until shortly before trial. All of this may be about to change. On December 5, 1984, the United States Supreme Court heard oral argument in Marek v. Chesny." In Marek, the Court is considering whether the term "costs" in Rule 68 includes civil rights attorney's fees, which are defined in 42 U.S.C. § 1988 as "part of the costs." Specifically, the Court will decide whether a civil rights plaintiff who rejects a Rule 68 offer and ultimately obtains a less favorable judgment at trial must be denied attorney's fees for all work performed after the Rule 68 offer was made.

Although Marek v. Chesny superficially involves only the relationship between Rule 68 and section 1988, the case may have a much broader impact. At least ninety federal statutes in addition to section 1988 allow courts to award prevailing parties reasonable attorney's fees as part of the costs. If the Court decides that Rule 68 in effect incorporates the definition of costs used in the attorney's fees statutes, Rule 68 will become an enormously powerful settlement tool in cases involving fee-shifting statutes. One third or more of all federal litigation will thus be affected by the decision in Marek v. Chzesny. Indeed, the issue is important enough for the Solicitor General of the United States to have filed an amicus brief urging the Supreme Court to hold that Rule 68 costs include attorney's fees in cases involving any of the ninety-plus fee award statutes. The court of appeals' holding in Marek that Rule 68 costs do not include attorney's fees in civil rights cases rested on two grounds. First, the court of appeals concluded that defining Rule 68 costs to include civil rights attorney's fees would have violated the Rules Enabling Act by abridging the plaintiff's substantive right to attorney's fees under section 1988. Second, the court of appeals concluded that construing Rule 68 costs to include civil rights attorney's fees would contradict the policies underlying section 1988.

This Article disagrees with the court of appeals holding.



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