Luis F. Gutierrez v. Eduardo Garcia, No. 2:2015cv03727 - Document 21 (C.D. Cal. 2016)
Court Description: MEMORANDUM OF DECISION REGARDING PLAINTIFFS SECOND MOTION TO ENFORCE RULE 68 OFFER OF JUDGMENT ACCORDING TO ITS TERMS by Magistrate Judge Andrew J. Wistrich. (mz)
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Luis F. Gutierrez v. Eduardo Garcia Doc. 21 1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 CENTRAL DISTRICT OF CALIFORNIA 9 WESTERN DIVISION 10 11 12 13 14 15 16 17 18 19 20 21 LUIS F. GUTIERREZ, ) ) Plaintiff, ) ) v. ) ) GOOD SAVIOR, LLC, et al., ) ) Defendants. ) ______________________________) ) LUIS F. GUTIERREZ, ) ) Plaintiff, ) ) v. ) ) EDUARDO GARCIA, ) ) Defendant. ) ______________________________) Case No. CV 14-4595 (AJW) Case No. CV 15-3727 (AJW) MEMORANDUM OF DECISION REGARDING PLAINTIFF’S SECOND MOTION TO ENFORCE RULE 68 OFFER OF JUDGMENT ACCORDING TO ITS TERMS1 22 Before the court is plaintiff’s second2 motion to enforce 23 defendants’ January 12, 2016 Rule 68 offer of judgment. The relevant 24 25 26 1 Although the motion was filed in Case No. CV 14-4595 AJW, the offer of judgment encompassed both that case and Case No. CV 15-3727 AJW. Therefore, the court issues this ruling in both cases. 27 2 28 Plaintiff’s first motion was denied without prejudice to facilitate more complete briefing. [See Order dated January 22, 2016 (Dkt. No. 83)]. Dockets.Justia.com 1 2 3 facts are few, and for the most part, undisputed. On January 12, 2016, defendants served an “Offer of Judgment by Defendants” (the “first offer”) in Case No. 14-4595 AJW. It stated: 4 “Pursuant to Rule 68 of the Federal Rules of 5 Civil Procedure and without admitting liability 6 for any of the claims alleged herein or the 7 claims 8 Gutierrez v. Eduardo Garcia, Case No. 2:15-3727 9 (“Garcia Action”), Defendants Good Savior, LLC, 10 Barrett Business Services, Inc., Atef Awada and 11 Eduardo 12 hereby allow judgment to be taken against them as 13 follows: 14 Judgment 15 (“Plaintiff”) for the total sum of twenty-five 16 thousand 17 claims in the above-captioned matter and all 18 claims in the Garcia Action. 19 In accordance with Rule 68, this offer shall be 20 deemed withdrawn if it is not accepted within 21 fourteen days of the service hereof. 22 this Offer of Judgment is not admissible except 23 in a proceeding to determine costs.” 24 25 26 alleged in Garcia for the related case, (collectively, plaintiff dollars F. “Defendants”) Luis ($25,000.00) Luis F. to Gutierrez settle all Evidence of [Tracy Declaration (“Decl.”), Exhibit (“Ex.”) A]. On January 13, 2016, plaintiff’s counsel sent the following email to defendants’ counsel: 27 “I am in receipt of a Rule 68 offer of judgment 28 that offers $25,000 to 2 settle all claims, 1 excluding costs and attorney’s fees. 2 Guiterrez is inclined to accept this offer – but 3 he has 14 days, and the offer cannot be rescinded 4 during that time. 5 I am happy to bring a motion for attorneys fees 6 and seek to tax costs, but would Defendants be 7 interested in an agreed amount of attorney’s fees 8 and costs? 9 bringing the fees motion, so perhaps we can try 10 11 12 13 First, I am entitled to attorney’s fees for to work this out?” [Tracy Decl., Ex. B]. On January 13, 2016, defendants’ counsel responded to the January 13, 2016 email from plaintiff’s counsel as follows: 14 “To clarify, the offer of judgment is for the 15 claims 16 including 17 Accordingly, attached is an amended offer of 18 judgment. 19 you’ve 20 willingness to negotiate in your previous email. 21 We are open to such a negotiation.” 22 alleged the in the claims However, spent respective on the for we complaints, attorneys’ appreciate case. You the fees. hours indicated a [Tracy Decl., Ex. C]. 23 On January 13, 2016, defendants served an “Amended Offer of 24 Judgment by Defendants” (the “second offer”) in Case No. CV 14-4595 25 AJW. It stated: 26 “Pursuant to Rule 68 of the Federal Rules of 27 Civil Procedure and without admitting liability 28 for any of the claims alleged herein or the 3 1 claims alleged in the related cases, Luis F. 2 Gutierrez v. Eduardo Garcia, Case No. 2:15-cv- 3 3727 (“Garcia Action”), Defendants Good Savior, 4 LLC, Barrett Business Services, Inc., Atef Awada 5 and Eduardo Garcia (collectively, “Defendants”) 6 hereby allow judgment to be taken against them as 7 follows: 8 Judgment 9 (“Plaintiff”) for the total sum of twenty-five for plaintiff 11 claims in the above-captioned matter and all 12 claims in the Garcia Action. 13 Plaintiff’s claims for attorneys’ fees and costs. 14 In accordance with Rule 68, this offer shall be 15 deemed withdrawn if it is not accepted within 16 fourteen days of the service thereof. 17 of 18 except in a proceeding to determine costs.” 19 of Judgment to Gutierrez thousand Offer ($25,000.00) F. 10 this dollars Luis settle all All claims include is not Evidence admissible [Tracy Decl., Ex. C]. 20 On January 14, 2016, plaintiff served “Plaintiff’s Notice of 21 Acceptance of Offer of Judgment by Defendants [Fed. R. Civ. P. 68]” in 22 Case No. CV 14-4595 AJW. It stated: 23 “Please take notice that pursuant to Federal 24 Rules of Civil Procedure, Rule 68, Plaintiff Luis 25 F. Gutierrez hereby accepts the offer of judgment 26 of Defendants Good Savior, LLC, Barrett Business 27 Services, Inc., Atef Awada and Eduardo Garcia 28 (collectively, “Defendants”), dated January 12, 4 1 2016, allowing Plaintiff to take judgment against 2 them in this action in the amount of $25,000, 3 exclusive 4 Attorney’s fees and costs will be in addition to 5 the $25,000, and Plaintiff will file a separate 6 memorandum of costs and a motion for attorney’s 7 fees.” 8 of costs and attorney’s fees. [Tracy Decl., Ex. D].3 9 The first question is whether the first offer entitled plaintiff 10 to recover his costs in addition to $25,000.4 The first offer did not 11 expressly state whether the $25,000 included or excluded costs. That 12 means that costs were excluded. It has been established for over 13 thirty years that “if a Rule 68 offer does not state costs are 14 included and an amount of costs is not specified, the court will be 15 obliged by the terms of the Rule to include in its judgment an 16 additional amount which in its discretion ... it determines to be 17 sufficient to cover the costs.” Marek v. Chesny, 473 U.S. 1, 6 (1985) 18 19 3 20 21 22 23 24 25 26 Plaintiff’s notice of acceptance did not simply state “accepted.” Instead, along with stating that plaintiff “hereby accepts” the first offer, it included some additional language explaining how plaintiff interpreted the first offer. Nevertheless, plaintiff’s response to the first offer was an acceptance. The elaboration included by plaintiff neither contradicted nor augmented the terms of the first offer. Although plaintiff’s notice of acceptance bears Case No. CV 14-4595 AJW and does not mention Case No. CV 15-3727 AJW, it expressly identifies the first offer by date and mentions Garcia, so the court interprets it as applying to both actions. Neither side suggests that plaintiff’s notice of acceptance applied only to Case No. CV 14-4595 AJW. 4 27 28 Because plaintiff did not accept the second offer, the court need not decide what it did or did not include or determine its enforceability. 5 1 (citation omitted). Therefore, the first offer entitled plaintiff to 2 recover his costs in addition to $25,000.5 3 The second question is whether the first offer entitled plaintiff 4 to recover his attorneys’ fees in addition to $25,000. This question 5 also must be answered in the affirmative, but the explanation is more 6 complicated. The starting point is two prior decisions of the Ninth 7 Circuit. 8 In Erdman v. Cochise County, 926 F.2d 877 (9th Cir. 1991), the 9 court followed Marek and held in a case brought pursuant to 42 U.S.C. 10 § 1983 that a Rule 68 offer of $7,500 “with costs now accrued”, which 11 had been accepted by the plaintiff, meant that the defendant had to 12 pay the plaintiff’s “reasonable attorney fees in addition to the 13 amount contained in its offer” because § 1983 defines attorneys fees 14 as a component of “costs.” Erdman, 926 F.2d at 879-881. In reaching 15 its conclusion, the court rejected the defendant’s contention that 16 “its offer had been ‘inartfully drafted’ and that it had intended to 17 include attorney fees in its lump sum offer.” Erdman, 926 F.2d at 879. 18 The court held that “the [defendant’s] drafting error should be 19 construed against it, rather than against the plaintiff.” Erdman, 926 20 21 22 23 24 25 26 27 28 5 Even apart from Marek, the last sentence of both the first offer and the second offer suggests that costs would be taxed separately in a subsequent application because it states that the offer “is not admissible except in a proceeding to determine costs.” [Tracy Decl., Exs. A, C]. Obviously, if costs were included in either the first offer or the second offer, what defendants described as “a proceeding to determine costs” would be superfluous. Even the January 13, 2016 email from defendants’ counsel purporting to clarify the first offer does not assert that costs were included in the $25,000. It merely says that the first offer included “the claims for attorneys’ fees.” [Tracy Decl., Ex. C]. Accordingly, an argument could be made that the first offer expressly contemplated that in addition to the $25,000, costs would be awarded in a separate proceeding. 6 1 F.2d at 879. 2 In Nusom v. Comh Woodburn, Inc., 122 F.3d 830 (9th Cir. 1997), 3 the court extended Erdman to non-§ 1983 actions and to actions resting 4 on statutes which do not define attorneys’ fees as a component of 5 costs. Nusom was brought under the Truth in Lending Act, 15 U.S.C. § 6 1640 and Or. Rev. Stat. § 166.725(14), both of which do not include 7 attorneys’ fees as a component of “costs.” Nusom, 122 F.3d at 834. 8 The defendant made a Rule 68 offer of “$15,000, together with costs 9 accrued”, which the plaintiffs accepted. Nusom, 122 F.3d at 832-833. 10 The court held that “the judgment does not foreclose the [plaintiffs] 11 from 12 unambiguously waive or limit them.” Nusom, 122 F.3d at 833. As the 13 Ninth Circuit explained: seeking attorney fees because it does not clearly 14 [W]here the underlying statute does not make 15 attorneys fees part of costs, it is incumbent on 16 the defendant making a Rule 68 offer to state 17 clearly that attorneys fees are included as part 18 of 19 entered if the defendant wishes to avoid exposure 20 to attorneys fees in addition to the sum offered 21 plus 22 unreasonable 23 defendant’s 24 judgment to be taken against it “to the effect 25 specified in the offer.” Fed. R. Civ. P. 68. .... 26 As such, defendants bear the brunt of uncertainty 27 but easily may avoid it by making explicit that 28 their offers do or do not permit plaintiffs to the total costs. sum [¶] for We burden, power to which do for make 7 judgment not it an may be think this an is within a offer to allow and 1 recover attorney fees. [¶] [W]e cannot say that 2 the judgment as offered, accepted, and entered 3 clearly 4 attorney fees as it was silent on the subject and 5 the underlying statute provides for an award of 6 attorney fees separate from costs in successful 7 actions. and unambiguously waived or limited 8 Nusom, 122 F.3d at 834; see generally Beauchamp v. Anaheim Union High 9 Sch. Dist., 816 F.3d 1216, 1223 (9th Cir. 2016)(recognizing that 10 “ambiguities in a Rule 68 offer are typically construed against the 11 offeror”). 12 In both CV 14-4595 AJW [Complaint (Dkt. No. 1)] and CV 15-3727 13 AJW [First Amended Complaint (Dkt. No. 12)] some of the statutes under 14 which plaintiff sued entitle a prevailing plaintiff to an award of 15 attorneys’ fees. See 29 U.S.C. § 216; Cal. Lab. Code § 1194. Unlike § 16 1983 and § 1988, the statutes involved in Erdman, however, the 17 statutes under which plaintiff sued do not define attorneys fees as a 18 component of “costs.” See 29 U.S.C. § 216; Cal. Lab. Code § 1194. 19 Nusom makes clear that this does not matter. Even in non-§ 1983 cases, 20 where, as here, the statute on which the action is based does not 21 define attorneys fees as a component of costs, if a Rule 68 offer says 22 nothing 23 separately in addition to the specified sum. Nusom, 122 F.3d at 835 24 (“[A] Rule 68 offer for judgment in a specific sum together with 25 costs, which is silent as to attorney fees, does not preclude the 26 plaintiff from seeking fees when the underlying statute does not make 27 attorney fees a part of costs.”). In this case, the first offer did 28 not “clearly and unambiguously waive or limit attorney fees.” Nusom, about attorneys fees, the 8 plaintiff may recover them 1 122 F.3d at 834. Therefore, the first offer excluded attorneys’ fees 2 and plaintiff is entitled to recover them separately in addition to 3 the $25,000 and costs. 4 Defendants advance a variety of arguments in opposition to the 5 motion. First, they contend that neither Marek nor Erdman require an 6 explicit waiver of costs and attorneys’ fees. [Opposition at 6-9]. As 7 previously discussed, that is simply not true. Marek, Erdman, and 8 Nusom all hold otherwise. 9 Second, defendants argue that Erdman applies only in civil rights 10 cases. [Opposition at 8-9]. They fail to acknowledge Nusom, in which 11 the 12 See Nusom, 122 F.3d at 833. Ninth Circuit Third, 13 applied defendants Erdman in that the argue a non-civil first offer rights case. unambiguously 14 included costs and attorneys fees because it said that it was an offer 15 to settle “all claims” and that costs and attorneys fees are “claims.” 16 [Opposition 17 “Defendants’ 18 rejected by other courts. See, e.g., Sanchez v. Prudential Pizza, 19 Inc., 709 F.3d 689, 691, 692 (7th Cir. 2013)(rejecting the argument 20 that 21 including all of Plaintiff’s claims for relief” barred plaintiff from 22 obtaining a separate award of attorneys’ fees because the defendant’s 23 logic would “force a plaintiff to guess the meaning of the offer”); 24 Barbour v. City of White Plains, 700 F.3d 631, 633, 634 (2d Cir. 2012) 25 (rejecting the argument that the defendant’s Rule 68 offer of “the 26 total sum of TEN THOUSAND DOLLARS ... for the settlement of all 27 claims” foreclosed a separate award of costs and attorneys’ fees). The 28 out-of-circuit law relied upon by defendants is inconsistent with the at 9-12 offer is defendant’s (especially not Rule at 10, ambiguous”)]. 68 offer 9 for where This “the they state argument amount has of they been $30,000 1 Marek as well as with the rationale of the Ninth Circuit’s holdings in 2 Erdman and Nusom. 3 Fourth, defendants argue that there was no manifestation of 4 mutual assent. [Opposition at 12-15]. In essence, defendants argue 5 that extrinsic evidence shows that plaintiff did not accept the offer 6 which defendants made. 7 To begin with, comparing defendants’ first offer (interpreted – 8 as it must be – in accordance with Marek, Erdman, and Nusom), see 9 LaPierre v. City of Lawrence, 819 F.3d 558, 563 (1st Cir. 2016)(“[T]he 10 offer was made pursuant to Rule 68. We thus must read the offer in 11 light of the Rule and the precedent construing the Rule. And a review 12 of the Rule and the precedent interpreting the Rule convinces us that 13 the City’s offer, by virtue of its silence as to whether it was 14 inclusive of costs, must be read to be exclusive of costs and thus to 15 be neither ‘incomplete [n]or ambiguous’ as to that issue”) with 16 plaintiff’s acceptance reveals that they match perfectly. There is no 17 reason to look further. Indeed, in these circumstances, it may be 18 inappropriate for the court to consider extrinsic evidence. See 19 LaPierre, 819 F.3d at 564 & n.9 (stating that courts “could not 20 consider extrinsic evidence to interpret a Rule 68 offer that is 21 silent as to the inclusion of costs,” and collecting cases); see 22 generally 23 2016)(“Under ordinary contract principles, we would next look to 24 extrinsic evidence to determine the intent of the parties. [H]owever, 25 the Rule 68 contract is different. The ambiguity must be resolved 26 against the offeror, as Rule 68 offerees are at risk for costs if the 27 ultimate award is less favorable than the offer.”). Considering 28 extrinsic evidence risks undercutting the settlement promotion purpose Steiner v. Lewmar, Inc., 10 816 F.3d 26, 35 (2d Cir. 1 of Rule 68, encouraging collateral litigation over the meaning Rule 68 2 offers, and exposing plaintiffs to exactly the type of “heads I win, 3 tails you lose” unfairness that has led the Ninth Circuit (and other 4 circuits) to strictly interpret Rule 68 offers against defendants. 5 See, e.g., Nusom, 122 F.3d at 833 (“but ‘Rule 68 offers differ from 6 contracts with respect to attorney fees,’ ... 7 or limitation must be clear and unambiguous”)(quoting Erdman, 926 F.2d 8 at 880; citing Guerrero v. Cummings, 70 F.3d 1111, 1113 (9th Cir. 9 1995), cert. denied, 518 U.S. 1018 (1996)); Sanchez, 709 F.3d at 692 10 (“Offers of judgment under Rule 68 are different from contract offers. 11 When a contract offer is made, the offeree can reject it without legal 12 (as distinct from economic) consequences. Plaintiffs who receive Rule 13 68 offers, however, are ‘at their peril whether they accept or reject 14 a 15 differently than we treat ordinary contract offers.”)(quoting Webb v. 16 James, 147 F.3d 617, 621 (7th Cir. 1998)). As the Ninth Circuit put 17 it, “it would be ludicrous to allow the Defendants to argue after the 18 fact that their offer really means more than it says.” Erdman 926 F.2d 19 at 880 (quoting Rateree v. Rockett, 668 F. Supp. 1155, 1159 (N.D. Ill. 20 1987)). What matters is not what defendants’ counsel intended, or what 21 they said in conversation, or even what plaintiff’s counsel may have 22 suspected, but rather what was contained in defendants’ written Rule 23 68 offer. As the Ninth Circuit has recognized, it is the written Rule 24 68 offer which “stands as the marker by which the plaintiff’s results 25 are ultimately measured.” Nusom, 122 F.3d at 834. Rule 68 offer.’ .... [T]herefore, we as to them, any waiver treat Rule 68 offers 26 The Ninth Circuit, however, has suggested that extrinsic evidence 27 sometimes may or should be considered in interpreting a Rule 68 offer. 28 See, e.g., Nusom, 122 F.3d at 834-835. Accordingly, the court will 11 1 examine the extrinsic evidence presented in this case to determine if 2 it convincingly points in a different direction. 3 Assuming that extrinsic evidence should be considered in this 4 case, it leads nowhere. Defendants rely on two pieces of extrinsic 5 evidence.6 First, defendants assert that their counsel told plaintiff’s 6 counsel on January 12, 2016, before the first offer was served, “that 7 any 8 [Fagerholm Decl., para. 6]. Plaintiff, however, denies that such a 9 statement was made. [Tracy Decl., para. 2 (“[T]here was never a 10 statement to the effect that future settlement offers would be 11 inclusive 12 defendants’ account more than plaintiff’s account, so this piece of 13 extrinsic evidence adds nothing. offer of of settlement attorneys would be fees.”)]. inclusive There is of no attorney reason to fees.” trust 14 Second, defendants argue that the parties’ course of dealing 15 indicates that all settlement demands and offers were lump sums 16 inclusive of costs and attorneys’ fees. [Fagerholm Decl., para. 11]. 17 Plaintiff contends, however, that he made a demand for $25,000 plus 18 attorneys fees in March 2015. [Tracy Decl., para 3]. On closer 19 inspection, it turns out that even defendants concede that not all of 20 the previous settlement offers and demands exchanged by the parties 21 were expressed as lump sums inclusive of attorneys fees. [Fagerholm 22 Decl., para. 11]. Thus, the parties’ bargaining history sheds little, 23 if any, light on how the first offer should be interpreted. 24 Even if the court accepted defendants’ account of both pieces of 25 6 26 27 28 Arguably, the emails between counsel and the second offer could be considered extrinsic evidence. But all they show is that defendants made a unilateral mistake. They do not show that the mistake was mutual or that the first offer, as written, barred a separate award of costs and attorneys’ fees. 12 1 extrinsic evidence as true, it would not matter. What parties say or 2 do 3 misdirection, and discontinuity than ordinary contract negotiations. 4 The court’s experience in presiding over hundreds of settlement 5 conferences demonstrates that plaintiffs frequently accept less than 6 their professed “bottom line”, that defendants frequently pay more 7 than the professed limits of their authority, and that both plaintiffs 8 and defendants switch from couching settlement proposals in lump sums 9 to separating out the components, and back again, sometimes suddenly 10 and inexplicably. Merely because a party says that its next offer will 11 be “X” or will be expressed in “Y” terms frequently does not mean that 12 it will be. Thus, defendant’s contention that the extrinsic evidence 13 demonstrates that the first offer meant something other than what it 14 said, 15 persuasive. in settlement or that negotiations plaintiff should likely have displays suspected more as strategy, much, is not 16 Fifth, defendants also argue that they properly revoked the first 17 offer by serving the second offer. [Opposition at 15-16]. Although the 18 Ninth Circuit apparently has not resolved the issue in a precedential 19 decision, 20 irrevocable during the 14-day period allowed for acceptance. See, 21 e.g., LaPierre, 819 F.3d at 562 n. 5 (noting “the established rule 22 that Rule 68 offers of judgment, once made, are irrevocable for 14 23 days”); Garayalde-Rijos v. Municipality of Carolina, 799 F.3d 45, 47 24 (1st Cir. 2015)(“Rule 68 guarantees the offeree fourteen days to 25 contemplate the offer, as though the offeree had paid for a fourteen- 26 day option”); Sanchez, 709 F.3d at 692 (“Rule 68 offers may not be 27 revoked during the 14-day period established by the Rule”); Richardson 28 v. Nat’l R. R. Passenger Corp., 49 F.3d 760, 765 (D.C. Cir. 1995)(“a most other circuits agree 13 that a Rule 68 offer is 1 Rule 68 offer is simply not revocable during the 14-day period”); see 2 also Morris K. Udall, May Offers of Judgment Under Rule 68 Be Revoked 3 Before Acceptance?, 19 F.R.D. 401, 403, 406 (1957)(“The present 4 wording of Rule 68 demonstrates an implied intention that offer of 5 judgment may not be revoked during the ten day period they are open to 6 the plaintiff. ... No one can compel a defendant to talk settlement. 7 But when he voluntarily does so by filing an offer he should be 8 required to hold the door of compromise open until days have run.”; 9 noting that Judge Donworth, a member of the Federal Rules of Civil 10 Procedure drafting committee, agreed that a Rule 68 is analogous to a 11 paid for option and “cannot be withdrawn”). This makes sense because 12 plaintiffs must choose carefully when deciding whether to accept or 13 reject a Rule 68 offer. See Marek, 473 U.S. at 10-11 (noting that a 14 Rule 68 offer “will require plaintiffs to ‘think very hard’ about 15 whether continued litigation is worthwhile”). The 14-day period allows 16 them a meaningful amount of time in which to do so. Therefore, 17 defendants’ attempt to amend or revoke their first offer by serving 18 the second offer was ineffective. Instead, defendants’ first offer 19 remained open for 14 days, notwithstanding defendants’ subsequent 20 service of a second, materially different offer less favorable to 21 plaintiff. Rather than revoking or modifying the first offer, the 22 second offer merely gave plaintiff an additional offer, which would 23 remain open for 14 days from its service. Plaintiff had the option of 24 accepting 25 surprisingly, plaintiff chose the first offer. either the first offer or the second offer. Not 26 There is, of course, one aspect of this case that is rather 27 unusual. Prior to accepting the first offer, plaintiff’s counsel sent 28 defendant’s counsel an email, and prompted by that email, defendants’ 14 1 counsel served the second offer. Does the fact that defendants’ 2 attempt to revoke or materially change the first offer came before 3 rather than after acceptance require a different result? 4 The First Circuit recently confronted a case similar to this one. 5 In LaPierre, the defendant served a Rule 68 offer “for $300,000 6 payable over (3) years” on September 5, 2014. The offer made no 7 mention of whether the offer was inclusive or exclusive of costs or 8 attorneys’ fees. On September 6, 2014, the defendant sent an email 9 purporting to withdraw the offer. On September 8, 2014 the defendant 10 sent an email explaining that the September 5, 2014 offer had to be 11 “clarified”, and attached an “amended offer of judgment.” The second 12 offer was identical to the first offer except that it contained the 13 following additional sentence: “This $300,000 figure also inclusive of 14 any costs and fees incurred to date, including attorney’s fees.” On 15 September 9, 2014, the plaintiff accepted the September 5, 2014 offer. 16 The district court adopted the defendant’s contention that “the 17 parties had not reached a meeting of the minds, noting that as a 18 result 19 September 20 interpretation of its offer when she purportedly “accepted” the offer, 21 though she understood the terms differently.’” The First Circuit, 22 however, rejected the defendant’s contention, reversed the decision of 23 the district court, and remanded the case with instructions to enter 24 judgment in accordance with the September 5, 2014 offer of judgment. 25 LaPierre, 819 F.3d at 560-561; see also Allen v. Freeman, 2016 WL 26 775788, at *1, 4 (S.D. Ga. Feb. 25, 2016)(holding that the defendant’s 27 attempt to clarify in a subsequent email that its Rule 68 offer of 28 “$100,000 of the 5 [defendant’s] offer, ..., ‘unilateral ‘plaintiff including all was of 15 on clarification’ notice plaintiffs’ of claims of the defendant’s for relief” 1 entitled plaintiff to separately recover costs and attorneys’ fees in 2 addition to the $100,000, and was binding on the defendant despite the 3 defendant’s attempt to clarify that it was inclusive of costs and 4 attorneys’ 5 reliance 6 contrary result, see, e.g., Radecki v. Amoco Oil Co., 858 F.2d 397, 7 401-402 (8th Cir. 1988), is unpersuasive. 8 Eighth Circuit’s application of Rule 68 is markedly more lenient 9 toward defendants than are Ninth Circuit precedents. The approach 10 taken in LaPierre is more consistent with the text and purpose of Rule 11 68, and with the Ninth Circuit’s application of Rule 68 in its 12 published decisions. fees on before other the plaintiff out-of-circuit accepted decisions it). arguably Defendants’ reaching a Among other things, the 13 In an unpublished disposition, the Ninth Circuit decided that 14 where the plaintiff in a Title VII case accepted a Rule 68 offer after 15 the defendants had attempted to revoke it because they had mistakenly 16 excluded attorneys’ fees from their offer, the defendants’ unilateral 17 mistake warranted rescission. Wyatt v. Horkley Self-Service, Inc., 216 18 Fed. Appx. 699, 700-701 (9th Cir. 2007). Although that disposition may 19 be cited, it never has been cited by any case (despite being nearly 20 ten years old), and according to the Ninth Circuit it is “not 21 precedent.” U.S. Ct. App. 9th Cir. R. 36-3. Of course, any decision by 22 the Ninth Circuit deserves respect, even if it is “not precedent.” 23 Nevertheless, in the court’s view, the approach taken in Wyatt risks 24 undercutting the goals of Rule 68, see Marek, 473 U.S. at 5 (stating 25 that the “plain purpose of Rule 68 is to encourage settlement and 26 avoid litigation”), is inconsistent with the rationale of Erdman and 27 Nusom, and arguably with Latshaw v. Trainer Wortham & Co., 452 F.3d 28 1097 (9th Cir. 2005) as well, is contrary to the recent trend of the 16 1 law in other circuits, both with respect to the revocability of Rule 2 68 offers generally, see, e.g., LaPierre, 819 F.3d at 562 n.5, and 3 with respect to the revocability of Rule 68 offers even when the 4 plaintiff discovers or is told before acceptance that the defendant’s 5 offer 6 Accordingly, it seems unlikely that the issue presented in Wyatt would 7 be decided the same way in a published decision today. was mistaken. See, e.g., LaPierre, 819 F.3d at 560-561. 8 This outcome might seem a little harsh, but that is the wrong way 9 to look at what happened here. Defendants did not have to make a Rule 10 68 offer, and if they elected to make one, they were free to include 11 whatever terms they wished and to make their offer at the time of 12 their choosing. As discussed in greater detail below, defendants’ 13 counsel – who admittedly lacked experience in making Rule 68 offers – 14 failed to research the applicable law, law that had been established 15 for nearly 20 years and that had put defendants “on notice” that 16 limits on costs and attorneys’ fees in their Rule 68 offers must be 17 explicit. See Nusom, 122 F.3d at 835 (Goodwin, J., concurring). Even 18 under ordinary contract law principles, such a failure to investigate 19 the relevant law – whether due to carelessness, inexperience, or 20 inattention – deprives defendants of any right to rescind for their 21 unilateral mistake. See, e.g., Praxair, Inc. v. Hinshaw & Culbertson, 22 235 F.3d 1028, 1034 (7th Cir. 200)(Posner, J.)(“If one party is 23 careless and the other is not, the careless party cannot rescind, 24 because he has offered no reason why the court should make him better 25 off than his opponent.”)(applying Illinois law); Anderson Bros. Corp 26 v. O’Meara, 306 F.2d 672, 677 (5th Cir. 1962)(holding that a buyer of 27 a dredge “who chose to act on assumption rather than upon inquiry or 28 information obtained by investigation” would not be “released from the 17 1 resulting consequences on the ground that because of his mistaken 2 assumption, 3 stand”)(applying Texas law); In re Allegheny Int’l Inc,, 954 F.2d 167, 4 181 (3d Cir. 1992)(explaining that if a unilateral mistake is due to 5 negligence rather than the fault of the other party, rescission is 6 unavailable)(applying Pennsylvania law); see also Restatement (2d) 7 Contracts § 154 & Comment c (1981).7 it would be unconscionable to allow the sale 8 7 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Section 154 provides: “A party bears the risk of a mistake when ¶ (a) the risk is allocated to him by the agreement of the parties, or ¶ (b) he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient, or ¶ (c) the risk is allocated to him by the court on the ground that it is reasonable in the circumstances to do so.” Comment c to Section 154 states: “Conscious ignorance. Even though the mistaken party did not agree to bear the risk, he may have been aware when he made the contract that his knowledge with respect to the facts to which the mistake relates was limited. If he was not only so aware that his knowledge was limited but undertook to perform in the face of that awareness, he bears the risk of the mistake. It is sometimes said in such a situation that, in a sense, there was not mistake but ‘conscious ignorance.’” Although the case law is not entirely consistent, numerous courts in disparate jurisdictions have denied relief from a unilateral mistake on the basis of § 154 (b). See, e.g., Kingik v. State Dept. Dep't of Admin., Div. of Ret. & Benefits, 239 P.3d 1243, 1250 (Alaska 2010)(affirming denial of survivor benefits to a widow because she failed to read a waiver form before signing it); Ribeiro v. County of El Dorado, 195 Cal. App. 4th 354, 371 (Cal. App. 2011)(denying a real estate purchaser’s claim for rescission because he had neglected to investigate bond arrearages against the property); Tauber v. Quan, 938 A.2d 724, 731-732 (D.C. App. 2007)(holding that sellers of commercial property could not avoid the contract on the ground of unilateral mistake where they either signed an addendum to the contract without reading it or read it but disregarding its express provisions); Leff v. Ecker, 972 So. 2d 965, 966 (Fla. App. 2007)(denying the plaintiff’s attempt to avoid enforcement of a settlement agreement on the basis of mistake where the plaintiff had participated in mediation and agreed to the settlement without a clear understanding of the insurance policy limits); City of Erie v. Fraternal Order of Police, Lodge 7, 977 A.2d 3, 11-12 & n.7 (Pa. Comwlth 2009)(holding that the city could not evade its obligations under a pension plan on the ground there was no meeting of the minds or its unilateral 18 to 1 This is not a situation in which a defendant whose counsel 2 exercised due care intended to offer to settle for $5,000 in a case in 3 which damages were capped at that amount by statute, but because of a 4 secretary’s 5 Whitaker v. Associated Credit Servs., Inc., 946 F.2d 1222, 1225 (6th 6 Cir. 1991)(granting relief from judgment under Rule 60 where a Rule 68 7 offer for “$500" had been mistyped as “$500,000"). The Rule 68 offer 8 defendants made may not have been interpreted as their counsel 9 expected, but the outcome is neither unconscionable nor absurd. Nor is 10 this a situation in which the plaintiff intentionally tricked the 11 defendant into making a fundamentally unfair Rule 68 offer. See 12 Colonial Penn Ins. Co. v. Coil, 887 F.2d 1236, 1240 (4th Cir. 13 1980)(acknowledging the general principle that Rule 68 offers are 14 irrevocable, but making an exception where, after accepting their fire 15 insurer’s Rule 68 offer the insureds pleaded guilty to arson). Here it 16 was defendants themselves (through their agent, their chosen counsel), 17 not plaintiff, who caused defendants’ predicament. typographical error offered $5,000,000 instead. See 18 Finally, defendants contend that the mistake of their counsel was 19 “excusable neglect” warranting relief from judgment under Rule 60(b). 20 [Opposition at 16-21]. Since no judgment has been entered, the issue 21 arguably is not ripe. Nevertheless, because defendants have asked the 22 court to address it, the court exercises its discretion to do so. 23 The frankness 24 unfamiliarity 25 commendable. [See Opposition at 20 (“Ms. Scheinhorn made the offer 26 under a mistake of law, unaware that the term ‘claims’ could be with of Rule defendants’ 68 and counsel the in controlling admitting their case 27 28 mistake about the repercussions of the bargained agreement). 19 law is 1 interpreted as being exclusive of attorneys’ fees and costs. This 2 misinterpretation was caused by counsel’s unawareness of Marek and the 3 Ninth Circuit authority on the issue....”); Fagerholm Decl., para. 10 4 (“I do not normally practice in federal court and had never made a 5 Rule 68 offer of judgment before.”); Scheinhorn Decl., para. 12 (“I am 6 in my second year of practicing law. I had not previously drafted any 7 Rule 68 offers. Nor was I familiar with Marek or any Ninth Circuit law 8 on the issues discussed in this Opposition.”). Nevertheless, an 9 attorney’s drafting mistakes are not grounds for rescission of a Rule 10 68 offer, especially more than 30 years after Marek, 25 years after 11 Erdman, and nearly 20 years after Nusom. See Nusom, 122 F.3d at 835 12 (“after today’s decision ... defendants will now be on notice that 13 they 14 fees”)(Goodwin, J., concurring); see also Latshaw, 452 F.3d at 1101 15 (holding that in the context of Rule 68, “the effects of a litigation 16 decision that a party later comes to regret through subsequently 17 gained knowledge that corrects the erroneous legal advice of counsel” 18 is not “mistake, inadvertence, surprise or excusable neglect” for 19 purposes of Fed. R. Civ. P. 60(b)(1)). One would expect lawyers 20 unfamiliar with federal practice and inexperienced in making Rule 68 21 offers to conduct adequate legal research and to proceed with caution. 22 Defendants’ counsel should have been meticulous in spelling out 23 exactly what their Rule 68 offer meant, as most counsel for defendants 24 are [See, e.g., Tracy Decl., Exs. H, I, J, K], and as leading practice 25 authorities 26 Practice Guide: Federal Civil Procedure Before Trial § 15-155.2a 27 (Calif. & 9th Cir. eds., 2016)(“To avoid this problem, the [Rule 68] 28 offer should specify that it includes all costs and fees.”). Quite must make urge. explicit See that their generally 20 James Rule M. 68 offers Wagstaffe, include California 1 simply, defendants’ counsel should have been more careful. Conclusion 2 3 Defendants made a Rule 68 offer which, properly interpreted, did 4 not include either costs or attorneys’ fees. Plaintiff accepted that 5 offer. Defendants’ attempted revocation was ineffective, and their 6 careless unilateral mistake affords them no right to rescission. 7 Therefore, plaintiff is entitled to judgment in the amount of $25,000, 8 plus such costs as may be taxed by the clerk and such attorneys’ fees 9 as may be awarded by the court.8 10 It is so ordered. 11 12 Dated: September 28, 2016 _____________________________ Andrew J. Wistrich United States Magistrate Judge 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 8 If the parties cannot reach an agreement concerning attorneys’ fees, plaintiff must file a motion to recover them within 14 days of entry of judgment. Fed. R. Civ. P. 54(d)(2)(B). Defendants may file any opposition within 14 days thereafter. Plaintiff may file any reply 7 days later. That motion likely will be resolved without argument. See C.D. Cal. L.R. 7-15. 21
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