Rule v. Tobin
Annotate this Case
Rule v. Tobin (97-316); 168 Vt. 166; 719 A.2d 869
[Opinion Filed 19-Jun-1998]
[Motion for Reargument Denied 27-Jul-1998]
NOTICE: This opinion is subject to motions for reargument under
V.R.A.P. 40 as well as formal revision before publication in the Vermont
Reports. Readers are requested to notify the Reporter of Decisions,
Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
any errors in order that corrections may be made before this opinion goes
to press.
No. 97-316
William D. and Beverly G. Rule Supreme Court
and Danielle Swain
On Appeal from
v. Rutland Superior Court
Gary G. Tobin and February Term, 1998
City of Rutland
Alden T. Bryan, J.
Alicia L. Aiken and Herbert G. Ogden, Jr. of Liccardi, Crawford &
Ogden, P.C., Rutland, for Plaintiffs-Appellants.
Shannon A. Bertrand of Reiber, Kenlan, Schwiebert, Hall & Facey, P.C.,
Rutland, for Defendants-Appellees.
PRESENT: Amestoy, C.J., Dooley, Morse, Johnson and Skoglund, JJ.
DOOLEY, J. Plaintiffs, William and Beverly Rule and Danielle Swain,
brought a civil rights action under 42 U.S.C. § 1983 against a Rutland
police officer, Gary Tobin, and the City of Rutland alleging that Tobin
unlawfully entered plaintiffs' apartment and unlawfully arrested Beverly
Rule, using excessive force. A Rutland Superior Court jury returned a
verdict for defendants, and plaintiffs appeal on a number of grounds,
including that the trial court erred in failing to enforce a settlement
agreement. We agree that the parties entered into a binding settlement
agreement and reverse for entry of judgment consistent with that agreement.
This case was tried twice. On April 10, 1997, between the first and second
trials, defendants' attorney sent plaintiffs an offer of judgment which
read as follows:
Now comes defendants . . . and in accordance with the
provisions of V.R.C.P. 68, and without prejudice to the rights of the
defendant to proceed with the defense and its general denial of liability
as envisioned by the rules, makes the following offer of judgment:
The defendant offers to allow the plaintiff to take judgment against
it in the amount and to the extent of Four Thousand and no/100
($4,000.00), having thoroughly reviewed the liability and damages
aspect of this case.
On April 15, 1997, plaintiffs' attorney answered, purporting to accept
the offer of judgment, as follows:
Assuming the defendants' 10 April Offer of Judgment does not
include costs and attorney's fees pursuant to 42 U.S.C. § 1988 or
any other entitlement, the plaintiffs accept the defendants' $4,000
offer.
The plaintiffs understand that attorney's fees and costs will be
determined in a later hearing pursuant to V.R.C.P. 54(d).
Asserting that they intended to include attorney's fees and costs in
the offer, defendants objected to plaintiffs' answer and claimed that the
offer had not been accepted.
The court apparently agreed with defendants' position. Over
plaintiffs' objection, the court ordered the parties to start over with a
new offer and acceptance, if appropriate. It directed that the new offer
explicitly cover "everything, including all attorney's fees." Thereafter,
defendants submitted an offer of judgment of $7,000, including "all claims
for damages, costs, attorney's fees and every other potential claim."
Plaintiffs rejected this offer.
On appeal, plaintiffs argue that (1) defendants' offer cannot be
interpreted to include attorney's fees, (2) plaintiffs accepted
defendants' offer, and (3) the court had no discretion to set aside the
resulting agreement. Defendants respond that its offer must be interpreted
to include costs and attorney's fees or, alternatively, it was ambiguous
and the court had the discretion to rescind it because there was no
meeting of the minds. We agree with plaintiffs' position.
The offer of judgment procedure which defendants invoked by their
offer is authorized and governed by Vermont Rule of Civil Procedure 68,
which provides in pertinent part:
At any time more than 10 days before the trial begins or within such
shorter time as the court may approve, a party defending against a
claim may serve upon the adverse party an offer to allow judgment
to be taken against the defending party for the money or property
or to the effect specified in the offer, with costs then accrued. If
within 10 days after the service of the offer or within such shorter
time as the court may order 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.
Refusal of an offer of judgment may have adverse consequences for the
plaintiff depending upon the ultimate result of the case. "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." Id.
Except for an irrelevant variation, the rule is identical to Federal
Rule of Civil Procedure 68. We have applied this rule on only one
occasion, and that precedent is not helpful to the question before us.
Because our rule is identical to the federal rule, we look to the "Federal
cases interpreting the Federal Rules [as] . . . an authoritative source
for the interpretation" of our rule. Reporters Notes to V.R.C.P. 1. It is
particularly appropriate to look to federal law in this case because we
are defining the interrelationship between Rule 68 and the attorney's fee
provision of the federal Civil Rights Act.
We take the component questions in the order plaintiffs have presented
them, looking first at defendants' offer. Our starting point is Marek v.
Chesny, 473 U.S. 1 (1985), the definitive federal case on the
interrelationship between Rule 68 and the Civil Rights Attorney's Fees
Awards Act, 42 U.S.C. § 1988. In Marek, defendant made an offer of
judgment, which was refused, and plaintiff obtained a favorable jury
verdict. The issue was whether the offer was greater than the verdict,
and, if so, whether plaintiff would lose the right to recover attorney's
fees because of the effect of Rule 68. The issue required the Supreme
Court to determine whether civil rights attorney's fees were "costs" under
Rule 68 and, if so, whether defendant's offer included such fees.
The Supreme Court held that attorney's fees recoverable under 42
U.S.C. § 1988 are "costs" as that term is used in Rule 68.
[T]he most reasonable inference is that the term `costs' in Rule 68
was intended to refer to all costs properly awardable under the
relevant substantive statute or other authority . . . . [A]bsent
congressional expressions to the contrary, where the underlying
statute defines `costs' to include attorney's fees, we are satisfied
such fees are to be included as costs for purposes of Rule 68.
Id. at 9. 42 U.S.C. § 1988 specifically provides that attorney's fees are
awarded "as part of the costs." Thus, civil rights attorney's fees are
costs under Rule 68. See V.R.C.P. 68.
The Court specified how Rule 68 deals with costs:
If an offer recites that costs are included or specifies an amount for
costs, and the plaintiff accepts the offer, the judgment will
necessarily include costs; if the offer does not state that costs are
included and an amount for costs is not specified, the court will be
obliged by the terms of the Rule to include in its judgment an
additional amount which in its discretion . . . it determines to be
sufficient to cover the costs.
Id. at 6 (internal citation omitted). Marek clearly states the options
available to a civil rights act defendant in making an offer of judgment
under Rule 68: (1) the defendant may make a lump sum offer, explicitly
covering all costs, including attorney's fees; or (2) the defendant may
make an offer without mentioning costs, thereby leaving them to court
determination, and plaintiff will be able to recover costs in addition to
the judgment amount.
The leading case on construing offers of judgment in civil rights
cases after Marek is Erdman v. Cochise Cty., 926 F.2d 877 (9th Cir. 1991).
The court reinforced the direction of Marek for two main reasons: (1) "a
settlement agreement is analyzed in the same manner as any contract, i.e.,
any ambiguities are construed against the drafter," id. at 880; and (2)
"any waiver or limitation of attorney fees in settlements of § 1983 cases
must be clear and unambiguous." Id. Other courts have also emphasized that
offers of judgment put particular pressure on plaintiffs because they
cannot be freely rejected without consequences; and, therefore, plaintiffs
should not be put in the position where ambiguities in the offer might be
construed against them.
See Chambers v. Manning, 169 F.R.D. 5, 8 (D. Conn. 1996); Said v.
Virginia Com. Univ. Med. College, 130 F.R.D. 60, 63 (E.D. Va. 1990).
Marek and its progeny hold that failure to explicitly deal with costs,
and particularly attorney's fees, in an offer of judgment means that the
plaintiff is free to accept the offer and seek attorney's fees and other
costs in addition to the amount specified in the offer. See Chambers v.
Manning, 169 F.R.D. at 8; Webb v. James, 172 F.R.D. 311, 314 (N.D. Ill.
1997); Swan v. Daniels, 917 F. Supp. 292, 298 (D. Del. 1995); SAS v.
Trintex, 709 F. Supp. 455, 458 (S.D.N.Y. 1989); Rohrer v. Slatile Roofing
& Sheet Metal Co., 655 F. Supp. 736, 738 (N.D. Ind. 1987); LaPerriere v.
Schrieve, 721 P.2d 630, 635 (Alaska 1986). Defendants' offer in this case
was silent on costs and attorney's fees. Under Marek, we must interpret
the offer as allowing plaintiffs to obtain costs and attorney's fees in
addition to the judgment amount specified in the offer.
We must next determine whether plaintiffs accepted defendants' offer.
In general, we turn to contract law to determine whether there has been a
valid offer and acceptance. See Radecki v. Amoco Oil Corp., 858 F.2d 397,
399 (8th Cir. 1988). Under contract law, an acceptance of an offer must
be unconditional. See Benya v. Stevens and Thompson Paper Co., 143 Vt.
521, 525, 468 A.2d 929, 931 (1983). It must "substantially comply with
the terms of the offer" because "[a]n acceptance that modifies or includes
new terms is not an acceptance of the original offer; it is a counteroffer
. . . ." Id.
Defendants argue that plaintiffs' purported acceptance of the offer of
judgment was invalid because it was conditional and varied from the terms
of the offer. Specifically, they rely on the language of the acceptance
that conditioned acceptance on a construction of the offer that allowed
plaintiffs to pursue attorney's fees and costs. Defendants argue that
plaintiffs' assumption was at variance with their intent in making the
offer.
Because we have held that the offer did not have to include attorney's
fees and costs within the stated amount, it is clear that plaintiffs'
acceptance did not vary the terms of the offer.
At best, defendants' argument is that the acceptance is invalid because it
was conditional, even if the condition is a correct statement of the legal
effect of the offer. We do not believe that the applicable contract
formation law is this formalistic.
As we have held, the condition imposed by plaintiffs was implied in
the offer as a matter of law. In such a case, the acceptance is
sufficient to form a contract. See Chambers v. Manning, 169 F.R.D. at 7;
Rohrer v. Slatile Roofing & Sheet Metal Co., 655 F. Supp. at 738. A
leading contract treatise explains the rationale:
Sometimes an acceptor from abundance of caution inserts a condition in his
acceptance which merely expresses what would be implied in fact or in law
from the offer. As such a condition involves no qualification of the
acceptor's assent to the terms of the offer, a contract is not precluded.
Thus an offer to sell land may be accepted subject to the condition that
the title is good, for unless the offer expressly specifies that the
offeree must take his chance as to the validity of the title, the meaning
of the offer is that a good title will be conveyed.
1 W. Jaeger, Williston on Contracts § 78, at 257-58 (3d ed. 1957); see also
Restatement of Contracts (2d) § 59, Comment b., Illustration 3 (1981).
Case law supports this interpretation. See State of Rhode Island Dept. of
Transp. v. Providence & Worcester R.R. Co., 674 A.2d 1239, 1243 (R.I.
1996) (acceptance not equivocal if offeree merely puts into words that
which was already reasonably implied in terms of offer); In re Lamarre, 34 B.R. 264, 266 (Bankr. D. Me. 1983) ("[T]he offeree from an abundance of
caution may condition his acceptance on a fact which would be implied in
fact or in law from the offer."); Panhandle Eastern Pipe Line Co. v. Smith,
637 P.2d 1020, 1023 (Wyo. 1981) (acceptance still effective if addition
only asks for something implied from offer). Because plaintiffs'
acceptance only clarified what they were already entitled to by law, it
was unconditional. Accordingly, a valid agreement was entered into between
plaintiffs and defendants for a judgment of $4,000, plus costs and
attorney's fees.
Finally, we must consider whether the trial court had discretion to
set aside the agreement that was reached by plaintiffs and defendants.
Rule 68 is drafted in mandatory terms, requiring the clerk to enter
judgment on the agreement with no intervention by the judge. Once
an agreement is reached, the rule provides no role for the trial judge.
Other courts have noted the mandatory nature of the rule and held that the
trial court has no discretion to refuse to enforce an accepted offer of
judgment:
Rule 68 also leaves no discretion in the district court to do anything
but enter judgment once an offer has been accepted. By directing
that the clerk shall enter judgment after proof of offer and
acceptance have been filed, the explicit language of the rule
signifies that the district court possesses no discretion to alter or
modify the parties agreement.
. . . .
From the foregoing it appears that Rule 68 judgments are
self-executing. Unlike imposed judgments and ordinary consent
judgments, once the parties agree on the terms of a Rule 68
judgment, the court has no discretion to withhold its entry or
otherwise to frustrate the agreement.
Mallory v. Eyrich, 922 F.2d 1273, 1279 (6th Cir. 1991); see also Jordan v.
Time, Inc., 111 F.3d 102, 105 (11th Cir. 1997) ("We believe that the
mandatory language of the rule leaves no room for district court
discretion."). We agree with the federal court precedents that the rule is
mandatory and provides no room for trial court discretion to refuse to
enforce a binding agreement.
Defendants argue, however, that if a judgment was reached based on the
offer and acceptance, the court could relieve them of the judgment under
V.R.C.P. 60(b). They believe there are sufficient grounds for relief from
judgment because the agreement does not reflect a meeting of the minds and
the offer is based on defendants' mistake as to its meaning. See V.R.C.P.
60(b)(1) (relief can be ordered for "mistake, inadvertence, surprise, or
excusable neglect"). Since this argument was not presented below, and the
superior court refused to enter judgment on the offer rather than granting
relief from a judgment, we would ordinarily remand to have the court
address it in the first instance. We believe, however, that it would be an
abuse of discretion to grant relief under Rule 60(b) in this case. Thus,
a remand is unnecessary.
We emphasize that a judgment based on a Rule 68 offer and acceptance
is consensual. It can be overturned only for grounds to set aside a
contract. See Mallory v. Eyrich, 922 F.2d
at 1280; Kanaan v. Kanaan, 163 Vt. 402, 413, 659 A.2d 128, 135 (1995)
(pretrial stipulation may be set aside only for "fraud, unconscionable
advantage, impossibility of performance, or hampering circumstances
intervening beyond the expectation of the agreeing parties"); see
generally 12 C. Wright, A. Miller & R. Marcus, Federal Practice and
Procedure (2d) § 3005.2, at 116 (2d 1997) ("relief under Rule 60(b) is not
readily justified, particularly with judgments based on Rule 68"). There
are no such grounds here.
The argument defendants make was rejected in SAS v. Trintex, a
factually similar case. We find its reasoning persuasive:
Defendant argues that this court must determine what its
intentions were in making the offer and what the plaintiff's
assumptions were in accepting it. To subject Rule 68 offers to such
collateral proceedings would undermine entirely the purpose of the
rule.
. . .
The simple and obvious fact of the matter is that the
defendant's counsel never anticipated that the plaintiff would accept
the offer of judgment and, indeed, that offer would not have been
accepted had it included attorney's fees. Defendant's counsel
simply erred in failing to protect against an acceptance of the offer
followed by a request for costs, including attorney's fees.
709 F. Supp. at 458; see also Webb v. James, 172 F.R.D. 311, 316 (N.D.
Ill. 1997) (defendant who submits offer of judgment without specifying
that costs and fees are included is not entitled to relief under F.R.C.P.
60(b) when plaintiff submits a request for attorney's fees after accepting
offer; although defendant's counsel's statement of his intent is credible,
"objective intent" as reflected in offer must control); Blair v. Shanahan,
795 F. Supp. 309, 314-15 (N.D. Cal. 1992) (disagreement concerns legal
effect of contract, not a term in contract, and thus there was meeting of
the minds; unilateral mistake in legal effect of offer not grounds for Rule
60(b) relief). We also agree with the court's observation in Blair:
In "murky" areas of the law, the parties properly bear the risk of
entering into agreements that are silent on crucial issues. Imagine
a contrary rule: A Rule 68 offer, duly accepted, may be vacated at
the offeror's whim when the offeror's research reveals that the
probable legal result of a judgment entered pursuant to that offer,
concerning an issue upon which the offer was silent, is
unfavorable. Such a policy would be absurd.
Id. at 316.
Our case law is consistent with these decisions. Rule 60(b) does not
protect a party from "tactical decisions which in retrospect may seem ill
advised," see Okemo Mountain, Inc. v. Okemo Trailside Condominiums, Inc.,
139 Vt. 433, 436, 431 A.2d 457, 459 (1981); nor does it protect against
counsel's careless ignorance of the law. See Margison v. Spriggs, 146 Vt.
116, 120, 499 A.2d 756, 759 (1985).
The hallmark of Rule 60(b) intervention is the prevention of hardship
or injustice. See Manosh v. Manosh, 160 Vt. 634, 635, 648 A.2d 833, 835
(1993). We cannot find either hardship or injustice here. Defendants
invoked Rule 68 to obtain a tactical advantage. The case had already once
been tried by a jury, and they knew that plaintiffs' attorney's fees far
exceeded what they were prepared to offer. Thus, the need to cover
plaintiffs' attorney's fees was a major impediment to settlement.
Moreover, even the most modest research effort would show that defendants'
offer had to cover attorney's fees explicitly. See 12 Wright, Miller &
Marcus, supra § 3005.1, at 112-13. To fail in these circumstances to
prepare a proper offer of judgment, consistent with what defendants say
was their intent, represents a degree of negligence beyond what is
appropriate for our relief.
Reversed and remanded for entry of judgment in accordance with
defendants' offer of April 10, 1997 and further proceedings not
inconsistent with this opinion.
FOR THE COURT:
_______________________________________
Associate Justice
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