A recent decision by the Second Circuit Court of Appeals should give all defendants, their lawyers and insurers pause. In Barbour, et al. v. City of White Plains, et al., the Court upheld an award of over $285,000 in attorneys fees after the defendants tendered a settlement offer of only $30,000 ($10,000 per plaintiff). Many defense attorneys, in making offers to plaintiffs, look to Fed.R.Civ.P. 68 as a shield, couching the tender as an Offer of Judgment. If the plaintiff rejects the offer and wins less (or the same) at trial, the plaintiff must pay the defendant’s costs. It gives a plaintiff the potential for a financial loss should they decline and force a trial.

In Barbour, the defendants made a Rule 68 Offer of Judgment. The plaintiffs accepted. Unlike a traditional settlement offer, an accepted Offer of Judgment acts as if the plaintiff won their case at trial, becoming a prevailing party. Since the claim was brought as constitutional rights violations under 42 USC sec. 1981 & 1983, those statutes allow a prevailing party to recover attorneys’ fees. Unfortunately for the defendants, their lawyers and insurers, the Offer of Judgment said “all claims” but did not specify that it would include “attorney fees”. The Court deemed the award of attorneys’ fees as not being compensation for the claim itself, but as a separate matter unto itself. Thus, as prevailing parties, the plaintiffs were entitled to their attorneys’ fees and were not limited by the amount specified in the offer of judgment.

Going forward, defendants, lawyers and insurers involved in federal cases in Connecticut, part of the Second Circuit, need to carefully prepare any Offer of Judgment in order to avoid the unforeseen consequence of an award of attorneys’ fees nearly ten times the settlement offer. Experienced trial counsel can help.