Offers of Judgment are settlement tools that enable any party to a lawsuit to allow judgment to be entered in their favor or against them on specified terms or for a specified dollar amount, i.e., I will agree to end the lawsuit now provided you pay me $50,000.00 or I will agree to end the lawsuit now upon paying you $100,000. The offer is a compromise so the offer can be structured such that the offering party is not admitting liability. Offers of Judgment are procedural mechanisms that can be used to expose the offeree party (the party receiving the offer) to paying the offeror party’s (the party making the offer) attorney fees as well as other costs from the date the offer is made moving forward.
Attorney’s Fees in Nevada
“Nevada adheres to the American Rule that attorney fees may only be awarded when authorized by statute, rule, or agreement.” The Nevada Supreme Court has repeatedly held that “[i]t is settled that attorney’s fees are not recoverable absent a statute, rule or contractual provision to the contrary.” This means that a party to a lawsuit may only be awarded the attorney’s fees he or she incurs in a lawsuit in limited circumstances. An Offer of Judgment can therefore create a valuable mechanism to recover attorney’s fees in cases where such an award would otherwise not be authorized.
Nevada’s Offer of Judgment Rules
Nevada does have a procedural rule and corresponding statute that permits an award of attorney’s fees where they are otherwise not permitted. In fact, Nevada’s Offer of Judgment rules can provide a mechanism to recover attorney’s fees in any case. The governing rule and statute are NRCP 68 and NRS 17.117, respectively. There are slight differences between the penalties under Rule 68 versus the penalties under NRS 17.117. The relevant portion of Rule 68, the more thorough rule, provides as follows:
[i]f the offeree rejects an offer and fails to obtain a more favorable judgment . . . the offeree cannot recover any costs, expenses, or attorney fees and may not recover interest for the period after the service of the offer and before the judgment; and . . . the offeree must pay the offeror’s post-offer costs and expenses, including a reasonable sum to cover any expenses incurred by the offeror for each expert witness whose services were reasonably necessary to prepare for and conduct the trial of the case, applicable interest on the judgment from the time of the offer to the time of entry of the judgment and reasonable attorney fees, if any be allowed, actually incurred by the offeror from the time of the offer.
In other words, if you reject an Offer of Judgment and thereafter fail to beat the offer at trial, you could be ordered to pay the other party’s reasonable attorney’s fees from the date the offer is made moving forward. I say could because even if the offeree fails to beat the offeror’s offer at trial, the court still retains discretion as to whether to award attorney’s fees under Rule 68. In fact, prior to awarding attorney’s fees under Rule 68, even where otherwise warranted under the Rule, the court must carefully consider the following “Beattie” factors:
(1) whether the plaintiff’s claim was brought in good faith; (2) whether the defendants’ offer of judgment was reasonable and in good faith in both its timing and amount; (3) whether the plaintiff’s decision to reject the offer and proceed to trial was grossly unreasonable or in bad faith; and (4) whether the fees sought by the offeror are reasonable and justified in amount.
The good faith and reasonableness of the involved parties are crucial in any Offer of Judgment analysis. Even if a party ultimately finds itself on the prevailing end of an Offer of Judgment, the court can still refuse to award that party its attorney’s fees if the court feels the party acted unreasonably or in bad faith in connection with the offer. As an illustration, if a defendant offers a plaintiff $1 at the inception of a case where the plaintiff has meritorious claims, and the defendant ultimately prevails at trial because a critical witness was impeached, the court could likely refuse to award attorney’s fees to the defendant as the offer, when made, was not reasonable or made in good faith. “The district court must evaluate the Beattie factors when deciding whether to award attorney fees pursuant to NRCP 68.” “After weighing the foregoing factors, the district judge may, where warranted, award up to the full amount of fees requested.” The Beattie factors are designed to ensure that the Offer of Judgment Rule is applied in a reasonable fashion. It would be inconsistent with the purpose of the Rule to award a defendant who makes an unreasonably low offer and thereafter gets lucky at trial.
Purpose Of Nevada’s Offer of Judgment Rules
The purpose of Nevada’s Offer of Judgement rules “is to encourage litigants who receive offers of judgment to settle their lawsuits by forcing the offeree to ‘balance the uncertainty of receiving a more favorable judgment against the risk of receiving a less favorable judgment and being forced to pay the offeror’s costs and attorney’s fees.” The Nevada Supreme Court has held that:
the purpose of [Nevada’s Offer of Judgment Rules] is to encourage litigants who receive offers of judgment to settle their lawsuits by forcing the offeree to ‘balance the uncertainty of receiving a more favorable judgment against the risk of receiving a less favorable judgment and being forced to pay the offeror’s costs and attorney’s fees.’
The purpose of NRS 17.117 and NRCP 68 “is to save time and money for the court system, the parties and the taxpayers. While the offer of judgment rules rewards a party who makes a reasonable offer and, the rules also punish the party who refuses to accept such an offer. However, please understand that although “the purpose of NRCP 68 is to encourage settlement, it is not to force plaintiffs unfairly to forego legitimate claims.”
Procedure for Serving and Responding an Offer of Judgment
Offers of judgment can be made at any time more than 21 days before trial. The offer must be in writing and must be unconditional and for a definite amount in order to be valid for purposes of NRCP 68. Once an offer if formally made pursuant to NRCP 68 or NRS 17.117, it is irrevocable for the duration of the (14-day) acceptance period. The offeree can accept the offer in writing, reject the offer in writing or simply ignore the offer. Ignoring the offer has the same effect as a rejection. If a party chooses to accept the offer and timely accept the same, the offeror must pay the offeree the amount within 21 days of the acceptance and the claims will be dismissed. If a party chooses to accept an offer and timely accepts the same and the offeror does not pay the offeree within 21 days of the acceptance, the amount will be reduced to judgment.
Additionally, when a court is considering the amount of attorneys’ fees to award, pursuant to an Offer of Judgment or otherwise, the analysis must always include a consideration of the factors enumerated by the Nevada Supreme Court in a case called Brunzell v. Golden Gate National Bank. Those factors include: (1) the qualities of the advocate: his ability, his training, education, experience, professional standing and skill; (2) the character of the work to be done: its difficulty, its intricacy, its importance, time and skill required, the responsibility imposed and the prominence and character of the parties where they affect the importance of the litigation; (3) the work actually performed by the lawyer: the skill, time and attention given to the work; (4) the result: whether the attorney was successful and what benefits were derived. In fact, a court that does not consider the Brunzell factors, but nevertheless awards attorneys’ fees, commits grounds for an automatic reversal of that attorneys’ fee award. Not only must the court consider the Brunzell factors, but it must also provide findings and sufficient reasoning in support of its ultimate fee determination.
Offer of Judgment
In Nevada, Offers of Judgment may create an invaluable opportunity in cases where the parties do not otherwise have a basis to recover attorney fees. Although the underlying grounds seem simple enough, analyzing all of the relevant factors can get complicated. As Nevada litigators, the attorneys at HAYES WAKAYAMA are accustomed to being served with Offers of Judgment in lawsuits. While Offers of Judgment should always be considered, as well as the potential effect of the same, it is important to always appreciate that “the purpose of NRCP 68 . . . is not to force plaintiffs unfairly to forego legitimate claims.” If you or a loved one has any questions about serving or being served with an Offer of Judgment in a civil matter, please do not hesitate to contact the Nevada civil litigators at HAYES WAKAYAMA for a free and confidential consultation.