The Offer of Judgment Rule is a mechanism useful to both Plaintiffs and Defendants in order to leverage settlement of cases in New Jersey. There are, however, several limitations as to the Rule’s applicability. In the case of Crudup v. Marrero, 57 N.J. 353 (1971), the New Jersey Supreme Court explained that the rules permitting offers of judgment were specifically designed “as a mechanism to encourage, promote and stimulate early out-of-court settlement of negligence and unliquidated damage claims that in justice and reason ought to be settled without trial.” Id. at 357. In Crudup, the court refused to exempt the Uninsured Motorist Fund from the operation of the Offer of Judgment Rule.
R. 4:58-1 sets forth the procedure for which a party to a case may submit an offer of judgment. It states as follows:
Except in a matrimonial action, any party may, at any time more than 20 days before the actual trial date, serve upon any adverse party, without prejudice, and file with the court, an offer to take judgment in the offeror’s favor, or as the case may be, to allow judgment to be taken against the offeror …. If at any time on or prior to the 10th day before the actual trial date the offer is accepted, the offeree shall serve upon the offeror and file a notice of acceptance with the court…. If the offer is not accepted on or prior to the 10th day before the actual trial date or within 90 days of its service, whichever period first expires, it shall be deemed withdrawn and evidence thereof shall not be admissible except in a proceeding after the trial to fix costs, interest and attorney’s fee.
Rules 4:58-2 and 4:58-3 set forth the consequences that result when an offer of judgment is not accepted and a verdict is obtained. R. 4:58-2 details the consequences of non-acceptance of a claimant’s offer, and provides, in pertinent part:
If the offer of a claimant is not accepted and the claimant obtains a money judgment, in an amount that is 120% of the offer or more, excluding allowable prejudgment interest and counsel fees, the claimant shall be allowed, in addition to costs of suit: (1) all reasonable litigation expenses incurred following non-acceptance; (2) prejudgment interest of eight percent on the amount of any money recovery from the date of the offer or the date of completion of discovery, whichever is later, but only to the extent that such prejudgment interest exceeds the interest prescribed by R. 4:42-11(b), which also shall be allowable; and (3) a reasonable attorney’s fee for such subsequent services as are compelled by the non-acceptance.
Rule 4:58-3 provides the above allowances if the offer of a party other than the claimant is not accepted, and the claimant obtains a monetary judgment, excluding allowable prejudgment interest and counsel fees, that is 80% of the offer or less.
While matrimonial actions are the only cases expressly excluded under R. 4:58-1, the courts have also refused to apply the rule in other contexts. See generally Casino Reinvestment Dev. Auth. v. Marks, 332 N.J.Super. 509 (App.Div.), certif. denied, 165 N.J. 607 (2000). In that case, the defendants relied on the phrase “Except in a matrimonial action….” to argue that the rule necessarily applies to any civil action, except matrimonial actions. The Appellate Division, however, held that the rule must be interpreted as a whole, and that it does not apply to condemnation actions. Id. at 513. The panel reasoned that a condemnee was neither a “claimant” nor a “non-claimant” as defined by R. 4:58-2 and R. 4:58-3. In affirming the trial court’s determination that the rule did not apply, the court noted that it had “no doubt that the Supreme Court in the exercise of its rule making power could provide that Rule 4:58 applies to actions involving condemnation as well as actions involving ‘claimants.’ See, e.g., State v. Dilley, 48 N.J. 383 (1967). We believe, however, that the rule as presently structured was not intended to apply to such proceedings. See Crudup v. Marrero, 57 N.J. 353, 361-64 (1971).” Id. at 515-516.
New Jersey courts have also found the Offer of Judgment rule inapplicable in tax court cases. See City of Atl. City v. Boardwalk Regency Corp., 20 N.J. Tax 21 (2002). In Boardwalk Regency, the court determined that R. 4:58 was not designed for tax court cases since “the original and continued purpose of the rule was and is to induce early settlements of negligence actions.” Id. at 27 (citing Pressler, Current N.J. Court Rules, comment on R. 4:58 (2002)). The tax court judge additionally noted that “Rule 4:58 is not compatible with Tax Court procedures because the judge with whom the offers and acceptances are filed is the same judge that will be the trier of fact. It would be unfair to the non-accepting party to have the judge (the trier of fact) know that the non-accepting party . . . did not accept an offer. In other words, the non-acceptance of an offer of judgment could prejudice the non-accepting party in the eyes of the trier of fact.” Id. The judge pointed to several procedural conflicts between Rule 4:58 and the rules of tax court, and concluded that “the administrative differences between the application of the offer of judgment rule to negligence actions and its application to Tax Court matters confirms the conclusion that R. 4:58 was not designated to apply to matters in the Tax Court.” Id. at 28.
Given the foregoing case law, while it is evident that the Offer of Judgment Rule is an important tool for attorneys to leverage settlement, it is important to note that its availability has been limited by the courts in the above situations.
Spencer J. Rothwell, Esq. is an Associate Attorney practicing in the firm’s Land Use, Litigation and Real Estate departments.