Marek v. Chesny, U.S. Supreme Ct. (1985)
Author: Bram

Cause of action: The following is a cause of action for recovery of all attorney's fees, both before and after settlement offer.

Procedural History: Trial court (District Court) held for petitioners that costs in this case only covered those before the settlement offer.  Court of Appeals reversed.  Cert granted and reversed.

Facts: After wrongful death suit filed, petitioners tried to settle for $100K, respondents refused.  Trial court awarded damages to respondent for $60K total, thereafter respondent added on another $172K-plus for attorney's fees, which petitioners claimed under FRCP 69 that all fees shifted to PL after trial subsequent to a judgment not exceeded by the ultimate recovery at trial.

Issue(s): Under federal rules of civil procedure, are attorney's fees incurred by a PL subsequent to an offer of settlement under F.R.C.P. 68, which must be paid by DF under U.S.C. 42 §1988, when the PL recovers a judgment less than the offer?

Sub-issues: (1) Was the offer proper?

(2) Are the costs, as used in FRCP 68 , includes attorney's fees awardable under USC 42 §1988?

Court's Rationale/Reasoning: Purpose of rule 68 is to encourage settlement and avoid litigation.  As to 1st sub-issue, if DF's are not allowed to make settlement offers which are not all encompassing of what they think would be owed for the entire cause of action, including attorney's fees, then offers would be few and far between.  But the offer is all encompassing, and PL's should know (a) if the offer is reasonable, and (b) if the offer plus costs is going to make them whole again.

As to the second sub-issue, when the authors of FRCP 68 drafted the rule, they were unclear as to the word "costs."    The Court determines it to mean all costs properly awardable under the relevant substantive statute or other authority.  Here, the suit was under 42 §1983, and is subject to those fee shifting requirements under 42 §1988, however the Court feels there will be no undermining legislative intent by, in this case, counting those costs only before the reasonable settlement offer.  In fact, the Court feels that under 42 §1988, the same underlying meaning still applied: to prevent the burdening of our judicial system with litigation.  Bottom line: if the offer is reasonable, it does not undermine the intent of either 42 §1988 or 1983.

This is a two-sided sword: parties could also receive compensation that far surpasses anything they thought they might get in litigation.  Settlements could serve the interests of PL's in this context, as opposed to DF's.  Now, FRCP 68 will let both litigants think about how hard they wish to pursue litigation.

Rule: Rule 68 provides: if a timely pretrial offer of a settlement is not accepted "and 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."

Holding: No.  The underlying meaning of the statute was to limit litigation and to promote settlements.  DF's should not be penalized for offering a fair amount in litigation, and PL's should think hard before they decide to enter into litigation.

Dissenting: (Brennan) This is just another attempt to vary a definition of a term, but it is counter to 100 other federal statutes to the same effect.  The Framers of the rules could not possibly have meant this kind of fee shifting to be applicable.  Similarly, it is contrary to those provisions set forth in section 5 of the 14th amendment.  In Roadway Express, the term costs meant what was in §1920, which was taxable costs.  Not costs depending on the case.  At least 11 other statutes explicitly mention costs as part of the fee shifting that accompanies a civil rights statute.  There is no case law which described costs as the majority does.

The words in FRCP are to be given consistent meaning, which is not the case here.  This kind of reading is contrary to the "either they're in or they're out" meaning previously given to costs related to fee shifting in civil rights cases.  Now there will be too much judicial construction.  Over 100 attorney's fees statutes to be touched by this decision, as now the meaning is inconsistent.

Congressional intent was based on a reasonableness standard, so for attorney's fees not to be included in the costs, there would have to be an unreasonable denial of a fair settlement.  There has never been considered as to respondent's denial of the settlement offer was not discussed by this Court.  Now low ball offers could be pandered off as an excuse not to include legal costs if the party receives an award, or before PL's can even thoroughly determine if an award is fair.  This takes away their rights as civil rights litigants, which is the incentive of litigating under these statutes.