Report of the Connecticut Law Revision Commission
to the Judiciary Committee
Concerning Offers of Judgment

Prepared by David L. Hemond

January 19, 2000

 

The Connecticut Law Revision Commission was requested by Senator Donald E. Williams, Jr. and Representative Michael P. Lawlor, Cochairs of the Judiciary Committee, by a letter to David Biklen dated May 13, 1999, to undertake a review of the laws concerning offers of judgment. In particular, they asked that the review consider appropriate revisions so that the process would induce early settlement of matters prior to litigation. The letter requested that recommendations be made prior to the 2000 legislative session.

The Commission has now completed its review. The Commission finds that offers of judgment have not proven effective either in Connecticut or in other jurisdictions and that proposals to strengthen the process do not have the support of either the plaintiffs or defendants bar. More, specifically, the Commission reports as follows:

CURRENT LAW

Current Connecticut law on offers of judgment is governed by parallel provisions in the Connecticut General Statutes and in the Rules for the Superior Court contained in the Connecticut Practice Book. The law restricts offers to actions involving contracts or suits for money damages. Offers are filed with the Clerk of the Superior Court.

The basic rules are as follows:

Offers by the plaintiff (Rules 17-14, 17-15, 17-16, 17-17, 17-18, CGS 52-192a)

1. The plaintiff may make an offer at any time before the trial begins.

2. The defendant must accept the offer within 30 days and before the verdict or a potential penalty for failure to accept may apply.

3. If the defendant does not accept and the plaintiff recovers equal or more than the offer, the plaintiff recovers an additional 12% from the date the complaint was filed and up to $350 attorneys fees, except that if the offer was made more than 18 months after the complaint was filed, the plaintiff only recovers the 12% from the date the offer was filed, plus up to $350 attorney fees.

 

Offers by the defendant (Rules 17-11, 17-12, 17-13, CGS 52-193, 52-195)

1. The defendant may make an offer at any time before evidence is offered.

2. The plaintiff must accept the offer within 10 days or a potential penalty for failure to accept may apply.

3. If the plaintiff does not recover more than the offer plus interest, the plaintiff does not recover any costs accruing after the offer and must pay the defendant's costs accruing after the offer plus up to $350 attorney's fees.

The statutes and rules concerning offers of judgment are intended to provide fair incentives to induce the parties to settle their claims prior to trial, thus bypassing the risks, vagaries, and costs to the judicial system and the parties of the trial itself.

The current incentive for a defendant to accept a plaintiff's offer is the possibility that the defendant will be required to pay 12% interest from the date of the complaint and attorney's fees up to $350.

The incentive for a plaintiff to accept a defendant's offer is the possibility that the plaintiff will be required to pay the defendant's costs accruing after the date of the offer and attorney's fees up to $350 because the plaintiff's judgment was less than the defendant's offer, notwithstanding that the plaintiff has "won" the case.

Current law, by providing the plaintiff with punitive interest if the defendant fails to settle for an amount less or equal to the amount ultimately awarded - but no comparable benefit for defendants where a plaintiff inappropriately fails to settle - conveys a litigation advantage to plaintiffs.

Connecticut cases have addressed offer of judgment issues as follows:

Blakeslee Arpaia Chapman, Inc. v. EI Constructors, Inc, 239 Conn. 708, 687 A2d 506 (1997).

In this primary case resolving the construction of the Connecticut statute, the Connecticut Supreme Court ruled that:

1. There is no equal protection problem with the statutory offer of judgment scheme that provides an interest penalty on behalf of plaintiffs but no comparable penalty on behalf of defendants because the plaintiffs and defendants are not similarly situated. Writes the majority opinion, "As long as the disparate treatment is, as here, rationally based, we may not judge the wisdom, desirability or logic of the legislative determination."

2. Use of the term "defendant" in the statute reasonably and logically should be interpreted to include the plural "defendants". Therefore the statute allows either submission of a unified offer of judgment to all defendants or individual offers of judgment to each defendant individually. "If the plaintiff files a unified offer of judgment that is not accepted, each defendant will be subject to offer of judgment interest only if the ultimate judgment rendered against that particular defendant equals or exceeds the amount of the offer." Ramifications of allowing the plaintiff this option are also discussed in the Superior Court case of Cacozzo v. Wickes, noted below.

3. Amendments allowed to the plaintiff's complaint after a plaintiff's offer of judgment do not invalidate that earlier offer. See also discussion of Lutynski v. BB and J Trucking, Inc, below.

4. There is no stay of interest during a period informally staying a proceeding because of other litigation.

Shawhan v. Langley, 249 Conn. 339 (1999)

In this case, the Connecticut Supreme Court concluded "that section 52-192a permits a plaintiff to file only one offer of judgment as to a particular defendant."

This ruling precludes further use of an offer of judgment once an initial offer has been rejected. Given that the public policy of the offer of judgment is to provide the parties with an inducement to settle and to remove litigation from the courts where possible, it is unclear what policy this "one offer" rule advances.

Lutynski v. BB and J Trucking, Inc, 229 Conn. 525, 642 A2d 7 (1994)

In this case, the Connecticut Supreme Court affirmed an Appellate Court decision which had held that a plaintiff's offer of judgment survived a later amendment of the claim and that the award of interest was mandatory and did not depend on an analysis of the underlying circumstances of the case. Those appellate decisions reversed the trial court finding that allowing the plaintiff to amend the claim superseded the effect of the earlier offer. As noted in the trial court opinion, survival of the effect of the offer beyond the amendment of the claim has disturbing implications because the ultimate trial is based on claims that were not before the defendant at the time that the offer was made.

Cocozzo v. Wickes, 1999 WL 417315

In this Superior Court case, Judge Radcliffe questions the ramifications of Connecticut's rule allowing the plaintiff the option of a unified offer or individualized offers in the context of certain negligence cases. Thus, he writes: "Although a change in the offer of judgment statute requiring unified offers of judgment in cases involving vicarious liability, respondeat superior, or automobile owner/operator negligence where permissive use is admitted might be a welcome alteration, any change should come from the General Assembly, or a reexamination of Blakeslee."

THE LAW REVISION COMMISSION REVIEW

The Law Revision Commission assembled a review committee consisting of Representative Robert Farr, I. Milton Widem, Professor Colin C. Tait, and Joseph Selinger, Jr. and invited participation from experienced litigators and the Judicial Department. The review examined whether the existing statute has the desired effect of fairly inducing early settlement; if not, why not; and what changes would improve the process. The review committee and the Commission reached the following conclusions:

 

The current rules have only a peripheral impact on litigation

Review of available writings concerning offers of judgment, as well as the committee discussions, disclose that Connecticut's rules, and alternative variations on the rule in other jurisdictions, have only a peripheral impact on litigation. The fundamental weakness of the system is the fact that, necessarily, the vast majority of cases are settled before litigation, commonly "on the court house step" when parties first seriously evaluate the merits of their cases in the light of the costs of actual litigation. When a case is settled, the possible penalty provided by a plaintiff's offer of judgment is not invoked and, at most, was a possible factor that was considered. Moreover, for the interest penalty to be a settlement factor, the initial offer of judgment must have been low enough so that the defendant felt a significant risk. Since an early plaintiff's offer that is made before a full evaluation of the case is likely to "highball", the risk to the average defendant from the offer of judgment is slight.

Offers of judgment by defendants are also ineffective because nothing in the statute induces a defendant to make an offer early. The nature of litigation, which relies on discovery to provide evidence for evaluating the value of a claim, is such that a defendant would be unlikely to make a realistic early offer. However, under Connecticut's rule, a defendant gains the same benefit from an offer of judgment made late in the litigation as from one made early. Thus, in the typical case, if a defendant bothers to make an offer, he makes the offer just prior to actual litigation.

In short, the rules for plaintiffs and for defendants concerning offers of judgment do not have any substantial beneficial effect in inducing early settlement or in reducing litigation. In the context of the case as a whole, the rules merely provide a minor factor in settlement discussions as the case approaches trial. This experience, that offers of judgment are relatively ineffectual, has been sufficiently universal that some commentators have suggested abolition of Rule 68, the federal version of the rule. The offer of judgement rule seems to owe its continued existence primarily to the sense that "it can't hurt" and that it sends the right message.

The Commission reviewed alternative approaches and floated several trial balloons for consideration by representatives of the plaintiffs and defendants bar. More specifically, a Commission staff draft suggested mandating that parties make an early offer and counteroffer - tied to the completion of discovery - and that the penalty for an inappropriate refusal to settle include actual attorney's fees and litigation costs. Copies of those proposals are available from the Commission office on request. Commission advisors opposed or expressed a noted lack of enthusiasm for those suggestions. Moreover, even the experience of the state with the strongest offer of judgment statute, Alaska, which invokes a variation of the English rule for the award of attorneys fees, has been equivocal. In the light of these dynamics, there does not appear to be any politically feasible basis under which the statute can be made to work effectively.

That said, there remain several issues for consideration. None of these matters, however, hold out the prospect of making this statute viable.

 

Procedural parity and other issues

As noted above, the existing statute provides a 12% interest penalty against a defendant that fails to accept an offer that was less than or equal to the award. There is no comparable penalty for a plaintiff's failure to accept a defendant's offer. This lack of "procedural parity" between the parties was litigated in the Blakeslee case and found to not constitute a constitutional violation because plaintiffs and defendants "are not similarly situated". Judge Borden, however, strongly dissented in that case, noting that "the majority has put all of the weapons created by section 52-192a in the hands of the plaintiff, with practically no risk, and all of the exposure on the defendant."

In Commission discussions, the current rule, predictably, was strongly defended by plaintiffs attorneys and roundly criticized by representatives of defendants. Plaintiffs argue that the interest is necessary to "level the playing field" in negotiations because during the interval between the claim and the trial the defendants are holding the plaintiff's money and earning interest on it. Moreover, it is not unfair to note that the interest penalty is the only meaningful settlement inducement in the existing statute - although its effect is limited.

The Commission, however, finds that the interest penalty is unsound. Lack of procedural parity - potentially chilling one party's right to litigate, but not the other's - is disturbing even if it does not violate constitutional due process criteria. The judicial process cannot prejudge a case and should remain procedurally neutral. Other plaintiff's tools, such as prejudgment remedies, are justified only by the need to protect property in the event of an ultimate award. Even those remedies require a judicial process before they may be invoked.

The argument that the interest penalty is necessary to level the playing field fails because Connecticut law already provides for interest in the context of the judgment. While interest, per se, is often not awarded individually in the context of tort litigation, that is because the award is intended to include full compensation for all damages, past and future (including any losses - such as lost opportunity costs - incurred after the tort but before the award). If, in fact, as argued by the plaintiffs' bar, interest is a necessary component of damages but is not currently being awarded, the proper remedy would be to more explicitly require interest for all such awards. There is, in any case, no rationale under which a plaintiff should have to make an offer of judgment to obtain access to justly due compensatory interest.

Given that the interest awarded under the offer of judgment statute is a penal award to induce settlement, it could, nevertheless, be justified if a comparable procedural inducement was provided on behalf of defendants. However, there is no such comparable interest penalty that can logically be imposed since, in the case of a defendant's verdict there is no consistent award on which an interest penalty could be based. The plaintiff's failure to settle is most egregious when the plaintiff recovers nothing.

In short, while the interest penalty provides what little effectiveness (on behalf of plaintiffs) that the statute has, it lacks a sound rationale.

The Commission also reviewed a lesser procedural issue concerning the "one offer" rule. As noted, the current statute has been construed to limit parties to the making of a single offer. See Shawhan v. Langley, 249 Conn. 339 (1999). The "one offer" rule does not appear to advance any rational policy. Because the statute assumes that acceptance of an offer is preferable to litigation, that benefit applies whether the offer that is accepted is a first offer, second offer, or one of multiple offers. Indeed the single consensus appearing among the Commission advisors was that such a restriction was unnecessary. A limited amendment removing that restriction is therefore in order. The Commission cannot represent, however, that such a limited change will result in significant benefit to the effectiveness of the statute.