January 01, 2014 BY Matthew Nanninga
Georgia's Rule 68- Offer Of Settlement - A Refresher And Recent Developments
If anyone questions the significance of Georgia’s Rule 68 offer of settlement statute, look no further than the front page of the Fulton County Daily Report in the last two months. We have seen Rule 68 effectively used to generate significant awards of attorney fees. In recent weeks, a Fulton County State Court judge awarded $1.5 million in attorney fees, on top of a $3 million dollar verdict, to plaintiff’s counsel. In that case, the defendant declined a $2 million offer to settle made pursuant to Georgia’s Rule 68 offer of settlement statute.
Just one-month prior, the Georgia Court of Appeals heard an appeal in a highly publicized tractor-trailer accident that killed a successful businessman. In that case, the plaintiff’s counsel was awarded approximately $14 million in attorney fees and expenses, about one-third of the roughly $40 million verdict for the death of the businessman, and for the injuries and emotion distress of his surviving spouse who was in the pick-up truck with her husband at the time of the accident. At some point prior to trial, the plaintiff’s counsel made an offer to settle the wrongful death claim for $10 million, and the wife’s personal injury claim for $250,000, pursuant to Georgia Rule 68. There are a host of issues on appeal in this case that could overturn the verdict. However, with regard to Georgia’s Rule 68, we saw for a second time in recent weeks the trial court’s willingness to award attorney fees based on the full amount of the contingency fee contract between the plaintiffs and their counsel.
Georgia’s Rule 68 offer of settlement procedure has been on the books since 2005, when it was included in a comprehensive state Tort Reform package. It took several years before litigators knew how the appellate courts would interpret many of its provisions. However, more than eight years later, Rule 68 has survived constitutional challenges, and the appellate courts have provided guidance and interpretation in some of its provisions.
In summary, O.C.G.A. § 9-11-68, (a/k/a Rule 68 – Offer of Settlement), allows either party in a tort case to serve the other party with a written offer to settle, so long as the offer is made 30 days after service of the summons and complaint, and not less than 30 days before trial (or 20 days if it is a counteroffer). If the defendant makes an offer, which is rejected by the plaintiff, the defendant can collect attorney fees and expenses incurred from the date of the rejection through the entry of judgment if the final judgment is less than 75% of the offer made. On the other hand, if the plaintiff makes an offer, which is rejected by the defendant, the plaintiff can collect attorney fees and expenses incurred from the date of the rejection through the entry of judgment if the final judgment is greater than 125% of the offer made.
The issue of whether or not a plaintiff’s lawyer can collect the full amount of their contingency fee in a Rule 68 offer of settlement may be decided soon by the Georgia Supreme Court in Georgia Dep't of Corr. v. Couch, 322 Ga. App. 234, 744 S.E.2d 432 (2013), cert. granted (Nov. 4, 2013). The Court heard oral arguments in that case on February 4, 2014. In Couch, the plaintiff was an inmate who was injured while working with a team of inmates painting the warden’s house. While working, a dry-rotted joist gave way, causing him to fall and land with his legs straddling a joist. As a result of the fall, Couch suffered a severed urethra. Before trial, the plaintiff’s counsel made an offer of settlement for $24,000 pursuant to O.C.G.A. § 9-11-68. The Department of Corrections rejected the offer. At trial, the plaintiff made a total recovery of $123,855.65. Plaintiff’s counsel filed a motion for attorney fees pursuant to Rule 68, seeking $104,158.79 based on an hourly rate of $250 per hour. However, the Court awarded only $49,542 based on the lawyer’s 40% contingency fee agreement with the plaintiff. The Georgia Court of Appeals affirmed the trial court’s findings.
Interestingly, the case before the Supreme Court presents a situation where the plaintiff’s attorney sought attorney fees based on an hourly rate. Instead, the trial court used his contingency fee agreement amount. As a result, the courts may have backed their way into some case law that will allow plaintiff’s lawyers to collect their full contingency fee rate under Rule 68 offers. Upon review of the Georgia Supreme Court case briefs, the Department of Corrections’ sole argument on appeal is that the award of attorney fees in this case should have been barred by the doctrine of sovereign immunity. Therefore, it is possible the Georgia Supreme Court may not even address the issue of contingency fee awards under Georgia’s Rule 68. However, many think this case may supply the case law needed to support a Rule 68 award of attorney fees based on the contingency fee agreement.
In light of the large awards in the recent trial court cases mentioned above, the issue of contingency fees in the Rule 68 arena is sure to generate future attention. Of course, there is no perfect resolution. The statute clearly states that attorney fees shall begin to accrue after the other side rejects the offer. From the defendant’s perspective, it is patently unfair to allow a plaintiff to collect the full contingency amount in attorney fees if the offer is made late in the litigation. Therefore, if an award of the full contingency fee is allowed, plaintiff’s attorneys will be allowed to effectively negate the portion of the statute that only allows for fees after their offer is rejected. On the other hand, defendants would only be allowed to collect their hourly fees from the time their offer was rejected through the end of the case. It will be interesting to see how the courts resolve this issue.
Another interesting line of cases that have come out of Georgia’s Rule 68 practice involve the “good faith” component of Rule 68 offers made. Even if a litigant succeeds in the numerical component of the Rule 68 statute, the court retains the right to determine whether or not the offer was made in “good faith.” A defense verdict alone is not sufficient under the statute to determine that an initial offer was made in good faith. InGreat W. Cas. Co. v. Bloomfield, 313 Ga. App. 180, 181, 721 S.E.2d 173, 175 (2011), one of the defendant trucking companies involved in a two tractor-trailer accident made a $25,000 offer of settlement pursuant to O.C.G.A. § 9-11-68. The plaintiff rejected the offer. At trial, the jury found no liability against the trucking company who had made the offer. However, the trial court denied their motion for attorney fees. The court found that the offer was not made in good faith because the case involved a wrongful death, and the amount offered was not a reasonable offer or a realistic assessment of liability in a wrongful death case. Additionally, the court noted that the defendant’s driver paid the citation he was issued, and at the time the offer was made, defense counsel had never deposed or even interviewed the first arriving police officer on the scene. Furthermore, during trial, the same defendant offered $1 million to settle the case. The Court of Appeals affirmed the trial court’s ruling that the defendant’s offer was not made in good faith.
The use of Rule 68 offers of settlement can be a very effective tool for defense lawyers. It forces the plaintiff to put some skin in the game. When made effectively, and at the right time, Rule 68 offers have the power to leverage settlements. However, in cases involving nominal value, they may have little effect because even if you prevail, you may be left with a plaintiff who simply has no means to satisfy the award of attorney fees. It is also important to keep in mind that if you decide a Rule 68 offer of settlement is warranted, be prepared to receive a Rule 68 counteroffer from the plaintiff, and if Georgia courts ultimately uphold the full value of contingency fee awards, the price of poker could significantly increase for the defense as well.
The Journal is a publication for the clients of Drew Eckl & Farnham, LLP. It is written in a general format and is not intended to be legal advice to any specific circumstance. Legal Opinions may vary when based upon subtle factual differences. All rights reserved.
H. Michael Bagley