Offer of Judgment

What Is An Offer Of Judgment?

An offer of judgment is an offer to lose, on the defendant’s terms. The defending party serves a written offer to allow judgment to be taken against it for a specified sum of money, with costs accrued to that date. If the plaintiff accepts, the offer and acceptance are filed and the clerk enters judgment for that amount; the case is over and the plaintiff holds an enforceable judgment. If the plaintiff does not accept within the time allowed, the offer is treated as withdrawn.

The offer is confidential as far as the jury is concerned. Evidence that it was made is not admissible except in a later proceeding to determine costs. The defendant may make more than one; a rejected offer does not prevent a later, higher one, and defense lawyers often serve a second offer as trial approaches.

How Does Rule 68 Work In North Carolina?

N.C. R. Civ. P. 68 sets the mechanics. The offer may be served at any time more than 10 days before the trial begins, only by a party defending against a claim, and only for a judgment to be taken against the offering party. The plaintiff has 10 days after service to accept by written notice. An offer not accepted within 10 days is deemed withdrawn. If the judgment the plaintiff finally obtains is not more favorable than the offer, the plaintiff must pay the costs incurred after the offer was made. The rule also contains a separate conditional-offer procedure for contract claims that has no role in an injury case.

Two features distinguish North Carolina’s rule from what many people assume. The offer must include costs accrued to the date of the offer, so the comparison at the end is between the offer and the judgment on like terms. And the rule shifts costs only; it does not require the plaintiff to pay the defendant’s attorney fees unless a separate statute makes fees recoverable as costs. How prejudgment interest that accrued under N.C. Gen. Stat. § 24-5 is counted when the judgment is compared with the offer depends on the terms of the offer and on case law, and it is a question to confirm with counsel before deciding.

What Costs Does A Plaintiff Pay After Rejecting An Offer Of Judgment?

Only the costs North Carolina law allows a court to tax. N.C. Gen. Stat. § 7A-305(d) lists the expenses that are assessable or recoverable as costs and states that the list is complete and exclusive; it limits the court’s discretion under N.C. Gen. Stat. § 6-20 to award costs in cases where no other statute provides for them. The list includes witness fees, counsel fees where a statute provides for them, fees for service of process, mediator and other court-appointee fees, interpreter fees, bond premiums, reasonable and necessary expenses for stenographic and videographic assistance in taking depositions and for deposition transcripts, and reasonable and necessary expert witness fees solely for the time actually spent testifying at trial, deposition, or another proceeding.

What the list leaves out matters as much. The defendant’s attorney fees are not costs unless a statute makes them so, and the general injury-case fee statute, N.C. Gen. Stat. § 6-21.1, works in the plaintiff’s favor in small cases rather than the defendant’s. An expert’s time preparing, reviewing records, and consulting is not taxable; only testimony time is. Investigation, copying, travel, and the defense lawyer’s overhead are not costs. A rejected offer therefore exposes the plaintiff to deposition transcripts and expert testimony fees incurred after the offer, which can be real money in a case with several experts, but not to the defense’s entire bill.

• Taxable under § 7A-305(d): deposition transcripts and videography, expert fees for testimony time, witness fees, mediator fees, service fees.
• Not taxable: attorney fees without a statute, expert preparation time, investigation, copying, travel.
• Only post-offer costs shift: everything the defense spent before the offer stays with the defense.
• Setoff: the shifted costs are offset against the plaintiff’s judgment.

Should You Accept An Offer Of Judgment?

It depends on the likely verdict, the likely post-offer costs, and the risk of losing outright. A worked example: Andre is injured in a Durham crash and sues. Eight months before trial the defense serves a Rule 68 offer of $60,000 plus accrued costs. His lawyer estimates the case’s verdict range at $50,000 to $120,000 and the defense’s post-offer taxable costs, mainly two deposition transcripts and the testimony time of a defense physician, at about $6,000. If Andre rejects the offer and the jury awards $45,000, the judgment is not more favorable than the offer, and Andre’s recovery is reduced by roughly $6,000 in costs. If the jury awards $90,000, nothing shifts. The offer is a real decision, but the downside is measured in thousands, not in the loss of the claim.

The analysis changes when fault is contested. North Carolina’s contributory negligence rule means that a jury finding the injured person negligent in any degree returns a verdict of zero, and zero is never more favorable than an offer. A defendant with a plausible contributory negligence argument can serve a modest offer and let the rule do the work: the plaintiff must weigh not only the chance of a lower verdict but the chance of no verdict at all, followed by a bill for the defendant’s post-offer costs. Under N.C. Gen. Stat. § 1-139 the defendant must prove the plaintiff’s negligence, so the strength of that evidence is the first thing to evaluate when an offer arrives.

How Is An Offer Of Judgment Different From A Settlement Offer?

A settlement offer is a contract proposal; if accepted, the parties sign a release and the case is dismissed, usually with confidentiality and no admission of fault. An offer of judgment results in a public judgment entered against the defendant by the clerk, which the plaintiff may enforce like any other judgment. Defendants and their insurers sometimes prefer the settlement route for that reason even after a Rule 68 offer has been served, and the two tracks can run at the same time.

The other difference is consequence. Rejecting a settlement offer costs nothing. Rejecting an offer of judgment creates the cost-shifting risk described above. That is why an offer of judgment must be answered within its 10-day window after a real evaluation, and why the evaluation should include the evidence on contributory negligence, the taxable costs the defense is likely to incur, and the possibility that a second, higher offer will follow if the first is declined.