Lessons On an Offer of Judgment

Court rules in most states allow one party to make an “offer of judgment” any time prior to trial, allowing judgment to enter against it for a specified sum. The case ends if the offer is accepted. If not accepted, and the other party fails to do better in the end, the party making the offer may be entitled to recover its subsequent costs and – in some states, at least – its attorneys’ fees incurred post-offer. A recent Alabama decision emphasizes how seriously the impact of this rule can be, with one nuance. The surety made an offer of judgment of $150,000, which was rejected. The other party eventually obtained a judgment for $145,000 against the surety. Thus, the surety sought to recover its attorneys’ fees incurred post-offer, which were in excess of $400,000. A significant swing! (Particularly when you consider that both parties probably incurred similar costs.) But under Alabama law, the “final judgment” includes interest. So the judgment of $145,000 was increased by interest to an amount greater than $150,000 (the decision does not say by how much), and the surety’s motion for attorneys’ fees post-offer was denied. The case is Stewart v. Continental Cas. Co., 2015 U.S. Dist. LEXIS 6010 (S.D. Ala., Jan. 20, 2015).