Bar News - March 16, 2012
The Uncertain Status of Offers of Judgment Under New Hampshire Law May Hinder Settlement of Cases
By: Christopher D. Hawkins and Robert M. Fojo
An offer of judgment is a device that may be used to transfer to the claimant part of the costs of defending the case. An offer of judgment can be a useful tool to move a recalcitrant plaintiff off of an unreasonable position, and thereby help to settle the case. New Hampshire has no meaningful offer of judgment mechanism, and as a result, opportunities to settle cases sooner may be missed.
Under Rule 68 of the Federal Rules of Civil Procedure, a defendant (or counterclaim defendant) may serve on the claimant an offer to allow judgment on specified terms, including the costs accrued to date. The claimant then has 14 days to respond to the offer. If the offer is accepted, the offer and acceptance are filed in court, judgment is entered accordingly, and the case is over. If the claimant fails to respond within 14 days, or rejects the offer expressly, then the case proceeds. The offer is inadmissible except to prove costs. If the claimant receives a judgment less favorable than the offer, then the claimant must pay the defendant’s costs incurred after the date of the offer. A body of case law has developed around issues such as whether a result at trial is more or less favorable than the offer of judgment, and the scope of costs recoverable under the Rule. In general terms, however, the rule is intended to facilitate earlier settlement by widening the claimant’s risk to include not simply the possibility of a defense verdict, but a chance that a plaintiff’s verdict will be less favorable than anticipated.
The NH House recently passed HB 1181, which is based upon Rule 68, with a key difference: the party that unreasonably rejects an offer is responsible for the offering party’s attorneys’ fees as well as its costs. The plaintiff’s bar will argue that this bill is draconian because it forces injured parties to accept less than the fair value of legitimate claims due to the heightened risk of a bad result that would require paying the other party’s attorneys’ fees. The defense bar would argue that this bill seeks to prevent frivolous litigation, which drives up insurance costs of insurance and the cost of doing business generally.
Leaving aside the issue of whether HB 1181 reflects good policy, New Hampshire law now offers no meaningful mechanism by which to make an offer of judgment.
Rule 60 is the nearest analog in the Superior Court Rules. Rule 60 requires that the defendant pay into court any sums they admit to be due, and if the claimant refuses to accept that amount in full satisfaction, and fails to recover that amount at trial, they cannot recover their costs. That is 01a small benefit considering that defendants are required to pay money into court simply to invoke the rule, and the plaintiff suffers relatively small consequences if they reject the offer.
Two ancient New Hampshire statutes apply as well. Under RSA 515:1, a defendant may offer the amount claim, plus costs, to the claimant prior to the return day. This offer may be conditioned upon acceptance as complete satisfaction, Brown v. Heath, 78 N.H. 180 (1916), and may be considered an admission of liability. Ashuelot R.R. v. Cheshire R.R., 60 NH 356 (1880). As such, it is perhaps unsurprising that this statute appears to have been cited or discussed in no New Hampshire Supreme Court case for nearly 100 years.
RSA 515:2 permits parties to confess to part of the claim against them and contest the remainder. If the plaintiff refuses to accept the tendered amount, and recovers less than that amount at trial, then the defendant may recover its costs from the date of the confession. Unlike Rule 60, RSA 515:2 appears to require no payment into court, and permits the defendant to recover its costs rather than merely deprive the plaintiff of its costs. The uncertain relationship between the statute and the rule suggests that the one may have been enacted without consideration of the other. This uncertainty may make it less likely either would be utilized in practice.
In any event, RSA 515:2 appears to have lain dormant since the Civil War. It appears generally accepted that a confession of one part of a claim constitutes no admission as to the balance of the claim. Gordon J. MacDonald, 4 Wiebusch on New Hampshire Practice and Procedure § 21.02, n.13 (3d ed. 2010) ("trial will proceed on the other[ claims] as though no confession had been made"). A defendant considering such a confession should state clearly that it applies only to part of the claim and not the remainder, Hackett v. B.C.& M. R.R., 35 N.H. 390, 397-98 (1857), and that the confession is wholly inadmissible.
RSA 515:2 is not generally used because lawyers consider a "confession" under this statute an admission of liability. Although, as explained above, it constitutes no admission as to the balance of the claim, it constitutes an admission as to the part of the claim that has been confessed. The statute states clearly that the defendant "may file a confession of the plaintiff’s right to recover certain real estate, or a certain amount of debt or damages, and plead to the residue of his claim." RSA 515:2. In other words, a defendant may confess liability on part of a claim and "plead"—argue or contest—the "residue" or remainder of his claim. Indeed, the NH Supreme Court over 140 years ago held that "a confession under the statute . . . is an admission made . . . not for the purpose of destroying the general issue or any other plea, and its operation and effect are confined to the purpose for which it is made." McIntire v. Randolph, 50 N.H. 94, 104 (1870) (emphasis added). The Court premised its statement on the view that a confession"is an admission of every fact which the plaintiff would be obliged to prove under the general issue," and "[i]t has been said that the admission in a confession is at least as strong as in a default." Id. (emphases added). In other words, a defendant who files a confession as to a claim or part of a claim admits liability with respect to that part of the "general issue." The confession does not affect the "residue" or remainder of the claim or claims, but destroys the part confessed.
RSA 515:2 might perhaps be used more often if it stated expressly, like a traditional offer of judgment, that confessions are not admissions of liability, are inadmissible at trial for any purpose, and that the plaintiff suffers a loss of interest recovery in the event of a recovery less than the amount of the confessed amount.
Counsel has attempted to ameliorate the lack of a meaningful offer of judgment rule by coupling reasonable offers of settlement, subject to NHRE 408, with assessment of reasonable costs, including attorneys’ fees, for frivolously or unreasonably continuing the litigation, pursuant to Superior Court Rule 59. To counsel’s knowledge, however, no New Hampshire court has issued a ruling on the validity of this approach.
The court and bar might benefit from a reconsideration of the efficacy of the New Hampshire rules and statutes relating to offers or confessions of judgment to vindicate their intended beneficial purposes.
Chris Hawkins is a member of the Professional Liability and Construction Practice Groups at Nelson Kinder & Mosseau, PC.
Robert Fojo is a member of the Employment Practice Group at Nelson Kinder & Mosseau, PC.