Applying NJ’s Offer of Judgment Rule in Multi-Defendant Cases

New Jersey Law Journal (reprinted with permission)

New Jersey’s Offer of Judgment Rule (R. 4:58) was “designed to produce early out-of-court settlements.” Crudup v. Marrero, 57 N.J. 353, 361 (1971). To achieve that laudable goal, if a plaintiff makes an Offer of Judgment, which is not accepted and the plaintiff thereafter obtains a money judgment in an amount that is 120 percent or more than the offer, the plaintiff “shall be allowed” to recover: (1) reasonable litigation expenses following non-acceptance, (2) prejudgment interest of 8 percent from the date of the offer or date of completion of discovery, whichever is later, and (3) a reasonable attorney’s fee for services compelled by the non-acceptance. Similarly, the rule affords defendants allowances should the plaintiff fail to accept a defense Offer of Judgment, and the money judgment is 80 percent or less than the defendant’s offer. While the plain language is rather straightforward, in practice, lawyers and judges have wrestled with the application of the rule in cases involving multiple defendants.

Of course, one could envision a number of scenarios wherein the difficulties of applying the Offer of Judgment can arise in multi-defendant actions. Defendants in multi-defendant actions may file answers at differing times. If an early Offer of Judgment is made by the plaintiff, what should the consequence be on a defendant joined near the end or after the expiration of the Offer of Judgment period? Moreover, how are the allowances of the rule appropriately attributed to each defendant if they have varying degrees of fault, if some but not all respond to the offer? How, if at all, is the Offer of Judgment and the rule’s allowances as to a non-settling defendant impacted by the settlement of some defendants during the offer period?

Despite the numerous questions, the Offer of Judgment rule can be an effective weapon in the hands of a skilled plaintiff’s lawyer. An early Offer of Judgment can subject defendants to potentially significant sanctions. This author is aware that certain New Jersey practitioners utilize the Offer of Judgment Rule early in a litigation, before any meaningful assessment can be made of exposure, as the proverbial Sword of Damocles to be held over defendants should settlement efforts be unsuccessful.

Last summer, New Jersey’s Supreme Court issued a decision which has left attorneys and trial judges unsure of how the rule should be applied in multi-defendant litigations on a going-forward basis. According to New Jersey’s Supreme Court, the Offer of Judgment Rule “leaves unclear the circumstances triggering the imposition of sanctions on an individual Defendant when a single Plaintiff makes a global offer to multiple Defendants, there is no acceptance of the offer, and no counter offer is made in response.” Willner v. Vertical Reality, 235 N.J. 65, 82-83 (2018).

While R. 4:58-4(b) contemplates an analysis of each defendant’s offer when compared with that defendant’s pro rata share, the Supreme Court in Willner looked at the impact of an Offer of Judgment in a multi-defendant case where no defendant makes an offer. The outcome of the Willner case leaves the application of the Offer of Judgment rule in a multi-defendant case “unclear.” As such, going forward, New Jersey judges have been given little guidance about the circumstances under which sanctions are allowable when a plaintiff makes an Offer of Judgment in a multi-defendant case where no defendant makes an offer.

The plaintiff in Willner was injured while climbing a rock wall and brought suit against the manufacturer of the wall (Vertical Reality) and the manufacturer of parts contained in the wall (Numatics). Prior to trial, the plaintiff made a single, joint Offer of Judgment to the defendants of $125,000 per Rule 4:58. The defendants did not accept or render a counteroffer. The jury returned a verdict in plaintiff’s favor for $358,000 and Numatics’ molded share of the verdict was $107,400. Since the jury returned a verdict in favor of the plaintiff greater than 120 percent of the plaintiff’s Offer of Judgment, the trial judge granted plaintiffs’ motion for attorney fees and costs pursuant to R. 4:58.

On appeal, Numatics asserted that the trial court erred in granting plaintiff’s motion for attorney fees because Numatics’ molded share of the total verdict ($107,400) did not exceed 120 percent of plaintiff’s Offer of Judgment ($125,00). The appellate panel found that case law did not compel the use of molded judgments in determining whether sanctions should be awarded under Rule 4:58Rather, the Appellate Division found that the appropriate figures to compare are the plaintiff’s Offer of Judgment and the total amount of the jury’s verdict.

On certification to the Supreme Court, Numatics asserted that for the purposes of Offer of Judgment sanctions, plaintiffs’ offers should be compared to each defendant’s actual proportionate share of liability—not the jury verdict in total. Numatics argued that comparing the Offer of Judgment to the jury verdict without regard to a defendant’s proportionate liability, “would be incongruous, as it would subject individual defendants to sanctions based on the collective liability of all defendants.” Wadeer v. New Jersey Manufacturers Ins. Co., 220 N.J. 591 (2015),

In discussing the Offer of Judgment rule, the Supreme Court indicated that the facts of the case make the outcome unclear. While a decision on the issue with a single plaintiff and a single defendant is “uncomplicated,” a similar such decision with joint and several liability is not.

The court acknowledged that, per Schettino v. Roizman Development, 158 N.J. 476, 483 (1999), “plaintiffs are permitted to act in respect to the total judgment.” Per the Pressler comment 6.1 to the Rule: “[T]the intention of R. 4:58-4 is to permit the [plaintiff] to deal exclusively in terms of the total judgment rather than to require him to accept pro rata shares from individual defendants.”

Thus, forcing a plaintiff to negotiate individually with defendants would be unfair and would shift the onus of evaluating the fairness of a settlement offer to the plaintiff. Therefore, “plaintiffs need consider only an offer to settle the entire liability on behalf of all defendants.”  Willner, at 84 quoting Schettino, at 484. Conversely, “by the same token, mandating that individual defendants contemplate global offers from a single plaintiff […] would force Defendants who are likely less liable than their co-defendants to consider settling for an amount greater than their individual liabilities, simply to avoid significant sanctions.” Willner, at 84.

The Willner court then found that the only way Numatics could have escaped the R. 4:58 sanctions would have been to accept Willner’s global Offer of Judgment which was for an amount greater than the actual amount that Numatics was ultimately determined to be at fault. The Supreme Court found that to be unfair and reversed the award of attorney fees and costs.

While the Supreme Court found that the Offer of Judgment Rule must “balance the competing interest of Plaintiff and Defendant,” it provided little guidance about how that balance should be achieved. The court’s only note to trial judges and attorneys is: “If the sanction of fee shifting is to be awarded, there must be advance notice of that consequence.” Id. at 85. This comment appears to presume that it is not enough for practitioners to have actual knowledge of the consequences delineated in R. 4:58 when confronted with an Offer of Judgment. Seemingly, something more is required.

The Supreme Court’s ruling may limit the efficacy of a plaintiff’s Offer of Judgment in a multi-defendant case. The court’s clear goal was fairness to all parties. It reiterated that a plaintiff need not accept a single defendant’s offer in a multi-defendant case because that would be unfair to the plaintiff. Similarly, imposing the rule’s sanction on one defendant in a multi-defendant case, when that defendant’s individual liability is not greater than 120 percent of the Offer of Judgment is equally unfair. It would appear that a plaintiff making an Offer of Judgment in a multi-defendant case will have to take some additional step to notify defendants of the potential consequences, or be faced with losing the ability to seek fees and costs under the rule. What that step is, though, is unknown. Per the Supreme Court’s concluding paragraph, “The effect of the offer of judgment rule and how it should operate in this case is unclear.”

What are practitioners to do with the Supreme Court’s opinion in Willner v. Vertical Reality? Seemingly, one problem identified by the court is “advance notice” of how the Offer of Judgment rule operates. A reasonable reading of the court’s opinion is that a plaintiff rendering an Offer of Judgment globally in multi-defendant case must provide some separate notice to each defendant of the consequences under the Offer of Judgment rule. This may come in the form of a delineation or breakdown in plaintiff’s view of the proportionate liability breakdown. In so doing, if a plaintiff indicates to a defendant what defendant’s proportionate share of liability is thought to be, and the jury’s molded verdict as to that defendant is greater than 120 percent of that figure, perhaps the Willner court would be satisfied that the rule’s sanctions are justified.

Clearly, Willner does not disallow an Offer of Judgment by a single plaintiff in a multi-defendant case. Willner merely qualifies the circumstances under which R. 4:58’s sanctions will be imposed.  A “target” defendant in a multi-defendant case will still need to be concerned with the potential ramifications of the rule’s sanction. Regardless, this issue has likely not seen its conclusion as the Supreme Court has not outlined a formulation for how the Offer of Judgment mechanism should work for a single plaintiff in a multi-defendant case where no counter-offer is made. This issue will likely need to be taken up in further litigation or in a future modification to content of R. 4:58.

Reprinted with permission from the April 04, 2019 issue of the New Jersey Law Journal. © 2019 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.