CASES ADJUDGED

IN THE

SUPREME COURT OF THE UNITED STATES

AT

OCTOBER TERM, 1984

MAREK ET AL. v. CHESNY, INDIVIDUALLY, AND AS ADMINISTRATOR OF THE ESTATE OF CHESNY

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SEVENTH CIRCUIT

No. 83-1437. Argued December 5, 1984-Decided June 27, 1985 Petitioner police officers, in answering a call on a domestic disturbance, shot and killed respondent's adult son. Respondent, in his own behalf and as administrator of his son's estate, filed suit against petitioners in Federal District Court under 42 U. S. C. § 1983 and state tort law. Prior to trial, petitioners made a timely offer of settlement of $100,000, expressly including accrued costs and attorney's fees, but respondent did not accept the offer. The case went to trial and respondent was awarded $5,000 on the state-law claim, $52,000 for the § 1983 violation, and $3,000 in punitive damages. Respondent then filed a request for attorney's fees under 42 U. S. C. § 1988, which provides that a prevailing party in a § 1983 action may be awarded attorney's fees "as part of the costs." The claimed attorney's fees included fees for work performed subsequent to the settlement offer. The District Court declined to award these latter fees pursuant to Federal Rule of Civil Procedure 68, which provides that if a timely pretrial offer of settlement is not accepted and "the judgment finally obtained by the offeree is not more favorable than the offer, the offeree must pay the costs incurred after the making of the offer." The Court of Appeals reversed. Held: Petitioners are not liable for the attorney's fees incurred by respondent after petitioners' offer of settlement. Pp. 5-12.

1

(a) Petitioners' offer was valid under Rule 68. The Rule does not require that a defendant's offer itemize the respective amounts being tendered for settlement of the underlying substantive claim and for costs. The drafters' concern was not so much with the particular components of offers, but with the judgments to be allowed against defendants. Whether or not the offer recites that costs are included or specifies an amount for costs, the offer has allowed judgment to be entered against the defendant both for damages caused by the challenged conduct and for costs. This construction of Rule 68 furthers its objective of encouraging settlements. Pp. 5-7.

(b) In view of the Rule 68 drafters' awareness of the various federal statutes which, as an exception to the "American Rule," authorize an award of attorney's fees to prevailing parties as part of the costs in particular cases, the most reasonable inference is that the term "costs" in the Rule was intended to refer to all costs properly awardable under the relevant substantive statute. Thus, where the underlying statute defines "costs" to include attorney's fees, such fees are to be included as costs for purposes of Rule 68. Here, where § 1988 expressly includes attorney's fees as "costs" available to a prevailing plaintiff in a § 1983 suit, such fees are subject to the cost-shifting provision of Rule 68. Rather than "cutting against the grain" of § 1988, applying Rule 68 in the context of a § 1983 action is consistent with § 1988's policies and objectives of encouraging plaintiffs to bring meritorious civil rights suits; Rule 68 simply encourages settlements. Pp. 7-11.

720 F. 2d 474, reversed.

BURGER, C. J., delivered the opinion of the Court, in which WHITE, POWELL, REHNQUIST, STEVENS, and O'CONNOR, JJ., joined. POWELL, J., post, p. 12, and REHNQUIST, J., post, p. 13, filed concurring opinions. BRENNAN, J., filed a dissenting opinion, in which MARSHALL and BLACKMUN, JJ., joined, post, p. 13.

Donald G. Peterson argued the cause for petitioners. With him on the brief was Elizabeth Hubbard.

Jerrold J. Ganzfried argued the cause for the United States as amicus curiae urging reversal. On the brief were Solicitor General Lee, Acting Assistant Attorney General Willard, Deputy Solicitor General Geller, Deputy Assistant Attorney General Kuhl, Katheryn A. Oberly, Robert S. Greenspan, and Barbara S. Woodall.

Victor J. Stone argued the cause for respondent. On the brief was James D. Montgomery.*

CHIEF JUSTICE BURGER delivered the opinion of the Court.

We granted certiorari to decide whether attorney's fees incurred by a plaintiff subsequent to an offer of settlement under Federal Rule of Civil Procedure 68 must be paid by the defendant under 42 U. S. C. § 1988, when the plaintiff recovers a judgment less than the offer.

I

Petitioners, three police officers, in answering a call on a domestic disturbance, shot and killed respondent's adult son. Respondent, in his own behalf and as administrator of his son's estate, filed suit against the officers in the United States District Court under 42 U. S. C. § 1983 and state tort law.

Prior to trial, petitioners made a timely offer of settlement "for a sum, including costs now accrued and attorney's fees,

*Briefs of amici curiae urging reversal were filed for the State of Florida by Jim Smith, Attorney General, Mitchell D. Franks, and Linda K. Huber and Bruce A. Minnick, Assistant Attorneys General; for the City of New York by Frederick A. O. Schwarz, Jr., Leonard Koerner, Ronald E. Sternberg, Evelyn Jonas, and John P. Woods; and for the Equal Employment Advisory Council by Robert E. Williams, Douglas S. McDowell, and Thomas R. Bagby.

Briefs of amici curiae urging affirmance were filed for the Alliance for Justice by Laura Macklin; for the American Civil Liberties Union et al. by Roger Pascal, Burt Neuborne, E. Richard Larson, and Harvey Grossman; for the Lawyers' Committee for Civil Rights Under Law by Fred N. Fishman, Robert H. Kapp, Norman Redlich, William L. Robinson, Norman J. Chachkin, Harold R. Tyler, Jr., and Sara E. Lister; for the Committee on the Federal Courts of the Association of the Bar of the City of New York by Sheldon H. Elsen, Michael W. Schwartz, Sidney S. Rosdeitcher, Edmund H. Kerr, and John G. Koeltl; and for the NAACP Legal Defense and Educational Fund, Inc., by Barry L. Goldstein, Julius LeVonne Chambers, and Charles Stephen Ralston.

of ONE HUNDRED THOUSAND ($100,000) DOLLARS." Respondent did not accept the offer. The case went to trial and respondent was awarded $5,000 on the state-law "wrongful death" claim, $52,000 for the § 1983 violation, and $3,000 in punitive damages.

Respondent filed a request for $171,692.47 in costs, including attorney's fees. This amount included costs incurred after the settlement offer. Petitioners opposed the claim for postoffer costs, relying on Federal Rule of Civil Procedure 68, which shifts to the plaintiff all "costs" incurred subsequent to an offer of judgment not exceeded by the ultimate recovery at trial. Petitioners argued that attorney's fees are part of the "costs" covered by Rule 68. The District Court agreed with petitioners and declined to award respondent "costs, including attorney's fees, incurred after the offer of judgment." 547 F. Supp. 542, 547 (ND Ill. 1982). The parties subsequently agreed that $32,000 fairly represented the allowable costs, including attorney's fees, accrued prior to petitioners' offer of settlement. Respondent appealed the denial of postoffer costs.

The Court of Appeals reversed. 720 F. 2d 474 (CA7 1983). The court rejected what it termed the "rather mechanical linking up of Rule 68 and section 1988." Id., at 478. It stated that the District Court's reading of Rule 68 and § 1988, while "in a sense logical," would put civil rights plaintiffs and counsel in a "predicament" that "cuts against the grain of section 1988." Id., at 478, 479. Plaintiffs' attorneys, the court reasoned, would be forced to "think very hard" before rejecting even an inadequate offer, and would be deterred from bringing good-faith actions because of the prospect of losing the right to attorney's fees if a settlement offer more favorable than the ultimate recovery were rejected. Id., at 478-479. The court concluded that "[t]he legislators who enacted section 1988 would not have wanted its effective

'The District Court refused to shift to respondent any costs accrued by petitioners. Petitioners do not contest that ruling.

ness blunted because of a little known rule of court." at 479.

Id.,

We granted certiorari, 466 U. S. 949 (1984). We reverse.

II

Rule 68 provides that if a timely pretrial offer of settlement is not accepted and "the judgment finally obtained by the offeree is not more favorable than the offer, the offeree must pay the costs incurred after the making of the offer." (Emphasis added.) The plain purpose of Rule 68 is to encourage settlement and avoid litigation. Advisory Committee Note on Rules of Civil Procedure, Report of Proposed Amendments, 5 F. R. D. 433, 483, n. 1 (1946), 28 U. S. C. App., p. 637; Delta Air Lines, Inc. v. August, 450 U. S. 346, 352 (1981). The Rule prompts both parties to a suit to evaluate the risks and costs of litigation, and to balance them against the likelihood of success upon trial on the merits. This case requires us to decide whether the offer in this case was a proper one under Rule 68, and whether the term "costs" as used in Rule 68 includes attorney's fees awardable under 42 U. S. C. § 1988.

A

The first question we address is whether petitioners' offer was valid under Rule 68. Respondent contends that the offer was invalid because it lumped petitioners' proposal for damages with their proposal for costs. Respondent argues that Rule 68 requires that an offer must separately recite the amount that the defendant is offering in settlement of the substantive claim and the amount he is offering to cover accrued costs. Only if the offer is bifurcated, he contends, so that it is clear how much the defendant is offering for the substantive claim, can a plaintiff possibly assess whether it would be wise to accept the offer. He apparently bases this argument on the language of the Rule providing that the defendant "may serve upon the adverse party an offer to allow judgment to be taken against him for the money or property