MEMO TO:
Alexsei Demo US
RESEARCH ID:
#400068752a6de2
JURISDICTION:
Federal
STATE/FORUM:
California, United States of America
ANSWERED ON:
April 12, 2022
CLASSIFICATION:
Civil practice and procedure

Issue:

Do the cost-shifting provisions of Rule 68 of the Federal Rules of Civil Procedure include attorney fees?

Conclusion:

The term "costs" in Fed. R. Civ. P. Rule 68 was intended to refer to all costs properly awardable under the relevant substantive statute. (Marek v. Chesny, UMG Recordings, Inc. v. Shelter Capital Partners LLC)

Thus, absent congressional expressions to the contrary, where the underlying statute defines "costs" to include attorney's fees, such fees are to be included as costs for purposes of Rule 68. (Marek v. Chesny)

Attorneys' fees are not “properly awardable” to a defendant in a case where the relevant statute awards attorneys' fees only to prevailing plaintiffs. (UMG Recordings, Inc. v. Shelter Capital Partners LLC, Champion Produce, Inc. v. Ruby Robinson Co., Inc.)

If the underlying statute provides that a prevailing plaintiff may be awarded attorneys' fees as part of costs and the defendant's Rule 68 offer exceeds the plaintiff's final judgment, the cost-shifting provision of Rule 68 bars the plaintiff from recovering their post-offer attorneys' fees. (Champion Produce, Inc. v. Ruby Robinson Co., Inc., Marek v. Chesny)

In U.S. v. Trident Seafoods Corp., the United States Court of Appeals for the Ninth Circuit explained that because costs, including reasonable attorneys' fees, were not awardable under the Clean Air Act unless the action was unreasonable, the defendant was only entitled to attorneys' fees as part of their costs for the purposes of Rule 68 if the underlying action was unreasonable.

Law:

Fed. R. Civ. P. Rule 68(d) provides that if the judgment that an offeree finally obtains is not more favorable than an unaccepted Rule 68 settlement offer, the offeree must pay the costs incurred after the offer was made:

(a) MAKING AN OFFER; JUDGMENT ON AN ACCEPTED OFFER. At least 14 days before the date set for trial, a party defending against a claim may serve on an opposing party an offer to allow judgment on specified terms, with the costs then accrued. If, within 14 days after being served, the opposing party serves written notice accepting the offer, either party may then file the offer and notice of acceptance, plus proof of service. The clerk must then enter judgment.

(b) UNACCEPTED OFFER. An unaccepted offer is considered withdrawn, but it does not preclude a later offer. Evidence of an unaccepted offer is not admissible except in a proceeding to determine costs.

(c) OFFER AFTER LIABILITY IS DETERMINED. When one party's liability to another has been determined but the extent of liability remains to be determined by further proceedings, the party held liable may make an offer of judgment. It must be served within a reasonable time-but at least 14 days-before the date set for a hearing to determine the extent of liability.

(d) PAYING COSTS AFTER AN UNACCEPTED OFFER. If the judgment that the offeree finally obtains is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made.

In Marek v. Chesny, 473 U.S. 1, 105 S.Ct. 3012, 87 L.Ed.2d 1 (1985) ("Marek"), superseded on other grounds by statute, the United States Supreme Court held that the term "costs" in Rule 68 was intended to refer to all costs properly awardable under the relevant substantive statute or other authority. Thus, absent congressional expressions to the contrary, where the underlying statute defines "costs" to include attorney's fees, such fees are to be included as costs for purposes of Rule 68 (at 8-9):

The authors of Federal Rule of Civil Procedure 68 were fully aware of these exceptions to the American Rule. The Advisory Committee's Note to Rule 54(d), 28 U.S.C.App., p. 621, contains an extensive list of the federal statutes which allowed for costs in particular cases; of the 35 "statutes as to costs" set forth in the final paragraph of the Note, no fewer than 11 allowed for attorney's fees as part of costs. Against this background of varying definitions of "costs," the drafters

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of Rule 68 did not define the term; nor is there any explanation whatever as to its intended meaning in the history of the Rule.

In this setting, given the importance of "costs" to the Rule, it is very unlikely that this omission was mere oversight; on the contrary, the most reasonable inference is that the term "costs" in Rule 68 was intended to refer to all costs properly awardable under the relevant substantive statute or other authority. In other words, all costs properly awardable in an action are to be considered within the scope of Rule 68 "costs." Thus, absent congressional expressions to the contrary, where the underlying statute defines "costs" to include attorney's fees, we are satisfied such fees are to be included as costs for purposes of Rule 68. Seee.g., Fulps v. Springfield, Tenn., 715 F.2d 1088, 1091-1095 (CA6 1983); Waters v. Heublein, Inc., 485 F.Supp. 110, 113-117 (ND Cal.1979); Scheriff v. Beck, 452 F.Supp. 1254, 1259-1260 (Colo.1978). See also Delta Air Lines, Inc. v. August, 450 U.S., at 362-363, 101 S.Ct., at 1155-1156 (POWELL, J., concurring).

In this case, the underlying statute (42 U.S.C. § 1983) provided that a prevailing party may be awarded attorney's fees "as part of the costs"; therefore, attorney's fees were subject to the cost-shifting provision of Rule 68. The petitioner in this action was the defendant in the underlying action. The prevailing party denied the petitioner's settlement offer in the underlying suit and obtained a recovery of $8,000 less than the settlement offer. The Court found that since attorney's fees were subject to the cost-shifting provision of Rule 68, the petitioners were not liable for costs, inclusive of attorney's fees, incurred by the prevailing party after the petitioners' offer of settlement (at 9-12):

Here, respondent sued under 42 U.S.C. § 1983. Pursuant to the Civil Rights Attorney's Fees Awards Act of 1976, 90 Stat. 2641, as amended, 42 U.S.C. § 1988, a prevailing party in a § 1983 action may be awarded attorney's fees "as part of the costs." Since Congress expressly included attorney's fees as "costs" available to a plaintiff in a § 1983 suit, such fees are subject to the cost-shifting provision of Rule 68. This "plain meaning" interpretation of the interplay between Rule 68 and § 1988 is the only construction that gives meaning to each word in both Rule 68 and § 1988.2

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Unlike the Court of Appeals, we do not believe that this "plain meaning" construction of the statute and the Rule will frustrate Congress' objective in § 1988 of ensuring that civil rights plaintiffs obtain " 'effective access to the judicial process.' " Hensley v. Eckerhart, 461 U.S. 424, 429, 103 S.Ct. 1933, 1937, 76 L.Ed.2d 40 (1983), quoting H.R.Rep. No. 94-1558, p. 1 (1976). Merely subjecting civil rights plaintiffs to the settlement provision of Rule 68 does not curtail their access to the courts, or significantly deter them from bringing suit. Application of Rule 68 will serve as a disincentive for the plaintiff's attorney to continue litigation after the defendant makes a settlement offer. There is no evidence, however, that Congress, in considering § 1988, had any thought that civil rights claims were to be on any different footing from other civil claims insofar as settlement is concerned. Indeed, Congress made clear its concern that civil rights plaintiffs not be penalized for "helping to lessen docket congestion" by settling their cases out of court. See H.R.Rep. No. 94-1588, supra, at 7.

Moreover, Rule 68's policy of encouraging settlements is neutral, favoring neither plaintiffs nor defendants; it expresses a clear policy of favoring settlement of all lawsuits. Civil rights plaintiffs—along with other plaintiffs—who reject an offer more favorable than what is thereafter recovered at trial will not recover attorney's fees for services performed after the offer is rejected. But, since the Rule is neutral, many civil rights plaintiffs will benefit from the offers of settlement encouraged by Rule 68. Some plaintiffs will receive compensation in settlement where, on trial, they might not have recovered, or would have recovered less than what was offered. And, even for those who would prevail at trial, settlement will provide them with compensation at an earlier date without the burdens, stress, and time of litigation. In short, settlements rather than litigation will serve the interests of plaintiffs as well as defendants.

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To be sure, application of Rule 68 will require plaintiffs to "think very hard" about whether continued litigation is worthwhile; that is precisely what Rule 68 contemplates. This effect of Rule 68, however, is in no sense inconsistent with the congressional policies underlying § 1983 and § 1988. Section 1988 authorizes courts to award only "reasonable" attorney's fees to prevailing parties. In Hensley v. Eckerhart, supra, we held that "the most critical factor" in determining a reasonable fee "is the degree of success obtained." Id., at 436, 103 S.Ct., at 1941. We specifically noted that prevailing at trial "may say little about whether the expenditure of counsel's time was reasonable in relation to the success achieved." Ibid. In a case where a rejected settlement offer exceeds the ultimate recovery, the plaintiff—although technically the prevailing party—has not received any monetary benefits from the postoffer services of his attorney. This case presents a good example: the $139,692 in postoffer legal services resulted in a recovery $8,000 less than petitioners' settlement offer. Given Congress' focus on the success achieved, we are not persuaded that shifting the postoffer costs to respondent in these circumstances would in any sense thwart its intent under § 1988.

Rather than "cutting against the grain" of § 1988, as the Court of Appeals held, we are convinced that applying Rule 68 in the context of a § 1983 action is consistent with the policies and objectives of § 1988. Section 1988 encourages plaintiffs to bring meritorious civil rights suits; Rule 68 simply encourages settlements. There is nothing incompatible in these two objectives.

III

Congress, of course, was well aware of Rule 68 when it enacted § 1988, and included attorney's fees as part of recoverable costs. The plain language of Rule 68 and § 1988 subjects such fees to the cost-shifting provision of Rule 68. Nothing revealed in our review of the policies underlying § 1988 constitutes "the necessary clear expression of congres-

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sional intent" required "to exempt . . . [the] statute from the operation of" Rule 68. Califano v. Yamasaki, 442 U.S. 682, 700, 99 S.Ct. 2545, 2557, 61 L.Ed.2d 176 (1979). We hold that petitioners are not liable for costs of $139,692 incurred by respondent after petitioners' offer of settlement.

Consistent with the decision in Mareksupra, the United States Court of Appeals for the Ninth Circuit in UMG Recordings, Inc. v. Shelter Capital Partners LLC, 718 F.3d 1006 (9th Cir. 2013) held that attorneys' fees are not “properly awardable” to a defendant in a case where the relevant statute awards attorneys' fees to a prevailing party unless the defendant is a prevailing party within the meaning of that statute. Thus, because the district court determined that attorney's fees were not “properly awardable” to the defendant under the relevant statute, 17 U.S.C. § 505, they were not awardable under Fed. R. Civ. P. Rule 68 either (at 1034):

In Marek, the Supreme Court held that “the term ‘costs' in Rule 68 was intended to refer to all costs properly awardable under the relevant substantive statute.” 473 U.S. at 9, 105 S.Ct. 3012 (emphasis added). We have interpreted this to mean that attorney's fees may be awarded as Rule 68 costs only if those fees would have been properly awarded under the relevant substantive statute in that particular case. In Trident, 92 F.3d at 860, for example, the issue was the interplay between the Clean Air Act (CAA) and Rule 68. Under the CAA, fees may only be awarded if the action was “unreasonable.” See id.24Trident held that “[t]he only interpretation that gives meaning to every word in both Rule 68 and the [CAA] is that ‘costs' in Rule 68 include attorneys' fees only if the action was unreasonable.” Id. The fact that fees could have been awarded under the CAA, had its requirements been met, was insufficient to make them “properly awardable” within the meaning of Marek when the district court decided not to grant them in that case. See id.

We confronted the same issue with regard to a different substantive statute in Champion. There, we considered whether Rule 68 “costs” included attorney's fees where Idaho Code § 12–120(3) permitted the award of fees to a “prevailing party,” and the district court expressly held that the defendant had not prevailed within the meaning of that section. See Champion, 342 F.3d at 1031. Relying on Trident, we held that “Rule 68 is not intended to expand the bases for a party's recovery of attorneys' fees,” id. at 1029, and thus,

[j]ust as attorneys' fees are not “properly awardable” to a defendant in a Clean Air Act case unless “the court finds that such action was unreasonable,” Trident, 92 F.3d at 860, attorneys' fees are not “properly awardable” to a defendant in a case where the relevant statute awards attorneys' fees to a prevailing party unless the defendant is a prevailing party within the meaning of that statute.

Id. at 1031 (citing Payne v. Milwaukee Cnty., 288 F.3d 1021, 1026 (7th Cir.2002) (“Briefly put, ‘costs' cannot encompass more than the rules or other relevant statutes authorize.”)). Although we have not yet confronted this question in a Copyright Act case, Trident and Champion make clear that in this context as well, because the district court determined that attorney's fees were not “properly awardable” to Veoh under § 505, they were not awardable under Rule 68 either.25

U.S. v. Trident Seafoods Corp., 92 F.3d 855 (9th Cir. 1996) involved a suit under the Clean Air Act. The United States Court of Appeals for the Ninth Circuit explained that because costs, including reasonable attorney's fees, were not awardable under the Clean Air Act unless the action was unreasonable, the defendant, in this case, was only entitled to attorneys' fees as part of their costs for purposes of Rule 68 if the underlying action was unreasonable (at 860): 

The term "costs" in Rule 68 is intended to refer to all costs properly awardable under the relevant substantive statute. Marek v. Chesny, 473 U.S. 1, 9, 105 S.Ct. 3012, 3016-17, 87 L.Ed.2d 1 (1985). Absent congressional expressions to the contrary, where the underlying statute defines "costs" to include attorneys' fees, such fees are to be included as costs for purposes of Rule 68. Id. To determine the interplay between Rule 68 and the Clean Air Act, the Court must construe the "plain meaning" interpretation of both the Rule and the statute in a manner that gives meaning to every word in each. Id. at 9-11, 105 S.Ct. at 3017.

The Clean Air Act indicates that Congress did not intend to award attorneys' fees unless the action was unreasonable. The Act provides:

In the case of any action brought by the Administrator under this subsection, the court may award costs of litigation (including reasonable attorney and expert witness fees) to the party or parties against whom such action was brought if the court finds that such action was unreasonable.

42 U.S.C. § 7413(b). The only interpretation that gives meaning to every word in both Rule 68 and the Clean Air Act is that "costs" in Rule 68 include attorneys' fees only if the action was unreasonable.

Trident contends that this interpretation frustrates the purpose of Rule 68 by robbing it of any independent operative force. According to Trident, if attorneys' fees are awardable under Rule 68 only if the action was unreasonable, there could never be a case where attorneys' fees would be awarded under Rule 68 when such fees were not already awardable under the Clean Air Act. Rule 68 is not intended to expand the bases for recovery of attorneys' fees. Rather, the purpose of Rule 68 is to encourage settlement by forcing the parties "to 'think very hard' about whether continued litigation is worthwhile...." Marek, 473 U.S. at 4, 11, 105 S.Ct. at 3014, 3017. An interpretation of Rule 68 "costs" that includes attorneys' fees if the government brings an unreasonable § 7413(b) action is likely to force the government to scrutinize more closely the reasonableness of its action when faced with an offer of judgment. If the government concludes that the court is likely to find that the action is unreasonable, the offer of judgment is more likely to be accepted.

Trident also cites numerous cases for the proposition that the EAJA allows a party to recover attorneys' fees under Rule 68 in a § 7413(b) action. See Thomas v. Peterson, 841 F.2d 332, 334 (9th Cir.1988); Natural Resources Defense Council, Inc. v. United States EPA, 703 F.2d 700 (3rd Cir.1983); Environmental Defense Fund, Inc. v. EPA, 716 F.2d 915, 918 (D.C.Cir.1983); Gavette v. Office of Personnel Management, 808 F.2d 1456, 1464-65 (Fed.Cir.1986). Each of these cases is distinguishable, however, on the ground that it concerned § 2412(d)(1)(A) of the EAJA--a provision not relevant here for the purpose of determining whether attorneys' fees should be awarded. The EAJA does not define "costs" to include attorneys' fees. See 28 U.S.C. § 2412(a)(1). Fees instead are defined separately. 28 U.S.C. §§ 2412(d)(1)(A) & (d)(2)(A). Thus, because attorneys' fees are not properly awardable as "costs" under § 2412(d)(1)(A), they are not within the scope of Rule 68. See Marek, 473 U.S. at 9, 105 S.Ct. at 3016 (Rule 68 "costs" include attorney's fees only where "underlying statute defines 'costs' to include attorney's fees").

Accordingly, Trident is entitled to attorneys' fees only if the action was unreasonable.

In Champion Produce, Inc. v. Ruby Robinson Co., Inc., 342 F.3d 1016 (9th Cir. 2003), the United States Court of Appeals for the Ninth Circuit affirmed the district court's denial of post-offer attorneys' fees to the plaintiff. The Court explained that, pursuant to the Supreme Court's decision in Mareksupra, when the underlying statute provides that a prevailing plaintiff may be awarded attorney's fees as part of costs, and the defendant's Rule 68 offer exceeds the plaintiff's final judgment, the cost-shifting provision of Fed. R. Civ. P. Rule 68 bars the plaintiff from recovering their post-offer attorneys' fees. The Court held that this construction of Rule 68 applies not only to federal fee-granting statutes but also to state fee-granting statutes. In this case, the district court found that the plaintiff was not a prevailing party under the underlying state statute; however, the Court noted that even if they had been a prevailing party, they would not have been entitled to their post-offer attorneys' fees because of Rule 68 (at 1026-1028):

The Supreme Court's construction of Rule 68 in Marek v. Chesny, 473 U.S. 1, 105 S.Ct. 3012, 87 L.Ed.2d 1 (1985), governs an award of post-offer attorneys' fees. The plaintiff in Marek brought suit against three police officers under 42 U.S.C. § 1983. Prior to trial, defendants made a Rule 68 offer of $100,000. Plaintiff rejected the offer and ultimately obtained a judgment of roughly $92,000. Plaintiff then sought to recover his attorneys' fees under 42 U.S.C. § 1988, which provides that a "prevailing" plaintiff in a § 1983 action may be awarded attorneys' fees "as part of costs." Defendants argued that plaintiff's rejection of their Rule 68 offer barred any recovery of post-offer attorneys' fees, even though plaintiff was a prevailing party within the meaning of § 1988.

The Court agreed with defendants. It held that under § 1988 plaintiff's attorneys' fees were part of Rule 68 "costs." It explained that because Rule 68 does not itself define "costs,"

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the most reasonable inference is that the term "costs" in Rule 68 was intended to refer to all costs properly awardable under the relevant substantive statute or other authority. In other words, all costs properly awardable in an action are to be considered within the scope of Rule 68 "costs." Thus, absent congressional expressions to the contrary, where the underlying statute defines "costs" to include attorney's fees, [] such fees are to be included as costs for purposes of Rule 68.

473 U.S. at 9, 105 S.Ct. 3012. Absent Rule 68 and the offer of judgment, plaintiff would have been able to recover all of his attorneys' fees under § 1988. However, because 42 U.S.C. § 1988 defines attorneys' fees as part of "costs," and because defendant's offer exceeded plaintiff's final judgment, the Court held that the cost-shifting provision of Rule 68 barred plaintiff from recovering his post-offer attorneys' fees. Id.

Like the underlying statute in Marek, the underlying statute in this case defines attorneys' fees as a part of "costs." See Idaho Code § 12-120(3)("[T]he prevailing party shall be allowed a reasonable attorney's fee to be set by the court, to be taxed and collected as costs."). Cf. Haworth, 56 F.3d at 1051 ("The FLSA statute defines attorney fees separately from costs. Therefore, unlike attorney fees in a section 1983 action, attorney fees in a FLSA action are not automatically shifted by Rule 68." (citation omitted)). And, like the plaintiff in Marek, Champion obtained a final judgment not more favorable than the defendant's Rule 68 offer.

Champion makes two arguments that, taken in combination, it hopes will permit an escape from Rule 68 and Marek. First, it argues that it was a "prevailing party" under § 12-120(3), and thus, absent Rule 68, would have been entitled to attorneys' fees under that statute. In other words, Champion argues that it is in the same position as the plaintiff in Marek, who had prevailed in his § 1983 suit and would have been entitled to attorneys' fees under § 1988 if he had not been subject to cost-shifting under Rule 68. The district court, however, concluded that Champion was not a prevailing party under § 12-120(3), and we have sustained the district court's decision on that point.

Second, Champion argues that Marek does not apply because the underlying fee-granting statute is state rather than federal, and because, in its view, Idaho's version of Rule 68 does not restrict a prevailing plaintiff's right to recover attorneys' fees.2 Even if we agreed with Champion's first argument that it is a prevailing party under § 12-120(3), we would nonetheless reject its second argument that Marek applies only to federal fee-granting statutes. As we have recently explained, "[t]he Federal Rules of Civil Procedure apply irrespective of the source of subject matter jurisdiction, and irrespective of whether the substantive law at issue is state or federal." Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1102 (9th Cir.2003). "A federal district court can refuse to apply a Federal Rule of Civil Procedure in a civil case `only if the Advisory Committee, [the Supreme] Court, and Congress erred in their prima facie judgment that the Rule in question transgresses neither the terms of the Enabling Act nor constitutional restrictions.'" Id. at

Page 1028

1103 (quoting Hanna v. Plumer, 380 U.S. 460, 471, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965)). "In other words, if a Federal Rule of Civil Procedure is valid under the Constitution and the Enabling Act, [28 U.S.C. § 2072], it applies according to its terms in all civil cases in federal district court." Id. See 28 U.S.C. § 2072 ("The Supreme Court shall have the power to prescribe general rules of ... procedure... for cases in the United States district courts.... Such rules shall not abridge, enlarge, or modify any substantive right.").

With only one exception, the Supreme Court has construed valid Federal Rules of Civil Procedure to have the same meaning irrespective of whether the underlying substantive law is federal or state, and irrespective of any differences between federal and state procedural law. That exception is Rule 3, which governs the timing of commencement of a civil suit and the tolling of statutes of limitations. See West v. Conrail, 481 U.S. 35, 107 S.Ct. 1538, 95 L.Ed.2d 32 (1987) (construing Rule 3 to apply in suits brought under federal law, but not in suits brought under state law). But the Court has not extended its holding in West beyond Rule 3, and we see no basis for such an extension here.

The Seventh Circuit in Marek had rejected the interpretation of Rule 68 advanced by the defendants based in part on a belief that such an interpretation would give substantive consequence to Rule 68 and would thus violate the Rules Enabling Act. See Chesny v. Marek, 720 F.2d 474, 479 (7th Cir.1983) ("When Congress authorized the Supreme Court to make rules of procedure for civil cases it did not authorize the Court to alter substantive policies (that is the force of the `shall not abridge' clause), such as those that underlie the right to attorney's fees created by section 1988, call that right what you will. But that is what the Court would (unwittingly) have been doing when it promulgated Rule 68 if the [defendants'] interpretation of the rule were upheld."). Justice Brennan, dissenting in Marek, agreed with the Seventh Circuit, arguing that the Court's decision "violate[d] the most basic limitations on [the Court's] rulemaking authority as set forth in the Rules Enabling Act." 473 U.S. at 15, 105 S.Ct. 3012. However, the majority of the Court necessarily rejected that conclusion when it reversed the Seventh Circuit. See Marek, 473 U.S. at 11, 105 S.Ct. 3012 ("[W]e are not persuaded that shifting the post-offer costs to respondent in these circumstances would in any sense thwart [Congress's] intent under § 1988.").

We therefore hold that the district court properly denied post-offer attorneys' fees to Champion. Champion is not a prevailing party under Idaho Code § 12-120(3). But even if it had been a prevailing party, it would not have been entitled to post-offer attorneys' fees because Marek's construction of Rule 68 applies not only to federal fee-granting statutes but also to state fee-granting statutes.

The Court also explained that the district court properly awarded post-offer costs, excluding attorneys' fees, to the defendant pursuant to the cost-shifting provision of Rule 68. The defendant made an offer of judgment under Rule 68 that exceeded the amount the plaintiff ultimately recovered; thus the cost-shifting provision of the rule applied. The Court noted there was a split in authority on the issue but ultimately held that Rule 68 costs do not include a non-prevailing defendant's post-offer attorneys' fees when the underlying statute awards attorneys' fees only to a prevailing party (at 1028-1031):

Finally, Champion appeals the district court's grant of Ruby's motion for an award of post-offer costs (excluding attorneys' fees). Because Ruby made an offer of judgment under Rule 68 that exceeded the amount Champion ultimately recovered, the cost-shifting provision of the rule applies. The district court therefore properly awarded post-offer costs (excluding attorneys' fees) to Ruby. See Trident, 92 F.3d at 859.

D. Denial of Post-Offer Attorneys' Fees to Ruby

Ruby appeals the district court's denial of its motion for post-offer attorneys' fees. Ruby argues that Rule 68, as

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interpreted in Marek, not only prohibits Champion from recovering its own post-offer attorneys' fees, but also requires that Champion pay Ruby's post-offer attorneys' fees. In the alternative, Ruby argues that it was the "prevailing party" and thus was entitled to attorneys' fees pursuant to Idaho Code § 12-120(3). The district court properly rejected both arguments.

The district court explained that the Supreme Court in Marek merely held that a prevailing plaintiff subject to the cost-shifting provision of Rule 68 cannot recover its own post-offer attorneys' fees where the underlying statute defines those fees as an item of "costs." The Supreme Court explicitly did not consider the question whether that plaintiff must not only lose the post-offer attorneys' fees to which it would have been otherwise entitled, but must also pay the defendant's post-offer attorneys' fees. See Marek, 473 U.S. at 4 n. 1, 105 S.Ct. 3012 ("The District Court refused to shift to [plaintiff] any costs accrued by [defendants]. [Defendants] do not contest that ruling."). Citing Trident Seafoods Corp., 92 F.3d at 860, the district court explained that Rule 68 is not intended to expand the bases for a party's recovery of attorneys' fees. Because Idaho Code § 12-120(3) permits an award of attorneys' fees only to the "prevailing party," it held that "costs" in Rule 68 include attorneys' fees only if the party seeking the award of attorneys' fees is the "prevailing party" within the meaning of that statute. Because it found that Ruby had not "prevailed," it denied the fee request.

The question whether Rule 68 and Marek require a plaintiff to pay a defendant's post-offer attorneys' fees, when the underlying statute permits a "prevailing" party to recover attorneys' fees "as costs" but when the defendant is not a prevailing party under that statute, has produced a circuit split. The First and Seventh Circuits have held that a plaintiff in that situation is not required to pay the defendant's attorneys' fees. See Crossman v. Marcoccio, 806 F.2d 329 (1st Cir.1986); Harbor Motor Co., Inc. v. Arnell Chevrolet-Geo, Inc., 265 F.3d 638 (7th Cir.2001). Both circuits have rejected the "deceptively simple syllogism" advanced by Ruby in this case. That syllogism is as follows:

(1) Rule 68 requires a plaintiff to pay a defendant's post-offer costs;

(2) Rule 68 costs, according to Marek, are determined by looking to the underlying substantive statute governing costs;

(3) the underlying substantive statute governing costs permits the recovery of attorneys' fees as part of costs;

(4) Rule 68 therefore requires the plaintiff to pay the defendant's post-offer attorneys' fees.

Crossman, 806 F.2d at 333. In rejecting this syllogism, both circuits emphasized that Marek holds that "the term `costs' in Rule 68 was intended to refer to all costs properly awardable under the relevant substantive statute or other authority." Marek, 473 U.S. at 9, 105 S.Ct. 3012 (emphasis added). Where the substantive statute permits a "prevailing party" to recover attorneys' fees as costs, a defendant who has not "prevailed" may not recover attorneys' fees pursuant to Rule 68. Such costs are not "properly awardable" under the relevant statute. See Crossman, 806 F.2d at 333 ("Although the logic of the syllogism is appealing, the second and third steps of [defendants'] argument distort the law governing the relationship between Rule 68 and [the relevant attorneys' fee statute] by ignoring two crucial words that serve to qualify the holding of the Marek case." (footnote omitted)).

The Eleventh Circuit disagrees with the approach of the First and Seventh Circuits. In Jordan v. Time, Inc., 111 F.3d 102 (11th Cir.1997), defendant Time argued

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that because plaintiff Jordan "did not obtain a judgment more favorable than the ones contained in Time's offers of judgment, Jordan must pay Time's attorneys' fees and costs." Id. at 104. The underlying statute permitted the court to "award a reasonable attorney's fee to the prevailing party as part of the costs." 17 U.S.C. § 505. The Eleventh Circuit held that Time should be awarded attorneys' fees under Rule 68 even though it was not a prevailing party under the underlying statute:

The language contained in Rule 68 is mandatory; the district court does not have the discretion to rule otherwise.... Costs as used herein includes attorneys' fees. Under Marek v. Chesny, Rule 68 "costs" include attorneys' fees when the underlying statute so prescribes. The Copyright Act so specifies, 17 U.S.C. § 505.

111 F.3d at 105 (citation omitted). But see Util. Automation 2000 v. Choctawhatchee Elec. Coop., Inc., 298 F.3d 1238, 1246 n. 6 (11th Cir.2002) (recognizing that Jordan has been subject to criticism in other circuits). See also Lucas v. Wild Dunes Real Estate, Inc., 197 F.R.D. 172, 175 (D.S.C. 2000) ("Even though Defendant is not a prevailing party, this court does not read the Supreme Court's language in Marek that the costs must be `properly awardable' to require that Defendant has to be a prevailing party in order to be eligible for an award of attorney's fees as costs in a copyright action pursuant to Rule 68.").

We have not answered the precise question posed in this case, but we have answered an analogous question. In United States v. Trident Seafoods Corp., the United States sued Trident for violations of the Clean Air Act. After rejecting Trident's Rule 68 offer, the United States ultimately obtained a smaller judgment. Trident argued that it was entitled to attorneys' fees pursuant to Rule 68 and 42 U.S.C. § 7413(b). Section 7413(b) defines attorneys' fees as an item of costs, but permits a defendant to recover such fees in an action "if the court finds that such action was unreasonable." We rejected Trident's argument that it was entitled to attorneys' fees under Rule 68, explaining that "[t]he only interpretation that gives meaning to every word in both Rule 68 and the Clean Air Act is that `costs' in Rule 68 include attorneys' fees only if the action was unreasonable." 92 F.3d at 860.

Similarly, the Eighth Circuit held in O'Brien v. City of Greers Ferry, 873 F.2d 1115 (8th Cir.1989), that a losing civil rights defendant is not entitled to attorneys' fees under Rule 68. Section 1988 permits a civil rights defendant to recover fees "as costs" only where the lawsuit was "frivolous, unreasonable, or without foundation." Id. at 1120; see 42 U.S.C. § 1988. The O'Briens had recovered a damage judgment smaller than defendant's Rule 68 offer of judgment, but their suit was not "frivolous, unreasonable, or without foundation." Because defendant was not entitled to fees under § 1988, defendant's attorneys' fees were not "properly awardable" and thus were not available under Rule 68's cost-shifting provisions. 873 F.2d at 1120. Accord Le v. Univ. of Pa., 321 F.3d 403, 410-411 (3d Cir.2003); EEOC v. Bailey Ford, Inc., 26 F.3d 570, 571 (5th Cir.1994) ("[E]ven if appellee were entitled to recover `costs' under Rule 68, [§ 1988] attorneys' fees are not among the properly recoverable costs without a determination that the action was frivolous, unreasonable, or without foundation."); see also Hopper, 867 F.2d at 296; Grosvenor v. Brienen, 801 F.2d 944, 946 n. 4 (7th Cir.1986).

Today we join the First and Seventh Circuits in holding that Rule 68 "costs" do not include a non-prevailing defendant's post-offer attorneys' fees when the underlying statute awards attorneys' fees to a

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prevailing party. Just as attorneys' fees are not "properly awardable" to a defendant in a Clean Air Act case unless "the court finds that such action was unreasonable," Trident, 92 F.3d at 860, attorneys' fees are not "properly awardable" to a defendant in a case where the relevant statute awards attorneys' fees to a prevailing party unless the defendant is a prevailing party within the meaning of that statute. See Payne, 288 F.3d at 1026 ("Briefly put, `costs' cannot encompass more than the rules or other relevant statutes authorize."). This is "[t]he only interpretation that gives meaning to every word in both Rule 68 and [the attorneys' fee statute]." Trident, 92 F.3d at 860.

In this case, the district court expressly held that Ruby did not prevail under Idaho Code § 12-120(3) and that attorneys' fees were therefore not "properly awardable under the relevant substantive statute or other authority." Marek, 473 U.S. at 9, 105 S.Ct. 3012. Consequently, the district court concluded that Ruby's attorneys' fees could not "be considered within the scope of [the] Rule 68 `costs'" shifted to Champion. Id. The district court got it exactly right.

In Solomon v. Onyx Acceptance Corp., 222 F.R.D. 418, 2004 U.S. Dist. LEXIS 12512, 21 A.L.R. Fed. 2d 747 (C.D. Cal. June 14, 2004), the United States District Court for the Central District of California explained that when the underlying statute does not define attorneys' fees as part of costs, but rather distinguishes attorneys' fees as separate from costs, attorneys' fees will not necessarily be subject to the cost-shifting provision of Fed. R. Civ. P. Rule 68. Nonetheless, the Ninth Circuit has held that district courts have wide discretion in refusing to award post-offer attorneys' fees where an offer of judgment exceeds the plaintiff's ultimate recovery. Courts must consider the results obtained by the plaintiff after they reject a Rule 68 offer to determine the reasonableness of any fee award. In determining what fee is reasonable under the circumstances, courts must take into consideration the amount of the Rule 68 offer, the stage of the litigation at which the offer was made, what services were rendered thereafter, the amount obtained by judgment, and whether it was reasonable to continue litigating the case after the Rule 68 offer was made (at 421-422): 

In Marek v. Chesny, 473 U.S. 1, 8-9, 87 L. Ed. 2d 1, 105 S. Ct. 3012 (1985), the Supreme Court held that  a plaintiff who rejects a Rule 68 offer and recovers less by prosecuting the case is not entitled to collect any post-offer attorneys' fees if the relevant fee statute treats attorneys' fees as part of "costs." The Court reasoned that because Rule 68 operates to shift "costs", when Congress defines attorneys' fees as "costs", absent evidence of contrary congressional intent, attorneys fees would subject to the known cost-shifting provision of Rule 68. Id.

Although the attorneys' fee provision at issue in Marek statutorily defined attorneys' fees as "costs", the same is not true for the statutes at issue in this action. Compare 42 U.S.C. § 1988 ("the court, in its discretion, may allow the prevailing party, other than the United States, a reasonable attorney's fee as part of the costs") (emphasis added) with 15 U.S.C. § 1681n(a)(3) and § 1681o(a)(2) (a prevailing party may recover "the costs of the action together with reasonable [**6]  attorney's fees as determined by the court") (emphasis added) and Cal. Civ. Code § 1785.31(d) ("the prevailing plaintiffs in any action commenced under this section shall be entitled to recover court costs and reasonable attorneys fees") (emphasis added). Therefore, the attorneys' fees are not necessarily subject to the cost-shifting provision of Rule 68.

 [**7]  However, the Ninth Circuit has held that district courts have wide discretion in refusing to award post-offer fees where an offer of judgment exceeds the Plaintiff's ultimate recovery.

In Haworth v. State of Nevada, 56 F.3d 1048 (9th Cir. 1995), the Court considered attorneys' fees incurred after an offer of judgment was made in an action based on violations of a statute which, like the statutes at issue in this action, did not define attorneys' fees as part of "costs." See Haworth, 56 F.3d at 1051 (noting that the language of the attorney fee provision of the Fair Labor Standards Act ("FLSA") allows for "a reasonable attorney's fee to be paid by the defendant and costs of the action"). The Ninth Circuit noted that the district court properly concluded that Rule 68 did not necessarily bar the plaintiffs from recovering reasonable attorneys' fees incurred after the Rule 68 offer. Id. However, the court held that the Court must consider the results obtained by the plaintiff after he rejects a Rule 68 offer in determining the reasonableness of any fee award: "We . . . hold that . . . when a Rule 68 offer of judgment has been rejected,  [**8]  and judgment is obtained for less than the settlement offer, these circumstances  [*422]  must be considered by the district court in determining what fee is reasonable." Id. at 1052. The court stated:

When a plaintiff rejects a Rule 68 offer, the reasonableness of an attorney fee award under the FLSA will depend, at least in part, on the district court's consideration of the results the plaintiff obtained by going to trial compared to the Rule 68 offer. This application of Rule 68 has the salutary benefit of encouraging settlement of cases that should be settled when reasonable settlement offers are made.

. . . .

In determining what fee is reasonable [under the] circumstance[s], the district court must take into consideration the amount of the Rule 68 offer, the stage of the litigation at which the offer was made, what services were rendered thereafter, the amount obtained by judgment, and whether it was reasonable to continue litigating the case after the Rule 68 offer was made.

Id. at 1052-53.

The court was especially critical of plaintiffs in Haworth because it appeared to the court that the "the only one who benefited by pursuing [**9]  the litigation after the Rule 68 offer was made was the plaintiffs' attorney." Id. at 1052. The court stated very clearly that "just because a plaintiff has [a statutory] violation in her pocket does not give her a license to go to trial, run up the attorney fees and then recover them from the defendant." Id.

Authorities:
Fed. R. Civ. P. Rule 68
Marek v. Chesny, 473 U.S. 1, 105 S.Ct. 3012, 87 L.Ed.2d 1 (1985)
UMG Recordings, Inc. v. Shelter Capital Partners LLC, 718 F.3d 1006 (9th Cir. 2013)
U.S. v. Trident Seafoods Corp., 92 F.3d 855 (9th Cir. 1996)
Champion Produce, Inc. v. Ruby Robinson Co., Inc., 342 F.3d 1016 (9th Cir. 2003)
Solomon v. Onyx Acceptance Corp., 222 F.R.D. 418, 2004 U.S. Dist. LEXIS 12512, 21 A.L.R. Fed. 2d 747 (C.D. Cal. June 14, 2004)