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EmailWINNING A DEFENSE VERDICT IS NOT ENOUGH!
Why The Defense Needs To Use The Offer Of Judgment Strategy In Every District Court Case.
I can’t count the number of times I have heard a defense client or an insurance adjuster say, “The plaintiff’s case is a dog. Why should I offer anything to the plaintiff to settle the case?” My response to that question has always been, “Only by serving an Offer of Judgment, can the defense best position itself to either settle the case or try it.” This article will explain why the Plaintiff faces minimal risk in negotiations or at trial, where no Offer of Judgment is served. The article will demonstrate how an Offer of Judgment significantly ratchets up the threat to the Plaintiff, even in cases where the defense has stipulated to liability. Finally, this article will teach you how to use this simple Offer of Judgment strategy in every case, thereby improving the possibility of settlement and also creating the chance to turn a tough defense case into a winner post-trial.
I. The Best Way To Intensify The Threat Is To Place The Plaintiff At Risk To Pay The Defense Attorney’s Fees
Following a trial, a prevailing defendant can make a motion to force its opponent to pay its costs. See N.R.S. § 18.020 and § 18.050. However, the court has the discretion to award or deny any of the claimed costs. My experience is that cases, tried after arbitration, may have a few thousand dollars in defense costs. Most plaintiffs and their attorneys are not put off by the threat that plaintiff might have to pay the defendant’s costs, should the defendant prevail. This is especially true in light of the fact that they can ask the judge to exercise discretion and deny an award of costs to the defense. On the other hand, attorney’s fees can be very expensive. The bill for a defense attorney fees can easily reach $10,000 or more in a district court trial. Therefore, the best way to increase the threat to the Plaintiff is to put that Plaintiff at risk for attorney’s fees.
Some have argued that many Plaintiffs do not feel threatened by the possibility of paying thousands of dollars in attorney’s fees. They suggest that the Plaintiff will simply file bankruptcy and avoid the threat if it ever comes to pass. Although that might happen in some cases, it is impossible to know the effect that this threat might have on this particular Plaintiff. The only way to know is to make the threat real.
II. Normally, Everyone Pays Their Own Attorney’s Fees
In most circumstances, all Nevada litigants will pay the fees of their own attorney. Nevada has always followed the American Rule which says that unless there are exceptional circumstances, such as a special court rule or a statute, each of the litigants will pay their own attorney’s fees. In the case of Smith v. Crown Fin. Svcs. Of America, 111 Nev. 277, 281, 890 P.2d 769, 771 (1995), the Nevada Supreme Court quoted Stuart M. Spiser’s treatise on Attorney’s Fees, explaining the American Rule as follows:
It has been a consistent rule throughout the United States that a litigant has no inherent right to have his attorneys’ fees paid by his opponent or opponents. Such an item is not recoverable in the ordinary case as damages, nor as costs, and hence is held not allowable in the absence of some provision for its allowance either in a statute or rule of court, or some contractual provision or stipulation. This sweeping general rule has been applied in legions of cases to preclude recovery of attorneys’ fees, whether by the plaintiff or by the defendant, from one’s opponent in a civil action.
Some have advocated a full scale adoption of the English Rule which is the converse of the American Rule. The English Rule requires the loser to always pay the attorney’s fees of the prevailing party. The advocates of the change say that adoption of the English Rule would discourage frivolous litigation.
However, until that happens, let’s look for some statutes or rules that deviate from the American rule and which can obligate your opponent to pay for your attorney.
III. A Defendant Cannot Use N.R.S. §18.010(2)(a) In District Court As The Basis For An Award Of Attorney’s Fees Even With A Defense Verdict
In Nevada, a commonly used exception to the American Rule of attorney’s fees is N.R.S. §18.010 (2)(a) which says:
2. In addition to the cases where an allowance is authorized by specific statute, the court may make an allowance of attorney’s fees to a prevailing party:
(a) When he has not recovered more than $20,000;
Those involved in Nevada litigation for any period of time have known a Plaintiff who has collected attorney’s fees from a Defendant based upon this statute. Plaintiffs recovering even a few hundred dollars in damages can rely on this statute as a basis for a claim of thousands in attorney’s fees.
Initially, prevailing District Court defendants argued that they could claim this exception because a defense verdict has a value of $20,000 or less. The defendants then asked for attorney’s fees based upon NRS § 18.010(2)(a).
However, the Nevada Supreme Court has specifically said that a prevailing defendant may not use this statute as a basis for recovery of attorney’s fees. Smith v. Crown Fin. Svcs. Of America, 111 Nev. 277, 281, 890 P.2d 769, 771 (1995). In that case, Nevada Supreme Court said:
Under the present formulation of the statute, eliminating the requirement of a money judgment would afford some prevailing plaintiffs (those recovering no more than $20,000) and all prevailing defendants the opportunity to recover attorney fees. This over-inclusive result could deeply offend the policy underlying the American Rule which seeks to provide less affluent people with access to the courts. For example, a plaintiff in a personal injury or products liability case would not only be required to pit his meager resources against those of a large insurance company or manufacturer, he would also risk the potentially devastating burden of paying for this marshalling of superior resources should he lose.
By retaining the requirement of a money judgment, this court preserves the right of some plaintiffs (and counterclaimants) to recover attorney fees while subjecting defendants to the common law rule. Although this under-inclusive rule gives plaintiffs an advantage, it does so only in cases involving $20,000 or less. This rule is faithful to the language of NRS 18.010(2)(a), it provides a significant portion of the intended class of beneficiaries with the intended benefit of being able to recover attorney fees, and it minimizes any harmful impact upon the policies underlying the American Rule.
In other words, the court told defendants that do not have a counterclaim to look elsewhere to find a basis on which claim attorney’s fees. In many cases, the only other way for a defendant to get an award of attorney’s fees is by making an Offer of Judgment.
IV. Offers Of Judgment Are The Best Way To Threaten Plaintiff With A Shift Of Attorney’s Fees
As seen above, the risk of a defense verdict is not much of a threat to Plaintiff because, the verdict alone does not threaten Plaintiff with a shift of attorney’s fees. The most effective way to threaten a shift of attorney’s fees is with an Offer of Judgment. Offers of Judgment can be made under either Rule 68 of the Nevada Rules of Civil Procedure or N.R.S. § 17.115. If the Offer that the defense makes is superior to the jury verdict, the Offer of Judgment does two things. First, it prevents the Plaintiff from recovering costs and attorney’s fees. Second, it allows the defense the opportunity to recover attorney’s fees and costs from the date of the Offer. Thus the amount and timing of the Offer of Judgment are critical in properly using this strategy. The timing and amounts of Offers will be discussed in a future issue.
V. Conclusion
When a District Court defendant fails to serve a timely and valid Offer of Judgment, that defendant has missed out on a prime negotiating opportunity. Absent an Offer of Judgment (or a counterclaim for money damages), plaintiff will rarely face the threat of having to pay the defendant’s attorney’s fees. That threat can be enough to force over zealous plaintiffs to rethink their negotiating posture. Additionally, it positions the defendant to recover attorney’s fees and costs should the case go to trial. Even if the attorney’s fee award could never be enforced, a defense Offer of Judgment should be made in every case to best use this critical negotiating strategy. Be sure to browse “Fee Shifting Part 2” which discusses when is the best time to serve an Offer and how to determine the value to make the Offer most effective.
Additional information on strategically implementing Offers of Judgment in litigation can be found by clicking HERE. We also encourage you to explore the “Categories” listed in the right column for related topics.
If you have any questions about the Offer of Judgment or any other litigation strategies, feel free to contact me at 702.240.6060 or by email.
About Michael Mills
