This is a previously published Mills & Associates Newsletter.
For additional information on this or other Nevada Insurance Law topics, please e-mail Mr. Mills at mike@mcmillslaw.com or phone (702) 240-6060.
I. CHANGES TO THE OFFER OF JUDGMENT RULES
Whether attorney’s fees, costs and interest will be awarded post-trial is a significant determiner in whether a case is tried or settled. If the defense serves a valid Offer of Judgment and “beats” that Offer at trial, the plaintiff can be stopped from recovering certain costs, attorney’s fees and interest. Plus, a valid defense Offer of Judgment can expose the plaintiff to the possibility of paying the defendant’s fees and costs. If there is no chance for a defense verdict, beating a defense Offer of Judgment is the next best result at trial. However, there have been changes in determining whether a defendant beat an Offer of Judgment. The changes were made to NRCP 68 in October 1998 and to NRS 17.115 in May 1999. Copies of the new Offer of Judgment rules are attached.
A. COMPARISON & CONTRAST: THE OLD RULES VS. THE NEW RULES
Under the old rules, the courts did not consider the effect of costs, attorney’s fees or pre-judgment interest in determining whether a particular party beat an Offer of Judgment. See former N.R.S. 17.115(5). Under the new rules, the court will consider the effect of costs on the offer in deciding who won and who lost. Rule 68 and NRS 17.115 allow Offers of Judgment to be made “inclusive of costs” or with “costs to be added”. In the past, all offers have been made “inclusive of costs”. The insurance companies like “inclusive of costs” wording because it attempts to set the bottom line on how much they will pay. A copy of a form Offer of Judgment from the Nevada Association of Legal Secretaries is attached.
However, under the new Rule 68 and new NRS 17.115, if an offer is made “inclusive of costs”, the court will subtract away the amount of costs that the plaintiff can prove it incurred to the date of the offer to decide whether the defendant beat the offer or not. Here is an example. On January 1, 2000 the defendant makes a Rule 68 Offer of Judgment which is “inclusive of costs” in the amount of $10,000. At that point in time, the plaintiff has incurred costs of $1,000. The verdict will have to be less than $9,000 ($10,000-$1,000) for the defendant to invoke the benefits of the Rule.
B. RULE 68 VS. NRS 17.115. IF AN OFFER IS MADE UNDER BOTH, WHICH ONE WILL PREVAIL?
If you read Rule 68 and NRS 17.115, the rules are not exactly the same. In the past, attorneys have always made their Offers of Judgment under both Rules. See the form Offer of Judgment. In the past, the statute and the rule were supposed to be interpreted harmoniously and the statute was given precedence over the Supreme Court rule. Bowyer v. Taack, 107 Nev. 625, 817 P.2d 1176 (1991). With the changes to the Offer of Judgment rules, it is not known if this same rule of “harmonious interpretation” will be followed.
C. WILL PRE-JUDGMENT INTEREST BE CONSIDERED?
Here is an issue arising from the new rule. The standard Offer of Judgment form is silent as to pre-judgment interest. See the Form Offer of Judgment. The old rule NRS 17.115 said that interest would not be considered in determining whether the offeror beat his offer. Both Rule 68 and NRS 17.115 are now silent as to the question of pre-judgment interest. I predict that the plaintiffs’ attorneys will argue that accrued interest should be treated like a cost. They will ask the court to subtract interest from the verdict to determine who beat the offer.
In the case of Mock v. T.G.&Y. Stores Co., 971 F.2d 522 (1992), a party accepted the Offer of Judgment and then asked the court to award pre-judgment interest in addition to the amount offered. The court would not award interest where the Offer of Judgment was silent on the question of interest. Although this case does not directly support the argument of plaintiffs’ attorneys that the court should subtract interest, it supports their position indirectly. The plaintiffs’ attorneys will argue that if the plaintiff cannot recover interest by accepting an Offer of Judgment, then the amount of interest that would have accrued should be subtracted from the verdict to determine whether the defendant beat his/her Offer of Judgment.
D. PREVENTION IS THE BEST MEDICINE
The best way to avoid a discussion of whether pre-judgment interest is due is to avoid an entry of judgment. Both new rules provide that a judgment can be avoided by promptly paying the amount of the Offer. So my advice is once the Offer is accepted, don’t wait around for a judgment to get entered. Pay the amount right away. Then you won’t give the plaintiffs’ attorneys a chance to argue that pre-judgment interest should be awarded against your client as a form of a sanction for failing to promptly pay the Offer amount.
E. SO WHAT IS THE MOST CONSERVATIVE THING TO DO UNDER THE NEW RULES?
Should the parties continue to make Offers of Judgment that are always “inclusive of costs”? I say no. Adjusters and Attorneys should consider the real advantages of making Offers of Judgment with costs to be added. Even though you don’t have the exact bottom line, an experienced attorney or adjuster will be able to ballpark the costs. There is precedent that says “costs” in the context of an Offer of Judgment situation is not intended to include pre-judgment interest. Stinson v. Clark Equipment Co., 473 N.W.2d 333 (Minn. App. 1991). So you shouldn’t have to worry that interest will be tagged on after the fact.
The advantage of making an offer “plus costs” is that if the case goes to trial, the judge will have no problem comparing the offer to the verdict. He will simply look at the two numbers to see which one is higher. On the other hand, if you make an “inclusive of costs” offer, the plaintiff will then attempt to show the judge that his costs are so high, that you in fact did not beat the costs.
Also keep in mind that if the amount of costs is going to make or break the decision on whether the defendant has beaten the Offer, the plaintiff’s attorney will be motivated to manufacture a huge amount of costs to avoid the adverse effects of the Offer of Judgment. Where a plaintiff is facing the risk of having to pay the defendant’s attorney’s fees, the plaintiff’s attorney will be asking 60 cents a page for photocopies and telephone fax line surcharges. Keep in mind that if the Offer allows costs to be added and the plaintiff’s attorney insists on recovering his costs, he or she will have to file a Memo of Costs. You can always file a Motion to Retax and challenge the amount of costs claimed.
Should a party continue to make Offers of Judgment based on both rules? That is probably all right. The rules are worded closely enough not to cause a serious problem with interpretation. You can claim the various benefits under both the Rule and the Statute. If you insist on filing an “inclusive of costs” offer, the best time to make such an Offer is at the same time that you file an Answer. That way the plaintiff has had little time to incur many costs and even if you choose to file an “inclusive of costs” offer, those costs will not be as great of a factor in determining whether the more time a case is in litigation, the greater are the advantages of filing a “costs to be added” offer. Or, if you choose an “inclusive of costs” offer, be sure to bump up your offer to include an estimate of the plaintiff’s costs.
II. MANDATORY INSTRUCTION TO THE JURY REGARDING THE OUTCOME AND AMOUNT OF ARBITRATION AWARD
This change was made by the legislature during the 1999 session. A copy of the changes made to the Court-Annexed Arbitration Program is attached. NRS 38.258 requires that if a case has gone to arbitration and an arbitration award is issued, the written findings of the arbitrator will be admitted as evidence in the trial. The arbitrator must make written findings as to each cause of action in the complaint. The arbitrator cannot be called as a witness and no other evidence regarding the arbitration hearing can be admitted as evidence. Not only will the arbitration award be admitted in evidence, the jury will be instructed as follows:
During the course of this trial, certain evidence was admitted concerning the findings of an arbitrator. On the cause of action for , the arbitrator found in favor of (name of party) and (“awarded damages in the amount of $ ” or “did not award damages on that cause of action”). The findings of the arbitrator may be given the same weight as other evidence or may be disregarded. However, you must not give those findings undue weight because they were made by an arbitrator, and you must not use the findings of the arbitrator as a substitute for your independent judgment. Your must weigh all the evidence that was presented at trial and arrive at a conclusion based upon your own determination of the cause of action.
The instruction is to be given as to each cause of action. This statute is being interpreted as applicable to cases filed after October 1, 1999. We will see instructions like the one above being proposed by plaintiff’s attorneys shortly.
III. OTHER ALTERNATIVE DISPUTE RESOLUTION SOLUTIONS
This change was made by the legislature during the 1999 session. NRS 38.258 provides that pursuant to rules adopted by the Nevada Supreme Court, the parties can stipulate to use ADR alternatives to the Mandatory Court-Annexed Non-Binding Arbitration Program. Either before or after non-binding arbitration, the parties can opt out of the court-annexed arbitration program and opt into several alternative ADR programs. Those programs include:
* Settlement Conferences
* Mediation
* Short Trial
This statute anticipates that if the parties agree, they can use any or all of these options. If the solution chosen does not produce a binding resolution to the dispute, the parties will be moved back to the Court-Annexed Arbitration program, where arbitration is not yet complete.
Settlement Conferences and Mediations are familiar to all involved in litigation. Both are non-binding programs where a mediator or a judge intervene to attempt to bring the parties together to settle the case.
Short Trials are a new animal. It is anticipated that a Short Trial will be binding. A Short Trial is:…conducted with the consent of the parties to the action, in accordance with procedures designed to limit the length of the trial, including without limitation, restrictions on the amount of discovery requested by each party, the use of a jury composed of not more than six persons, and a specified limit on the amount of time each party may use to present his case. See NRS 38.250. The Supreme Court Rules that are required to kick-start the Short Trials program have not been published but are still expected. There was talk at the time that this bill was passed that the court may even consider using lawyers (not judges) to preside over these Short Trials. I do not know what the Supreme Court will approve when it publishes its rules. Could the defendant agree to a Short Trial after arbitration if the plaintiff agrees not to admit the Arbitration Award? I don’t know if the court would allow such a result or not.
Prepared by Michael C. Mills, Esq. Mr. Mills is a trial attorney with the firm Mills & Associates. His practice focuses on defense of civil litigants. He can be reached at (702) 240-6060.
