New Case Law: In Tennessee, Offers of Judgment are Irrevocable

Posted on November 4th, 2014 by sutteroconnell

The Court of Appeals of Tennessee recently ruled on an issue of first impression. In McGinnis v. Cox, Case No. M2014-00102-COA-R3-CV (opinion filed October 31, 2014), the court considered a personal injury case in which the defendants made an offer of judgment pursuant to Tennessee Rule of Civil Procedure 68, which states:

At any time more than 10 days before the trial begins, a party defending against a claim may serve upon the adverse party an offer to allow judgment to be taken against the defending party for the money or property, or to the effect specified in the offer, with costs then accrued. Likewise a party prosecuting a claim may serve upon the adverse party an offer to allow judgment to be taken against that adverse party for the money or property or to the effect specified in the offer with costs then accrued. If within 10 days after service of the offer the adverse party serves written notice that the offer is accepted, either party may file the offer and notice of acceptance, together with proof of service thereof, with the court and thereupon judgment shall be rendered accordingly. An offer not accepted shall be deemed withdrawn and evidence thereof is not admissible except in the proceeding to determine costs. If the judgment finally obtained by the offeree is not more favorable than the offer, the offeree shall pay all costs accruing after the making of the offer. The fact that an offer is made but not accepted does not preclude a subsequent offer.

In this automobile accident case, the defendants made an offer pursuant to Rule 68 in the amount of $784.641.55 or the policy limits of the applicable insurance policy. The offer included much of the language of Rule 68 and provided “at the expiration of which ten (10) days the Offer would be withdrawn.”  Seven days later, the defendants faxed a letter to plaintiffs’ counsel withdrawing the offer, and filed a “Notice of Withdrawal” in the trial court.

After Plaintiffs received the revocation, they replied that they accepted the offer of judgment, in the amount of the policy limits of $100,000.00.  The acceptance was made within the ten days specified in the offer and by the text of Rule 68.  The trial court ruled defendants could not revoke the offer and entered judgment in favor of the plaintiffs.

The Court of Appeals noted this is an issue of first impression in Tennessee, but has been extensively litigated in federal courts, interpreting similar language contained in Fed. R. Civ. P. 68.  It further noted nothing in the Rule seems to touch on the issue of revocability, and held the Rule is ambiguous on the issue.  Ultimately, the Court adopted the reasoning of Richardson v. Nat’l R.R. Passenger Corp., 49 F.3d 760, 764-765 (D.C. Cir. 1995), which held a Rule 68 offer:

[I]s simply not revocable during the 10-day period. Rule 68 sets forth a rather finely tuned procedure; unlike a normal contract offer, an offer of judgment under the Rule imposes certain consequences that can be costly for the plaintiff who declines the offer.  The rule is thus designed to put significant pressure on the plaintiff to think hard about the likely value of its claim as compared to the defendant’s offer.  In return, the plaintiff, as we understand the scheme, is guaranteed 10 days to ponder the matter as though the plaintiff had paid for a 10-day option.

The Court of Appeals held Rule 68 is intended to put “balanced pressure” on both plaintiffs and defendants to settle cases, and permitting revocation within the 10-day period would upset the balance created by the rule. “An interpretation of Rule 68 that permits an offeree ten days to consider an offer of judgment, without fear that the offer may be revoked, allows the appropriate amount of caution to be taken in considering the offer.”  The court upheld the trial court’s entry of judgment in favor of the Plaintiffs.

Ultimately, the court did leave a window open to attempted revocations, noting “[i]n this case, there are no allegations of fraud or any other good cause that would prevent the typical operation of Rule 68…[a]ccordingly, we need not consider what, if any circumstances would bar operation of the above rule.”  This implies that an allegation of fraud or other misbehavior may allow revocation under the right circumstances.  Still, this case serves as a good reminder to exercise care in considering and drafting offers of judgment and to be sure all of the relevant facts and circumstances are known.  If you make an offer of judgment hastily, you may be stuck with it.