Offer-of-Judgment Rules and Civil Litigation: An Empirical Study of Automobile Insurance Litigation in the East

Although their express purpose is to adjudicate disputes, courts by their institutional design encourage civil litigants to settle their differences without resorting to trial. Most civil systems impose filing fees, pleading requirements, and a highly formalized presentation of evidence; also, because of crowded civil dockets, courts typically require litigants to wait months, or even years, for their trial date.' For these reasons, and because of the increasing costs of legal representation, it is not surprising that the majority of litigants settle before trial. Notwithstanding these measures, federal courts and most state courts have an additional mechanism to encourage settlement, generally known as an offer-of-judgment rule. Following the leads of Minnesota, Montana, and New York, the Supreme Court promulgated Federal Rule of Civil Procedure 68 (hereinafter "Rule 68") in 1937.

Briefly stated, the rule allows a defending party-at her discretion-to submit a formal settlement offer to the court as well as to the claimant. If the plaintiff does not accept the offer and does not ultimately recover an amount greater than the proposed settlement, then she is required to pay the defendant's post-offer court costs.