N.M. R. Civ. P. Dist. Ct. 1-068
If an offer of settlement made by a claimant is not accepted and the judgment finally obtained by the claimant is more favorable than the offer, the defending party must pay the claimant's costs, excluding attorney's fees, including double the amount of costs incurred after the making of the offer. If an offer of settlement made by a defending party is not accepted and the judgment finally obtained by the claimant is not more favorable than the offer, the claimant must pay the costs, excluding attorney's fees, incurred by the defending party after the making of the offer and shall not recover costs incurred thereafter.
The fact that an offer has been made but not accepted does not preclude a subsequent offer. When the liability of one party to another has been determined by verdict or order or judgment, but the amount or extent of the liability remains to be determined by further proceedings, any party may make an offer of settlement, which shall have the same effect as an offer made before trial if it is served within a reasonable time not less than ten (10) days prior to the commencement of hearings to determine the amount or extent of liability.
N.M. R. Civ. P. Dist. Ct. 1-068
Committee commentary for 2003 amendment.
Rule 1-068 formerly was titled "Offer of judgment" and required that the accepting party "allow judgment to be taken against him for the money or to the effect specified in the offer." Rule 1-068 NMRA (superseded). Requiring that a judgment be entered for the amount of the agreed-upon offer was a disincentive to some litigants to make offers because those litigants preferred to make the Rule 1-068 offer, tender full payment of the amount of the offer and then obtain a dismissal of the lawsuit with prejudice pursuant to Rule 1-041(A) NMRA when the offer and tender were accepted. The rule now titles the procedure an "Offer of settlement" to make explicit that when either party makes an offer of settlement which is accepted, the party who thereby agreed to make a payment may tender full payment of the agreed-upon sum before a judgment is entered. When this is done, the court should enter a judgment of dismissal with prejudice rather than a money judgment in the amount specified in the offer of settlement. Because the form of judgment will depend upon whether full payment is tendered before the accepted offer results in a judgment, the offer of settlement shall not be conditioned on the form that the judgment might take, but only upon the substantive content of the settlement proposal.
This rule also applies to actions seeking relief other than money damages. See e.g., Assoc. of Apartment Owners of Wailea Elua v. Wailea Resort Co., Ltd., 58 P.2d 608 (Hawaii 2002) ("[F]ederal courts have overwhelmingly applied Rule 68 to cases dealing with equitable relief.").
Rule 1-068 previously permitted only a party defending against a claim to make an offer of judgment. At least sixteen states have rules that allow the claimant as well as the defending party to do so. Allowing either party to make offers of settlement increases the likelihood that settlement will occur and provides equality of opportunity to all parties to initiate the settlement process.
Rule 1-068 has always provided that when a defending party's offer of judgment is not accepted and the claimant fails to obtain a judgment more favorable than the offer, the claimant must pay the costs of the defending party incurred after the making of the offer. The rule continues to provide this remedy. Rule 1-068 also now makes explicit what has been the universal construction of the rule - that when the claimant does not obtain a judgment more favorable than the offer, the claimant not only must pay the defending party's costs, but also is not entitled to its costs incurred after the making of the offer. E.g., Crossman v. Maroccio, 806 F.2d 329, 333 (1st Cir. 1986), cert. denied, 481 U.S. 1029 (1987); see Moore's Federal Practice Digest Par. 68.08[2] (3rd ed. 2002).
When a claimant's offer of settlement is declined and the claimant obtains a judgment greater than the offer, the appropriate sanction is more complicated. Because the claimant is normally entitled to costs if the claimant prevails in obtaining a judgment in any amount, see Rule 1-054(D)(1) NMRA, an award only of costs would not provide additional incentive for the defending party to accept the offer. To provide additional incentive, the rule provides that costs incurred by the claimant after the making of the offer of settlement shall be doubled and the doubled amount awarded as costs.
The plaintiff often has the opportunity for extensive investigation and preparation of the claim prior to filing suit. The claimant thus may be in a position to make an offer of settlement very early in the proceedings, before the defending party has had a fair opportunity through discovery to determine the relative merits of claimant's case. For this reason, the rule provides that an offer of settlement may not be made by a claimant until one hundred twenty days after the service of a responsive pleading by the defending party who thus has additional time to evaluate the offer before deciding whether to accept or reject it. For example, if the claimant is the plaintiff, the time for making an offer begins upon service of the answer by the defendant. If the claimant is a defendant who has filed a counterclaim, the time for making an offer begins upon service of the plaintiff's reply to the counterclaim. See Rule 1-007(A) NMRA.
"Costs" awardable pursuant to this rule are those provided for in Rule 1-054(D). Attorney's fees are not included in Rule 1-054(D), see Rule 1-054(E) NMRA, and are excluded from the cost-shifting provisions of this rule even if attorney's fees are included as costs for other purposes or in other contexts. E.g., 28 U.S.C. Sec. 1988(b) (attorney's fees included as costs awardable in cases involving civil rights actions). While a cost award is mandatory under the conditions specified in Rule 1-068, the amount of those costs is separately determined by the trial court pursuant Rule 1-054(D). See Key v. Chrysler Motors Corp., 2000-NMSC-010, 128 N.M. 739, 998 P.2d 575.
This rule does not apply to domestic relations actions because such actions frequently provide for the award of attorney's fees in the discretion of the court and this provides sufficient incentive for parties in domestic relations cases to seek to settle their disputes. The excluded "domestic relations actions" are those described in the Committee commentary to Rule 1-120 NMRA.
A statute, Section 56-8-4(B) NMSA 1978, authorizes the court to award interest to a plaintiff under certain circumstances if the defendant fails to make reasonable and timely offers of settlement to the plaintiff. This statute operates differently from Rule 1-068 NMRA in that the statute penalizes a defendant for not making offers rather than providing an incentive for plaintiffs to make offers of settlement. Nonetheless, awarding plaintiffs both double costs under this rule and interest pursuant to the statute is unduly punitive.
The broader terms "claimant" and "defending party" are used in the Rule instead of "plaintiff" and "defendant" because, for example, when a defendant files a counterclaim, the defendant also become a claimant and the plaintiff also becomes a defending party.
.ANNOTATIONS The 2003 amendment, effective August 1, 2003, substituted "settlement" for "judgment" in the rule heading and in the second undesignated paragraph in Subsection A; inserted the Subsection A designation in the first paragraph and the bold subcatchline and rewrote the former first paragraph which read "At any time more than ten (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 him for the money or property or to the effect specified in his offer, with costs then accrued. If within ten (10) days after the service of the offer the adverse party serves written notice that the offer is accepted, either party may then file the offer and notice of acceptance together with proof of service thereof and thereupon such judgment may be entered as the court may direct. An offer not accepted shall be deemed withdrawn and evidence thereof is not admissible except in a proceeding to determine costs. If the judgment finally obtained by the offeree is not more favorable than the offer, the offeree must pay the costs incurred after the making of the offer. The fact that an offer has been made but not accepted does not preclude a subsequent offer"; and inserted the first sentence in the second undesignated paragraph in Subsection A; and added Subsections B and C.
For computation of time, see Rule 1-006 NMRA. For costs, see Rule 1-054 NMRA. Compiler's notes. - This rule is deemed to have superseded 105-829, C.S. 1929 (Laws 1897, ch. 73, §118; C.L. 1897, §2685; Code 1915, §4213 ), which was substantially the same. This rule does not apply where judgment is entered in defendant's favor. Apodaca v. AAA Gas Co., 2003-NMCA-085, 134 N.M. 77, 73 P.3d 215. Offer is irrevocable for ten-day period. - A Rule 1-068 offer is irrevocable during the ten-day period provided by the rule, and a plaintiff can accept the offer any time during the period, regardless of whether the plaintiff has made a counteroffer to try to obtain a more favorable settlement. Shelton v. Sloan, 1999-NMCA-048, 127 N.M. 92, 977 P.2d 1012. Offer of judgment is admissible only in proceeding to determine costs, and the submission of proposed findings and conclusions is such a proceeding. Aspen Landscaping, Inc. v. Longford Homes of N.M., Inc., 2004-NMCA-063, 135 N.M. 607, 92 P.3d 53, cert denied, 2004-NMCERT-005. "Judgment finally obtained". - The "judgment finally obtained" by plaintiff included prejudgment interest awarded by the court, where the damages were to compensate plaintiff for funds wrongfully held by defendant. Gilmore v. Duderstadt, 1998-NMCA-086, 125 N.M. 330, 961 P.2d 175. Costs are calculated from the date of the offer. - When there is a judgment that is more favorable than an offer of settlement, the plain language of Paragraph A of Rule 1-068 NMRA requires the costs to be calculated from the date of the offer, not from the date the offer expired. Estate of Lajeuenesse v. University of N.M. Bd. of Regents, 2013-NMCA-004, 292 P.3d 485, cert. granted, 2012-NMCERT-012. Defendant's recovery of costs after plaintiff's rejection of settlement offer. - Defendants could recover their costs from the date of their rejected first offer of settlement, where the judgment ultimately recovered by plaintiff was not more favorable than the first offer. Dickenson v. Regent of Albuquerque, 1991-NMCA-071, 112 N.M. 362, 815 P.2d 658. Untimely offer. - The defendant's attempted offer of judgment to the plaintiff was not sufficiently in advance of the trial to allow the plaintiff to respond before trial and was therefore untimely. Because the defendant's offer of judgment to the plaintiff was untimely, the plaintiff's subsequent attempt to accept the offer was properly rejected by the court. The fact of its untimeliness rendered the defendant's offer of judgment not effective under this rule, and, therefore, the cost shifting provision of this rule did not apply. Drake v. Trujillo, 1996-NMCA-105, 122 N.M. 374, 924 P.2d 1386. Judgment less than offer. - If the judgment finally obtained is far less than the offer of judgment, the offeree is entitled to recover his pre-offer costs but is not entitled to post-offer costs and must also pay the offeror's post-offer costs. Dunleavy v. Miller, 1992-NMCA-061, 116 N.M. 365, 862 P.2d 1224, rev'd on other grounds, 1993-NMSC-059, 116 N.M. 353, 862 P.2d 1212. Meaning of "prevailing party". - Plaintiff who won judgment less than the offer of judgment proffered by defendant was, nonetheless, the "prevailing party" and entitled to costs from defendant. Gilmore v. Duderstadt, 1998-NMCA-086, 125 N.M. 330, 961 P.2d 175. Inclusion of pre-offer costs. - Plaintiff's pre-offer costs in an automobile negligence action should have been added to her damage award to determine the amount of "the judgment finally obtained by the referee" under this rule, since the offer of judgment included all costs accrued to that point. Dunleavy v. Miller, 1993-NMSC-059, 116 N.M. 353, 862 P.2d 1212. Mutual assent as to form of judgment. - Where defendant made an offer of cash but expressly denied liability, and plaintiff accepted the offer but without the denial of liability, the court erred in entering defendant's form of judgment, since it failed to reflect mutual assent on the part of the parties; instead, the court should have accepted the plaintiff's form of judgment, since defendant was in the better position to ascertain the intentions of the parties. Pope v. The Gap, Inc., 1998-NMCA-103, 125 N.M. 376, 961 P.2d 1283. Judgment silent as to liability. - Form of judgment which is silent as to the liability of defendant does not constitute a determination or admission of liability, and cannot be used against defendant in a subsequent proceeding. Pope v. The Gap, Inc., 1998-NMCA-103, 125 N.M. 376, 961 P.2d 1283. Setting aside offer of judgment. - Rule 1-060B NMRA applies to a trial court's consideration of whether to set aside an offer of judgment made under this rule. Fuller v. Bachen, 1999-NMCA-130, 128 N.M. 151, 990 P.2d 825. Ability to pay costs. - Where plaintiff recovers a judgment such that plaintiff is the prevailing party under Rule 1-054 NMRA, but does not recover as much as defendant's pre-trial offer, the award of costs is governed by Rule 1-068 NMRA, which makes mandatory the award of defendant's post-offer costs, although plaintiff is not precluded from recovering its pre-offer costs as the prevailing party. The ability of the party liable for costs to pay the costs is a factor that may be considered under Rule 1-054 NMRA where the court has discretion in the matter. But, because there is not discretion in the application of Rule 1-068 NMRA, the court cannot consider a party's ability to pay costs. Montoya v. Pearson, 2006-NMCA-097, 140 N.M. 243, 142 P.3d 11, cert. denied, 2006-NMCERT-008, 140 N.M. 423, 143 P.3d 185. Double cost provision does not conflict with the Tort Claims Act. - The double costs awarded under Paragraph A of Rule 1-068 NMRA are not punitive damages or prejudgment interest and are not prohibited by Subsection D of Section 41-4-19 NMSA 1978 of the Tort Claims Act. Estate of Lajeuenesse v. University of N.M. Bd. of Regents, 2013-NMCA-004, 292 P.3d 485, cert. granted, 2012-NMCERT-012. Am. Jur. 2d, A.L.R. and C.J.S. references. - 20 Am. Jur. 2d Costs §23 et seq. Warrant of attorney to confess judgment, necessity that amount be stated, 7 A.L.R. 735. Sureties whose obligation is conditioned upon judicial determination of liability or rights of principal, judgment by consent, confession, or default of principal as affecting, 51 A.L.R. 1489. Municipality's power to consent or confess to judgment against itself, 67 A.L.R. 1503. Joint or several or joint and several character of warrant of attorney to confess judgment, signed by two or more, 80 A.L.R. 403. Conditional sales contract, validity and effect of cognovit or warrant of attorney to confess judgment in, 89 A.L.R. 1106. Confession under warrant of attorney, time within which application to reopen or set aside judgment by, may be made, 112 A.L.R. 797. Warrant of attorney to confess judgment, judgment entered in sister state under, 39 A.L.R.2d 1232. Constitutionality, construction, application and effect of statute invalidating powers of attorney to confess judgment or contract giving such powers, 40 A.L.R.3d 1158. 49 C.J.S. Judgments §§ 86 to 89, 188 to 192.