The offer of judgment rule, R. 4:58, embodies important and salutary public policy: cases should settle as soon as possible, and if a party holds out for an unreasonable verdict or award, that party should pay the adverse party’s litigation fees following non-acceptance of the offer. A survey recently conducted by the Civil Practice Committee suggested that the rule frequently does provide “some impetus in producing settlements.” 2018 Committee Report at 71. We wonder whether the perception will change with respect to multi-defendant cases after the Supreme Court’s Aug. 15 opinion in Wilner v. Vertical Realty, Inc., and believe the rule requires revision with respect to such cases.
The rule addresses consequences of non-acceptance of an offer by a claimant and by a defendant or other non-claimant, R.4:58-2,-3, and specifically embodies provisions relating to multiple claims and multiple parties. R. 4:58-4. Under the rule, fees are awarded to a plaintiff if the judgment exceeds 120 percent of the amount plaintiff was willing to accept in settlement. Defendant recovers if there is a verdict or award of 80 percent or less of defendant’s offer.
In this product liability case, plaintiff made an offer to accept judgment in the total amount of $125,000 against two defendants involving an alleged defectively manufactured climbing wall from which plaintiff fell. Following rejection of the offer, a verdict of $358,000 was rendered in plaintiff’s favor, allocated 70 percent against the manufacturer of the wall, Vertical Reality Inc., and 30 percent against ASCO Numatics, the manufacturer of parts used in the wall. Numatics contested the award because its allocated share of the award did not exceed 120 percent of the $125,000 offer; in fact it was less than the aggregate $125,000 offer.
The judgment of the trial court was upheld by the Appellate Division. While the Supreme Court found that an error in the jury charge constituted harmless error, it ruled in favor of Numatics on the award under the Offer of Judgment Rule. The Supreme Court agreed with Numatics because, under the lower courts’ holdings, “the only way Numatics could have escaped an award of sanctions would have been to accept Willner’s global offer—for an amount greater than the amount that Numatics was ultimately determined to be at fault.” The decision makes sense and seems fair to Numatics but deprives Willner of the benefit of the rule. In other words, he did not receive the same counsel fees for rejection of an offer in its entirety that other plaintiffs suing only one defendant would have received when the verdict exceeds 120 percent of the offer. We agree with Justice Fernandez-Vina’s opinion for the court that “mandating that individual defendants contemplate global offers from a single plaintiff … is problematic.” And the Willner opinion, of course, did not address the “consequences of non-acceptance” of an offer made by one of several defendants where the allocation may impact on the plaintiff as well as an individual defendant’s obligation.
According to the Willner court, “it would be unfair to impose sanctions in a case where the only means for a party to avoid sanctions would be to pay an amount greater than the jury’s verdict against that party, without advance notice of that consequence.” Moreover, as stated by the court, “if the sanction of fee shifting is to be awarded, there must be advance notice of that consequence” that did not occur in this case by virtue of the Rule as written. We agree that the effect of the Rule in these circumstances is “unclear,” and believe the rule requires reconsideration and greater clarity and precision in multiple-party cases. We hope and trust that the Civil Practice Committee will reexamine the rule again in the next rules cycle in an effort to promote settlements in the context of multi-defendant cases.