A Rule 68 offer of judgment is a formal written settlement proposal made in federal court by a party defending against a claim; if the other side rejects it and then fails to obtain a more favorable result at trial, that party must pay the offeror’s litigation costs incurred after the offer was made.1Legal Information Institute. Rule 68 Offer of Judgment The rule pushes cases toward settlement by putting a real financial penalty on the decision to continue to trial when a reasonable offer is on the table.
Who Can Use Rule 68
Only a party defending against a claim can make an offer of judgment. That is usually the defendant, but a plaintiff facing a counterclaim can also use the rule, because it applies to any “party defending against a claim.”1Legal Information Institute. Rule 68 Offer of Judgment A plaintiff pursuing an original claim cannot use Rule 68 to pressure a defendant. The mechanism flows one direction.
Making an offer is not an admission of liability. If the recipient rejects the offer, it is treated as withdrawn and cannot be shown to the jury. The only later proceeding where the offer becomes relevant is the determination of costs, because the court has to compare the offer against the final judgment.1Legal Information Institute. Rule 68 Offer of Judgment
How to Make a Valid Offer
The offer has to be in writing and served on the opposing party at least 14 days before the trial date.1Legal Information Institute. Rule 68 Offer of Judgment An offer served 13 days out is untimely and unenforceable.
The written terms need to be specific: a dollar figure, a transfer of property, or other defined relief. The offer must also include “costs then accrued,” meaning the litigation costs the offeree has racked up as of the date of the offer. Once served, the offer is locked in for the acceptance window. The offeror cannot pull it back, amend it, or lower the number during that period. Service follows the ordinary Federal Rules for delivering litigation documents.
The 14-Day Acceptance Window
The recipient has 14 days from service to accept in writing.1Legal Information Institute. Rule 68 Offer of Judgment If they accept, either party can file the offer, the notice of acceptance, and proof of service with the court. The clerk enters judgment on the agreed terms and the case is over.
If the 14 days pass without a written acceptance, the offer is automatically considered withdrawn. A formal rejection has the same effect as silence.
An expired or rejected offer does not end the possibility of another one. Rule 68 explicitly allows later offers after an earlier one is withdrawn.1Legal Information Institute. Rule 68 Offer of Judgment A defendant who offered $50,000 and got no response can serve a new offer at $75,000, provided the new offer is again served at least 14 days before trial. When more than one offer has been made, the cost-shifting penalty is measured against the most recent offer that was equal to or greater than the final judgment.
The Cost-Shifting Penalty
The consequence that gives Rule 68 its force appears when the offeree rejects and then goes to trial and does not beat the offer. The offeree must pay the offeror’s costs incurred from the date of the offer through the end of the case.1Legal Information Institute. Rule 68 Offer of Judgment That flips the usual rule that the prevailing party recovers costs. Under Rule 68 a plaintiff can technically win at trial and still owe the defendant’s post-offer expenses because the verdict fell short of the offer.
The comparison is arithmetic. Put the final judgment next to the rejected offer. If the judgment is not more favorable, the penalty triggers. A plaintiff who turned down $100,000 and won $95,000 owes post-offer costs. A plaintiff who won $100,001 does not. The line is that sharp.
What Counts as Costs
The costs recoverable under Rule 68 are those defined in 28 U.S.C. § 1920, which limits taxable costs in federal court to six categories:2Office of the Law Revision Counsel. 28 USC 1920 Taxation of Costs
- Clerk and marshal fees, including filing fees and service of process charges.
- Transcript fees for printed or electronically recorded transcripts necessarily obtained for the case, including deposition transcripts.
- Printing costs and witness fees for attendance and travel.
- Copying and exemplification fees for materials necessarily obtained for use in the case.
- Docket fees assessed under 28 U.S.C. § 1923.
- Compensation for court-appointed experts and interpreters.
These categories are narrower than many litigants expect. Private investigator fees, attorney travel, and paralegal time do not qualify. Attorney fees, the largest expense in most lawsuits, are also excluded from § 1920 costs by default. That default has an important exception.
When Attorney Fees Are Included
The Supreme Court decided the attorney fee question in Marek v. Chesny (1985). The Court held that when the statute underlying the plaintiff’s claim defines attorney fees as part of recoverable “costs,” those fees fall within Rule 68’s cost-shifting penalty.3Justia U.S. Supreme Court Center. Marek v Chesny Because 42 U.S.C. § 1988 makes attorney fees recoverable “as part of the costs” in civil rights actions, a § 1983 plaintiff who rejects a Rule 68 offer and wins less at trial cannot recover post-offer attorney fees.4Office of the Law Revision Counsel. 42 USC 1988 Proceedings in Vindication of Civil Rights
That changes the stakes dramatically in civil rights litigation. Post-offer attorney fees in a case that goes through discovery, depositions, motion practice, and trial can run into six figures. A rejected Rule 68 offer in a § 1983 case can wipe out the financial value of a favorable verdict.
In ordinary contract or tort cases, where the governing statute does not treat attorney fees as costs, the penalty is confined to the § 1920 categories. The dollar exposure is real but usually smaller, often from a few hundred to several thousand dollars depending on how much discovery and witness activity happened after the offer date.
When the Offer or Judgment Isn’t Just Money
Where both the offer and the judgment are monetary, the comparison is arithmetic. Non-monetary relief such as an injunction or a policy change is harder. Courts have not settled on a single approach. Some do a point-by-point comparison of the scope and specificity of the offered relief against what the judgment actually ordered. Some try to attach a dollar figure by estimating what the relief would cost the defendant to provide. Others compare only the monetary components and set the non-monetary terms aside. There is no controlling Supreme Court answer, so the method can vary by circuit. A party drafting or evaluating an offer that includes non-monetary terms should account for that uncertainty.
Offers After Liability Has Been Decided
Rule 68 also reaches bifurcated proceedings, where liability has already been determined and only damages remain. The party found liable can serve an offer of judgment on the damages issue. That offer must be served within a reasonable time and no later than 14 days before the damages hearing.1Legal Information Institute. Rule 68 Offer of Judgment The same cost-shifting penalty follows if the offeree rejects and then does not beat the offer at the damages phase.
How the Offeror Collects
The penalty does not pay itself. After it triggers, the offeror files a bill of costs, and the clerk taxes those costs on 14 days’ notice to the opposing party. Either side can move for court review within seven days of the clerk’s decision.5Legal Information Institute. Rule 54 Judgment Costs The offeror needs documentation, including receipts, invoices, and itemized records, showing that each cost was incurred after the date of the rejected offer.
Strategic Points on Both Sides
Rule 68 often does its work as a pressure tool rather than through actual cost-shifting. A defendant’s offer pegged just above what the plaintiff is realistically likely to recover forces the plaintiff and counsel to have a candid conversation about the value of the case, because continued litigation could end up costing the plaintiff money.
For a plaintiff, the mistake is reading a Rule 68 offer as an insult. The question is whether the trial verdict will exceed the offer amount after accounting for the costs owed if it does not. In civil rights cases, where post-offer attorney fees are on the table under Marek, a modest shortfall can trigger a disproportionate penalty. A plaintiff confident about liability but uncertain about damages sits in the hardest spot.
For a defendant weighing a second, higher offer after a first one is rejected, the new number resets the baseline against which the judgment is compared. That takes on some added risk, because the trial result now has to fall below the new figure to trigger the penalty.