Offers of Judgment – Nevada Supreme Court Update

Offers of Judgment – Powerful Settlement Tool that Requires Attention to Detail

Offers of Judgment (“OOJ”) under NRCP 68 and NRS 17.117 are valuable settlement tools that present a risk-reward dichotomy because of penalty provisions in OOJs. See, e.g., NRCP 68(f); NRS 17.117(10). The OOJ’s purpose “is to save time and money for the court system, the parties, and the taxpayers” and shift the risk to the opponent to “reward a party who makes a reasonable offer and punish the party who refuses to accept such an offer.” See Dillard Dep’t Stores v. Beckwith, 989 P.2d 882, 888 (Nev. 1999). In 2024, the Nevada Supreme Court published three decisions that clarify important procedural points for practitioners relying on an OOJ in litigation.

OOJs Inclusive vs. Exclusive of Attorney’s Fees and Costs

Aguilar v. Lucky Cab Co. provides a comprehensive explanation of OOJs and the difference between OOJs that are inclusive versus exclusive of attorney fees or costs. 540 P.3d 1064, 1066-69 (Nev. 2024). OOJs “that preclude a separate award” of attorney’s fees or costs “are said to be ‘inclusive’” while “offers that allow a separate award of such allowances are said to be ‘exclusive.’” Id. at 1067. An inclusive OOJ “is exactly that number written” on the OOJ, meaning, “an offeree who accepts an” OOJ “for $50,000 inclusive of all costs, expenses, interest, and allowable attorney’s fees can expect only $50,000-nothing more and nothing less.” Id. It is important to note that an exclusive OOJ does not mean attorney’s fees and costs are unavailable.   As the Court explained, prevailing party status results from OOJs for costs and fees purposes. Therefore, depending on the offer, the party’s position, and the nature of the exclusive OOJ, a party “must separately pay the amount of pre-offer costs, expenses, and interest” that “would otherwise be entitled to as a prevailing party. It must also pay attorney fees, so long as law or contract supplies a basis for those fees.” Id. at 1068. The nuanced analysis for an exclusive OOJ is because in Nevada (unlike federal court), both Plaintiffs and Defendants may propound an OOJ.  Cf. Fed. R. Civ. P. 68.

Application of Penalty Provision

Valley Health Systems v. Murray provides additional context for weighing the risks of an OOJ-regardless of whether the OOJ is exclusive or inclusive. 544 P.3d 904, 912-13 (Nev. 2024).  Specifically, when a party rejects an OOJ, a district court must determine whether the penalty provision should result in shifting attorney’s fees and costs. The Murray Court explained that courts must examine the Beattie factors which include (1) whether the claims or defenses were “brought in good faith”; (2) whether the OOJ “was reasonable and in good faith in both its time and amount”; (3) whether the “decision to reject” the OOJ “was grossly unreasonable or in bad faith” and (4) whether, under Brunzell, the fees sought were “reasonable and justified.” Id. at 912. In Murray, the plaintiff beat the OOJ that plaintiff propounded by several hundreds of thousands of dollars at trial as well as after appeal when a statutory cap reduced the jury award. Applying Beattie factors, the Murray Court held that the penalty provision should apply. Id. The court’s reasoning focused on how acceptance of the OOJ would have avoided “a nine-day jury trial” and appeal such that Nevada courts and “each party would have forgone considerable time and expense.” Id. at 913.

Avoiding the Penalty Provision

In re Parametric Sound Corp. Shareholders’ Litig. expanded on Aguilar for inclusive OOJs and detailed that, to avoid the penalty provision, the rejecting party must demonstrate both (1) the amount of the fees and costs incurred at the time of the OOJ and (2) that the rejecting party is nonetheless entitled to have attorney’s fees and costs included in the court’s analysis of whether rejecting the OOJ was reasonable.  549 P.3d 1189, 1197 (Nev. 2024). Meaning, that when a party propounds an inclusive OOJ, and the rejecting party is not entitled to attorney’s fees, district courts cannot take into account the rejecting party’s fees when considering the reasonableness of rejection.  Id. (“[I]t was improper for the district court to have considered” the rejecting party’s “fees because there is no indication that” the party was “entitled to fees ‘by law or contract’”).  The Court further noted that even if the rejecting party is entitled to fees, it is improper “for the district court to have guessed as to the amount” of fees “without any evidence before it.” Id.

Offers of Judgment are powerful settlement tools. Three 2024 published Nevada Supreme Court decisions clarify important procedural points for utilizing OOJs in litigation and demonstrate the risk-reward relating to penalty provisions. Attention to detail is required to properly wield the OOJ tool as a sword or shield.