Before I explain what an Offer of Judgment ("OOJ") is, I want to explain why the rule exists. The purpose of the Rule is to encourage reasonable settlements of lawsuits. The OOJ forces the parties to a lawsuit to evaluate the strength and value of their case instead of blindly moving closer to trial. The OOJ is basically a stick used to motivate parties to settle when a reasonable offer is made. Failing to properly value and evaluate one's case can have an adverse impact.
The OOJ Rule can be found in the New Jersey Court Rules 4:58. The Rule states that in any action (other than a matrimonial action), a party may serve on any adverse party an offer to take a monetary judgment in the offering party’s favor (or, on the other hand, to allow judgment to be taken against it) for a specific amount, including costs.
The party receiving the offer has until 10 days before trial date or 90 days from service of the offer to accept the offer of judgment, whichever expires first. If the offer is not accepted within that time, it will be considered to be rejected.
So, what happens if you are the party receiving the offer and you reject it? Well, there are consequences for the non-acceptance of the offer. The consequences differ depending on whether you are the plaintiff or the defendant.
Plaintiff's Offer of Judgement
Let's say that you are the plaintiff, the party bringing the claim, and you offer to take a monetary judgment against the defendant, and it is rejected. If you ultimately obtain a money judgment in an amount that is 120% or more of the offer (excluding prejudgment interest and counsel fees), then you (the Plaintiff) will be entitled to: (1) all reasonable litigation expenses incurred following non-acceptance; (2) prejudgment interest of eight percent on the amount of any money recovery from the date of the offer or the date of completion of discovery, whichever is later; and (3) reasonable attorney’s fees for services provided after the non-acceptance of the offer.
So, if you are the plaintiff and you offer to settle your case with the defendant for $50,000 but the offer is rejected, and you go to trial and recover 120% or more than the $50,000, you can recover litigation expenses, interest, and attorney’s fees accruing after the offer’s rejection.
Defendant's Offer of Judgement
If you are the Defendant and you offer to take a judgment in favor of the Plaintiff that is not accepted and the Plaintiff recovers 80% or less than the offer, the Plaintiff has to pay the Defendant's attorney's fees and expenses accruing after the rejection of the offer.
So, if a Defendant offers to pay a Plaintiff $100,000 to settle a case, the offer is rejected, and the Plaintiff ultimately receives only $50,000.00, the Plaintiff would have to pay Defendant's expenses and attorney’s fees accruing after the rejection of the offer.
The Take-Away
If you are faced with an Offer of Judgment, it is essential that you properly evaluate the strength of your case. If you think that your case is stronger or more valuable than it is, you could end up paying the other side's attorney's fees and expenses.
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