Federal Rule 68 Offers of Judgment: An Underutilized Tool for Defense Counsel

Many litigators are familiar with Federal Rule of Civil Procedure 68, but few fully appreciate its strategic value in the defense arsenal. Although straightforward in operation, Rule 68 can be a powerful tool for influencing settlement negotiations, and in some cases, limiting a plaintiff’s ability to recover post-offer attorneys’ fees.

This article examines the Rule 68 framework, the critical question of when attorneys’ fees qualify as recoverable costs, and key considerations for practitioners litigating in the Seventh Circuit and the Northern District of Illinois.

Federal Rule 68 – What is it?

Rule 68 authorizes a defendant to serve a formal offer of judgment at least 14 days before trial. The plaintiff has 14 days to accept the offer. If accepted, either party may file the offer and notice of acceptance, and the clerk must enter judgment accordingly. If the offer is not accepted within 14 days, it is deemed withdrawn and generally cannot be used in the litigation except in a proceeding to determine costs. Fed. R. Civ. P. 68(a).

Rule 68's significance lies in its cost-shifting provision, which is designed to encourage settlement by imposing financial consequences on plaintiffs who reject reasonable settlement offers and later recover less than the amount offered. Marek v. Chesny, 473 U.S. 1, 5 (1985). Specifically, if a plaintiff obtains a judgment that is not more favorable than the rejected offer, the plaintiff must pay the post-offer costs incurred after the offer was made. Fed. R. Civ. P. 68(d). Those costs generally include taxable litigation expenses such as filing fees, witness fees, jury fees, and court reporter or transcript fees.

Why Rule 68 Matters for Defense Counsel

A well-timed Rule 68 offer forces a plaintiff to evaluate the likely value of the case against a concrete settlement figure. If the plaintiff declines the offer and fails to achieve a better result, the plaintiff may be responsible for post-offer costs, and depending on the underlying statute, may lose the ability to recover post-offer attorneys’ fees. This can create substantial settlement leverage, particularly in employment, civil rights, and other statutory claims where attorneys’ fees often exceed the damages at issue.

The Seventh Circuit has also emphasized the importance of precision. Because plaintiffs face significant consequences when evaluating a Rule 68 offer, ambiguities are generally construed against the defendant (the offeror).  Sanchez v. Prudential Pizza, Inc., 709 F.3d 689, 691 (7th Cir. 2013). Drafting clear and explicit offers is therefore critical because courts generally construe ambiguities against the offeror, and vague terms may render an offer unenforceable. Gavoni v. Dobbs House, Inc., 164 F.3d 1071, 1076 (7th Cir. 1999).

The Critical Question: Do “Costs” Include Attorneys’ Fees?

The Supreme Court’s decision in Marek v. Chesny established that Rule 68 does not create a uniform definition of “costs.” Instead, the answer depends entirely on the underlying substantive statute.

The Seventh Circuit has consistently applied this statute-specific approach. In Webb v. James, the Seventh Circuit examined the fee-shifting language of the Americans with Disabilities Act and concluded that the statute did not define attorneys’ fees as part of costs. 147 F.3d 617, 620, 623 (7th Cir. 1998). As a result, the plaintiff remained entitled to attorneys’ fees despite rejecting a Rule 68 offer that exceeded the ultimate recovery. Id.

By contrast, where a statute expressly treats attorneys’ fees as part of recoverable costs, such as the Copyright Act, Rule 68 may cut off a plaintiff’s ability to recover post-offer fees. In those cases, the financial consequences of rejecting a Rule 68 can be substantial. See Harbor Motor Co. v. Arnell Cheverloet-Geo, Inc., 265 F.3d 638, 645 (7th Cir. 2001).

The takeaway for defense counsel is straightforward: before serving a Rule 68 offer, analyze the fee-shifting provisions governing the plaintiff's claims. Practitioners should also remember that Rule 68 does not independently authorize a fee award to defendants. Defense counsel must still identify a separate statutory or common-law basis for recovery and satisfy any applicable prevailing-party requirements. Poteete v. Capital Engineering, Inc., 185 F.3d 804, 807 (7th Cir. 1999).

Comparable Illinois State Law

The Illinois Code of Civil Procedure does not contain an offer of judgment rule comparable to Federal Rule 68. Parties engaged in litigation must look to the specific, tender requirements of 735 ILCS 5/5-126 for general cost-shifting in tort and contract actions.

Before serving a Rule 68 offer, consider the following:

• Draft the offer as though it will be accepted immediately
• Clearly specify whether costs are included and how they are calculated
• Evaluate whether the underlying cause of action treats attorneys’ fees as recoverable costs
• Eliminate ambiguous language
• Confirm compliance with Rule 68’s 14-day service requirement
• Rember that only post-offer costs are affected by Rule 68’s cost-shifting mechanism
• Consider the settlement and fee-shifting implications before extending an offer, particularly in statutory fee cases.

Federal Rule 68 remains an underutilized but highly effective tool for defense counsel. When supported by careful statutory analysis, strategic timing, and precise drafting, a well-crafted offer of judgment can create meaningful settlement leverage and potentially shift significant costs. Practitioners who understand Rule 68's nuances, particularly in fee-shifting cases, can use it to reduce litigation exposure and improve case outcomes.

If you have questions about Rule 68 offers of judgment or defense litigation strategy, contact Sarah Reusché at sreusche@lavellelaw.com to schedule a consultation.