Utility Automation 2000, Inc. v. Choctawhatchee Electric Cooperative, Inc.

298 F.3d 1238, 63 U.S.P.Q. 2d (BNA) 1879, 53 Fed. R. Serv. 3d 692, 2002 U.S. App. LEXIS 15461, 2002 WL 1669308
Court of Appeals for the Eleventh Circuit·Decided July 24, 2002·No. 01-16265·Published·Cited by 103 cases

Opinions

BARKETT, Circuit Judge:

Utility Automation 2000, Inc. (“UA 2000”) appeals the district court’s denial of its motion for attorneys’ fees following the court’s entry of a Rule 68 judgment against Choctawhatchee Electric Cooperative, Inc., Cheleo Services, Inc., and Tommie Gipson (collectively, “Defendants”). UA 2000 originally sued Defendants1 for the misappropriation of UA 2000’s trade secrets in violation of the Alabama Trade Secrets Act, Ala.Code § 8-27-1 et seq. (1975), breach of contract, and intentional interference with a business or contractual relationship. In its complaint, UA 2000 also sought recovery of its attorneys’ fees under the Trade Secrets Act and the contract between UA 2000 and Cheleo.

Prior to trial, Defendants served upon UA 2000 an offer of judgment pursuant to Rule 68 of the Federal Rules of Civil Procedure, which authorizes a defendant to make an offer of judgment “for the money ... specified in the offer, with costs then accrued.” Fed.R.Civ.P. 68. Defendants’ offer provided:

Defendants ... hereby make the following Offer of Judgment pursuant to Federal Rule of Civil Procedure 68; that Defendants shall pay to Plaintiff [UA 2000] the sum of Forty-five thousand and 00/100 Dollars ($45,000) with costs accrued, and that Defendant, Cheleo Services, Inc., shall refrain from compet[1240]*1240ing with Plaintiff for a period of thirty (30) days from the date of acceptance of this Offer.

UA 2000 accepted the offer of judgment, and the district court entered a Final Judgment ordering that

Plaintiff Utility Automation 2000, Inc. have and recover of Defendants Chocta-whatchee Electric Cooperative, Inc., Cheleo Services, Inc. and Tommie Gip-son the sum of $45,000, with costs accrued, and that Defendant Cheleo Services, Inc. shall refrain from competing with Utility Automation 2000, Inc. for a period of 30 days from August 25, 2000.
It is further ORDERED, ADJUDGED and DECREED that Defendants Choe-tawhatchee Electric Cooperative, Inc. and Cheleo Services, Inc. take nothing in regard to their counterclaims asserted against Plaintiff Utility Automation 2000, Inc. and that said claims are hereby dismissed with prejudice.

Following the court’s entry of the Final Judgment, UA 2000 submitted a motion for the attorneys’ fees, costs, and expenses incurred prior to the service of the Rule 68 offer of judgment. The district court granted UA 2000’s request for the recovery of costs in the amount of $5,220.50, but denied its motion for attorneys’ fees, holding:

Because the underlying statute does not define “costs” to include attorneys’ fees, Plaintiffs motion for an award of attorneys’ fees is hereby DENIED. See Ma-rek v. Chesny, 473 U.S. 1, 9, 105 S.Ct. 3012, 87 L.Ed.2d 1 (1985); Arencibia v. Miami Shoes, Inc., 113 F.3d 1212, 1214 (11th Cir.1997).

UA 2000 appeals. The interpretation of Rule 68 is a legal question that we decide de novo. See Jordan v. Time, Inc., 111 F.3d 102, 105 (11th Cir.1997).

DISCUSSION

The question presented in this appeal is simply whether, having accepted Defendants’ Rule 68 offer, UA 2000 may recover its attorneys’ fees in addition to the $45,000 judgment award. Rule 68 provides:

At any time more than 10 days before the trial begins, a party defending against a claim may serve upon the adverse party an offer to allow judgment to be taken against the defending party for the money or property or to the effect specified in the offer, with costs then accrued. If within 10 days after the service of the offer the adverse party serves written notice that the offer is accepted, either party may then file the offer and notice of acceptance together with proof of service thereof and thereupon the clerk shall enter judgment. An offer not accepted shall be deemed withdrawn and evidence thereof is not admissible except in a proceeding to determine costs. If the judgment finally obtained by the offeree is not more favorable than the offer, the offeree must pay the costs incurred after the making of the offer.

Fed.R.CivJP. 68.

As the Supreme Court has explained, “The plain purpose of Rule 68 is to encourage settlement and avoid litigation.” Marek v. Estate of Chesny, 473 U.S. 1, 5, 105 S.Ct. 3012, 87 L.Ed.2d 1 (1985). The rule accomplishes this objective with a two-part approach. First, Rule 68 allows a defendant to make a firm, nonnegotiable offer of judgment. Unlike traditional settlement negotiations, in which a plaintiff may seek clarification or make a counteroffer, a plaintiff faced with a Rule 68 offer may only accept or refuse. If he accepts, the court automatically enters judgment in his favor; if he refuses, the case proceeds. Second, the Rule encour[1241]*1241ages plaintiffs to accept reasonable offers through what is referred to as its “cost-shifting” provision, which forces a plaintiff who refuses an offer and then ultimately recovers less at trial than the offer amount to pay the costs incurred from the time of the offer. Thereby, “[t]he Rule prompts both parties to a suit to evaluate the risks and costs of litigation, and to balance them against the likelihood of success upon trial on the merits.” Id.

The sole constraint Rule 68 places on offers of judgment is its mandate that an offer include “costs then accrued.” This does not mean that every offer must explicitly state that it includes costs: “If an offer recites that costs are included or specifies an amount for costs, and the plaintiff accepts the offer, the judgment will necessarily include costs; if the offer does not state that costs are included and an amount for costs is not specified, the court will be obliged by the terms of the Rule to include in its judgment an additional amount which is in its discretion.” Marek at 5, 105 S.Ct. 8012. Thus, as long as an offer does not explicitly exclude costs, it is proper under the Rule.

Rule 68 does not define the meaning of the term “costs,” however, and consequently parties frequently dispute whether attorneys’ fees are included. In Marek, the Supreme Court considered one such dispute, addressing when attorneys’ fees might be included as costs for the purposes of Rule 68’s cost-shifting provision. Marek held that the term “costs”

was intended to refer to all costs properly awardable under the relevant substantive statute or other authority.

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Utility Automation 2000, Inc. v. Choctawhatchee Electric Cooperative, Inc., 298 F.3d 1238, 63 U.S.P.Q. 2d (BNA) 1879, 53 Fed. R. Serv. 3d 692, 2002 U.S. App. LEXIS 15461, 2002 WL 1669308 (11th Cir. 2002).

298 F.3d 1238 (Utility Automation 2000, Inc. v. Choctawhatchee Electric Cooperative, Inc.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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