Warr v. Williamson

195 S.W.3d 903, 359 Ark. 234

• Court: Supreme Court of Arkansas
• Decided: October 21, 2004
• Docket: 03-1474
• Status: Published

Opinions

Jim Hannah, Justice.

Gaye N. Warr appeals an order of the Pope County Circuit Court awarding Kathleen Williamson costs under Ark. R. Civ. P. 68 (2003). Warr alleges that Williamson’s one dollar offer of judgment under Rule 68 was not a bona fide offer and so could not trigger an award of costs under Rule 68. We reverse the circuit court and hold that the offer of one dollar was not a bona fide or good faith offer as required to trigger an award of costs under Rule 68. We also hold that because the law on what sort of offer is required to trigger costs under Rule 68 was not settled at the time Williamson made the offer of judgment, sanctions under Ark. R. Civ. P. 11 (2003) were not proper, and we affirm the circuit court’s denial of sanctions.

Facts

On July 26, 2000, Warr was a passenger in a car on Interstate 40 that was struck from behind. Warr filed a complaint against Williamson and Richard D. Kennedy on April 11, 2001, based in negligence. She alleged that Williamson was driving a car that struck a car driven by Kennedy, and that “one or both” of the cars struck the vehicle in which she was riding. By way of an Offer of Judgment dated August 6, 2001, Williamson offered to have judgment entered against her in the “total sum of $1.00” in settlement of the lawsuit. The offer was never accepted by Warr, and the case went to trial on June 3, 2003. At trial, the jury returned a verdict finding Williamson zero percent at fault and Kennedy 100 percent at fault. The judgment states, “IT IS THEREFORE CONSIDERED, ORDERED AND ADJUDGED that the Complaint of Gaye N. Warr against Kathleen C. Williamson is hereby dismissed with prejudice.” After entry of the judgment, Williamson brought a motion for costs under Rule 68. Warr responded to the motion for costs by arguing that the “Arkansas courts have clearly held that a bona fide offer must be made for Rule 68 to apply.” Warr further argued that the offer of one dollar was a “bogus offer” and an “attempt to circumvent and abuse the purposes of Rule 68 . . . .” Warr also argued that costs were discretionary and not mandatory. The motion for costs was granted in an order entered October 15, 2003.

Warr brought a motion for sanctions under Ark. R. Civ. P. 11, arguing that the motion for costs under Rule 68 was “not well grounded in the law or a good faith argument to change the law.” The motion for sanctions was denied in an order entered October 15, 2003. In her Notice of Appeal, Warr states that she is appealing from the order granting costs and the order denying sanctions.

Rule 68

At issue is Ark. R. Civ. P. 68 and whether a one dollar offer of judgment will serve to trigger a right to costs under Ark. R. Civ. P. 68. Rule 68 provides in pertinent part:

At any time more than i 0 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 him for the money or property or to the effect specified in his 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 judgment shall be entered. An offer not accepted shall be deemed withdrawn and evidence thereof is not admissible except in a proceeding to determine costs. If the judgment exclusive of interest from the date of offer 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.

(Emphasis added). Rule 68 does not define what constitutes an offer under the Rule beyond that it must be “money or property.” Certainly one dollar is money, albeit not much. The purpose of Rule 68 is to provide a defendant the means to compel a plaintiff to consider anew the merit of his or her claim at the time the offer is made and whether continued litigation is appropriate. Jones v. Abraham, 341 Ark. 66, 15 S.W.3d 310 (2000). Rule 68 encourages early settlement of claims and protects the party who is willing to settle from expenses and costs which will subsequently accrue. Bell v. Bershears, 351 Ark. 260, 92 S.W.3d 32 (2002); see also Jones, supra. Obviously, if Rule 68 is to serve its stated purpose, it must require that an offer be extended which is sufficient to compel a plaintiff to reassess the likelihood of success on the merits of the claim. See, e.g., Jones, supra.

In Darragh Poultry & Livestock Equipment Co. v. Piney Creek Sales, Inc., 294 Ark. 427, 431, 743 S.W.2d 804 (1988),¹ this court stated, “Under Rule 68 a trial judge has no discretion but must order the offeree to pay the authorized costs incurred after the making of a bona fide offer, if the judgment, exclusive of interest, is not more favorable than the offer.” Similarly, in Hankins v. Deptartment of Finance and Administration, 330 Ark. 492, 497, 954 S.W.2d 259 (1997), this court cited Darragh, supra, in stating, “We recognize that Ark. R. Civ. P. 68 requires the trial judge to order an offeree to pay the authorized costs after the making of a bona fide offer, if the judgment, exclusive of interest, is not more favorable than the offer.” Thus, while in both opinions this court used the term “bonafide offer,” neither opinion discussed why that term was used or exactly what sort of offer is required to trigger an award of costs under Rule 68. However, while not precisely on point, the discussion in Jones, supra, is helpful. In Jones this court cited Darragh and stated:

The purpose of Rule 68 is to provide a means by which a defendant can compel the plaintiff realistically to reassess his claim and thereby, perhaps, persuade plaintiff to settle. See Darragh Poultry & Livestock Equipment Co. v. Piney Creek Sales, Inc., 294 Ark. 427, 743 S.W.2d 804 (1988).

The chancellor denied cross-appellants’ motion for costs based on their October 1997 offer of judgment. Cross-appellants made a settlement offer of "one-third of one-fourth of the net value of the estate of Frances Abraham,” which was no greater than the minimum amount that cross-appellees were to inherit under Frances Abraham’s last will executed in 1987. The three appellants were to inherit one-fourth of Frances Abraham’s estate under the 1987 will. Rule 68 is not applicable where a defendant makes an offer of settlement that is no greater than the minimum amount that the plaintiff can recover. The trial court was correct in its ruling.

Jones, 341 Ark. at 81-2 (emphasis added). In Jones, supra, this court affirmed the court of appeals decision in Jones v. Abraham, 67 Ark. App. 304, 318, 999 S.W.2d 698 (1999), wherein the court of appeals in citing to Darragh, supra, stated, “Offers ofjudgment made pursuant to Rule 68 are effective only if they are bona fide offers.” “[T]he settled meaning of bona fide is synonymous with its literal translation, ‘good faith,’ and is so familiar that the average person could not be misled.” 4000 Asher, Inc. v. State, 290 Ark. 8, 14, 716 S.W.2d 190 (1986).

Rule 68 offers a defendant the opportunity to make a good faith offer ofjudgment to encourage the plaintiff to settle the case and to acquire protection against expenses and costs accruing after the offer is made. To obtain the protection and benefit of Rule 68, a defendant must make a good faith offer, or in other words, an offer sufficient to compel the plaintiff to reassess his or her case. It is difficult to imagine any circumstances under which an offer of one dollar would compel a plaintiff to seriously consider settling a case. For example, Warr paid far in excess of one dollar in filing fees just to bring the lawsuit. It is apparent that the offer of one dollar was made in an attempt to entitle Williamson to costs under Rule 68 on technical grounds should the jury return a defense verdict.

It should be noted that Rule 68 applies to offers made “with costs then accrued.” Clearly, even though parties to a lawsuit will certainly value any given case differently, the Rule contemplates that an offer triggering an award of costs under Rule 68 would at the least take costs into account. This court has stated that Rule 68 has real meaning, and as an example noted how the Rule is to be given effect as shown by the fact it allows the trial judge no discretion in granting fees where a party meets the requirements of the rule. Darragh, supra. An offer of one dollar simply would not compel Warr to reassess the likelihood of success and consider whether accepting the offer would be best. The offer was not made in good faith under Rule 68. The circuit court is reversed on the award of fees under Rule 68 because Williamson failed to make a valid offer of judgment under Rule 68.

Rule ÍÍ Sanctions

This court recently discussed Ark. R. Civ. P. 11 sanctions:

The primary purpose of Rule 11 sanctions is to deter future litigation abuse, and the award of attorney’s fees is but one of several methods of achieving this goal. See Crockett & Brown, P.A. v. Wilson, 321 Ark. 150, 901 S.W.2d 826 (1995). When a trial court determines that a violation of Rule 11 has occurred, the Rule makes sanctions mandatory. Id. The moving party has the burden to prove a violation of Rule 11. Bratton v. Gunn, 300 Ark. 140, 777 S.W.2d 219 (1989). The imposition of sanctions pursuant to Rule 11 is a serious matter to be handled with circumspection, and the trial court’s decision is due substantial deference. Williams v. Martin, 335 Ark. 163, 980 S.W.2d 248 (1998); Crockett & Brown, supra.

Pomtree v. State Farm Mut. Auto. Ins., 353 Ark. 657, 666, 121 S.W.3d 147 (2003). Warr argues that the circuit court abused its discretion in denying her motion for Rule 11 sanctions because the offer of one dollar was “clearly in violation of the purpose and intent of Rule 68.” Warr further argues that filing the motion for costs was an “abuse of the rules of civil procedure and the judicial system.”

This court further stated in Pomtree, supra:

The essential issue is whether the attorney who signed the pleading or other document fulfilled his or her duty of reasonable inquiry into the relevant law, and the indicia of reasonable inquiry into the law include the plausibility of the legal theory espoused in the pleading and the complexity of the issues raised. Id. The moving party establishes a violation ofRule 11 when it is patently clear that the nonmoving party’s claim had no chance of success.

Pomtree, 353 Ark. at 667.

We cannot say that the motion was made for an improper purpose or that a reasonable inquiry into the issue of what offer is required to trigger an award of costs under Rule 68 at the time the offer was made would have shown that it was implausible. At the time the Rule 68 offer was made, there was no decision of this court on point discussing what sort of offer triggers an award of costs under Rule 68. We therefore affirm the circuit court’s denial of the motion for sanctions, although on a basis different than that relied upon by the circuit court. We will affirm the lower court when it has reached the right result even though it was based on the wrong reason. HRR Arkansas, Inc. v. River City Contractors, Inc., 350 Ark. 420, 87 S.W.3d 232 (2002).

Glaze and Imber, JJ., concurring.

1 In Darragh Poultry & Livestock Equipment Co. v. Piney Creek Sales, Inc., 294 Ark. 427, 743 S.W.2d 804 (1988), this court considered whether a defendant who obtains a judgment by a defense verdict at trial may collect costs under Ark. R. Civ. P. 68, even though the Rule provides that costs are awarded when the offeree’s judgment “is not more favorable than the offer” that the offeror made. In that case, this court declined to follow the reasoning in Delta Airlines, Inc. v. August, 450 U.S. 346 (1981), where the United States Supreme Court held that a victorious defendant is not entitled to recover costs incurred after the making of the offer under Fed. R. Civ. P. 68. Delta, supra. Neither party has asked this court to reconsider our decision in Darragh, supra.