Juana Sanchez v. Prudential Pizza , 709 F.3d 689 ( 2013 )

In the
United States Court of Appeals
For the Seventh Circuit
No. 12-2208
JUANA S ANCHEZ,
Plaintiff-Appellant,
v.
P RUDENTIAL P IZZA, INC., et al.,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Illinois, Eastern Division.
No. 1:10-cv-06289—Sharon Johnson Coleman, Judge.
A RGUED JANUARY 14, 2013—D ECIDED M ARCH 4, 2013
Before E ASTERBROOK, Chief Judge, H AMILTON, Circuit
Judge, and M ILLER, District Judge. Œ
H AMILTON, Circuit Judge. This appeal requires us to
address once more the problems posed by ambiguous
offers of judgment under Rule 68 of the Federal Rules
of Civil Procedure. And once more we must teach de-
Œ
The Honorable Robert L. Miller, Jr. of the Northern District
of Indiana, sitting by designation.
2 No. 12-2208
fendants making Rule 68 offers to be specific and clear
in their offers. Any ambiguities will be resolved against
them.
Plaintiff Juana Sanchez sued defendant Prudential
Pizza for sex discrimination, sexual harassment, and
retaliation under Title VII of the Civil Rights Act
of 1964. The litigation was heading for trial until Sanchez
accepted Prudential Pizza’s offer of judgment under
Federal Rule of Civil Procedure 68. The district court
entered judgment in Sanchez’s favor but denied her
request for attorney fees and costs in addition to the
amount specified in Prudential Pizza’s Rule 68 offer.
Prudential Pizza’s offer said that it included “all
of Plaintiff’s claims for relief” but made no specific men-
tion of costs or attorney fees. Based on this language
the district court found that the offer was unambiguous
and included attorney fees. The legal effect of this
wording is the subject of this appeal. We review de novo
the district court’s determination of the legal effect of
the written Rule 68 offer. See Harbor Motor Co. v. Arnell
Chevrolet-Geo, Inc., 265 F.3d 638, 645 (7th Cir. 2001); Jordan
v. Time, Inc., 111 F.3d 102, 105 (11th Cir. 1997). Because
the Rule 68 offer was silent as to costs and fees, we con-
clude that costs and fees were not included. We there-
fore reverse and remand for a determination of rea-
sonable costs and fees.1
1
Sanchez also brought a claim against defendant John
Apostolou for violations of the Employee Polygraph Protec-
(continued...)
No. 12-2208 3
Rule 68 permits a party defending a claim to serve
on an opposing party “an offer to allow judgment on
specified terms, with the costs then accrued.” Fed. R. Civ.
P. 68(a). Where a suit is brought under a statute that
provides for an attorney fee award to a prevailing
plaintiff, the relevant “costs” include attorney fees. Marek
v. Chesny, 473 U.S. 1 (1985). If the offer is accepted in
writing within 14 days, either party may file the offer
and acceptance with the court. “The clerk must then
enter judgment,” Fed. R. Civ. P. 68(a), meaning that the
court has no discretion to alter or modify the parties’
agreement. See Webb v. James, 147 F.3d 617, 621 (7th Cir.
1998), citing Mallory v. Eyrich, 922 F.2d 1273, 1279 (6th Cir.
1991). If the offer is rejected and the “judgment that the
offeree finally obtains is not more favorable than the
unaccepted offer, the offeree must pay the costs incurred
after the offer was made.” Fed. R. Civ. P. 68(d). The rule’s
purpose is to encourage settlement and to discourage
protracted litigation. See Webb, 147 F.3d at 620, citing
Marek, 473 U.S. at 5.
If the terms of a Rule 68 offer are not specific and
clear, there are opportunities for both confusion and
1
(...continued)
tion Act. The district court granted summary judgment in
Sanchez’s favor as to liability on this claim but denied her
request for interim attorney fees. Sanchez also has appealed
the denial of her interim fee request, but while this appeal
was pending, the district court ordered Apostolou to pay
Sanchez $140,000 in attorney fees. Sanchez’s challenge to
the denial of an interim fee award is therefore moot.
4 No. 12-2208
mischief. The Rule 68 offer made by Prudential Pizza
and accepted by Sanchez stated in its entirety:
Pursuant to Rule 68 of the Federal Rules of Civil
Procedure, Defendant, PRUDENTIAL PIZZA, INC.,
hereby offers to allow Judgment to be entered against
them [sic] in this action in the amount of $30,000
including all of Plaintiff’s claims for relief. This offer
of judgment is made for the purposes specified in
Federal Rule of Civil Procedure 68, and is not to be
construed as either an admission that Defendants,
PRUDENTIAL PIZZA, INC., and JOHN APOSTOLOU
are liable in this action, or that the Plaintiff has suf-
fered any damage. This Offer of Judgment shall not
be filed with the Court unless (a) accepted or (b) in
a proceeding to determine costs.
Sanchez’s attorney accepted the offer seven days after
it was made. The district court entered judgment in
Sanchez’s favor accordingly.
Sanchez then moved for attorney fees. She contended
that Prudential Pizza’s Rule 68 offer was silent with
regard to costs and fees, and that she, as a prevailing
party, was entitled to attorney fees under Title VII. The
district court denied her motion, finding that Prudential
Pizza’s Rule 68 offer specified that it applied to “all of
Plaintiff’s claims for relief,” and that contract principles
controlled. The district court wrote:
The plain and ordinary meaning of the language in
the Offer of Judgment in this case indicates that it
was the parties’ intent to cover all of plaintiff’s
claims for relief. Sanchez’s claims for relief are con-
No. 12-2208 5
tained in her Amended Complaint (Dkt. #33). In
each count of her Amended Complaint, Sanchez
specifically requests costs and attorneys’ fees in its
[sic] claims for relief. Moreover, Sanchez has already
requested interim attorneys’ fees and costs in this
case and thus Prudential was well aware that
Sanchez would be seeking such an award and
would not have made an offer without including
fees and costs. Accordingly, this Court believes that
costs and fees were specifically addressed by the
terms of the Offer of Judgment.
Dkt. 117.
Offers of judgment under Rule 68 are different from
contract offers. When a contract offer is made, the
offeree can reject it without legal (as distinct from eco-
nomic) consequences. Plaintiffs who receive Rule 68
offers, however, are “at their peril whether they accept
or reject a Rule 68 offer.” Webb, 147 F.3d at 621. Costs
are usually a relatively minor aspect of most federal
litigation, but when the costs in question include
attorney fees, as in this case, Rule 68 takes on much
greater significance, often exceeding the damages a
successful plaintiff might recover. A plaintiff who rejects
a Rule 68 offer but later wins a judgment in such a
case may lose her entitlement to a substantial portion of
otherwise awardable attorney fees and costs if she does
not win more than the rejected Rule 68 offer. See Marek,
473 U.S. at 9; Webb, 147 F.3d at 621.
Contrary to the district court’s reasoning, therefore,
we treat Rule 68 offers differently than we treat ordinary
6 No. 12-2208
contract offers. See Webb, 147 F.3d at 621. For example,
Rule 68 offers may not be revoked during the 14-day
period established by the Rule. We have rejected the
applicability of the contract doctrine of rescission to
Rule 68 offers, and we have been reluctant to allow defen-
dants to challenge the meaning of an offer of judgment,
either before or after acceptance. See id. Most important,
because the consequences of a Rule 68 offer are so
great, the offering defendant bears the burden of any
silence or ambiguity concerning attorney fees. As we
explained in Webb:
We are inclined to agree with the district court that
defendants should bear the burden of the ambiguity
created by their silence on fees. The ADA provides
for attorney’s fees for the prevailing party and defen-
dants said nothing in the offer to terminate that statu-
tory liability. Because Rule 68 puts plaintiffs at their
peril whether or not they accept the offer, the defendant
must make clear whether the offer is inclusive of fees
when the underlying statute provides fees for the prevailing
party. As with costs, the plaintiff should not be left
in the position of guessing what a court will later
hold the offer means.
Id. at 623 (emphasis added) (internal citation omitted);
accord, Nordby v. Anchor Hocking Packaging Co., 199 F.3d
390, 392-93 (7th Cir. 1999) (repeating principle that am-
biguities in a Rule 68 offer must be resolved against
the offeror).
Prudential Pizza argues that its offer was not silent
regarding fees. Relying on Nordby, it points out that its
No. 12-2208 7
offer referred to plaintiff’s “claims for relief,” and that
Sanchez requested attorney fees and costs in her
amended complaint. Thus, Prudential Pizza contends,
it would be “illogical” to conclude that attorney fees
were not included in the defendant’s Rule 68 offer.
We reject this argument. Prudential Pizza’s logic
would allow a defendant to force a plaintiff to guess the
meaning of the offer, which the Rule and Webb do not
permit. Rule 68(a) requires the offer to include “specified
terms.” If Prudential Pizza’s offer was meant to
include attorney fees and costs, the offer was not spe-
cific. It simply did not refer to Sanchez’s attorney fees
or costs. It referred to Sanchez’s “claims” but failed to
specify what those claims were, such as whether they
included her claim against the other defendant. Thus,
Prudential Pizza’s reliance on Nordby is not persuasive.
In Nordby, we found that a Rule 68 offer that provided
for “judgment in the amount of $56,003.00 plus $1000
in costs as one total sum as to all counts of the
amended complaint” was not silent and that the specific
amount for “costs” was sufficiently clear to include
attorney fees. 199 F.3d at 391-92. (Fees are included
under Rule 68 as “costs,” per Marek.) The Nordby defen-
dant’s offer specifically mentioned costs and specified
that the counts subject to the offer were contained in
Nordby’s amended complaint. Although no “magic
words” are required, id. at 393, Prudential Pizza’s offer
fails in both of these regards. Either failure alone
is sufficient to render the offer ambiguous. If Prudential
Pizza intended its offer to include attorney fees, its
chosen language was insufficient.
8 No. 12-2208
The record here brings the offer’s ambiguity into re-
lief. Sanchez filed an original complaint against only
Prudential Pizza, but she later amended it to add an
additional defendant and count. Prudential Pizza’s
Rule 68 offer refers to the added defendant, John
Apostolou, and refers to the defendants using the plural
“them,” but only Prudential Pizza is named as the
“offeror.” Prudential Pizza’s Rule 68 offer also fails to
specify where plaintiff’s “claims for relief” are to be
found. Her complaint? Her amended complaint? A later
statement of her case? And are claims against Apostolou
included or not? The Rule 68 offer does not answer
these questions.
Adding to the ambiguity, even if we assume that the
plaintiff’s amended complaint was the relevant reference
for her “claims,” as Prudential Pizza argued and the
district court found, attorney fees are not part of a
“claim.” Claims and demands for relief are different
animals in civil procedure. Under Federal Rule of Civil
Procedure 8(a)(2), a “claim” is a “short and plain state-
ment . . . showing that the pleader is entitled to relief,”
and Rule 8(a)(3) distinguishes between claims and de-
mands for relief. The fact that Sanchez listed attorney
fees when she set forth her demands for relief meant
nothing when the issue was Sanchez’s claims. In addi-
tion, the judgment is the remedy for the claim, but
under Federal Rule of Civil Procedure 54(d) attorney
fees can be awarded separately from the judgment on
the merits and can be appealed separately. In short, the
rules foreclose Prudential Pizza’s argument. Attorney
fees are not part of a plaintiff’s claim. By referring only
No. 12-2208 9
to plaintiff’s claims, Prudential Pizza’s offer of judgment
was silent concerning fees.2
In the absence of the judicial gloss holding that an
offer that is ambiguous as to costs and attorney fees will
be held against the defendant, an ambiguous offer puts
the plaintiff in a very difficult situation and would
allow the offering defendant to exploit the ambiguity in
a way that has the flavor of “heads I win, tails you lose.”
If the plaintiff accepts the ambiguous offer, the de-
fendant can argue that costs and fees were included. If
the plaintiff rejects the offer and later wins a modest
judgment, the defendant can then argue that costs and
fees were not included, so that the rejected offer was
more favorable than the ultimate judgment and that the
2
The Nordby court did not discuss the Rule 8 definition of
“claim” or the implications of Rule 54(d) in its determination
that the defendant’s offer for judgment “as to all counts of
the amended complaint” could “only mean one amount en-
compassing all the relief sought in the counts,” and in-
cluded attorney fees. 199 F.3d at 392; see also id. at 393 (finding
distinction between substantive relief and costs: “if the fees
that the plaintiff is seeking . . . are part of the substantive
relief they are covered by the part of the Rule 68 offer that
refers to the judgment, and if they are part of the costs that the
plaintiff is seeking then they are covered by the part of the
offer that refers to costs”). Nevertheless, because the Nordby
defendant specified that the counts in question were con-
tained in the plaintiff’s amended complaint and included
a specific amount for “costs,” Nordby is both sound and con-
sistent with this decision.
10 No. 12-2208
plaintiff’s recovery of costs and fees should be limited
accordingly. Whether the ambiguity is accidental or
strategic, Rule 68 must be interpreted to prevent such
strategic use of ambiguity by construing an ambigu-
ous offer against the offering defendant’s interests,
whether the question arises from the offer’s acceptance
or rejection.
“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 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 addi-
tional amount which in its discretion it determines to be
sufficient to cover the costs.” Marek, 473 U.S. at 6 (internal
citation omitted). Prudential Pizza’s offer was silent as
to costs and fees. Pursuant to Webb and Nordby, we
resolve the ambiguity against the offeror. Sanchez is
entitled to attorney fees and costs under the Rule 68
offer she accepted. The judgment of the district
court denying fees and costs is reversed and the case
is remanded for an appropriate award of attorney fees
and other costs, and for further proceedings consistent
with this opinion.
R EVERSED and R EMANDED.
3-4-13