Garayalde-Rijos v. Municipality of Carolina

United States Court of Appeals
For the First Circuit
No. 14-2347
WALESKA GARAYALDE-RIJOS,
Plaintiff, Appellee,
v.
MUNICIPALITY OF CAROLINA,
Defendant, Appellant.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF PUERTO RICO
[Hon. Francisco A. Besosa, U.S. District Judge]
Before
Lynch, Thompson, and Kayatta,
Circuit Judges.
Francisco Medina Medina and Pedro E. Ortiz-Alvarez, LLC, on
brief for appellant.
Juan M. Frontera-Suau, Carlos J. Jimenez-Torres, and Frontera
Suau Law Offices, PSC, on brief for appellee.
August 21, 2015
LYNCH, Circuit Judge. This case comes to us once again
from the District of Puerto Rico. Earlier, we reversed the
dismissal of the action. Garayalde-Rijos v. Municipality of
Carolina, 747 F.3d 15 (1st Cir. 2014). The issue this time is
whether the defendant's offer of judgment under Federal Rule of
Civil Procedure 68 was properly accepted by the plaintiff such
that the district court did not err in entering judgment for the
plaintiff. No issue concerning Rule 68(d)'s cost-shifting
provision is presented.
I.
On September 26, 2011, Waleska Garayalde-Rijos filed a
complaint against the Municipality of Carolina (Carolina) in the
federal district court of Puerto Rico, alleging gender-based
employment discrimination and retaliation. After we remanded the
case, the trial date was set for December 1, 2014.
The key date for the purpose of this appeal is November
24, 2014. At 12:48 PM that day, Carolina extended to Garayalde-
Rijos what it explicitly labeled a Rule 68 offer of judgment for
$25,000.1 At 5:13 PM, Carolina informed the district court by
1 The parties allege several subsequent events: Carolina
offers an email that suggests that Garayalde-Rijos extended a
counteroffer to Carolina at 2:25 PM. Garayalde-Rijos, for her
part, offers an email that suggests that Carolina responded to the
counteroffer by renewing its original offer at 3:54 PM. Carolina
claims that, in a subsequent phone call at 4:33 PM, Garayalde-
Rijos rejected the original offer. However, because none of this
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electronic filing that no settlement had been reached. This was
followed closely by a 5:38 PM motion by Garayalde-Rijos informing
the district court that she was accepting Carolina's Rule 68 offer
of judgment. Carolina then made a motion to clarify, which asked
the district court to withhold judgment on the basis that
Garayalde-Rijos had not been willing to accept some of its
conditions and thus no agreement had been reached between the
parties. The district court denied that motion and entered
judgment for Garayalde-Rijos on November 25, 2014. Carolina then
made a motion for reconsideration on December 2, 2014, claiming
that because Garayalde-Rijos had rejected the offer prior to
purportedly accepting it, the offer should have been considered
withdrawn. The district court denied that motion later that same
day. This appeal followed.
II.
Carolina argues that the district court erred in
entering judgment because Garayalde-Rijos had already rejected the
offer of judgment prior to informing the court of her acceptance.
Meanwhile, Garayalde-Rijos argues that she never rejected the
offer. We need not wade into this contested factual issue to
resolve this appeal because even an express rejection does not
information was presented to the district court, we do not consider
these events in this appeal.
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terminate a Rule 68 offeree's power to accept the offer within a
fourteen-day period.2
Rule 68 provides that "[a]t least 14 days before the
date set for trial, a party defending against a claim may serve on
an opposing party an offer to allow judgment on specified terms,
with the costs then accrued." Fed. R. Civ. P. 68(a). If the offer
is accepted, "either party may then file the offer and notice of
acceptance, plus proof of service," at which time the clerk must
enter judgment. Id. A party's decision not to accept a Rule 68
offer of judgment comes with consequences: if the judgment that
the offeree ultimately obtains is not more favorable than the
unaccepted offer, the offeree is on the hook for the offeror's
post-offer costs. Id. 68(d).
This rule was designed to encourage the settlement of
private disputes. Marek v. Chesny, 473 U.S. 1, 5 (1985). Its
mechanism for doing so is its cost-shifting provision, which
enables an offeror to put pressure on the offeree to evaluate the
likely value of her claim and "'think very hard' about whether
continued litigation is worthwhile." Id. at 11. In return, Rule
68 guarantees the offeree fourteen days to contemplate the offer,
as though the offeree had paid for a fourteen-day option. See
2 Although it is not clear what standard of review we should
apply to the district court's entry of judgment, we need not decide
that question because there was no error by the district court.
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Richardson v. Nat'l R.R. Passenger Corp., 49 F.3d 760, 765 (D.C.
Cir. 1995). If the offeror were able to revoke the offer at any
time, the offeror would be able to exert even greater settlement
pressure than the Rule contemplates, throwing off the Rule's
"rather finely tuned" balance. See id. As a result, a number of
federal courts have suggested that Rule 68 offers should be treated
as irrevocable fourteen-day option contracts. Id. at 764 ("[T]he
few federal courts that have considered the revocability of offers
under Rule 68 . . . have treated Rule 68 offers as at least
generally irrevocable during the [14]-day period."); see also
Colonial Penn Ins. Co. v. Coil, 887 F.2d 1236, 1240 (4th Cir.
1989). Commentators have also endorsed this rule. See, e.g., 12
C. Alan Wright et al., Federal Practice and Procedure § 3004 (3d
ed. 2014); Simon, Jr., The Riddle of Rule 68, 54 Geo. Wash. L.
Rev. 1, 5 n.13 (1985); Udall, May Offers of Judgment Under Rule 68
Be Revoked Before Acceptance?, 19 F.R.D. 401, 406 (1957).
Federal courts have applied ordinary contract law
principles to determine whether there has been a valid offer and
acceptance under Rule 68. See, e.g., Andretti v. Borla Performance
Indus., Inc., 426 F.3d 824, 837 (6th Cir. 2005); Arbor Hill
Concerned Citizens Neighborhood Ass'n v. Cty. of Albany, 369 F.3d
91, 95 (2d Cir. 2004) (per curiam); Stewart v. Prof'l Computer
Ctrs., Inc., 148 F.3d 937, 939 (8th Cir. 1998); Radecki v. Amoco
Oil Co., 858 F.2d 397, 400 (8th Cir. 1988); see also Wright et
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al., supra, § 3002. Under ordinary contract law principles, the
irrevocable nature of a Rule 68 offer has particular significance:
neither a rejection nor a counteroffer terminates the offeree's
ability to accept a Rule 68 offer within the fourteen-day period.
Restatement (Second) of Contracts § 37 (Am. Law Inst. 1981); 1 A.
Linton Corbin, Corbin on Contracts § 3.38 (rev. ed. 1993); 1 E.
Allan Farnsworth, Farnsworth on Contracts § 3.23 (3d ed. 2004);
see also Kirkland v. Sunrise Opportunities, 200 F.R.D. 159, 162
n.3 (D. Me. 2001); Pope v. Lil Abner's Corp., 92 F. Supp. 2d 1327,
1328 (S.D. Fla. 2000); Butler v. Smithfield Foods, Inc., 179 F.R.D.
173, 176 (E.D.N.C. 1998); United States v. Hendricks, No. 92 C
1461, 1993 WL 226291, at *2 (N.D. Ill. June 24, 1993). This
conclusion is consistent with the language of Rule 68 itself, which
recognizes only two types of offers -- offers accepted within
fourteen days and offers not accepted within fourteen days -- and
does not even contemplate a counteroffer or an affirmative
rejection within the fourteen-day period. Because Garayalde-Rijos
filed a timely acceptance, the district court's entry of judgment
was correct regardless of what took place in the contested series
of exchanges between the parties in the time between the offer of
judgment and Garayalde-Rijos's acceptance.3
3
In certain situations, an offeror's detrimental reliance on
the offeree's rejection of the offer may terminate the power of
acceptance, Farnsworth, supra, § 3.23, or an offer should be
considered revocable because it was induced by fraudulent conduct
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Carolina argues that this conclusion is foreclosed by
the text of Rule 68(b), which says that "[a]n unaccepted offer is
considered withdrawn." Fed. R. Civ. P. 68(b). However, the rule
that a rejection or counteroffer does not terminate the offeree's
power of acceptance does not contravene the text of the Rule, which
merely says that an offer is considered withdrawn if not accepted
within the fourteen-day period. Carolina also claims that our
conclusion is at odds with the Supreme Court's opinion in Genesis
Healthcare Corp. v. Symczyk, 133 S. Ct. 1523 (2013). Specifically,
Carolina points to the statement that "the recipient's rejection
of an offer 'leaves the matter as if no offer had ever been made.'"
Id. at 1533 (Kagan, J., dissenting) (quoting Minneapolis & St. L.
Ry. Co. v. Columbus Rolling-Mill Co., 119 U.S. 149, 151 (1886)).
However, that statement comes from a part of Justice Kagan's
dissent discussing a completely unrelated issue: an offeree's
rejection of a Rule 68 offer that would have afforded her complete
relief and that rejection's effect on the continued existence of
a live controversy. Id. at 1533–34. A cherry-picked quote,
particularly from a dissent that does not even remotely address
the issue at hand, does not persuade us to reach the opposite
conclusion.
by the offeree, Colonial Penn Ins. Co., 887 F.2d at 1240. Also,
an offeror may in some circumstances clarify an offer after making
it. See Radecki, 858 F.2d at 402–03. However, none of those
exceptions are relevant here.
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III.
In a further attempt to backtrack on its offer, Carolina
argues that its offer should not have been considered a proper
Rule 68 offer, despite the fact that it was Carolina itself that
labeled its November 24, 2014, offer a Rule 68 offer of judgment.
Specifically, Carolina argues that because its offer was not made
"[a]t least 14 days before the date set for trial," Fed. R. Civ.
P. 68(a), the offer should have been considered a garden-variety
settlement offer that could not have led to entry of judgment
without a joint request for settlement. However, this argument is
waived because it was not raised in the district court in any of
Carolina's motions objecting to Garayalde-Rijos's acceptance of
the offer, or in its motion for reconsideration of entry of
judgment. See Curet-Velázquez v. ACEMLA de Puerto Rico, Inc., 656
F.3d 47, 53 (1st Cir. 2011) ("It is hornbook law that theories not
raised squarely in the district court cannot be surfaced for the
first time on appeal." (quoting McCoy v. Mass. Inst. of Tech., 950
F.2d 13, 22 (1st Cir. 1991))). As a result, Carolina's attempt to
take back its offer is to no avail.
IV.
For the reasons stated, the judgment is affirmed. Costs
are awarded against Carolina.
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