What Is an Offer of Judgment (Rule 68)?

An offer of judgment under Federal Rule of Civil Procedure 68 is a formal pretrial settlement offer by a defending party that, if rejected, forces the plaintiff to pay post-offer costs whenever the final judgment is not more favorable than the offer. It is a cost-shifting device meant to pressure settlement.

This article explains how Rule 68 works, what “costs” it actually shifts, why the rule reaches attorney fees only in narrow circumstances and how it compares to the more aggressive state offer statutes practitioners encounter. The rule is short, but its mechanics — and its limits — reward close reading.

What Does Rule 68 Actually Do?

Rule 68 lets a party defending against a claim serve a written offer to allow judgment on specified terms at least 14 days before trial begins. If the offeree rejects the offer and the judgment the offeree finally obtains is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made. The rule is one-directional in practice: only a defending party may invoke its cost-shifting sting, and the offeror gains nothing unless the plaintiff recovers something less than the offer.

The offer must state a definite sum or definite terms and remains open for 14 days; acceptance is made in writing and either party may file it, at which point the clerk enters judgment. An unaccepted offer is withdrawn but does not bar a later offer, and evidence of it is inadmissible except to determine costs. Crucially, the Supreme Court held in Delta Air Lines v. August that Rule 68 does not apply at all when the defendant wins outright — the plaintiff must actually recover a judgment for the comparison to trigger.

• The offer must be served at least 14 days before the trial date.
• Only a party defending against a claim can make a cost-shifting Rule 68 offer.
• The rule bites only when the plaintiff recovers, but recovers less than the offer.
• An unaccepted offer is confidential except when the court fixes costs.

What “Costs” Does an Offer of Judgment Shift?

The costs Rule 68 shifts are ordinarily the modest taxable costs listed in 28 U.S.C. § 1920 — filing fees, transcript and witness fees, copying — not attorney fees. This is the practical weakness of the federal rule: garden-variety taxable costs rarely amount to enough to change a plaintiff’s settlement calculus. In many diversity personal injury cases, a Rule 68 offer carries limited financial teeth for exactly this reason.

The exception comes from Marek v. Chesny, in which the Supreme Court held that where the substantive statute underlying the claim defines “costs” to include attorney fees, those fees are swept into Rule 68’s cost-shifting. In a civil rights action under 42 U.S.C. § 1988, for instance, a plaintiff who rejects an offer and does worse can lose the right to recover post-offer attorney fees — a consequence far larger than taxable costs alone.

• In ordinary tort cases, Rule 68 shifts only § 1920 taxable costs, which are small.
• Under Marek, “costs” includes attorney fees only where the fee-authorizing statute defines fees as costs.
• Fee-shifting statutes like § 1988 make Rule 68 a genuine threat in civil rights litigation.
• The offeree who rejects and does worse also forfeits its own post-offer costs.

How Does Rule 68 Compare to State Offer Statutes?

Rule 68 is weaker and less frequently used than the offer-of-compromise statutes many states enacted to encourage settlement. Because the federal rule shifts only taxable costs in most cases and runs in one direction, practitioners often find state analogues far more consequential — particularly California’s 998 offer, which is bidirectional and can shift expert-witness fees. Counsel litigating in both systems must track which regime governs.

• Rule 68 governs only in federal court and only for the party defending a claim.
• State offer statutes frequently reach expert fees and sometimes prejudgment interest.
• A defendant may face a state offer and a Rule 68 offer with very different stakes.
• Removal or remand can change which offer regime controls a case midstream.

How Do Litigators Use a Rule 68 Offer Strategically?

Litigators use a Rule 68 offer to build a record that shifts post-offer costs and, in fee-statute cases, to cap or defeat a plaintiff’s attorney-fee recovery. The tactical value lies less in the dollar amount recovered than in the leverage it creates: a well-timed, reasonable offer forces the plaintiff to weigh the risk of a lesser verdict against mounting post-offer costs. In statutory-fee litigation, that calculus can be decisive.

Drafting matters. A lump-sum offer that bundles damages, costs, and fees is compared differently from an offer “plus costs then accrued,” and ambiguity is construed against the offeror who drafted it. Practitioners also weigh a Rule 68 offer against a high-low agreement or a time-limited demand, each of which allocates trial risk differently. Because the rule interacts with fee statutes, coverage and any structured settlement the parties contemplate, the offer is best drafted with the endgame in view.

• Time the offer early enough to shift meaningful post-offer costs.
• Specify whether the stated sum is inclusive of costs and fees to control the comparison.
• In fee-statute cases, use the offer to put the plaintiff’s fee recovery at risk.
• Coordinate the offer with coverage limits and any planned settlement structure.

Conclusion

An offer of judgment under Rule 68 is a pretrial cost-shifting device that penalizes a plaintiff who rejects a defendant’s offer and then fails to beat it at trial. Its reach is narrow — ordinarily only taxable costs, and attorney fees only where Marek’s statutory-costs test is met — which is why practitioners so often find state offer statutes the sharper tool. Used deliberately, and drafted with precision, a Rule 68 offer remains a useful instrument for managing trial risk. Counsel should confirm the operative fee statute and the governing forum before relying on it.

Frequently Asked Questions