The Limits of the Offer of Judgment Rule

J.P. Electric, Inc. v. LPMG Construction Management, LLC, ___ N.J. Super. ___ (App. Div. 2023). Judge Sabatino frequently writes long, intricate opinions on complex issues. Today, however, he authored the shortest published opinion of the current Term to date, “a straightforward application of the terms of the Offer of Judgment provisions in Rule 4:58-1 to -6.”

Before trial, defendant served upon plaintiff an offer of judgment under Rule 4:58-1 “to allow judgment to be entered against it and in favor of [p]laintiff for damages in the amount of $5,000 . . . to resolve all of [p]laintiff’s claims in this action of any kind, including all claims for damages of any kind, actual or otherwise . . . .” Plaintiff rejected the offer, and the case was tried before a judge alone.

At the close of plaintiff’s proofs, the judge granted defendant’s motion for involuntary dismissal under Rule 4:37-2(b). Defendant then moved for an award of over $50,000 in attorneys’ fees and costs, relying on Rule 4:58-6. The trial judge denied the motion. Defendant appealed, “stressing that an involuntary dismissal under Rule 4:37-2(b) represents an adjudication on the merits of the case.” Judge Sabatino noted that the standard of review regarding the meaning or scope of a court rule is de novo. Applying that standard, the Appellate Division affirmed.

Here was the panel’s rationale, in full:

“Although Rule 4:58-3(a) authorizes an offeror to recover fees ‘[i]f the offer of a party other than the claimant is not accepted, and the claimant obtains a judgment . . . that is favorable to the offeror as defined by this rule,’ that authorization does not apply when ‘the claimant’s claim is dismissed,’ see Rule 4:58-3(c)(1), or ‘a no-cause verdict is returned,’ see Rule 4:58-3(c)(2).

Because a successful motion under Rule 4:37-2(b) results in the ‘dismissal of the action’ as ‘the plaintiff has shown no right to relief[,]’ no verdict was returned so the trial court’s denial of fees was manifestly correct. The policy reasons underlying the zero-recovery exceptions to Rule 4:58-3(c) would be undermined if such fee-shifting were permitted. See Schettino v. Roizman Dev., Inc., 158 N.J. 476, 486 (1999) (noting that the preclusion of fee-shifting under the Rule in instances when a plaintiff does not prevail ‘prevent[s] the transformation of the offer-of-judgment rule into a general fee-shifting rule’).”

That was clear and concise. But in case anyone thought it was not, Judge Sabatino concluded by stating the holding in a single sentence: “Lest there be any doubt, a mid-trial involuntary dismissal does not entitle a defendant offeror to fee-shifting under the Rule.”