Second Circuit Holds That Rule 68 Offer of Judgment Was Unenforceable Because There Was No Meeting of the Minds on the Monetary Term

In Electra v. 59 Murray Enterprises, Inc., No. 19-235 (2d Cir. Feb. 9, 2021), the panel – while reviewing summary judgment in a New York Civil Rights Law §§ 50 and 51 action – holds that plaintiffs had not accepted a Fed. R. Civ. P. 68 offer of judgment because of an ambiguity in the monetary terms that could not be resolved.

Defendants served an offer of judgment that stated in relevant part: “Pursuant to Rule 68 of the Federal Rules of Civil Procedure, Defendants hereby offer to Plaintiffs collectively to take a judgment against Defendants in the amount of $82,500.00, inclusive of interest, costs and attorneys’ fees, and without any admission of liability, on each of the Causes of Action contained in the Complaint, based upon facts existing as of the date of acceptance of the offer ….” [emphasis added]. The plaintiffs purported to accept in a document which state that “as of the date of Defendants’ Offer of Judgment, Plaintiffs had eight (8) Causes of Action against Defendants,” and thus valuing the total settlement as $660,000.

Before judgment could be entered, defendants “filed in the district court on July 5 a letter urging that no judgment be entered in accordance with the Reply,” because “$82,500 was intended to dispose of the entire case.” Eventually, “the district court declined to enter[the] proposed judgment, reasoning that the offer was ambiguous and citing the district court’s supervisory authority over the case.”

The Second Circuit affirms the district court’s rejection of the offer of judgment. Plaintiffs made two arguments for enforcement: “that (1) the contract unambiguously offered $660,000; and (2) even if the offer was ambiguous, our case law requires that the offer must be construed against the offeror, without looking to extrinsic evidence,” under the doctrine of contra proferentem.

Initially, the panel rejects the contra proferentem argument. The doctrine is inapt here, the panel, notes, because it assumes the existence of a contract about which there is some dispute as to one or more terms. “To apply contra proferentem to the threshold question of whether an enforceable contract existed—i.e., to whether there was mutual assent to be bound—would be the antithesis of its generally accepted purpose as an interpretive tiebreaker of last resort.”

The panel holds that the plaintiffs’ purported acceptance was non-conforming “because it changed the most essential term of the Offer of Judgment—the dollar amount offered …. The Rule 68 process does not work if the dollar amount offered is not clear.” The panel finds the judgment amount “reasonably susceptible to more than 6 one interpretation because the word ‘collectively’ contradicts the use of the word ‘each.’ The Rule 68 offer therefore was ambiguous in its most crucial term: the amount of settlement. [Plaintiffs]’ arguments to the contrary simply ignore this contradiction and are accordingly unconvincing.”

“In sum, because the Rule 68 offer was ambiguous as to what dollar amount the [Defendants] were offering—i.e., as to the most fundamental aspect of the proposed contract, the amount to be specified in the judgment—the Offer of Judgment was not a proper Rule 68 offer. There was here no mutual assent; [Defendants]’ Offer of Judgment was of no effect under Rule 68; the district court properly refused to enter the judgment proposed by [Plaintiffs]; and [Plaintiffs] are not subject to the costs-shifting consequences that would have occurred if [Defendants]’ Offer of Judgment had been a proper Rule 68 offer.”

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