"To encourage settlement": Rule 68, offers of judgment, and the history of the federal rules of civil procedure

Rule 68, the offer of judgment rule, has been described as among the most enigmatic of the Federal Rules of Civil Procedure. This Rule allows a defendant to serve an offer of judgment on the plaintiff and makes the plaintiff who rejects the offer liable for post-offer costs if she fails to improve on the offer at trial. It is universally accepted today that Rule 68 was adopted to encourage settlements, but the Rule's text makes it an extremely poor settlement device. The Rule operates only one-way (in favor of defendants); the penalty is too small to be meaningful; the requirement of a judgment (rather than just a settlement) discourages its use, and the Rule's timing requirements are puzzling. The mystery is why intelligent lawyers and judges in 1938 would have drafted such a poor settlement promotion tool. This Article solves that mystery. Contrary to the conventional view, the 1938 drafters did not intend Rule 68 to encourage settlement in the way we understand that today. They adopted the offer of judgment rule that existed in state practice, the primary purpose of which was litigation fairness not settlement promotion. The state rules aimed to prevent plaintiffs from imposing costs unfairly when the defendant offered everything the plaintiff was entitled to receive from trial. The text of Rule 68 makes much more sense when it is viewed in fairness terms. The prevailing settlement promotion view became entrenched in the 1970s and 1980s, when concerns about litigation cost, case backlog, and litigation delay grew acute and interest in settling cases intensified. Because the settlement promotion view has caused problems for interpretation of the Rule and for efforts to revise it, clarifying the history of Rule 68 is important. Moreover, empirical work on Rule 68 is nearing completion and the Advisory Committee is considering another look at the Rule, so the time is ripe for a clearer understanding. With the FRCP about to celebrate their seventieth anniversary, the history of Rule 68 also sheds light on two of the most important changes in federal civil procedure over the past seventy years: the rise of settlement and the politicization of the rulemaking process.