Wednesday, April 22, 2009

A definite push towards a settlement

In some kinds of mediation/negotiation, the main issue is how much one party is obliged to pay to another. One of the reasons such a mediation/negotiation can fail can be is because the party who is claiming might not agree to any offer (even if it is reasonable) by the other party if he feels even though the chances of him getting an award better than the offer are very slim, he has nothing to lose by continuing with the litigation and even with a lower award he will be able to force the costs of litigation on the other party.

If this is indeed the practice, it seems unfair on many counts. First the party against whom the claim is made is forced into a litigation even when he is willing to settle. Assuming the court awards the claimant an amount lesser than the offer made by the opposite party, the court has in fact held that the opposite party's substantive rights are more than what he is willing to settle for. However, by imposing costs on the opposite party, the court gives the claimant an undue incentive to increase the burden of pending litigation on the court.

Relating to this I would like to call the attention of the reader to rule 68 of the US Rules of Civil Procedure
It reads-

Rule 68. Offer of Judgment


(a) Making an Offer; Judgment on an Accepted Offer.

More than 10 days before the trial begins, 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. If, within 10 days after being served, the opposing party serves written notice accepting the offer, either party may then file the offer and notice of acceptance, plus proof of service. The clerk must then enter judgment.

(b) Unaccepted Offer.

An unaccepted offer is considered withdrawn, but it does not preclude a later offer. Evidence of an unaccepted offer is not admissible except in a proceeding to determine costs.

(c) Offer After Liability Is Determined.

When one party's liability to another has been determined but the extent of liability remains to be determined by further proceedings, the party held liable may make an offer of judgment. It must be served within a reasonable time—but at least 10 days— before a hearing to determine the extent of liability.

(d) Paying Costs After an Unaccepted Offer.

If the judgment that the offeree finally obtains is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made.

(c) and (d) are especially important here. What such a rule does is not just set right the inequity I pointed out earlier but also gives the claimant a strong reason to agree to a reasonable offer of settlement. Someone told me that this is in practice in India too, but I couldn't find the relevant provision anywhere and can't think of any instance where I've seen this happen. Does seem indeed to be a necessary change. What say?

4 comments:

iissarayu said...

Interesting!

vikramhegde said...

Ex convener madam,
Welcome to your committee's blog :)

Blaageshi said...

I guess one will have to 'settle' with that !

vikramhegde said...

Mangaloor Hegderu, welcome to this blog also. Made mental note to post on OUR blog also.