The Arizona Supreme Court modified Rule 68(g) of the Arizona Rules of Civil Procedure by changing the amount of sanctions available when a party rejects an offer of judgment and fails to beat the offer at trial. Under the new version of Rule 68(g), the sanctions against a party who fails to obtain a more favorable judgment than the offer is “twenty percent of the difference between the amount of the offer and the amount of the final judgment.” This change applies to offers of judgment served on or after January 1, 2022. Under the old version of Rule 68(g), the sanctions were the opposing party’s reasonable expert fees and double the taxable costs incurred after service of the offer. The effect of these changes is significant. Indeed, after January 1, 2022, for a defendant to obtain sanctions, the defendant would need to make an offer of judgment significantly greater than the true value of the case. Similarly, a plaintiff with a weak case can make unreasonable offers of judgment to defendants because of the outside risk of a runaway jury.
Cases Involving Questionable Causation and/or Damages
Consider a case involving a minor rear-end car accident with little property damage to either vehicle, and proof of pre-existing conditions and/or proof that the delta-V of the plaintiff’s vehicle is incapable of causing injury. The plaintiff obtained $3,000 worth of chiropractic treatment over two months and then obtained $50,000 dollars in lien-based pain management intervention. Assume that if the pain management treatment is not recoverable, this case is worth $5,000. Assume a 15% chance that a jury finds it is recoverable, and awards $100,000.
Under the new rule, if the plaintiff rejects a $5,000 offer of judgment and obtains $5,000 at trial, the sanctions against the plaintiff are zero because 20% of zero (the difference between the offer and the judgment) is zero. Alternatively, if Plaintiff serves an offer of judgment for $50,000 and obtains a judgment of $100,000, the defendant must pay plaintiff $10,000 in Rule 68 sanctions. Clearly, the plaintiff has little to lose by rejecting a reasonable offer of judgment because the sanctions will be little to nothing for trying to get lucky at trial under the new rule.
Cases With Strong Liability Defenses / Likely Defense Verdicts
Consider a wrongful death case arising out of a car accident where the decedent was driving and had a BAC of .08 and struck the insured’s vehicle. Plaintiff argues that the defendant, despite no correlation, is at fault because the insured was driving 8 miles per hour over the speed limit. Assume that the odds of defense verdict are 85% and that the plaintiff’s damages are realistically $500,000. The plaintiff refuses to settle.
Under the new rule, a defense verdict after a $10,000 offer of judgment would yield $2,000 in sanctions against the plaintiff. Under the old rule, however, the plaintiff would have been forced to think twice before rejecting an offer of judgment because the sanctions under this scenario would result in plaintiff owing the defendant tens of thousands of dollars in expert fees and taxable costs. Additionally, under this scenario, if the plaintiff made an offer of judgment for $500,000 (the reasonable full value of their damages that does not contemplate liability defenses) and then ends up with a runaway jury that awards $1,000,000, the defendant must pay $100,000 in sanctions.
Conclusion
Simply put, the new version of Rule 68 decreases the risk to plaintiffs in weak cases while also increasing the risk to defendants. At best, plaintiffs will be disincentivized to settle as many of them have little to lose from a low or defense verdict, and the costs for their gamble will not be borne by them. At worst, the changes may incentivize plaintiffs to demand more from defendants because the costs to plaintiffs to prepare a weak case for trial is substantially less than to the defense given that many fee agreements do not require plaintiffs to pay for their own experts.
The attorneys at Thomas Rubin & Kelley are well-versed in civil litigation. If you require any assistance as to any of your Arizona claims, please do not hesitate to contact Brian Rubin (brubin@trkfirm.com) or Michael Kelley (mkelley@trkfirm.com).