A U.S. District Court in the Southern District of California recently held that a Federal Rule of Civil Procedure 68 offer of judgment must clearly state that attorneys’ fees and costs are limited or waived, as Arvest Central Mortgage Company (Arvest) learned to its detriment. The plaintiff had a mortgage with Arvest, entered into a forbearance agreement, and made the payments on the property, but claimed Arvest inaccurately reported that he was late on his October 2020 payment. The plaintiff sued Arvest and nine other defendants for violations of the Fair Credit Reporting Act and California’s Consumer Credit Reporting Agencies Act, ultimately resolving his claims against all defendants except Arvest.

The plaintiff accepted a Rule 68 offer of judgment from Arvest for $40,000.00 in damages, “inclusive of any and all actual, statutory and punitive damages, including any applicable interest” plus certain injunctive relief. He then filed a motion for attorneys’ fees and costs. Arvest opposed the motion, arguing the plaintiff was not entitled to fees and costs because Arvest intended for the Rule 68 offer to include fees and costs and because the amount requested was unreasonable.

The court agreed the plaintiff was the prevailing party once he accepted the offer of judgment. Arvest argued it was reasonable for it to presume the plaintiff accepted the $40,000.00 inclusive of fees and costs because of prior confidential settlement communications, but the court rejected that argument. The court noted that the Ninth Circuit has held a Rule 68 offer of judgment “must be clear and unambiguous” in waiving or limiting attorneys’ fees and costs. Further, when attorneys’ fees are not part of costs under the relevant statute, a defendant must state clearly that attorneys’ fees are included in the total sum of the Rule 68 judgment. If a Rule 68 offer is for judgment in a specific sum with costs, but is silent about fees, then plaintiff is not precluded from seeking fees. Ambiguities in the offer are typically construed against the offeror.

Because Arvest’s offer of judgment was silent regarding whether attorneys’ fees and costs were included in the offer, they were not a part of the offer. The court acknowledged that extrinsic evidence could be looked at in limited circumstances, but here Arvest was in control of its offer, had access to the relevant Ninth Circuit law, and the plaintiff was entitled to rely on the actual offer given to him which did not explicitly include attorneys’ fees and costs.

The court then considered the amount of fees requested. It first looked at the reasonableness of the rates, weighing the “experience, skill, and reputation of the attorney[s] requesting fees” and comparing those to the prevailing market rates, finding $650/hour a reasonable rate for the three more experienced attorneys and $295/hour reasonable for the associate on the case. The court also reviewed the hours claimed, generally disagreeing with Arvest’s arguments of unnecessary duplicative billing, but finding the plaintiff’s attorneys did fail to segregate out billing only related to Arvest and clerical tasks and that some billing was vague or excessive. The court also reduced the total amount of fees by 10%. Ultimately the court awarded the plaintiff $82,650.15 in attorneys’ fees and $11,829.33 in costs, on top of the $40,000.00 in damages from the offer of judgment.