Offers of Judgment - Can They Shift Fees?

A recent Resource Conservation and Recovery Act (“RCRA”) lawsuit may offer some additional guidance on when offers of judgment may cut off a party’s right to recover attorneys’ fees and costs under environmental laws.  Plaintiff National Exchange Bank and Trust (“National Exchange”) prevailed on its RCRA claim and was found to be entitled to litigation costs.  The defendant, Petro-Chemical Systems, Inc. (“Petro”), argued that National Exchange was not entitled to recover costs incurred after July 30, 2012, because that was the date Petro notified National Exchange that it was prepared to undertake the entire remediation.  National Exchange refused the offer and made a counter-offer, which sought an admission of liability under RCRA that was to be documented in a consent decree.  Petro did not accept the counter-offer. The court found Petro’s offer was “incomplete” and that National Exchange was entitled to recover litigation costs.

The court found Petro’s offer to be deficient because it was not in the form of an offer of judgment and did not include an admission of liability.  The court said Petro would have to make an offer of judgment for “all [National Exchange] could hope to obtain at trial” to cut off its potential liability for further fees and costs.  In this case, National Exchange was concerned that the lack of an admission of liability in Petro’s offer would have foreclosed National Exchange from recovering attorneys’ fees and costs up to the date of the offer.  The court’s finding implies that Petro would have prevailed and cut-off National Exchange’s right to recover costs if Petro had made an offer of judgment that admitted liability.

It is unclear whether this case signals a shift in approach for cutting off the right to fees in other types of environmental cases.  Indeed, it raises additional questions regarding a defendant’s timing for making an offer. For example, in a case to recover cleanup costs when the prevailing party is entitled to attorneys’ fees under an environmental statute, can the defendant cut off the right to fees and/or costs if it admits liability and offers to pay its share of the damages in the form of an offer of judgment?  Such an offer should certainly make the plaintiff question whether it has the right to fees and costs incurred after the date of the offer.  In cases where there is no question as to the defendant’s liability, it certainly would be prudent to make such an offer as early in the litigation as possible.