Offer of Settlement: Award of LItigation Costs (Offer of Judgement)
In Texas, an offer of judgment is governed by Tex. Civ. Prac. & Rem. Code §§ 42.001-42.005 and Tex. R. Civ. P. 167 (consisting of seven parts, 167.1-167.7). The full text of the statutes and rules are too lengthy to quote here, but a summary of its general operation is provided below. It is important to consult the statute and rule themselves before deciding to implement this procedure.
Only a defendant may elect to proceed under the rule. Tex. R. Civ. P. 167.2(a). However, if such an election is made, any party may make an offer of settlement as to that defendant’s liability. Id. The election is specific to the defendant making the designation. An offer must comply with the requirements of the rule. Id. at 167.2(b), (c), (d), (e), (f). If an offer is rejected and the judgment is either less than or exceeds the offer by a set percentage, costs must be taxed against the offeree. Id. at 167.4(a), (b). Costs include court costs, deposition costs, certain expert witness fees, and reasonable attorneys’ fees. Id. at 167.4(c). Costs are capped. Id. at 167.4(d). Settlement offers made outside of the rule or that do not comply with the rule’s requirements are not governed by the rule Id. at 167.7.
A decision to elect to proceed under Rule 167 and Chapter 42 should be carefully considered by the attorney representing a defendant in this State. Caution is recommended because, as we say here in Texas, the award of costs kicks as hard as it shoots. In other words, a defendant may end up paying costs as a result of making the election. Another consideration is how the court case is to be resolved if the offer is accepted. The rule is silent on this question, leaving the possibility that the trial court may elect to treat the settlement as an agreed judgment. Clients who are averse to having such a judgment on record that may be used against them in other litigation should think twice before electing the procedure. Alternatively, the client could seek to incorporate into the offer and acceptance terms that require the plaintiff to nonsuit its claims (or have them dismissed with prejudice) upon receipt of the agreed amount.