FLOWERS v. STEERPOINT MARKETING, LLC et al
Filing
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ORDER denying Defendant's 69 Motion to Set Aside Judgment under Rule (60)(b)(1). (See Order). Signed by Magistrate Judge Doris L. Pryor on 9/3/2019. (MAC) Modified on 9/3/2019 (MAC).
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION
JOSEPH D FLOWERS, II,
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Plaintiff,
v.
STEERPOINT MARKETING, LLC,
JOHN SLIMAK,
Defendants.
No. 1:18-cv-01618-DLP-SEB
ORDER
This matter comes before the Court on the Defendants’ Verified Motion for
Relief from Judgment (Dkt. 69). The Plaintiff filed a response on June 3, 2019. The
Motion was referred to the Undersigned for ruling and, for the reasons set forth
below, is hereby DENIED.
I.
Background
Mr. Flowers’s Complaint alleges that Defendants, SteerPoint Marketing, LLC
and John Slimak (“SteerPoint”) failed to pay him overtime wages pursuant to the
Fair Labor Standards Act (“FLSA”), Indiana’s Minimum Wage Statute, and
Indiana’s Wage Claims Statute. [Dkt. 1.] The parties participated in a settlement
conference on December 28, 2018, which was unsuccessful. [Dkt. 44.] After the
settlement conference, the parties conducted further discovery and continued to
discuss settlement options. [Dkt. 57 ¶¶ 2–4.] On April 1, 2019, SteerPoint submitted
a written settlement offer to Mr. Flowers, via email, of $25,000. [Dkt. 57 ¶ 4.] The
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written offer captioned “Defendants’ Offer of Judgment” and signed by defense
counsel, states in full:
Pursuant to Federal Rule of Civil Procedure 68,
Defendants SteerPoint Marketing, LLC and John Slimak,
by counsel, hereby offer to allow the Plaintiff to take a
judgment against them in the amount of Twenty-five
Thousand Dollars ($25,000.00).
(“April 1 Offer”) [Dkt. 57-2.]
After receiving the April 1 offer, Mr. Flowers’s counsel emailed SteerPoint’s
counsel to discuss the terms. The parties’ respective counsel had a telephonic
conversation on April 3, 2019, wherein SteerPoint’s counsel indicated that the April
1 Offer was intended to include all costs, expenses, and attorney fees. Mr. Flowers’s
counsel responded that he believed Rule 68 allowed Mr. Flowers to recover attorney
fees in addition to the $25,000 Offer of Judgment. [See Dkt. 57-3.]
Immediately after the April 3, 2019 phone conversation at 3:52 p.m.,
SteerPoint’s counsel emailed Mr. Flowers’s counsel to confirm their position that the
April 1 Offer was intended to be inclusive of all costs, expenses, and attorney fees.
[Dkt. 57-3.] Five minutes later at 3:57 p.m., SteerPoint’s counsel emailed to Mr.
Flowers’s counsel “Defendants’ Amended Offer of Judgment” that offered Mr.
Flowers $25,000 and expressly stated the offer included attorney fees, costs and all
expenses (“April 3 Offer”). [Dkt. 57 at ¶ 6.] Fourteen minutes later at 4:11 p.m., Mr.
Flowers filed his “Notice of Acceptance of Offer of Judgment” with this Court, which
purported to accept the April 1 Offer. [Dkt. 51.]
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On May 2, 2019, the Court determined that Federal Rule of Civil Procedure
68 did not allow alterations, modifications, or clarifications to offers of judgment
and that it did not have the discretion to alter or modify the parties’ agreement.
[Dkt. 61 at 5-6.] Accordingly, the Court entered judgment in favor of Mr. Flowers in
the amount of $25,000. [Dkt. 61 at 6.] SteerPoint now seeks relief from that
judgment pursuant to Rule 60. (Dkt. 69). The parties presented oral argument
before the Undersigned on August 2, 2019.
II.
Discussion
a. Offer of Judgment
Federal Rule of Civil Procedure 68 permits a defending party to “serve on an
opposing party an offer to allow judgment on specified terms.” Fed. R. Civ. P. 68(a).
The offer does not need to be filed with the court at the time of service. See Id. The
offeree then has 14 days to accept or reject the offer. Id. If the offeree accepts the
offer by written notice, “either party may then file the offer and notice of acceptance,
plus proof of service. The clerk must then enter judgment.” Id. If the offeree rejects
the offer of judgment and “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. Id.
The purpose of Rule 68 is to encourage settlements and it favors neither
plaintiffs nor defendants. Marek v. Chesny, 473 U.S. 1, 5–6, 10 (1985). But, Rule 68
offers of judgment carry serious legal consequences for those who reject them. See
Webb v. James, 147 F.3d 617, 621 (7th Cir. 1998); Nordby v. Anchor Hocking
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Packaging Co., 199 F.3d 390, 392 (7th Cir. 1999); Sanchez v. Prudential Pizza, Inc.,
709 F.3d 689, 692 (7th Cir. 2013).
Because of these consequences, Rule 68 has spawned a body of case law
which guides the Court’s analysis. In Marek v. Chesny, the Supreme Court
considered the requirements of a valid Rule 68 offer. Marek, 473 U.S. at 5. In
addressing this issue, the Supreme Court held:
[i]f an offer recites that costs are included or specifies an
amount for costs, and the plaintiff accepts the offer, the
judgment will necessarily include costs; if the offer does not
state that costs are included and an amount for costs is not
specified, the court will be obliged by the terms of the Rule
to include in its judgment an additional amount which in
its discretion, . . . it determines to be sufficient to cover the
costs.
Id. at 6 (emphasis added). The Supreme Court then went on to address whether the
term “costs” in Rule 68 included attorney fees. Id. at 7. It concluded that “absent
congressional expressions to the contrary, where the underlying statute defines
‘costs’ to include attorney’s fees, . . . such fees are to be included as costs for the
purposes of Rule 68.” Id. at 9.
A little over a decade after the Marek decision, the Seventh Circuit decided
Webb v. James, which addressed a situation similar to the one before this Court. In
Webb, the defendants served a Rule 68 offer on the plaintiff that read: “[t]he
Defendants . . . hereby make an offer of judgment in the above-captioned matter in
the amount of Fifty Thousand Dollars ($50,000.00) pursuant to Federal Rule of Civil
Procedure 68.” Webb, 147 F.3d at 619. The plaintiff accepted the offer of judgment
by filing a notice of acceptance with the district court. Thereafter, defense counsel
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contacted plaintiff’s counsel “to clarify that the offer was all-inclusive, and that
defendants had no intention of paying any additional sums for attorney's fees.” The
attorneys brought their disagreement to the district court, which, “[a]fter hearing
argument, . . . entered judgment and allowed plaintiff to submit a fee application.”
The defendants then moved to vacate the judgment and rescind the Rule 68 offer of
judgment.
The Seventh Circuit, after examining Rule 68 and the relevant case law, held
that Rule 68 offers may not be revoked prior to acceptance or rescinded after
acceptance. Webb, 147 F.3d at 621. The Court reached this conclusion, in part
because it determined that revocation and rescission would undermine the purpose
of Rule 68, but, more importantly, because of the automatic nature of Rule 68. In
pertinent part, the Court stated:
Rule 68 operates automatically, requiring that the clerk
“shall enter judgment” upon the filing of an offer, notice of
acceptance and proof of service. This language removes
discretion from the clerk or the trial court as to whether to
enter judgment upon the filing of the accepted offer. See
[Mallory v. Eyrich, 922 F.2d 1273, 12799 (6th Cir. 1991)].
Because of this mandatory directive, the district court has
no discretion to alter or modify the parties' agreement.
“Entry of a Rule 68 judgment is ministerial rather than
discretionary.” Id. Thus, there is no opportunity for a
district court to even consider allowing rescission of the
Rule 68 “contract.” Once the acceptance has been properly
filed, judgment must be entered.
Webb, 147 F.3d at 621. After addressing the availability of a Rule 60 challenge to
the judgment, the Webb court noted that the Supreme Court was clear in Marek:
Rule 68 offers must include costs, and if the offer is silent to costs, the trial court
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may award an additional amount to cover them. Id. at 622. The Seventh Circuit
placed the burden of any ambiguity on the defendant and held that an offer must be
clear as to whether it includes attorney’s fees when the underlying statute provides
fees for the prevailing party. Id. at 623. Otherwise, a court may award an additional
amount to cover costs and fees. Id.
A year later, in Nordby v. Anchor Hocking Packaging Co., the Seventh Circuit
addressed Rule 68 again. There, the defendants made a Rule 68 offer for “judgment
in the amount of $56,003.00 plus $1,000 in costs as one total sum as to all counts of
the amended complaint.” Nordby v. Anchor Hocking Packaging Co., 199 F.3d 390,
391 (7th Cir. 1999). The Court reaffirmed Webb but rejected a “magic-words”
approach to the Rule. Ultimately, the Court found that the offer was not ambiguous
because the term “costs” was sufficiently clear to include attorney’s fees.
Then, in 2013, the Seventh Circuit addressed Rule 68 once again. In Sanchez
v. Prudential Pizza, Inc., the defendant made a Rule 68 offer for “‘all of Plaintiff's
claims for relief’ but made no specific mention of costs or attorney fees.” Sanchez v.
Prudential Pizza, Inc., 709 F.3d 689, 690 (7th Cir. 2013). The Sanchez court, relying
on Webb and Nordby and noting the consequences of Rule 68 offers, determined that
the defendant’s language was not clear, and the district court erred in finding that
the offer was inclusive of attorney’s fees. Id. at 691–94.
These cases make four things clear. First, Rule 68 offers of judgment can only
be accepted or rejected; the language of an offer may not be altered. Webb, 147 F.3d
at 620–21; Sanchez, 709 F.3d at 692. Second, once a Rule 68 offer is accepted, the
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court must enter judgment on those terms. Webb, 147 F.3d at 621; Sanchez, 709
F.3d at 691. Third, Rule 68 offers must include costs; if the terms of the offer are
silent as to costs, the court is obliged—by the Rule—to award an additional amount
to cover costs and fees. Marek, 473 U.S. at 6; Webb, 147 F.3d at 622–23; Sanchez,
709 F.3d at 692–94. Fourth, because Rule 68 offers subject plaintiffs to
consequences that other settlement offers do not, Rule 68 offers must be written
with clarity and any offers that are ambiguous will be resolved against the offeror.
Webb, 147 F.3d at 622–23; Nordby, 199 F.3d at 393; Sanchez, 709 F.3d at 692–94.
Here, The Defendants’ April 1 Offer provided as follows:
Pursuant to Federal Rule of Civil Procedure 68, Defendants SteerPoint
Marketing, LLC and John Slimak, by counsel, hereby offer to allow the
Plaintiff to take a judgment against them in the amount of Twenty-five
Thousand Dollars ($25,000.00).
[Dkt. 57-2.] This April 1 Offer is silent as to attorney’s fees and costs. Although the
parties acknowledge that their settlement negotiations up through April 1, 2019
had included global offers and demands, this Rule 68 offer lacks clarity as to
whether the offer includes attorney’s fees and costs. This Circuit does not require
“magic words” to be included in the Rule 68 offer, but even without that
requirement the April 1 Offer is insufficient to demonstrate an intent to include
attorney’s fees or costs. Under the case law of this Circuit, because the April 1 Offer
is silent to fees and costs, the April 1 Offer’s ambiguity is resolved against the
offeror. Accordingly, the Defendants’ April 1, 2019 Rule 68 Offer of Judgment is not
inclusive of costs and attorney’s fees and the Court must either award an additional
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amount to cover those costs and fees or relieve the Defendants from the Judgment
under Federal Rule of Civil Procedure 60.
b. Rule 60 Relief
“[T]he proper procedural device for relief from a Rule 68 judgment is the
same as for any other judgment: Rule 60.” Webb, 147 F.3d at 622. Pursuant to Rule
60, “the court may relieve a party . . . from a final judgment . . . for the following
reasons: (1) mistake, inadvertence, surprise, or excusable neglect; . . . (6) any other
reason that justifies relief.” Fed. R. Civ. P. 60(b)(1), (6).
Defendants argue that both Rule 60(b)(1) and 60(b)(6) apply to this scenario.
Relief under Rule 60(b)(6) “is available only when sections (b)(1) through (b)(5) do
not apply.” Webb, 147 F.3d at 622 (citing Brandon v. Chicago Bd. of Educ., 143 F.3d
293, 295 (7th Cir. 1998). Because Defendants argue and the Court agrees that
section (b)(1) applies to this scenario, section (b)(6) relief is not available to
Defendants. Thus, Defendants must demonstrate that the Rule 68 Judgment in this
case is the result of mistake, inadvertence, surprise, or excusable neglect. See Webb,
147 F.3d at 622.
In their briefing, the Defendants appear to argue that it was a mistake for
the Court to direct the entry of judgment in the amount of $25,000, exclusive of
costs. [Dkt. 69 at 4–5.] Defendants, however, do not provide any authority or
argument identifying how the Court erred when it entered judgment. Furthermore,
as discussed in the previous section, the Court was required to direct the clerk to
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enter judgment. Fed. R. Civ. P. 68(a); Webb, 147 F.3d at 621; Sanchez, 709 F.3d at
691.
Defendants also argue that, “[a]t worst, the omission of the scant words that
were added in the April 3 Offer (to specify that which all counsel already
understood) is excusable neglect on the part of undersigned counsel . . . .” [Dkt. 69
at 5.] As an initial matter, the case law of this Circuit makes clear that the terms
“inclusive of all fees, costs and expenses” in a Rule 68 offer of judgment are not
“scant words,” but are required to prevent prolonged litigation such as this. Webb,
147 F.3d at 622 (“Rule 68 offers must include costs. If the offer is silent as to costs,
the court may award an additional amount to cover them.”); Sanchez, 709 F.3d at
694 (“If an offer recites that costs are included or specifies an amount for costs, and
the plaintiff accepts the offer, the judgment will necessarily include costs; if the
offer does not state costs are included and an amount for costs is not specified, the
court will be obliged by the terms of the Rule to include in its judgment an
additional amount which in its discretion it determines to be sufficient to cover the
costs.”) (quoting Marek, 473 U.S. at 6).
Nevertheless, the Defendants have argued that they should be relieved from
judgment due to excusable neglect. For Rule 60 purposes, the Court must determine
if the omission of these necessary words can be considered the result of excusable
neglect. The Supreme Court has defined excusable neglect broadly, including acts
attributable to negligence, carelessness, and mistake. “[A]t bottom, [Rule 60 relief
is] an equitable [determination], taking account of all relevant circumstances
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surrounding the party’s omission.” Pioneer Inv. Servs. Co. v. Brunswick Assocs. Ltd.
P’ship, 507 U.S. 380, 394–95 (1993). The Seventh Circuit has held that trial judges
are given the discretion to make this determination, and their discretion “must be
exercised after careful consideration of ‘all relevant circumstances surrounding the
omission’ in [the] particular case.” Robb v. Norfolk & Western Ry. Co., 122 F.3d 354,
363 (7th Cir. 1997).
Based on precedent from the Supreme Court and the Seventh Circuit, the
Undersigned must consider “all relevant circumstances surrounding” the
Defendants’ failure to include language regarding costs and fees in his April 1 Offer
to determine whether that omission constitutes excusable neglect. In particular, the
Court takes special notice of the parties’ settlement negotiations and conversations
before the April 1 Offer. Additionally, the Court considers the parties’ further
argument that was presented to the Undersigned on August 2, 2019.
At oral argument, Defendants’ counsel offered the Court a simple answer for
how his April 1 Offer came to be silent as to costs and fees: “I made a mistake.”
Defendants’ counsel argued that Plaintiff and his counsel would be receiving an
unjust enrichment, something to which they were not entitled, and that it would not
be equitable or in the interest of justice to permit the Court’s judgment to stand. In
closing, he requested that the Court allow him to correct his mistake through Rule
60 because the context of the parties’ negotiations and conversations supported his
contention that he had been careless.
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Plaintiff’s counsel does not dispute that the parties had engaged in
settlement negotiations that only contemplated global settlement offers and
demands, but he does argue, however, that he never heard Defendants’ counsel say
that his client would never offer any more than $25,000 total, inclusive of costs,
fees, and expenses. Moreover, Plaintiff’s counsel argued that Rule 68 is complicated,
a veritable weapon in the Federal Rules, and that he and his client should not be
penalized for Defendants’ counsel’s failure to learn Rule 68’s requirements.
Furthermore, Plaintiff’s counsel expressed to the Court that he did not want his
client to file a lawsuit against him, ostensibly for the judgment being overturned,
after he had advised his client to take the April 1 Offer.
The parties exhaustively briefed and argued the circumstances surrounding
the April 1 Offer and April 3 Offer. Of special note, the Court considers that the
parties had engaged in several back and forth settlement negotiations that included
global offers and demands that were inclusive of all fees and costs. After
Defendants’ counsel had submitted the April 1 Offer, counsel for Plaintiff and
Defendants discussed the offer, wherein it was reiterated that the April 1 Offer was
intended to be inclusive of all fees and costs. Within a five minute period on April 3,
2019, Defendants’ counsel sent an email to Plaintiff’s counsel confirming that the
April 1 Offer was intended to be inclusive of all fees and costs and a second email
containing an updated Rule 68 Offer of Judgment that included the necessary
language regarding fees and costs. It was only after this succession of phone
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conversations and emails that Plaintiff’s counsel filed his Notice of Acceptance of
the April 1 Offer.
This Court has previously addressed the issue of whether a Rule 68 judgment
can be set aside under Rule 60. In Aynes v. Space Guard Prods., Inc., after the
Defendant had filed a Motion for Summary Judgment and before the Plaintiff’s
deadline to respond, the Defendant made a Rule 68 Offer of Judgment that was
silent as to costs and fees. 201 F.R.D. 445 (S.D. Ind. 2001). The Defendant requested
that the Court set aside the judgment pursuant to Rule 60, but failed to identify a
specific portion of Rule 60 under which it requested relief. The Court evaluated the
situation under the excusable neglect standard and, using the sound discretion
accorded to the district court, determined:
[W]e do not believe that the neglect here is excusable. Any effort
to research Rule 68 would have alerted an attentive lawyer to
the possibility of attorney’s fees being included under the rule,
and in fact a host of examples demonstrating how to draft a Rule
68 offer in order to avoid the present confusion was also readily
available. Further, the language of Rule 68 itself provides that
costs are to be included. Finally, to set aside the judgment and
allow the litigation to continue would most certainly undermine
the purpose of the Rule, “[t]he purpose of [which] is to encourage
settlement and avoid protracted litigation.” Therefore, we deny
Defendant’s alternative request to set aside the judgment.
Aynes, 201 F.R.D. at 449 (internal citations omitted).
The Undersigned finds no reason to stray from the Court’s previous analysis.
Defendants’ counsel had a duty to research and should have researched Rule 68
offers of judgment; if he had, he would have been alerted to the specific
requirements that the Seventh Circuit put in place for a satisfactory Rule 68 offer of
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judgment. Defendants’ counsel was undoubtedly negligent – the parties do not
dispute this point – but, the Court must determine whether that negligence was
excusable.
Once Defendants’ counsel chose to respond to the Plaintiff’s settlement
demand with a Rule 68 offer, the rules of the game changed. Where the Court’s
analysis once would have been guided by general contract principles of offer and
acceptance, the Court must instead consider Defendants’ counsel’s actions under the
Rule 68 framework. The case law could not be clearer, and Defendants’ counsel had
a duty to make himself aware of the relevant standards by which a Rule 68 Offer of
Judgment would be evaluated. This Circuit has repeatedly provided litigants with
the necessary information to create a proper Rule 68 offer, and Defendants’ counsel
should have availed himself of that information prior to issuing the April 1 Offer.
Counsel acknowledged that his omission was a mistake, but it was a unilateral
mistake and the result of counsel’s failure to investigate properly the parameters
and requirements for the Rule of which he sought to take advantage. This conduct
is not excusable.
Moreover, it would not be equitable to the Plaintiff if this Court were to set
aside the judgment; he duly accepted the Defendants’ offer on the advice of counsel
and would be unduly prejudiced by the granting of Defendants’ request for relief.
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Accordingly, relief from the judgment is not warranted under Rule 60(b)(1)
and Defendants’ motion (Dkt. 69) is DENIED.
So ORDERED.
Date: 9/3/2019
Distribution:
S. Andrew Burns
COX SARGEANT & BURNS PC
aburns@coxsargelaw.com
Ronald E. Weldy
WELDY LAW
rweldy@weldylegal.com
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