Knopf et al v. Esposito et al

Filing 416

OPINION AND ORDER: Having unambiguously rejected Esposito's Rule 68 offer of judgment, the plaintiffs may not reverse course and accept the same offer. (Signed by Judge Denise L. Cote on 3/5/2021) (jca)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
-------------------------------------- X
:
:
NORMA KNOPF and MICHAEL KNOPF,
:
Plaintiffs,
:
-v:
:
:
FRANK M. ESPOSITO, DORSEY & WHITNEY,
LLP, NATHANIEL H. AKERMAN, EDWARD S.
:
FELDMAN, and MICHAEL HAYDEN SANFORD,
:
:
:
Defendants.
:
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17cv5833(DLC)
OPINION AND ORDER

Appearances
For the plaintiffs:
Eric Berry
Eric W. Berry, PC
5 Columbus Circle, 8th Floor
New York, NY 10022
Gary Greenberg
Gary Greenberg, Esq.
666 Fifth Avenue, 27th Floor
New York, NY 10103
For defendant Frank M. Esposito:
Frank Esposito
Esposito Partners
175 Madison Avenue, 14th Floor
New York, NY 10016
DENISE COTE, District Judge:
For the following reasons, having unambiguously
communicated their rejection of a Rule 68 offer of judgment, the
plaintiffs cannot thereafter reverse course and obtain the
benefits of that same offer of judgment.

This is true even when

that acceptance is communicated within the 14-day period
provided by Rule 68.

See Fed. R. Civ. P. 68.

In this action, the plaintiffs are pursuing a single claim
pursuant to 42 U.S.C. § 1983 against the defendants for a
violation of their due process rights.

They contend that the

defendants conspired to corrupt a state court official in
connection with their litigation against Michael Sanford and
entities he controlled.
This case was filed in 2017 and is but one of a spate of
lawsuits arising out of commercial arrangements between the
plaintiffs and Sanford.

As its filing date suggests, this case

has had a long and tortuous history, which is set forth in
several prior Opinions.

See Knopf v. Esposito, No.

17CV5833(DLC), 2018 WL 3579104 (S.D.N.Y. July 25, 2018); Knopf
v. Esposito, No. 17CV5833(DLC), 2018 WL 1226023 (S.D.N.Y. Mar.
5, 2018); Knopf v. Esposito, No. 17CV5833 (DLC), 2017 WL 6210851
(S.D.N.Y. Dec. 7, 2017).

For purposes of this Opinion, the

critical facts are that fact discovery closed on February 19,
2021, and the plaintiffs’ summary judgment motion is due March
12.
On February 4, 2021, defendants Nathaniel Akerman and
Akerman’s law firm Dorsey & Whitney LLP (the “Dorsey
Defendants”) made an offer of judgment to the plaintiffs
pursuant to Rule 68.

The plaintiffs filed a notice of

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acceptance of the Dorsey Defendants’ offer of judgment on
February 18.
On February 17, defendant Frank Esposito also made an offer
of judgment to the plaintiffs.
proceeding pro se.

Esposito, who is an attorney, is

On February 18, plaintiffs’ attorney Eric

Berry emailed Esposito stating that the plaintiffs would not be
accepting the offer of judgment.

Esposito immediately followed

up, asking, “to be clear, you have rejected the offer or are not
accepting it at this time?”

Berry responded unequivocally that

the plaintiffs were rejecting Esposito’s offer of judgment.
On March 1, the plaintiffs filed a Notice of Acceptance of
Esposito’s offer of judgment.

The notice was given within 14

days of Esposito’s initial offer.

Also on March 1, the

plaintiffs filed a motion for entry of judgment against the
Dorsey Defendants and Esposito pursuant to Fed. R. Civ. P.
54(b).

That motion has been denied.

Knopf v. Esposito, No.

17CV5833(DLC), 2021 WL 798358, at *2 (S.D.N.Y. Mar. 1, 2021).
In submissions of March 1 and March 2, the plaintiffs and
Esposito dispute whether the plaintiffs could accept a Rule 68
offer after having unambiguously rejected it.
Rule 68 provides:
[A] party defending against a claim may serve on an
opposing party an offer to allow judgment on specified
terms, with the costs then accrued. If, within 14 days
after being served, the opposing party serves written
notice accepting the offer, either party may then file the

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offer and notice of acceptance.
Fed. R. Civ. P. 68.
The Advisory Committee Notes explain that Rule 68 is meant
to “encourage settlements and avoid protracted litigation.”
Fed. R. Civ. P. 68, advisory committee notes (1946).

Rule 68

“prompts both parties to a suit to evaluate the risks and costs
of litigation, and to balance them against the likelihood of
success upon trial on the merits.”

Electra v. 59 Murray

Enterprises, Inc., 987 F.3d 233, 246 (2d Cir. 2021)
(quoting Marek v. Chesny, 473 U.S. 1, 5 (1985)).
“Rule 68 offers of judgment and acceptances thereof
are contracts to be interpreted according to ordinary contract
principles.”

Electra, 987 F.3d at 244 (citation omitted).

See

also Steiner v. Lewmar, Inc., 816 F.3d 26, 31 (2d Cir. 2016).
Ordinary contract principles dictate that “[a]n offeree's power
of acceptance is terminated by his rejection of the offer,
unless the offeror has manifested a contrary intention.”
Restatement (Second) of Contracts § 38 (1981).

See also Naldi

v. Grunberg, 908 N.Y.S.2d 639, 648 (1st Dept. 2010); Keryakos
Textiles, Inc. v. CRA Dev., Inc., 563 N.Y.S.2d 308, 309 (3rd
Dept. 1990); Kleinberg v. Ambassador Assocs., 480 N.Y.S.2d 210,
211 (1st Dept. 1984), aff'd, 64 N.Y.2d 733 (1984); 22 N.Y. Jur.
2d Contracts § 40.
“too late”.

An acceptance after a rejection is therefore

Kleinberg, 480 N.Y.S.2d at 211.

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In other words,

“the recipient's rejection of an offer leaves the matter as if
no offer had ever been made.”

Campbell-Ewald Co. v. Gomez, 577

U.S. 153, 162 (2016) (citation omitted).

See also Radha

Geismann, M.D., P.C. v. ZocDoc, Inc., 850 F.3d 507, 513 (2d Cir.
2017).
The plaintiffs’ February 18 unambiguous rejection of
Esposito’s offer of judgment terminated the plaintiffs’ right to
accept that offer.

As a result, the plaintiffs could not

subsequently accept the offer even though the subsequent
acceptance was within the 14-day period otherwise allotted under
Rule 68.
The plaintiffs rely on a First Circuit decision to argue
that they were free to accept the offer at any time within the
14-day period provided by the Rule.

The court in Garayalde-

Rijos v. Municipality of Carolina, 799 F.3d 45 (1st Cir. 2015),
held that “the irrevocable nature of a Rule 68 offer has
particular significance: neither a rejection nor a counteroffer
terminates the offeree's ability to accept a Rule 68 offer
within the fourteen-day period.”

Id. at 47.

Garayalde-Rijos

cited two cases that stand for the unremarkable proposition that
a defendant may not revoke a Rule 68 offer during the 14-day
period.

See Richardson v. Nat'l R.R. Passenger Corp., 49 F.3d

760, 764 (D.C. Cir. 1995); Colonial Penn Ins. Co. v. Coil, 887
F.2d 1236, 1240 (4th Cir. 1989).

Neither of these cases

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suggests that a plaintiff may reverse course, however, and
accept the offer after having communicated an unambiguous
rejection.

While the court in Richardson recognized that

“unlike a normal contract offer, an offer of judgment under the
Rule imposes certain consequences that can be costly for the
plaintiff who declines the offer,” this does not suggest that a
plaintiff’s unambiguous rejection should be treated as something
other than a rejection under ordinary contract principles.

49

F.3d at 765.
Allowing a plaintiff to accept a Rule 68 offer after having
rejected it invites gamesmanship.

It also introduces even more

unpredictability into the litigation process.

A plaintiff

considering an offer of judgment has the right to remain silent
for up to 14 days as she ponders the offer.
silent, the offer expires.

If she remains

But, if she accepts it within those

14 days, the offering party is bound by the terms of the offer,
as is the plaintiff.

They have a binding agreement.

See Fed.

R. Civ. P. 68; Electra, 987 F.3d at 244.
If a plaintiff rejects the offer, that too has
consequences.
litigation.

Words matter.

And they certainly matter in

The offer may have been extended, as it was here,

at a sensitive point in the litigation.

Those sensitive points

may include the periods before significant depositions, before
the retention of experts or the filing of expert reports, in the

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final days of discovery, on the eve of the filing of critical
motions, or in the weeks when the parties are making their final
trial preparations.

Once the plaintiff makes an unambiguous

statement, the defendant must be able to rely on that statement
and engage in the litigation knowing that its Rule 68 offer has
been accepted or rejected.

A rule that allows a plaintiff to

retract an unambiguous rejection of a Rule 68 offer encourages
gamesmanship, permits manipulation, and increases the cost of
litigation choices.

It does not encourage settlement.

None of this analysis is novel.

The principals of reliance

and predictability are cornerstones of the law.

As the

Restatement of Contracts instructs, “The legal consequences of a
rejection rest on its probable effect on the offeror . . . .

If

the offeree states in effect that he declines to accept the
offer, it is highly probable that the offeror will change his
plans in reliance on the statement.”
Contracts § 38 cmt. a (1981).

Restatement (Second) of

Because litigation is less

expensive and more efficient when there is predictability,
courts routinely fashion rules and doctrines that encourage
predictability.

See, e.g., Ramos v. Louisiana, 140 S. Ct. 1390,

1403 (2020) (“the goals of predictability and reliance [lay]
behind the doctrine of stare decisis”); Davis v. Blige, 505 F.3d
90, 104–05 (2d Cir. 2007) (declining to allow retroactive
copyright licenses or assignments because such a rule would

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“inject uncertainty and unpredictability into copyright
ownership”); Manning v. Utilities Mut. Ins. Co., 254 F.3d 387,
398 (2d Cir. 2001) (uniform federal statute of limitations
“preferable in terms of predictability and reducing judicial and
litigation costs”); Gregory v. Chehi, 843 F.2d 111, 116 (3d Cir.
1988) (claim and issue preclusion share “the common goals of
judicial economy, predictability, and freedom from harassment”);
Deutsche Bank Nat'l Tr. Co. v. Barclays Bank PLC, 34 N.Y.3d 327,
339 (2019) (applying plaintiff-residence rule to promote
predictability).
As New York’s highest court teaches, “stability and
predictability in contractual affairs is a highly desirable
jurisprudential value.”

Sabetay v. Sterling Drug, Inc., 69

N.Y.2d 329, 336 (1987).

Indeed, the district court in A.A. v.

Goleta Unified Sch. Dist., No. CV1506009DDPMRWX, 2016 WL 4134514
(C.D. Cal. Aug. 2, 2016), declined to follow Garayalde-Rijos
because such an approach would “allow an offeree to expressly,
or even repeatedly, reject an offer, and thus induce the
opposing party to continue to prepare for hearing or trial, but
then accept that very same offer on the eve of trial”.

Id. at

*3.
Here, the plaintiffs could have taken the allotted 14 days
to consider Esposito’s offer of judgment.

Instead, they

unambiguously rejected his offer the day after receiving it.

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Esposito is entitled to rely upon this rejection.

If he wishes

to make another Rule 68 offer on the same or different terms,
that is his right.

If the plaintiffs wish to suggest terms to

Esposito for the settlement of this litigation, that is their
right.
Conclusion
Having unambiguously rejected Esposito’s Rule 68 offer of
judgment, the plaintiffs may not reverse course and accept the
same offer.

Dated:

New York, New York
March 5, 2021

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