Undue Hardship Showing Can Swallow NJ Offer of Judgment Rule.

Under R. 4:58-3, unless, among other things, undue hardship can be shown, a defendant is entitled to recover costs and fees if the verdict is 80% of the offer of judgment or less.  In the case of Reid, et al. v. Finch, et al., Judge Rothschild of New Jersey’s Superior Court, Essex County, was faced with a request for the award of counsel fees after a $40,000 offer of judgment had been made, a non-binding arbitration award of $110,000 had been issued, but the jury award was only $34,400.  Since the award was 80% or less than the final offer of judgment, the defendants sought to recapture their fees and costs.  In opposition, plaintiffs claimed undue hardship because, if forced to pay defendants’ fees and costs, plaintiffs would end up owing their attorneys money.  In the first reported decision of its kind, Judge Rothschild ruled that the intent of the Rule was to discourage frivolous lawsuits, not misvalued lawsuits.  Thus, he held that the defendants were only entitled to recover their costs and not their fees.

The case is, to my mind, yet another example of an American court refusing to adopt a true “loser’s pay” system.  While some might disagree, I happen to think the court got it right.  As I have often said, the US legal system is not designed to distinguish wheat from chafe up front.  Rather, it’s kind of like a hot dog.  The end result can be quite tasty (particularly when envisioned on a day of fasting and abstinence), but you sure as heck don’t want to know how it’s made.

For more information about this post, please contact Bob Cosgrove at rcosgrove@wcmlaw.com.