On June 3, 2014, the Second Circuit issued a decision in Stanczyk v. City of New York, Docket No. 13-1582-CV, holding that Rule 68 requires a prevailing civil rights plaintiff to pay a defendant’s post-offer costs if the plaintiff’s judgment is less favorable than the unaccepted Rule 68 offer.
In Stanczyk, the City of New York, which, along with two police officers, was a defendant in a civil rights action, made an offer of judgment before trial in the EDNY. The City was not found liable, but jury did find that the two police officers had used excessive force against the plaintiff and awarded the plaintiff $55,000 in compensatory damages and $2,000 in punitive damages against each officer. The EDNY granted the plaintiff’s “fees and costs incurred prior to the date of Defendants’ Rule 68 Offer and awarded the defendants post-offer costs, excluding attorney’s fees.” The Second Circuit affirmed the award, explaining:
Rule 68 is a cost-shifting rule designed to encourage settlements without the burdens of additional litigation. Under normal circumstances, a plaintiff who prevails on a 42 U.S.C. § 1983 claim is entitled to recover costs, including reasonable attorney’s fees. Rule 68, however, precludes a plaintiff from recovering post-offer costs if (a) the defendant timely serves plaintiff with an offer of judgment, (b) plaintiff rejects the offer, and (c) plaintiff prevails but obtains a judgment less than the rejected offer.
The City’s unaccepted offer provided for a judgment in an amount greater than that which [the plaintiff] obtained at trial. In light of Rule 68, it is undisputed that the district court properly limited [the plaintiff’s] costs and attorney’s fees to those incurred prior to [the date of the Rule 68 offer]. The district court also determined that Rule 68 entitled Defendants to costs–excluding attorney’s fees–that they incurred after making the Offer. [The plaintiff] challenges this latter portion of the district court’s decision and argues that Rule 68 cuts off a prevailing plaintiff’s right to costs but does not compel a prevailing plaintiff to bear the defendant’s post‐offer costs.
In other words, [the plaintiff’s] challenge requires us to determine whether Rule 68 not only cancels the operation of Rule 54(d)–which entitles a prevailing party to costs–but also reverses it. Although this is an issue of first impression in this Circuit, every Circuit to have confronted this question appears to have reached the same conclusion: Rule 68 reverses Rule 54(d) and requires a prevailing plaintiff to pay a defendant’s post-offer costs if the plaintiff’s judgment is less favorable than the unaccepted offer. . . .
[O]ur conclusion in no way dictates that a prevailing plaintiff . . . would be liable for a defendant’s post-offer attorney’s fees–a result that would be at odds with Section 1988. In Marek, the Supreme Court made clear that the term “costs” in Rule 68 was intended to refer to all costs properly awardable under the relevant substantive statute or other authority. Because a civil rights defendant can recover attorney’s fees only when the plaintiff’s claims are vexatious, frivolous, or brought to harass or embarrass, and a prevailing plaintiff by virtue of her victory exceeds this standard, we cannot conceive of a situation in which attorney’s fees could be properly awardable to a non-prevailing defendant under Rule 68 in a civil rights action.
(Internal quotations and citations omitted) (emphasis added).