Shealey v. Ala. Council on Human Relations Inc. (In re Shealey)
Docket: Case No. 16–81391–WRS; Adv. Pro. No. 16–8037–WRS
Court: United States Bankruptcy Court, M.D. Alabama; May 18, 2018; Us Bankruptcy; United States Bankruptcy Court
William R. Sawyer, United States Bankruptcy Judge, ruled on a case involving Plaintiff Takisha R. Shealey and Defendant Alabama Council on Human Relations, Inc. The court addressed Defendant's Offer of Judgment and Plaintiff's Motion for Additional Attorney Fees. Plaintiff accepted Defendant's Rule 68 Offer of Judgment for $11,500, but the court found her acceptance to be a rejection due to a violation of the mirror image rule in contracts. Consequently, the court will not enter judgment for Plaintiff, and her motion for additional attorney fees will be denied.
The case arose from allegations that Defendant violated the automatic stay under 11 U.S.C. 362(a) by garnishing Plaintiff's wages after she filed for bankruptcy. Defendant denied any willful violation but made an offer to settle. After acceptance, Plaintiff sought attorney fees totaling $6,459.42, while Defendant contended that the offer included attorney fees and that no agreement was reached regarding the judgment terms.
The court confirmed its jurisdiction under 28 U.S.C. 1334(b) and 157(a) and noted that this proceeding is a core matter but not a final order.
The Court is considering the validity of the Plaintiff's acceptance of the Defendant's offer of judgment under Rule 68 of the Federal Rules of Civil Procedure, which is also applicable in bankruptcy proceedings through Rule 7068 of the Federal Rules of Bankruptcy Procedure. Rule 68 allows a defending party to serve an offer to allow judgment on specified terms at least 14 days before trial. If the opposing party accepts the offer within this period, both parties can file the offer and acceptance, leading to a mandatory judgment entry by the clerk. If the Plaintiff ultimately obtains a judgment less favorable than the unaccepted offer, they must pay costs incurred after the offer was made. The rule aims to encourage settlement and reduce litigation, providing that offers must be accepted or rejected without negotiation. Acceptance results in an automatic judgment in favor of the Plaintiff, as the court has no discretion to rule otherwise.
Rule 68 also contains a "cost-shifting" provision, which penalizes a Plaintiff for rejecting a reasonable offer by requiring them to pay post-offer costs if they do not achieve a more favorable outcome at trial. An offer must include "costs then accrued," which can either be explicitly stated or determined by the court if not specified. Typically, each party bears their own attorney's fees under the American Rule, with three exceptions: (1) if the offer includes attorney's fees, (2) if a statute defines costs to include attorney's fees, or (3) if attorney's fees are recoverable under relevant law even if not classified as "costs" in the offer.
The Court determines that it does not need to analyze whether exceptions to certain rules apply, focusing instead on the ambiguous language of the Defendant's offer of judgment. According to contract principles, a valid acceptance must comply with the mirror image rule, meaning that the offeree cannot alter the material terms of the offer; any deviation is considered a rejection and a counteroffer. In this instance, the Defendant offered a judgment of $11,500, but the ambiguity pertains to whether this amount includes attorney's fees. The Plaintiff attempted to accept the offer while also addressing the ambiguity by stating an intent to file for attorney's fees. However, this action contravenes the mirror image rule, rendering the Plaintiff's response a rejection of the offer. Consequently, the Plaintiff's response is not a valid acceptance, and since the acceptance period has expired, the Plaintiff is deemed to have rejected the offer. The Court will proceed to schedule a conference regarding the case.
