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Prevailing Defendants Can Recover Costs Incurred After Plaintiff Rejected Offer of Judgment in MHRA Case

A recent decision by the Missouri Court of Appeals should serve as a reminder of what a useful tool an offer of judgment can be for defendants in both state and federal court.  Federal Rule of Civil Procedure 68 and similar rules in many states (including Missouri) provide that, if a defendant makes an offer of judgment that the plaintiff rejects, and the plaintiff does not recover a judgment that is more favorable than the offer, then the defendant is entitled to its costs incurred after making the offer.  These rules are intended to facilitate reasonable settlements, but they also serve to limit defendants’ litigation costs in the event a reasonable offer is rejected.

In Gabriel v. Saint Joseph License, LLC, (Mo. App. W.D., Case No. WD75959, Dec. 31, 2013), the plaintiff, Rhonda Gabriel, filed a number of claims against her employer and three individual defendants. During the course of the litigation, the defendants submitted an offer of judgment for $10,000 pursuant to Missouri Rule of Civil Procedure 77.04, which Gabriel rejected.  After the offer of judgment was made, the Defendants incurred $4,488.70 in costs related to 14 depositions.  Ultimately, only one of Gabriel’s claims against her employer made it to trial, and the jury found for the employer.  The defendants filed a motion for recovery of costs that they incurred after making the offer of judgment.  The trial court denied the defendants’ motion, because the Missouri Human Rights Act (under which some of Gabriel’s claims were filed) provides that a prevailing defendant “may be awarded court costs and reasonable fees only upon a showing that the case is without foundation.”  Mo. Rev. Stat. §213.111.2.  The defendants appealed this ruling.

The Court of Appeals held that Rule 77.04 and the MHRA can be read in conjunction with each other, and that, in cases where an offer of judgment has been made, the rule trumps the statute.  Rule 77.04 provides that, if an offer of judgment is not accepted and if the adverse party “fails to obtain a judgment more favorable than that offered, that party shall not recover costs in the circuit court from the time of the offer but shall pay costs from that time.”  Because the defendants had made an offer of judgment in this case, and because the language of Rule 77.04 is mandatory, the Court of Appeals reversed the trial court’s ruling and remanded the case for a determination as to which of the defendants’ requested costs were properly assessed to Gabriel.