On appeal from Superior Court of New Jersey, Law Division, Morris County, Docket No. L- 3799-98.
Before Judges Skillman, Carchman and Wells.
The opinion of the court was delivered by: Skillman, P.J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted December 11, 2001
Rule 4:58, commonly referred to as the offer of judgment rule, provides in pertinent part that "any party may . . . serve upon any adverse party, without prejudice, . . . an offer to take judgment in the offeror's favor, or as the case may be, to allow judgment to be taken against the offeror, for a sum stated therein[.]" R. 4:58-1. While this case was being litigated, Rule 4:58-2 provided that if, in an action for liquidated damages, an offer of judgment by a party designated as a "claimant" is not accepted and that party obtains a verdict at least as favorable as the rejected offer,*fn1 it "shall be allowed, in addition to costs of suit, eight per cent interest on the amount of any money recovery from the date of the offer or the date of completion of discovery, whichever is later, and also a reasonable attorney's fee . . . for such subsequent services as are compelled by the non-acceptance."*fn2 Rule 4:58-3 similarly provided that if, in an action for liquidated damages, an offer of judgment by a party designated as "a party other than the claimant" is rejected and the verdict is at least as favorable as the offer, it "shall be allowed, in addition to costs of suit, a reasonable attorney's fee, for such subsequent services as are compelled by the non-acceptance."
This appeal involves application of the offer of judgment rule in a case where the defendant has asserted a counterclaim. The trial court concluded that because Rules 4:58-2 and -3 deal separately with the consequences of non-acceptance of an offer of judgment by a "claimant" and "a party other than the claimant," a plaintiff against which a counterclaim is filed cannot submit a single offer of judgment that applies to both its affirmative claim and the counterclaim. We reject this interpretation of the offer of judgment rule and conclude that Rule 4:58 authorizes a plaintiff against which a counterclaim is filed to submit an offer of judgment for resolution of the entire case including the counterclaim.
Plaintiff, which manufactures fire suppression products, brought suit for $13,017.74 on a book account against defendant, a wholesaler distributor of plaintiff's products. Defendant filed a counterclaim for $26,795.34 representing commissions plaintiff allegedly owed defendant.
Plaintiff submitted an offer pursuant to Rule 4:58-1 "to take judgment against defendant in the amount of $9,629.49 in the referenced case." Defendant rejected this offer, and submitted its own offer "to take judgment in this action [against plaintiff] in the amount of $20,096.50." Before trial, plaintiff rejected this offer.
The case was tried before a jury, which returned a verdict for $11,488.40 on plaintiff's claim and a no cause against defendant on its counterclaim.
Plaintiff then brought a motion pursuant to Rule 4:58-2 for the costs of suit, interest and the attorney's fees it incurred subsequent to defendant's rejection of its offer of judgment. The supporting certification and attached billing records indicated that plaintiff's attorney's fees totaled $25,242.96.
In opposition to this motion, defendant argued that plaintiff was not entitled to any award, because its damages were "unliquidated," and Rule 4:58-2 authorizes an award "[i]n an action for unliquidated damages" only if "the amount of the recovery is in excess of 120% of the offer," and the $11,488.40 verdict in plaintiff's favor was less than 120% of its $9,629.49 offer. Defendant also argued, in the alternative, that "the offer of judgment . . . had no bearing on the counterclaim" and consequently any award should be limited to the attorney's fees plaintiff incurred in proving its affirmative claim.
The trial court rejected defendant's argument that plaintiff's claim was for "unliquidated damages" and therefore it was not entitled to any award under Rule 4:58-2. However, the court concluded that under the language of Rule 4:58-2, plaintiff's offer "to take judgment against defendant" for $9,629.49 should be considered to apply only to the affirmative claim asserted in plaintiff's complaint, and not to defendant's counterclaim, because plaintiff was a "claimant" only with respect to that claim. Accordingly, the court granted plaintiff's motion, but limited the attorney's fees award to the fees plaintiff incurred in proving its claim. The court concluded that plaintiff's attorneys had expended only about one-quarter of their time in proving plaintiff's affirmative claim, and thus awarded plaintiff one-quarter of the total attorney's fees sought, which totaled $6,434.30.
Plaintiff appeals, arguing that its offer of judgment applied to the entire case, including defendant's counterclaim, and that the trial court erred in refusing to award the full amount of attorney's fees plaintiff incurred after defendant's rejection of its offer of judgment. Defendant cross appeals, arguing that the court should not have made any award to plaintiff under Rule 4:58-2 ...