This opinion will be unpublished and
may not be cited except as provided by
Minn. Stat. § 480A.08, subd. 3 (2004).
IN COURT OF APPEALS
Filed January 31, 2006
Ramsey County District Court
File No. C4-03-6401
William J. Schmitz, Terry &
Matthew P. Kostolnik, Gislason & Hunter LLP,
Considered and decided by Lansing, Presiding Judge; Willis, Judge; and Hudson, Judge.
U N P U B L I S H E D O P I N I O N
Mark Wingo, the prevailing party in a negligence action, appeals from the district court’s decision to award Paul Perrone, the defendant, costs and disbursements under Minn. R. Civ. P. 68. Because the rule 68 offer of judgment exceeds the judgment finally entered, Perrone is entitled to costs and disbursements, and we affirm.
F A C T S
Mark Wingo sued Paul Perrone for damages arising from a motor-vehicle accident. Before trial, Perrone served a rule 68 offer of judgment on Wingo. In this offer, Perrone stated that he would allow judgment to be entered in favor of Wingo “in the amount of $5,000 inclusive of all costs and disbursements accrued as of the date of [the offer].” Wingo rejected the offer, and the case proceeded to trial.
The jury returned a verdict of $17,914.05 in Wingo’s favor. After deducting collateral-source benefits and adding an insurance-premium payment, the district court entered judgment for Wingo “in the amount of $3,642.70, together with his costs and disbursements.”
Perrone filed a motion for his costs and disbursements under rule 68, arguing that his pretrial offer of judgment was more favorable to Wingo than the judgment finally entered. The district court initially denied this motion, concluding that the offer of a lump sum inclusive of costs and disbursements did not comply with the requirements of rule 68. Perrone requested reconsideration of the denial, and the district court granted his request. After submission of additional authority and argument, the district court vacated its original order and entered judgment granting Perrone’s motion for costs and disbursements. Specifically, the court determined that, for purposes of rule 68, costs and disbursements are not part of the final judgment; that the amount of an offer for judgment “inclusive of all costs and disbursements” must be determined by subtracting the costs and disbursements that had accrued at the time of the offer; and that Wingo’s stated costs and disbursements include amounts that had not accrued at the time of the offer for judgment. Wingo appeals from this judgment, arguing that the district court erred by requiring Wingo to pay Perrone’s costs and disbursements.
Under rule 68 of the Minnesota Rules of Civil
Procedure, any party may serve on an adverse party, at any time until ten days
before the trial begins, “an offer to allow judgment to be entered to the
effect specified in the offer or to pay or accept a specified sum of money,
with costs and disbursements then accrued.”
Notwithstanding the provisions of rule 68, when an offer of judgment is rejected and the case is litigated, a rule 68 offeree who prevails on the merits is still entitled to recover costs and disbursements under Minnesota Statutes chapter 549. Borchert v. Maloney, 581 N.W.2d 838, 840-41 (Minn. 1998) (holding that obligation to pay opposing party’s costs and disbursements under Minnesota’s rule 68, unlike federal rule 68, does not affect prevailing party’s right to tax costs and disbursements). The appellate record does not include Wingo’s taxation of costs and disbursements as the prevailing party. But those final amounts are relevant only to Wingo’s argument that they should be added to the amount of the district court judgment to determine whether the judgment finally entered was more favorable to Wingo than Perrone’s rule 68 offer of judgment.
To determine whether an offeror is entitled
to costs and disbursements under rule 68, we must compare the offer of judgment
with the judgment finally entered. Wingo
first contends that the district court erred by not adding his prevailing-party
costs and disbursements to the $3,642.70 judgment to determine the amount of
the “judgment finally entered.” We are
unable to find any authority to support Wingo’s contention that the
prevailing-party costs and disbursements should be added. The supreme court has explicitly stated that
a rule 68 analysis requires the court to compare the “net judgment entered” for
the offeree with the opposing party’s offer of judgment.
The district court ordered entry of judgment for Wingo in the amount of $3,642.70, together with his costs and disbursements. Neither Wingo nor Perrone disputes that this amount correctly states the net verdict. Because the net judgment amount exclusive of costs and disbursements constitutes the “judgment finally entered,” $3,642.70 is the amount that must be compared to Perrone’s offer for judgment to determine which is more favorable to Wingo. We now turn to the offer for judgment.
An offer of judgment under rule 68 is “an
offer to allow judgment to be entered to the effect specified in the offer or
to pay or accept a specified sum of money, with costs and disbursements then
Rule 68 contemplates an offer of judgment for
a specified sum of money with costs and disbursements added to that sum. See Minn. R. Civ. P. 68 (providing for
offer to “pay or accept a specified sum of money, with costs and disbursements
then accrued”). Federal courts have
determined that a rule 68 offer is nonetheless valid if it provides a lump sum
and states that costs and disbursements are included in the specified sum. Marek v. Chesny, 473
The provision in rule 68 that permits “an
offer to allow judgment to be entered to the effect specified in the offer”
would appear to authorize, based on common law contract principles, this
variation of a lump sum that includes, rather than adds, costs and
disbursements. As a general matter, we
interpret rule 68 offers of judgment according to ordinary contract
principles. Collins v. Minn. Sch. of Bus., Inc., 636 N.W.2d 816, 818 (Minn.
App. 2001), aff’d, 655 N.W.2d 320 (
When an offeree accepts a lump-sum offer that includes costs and disbursements, the entry of judgment for exactly the specified sum is straightforward and promotes the certainty that the offeror may be seeking to achieve. But when the offer is rejected and the district court must make a posttrial determination of whether the judgment finally entered is more favorable than the offer, the net value of a lump sum that is inclusive of costs and disbursements is less readily ascertained. To compare fairly the net judgment and the offer for judgment, the offer’s “included” costs and disbursements must be deducted from the lump sum to achieve a parallel net offer. Thus, the district court must determine, first, whether the submitted expenses qualify as costs and disbursements and, second, whether the cost or disbursement had accrued as of the date of the offer. Thus, we turn to the final part of the calculation, the deduction for costs and disbursements accrued as of the date of the offer.
The district court deducted $204.30 from Perrone’s $5,000 lump-sum offer for judgment, concluding that only the costs for service of process ($90) and a medical-record acquisition fee ($114.30) qualified as costs and disbursements accrued as of the date of the offer. Based on this deduction, the district court determined that the net value of Perrone’s offer for judgment was $4,795.70. Comparing this amount to the judgment of $3,642.70, the district court concluded that the offer was more favorable to Wingo than the judgment finally entered, and Wingo was therefore obligated under rule 68 to pay Perrone’s costs and disbursements.
Wingo contends that the district court erred by excluding his submitted expenses for statutory costs ($200), filing fees ($220), deposition fees ($722.30), and expert-witness fees ($1,000). These disputed costs and disbursements total $2,142.30. If they qualify as costs and disbursements accrued as of the date of the offer, the net offer would only amount to $2,653.40, which would be less than the judgment finally entered, and Wingo would not be obligated under rule 68 to pay Perrone’s costs and disbursements.
In considering whether a submitted expense
had accrued, the district court stated that “[i]t can be reasonably assumed
that ‘accrued’ costs and disbursements are those that had been incurred prior
to the offer and were taxable at the time of the offer.” Applying this assumption, the court excluded
submitted amounts that were incurred prior to the offer but became taxable only
at the conclusion of the trial. Rule 68
does not provide a definition of “accrue,” and no
Wingo claims that his statutory costs, filing fees, deposition fees, and expert-witness fees all qualify as costs and disbursements that had been incurred at the time of Perrone’s offer for judgment. As a plaintiff, Wingo would be entitled to statutory costs of $200 “[u]pon a judgment in the plaintiff’s favor.” Minn. Stat. § 549.02, subd. 1 (2004). At the time of the offer, the case had not been litigated to a conclusion, and Wingo was not entitled to statutory costs. Therefore, the district court correctly declined to deduct statutory costs from the offer of judgment.
The district court excluded Wingo’s $220 in filing fees from the deduction, reasoning that the filing fees had not accrued by the date of the offer because Wingo’s “opportunity to tax did not accrue until trial.” Because we conclude that “accrue” in rule 68 is synonymous with “incur,” a cost or disbursement need not be legally enforceable against the opposing party to qualify as a deduction to determine the net value of the offer. By the time of the offer, Wingo had incurred $220 in filing expenses for which he was responsible, regardless of whether the case proceeded to trial. Because the fees are taxable costs and disbursements that Wingo incurred before the offer, they are deductible from the lump-sum offer.
The district court also excluded Wingo’s
claimed deposition costs from its calculation.
The court reasoned that the depositions were only for discovery purposes
and therefore could not qualify as costs or disbursements. But “[t]he fact that a deposition was not
used at trial does not bar deposition costs.”
Johnson v. S. Minn. Mach. Sales,
Inc., 460 N.W.2d 68, 73 (
The final expense that Wingo asserts should have been deducted from the offer is a $1,000 payment for expert-witness fees. Expert-witness fees are taxable costs. Stinson v. Clark Equip. Co., 473 N.W.2d 333, 336-37 (Minn. App. 1991) (observing that district court has discretionary authority to allow expert-witness fees as taxable costs). The record does not support Wingo’s claim, however, that he had incurred these witness fees at the time of the offer. The evidence is undisputed that Wingo made a $1,000 deposit in April 2004 for expert-witness services to be provided on June 7, 2004. This deposit was fully refundable up to five working days before the scheduled appointment. Thus, Wingo could have recovered the deposit and did not incur that amount as a cost until June 2, 2004, which was approximately two weeks after the offer’s date. Therefore, the district court did not err by concluding that the expert-witness expenses should not be included as part of the deduction.
We conclude, for the reasons stated, that the district court should have deducted an additional $589.80 from the $5,000 lump-sum offer: $220 for filing fees and $369.80 for deposition expenses. Combined with the $204.30 in service costs and medical-record expenses already deducted from the offer, the net offer of judgment amounted to $4,205.90. Because this figure still is greater than the final judgment of $3,642.70, Perrone’s offer of judgment exceeds the judgment as finally entered. The adjustments in calculating the deductible costs and disbursements do not affect the district court’s ultimate determination that Perrone is entitled to costs and disbursements under rule 68, and we affirm.