Offer of Judgment in New Jersey: Before You Accept or Reject an Offer
How a formal offer can change the cost of taking a case to trial
By Peter J. Lamont, Esq.
A business owner receives an offer to resolve a lawsuit for $100,000 and decides the case is worth more. That may be a sound assessment. But if the document is an offer of judgment in New Jersey, the owner needs to evaluate more than the settlement amount. Rejecting a qualifying offer can affect responsibility for later litigation expenses and attorney’s fees, depending on the judgment and the rule’s exceptions.
The offer should go to counsel promptly, even if settlement discussions have been going nowhere. A formal deadline may be running while the parties continue negotiating. Ask counsel to explain the amount being offered, which claims it covers, and how the financial consequences would change under several realistic trial outcomes.
A Formal Offer Has Specific Requirements
Rule 4:58-1 permits an eligible party to serve an adverse party and file with the court an offer to take a monetary judgment in the offeror’s favor or to allow a judgment against the offeror for a stated sum, including costs. This is a court-rule procedure. An informal settlement email does not become an effective offer under the rule merely because it contains a dollar figure.
The rule excludes matrimonial actions and actions adjudicated in the Special Civil Part. It also requires the relief sought by the parties to be exclusively monetary when the offer is extended. If a lawsuit includes a request for an injunction or other nonmonetary relief, counsel must address that requirement before relying on the offer-of-judgment procedure.
For a business involved in New Jersey litigation, identifying the relief actually sought is an early part of the review. The label on the complaint is not enough. Read the claims and requested remedies, including any counterclaim, before deciding whether the rule applies.
The Offer and Acceptance Deadlines
An offer must be made more than 20 days before the actual trial date. Under Rule 4:58-1(b), an unaccepted offer is deemed withdrawn when the earlier of two periods expires: the deadline on the tenth day before the actual trial date or 90 days after service of the offer. Counsel should calculate those dates from the record rather than treating an offer as open indefinitely.
Acceptance requires serving the offeror and filing a notice of acceptance with the court. Telling your own attorney that the number sounds acceptable is not the same as completing those steps. Give counsel enough time to confirm the terms and handle the required service and filing.
The current rule also permits an offeror, subject to the rule’s provisions, to withdraw an offer before service or filing of a notice of acceptance by serving and filing a notice of withdrawal. A voluntarily withdrawn offer is not subject to the rule. This matters because older explanations describing these offers as invariably irrevocable do not reflect the current text.
A further offer by the same party withdraws that party’s previous offers. A counteroffer from the opposing party does not, by itself, withdraw the original offer. Keep copies of each offer and notice in date order so that everyone advising the client is working from the offer that remains operative.
How the 120 Percent and 80 Percent Thresholds Work
For an ordinary monetary claim outside the rule’s separate uninsured and underinsured motorist provisions, Rule 4:58-2(a) addresses a claimant’s rejected offer. The claimant must obtain a money judgment of at least 120 percent of the offer, excluding allowable prejudgment interest and counsel fees from the comparison.
For example, assume a single plaintiff makes a valid $100,000 offer in a straightforward contract case. A qualifying judgment of $120,000 meets that numerical threshold. A judgment of $115,000 does not, even though the plaintiff recovered more than the offer. These are simplified figures, not a calculation of the allowances a court would award in a particular case.
Rule 4:58-3 addresses an offer made by a party other than the claimant. The relevant judgment must be 80 percent of the offer or less, again excluding allowable prejudgment interest and counsel fees. If a defendant offers $100,000 and the claimant obtains a qualifying $75,000 judgment, the numerical test is satisfied, subject to the exceptions discussed below.
Do not compare the offer with a gross verdict figure without checking which figure the rule requires. The uninsured and underinsured motorist provisions use a different formulation involving the verdict and comparative negligence. Multiple-party cases also have their own provisions. Counsel should identify the correct comparison before giving the client a projected exposure figure.
Meeting the Threshold Does Not Answer Every Fee Question
Rule 4:58-2 describes reasonable litigation expenses incurred following nonacceptance and a reasonable attorney’s fee for subsequent services compelled by nonacceptance. It does not simply shift every legal bill from the beginning of the lawsuit. The work performed and the period for which recovery is sought still matter.
The rule also provides for eight-percent prejudgment interest on the money recovery from the offer date or completion of discovery, whichever is later, but only to the extent that it exceeds the otherwise allowable interest under Rule 4:42-11(b). The interest provisions need to be applied together. Adding eight percent on top of every other interest figure would misstate the rule.
There are significant exceptions. Under Rule 4:58-3(c), a nonclaimant does not receive these allowances where the claim is dismissed, a no-cause verdict is returned, or only nominal damages are awarded. The provision also addresses conflict with a fee-shifting statute or court rule and undue hardship or unfairness. A complete defense victory therefore does not automatically produce an offer-of-judgment fee award.
Rule 4:58-2(c) likewise bars allowances that would impose undue hardship or otherwise be unfair to the offeree. Where reducing the allowance would eliminate undue hardship, the court must reduce it accordingly. The offeree bears the burden of establishing the claimed hardship or unfairness. Those issues require evidence, not simply an assertion that the fee request is large.
Read Which Claims and Parties the Offer Covers
Rule 4:58-4 contains separate provisions for multiple claimants, multiple defendants, and multiple claims. If a claimant asserts several claims or faces a counterclaim, the claimant’s offer must include all claims made by or against that claimant. A party asserting a counterclaim is also subject to the rule’s all-claims requirement for its offer.
Suppose a company seeks unpaid invoices while its customer seeks damages for defective work. A proposed number cannot be evaluated sensibly without understanding how the counterclaim is treated. The contract and payment records may help counsel evaluate both sides of that dispute, but the offer itself must also be reviewed for compliance with the rule.
Offers involving several defendants can raise allocation questions that do not arise in a one-plaintiff, one-defendant example. Have counsel address those provisions directly. Applying the simple percentage examples above without that review can produce a misleading estimate of who may owe what.
Evaluate the Offer Against the Evidence
Before rejecting an offer, ask for a candid assessment of the evidence supporting damages and the likely cost of finishing the case. Identify what remains uncertain. A witness may not support the account you expected, or the documents may establish liability more clearly than the amount of the loss. A settlement decision should reflect those problems as well as the strongest parts of the claim.
Have counsel show the possible results in dollars. Include the proposed settlement, a reasonable range of judgments, and any potential allowances under the rule. Keep your own future litigation costs in the comparison too. The purpose is to understand the choices, not to predict a verdict with false precision.
Our business law practice in Wyckoff works with Bergen County businesses facing decisions that affect their operations as well as their legal claims. When a formal offer arrives, provide counsel with the latest financial records and any settlement communications. Review the deadline together and make the decision while there is still time to act on it.
Contact us today to discuss your business or legal matter. Put our 20+ years of legal experience to work for you.
For detailed insights and legal assistance on topics discussed in this post, including litigation, contact the Law Offices of Peter J. Lamont at our Bergen County Office. We're here to answer your questions and provide legal advice. Contact us at (201) 904-2211 or email us at info@pjlesq.com.
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About Peter J. Lamont, Esq.
Peter J. Lamont is a nationally recognized attorney with significant experience in business, contract, litigation, and real estate law. With over two decades of legal practice, he has represented a wide array of businesses, including large international corporations. Peter is known for his practical legal and business advice, prioritizing efficient and cost-effective solutions for his clients.
Peter has an Avvo 10.0 Rating and has been acknowledged as one of America's Most Honored Lawyers since 2011. 201 Magazine and Lawyers of Distinction have also recognized him for being one of the top business and litigation attorneys in New Jersey. His commitment to his clients and the legal community is further evidenced by his active role as a speaker, lecturer, and published author in various legal and business publications.
As the founder of the Law Offices of Peter J. Lamont, Peter brings his Wall Street experience and client-focused approach to New Jersey, offering personalized legal services that align with each client's unique needs and goals.
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