Erdman v. Cochise County, Ariz.

• Decision Date: 22 February 1991
• Docket Number: No. 89-16015,89-16015
• Parties: James Richard ERDMAN, Plaintiff-Appellant, v. COCHISE COUNTY, ARIZONA; and City of Douglas, Arizona, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 877

926 F.2d 877

18 Fed.R.Serv.3d 1459

James Richard ERDMAN, Plaintiff-Appellant, v. COCHISE COUNTY, ARIZONA; and City of Douglas, Arizona,

Defendants-Appellees.

No. 89-16015.

United States Court of Appeals,

Ninth Circuit.

Argued and Submitted Dec. 13, 1990.

Decided Feb. 22, 1991.

Tony K. Behrens, Sierra Vista, Ariz., for plaintiff-appellant.

Steven Weatherspoon, Chandler, Tullar, Udall & Redhair, Tucson, Ariz., for defendant-appellee Cochise County.

Arthur C. Atonna, Douglas, Ariz., for defendant-appellee City of Douglas.

Appeal from the United States District Court for the District of Arizona.

Before GOODWIN, C.J., ALDISERT ^* and FERGUSON, Circuit Judges.

FERGUSON, Circuit Judge:

James Erdman appeals from the district court's rescission of an Offer of Judgment extended by the City of Douglas, Arizona under Rule 68 and accepted by him. In addition, he appeals the grant of summary judgment to both defendants on the merits of his Sec. 1983 claim for unlawful incarceration. We reverse on the Rule 68 claim, but affirm on the merits.

FACTS

Erdman was arrested on July 14, 1987 in the City of Douglas, Cochise County, Arizona, and taken into custody. He was booked on two charges: driving while intoxicated (second offense), and driving with a suspended license. Although the charges carried a minimum sentence of 60 days in jail, Douglas City Magistrate Bradshaw permitted Erdman to plead guilty to misdemeanor charges and released him on probation after two days in custody.

Subsequently, he was indicted by a Cochise County grand jury on a felony count for the same offense, as well as a second felony count of resisting arrest, and arrest warrants were issued. A Cochise County Deputy Sheriff discovered the mix-up when he tried to serve Erdman at the city jail, but failed to notify the prosecutor or the court that Erdman's case had already been adjudicated as a misdemeanor. Erdman was never notified of the outstanding arrest warrants.

Some months later, Erdman was arrested for disorderly conduct in Yuma, and a computer check revealed the outstanding bench warrant. The Yuma municipal court refused to release him on bail, and held him for nine days while his family unsuccessfully attempted to straighten out the error. Eventually Erdman was taken to Cochise County, arraigned and allowed to post bail after three more days. He promptly contacted a public defender, who was able to get the felony charges dismissed.

Through attorney Tony Behrens, Erdman then filed a claim for monetary damages and injunctive relief against both the City and the County under 42 U.S.C. Sec. 1983, claiming that his incarceration constituted double jeopardy and violated the Fourth and Fourteenth Amendments. Discovery and settlement negotiations commenced. Thereafter, the City made an Offer of Judgment, which stated:

The City of Douglas, pursuant to Rule 68, Federal Rules of Civil Procedure, offers to allow judgment to be taken against the City of Douglas for the sum of SEVEN THOUSAND FIVE HUNDRED DOLLARS ($7,500.00) with costs now accrued.

(Emphasis added). As the district court found, both Erdman and his attorney construed the offer to mean that Erdman himself would receive the full $7,500, and that Behrens would be entitled to an additional In response, the City filed a Motion in Opposition and a "Notice of Unacceptable Acceptance," claiming that its offer had been "inartfully drafted" and that it had intended to include attorney fees in its lump sum offer. The court accepted the City's protestations, and ordered that the offer be rescinded based on "mutual mistake," although no argument was heard or evidence taken. The court held that:

sum as reasonable attorney fees under the "costs" provision of 42 U.S.C. Sec. 1988. Erdman promptly filed a Notice of Acceptance with the Court, along with a Motion for Determination of Costs.

any ambiguity in the terms of the offer is interpreted in favor of the offeree unless the offeree has reason to know of the offeror's intentions. In the present case, although it is not clear that the plaintiff knew of the defendant's intentions, there is some evidence that the plaintiff had reason to know that its interpretation of the offer differed materially from the defendant's.

After summarizing the City's evidence, the court found:

Defendant clearly intended its offer to include attorney fees and costs. Plaintiff obviously attached materially different meanings to defendant's offer as evidenced by plaintiff's filing of its Motion for Determination of Costs in conjunction with its Notice of Acceptance.

In rescinding the offer, the district court relied on an Eighth Circuit case which involved two Rule 68 offers, Radecki v. Amoco Oil Co., 858 F.2d 397 (8th Cir.1988). In that case, the original offer was for a sum "including costs now accrued," and did not expressly mention attorney fees. The next day, Amoco attempted to clarify its offer to clearly state that all fees had been included, but the district court allowed Radecki to accept the original, unmodified offer. The Court of Appeals reversed, holding that the second offer was permissible since it merely clarified Amoco's original intent, and that Radecki's attempt to accept the ambiguous offer was invalid. 858 F.2d at 400.

I. The Offer of Judgment

Although issues involving construction of Rule 68 offers are reviewed de novo, disputed factual findings concerning the circumstances under which the offer was made are usually reviewed for clear error. ¹ Simon v. Intercontinental Transport B.V., 882 F.2d 1435, 1439 (9th Cir.1989). However, no deference need be accorded in the summary judgment setting where no evidentiary hearing was ever held on the settlement issue. ² Heiniger v. City of Phoenix, 625 F.2d 842, 843-44 (9th Cir.1980).

This case presents an issue of first impression in this circuit: whether a Rule 68 Offer of Judgment may be withdrawn after acceptance based on the offeror's failure to recognize that "costs" in actions under 42 U.S.C. Sec. 1983 automatically include attorney fees under 42 U.S.C. Sec. 1988. We hold that the City's drafting error should be construed against it, rather than against the plaintiff.

Erdman was entitled to rely on the plain language of the offer he accepted, "$7,500 with costs now accrued," which under Marek v. Chesny, 473 U.S. 1, 105 S.Ct. 3012, 87 L.Ed.2d 1 (1985), entitles him to a reasonable attorney's fee award in addition to the lump sum named in the offer. ³ The City alleges that plaintiff's counsel somehow "laid in waiting" to trick the City into offering more than it meant to. It contends Both sides agree that Rule 68's cost-shifting provision is generally intended to encourage settlement by providing both defendants and plaintiffs with strong incentives to end the litigation early. The stakes for a plaintiff who receives an Offer of Judgment under Rule 68 are especially high in civil rights cases, since 42 U.S.C. Sec. 1988 specifically authorizes attorneys' fees to be awarded to prevailing plaintiffs as an element of "costs." The effect of Rule 68 in civil rights cases encourages settlements rather than engaging in costly litigation.

that "with costs" was intended to mean "including costs" rather than "plus costs," and argues that its "inartful draftsmanship" constitutes grounds for rescission since the opposing attorney should have realized that the offer was misleadingly drafted.

Marek, the leading case on this issue, confirms this trade-off based on the history and intent behind Rule 68. "Application of Rule 68 will serve as a disincentive for the plaintiff's attorney to continue litigation after the defendant makes a settlement offer," and "will require plaintiffs to 'think very hard' about whether continued litigation is worthwhile." 473 U.S. at 10-11, 105 S.Ct. at 3017-18. Marek specifically held that the Rule 68 term "costs" includes attorney fees under 42 U.S.C. Secs. 1983 and 1988, but allowed defendants to choose whether to make all-inclusive lump-sum offers or name a damages figure and allow fees to be added later.

If an offer recites that costs are included or specifies an amount for costs, and the plaintiff accepts the offer, the judgment will necessarily include costs; if the offer does not state that costs are included and an amount for costs is not specified, the court will be obliged by the terms of the Rule to include in its judgment an additional amount which in its discretion it determines to be sufficient to cover the costs.... Accordingly, it is immaterial whether the offer recites that costs are included, whether it specifies the amount ... or, for that matter whether it refers to costs at all.

Id. at 6, 105 S.Ct. at 3015 (citation omitted).

Typically, a settlement agreement is analyzed in the same manner as any contract, i.e., any ambiguities are construed against the drafter. Where necessary, district courts are authorized to look to extrinsic evidence to clarify ambiguities as to the intended meaning of material terms. Callie, 829 F.2d at 890-91. Rule 68 offers, however, differ from contracts with respect to attorney fees. We have held that any waiver or limitation of attorney fees in settlements of Sec. 1983 cases must be clear and unambiguous. Muckleshoot Tribe v. Puget Sound Power & Light Co., 875 F.2d 695, 698 (9th Cir.1989).

Muckleshoot was a Sec. 1983 case involving Indian water rights. After four years of negotiations, the parties agreed on a consent decree which said nothing about fees or costs. In resolving the subsequent attorney fee litigation, we stated that "any party wishing to foreclose a suit for Sec. 1988 fees must negotiate a provision waiving attorneys' fees." Id. We placed the burden squarely on the defendant to demonstrate by "clear language in the release" that fees had been waived or otherwise negotiated.

[I]f the language in the release is unclear or ambiguous, surrounding circumstances may clearly manifest the intent of the parties that...