Radecki v. Amoco Oil Co.

• Decision Date: 23 September 1988
• Docket Number: No. 87-5253,87-5253
• Citation: 858 F.2d 397
• Parties: Ronald J. RADECKI and Radecki's Service, Inc., a Minnesota corporation, Appellees, v. AMOCO OIL COMPANY, a Maryland corporation, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 397

858 F.2d 397

12 Fed.R.Serv.3d 165

Ronald J. RADECKI and Radecki's Service, Inc., a Minnesota corporation, Appellees, v. AMOCO OIL COMPANY, a Maryland corporation, Appellant.

No. 87-5253.

United States Court of Appeals Eighth Circuit.

Submitted Feb. 10, 1988.

Decided Sept. 23, 1988.

Ernest Reveal, Minneapolis, Minn., for appellant.

Wayne A. Hergott, Minneapolis, Minn., for appellees.

Before BOWMAN, Circuit Judge, FAIRCHILD, ^* Senior Circuit Judge, and MAGILL, Circuit Judge.

BOWMAN, Circuit Judge.

Amoco Oil Company (Amoco) appeals from a District Court judgment in favor of appellees, Ronald J. Radecki and Radecki's Service, Inc. (Radecki). Amoco contends that the District Court erred both by entering judgment for Radecki pursuant to Amoco's Fed.R.Civ.P. 68 offer of judgment and by awarding attorney fees. We agree and reverse.

I.

Radecki brought the present suit against Amoco on April 20, 1983. Invoking the Petroleum Marketing Practices Act (PMPA), 15 U.S.C. Sec. 2801 et seq., Radecki sought to compel Amoco to renew the Radecki franchise agreement without including a provision Amoco wanted that would have called for converting the "full-service" station to a "pumper," or, alternatively, to compel Amoco to sell the station to Radecki.

In the fall of 1986, shortly before the suit was scheduled to go to trial, the parties conducted settlement negotiations. Radecki was represented by Wayne Hergott and his co-counsel Patrick Flaherty; Amoco was represented by Dale Larson and his co-counsel Rita McConnell, along with Amoco in-house attorney Maurice Glover. At the end of the last settlement conference, the parties were close to settlement. Amoco was offering $600,000 plus non-cash considerations to settle the case, and Radecki was demanding $675,000 plus the non-cash considerations. The parties understood that the amounts offered and demanded were to cover all of Amoco's potential liability, including any liability for costs and attorney fees. The negotiations ended without the parties reaching a settlement.

A few days later, on November 18, 1986, Amoco served on Radecki a formal offer of judgment pursuant to Rule 68 of the Fed.R.Civ.P. ¹ The offer stated: "PLEASE TAKE NOTICE that, pursuant to Rule 68 of the Federal Rules of Civil Procedure, defendant, Amoco Oil Company, hereby offers to allow judgment [to] be taken against it in the amount of $525,000.00, including costs now accrued." Joint Appendix (App.) at 173. The next day, Amoco served Radecki with a second offer of judgment that differed from the first only in that it stated explicitly that the amount offered was inclusive of attorney fees. In a telephone conversation on November 20, 1986, McConnell informed Hergott that Amoco's second offer was intended to clarify the first and that Amoco was tendering the $525,000 offer of judgment with the understanding that the amount offered included any liability for attorney fees. Hergott understood then, if not before, that the offer of judgment Amoco wanted on the table was for $525,000, inclusive of attorney fees. As the end of the ten-day period for accepting the offer approached, Radecki simultaneously filed an "Acceptance of Judgment" (purporting to accept the November 18 offer) and a motion for attorney and expert witness fees.

The District Court determined that "Amoco could not properly withdraw or clarify its offer of November 18," held that Radecki's purported acceptance of the offer was effective, and found that the $525,000 sum offered did not subsume attorney fees. Thus, on February 25, 1987, the District Court ordered judgment entered for Radecki "in the amount of $525,000, including costs now accrued" and, pursuant to the PMPA, 15 U.S.C. Sec. 2805(d)(1)(C), awarded Radecki an additional $229,887.29 in attorney fees. Amoco's subsequent motions were denied, and in an order dated May 13, 1987, the District Court confirmed its February 25, 1987 order. Amoco brought this appeal contending, inter alia, that the District Court should not have held that Radecki's acceptance was effective and should not have awarded attorney fees.

II.

This case involves application of the contract principles of offer and acceptance to a Rule 68 offer of judgment. Rule 68 allows a defendant to make an offer to a plaintiff whereby, upon acceptance, judgment will be taken against the defendant for a specified sum "with costs then accrued." Fed.R.Civ.P 68. The primary issue here is whether Radecki accepted Amoco's Rule 68 offer of judgment.

To decide whether there has been a valid offer and acceptance for purposes of Rule 68, courts apply the principles of contract law. See, e.g., Johnson v. University College of the Univ. of Alabama, 706 F.2d 1205, 1209 (11th Cir.), cert. denied, 464 U.S. 994, 104 S.Ct. 489, 78 L.Ed.2d 684 (1983); Adams v. Wolff, 110 F.R.D. 291, 293 (D.Nev.1986); Bentley v. Bolger, 110 F.R.D. 108, 113-14 (C.D.Ill.1986); Boorstein v. City of New York, 107 F.R.D. 31, 34 (S.D.N.Y.1985). Under basic contract law principles, for an offer and acceptance to create a binding agreement there must be an objective manifestation of mutual assent, i.e., what is often referred to (somewhat misleadingly) as a "meeting of the minds," see 1 A. Corbin, Corbin on Contracts Sec. 107, at 478-79 (1963); this principle applies to Rule 68 offers and acceptances. See, e.g., Johnson, 706 F.2d at 1209; Adams, 110 F.R.D. at 293; Boorstein, 107 F.R.D. at 33-34; Greenwood v. Stevenson, 88 F.R.D. 225, 229-30 (D.R.I.1980).

Whether there has been mutual assent between the parties in this case depends in part on the disputed issue of what Amoco offered. In dispute is whether the $525,000 Amoco tendered in its November 18 offer was intended to include attorney fees. Amoco argues that attorney fees were included, Radecki contends they were not. A finding that attorney fees were not included supports Radecki's position that its purported acceptance was effective, and vice versa. See infra p. 403. The offer itself makes no mention of attorney fees, yet it seems to contemplate that acceptance of the offer will fully resolve Amoco's liability; the offer appears to be a lump-sum offer, even subsuming within the amount offered any liability for "costs." ² (The offer states that the amount offered "includes" costs rather than stating "plus" or "and" costs.) See Chesny v. Marek, 720 F.2d 474, 476 (7th Cir.1983), rev'd on other grounds, 473 U.S. 1, 105 S.Ct. 3012, 87 L.Ed.2d 1 (1985). Because the offer is silent with respect to attorney fees, we resort to factors outside the words themselves to determine whether Amoco intended the offered sum of $525,000 to subsume attorney fees. ³

The District Court found that Amoco did not intend to include attorney fees in its November 18 offer. The District Court states: "An award of fees ... differs in both nature and effect from a judgment on the merits. Thus, the court concludes that the offer of judgment of November 18, 1986 was not intended to include attorneys' and expert witness' [sic] fees as part of the judgment Amoco offered." App. at 226 (citation omitted). That, of course, is a non sequitur. Perhaps the District Court's conclusion is based on its belief that "McConnell was unaware of the status of the [settlement] negotiations" when she drafted the offer. App. at 223. But the District Court does not cite, nor have we found, anything in the record to support that belief. To the contrary, McConnell had every reason to know the parties' positions since she personally attended the settlement negotiations as a representative of Amoco. As she explains in her affidavit, she knew of Amoco's last offer and Radecki's last demand during the final settlement conference and, consistent with the settlement discussions, intended the November 18 offer to be a lump-sum amount inclusive of attorney fees.

Consistent with its purpose of promoting settlements, Rule 68 allows defendants to make lump-sum offers that are inclusive of attorney fees. "If defendants [were] not allowed to make lump-sum offers that would, if accepted, represent their total liability, they would understandably be reluctant to make settlement offers." Marek v. Chesny, 473 U.S. 1, 6-7, 105 S.Ct. 3012, 3015-16, 87 L.Ed.2d 1 (1985). See Delta Air Lines v. August, 450 U.S. 346, 379 n. 5, 101 S.Ct. 1146, 1163 n. 5, 67 L.Ed.2d 287 (1981) (Rehnquist, J., dissenting) ("Were we to hold that attorney's fees were not subject to settlement and compromise (in the same way as the issues of liability, damages, and other remedies) as a part of a Rule 68 offer, we would frustrate the purpose of [Rule 68].") (emphasis in original); see also Evans v. Jeff D., 475 U.S. 717, 732-34, 106 S.Ct. 1531, 1540-41, 89 L.Ed.2d 747 (1986) (citing Marek ). Moreover, Rule 68 does not require a laundry list of the elements of relief included within an offer or specific mention of attorney fees, and it runs counter to the purpose of Rule 68 to assume that forms of relief not mentioned are not intended to be included within the sum offered. Rule 68 is designed to encourage complete settlement, not simply to resolve the issues of liability and remedies.

Here, the evidence as a whole strongly supports the view that Amoco intended to include attorney fees within the amount specified in its initial offer of November 18. First, the settlement amounts discussed during negotiations consistently had been inclusive of attorney fees. McConnell therefore was surprised when Hergott told her he might take the position that attorney fees were not subsumed in the amount tendered in the November 18 offer of judgment. Second, the November 19 offer appears to be a clarification rather than a modification of the November 18 offer. The "revised" offer followed right on the heels of the first, with no apparent intervening event to cause Amoco to change the terms of its offer. Radecki provides no explanation why Amoco would want to modify on November 19 what it offered on November...