Ellen Pao, the former BigLaw associate who sued her venture capital firm, Kleiner Perkins Caufield & Byers, for sex-discrimination, now owes the firm its litigation costs and possibly its attorney fees according to the abajournal.com June 19, 2015 article titled Judge says Ellen Pao owes $276K to venture capital firm in sex-discrimination case. Why? Because sometime before the trial, the firm made her a million dollar settlement offer in the form of an “offer of judgment,” and she lost at trial. In California, where the lawsuit was pending, Rule 68 governs offers of judgment:
If the judgment that the offeree finally obtains is not more favorable than the unaccepted offer, the offeree must pay the costs incurred after the offer was made.
Because Ms. Pao did not accept the firm’s million dollar offer, and because she lost at trial, under Rule 68, she must pay the firm’s costs that were incurred after they made the offer. Citing the disparity between the resources of Ms. Pao and the firm, the judge reportedly reduced the firm’s costs from $972,814 to $276,966.
Offers of judgment can be very effective tools for the defendant in a case, because it puts pressure on the plaintiff to settle. And, since offers of judgment can be made early in the case, should a defendant prevail, or get a verdict that is less than the offer of judgment, the plaintiff can end up paying most of the defendant’s costs.
If you receive an offer of judgment, take it seriously and critically analyze the strength of your case in light of all the factors that can affect the outcome. After all, if it can happen to Ellen Pao . . . it can happen to you.