May 08, 2012

Limiting Delay Damages - Rule 238 Settlement Offers

Many factors can delay the ultimate resolution of a case, not least of which is the backlog of cases in many Pennsylvania courts. It is not uncommon to see cases tried in 2012 that arise out of incidents occurring five or more years prior. Unfortunately for defendants, any award of damages to the plaintiff may be amplified through the imposition of delay damages pursuant to the Pennsylvania Rules of Civil Procedure. Delay damages can be limited or avoided, however, if a valid Rule 238 settlement offer is made. Delay damages are unavailable for the time period following a Rule 238 offer if:

  1. (1) The offer is in writing and contains an express clause leaving the offer open for ninety (90) days; and
  2. (2) The eventual judgment is not in excess of 125% of the offer.

Under Pa. R.Civ. P. 238, delay damages are calculated from the date one year following service of original process up to the date of the award. Rates are calculated at the Wall Street Journal’s published prime interest rate for each year, plus 1%.

 

Prime   Rule 238

Year      Rate     Delay Damages Rate

2000    8.50%    9.50%

2001    9.50%  10.50%

2002    4.75%    5.75%

2003    4.25%    5.25%

2004    4.00%    5.00%

2005    5.25%    6.25%

2006    7.25%    8.25%

2007    8.25%    9.25%

2008    7.25%    8.25%

2009    3.25%    4.25%

2010    3.25%    4.25%

2011    3.25%    4.25%

2012    3.25%    4.25%

Rule 238 does provide that delay damages will not be available for time periods “during which Plaintiff caused delay of the trial.” As a practical matter, however, this will not include delays such as rescheduled IMEs, cancelled depositions, or late discovery answers, even if they were caused solely by the plaintiff. The rationale for this is that scheduling issues and late discovery are an unavoidable part of litigation of which both sides are guilty at one point or another. Courts do not want to be the arbiter of litigation scheduling issues after the matter has been tried. The only strong support on the case law for a credit to the defendant is in instances where the plaintiff expressly requests a continuance of the trial. This, however, is usually a short delay which will not have a significant impact in overall delay damages. As such, the best way to limit or avoid delay damages is to make a valid Rule 238 settlement offer once discovery is complete and the defendant is in a position to make a full evaluation of the case.

Consider the following scenario:Plaintiff files and serves a complaint on January 1, 2004, in Luzerne County in a case with clear liability against the defendant. Following discovery (protracted with delays and motions to compel plaintiff), failure of several medical providers to respond to subpoenas, and delays in depositions and an IME (rescheduled once due to plaintiff’s illness and once due to an emergency situation in plaintiff’s counsel’s family), the case goes to mediation on January 1, 2006. Defendant makes a best and final written settlement offer of $40,000. The offer does not contain an express clause leaving the offer open for 90 days. The plaintiff rejects the offer and following some additional settlement discussions, trial certification is filed in May 2006. Due to the delay in listing for trial in Luzerne County and delays due to various pretrial motions, the case is not tried until the December term of 2008. The jury returns a verdict in favor of the plaintiff in the amount of$50,000 on January 1, 2009.

In this situation, where the offer was made in writing, but did not contain a clause expressly keeping the offer open for 90 days, delay damages on the $50,000 award would be calculated as follows:

Without a valid Rule 238 Offer (offer on 1/1/06):

Time period                                         Rule 238 Rate   Delay Damages

(begins one year after service)

Jan 1, 2005 - Dec 31, 2005:                       6.25%             $3,125

Jan 1, 2006 - Dec 31, 2006:                       8.25%             $4,125

Jan 1, 2007 - Dec31, 2007:                       9.25%              $4,625

Jan 1, 2008 - Dec 31, 2008:                       8.25%             $4,125

Total Delay Damages w/o valid Rule 238 offer:         $16,000

In the above hypothetical, a written offer was made at a time in the litigation when discovery and an IME had been completed. Defendant made a substantial offer for settlement confident that the defendant had all necessary information to properly evaluate the case. Had the defendant simply included an express clause keeping the offer open for 90 days, delay damages would have been unavailable to the plaintiff from January 1, 2006, (date of offer) onward as follows:

 

With a valid Rule 238 Offer (offer on 1/1/06):

Time period                     Rule 238 Rate   Delay Damages

(begins 1 year after service) 

Jan 1, 2005 - Dec 31, 2005:     6.25%              $3,125

Jan 1, 2006 - Dec 31, 2006:     8.25%     Unavailable (post offer)

Jan 1, 2007 - Dec 31, 2007:     9.25%     Unavailable (post offer)

Jan 1, 2008 - Dec 31, 2008:     8.25%     Unavailable (post offer)

Total Delay Damages with

valid Rule 238 offer:                 $3,125

In this hypothetical, simply making a valid Rule 238 offer (in writing; expressly open for 90 days) would have limited the plaintiff’s delay damages to $3,125, saving the defendant nearly $13,000 on the eventual judgment. In cases with larger numbers and longer delays, savings would be further realized.