May 6, 2022 - This Week at the Ninth

This Week at The Ninth: Offers and Offsets

This week, the Ninth Circuit examines whether a Rule 68 offer of judgment overrides a non-final order granting summary judgment, and explores the applicability of the Government Pension Offset to spousal Social Security benefits.

KUBIAK V. COUNTY OF RAVALLI

The Court holds that when an offer under Federal Rule of Civil Procedure 68 is accepted within the 14-day window for acceptance, the clerk of court must enter judgment in accordance with the offer even if the district court has already issued a non-final order granting summary judgment to the other party.

Panel: Judges Kleinfeld, Fisher (3d Cir.), and Bennett, with Judge Fisher writing the opinion.

Key Highlight: “A Rule 68 offer, once made, is non-negotiable; it is either accepted, in which case it is automatically entered by the clerk of court, or rejected, in which case it stands as the marker by which the plaintiff’s results are ultimately measured.”

Background: Plaintiff Robert Kubiak brought a civil rights suit against the County of Ravalli, the Ravalli County Sheriff’s Office, and others.  The County moved for summary judgment and, while its motion was pending, it made Kubiak a settlement offer under Federal Rule of Civil Procedure 68 for $50,000 plus costs and fees.  Under that Rule, a plaintiff may accept the settlement offer within fourteen days and, if he does, the district court must enter judgment accordingly.  Before Rule 68’s fourteen-day window closed, the district court granted summary judgment to the County, but said that judgment would be entered “in due course” after it issued a reasoned opinion.  The County emailed Kubiak that it was withdrawing its Rule 68 offer, but shortly thereafter, Kubiak accepted the County’s Rule 68 offer.  The County objected, arguing that its offer should be deemed a nullity as of the issuance of the summary judgment order.  But the district court held that it was bound, under Rule 68, to enter judgment for Kubiak in the amount of $50,000 plus costs and fees.  The County appealed.

Result: The Ninth Circuit affirmed.  The Court explained that under the plain text of Rule 68, the district court properly entered judgment according to the County’s offer of judgment.  A Rule 68 offer, once made, is non-negotiable; it is either accepted, in which case it is automatically entered by the clerk of court, or rejected, in which case it stands as the marker by which the plaintiff’s results are ultimately measured.  Nor does the text admit exceptions to the 14-day period during which an offer of judgment remains open.  Accordingly, an offer must remain open for 14 days, and if it is accepted during that time, the clerk must enter judgment.  The rule contains no exception for the entry of a non-final order granting summary judgment on all claims, and the Court declined to create one.  The Court noted that its conclusion was supported by other Circuits’ uniform interpretations of the rule.  The Eighth Circuit has held that a plaintiff can accept a Rule 68 offer even after entry of final judgment.  The Eleventh Circuit, by contrast, has held that Rule 68 offers do not survive the entry of final judgment, but explained that absent the entry of final judgment, if a Rule 68 offer is timely accepted by the plaintiff, the clerk of court performs the ministerial act of entering judgment.  And the D.C. Circuit has held that a Rule 68 offer is not revocable during the specified window of time.  The Court then rejected three counterarguments by the County.  First, the Court rejected the argument that the district court’s grant of summary judgment amounted to a final order.  Though the Court had previously treated a dismissal with prejudice pursuant to a voluntary dismissal as a final order, it had not, and would not hold, that a non-final order granting summary judgment was one.  Second, the Court rejected the argument that the offer should be treated as invalid because, under Montana contract law, contracts require consideration, but any consideration evaporated when the summary judgment order was entered.  But Rule 68 offers differ from ordinary contracts, and Montana contract law does not overcome the mandatory operation of Rule 68.  Third, the Court disagreed that the County’s supposed inability to draft an offer that would have insulated it from an unexpected entry of summary judgment was a basis for relieving it from the judgment.  Finally, the Court made clear that it left open whether an entry of final judgment would nullify an outstanding Rule 69 offer and what happens to Rule 68 offer sin exceptional factual situations, such as when the plaintiff’s claim is fraudulent.

ROBERT KUBIAK V. COUNTY OF RAVALLI

The Court holds that a recipient of spousal Social Security benefits is subject to the Government Pension Offset if he receives a qualifying pension, notwithstanding whether he also receives a pension that would not otherwise trigger the offset.

Panel: Judges Paez, Friedland, and Korman (E.D.N.Y.), with Judge Friedland writing the opinion.

Key Highlight: “Because § 404.408a is unambiguous and clearly provides that the GPO applies to Miskey’s spousal benefits, and because Miskey has not meaningfully challenged the regulation, which appears reasonable and otherwise valid, the regulation controls here.”

Background: Social Security Administration regulations provide that someone who receives a government pension based on “noncovered” employment—providing compensation not subject to Social Security taxes—will have any spousal benefits they receive reduced by two-thirds of the amount of the pension.  Paul Miskey receives two government pensions, one from covered employment and one from noncovered employment.  In administrative proceedings, Miskey urged the Administration not to apply the so-called “Government Pension Offset” to his spousal benefits.  The Administration agreed at first, but ultimately realized Miskey was also receiving a pension from noncovered employment, withheld Miskey’s spousal benefits to recoup some $15,000 in overpayments, and applied the offset to Miskey’s spousal benefits going forward.  An ALJ ruled against Miskey and he sought review in federal court.  The district court remanded back to the agency for further proceedings, and Miskey appealed.

Result: The Ninth Circuit affirmed in part and reversed in part. First, the Court held that the Government Pension Offset applies to Miskey’s spousal benefits.  Both an older version of the relevant regulation, 20 C.F.R. § 404.408a, and an amended version enacted in 2015, applied the offset.  “The old version of the regulation provided that an individual in Miskey’s position—with a pension based on noncovered employment and another pension based on later, covered employment—‘will always’ have his benefits reduced.” And while the later version created an exception, that exception applied only “if the ‘earlier and later Federal, State, or local government employment were under the same pension plan,’” which was undisputedly not the case here.  The existence of Miskey’s pension from noncovered employment “therefore triggers the GPO’s application to his spousal benefits notwithstanding his later covered employment.”  And because the regulations were unambiguous, it did not matter that the Social Security Administration had published guidance documents that Miskey argued were unclear on this point.

The Court next concluded that the ALJ’s decision permitting the Administration to recoup overpayments from Miskey was not supported by substantial evidence, and remanded for further proceedings.  Recoupment was proper unless Miskey was “without fault” for the overpayment, and recoupment “would defeat the purpose of [the statute] or would be against equity and good conscience.”  The ALJ’s conclusion about Miskey’s fault was “problematic.”  It pointed to statements “dated after August 2015, by which time the agency had already concluded that there had been an overpayment and decided to re-apply the GPO to Miskey’s benefits.”  There was no evidence Miskey intentionally misled the Administration about the nature of his employment.  And “the record suggests that Miskey had a good faith—though mistaken—belief that the [offset] did not apply to his spousal benefits.”  The district court did not abuse its discretion by remanding to the agency because the agency could still consider additional evidence of fault, and “must decide in the first instance whether recoupment” would be inequitable or frustrate the statutory purpose.