Erie — State Offer of Settlement Statute Is Substantive and Applies in Federal Court Diversity Action

From Wheatley v. Moe’s SW Grill, LLC, 2008 U.S. Dist. LEXIS 88108 (N.D. Ga. Sept. 30, 2008):

...Rule 68 and O.C.G.A. § 9-11-68 are not in "direct collision" with one another. Rule 68 is available only to a party defending against a claim, whereas O.C.G.A. § 9-11-68 is available to both plaintiffs and defendants. Moreover, Rule 68 allows the recovery of "costs," which ordinarily does not include attorney's fees. O.C.G.A. § 9-11-68, on the other hand, awards the successful offeror his attorney's fees incurred between the date of rejection of the offer and the entry of judgment. Additionally, Rule 68 applies to any claim, whereas O.C.G.A. § 9-11-68 is applicable only to tort claims. Further, Rule 68 authorizes offers of judgment, not offers of settlement, as is the case with O.C.G.A. § 9-11-68. Finally, unlike Rule 68, O.C.G.A. § 9-11-68 expressly allows the offeror to place conditions (as Defendants did here) on the acceptance of the offer of settlement. In light of these substantial differences between Rule 68 and O.C.G.A. § 9-11-68, the two cannot be said to be in "direct collision," and there is no reason to believe that O.C.G.A. § 9-11-68 cannot be applied in harmony with Rule 68.

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O.C.G.A. § 9-11-68 creates a substantive right to attorney's fees in certain cases where either party, having made an offer of settlement (not judgment, unlike Rule 68), ultimately prevails. While the statute may provide certain procedural constraints, the statute is at its core a substantive law. Accord Pinkerton & Laws, Inc. v. Royal Ins. Co. of Am., 227 F. Supp. 2d 1348, 1357 (N.D. Ga. 2002) (holding that O.C.G.A. § 33-4-6, which authorizes an award of attorney's fees against an insurer who refuses in bad faith to pay a covered claim, was substantive law for purposes of the Erie doctrine and thus inapplicable where the parties had agreed that the policy was governed by Florida law); Elberta Crate & Box Co. v. Cox Automation Systems, LLC, No. 6:05 CV 03(HL), 2005 WL 1972599, at *5-6 (M.D. Ga. Aug. 16, 2005) (holding that O.C.G.A. § 13-6-11, which authorizes an award of attorney's fees against a defendant who acts in bad faith, is stubbornly litigious, or causes the plaintiff unnecessary trouble and expense, is substantive for purposes of Erie).

Held: “Because O.C.G.A. § 9-11-68 is substantive in nature and does not conflict with a federal law or rule of procedure, the Court is bound to apply it to this case.”

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