Arizona Court of Appeals Division One holds that a subsequent Rule 68 offer of judgment does not extinguish the effect of an offeree’s failure to accept a prior offer of judgment when both offers were more favorable to the offeree than the ultimate judgment.

Arizona Rule of Civil Procedure 68(g) governs offers of judgment.  Under Rule 68, if the offeree rejects the offer and “does not obtain a more favorable judgment,” the offeree must pay sanctions of reasonable expert witness fees, double taxable costs incurred after making the offer, and prejudgment interest on unliquidated claims accruing from the date of the offer.  The rule allows an offeror to make multiple offers of judgment but does not specifically address the effect of a subsequent offer on a prior offer.

Plaintiffs made two offers of judgment, one of $3,950,000 and a second of $3,949,999.  The defendant did not accept or reject either offer.  The jury returned a verdict of $4,250,000 and found the defendant 99% at fault.  Under Rule 68(g), the trial court awarded sanctions calculated from the date of the first offer of judgment.

The Court of Appeals affirmed.  It held that, when a party makes multiple offers of judgment that are each more favorable to the offeree than the ultimate judgment, a subsequent offer of judgment does not extinguish the effect of the offeree’s failure to accept a prior offer of judgment.  The court further held that the costs of service of process are taxable costs under A.R.S. § 12-332(A)(1).

Presiding Judge Johnsen delivered the opinion of the court, in which Judge Thompson and Chief Judge Brown joined.