JEFFREY MAREK, THOMAS WADYCKI AND LAWRENCE RHODE, PETITIONERS V.
ALFRED W. CHESNY, INDIVIDUALLY AND AS ADMINISTRATOR OF THE ESTATE OF
STEVEN CHESNY, DECEASED

   No. 83-1437

   In the Supreme Court of the United States

   October Term, 1984

   On Writ of Certiorari to the United States Court of Appeals for the
Seventh Circuit

   Brief for the United States As Amicus Curiae Supporting Petitioners

            TABLE OF CONTENTS
   Interest of the United States
   Summary of argument
   Argument:
      A plaintiff who rejects a Rule 68 offer of judgment
      and then obtains a less favorable final judgment may
      not shift his post-offer attorneys' fees to the defendant
      under 42 U.S.C. (Supp. V) 1988
      I. Settled principles of statutory construction
         require that the definition of attorneys' fees "as
         part of the costs" in 42 U.S.C. (Supp. V) 1988
         be harmonized with the language of Fed. R. Civ. P. 68
     II. The court of appeals erred in rejecting the
         "logical" approach to harmonizing Rule 68 and
         Section 1988
         A. The policies underlying both Section 1988
            and Rule 68 require limiting a plaintiff's
            attorneys' fee award to fees incurred before
            the making of the defendant's offer of judgment
         B. Construing "costs" under Rule 68 as
            encompassing attorneys' fees under Section
            1988 does not render Rule 68 invalid under
            the Rules Enabling Act
   Conclusion
   Appendix

                          QUESTION PRESENTED

   Rule 68 of the Federal Rules of Civil Procedure provides that, if a
plaintiff rejects a pre-trial offer of judgment and then obtains a
less favorable final judgment, the plaintiff "must pay the costs
incurred after the making of the offer." The Civil Rights Attorney's
Fees Awards Act of 1976, 42 U.S.C. (Supp. V) 1988, provides that in
certain enumerated actions the court may award the prevailing party "a
reasonable attorney's fee as part of the costs." Against this
background, the United States will address the following question:

   Whether a plaintiff who rejects a Rule 68 offer of judgment that is
more favorable to the plaintiff than the judgment finally obtained may
shift to the defendant, under 42 U.S.C. (Supp. V) 1988, the attorneys'
fees incurred by the plaintiff after the making of the defendant's
more favorable offer of judgment.

                     INTEREST OF THE UNITED STATES

   This case presents the important question whether attorneys' fees,
which are statutorily defined as "part of the costs" in The Civil
Rights Attorney's Fees Awards Act of 1976, 42 U.S.C. (Supp. V) 1988,
are among the "costs" encompassed by Rule 68 of the Federal Rules of
Civil Procedure for purposes of determining a plaintiff's liability
for his own attorneys' fees when the plaintiff rejects an offer of
judgment under Rule 68 but later obtains a final judgment less
favorable than the offer.  The issue arises because, under Rule 68,
such a plaintiff is liable for "the costs incurred" after the offer is
made.

   The United States has a substantial interest in the resolution of
this issue.  The decision of the court below, holding that civil
rights plaintiffs may recover post-offer attorneys' fees even if the
final judgment they obtain is less favorable than the Rule 68 offer
they rejected, significantly impairs the effectiveness of Rule 68 as a
tool for encouraging settlements and avoiding protracted litigation.
Accordingly, the decision may well result in an unnecessary increase
in the workload of the already over-burdened federal courts.  In
addition, as a defendant, the United States may face potential
liability for attorneys' fees under a host of fee-shifting statutes
(most notably, Title VII of the Civil Rights Act of 1964, 42 U.S.C.
2000e-5(k)) that, like Section 1988, specifically define attorneys'
fees "as part of the costs."

   The United States makes regular use of Rule 68 generally and in
civil rights litigation in particular.  Civil rights cases are
expensive to take to trial;  they may involve many witnesses and
thousands of documents.  See Hensley v. Eckerhart, No. 81-1244 (May
16, 1983), slip op. 11-12.  At the same time, the realistic value of
the claims asserted is often relatively small, notwithstanding the
frequent inclusion of rather extravagant claims for relief.  In
appropriate cases, therefore, the United States makes a reasonable
offer of judgment.  Such offers are made not only to avoid needless
litigation but also to ensure that the government will not be required
to pay the plaintiff's attorneys' fees (which often far exceed the
plaintiff's damages) if the plaintiff prevails on some aspect of his
claim.  Incorporation of Section 1988's definition of "costs" into
Rule 68 (which does not itself define "costs") would serve the
important purpose of relieving defendants of the burden of plaintiffs'
attorneys' fees for continued litigation that produces no additional
benefits.  But if plaintiffs are assured that they will recover
attorneys' fees even if they reject reasonable offers and ultimately
obtain less favorable judgments, there will be very little incentive
for plaintiffs to accept reasonable settlement offers.  Accordingly,
the United States joins petitioners in urging reversal of the decision
below.

                          SUMMARY OF ARGUMENT

   Notwithstanding Section 1988's definition of attorneys' fees as
"part of the costs," the court of appeals held that a civil rights
plaintiff who obtains a less favorable final judgment than the Rule 68
offer he rejects is entitled to recover his post-offer attorneys' fees
from the defendant.  The facts of this case vividly demonstrate the
anomalous result that flows from such a ruling.  Petitioners made an
obviously reasonable offer of judgment to settle this case for
$100,000, which would have compensated respondent for his pre-offer
attorneys' fees of $32,000 and $68,000 in damages.  Respondent
rejected that offer and then ran up additional attorneys' fees of
$171,000 to secure a jury verdict of $60,000 -- a net loss to
respondent of $8,000.  To require petitioners to pay $171,000 in
post-offer fees incurred solely because of respondent's unreasonable
failure to accept a favorable settlement is contrary to elementary
principles of fairness.

   The law does not require such an inequitable result.  The court of
appeals' decision conflicts with the plain meaning of Rule 68 and
Section 1988 and rests on erroneous policy considerations.  Rule 68
and Section 1988 can be easily harmonized to produce a result that is
faithful to the purposes of the statute and the rule and fair to both
parties.

   I. Because Rule 68 does not define "costs," it is appropriate to
look to Congress's definition of that term in the underlying statute.
Section 1988 expressly includes attorneys' fees as "part of the
costs." Thus, although the traditional understanding of "costs" might
not ordinarily include attorneys' fees, here Congress has exercised
its unquestioned authority to define fees as costs, and that
determination is binding on the courts.  See, e.g., White v. New
Hampshire Dep't of Employment Security, 455 U.S. 445, 449 n.7 (1982);
Hutto v. Finney, 437 U.S. 678, 693-697 (1978).

   Moreover, the plain language of Section 1988 is no accident.
Contrary to the court of appeals' assumption, the contemporaneous
understanding of the term "costs" at the time of Rule 68's
promulgation in 1938 clearly included attorneys' fees.  By 1938,
Congress had enacted numerous statutes -- encompassing much of the
major legislation of the period -- that defined attorneys' fees "as
part of the costs," and it has continued to do so with ever-increasing
frequency.  See App., infra, 1a-6a.  The substantial number of
statutes affected, coupled with the rule that courts must defer to
Congress's definition of costs and attorneys' fees compels a reading
of Rule 68 and Section 1988 that harmonizes the language of each.

   II. Although the court of appeals acknowledged that a plain meaning
analysis would be "logical" (Pet. App. A8), it rejected that approach
based on its understanding of the policies behind Section 1988 and its
view that the Rule Enabling Act, 28 U.S.C. 2072, prohibits
interpreting Rule 68 costs as encompassing attorneys' fees under
Section 1988.  The court erred in both respects.

   A. Holding a plaintiff responsible for his own post-offer
attorneys' fees does not "cut() against the grain of section 1988"
(Pet. App. A8).  While it is undoubtedly true that the primary purpose
of Section 1988 was to encourage the bringing of meritorious civil
rights actions, Congress never intended Section 1988 to override all
competing policies.  Rather, fee awards under Section 1988 must be
"reasonable." Here, respondent seeks to charge petitioners with
$171,000 in post-offer attorneys' fees for work that produced no
additional benefits;  on the contrary, that work resulted in a jury
verdict $8,000 less that petitioners' offer.  In these circumstances,
it would be "unreasonable," and thus contrary to Section 1988, to
reward respondent for his mistake in judgment.

   In addition, the lower court's decision is inconsistent with this
Court's approach to Section 1988 as set forth in Hensley v. Eckerhart,
No. 81-1244 (May 16, 1983).  There, the Court stressed that the amount
of fees recoverable under Section 1988 depends, to a very large
extent, on the degree of success obtained.  It is quite obvious that a
plaintiff who rejects a reasonable offer of judgment and then obtains
a less favorable final judgment has not achieved any success
whatsoever attributable to his post-offer efforts, and it would be
contrary to the teaching of Hensley to reward such a plaintiff with
his post-offer attorneys' fees.

   Congress's concern with imposing reasonable limits on fee awards
under Section 1988 demonstrates that there is ample room for
harmonizing the policies of that Section with other provisions of law,
including Rule 68.  Rule 68 was intended to encourage settlements and
thereby avoid unnecessary litigation;  it also incorporates elementary
principles of fairness to defendants, who should not be saddled with a
plaintiff's unnecessary litigation expenses.  Indeed, the goals of
Rule 68 and Section 1988 are virtually identical -- to create an
incentive structure that will encourage meritorious and discourage
pointless litigation.  The court of appeals thus erred in elevating
its single-minded perception of Section 1988's purposes over the more
balanced approach intended by Congress.

   B. Concluding that the "right" to attorneys' fees under Section
1988 is "substantive," the court below also held that an
interpretation of Rule 68 costs that includes attorneys' fees would
run afoul of the Rules Enabling Act, 28 U.S.C. 2072, which provides
that the federal rules may not alter any "substantive right." The
court rested its conclusion on the substance/procedure dichotomy
originally formulated by this Court in diversity cases, in the
immediate wake of Erie R.R. v. Tompkins, 304 U.S. 64 (1938).  See,
e.g., Sibbach v. Wilson & Co., 312 U.S. 1 (1941).  Even in diversity
cases, however, the Court long ago abandoned that approach as a test
for determining the validity of a federal rule.  See, e.g., Hanna v.
Plumer, 380 U.S. 460, 469-474 (1965).  And the test has never been
applied in non-diversity cases such as this one, where the concern is
not displacement of state substantive law, but rather the allocation
of authority between Congress and this Court.  Thus, the only relevant
inquiries are whether the Constitution permits Congress to delegate to
the Court authority to promulgate the particular rule in question (an
issue not here in dispute), and, if so, whether Congress has exercised
its authority to supersede the rule promulgated by the Court.

   The federal rules have the force of statutes, there is a strong
presumption in favor of their validity, and there is no indication
whatsoever, much less the necessary clear evidence, that Congress
intended an implied, partial repeal of Rule 68 when it enacted Section
1988.  Thus, the Rules Enabling Act presents no obstacle to the
ordinary operation of Rule 68 in this case.

                               ARGUMENT

 A PLAINTIFF WHO REJECTS A RULE 68 OFFER OF JUDGMENT AND THEN OBTAINS
A LESS FAVORABLE FINAL JUDGMENT MAY NOT SHIFT HIS POST-OFFER
ATTORNEYS' FEES TO THE DEFENDANT UNDER 42 U.S.C. (SUPP. V) 1988

   The Civil Rights Attorney's Fees Awards Act of 1976, 42 U.S.C.
(Supp. V) 1988, provides that in certain enumerated actions the court
may award the prevailing party "a reasonable attorney's fee as part of
the costs" (emphasis added).  Rule 68 of the Federal Rules of Civil
Procedure provides that, if a plaintiff rejects a pre-trial offer of
judgment and then obtains a less favorable final judgment, the
plaintiff "must pay the costs incurred after the making of the offer."
The issue in this case is whether such a plaintiff may rely on Section
1988 to shift his own post-offer attorneys' fees to the defendant.  In
our submission, fee-shifting in these circumstances is barred by
elementary principles of statutory construction as well as by sound
reasons of policy.

 I. Settled Principles Of Statutory Construction Require That The
Definition Of Attorneys' Fees "As Part Of The Costs" In 42 U.S.C.
(Supp. V) 1988 Be Harmonized With The Language Of Fed. R. Civ. P. 68

   A. Neither the language nor the history of Rule 68 defines "costs."
/1/ Accordingly, one must look elsewhere to ascertain the items
encompassed by the term "costs" as it is used in the rule.
Ordinarily, it might be proper to look to the traditional
understanding of costs.  But when Congress has specified a particular
meaning for "costs," Congress's definition must control.  See White v.
New Hampshire Dep't of Employment Security, 455 U.S. 445, 449 n.7
(1982) (emphasis added) ("Unless so defined by statute, attorney's
fees are not generally considered 'costs' * * *.");  Hutto v. Finney,
437 U.S. 678, 693-697 (1978) (Congress may amend definition of costs
to include attorneys' fees and have it apply to all litigants);
Roadway Express, Inc. v. Piper, 447 U.S. 752, 772 (1980) (Burger,
C.J., dissenting);  cf. Alyeska Pipeline Service Co. v. Wilderness
Society, 421 U.S. 240 (1975) (Congress, not the courts, determines
when and how attorneys' fees shall be awarded).  /2/ It follows that
when the action involves a statute that, like Section 1988, authorizes
the award of attorneys' fees "as part of the costs," Rule 68 costs
must include any attorneys' fees that might be awarded under the
statute.  Rule 68 thus requires that respondent bear that portion of
his own attorneys' fees incurred after the making of petitioners'
offer of judgment.  /3/

   Such a straightforward, "plain language" construction of the
interplay between Rule 68 and attorneys' fee statutes has been widely
accepted.  See, e.g., Delta Air Lines, Inc. v. August, 450 U.S. 346,
362-363 (1981) (Powell, J., concurring);  Fulps v. City of
Springfield, 715 F.2d 1088, 1091-1095 (6th Cir. 1983);  Waters v.
Heublein, Inc., 485 F. Supp. 110, 113-117 (N.D. Cal. 1979);  Scheriff
v. Beck, 452 F. Supp. 1254, 1259-1260 (D. Colo. 1978);  cf. Roadway
Express, 447 U.S. at 771-772 (Burger, C.J., dissenting) (same
reasoning applied to "costs" in 28 U.S.C. 1927).  Indeed, even the
court below described this approach to the operation of Rule 68 as
"logical" (Pet. App. A8), but it based its decision instead on its
understanding of policy considerations extraneous to the statutory
language.  In so doing, the court ignored well-established principles
of statutory construction, as well as logic, that support reading
"costs" in Rule 68 to include attorneys' fees authorized by statutes
defining those fees "as part of the costs."

   Statutes should be construed so as to avoid making any word
meaningless or superfluous.  Colautti v. Franklin, 439 U.S. 379, 392
(1979);  Fulps, 715 F.2d at 1093 & n.4 (citing cases).  Moreover,
statutory language is to be given its plain and ordinary meaning.
Burns v. Alcala, 420 U.S. 575, 580-581 (1975);  Banks v. Chicago Grain
Trimmers Ass'n, 380 U.S. 459, 465 (1968).  The meaning of the phrase
describing attorneys' fees "as part of the costs" is obvious.  It
means that attorneys' fees are to be treated like all other costs of
litigation, to be granted if other costs are granted and to be denied
if other costs are denied.  Rule 68 denies costs incurred after the
making of an offer more generous than the judgment finally obtained.
The plain language of Section 1988 makes attorneys' fees a part of
those costs.

   When it drafted Section 1988, Congress, of course, simply could
have authorized the recovery of attorneys' fees.  But Congress chose
to go further and characterize the fees as costs.  In Hutto v. Finney,
437 U.S. at 693-697, this Court recognized that Congress's choice of
language was deliberate.  /4/ While we do not contend that Congress
chose this language specifically envisioning its effect in conjunction
with Rule 68, we do contend, as this Court held in Hutto, that
Congress's decision to "impose() attorney's fees 'as part of the
costs'" (id. at 695), was not simple inadvertence.  That being the
case, this Court should give the language of Section 1988 its ordinary
meaning.

   B. There is a still more compelling reason for this Court to read
Section 1988's authorization for attorneys' fee awards "as part of the
costs" to mean exactly that.  Congress has enacted numerous statutes
authorizing attorneys' fee awards for parties litigating certain
claims in federal court.  The vast majority of these statutes direct
that such fees as are awarded should be assessed as costs.  See Note,
Rule 68:  A "New" Tool for Litigation, 1978 Duke L.J. 889, 898-899.
See also Subcomm. on Constitutional Rights, Senate Comm. on the
Judiciary, 94th Cong., 2d Sess., Civil Rights Attorney's Fees Awards
Act of 1976:  Source Book 303-313 (Comm. Print 1976) (compiling 90
federal attorneys' fee statutes).  In an appendix to this brief, we
have listed the 141 federal attorneys' fee statutes that our research
has uncovered.  App., infra, 1a-9a.  Of these, 91 -- including many of
our most important legislative enactments /5/ -- describe attorneys'
fees as part of the costs of litigation.  With so many, and so many
important, pieces of legislation involved, this Court should not
ignore the effect of any of the statutory language and should adopt
the "specific and explicit provisions for the allowance of attorneys'
fees" made by Congress.  Alyeska, 421 U.S. at 260 (emphasis added).

   Indeed, the main point of this Court's decision in Alyeska was its
recognition that Congress has not extended "any roving authority to
the Judiciary to allow counsel fees as costs or otherwise whenever the
courts might deem them warranted" (421 U.S. at 260 (emphasis added)).
Rather, "the circumstances under which attorneys' fees are to be
awarded and the range of discretion of the courts in making those
awards are matters for Congress to determine" (id. at 262 (emphasis
added)).  The proper interpretation is one that relies on the language
Congress has chosen (id. at 269):

      Since the approach taken by Congress to this issue has been to
      carve out specific exceptions * * * courts are not free to
      fashion drastic new rules with respect to the allowance of
      attorneys' fees * * * or to pick and choose among plaintiffs and
      the statutes under which they sue and to award fees in some
      cases but not in others, depending upon the courts' assessment
      of the importance of the public policies involved in particular
      cases.

Yet this is precisely what was done by the court below in refusing to
give effect to the language of Section 1988 making attorneys' fees
"part of the costs." /6/

   C. Notwithstanding the clear interplay between the plain language
of Rule 68 and the plain language of Section 1988, the court of
appeals concluded that there is no reason to suppose that "costs" in
Rule 68 was meant to include attorneys' fees.  Pet. App. A4-A5,
A9-A11.  The court of appeals assumed that awards of attorneys' fees
were "uncommon" in 1938, when Rule 68 was promulgated.  Pet. App. A4.
This assumption is similar to the approach taken by the dissent in
Delta Air Lines, 450 U.S. at 377 (Rehnquist, J., dissenting), which
stressed the importance of looking to the "contemporaneous
understanding" of the term "costs" at the time of Rule 68's
promulgation.  The dissent assumed that "the 'contemporaneous
understanding' of 'costs' when the Federal Rules of Civil Procedure
were promulgated in 1938 did not include attorneys' fees any more than
it did in 1813 when the predecessor to Section 1927 was enacted."
Delta Air Lines, 450 U.S. at 377 (Rehnquist, J., dissenting).

   Additional research reveals, however, that this assumption is
probably incorrect.  Between 1813 and 1938, Congress itself began the
practice of awarding attorneys' fees as part of the costs.  By the
time Rule 68 was promulgated in 1938, Congress had on numerous
occasions defined the term "costs" to include attorneys' fees.  See
App., infra, 1a-3a, 6a.  Moreover, it appears that the great majority
of statutes enacted prior to 1938 that authorized attorneys' fee
awards did so as part of the costs.  /7/ Furthermore, these statutes
constituted much of the major legislation of the period:  the Clayton
(Anti-Trust) Act, 15 U.S.C. 15;  the Securities Act of 1933, 15 U.S.C.
77k(e);  the Securities Exchange Act of 1934, 15 U.S.C. 78i(e),
78r(a);  the Interstate Commerce Act, 49 U.S.C. 8, 16, 908;  the
Railway Labor Act, 45 U.S.C. 153;  and the Copyright Act of 1909, 17
U.S.C. 505 (formerly codified at 17 U.S.C. 40).  /8/

   Congress must be presumed to have had knowledge of these provisions
when Rule 68 was promulgated in 1938.  Indeed, given the number and
prominence of the relevant statutes, this presumption is not merely a
legal fiction;  it is difficult to believe that Congress was unaware
of the terms of so many enactments.  Thus, by 1938, the
contemporaneous understanding of costs was clearly quite different
than it had been in 1813, /9/ and there is no basis for concluding
that Congress had in mind a fixed definition of costs that excluded
attorneys' fees.  This history, in conjunction with the mandate of
Alyeska, the great number of statutes affected, and the policy
considerations discussed below, all counsel the Court to read both
Rule 68 and Section 1988 according to their plain meaning.

 II. The Court Of Appeals Erred In Rejecting The "Logical" Approach To
Harmonizing Rule 68 And Section 1988

   The court of appeals acknowledged that the construction of Rule 68
for which we have argued above is "logical" (Pet. App. A8), but it
then proceeded to discard logic in favor of a misguided policy
analysis and an obsolete and inappropriate approach to the Rules
Enabling Act, 28 U.S.C. 2072.  As we demonstrate below, the court
erred in both respects.

 A. The Policies Underlying Both Section 1988 And Rule 68 Require
Limiting A Plaintiff's Attorneys'

 Fee Award To Fees Incurred Before The Making Of The Defendant's Offer
Of Judgment

   1. Contrary to the court of appeals' conclusion, holding a
plaintiff responsible for his own post-offer attorneys' fees does not
"cut() against the grain of section 1988" (Pet. App. A8).  Rather,
construing "costs" under Rule 68 as encompassing attorneys' fees under
Section 1988 is fully consistent with congressional intent in enacting
Section 1988 and, indeed, is the only result that harmonizes that
intent with the clear and important purposes underlying the
promulgation and congressional consideration of Rule 68.  See Delta
Air Lines, 450 U.S. at 364 (Powell, J., concurring).  There is no
support for concluding, as did the court of appeals, that in enacting
Section 1988 Congress impliedly intended to curtail the ordinary
application of Rule 68.  In operation, the two provisions need not
come into conflict.  It is possible to award attorneys' fees within
the terms of Section 1988 while limiting such fees, as is required by
Rule 68, to those incurred before an offer of judgment.  And while the
legislative history of Section 1988 is silent with respect to Rule 68
specifically, it is quite clear that Congress did not think it was
establishing an unqualified right to attorneys' fees when it enacted
Section 1988.  /10/

   Congress provided for an award of "a reasonable attorney's fee as
part of the costs" in Section 1988 in response to this Court's
rejection in Alyeska of the "private attorney general" rationale that
had been employed by some lower courts as a basis for attorneys' fee
awards in litigation deemed to further the public interest.  S. Rep.
94-1011, 94th Cong., 2d Sess. 1-2 (1976);  H.R. Rep. 94-1558, 94th
Cong., 2d Sess. 1-3 (1976).  Undoubtedly, as the court below noted,
the primary purpose of Section 1988 is to encourage the bringing of
meritorious civil rights actions in order to utilize fully "private
attorneys general" in securing compliance with civil rights laws.  See
Pet. App. A8.  But Section 1988 is not an unqualified, single-minded
provision intended to override any contrary policies that stand in its
way.  /11/ Rather, fee awards under Section 1988 must be "reasonable."
/12/ The debates over passage of Section 1988 reflect Congress's
concern that the bill could induce plaintiffs and plaintiffs'
attorneys to pursue marginal or frivolous litigation.  During the
House hearings on the bill that was ultimately enacted as Section
1988, Representative Seiberling noted that the bill "certainly (was)
not calculated to promote the interests of lawyers who make the wrong
judgment or who make an ineffective presentation or who are on the
wrong side of a lawsuit * * *." Awarding of Attorneys' Fees:  Hearing
Before the Subcomm. on Courts, Civil Liberties and the Administration
of Justice of the House Comm. on the Judiciary, 94th Cong., 1st Sess.
8 (1975).  See also, e.g., 122 Cong. Rec. 31473, 31474, 31830 (1976)
(statements of Sen. Allen);  122 Cong. Rec. 31832 (1976) (remarks of
Sen. Abourezk);  122 Cong. Rec. 31834 (1976) (remarks of Sen. Helms).
/13/

   This legislative history should be considered not in the abstract,
but against the factual background of this case, in which respondent
seeks to charge petitioners $171,000 in post-offer attorneys' fees for
work that did not produce any additional benefits;  instead, the
post-offer fees were incurred to produce a jury verdict that was
$8,000 less than petitioners' offer.  /14/ Given these results, it is
"unreasonable," and thus contrary to Section 1988, to reward
respondent's attorneys with $171,000 in post-offer fees.  As the court
stated in Waters v. Heublein, Inc., 485 F. Supp. at 114, there is
"little reason to reward (an) attorney for the post-offer work
necessitated by a mistaken judgment that failed to obtain any
additional benefits."

   As the legislative history discussed above makes clear, no such
unreasonable result is required to effectuate the policies of Section
1988.  Rather, Congress left ample room for Section 1988 to be
intermeshed with other provisions of law reflecting equally important
policies involved in the judicial enforcement of rights.  /15/ Fed. R.
Civ. P. 1 provides that the federal rules "shall be construed to
secure the just, speedy, and inexpensive determination of every
(civil) action." Rule 68, whose purpose was ignored by the court
below, encourages settlements and thereby avoids unnecessarily
protracted litigation by providing a realistic deterrent that compels
offerees to consider seriously good faith offers of judgment.  Delta
Air Lines, 450 U.S. at 352 & n.8, 363 (Powell, J., concurring);  id.
at 379-380 (Rehnquist, J., dissenting);  Fed. R. Civ. P. 68 advisory
committee note, 28 U.S.C. App. at 637;  12 C. Wright & A. Miller,
Federal Practice and Procedure Section 3001, at 56 (1973).  There can
be no dispute over the importance and desirability of this goal.  As
Justice Powell explained in a similar context in his concurring
opinion in Delta Air Lines, 450 U.S. at 363-364 (footnote and citation
omitted):

      Title VII's fee provision (identical to Section 1988) was
      designed to enable plaintiffs to vindicate their rights through
      litigation.  * * * On the other hand, parties to litigation and
      the public as a whole have an interest -- often an overriding
      one -- in settlement rather than exhaustion of protracted court
      proceedings.  Rule 68 makes available to defendants a mechanism
      to encourage plaintiffs to settle burdensome lawsuits.  The Rule
      particularly facilitates the early resolution of marginal suits
      in which the defendant perceives the claim to be without merit,
      and the plaintiff recognizes its speculative nature.

         * * * It therefore seems clear that the relevant interests --
      of both parties and the public -- will be served by construing
      Title VII and Rule 68 in accordance with their plain language.

   This is no less true with respect to Section 1988.  The purpose of
Rule 68 dictates a construction that will operate, to the greatest
extent possible, to provide a realistic deterrent to continued
litigation so that offerees will seriously consider good faith offers
of judgment.  /16/ This is especially true in actions such as this
one, in which respondent persisted in pressing a claim for $3,500,000
in damages -- a claim that bore no relationship to a realistic
evaluation of the value of the case, ultimately determined by a jury
to be $60,000.  Congress's intent to facilitate the bringing of
meritorious civil rights cases, manifested in the enactment of Section
1988, certainly does not mean that Congress also intended to promote
full-blown litigation of every such claim even in the face of
reasonable settlement offers.  See S. Rep. 94-1011, supra, at 5
("(F)or purposes of the award of counsel fees, parties may be
considered to have prevailed when they vindicate rights through a
consent judgment or without formally obtaining relief.").  This Court
likewise has recognized the desirability of settling civil rights
claims.  See Maher v. Gagne, 448 U.S. 122, 129 (1980);  Alexander v.
Gardner-Denver Co., 415 U.S. 36, 44 (1974) ("Cooperation and voluntary
compliance (are) * * * the preferred means" for achieving compliance
with Title VII).

   In addition to ignoring Rule 68's goal of promoting settlements,
the court of appeals failed to consider the equities from a
defendant's perspective.  As this Court has recognized, Rule 68
incorporates elementary principles of fairness (Delta Air Lines, 450
U.S. at 356):

      If a plaintiff chooses to reject a reasonable offer, then it is
      fair that he not be allowed to shift the cost of continuing the
      litigation to the defendant in the event that his gamble
      produces an award that is less than or equal to the amount
      offered.

Although the Court in Delta Air Lines did not address itself to
attorneys' fees, the equitable considerations are at least as strong
in the case of fees as in the case of more traditional "costs." That
is particularly the case here, where respondent's rejection of
petitioners' reasonable offer of judgment led to the expenditure of an
additional $171,000.  Respondent was of course free to gamble that he
would do better before a jury than by accepting petitioners' offer,
but it is hardly fair to expect petitioners to bankroll the exercise
of respondent's mistaken judgment.

   In sum, the court of appeals went astray in its analysis of the
relevant policy considerations.  As Justice Powell observed in his
concurring opinion in Delta Air Lines, 450 U.S. at 363-364, the goals
of Rule 68 and civil rights fee-shifting statutes can be easily
harmonized.  Indeed, those goals are virtually identical:  to create
an incentive structure that will lead to the optimal level of
litigation, encouraging meritorious and discouraging pointless
litigation.  It is thoroughly appropriate, therefore, to read Rule 68
and Section 1988 together.

   2. The court of appeals' policy analysis also is inconsistent with
this Court's approach to Section 1988 as set forth in Hensley v.
Eckerhart, No. 81-1244 (May 16, 1983).  In examining the
reasonableness of attorneys' fees awarded under Section 1988, the
Court in Hensley held that the amount of fees recoverable is
dependent, to a very large extent, on the degree of success obtained.
Slip op. 9-12.  "(E)xcellent results" ordinarily should result in the
award of a fully compensatory fee, but "partial or limited success"
may well mandate a reduction in the fee award.  Slip op. 11.

   Generally, as the Court recognized, "(t)here is no precise rule or
formula" for determining reasonable attorneys' fees under Section
1988.  Hensley, slip op. 12.  In the instant case, however, a
well-established rule having the force of a statute (see Sibbach v.
Wilson & Co., 312 U.S. 1, 13 (1941)) prescribes precisely, by a
procedure equitable to the parties and beneficial to the judicial
system, the equation for ensuring that the amount of fees awarded to a
prevailing plaintiff bears a reasonable relationship to the degree of
success achieved.  Under Rule 68, a party who prevails but obtains a
final judgment less favorable than a previous offer of judgment
receives an award of attorneys' fees for his counsel's pre-offer work;
 this ensures compensation for all work that produced the offer.  Work
done after rejection of the offer, on the other hand, produced no
additional benefits, and the offeree should not be permitted to
recover his fees from the offeror who has made a reasonable effort to
end the litigation before additional costs are incurred.  This result
is fully consistent with Hensley, which clearly establishes that
Section 1988 does not authorize fee awards for unproductive work.
Slip op. 9.  See also Smith v. Robinson, No. 82-2120 (July 5, 1984),
slip op. 13 ("Due regard must be paid, not only to the fact that a
plaintiff 'prevailed,' but also to the relationship between the claims
on which effort was expended and the ultimate relief obtained.");
Vocca v. Playboy Hotel of Chicago, Inc., 686 F.2d 605, 607-608 (7th
Cir. 1982) (no fees awarded because plaintiff refused to accept
reasonable settlement);  Copeland v. Marshall, 641 F.2d 880, 891 (D.C.
Cir. 1980) (en banc) (no fee award for nonproductive time).

 B. Construing "Costs" Under Rule 68 As Encompassing Attorneys' Fees
Under Section 1988 Does Not Render Rule 68 Invalid Under The Rules
Enabling Act

   The court of appeals also held that its interpretation of Rule 68
was required by the Rules Enabling Act, 28 U.S.C. 2072.  That Act,
which delegates authority to this Court to make rules governing the
"practice and procedure" of the federal courts, provides, in pertinent
part, that the Federal Rules of Civil Procedure "shall not abridge,
enlarge or modify any substantive right." In a short, enigmatic
discussion, the court of appeals reasoned that the right to attorneys'
fees created by Section 1988 is more "procedural" then "substantive"
in some senses, more "substantive" than "procedural" in other senses,
and both "substantive" and "procedural" in reality before finally
concluding that "(f)or present purposes it is substantive." Pet. App.
A9.  The right established in Section 1988 is a "substantive" one,
according to the court of appeals, because rather than "mak(ing) the
litigation process more accurate and efficient for both parties * * *
it is designed instead to achieve a substantive objective --
compliance with the civil rights laws." Pet. App. A9.  Thus, the court
concluded that the Rules Enabling Act requires the imposition of a
limitation on the ordinary operation of Rule 68 in order to avoid
interference with the "substantive right" to attorneys' fees.  The
court's analysis misconstrues the meaning of the Rules Enabling Act,
the status of the rules promulgated pursuant thereto, and the proper
construction of the rules in the light of other federal statutes.

   The validity of any particular application of a federal rule turns
on a proper understanding of the meaning of the phrase "substantive
right" as employed in the Rules Enabling Act.  The lower court
interpreted "substantive" in Section 2072 in contradistinction to
"procedural." This is the result of that court's misinterpretation of
a series of decisions in which this Court relied on the substance/
procedure dichotomy.  See, e.g., Ragan v. Merchants Transfer &
Warehouse Co., 337 U.S. 530 (1949);  Mississippi Publishing Corp. v.
Murphree, 326 U.S. 438 (1946);  Sibbach v. Wilson & Co. 312 U.S. 1
(1941).  See generally, Ely, The Irrepressible Myth of Erie, 87 Harv.
L. Rev. 693, 718-738 (1974).  All of these cases were diversity suits
in which the issue was whether the federal rule altered a state law.
The Court's concern with protecting state substantive law from
encroachment by the federal judiciary -- whether in the guise of
judicially created federal common-law or judicial exercises of
delegated authority from Congress -- was apparent.  /17/ In Sibbach,
for example, the Court concluded that Section 2072 was to be
interpreted under Erie's substance/procedure rubric because Congress
"has never essayed to declare the substantive state law, or to abolish
or nullify a right recognized by the substantive law of the state * *
*.  On the contrary it has enacted that the state law shall be the
rule of decision in the federal courts" (312 U.S. at 10 (emphasis
added;  footnote omitted)).  See also Ragan, 337 U.S. at 533-534 (Fed.
R. Civ. P. 3, which tolls statutes of limitations upon the filing of
the complaint in nondiversity suits, cannot be so applied in diversity
suits because "the principle of Erie R. Co. v. Tompkins" demands that
state law be applied).

   Whether or not it is appropriate in diversity cases to construe
Section 2072 in light of the substance/procedure dichotomy deriving
from Erie, /18/ it is manifestly clear that this approach is
inapplicable when, as in the instant case, suit is brought under
federal law.  The federalism concerns that animated the diversity
cases and gave rise to the elusive substance/procedure dichotomy no
longer exist when a federal rule is challenged because it "abridge(s),
enlarge(s) or modif(ies)" a federally created "substantive right."
Instead, in the federal question context, the phrase "substantive
right" in Section 2072 refers to the allocation of authority between
Congress and the Court.  /19/

   Because, when it promulgates rules pursuant to Section 2072, the
Court exercises power delegated to it by Congress, a two-step inquiry
is called for in judging a rule's validity.  First, does the
Constitution permit Congress to delegate to the Court authority to
enact the particular rule?  Second, if the answer is affirmative, has
Congress in fact delegated the necessary authority?  The second step
is one of statutory construction /20/ and requires both that the rule
be within the terms of the Rules Enabling Act and that Congress not
have exercised its unquestioned authority, see Sibbach, 312 U.S. at
14-15;  Wayman v. Southard, 23 U.S. (10 Wheat.) 1, 42-43 (1825);
United States v. Gustin-Bacon Division, 426 F.2d 539, 542 (10th Cir.),
cert. denied, 400 U.S. 832 (1970), to overrule the Court.

   Neither the parties to this lawsuit nor the court below have
questioned the constitutionality of Rule 68 as an exercise of
delegated authority pursuant to Section 2072, even when attorneys'
fees are placed within the larger set of "costs." /21/ Moreover, as we
have argued above, Rule 68 was approved by Congress with the
understanding that it would incorporate the definition of costs
contained in the statute underlying the motion for attorneys' fees.
See pages 9-10 & note 4, supra.  The only remaining question,
therefore, is whether, in enacting Section 1988, Congress intended an
implied, partial repeal of Rule 68 in civil rights cases.

   The Federal Rules of Civil Procedure have the force of statutes.
Sibbach, 312 U.S. at 13;  7 (Pt. 2) J. Moore, J. Lucas & K. Sinclair,
Moore's Federal Practice Paragraph 69.04 (2d ed. 1984).  A strong
presumption exists in favor of the Rules' validity.  Hanna, 380 U.S.
at 471, 473;  H.F.G. Co. v. Pioneer Pub. Co., 162 F.2d 536, 539 (7th
Cir. 1947);  Helms v. Richmond Petersburg Turnpike Auth., 52 F.R.D.
530, 531 (E.D. Va. 1971);  19 C. Wright, A. Miller & E. Cooper,
Federal Practice and Procedure:  Jurisdiction Section 4508, at 133
(1982).  Repugnancy of a later-enacted statute to a federal rule is
not to be lightly inferred.  Weiss v. Temporary Investment Fund, Inc.,
692 F.2d 928, 936 (3d Cir. 1982);  see also Gustin-Bacon Division, 426
F.2d at 542;  7 (Pt. 2) Moore's Federal Practice, supra, Paragraph
86.04(4) ("(A) subsequently enacted statute should be so construed as
to harmonize with the Federal Rules if that is at all feasible.")
Rather, absent "the necessary clear expression of congressional intent
to exempt actions brought under that statute from the operation of the
Federal Rules of Civil Procedure," Califano v. Yamasaki, 442 U.S. 682,
700 (1979), a federal statute is assumed not to alter the operation of
the Federal Rules of Civil Procedure.  See also Weiss, 692 F.2d at 936
("abrogation" of a rule is "inappropriate" absent a "clear expression
of congressional intent");  In re General Motors Corp. Engine
Interchange Litigation, 594 F.2d 1106, 1134-1135 n.50 (7th Cir. 1979),
cert. denied, 444 U.S. 870 (1980) ("Congressional intent to repeal a
federal rule must be clearly expressed before the courts will find
such a repeal.");  Brennan, 503 F.2d at 804-805;  Gustin-Bacon
Division, 426 F.2d at 542.

   The court of appeals did not find any "clear expression of
congressional intent" to exempt fee applications filed under Section
1988 from the normal operation of Rule 68.  The lower court merely
inferred such an intention from the policy behind Section 1988 "to
encourage the bringing of meritorious civil rights actions" and to
further "compliance with the civil rights laws" (Pet. App. A8, A9).
Implied repeals are strongly disfavored, however, and are found only
when two acts are in irreconcilable conflict or when a later act
covers the whole subject of an earlier one and is clearly intended as
a substitute;  and, even then, "'the intention of the legislature to
repeal must be clear and manifest . . . .'" Kremer v. Chemical Constr.
Corp., 456 U.S. 461, 468 (1982) (quoting Radzanower v. Touche Ross &
Co., 426 U.S. 148, 154 (1976));  St. Martin Evangelical Lutheran
Church v. South Dakota, 451 U.S. 772, 787-788 (1981) (citing cases).
This policy against implied repeals applies a fortiori in considering
the effect of Section 1988 on Rule 68 in light of the strong
presumption in favor of the validity of the Federal Rules.  The court
of appeals thus clearly erred in holding that the Rules Enabling Act
presents any obstacle to the normal operation of Rule 68 in the
circumstances of this case.

                              CONCLUSION

   The judgment of the court of appeals should be reversed.

   Respectfully submitted.

   REX E. LEE

      Solicitor General

   RICHARD K. WILLARD

      Acting Assistant Attorney General

   KENNETH S. GELLER

      Deputy Solicitor General

   CAROLYN B. KUHL

      Deputy Assistant Attorney General

   KATHRYN A. OBERLY

      Assistant to the Solicitor General

   ROBERT S. GREENSPAN

   BARBARA S. WOODALL

      Attorneys

   JULY 1984

   /1/ The Advisory Committee responsible for the original Federal
Rules of Civil Procedure limited its entire explanation of Rule 68 to
a citation to three state statutes, 2 Minn. Stat. Section 9323 (Mason
1927);  4 Mont. Code Ann. Section 9770 (1935);  N.Y. C.P.A. Section
177 (1937).  Neither these statutes nor the practice under them aid in
determining the meaning of "costs" in Rule 68.  Cf., e.g., Watkins v.
W.E. Neiler Co., 135 Minn. 343, 160 N.W. 864 (1917);  Morris-Turner
Live Stock Co. v. Director Gen. of Railroads, 266 F. 600 (D. Mont.
1920);  Margulis v. Solomon & Berck Co., 223 A.D. 634, 229 N.Y.S. 157
(1928).  Rule 68 elicited virtually no discussion in the debates of
the Advisory Committee.  See ABA, Rules of Civil Procedure for the
District Courts of the United States 337-338 (1938).  The history of
the 1946 and 1966 amendments to Rule 68 is similarly unenlightening.
See Fed. R. Civ. P. 68 advisory committee note, 28 U.S.C. App. at 637.

   /2/ Notwithstanding the court of appeals' apparently contrary
conclusion (see Pet. App. A11), this is all that Roadway Express,
supra, actually held.  In Roadway Express, the issue was whether the
"costs" to be imposed on an attorney under 28 U.S.C. 1927 should
include attorneys' fees because the action was brought under Title
VII, the attorneys' fee provision of which defines fees "as part of
the costs" (42 U.S.C. 2000e-5(k)).  The Court ruled that "costs" in 28
U.S.C. 1927 should be read to track the definition of "costs" in 28
U.S.C. 1920 (which does not include attorneys' fees) because Congress
enacted the two statutes together in 1853 as part of one,
comprehensive legislative package.  447 U.S. at 757, 759-760.  Rule
68, on the other hand, is not part of an integrated statute or rule
provision that defines "costs." Instead, as Justice Powell has noted,
"(i)n approving the Federal Rules, Congress appears to have
incorporated the definition of costs found in the substantive statute
at issue in the litigation.  Cf. Fed. Rule Civ. Proc. 54(d)." Delta
Air Lines, Inc. v. August, 450 U.S. 346, 364 n.2 (1981) (Powell, J.,
concurring).

   /3/ Because Rule 68 is concerned only with liability for costs
incurred after the making of the offer, respondent's entitlement to
his pre-offer attorneys' fees of $32,000 is not at issue in this case.
 Moreover, the district court held (Pet. App. B10) that petitioners
were not entitled to recover their post-offer costs, including
attorneys' fees, from respondent, and petitioners have not challenged
that ruling.  Thus, this case does not present any issue concerning
the circumstances in which a defendant might seek to collect his
post-offer costs from the plaintiff.

   In any event, reading "costs" in Rule 68 to include Section 1988
attorneys' fees does not have the result, suggested in Justice
Rehnquist's dissenting opinion in Delta Air Lines, Inc. v. August, 450
U.S. 346, 378 (1981), of requiring civil rights plaintiffs who reject
Rule 68 offers also to absorb the defendant's attorneys' fees as
costs.  Delta Air Lines held that Rule 68 is entirely inapplicable
when judgment is rendered in favor of the defendant.  Thus, in any
case to which Rule 68 applies, the defendant will by definition have
lost the case.  Section 1988, on the other hand, provides that fees
may be awarded only to the prevailing party.  Thus, the condition that
entitles the defendant to be considered for the benefits of Rule 68 is
the same condition that precludes him from taking advantage of Section
1988.

   /4/ In Hutto, the Court held that Congress may redefine costs to
include attorneys' fees without running afoul of the Eleventh
Amendment.  Congress surely knew that costs "have traditionally been
awarded without regard for the States' Eleventh Amendment immunity"
(437 U.S. at 695).  Thus, by defining attorneys' fees "as part of the
costs," Congress was safeguarding its intent that states be held
liable for attorneys' fees in civil rights litigation.  See S. Rep.
94-1011, 94th Cong., 2d Sess 5 (1976);  H.R. Rep. 94-1558, 94th Cong.,
2d Sess. 7 & n.14 (1976).  In upholding that intent, this Court held
that "(j)ust as a federal court may treat a State like any other
litigant when it assesses costs, so also may Congress amend its
definition of taxable costs and have the amended class of costs apply
to the States" (437 U.S. at 696 (emphasis added)).  And, in concluding
that "(t)here is ample precedent for Congress' decision to authorize
an award of attorney's fees as an item of costs" (id. at 697 (emphasis
added)), the Court emphasized the limited nature of its holding in a
footnote:  "Thus we do not suggest that our analysis would be the same
if Congress were to expand the concept of costs beyond the traditional
category of litigation expenses" (id. at 697 n.27 (emphasis added)).
The Court thus explicitly recognized that Congress deliberately and
intentionally categorized attorneys' fees under Section 1988 as an
item of costs.  See also Roadway Express, 447 U.S. at 772 (Burger,
C.J., dissenting).  The issue then becomes whether there is some
compelling reason for the Court to ignore traditional canons of
statutory construction so as not to give effect to this deliberate
choice of language by Congress.  We submit there is none.

   /5/ Among the statutes authorizing attorneys' fee awards as costs
of litigation are Title VII, 42 U.S.C. 2000e-5(k);  the Copyright Act,
17 U.S.C. 505;  the Railway Labor Act, 45 U.S.C. 153;  the
Communications Act, 47 U.S.C. 206, 407;  the Interstate Commerce Act,
49 U.S.C. 8, 16, 908;  the Clayton (Anti-Trust) Act, 15 U.S.C. 15;
the Securities Act of 1933, 15 U.S.C. 77k(e);  the Trust Indenture Act
of 1939, 15 U.S.C. 77ooo(e);  and the Securities Exchange Act of 1934,
15 U.S.C. 78i(e), 78r(a).

   /6/ The rule established in Alyeska also is sufficient answer to
the objection that our interpretation of Rule 68 and Section 1988
would create a two-tiered system of cost-shifting under Rule 68
depending upon the language of the statute authorizing attorneys'
fees.  See Delta Air Lines, 450 U.S. at 378 (Rehnquist, J.,
dissenting);  Roadway Express, 447 U.S. at 762-763.  If this is the
result, it is a result compelled by Congress's choice of language and
a matter for Congress to correct if it chooses.  Indeed, Section 1988
itself in Congress's response to the two-tiered system for awarding
attorneys' fees created by this Court's Alyeska decision.  See S. Rep.
94-1011, 94th Cong., 2d Sess. 1-2 (1976);  page 15, infra.

   /7/ The appendix shows that of the 25 statutes currently in force
that authorize attorneys' fee awards and that were in force at the
time Rule 68 was promulgated, 19 describe attorneys' fees as part of
the costs.  App., infra, 1a-3a, 6a-8a.  The numbers may well have been
larger in the past, for the appendix does not include statutes that
were enacted and in force around 1938 but subsequently have been
repealed.

   /8/ The legislative alterations in the traditional definition of
"costs" to include attorneys' fees did not go unnoticed in the
literature either.  See, e.g., Goodhart, Costs, 38 Yale L.J. 849, 878
(1929) (footnotes omitted) ("(A) number of recent federal and state
statutes include provisions giving substantial costs to the successful
party.  Thus, the Clayton Act allows * * * reasonable attorney's fees
* * *.").

   /9/ The Court itself has acknowledged the effect of these statutes
on the traditional understanding of "costs." In Hutto, 437 U.S. at 697
n.27 (emphasis added), the Court recognized that including attorneys'
fees in costs did not "expand the concept of costs beyond the
traditional category of litigation expenses."

   /10/ This silence concerning Rule 68 in the legislative history of
Section 1988 takes on some significance when one remembers that Rule
68 has been part of the Federal Rules of Civil Procedure since 1938
and that statutes taxing attorneys' fees "as part of the costs" have
been in existence even longer.  See pages 12-13 & note 7, supra.

   /11/ On several recent occasions, this Court has rejected similar
arguments for subordinating other rules of law to the goal of
enforcing the civil rights laws.  For example, in General Telephone
Co. v. Falcon, 457 U.S. 147, 156-159 (1982), the Court held that a
private Title VII plaintiff seeking to maintain a class action must
comply with the requirements of Fed. R. Civ. P. 23.  Similarly, the
Court refused to find that Congress implicitly intended to exempt
civil rights cases from the ordinary operation, under 28 U.S.C. 1738,
of res judicata, Migra v. Warren City School Dist. Bd. of Educ., No.
82-738 (Jan. 23, 1984), slip op. 4-9;  Kremer v. Chemical Constr.
Corp., 456 U.S. 461 (1982), and of collateral estoppel, Allen v.
McCurry, 449 U.S. 90, 97-99 (1980).  In these cases, the Court held
that plaintiffs seeking to vindicate the public policy of civil rights
enforcement must suffer the same consequences as any other plaintiff
when their own conduct in a lawsuit is such as to invoke
well-established rules reflecting concerns of judicial economy and
fairness to defendants.  It is difficult to see why the result should
be any different with respect to Rule 68's policy of encouraging
settlement of marginal lawsuits.  See Delta Air Lines, 450 U.S. at
352, 356, 359 n.24;  id. at 363 (Powell, J., concurring);  id. at 380
(Rehnquist, J., dissenting).

   /12/ The court of appeals avoided the limitations established in
the statute and the legislative history by relying on a passage from
the Senate Report stating that private attorneys general "'should not
be deterred from bringing good faith actions to vindicate the
fundamental rights here involved by the prospect of having to pay
their opponent's counsel fees should they lose" (Pet. App. A8 (quoting
S. Rep. 94-1011, supra, at 5)).  This language, however, is irrelevant
to the issue before the Court.  There is no question here of
respondent's having to pay petitioners' counsel fees;  the only
question is whether respondent's post-offer fees should be borne by
petitioners.  See page 8 note 3, supra.

   /13/ Cf. Note, Delta Air Lines, Inc. v. August:  The Agony of
Victory and the Thrill of Defeat, 35 Ark. L. Rev. 604, 631 (1982).  In
fact, even in cases in which there is no clear rule governing the
allocation of costs, no fee award is appropriate when "special
circumstances would render such an award unjust." Newman v. Piggie
Park Enterprises, Inc., 390 U.S. 400, 402 (1968).  See also S. Rep.
94-1011, supra, at 4 (adopting Piggie Park standard);  H.R. Rep.
94-1558, supra, at 6 (same).  Among the special circumstances for
denying attorneys' fees is the maintenance of suit "vexatiously."
Piggie Park, 390 U.S. at 402 n.4.  As this Court has recognized, "Rule
68 is an outgrowth of the equitable practice of denying costs to a
plaintiff 'when he sues vexatiously after refusing an offer of
settlement.'" Delta Air Lines, 450 U.S. at 356 (footnote omitted).
Congress's intentions with respect to Section 1988 and Rule 68 thus
mesh quite neatly.  See pages 18-21, infra.

   /14/ Although the offer of judgment in this case was for "a sum,
including costs now accrued and attorney's fees, of ONE HUNDRED
THOUSAND ($100,000) DOLLARS" (J.A. 17), the courts below never
suggested that the form of the offer was invalid by virtue of setting
a ceiling on attorneys' fees.  Cf. Delta Air Lines, 450 U.S. at
365-366 (Powell, J., concurring).  Since Rule 68 certainly was not
intended to preclude parties from agreeing on the amount of attorneys'
fees (id. at 365 n.4) -- and probably would be unworkable for
defendants if so construed (see Pet. App. A3-A4) -- we do not think it
is of any consequence that the parties in this case stipulated to the
amount of respondent's pre-offer fees after trial rather than at the
time the offer was made.

   /15/ The House Report explains that Congress rejected the option of
making awards of attorneys' fees mandatory for any prevailing party
and instead deliberately chose "the more moderate approach" of leaving
awards to the discretion of the courts in order to prevent abuses by
plaintiffs and their lawyers.  H.R. Rep. 94-1558, supra, at 5-6, 8;
see also 122 Cong. Rec. 31832 (1976) (remarks of Sen. Abourezk).  Rule
68 is simply another measure that aims to achieve precisely this same
goal.

   /16/ As a reason for refusing to apply Rule 68 to this case, the
court of appeals observed that lawyers would "have to think very hard"
before rejecting an offer, even if they initially considered it
inadequate, because they would know that a mistake could cost them a
lot of money (Pet. App. A8).  Such increased consideration is the
precise purpose of Rule 68, and serious thought about a serious offer
should not be rejected as harmful.

   The court also expressed concern that a Rule 68 offer of judgment
made immediately after the filing of the complaint might deter a
plaintiff's lawyers from conducting any discovery (Pet. App. A8-A9).
The court's fears seem exaggerated.  Before filing suit, a plaintiff's
lawyers should have sufficient information to permit evaluation of an
early offer of judgment.

   In any event, the fact that an offer may be made before discovery
is not all that significant.  True, discovery may reveal information
that strengthens a plaintiff's case, but it may also destroy it.
There is no particular reason to think that discovery is of more
benefit to one side than to the other.

   /17/ The Rules Enabling Act was passed in 1934, but the first rules
were not promulgated until 1938, the same year that the Court decided
Erie R.R. v. Tompkins, 304 U.S. 64 (1938).  The first case in which
the Court was called upon to interpret Section 2072 -- Sibbach --
arose a scant three years later.

   /18/ The Court has subsequently repudiated the use of Erie's
substance/procedure dichotomy even in the diversity context as the
test for determining the validity of federal rules under the Rules
Enabling Act.  See Walker v. Armco Steel Corp., 446 U.S. 740, 747-753
(1980);  Hanna v. Plumer, 380 U.S. 460, 469-474 (1965);  Ely, supra,
87 Harv. L. Rev. at 718-738.  In its place, the Court has held that
where there is a "direct collison" between a federal rule and state
law, the test is "whether the Rule (is) within the scope of the Rules
Enabling Act * * *, and if so, within a constitutional grant of
power." Walker, 446 U.S. at 748;  Hanna, 380 U.S. at 470-472.  As the
Court explained in Sibbach, 312 U.S. at 14, whether a rule is within
the scope of the Rules Enabling Act depends upon:

      whether a rule really regulates procedure, -- the judicial
      process for enforcing rights and duties recognized by
      substantive law and for justly administering remedy and redress
      for disregard or infraction of them.

So long as a federal rule does regulate procedure, it is valid,
whether or not it affects substantive rights.  See Hanna, 380 U.S. at
464-474;  Murphree, 326 U.S. at 445-446;  Sibbach, 312 U.S. at 14.
Thus, analysis premised upon the distinction between substance and
procedure has been abandoned for a test that focuses on procedure
alone.  That test does not even remotely resemble the test under Erie
or Guaranty Trust Co. v. York, 326 U.S. 99, 109 (1945)
(outcome-determinativeness test for substance/procedure) (cited by the
court below at Pet. App. A9).  So long as a rule governs "practice and
procedure" (28 U.S.C. 2072), it is valid.  See also Hanna, 380 U.S. at
476 (Harlan, J., concurring) (labeling the new approach the "arguably
procedural" test).

   This test results from the interaction between the constitutional
policies of federal supremacy and federalism.  In Hanna, 380 U.S. at
471-472 (footnote omitted), the Court explained:

         We are reminded by the Erie opinion that neither Congress nor
      the federal courts can, under the guise of formulating rules of
      decision for federal courts, fashion rules which are not
      supported by a grant of federal authority contained in * * * the
      Constitution;  in such areas state law must govern because there
      can be no other law.  But the opinion in Erie * * * involved no
      Federal Rule and dealt with a question which was "substantive"
      in every traditional sense * * *.  (T)he constitutional
      provision for a federal court system * * * carries with it
      congressional power to make rules governing the practice and
      pleading in those courts, which in turn includes a power to
      regulate matters which, though falling within the uncertain area
      between substance and procedure, are rationally capable of
      classification as either.

   The foregoing analysis has no logical applicability when the
conflict is not between state law and a federal rule, but between
federal law and a federal rule.  Such conflicts raise questions of
congressional delegation and statutory construction.  Thus, the United
States does not ask this Court to uphold the application of Rule 68 in
this case under the test of Hanna and Walker.  We note, however, that
under that test, it is obvious that the court of appeals erred in not
applying Rule 68 to bar recovery of respondent's post-offer attorneys'
fees.  Clearly, Rule 68 "really regulates procedure" within the
meaning of Section 2072.  See page 27 note 21, infra.  Under the
diversity cases discussed above, the reference to "substantive
right(s)" in Section 2072 is inapplicable where this is the case.  See
Hanna, 380 U.S. at 472;  Sibbach, 312 U.S. at 14;  Ely, supra, 87
Harv. L. Rev. at 718-720.

   /19/ The legislative history of the Rules Enabling Act supports
this construction of Section 2072.  Although the debates and
legislative reports pertaining to the statute as finally enacted are
sparse and uninformative, see Burbank, The Rules Enabling Act, 130 U.
Pa. L. Rev. 1015, 1096-1097 (1982);  see also S. Rep. 1049, 73d Cong.,
2d Sess. (1934);  H.R. Rep. 1829, 73d Cong., 2d Sess. (1934);  78
Cong. Rec. 9363, 10866 (1934), the Rules Enabling Act was originally
proposed, in virtually identical form, in 1926, and again in 1928.
See S. 477, 69th Cong., 1st Sess. (1926);  S. 759, 70th Cong., 1st
Sess. (1928).  The legislative materials from these earlier attempts
clearly reveal that Congress, in referring to "substantive right(s),"
sought only to make clear its intention in the delegation to the Court
contained in the Act's first sentence:  that the Rules Enabling Act
vested in the Court as much authority to make rules as the
Constitution permits, but no more.  See S. Rep. 1174, 69th Cong., 1st
Sess. 9-16 (1926) (report accompanying S. 477);  S. Rep. 440 (Pt. 2),
70th Cong., 1st Sess. 16-17 (1928) (report accompanying S. 759).  For
an exhaustive consideration of this generally ignored, pre-1934
legislative history, see Burbank, supra, 130 U. Pa. L. Rev. at
1035-1113.

   That Congress was concerned with the limits of its power to
delegate authority rather than with protecting state law from federal
encroachment is not surprising.  In 1934, Erie was four years away,
and in the 1920's, when most of the Rules Enabling Act debate took
place, Swift v. Tyson, 41 U.S. (16 Pet.) 1 (1842), was in full bloom.
The question of congressional authority to delegate responsibility to
other branches of government, on the other hand, was extremely
controversial.  See, e.g., R. Jackson, The Struggle for Judicial
Supremacy (1941).

   /20/ This Court has never decided a case concerning the meaning of
the Rules Enabling Act in a nondiversity context.  Lower courts that
have construed Section 2072 in federal question cases, however, have
uniformly treated the issue as one of statutory construction.  See
Brennan v. Silvergate District Lodge No. 50, 503 F.2d 800, 804-805
(9th Cir. 1974);  United States v. Gustin-Bacon Division, 426 F.2d
539, 542-543 (10th Cir.), cert. denied, 400 U.S. 832 (1970);  7 (Pt.
2) J. Moore, J. Lucas & K. Sinclair, Moore's Federal Practice
Paragraph 86.04(4) (2d ed. 1984).

   /21/ There is no question that Rule 68 is, in fact, constitutional.
 Congress may delegate to the Court authority "to regulate the
practice of the court and to facilitate the transaction of its
business." Washington-Southern Navigation Co. v. Baltimore &
Philadelphia Steamboat Co., 263 U.S. 629, 635 (1924).  This is so even
though the delegation is of powers "which the legislature may
rightfully exercise itself." Wayman, 23 U.S. (10 Wheat.) at 19.  The
allocation of costs and attorneys' fees is a tool that affects the
judicial process, not the underlying sources of substantive rights
upon which the parties base their claims.  White v. New Hampshire
Dep't of Employment Security, 455 U.S. at 451-452 (attorneys' fee
awards are "not compensation for the injury giving rise to an action"
and are "uniquely separable from the cause of action to be proved at
trial");  see also New York Gaslight Club, Inc. v. Carey, 447 U.S. 54,
66 (1980);  Hutto v. Finney, 437 U.S. at 691, 695 n.24;  Sprague v.
Ticonic National Bank, 307 U.S. 161, 170 (1939).  Consequently, cost
and fee-shifting rules govern the practice and procedure of courts and
are within the power of Congress under the Constitution to delegate to
the Court.  See also Alyeska, 421 U.S. at 262 (Congress may authorize
fee-shifting at discretion of courts).

   APPENDIX