An Arizona Offer of Judgment is a formal settlement proposal served under Rule 68 of the Arizona Rules of Civil Procedure, and its consequences are serious: reject one and fail to beat it at trial, and you owe the other side a mandatory sanction equal to 20% of the gap between the offer and the judgment. Either the plaintiff or the defendant can make the offer, and either side can be on the hook for the sanction.
What a Valid Offer Must Contain
An offer that proposes a money judgment has to state an exact dollar figure. That figure must be inclusive of all damages, taxable court costs, interest, and attorney’s fees sought in the case. The only carve-out is attorney’s fees, and only if the offer says so explicitly. When an offer excludes fees and is later accepted, either side can ask the court to award fees separately.
Timing is just as strict as content. The offer must be served more than 30 days before trial. In arbitration cases, no offer can be made during the window that starts 25 days before the arbitration hearing and ends when a notice of appeal is filed. If liability has already been decided and only damages remain, an offer on damages must be served at least 10 days before the damages hearing.
If you receive an offer you believe is procedurally defective, you have 10 days to serve written objections. Miss that window and you lose the ability to challenge the offer’s validity when the court later calculates sanctions.
How Long the Offer Stays Open
The default effective period is 30 days after service, but the rule adjusts the window based on where the case is:
- An offer served within 60 days after the summons and complaint must stay open for 60 days.
- A standard offer remains open for 30 days.
- An offer made within 45 days of trial stays open for only 15 days.
- In arbitration cases, an unexpired offer automatically expires at 5:00 p.m. on the fifth day before the arbitration hearing.
If the court extends the effective period, the offering party can withdraw the offer any time after the original period ends and before acceptance. A rejected offer doesn’t stop the same party from making a new one later as the case develops.
Accepting or Rejecting
To accept, serve written notice on the offering party during the effective period. Either side then files the offer and proof of acceptance with the court, and the court enters judgment. The case ends.
You don’t need to formally reject. If the effective period passes with no acceptance, the offer is treated as rejected and withdrawn. An unaccepted offer is not admissible at trial, so the jury never hears about it. It resurfaces only after trial, when the court decides sanctions.
The 20% Sanction
If you reject an offer and then fail to obtain a more favorable judgment, you owe the offering party 20% of the difference between the offer and the final judgment. The percentage runs on the gap, not on the total.
Say a defendant offers $100,000 and the plaintiff turns it down. At trial the plaintiff wins $70,000. The gap is $30,000, and the plaintiff owes the defendant $6,000. The math works the same in reverse. If a plaintiff offers to accept $50,000 and the defendant rejects, and the jury then awards $80,000, the defendant owes the plaintiff $6,000 on that same $30,000 gap.
When the judgment includes taxable costs or attorney’s fees, the court’s comparison counts only the costs and fees reasonably incurred as of the date the offer was made. Anything that piled up after the offer date doesn’t help the rejecting party close the gap.
When Sanctions Don’t Apply
Two limitations matter. The court cannot impose a Rule 68 sanction in a lawsuit that seeks only injunctive relief with no monetary component. And the court has discretion to reduce or eliminate a sanction if it finds the result would be “manifestly unjust.” That safety valve exists, but Arizona courts treat it as a narrow exception, not a routine escape.
Offers to Multiple Parties
When more than one plaintiff or defendant is involved, an offer to multiple parties has to be apportioned so each party can independently evaluate whether to accept for their own claim. A single lump-sum offer that lumps everyone together isn’t valid. Apportioned offers can be conditioned on all recipients accepting, which means one holdout can defeat the whole settlement. The Arizona Court of Appeals explained the apportionment requirement in Duke v. Cochise County: an unapportioned joint offer strips each recipient of the ability to assess their individual chances at trial.
How Arizona’s Rule Differs From Federal Rule 68
If your case could land in either state or federal court, the differences change the stakes. Under Federal Rule of Civil Procedure 68, only the party defending against a claim can make an offer. The offer must be served at least 14 days before trial, and the opposing party has 14 days to accept. If the plaintiff rejects and then obtains a judgment that is not more favorable, the plaintiff pays the costs the defendant incurred after the offer.
The federal penalty is limited to post-offer “costs,” which typically means filing fees, witness fees, and similar litigation expenses. Whether attorney’s fees count as costs depends on the underlying statute. The Supreme Court held in Marek v. Chesny that when a statute like 42 U.S.C. § 1988 defines attorney’s fees as part of costs, those fees fall within Rule 68’s cost-shifting. Where no such statute applies, attorney’s fees stay out of the calculation.
Arizona’s rule departs from that framework in three ways that matter. Both plaintiffs and defendants can make offers. The effective periods are longer. And the sanction is a flat 20% of the gap between the offer and the judgment rather than a reimbursement of post-offer costs. Arizona also requires the offer to state a specific sum inclusive of all damages, costs, interest, and fees, while the federal rule is less prescriptive about content. Rejecting an offer in Arizona state court carries a steeper and more predictable financial penalty than the same move would in federal court.