                  In the
             Court of Appeals
     Second Appellate District of Texas
              at Fort Worth
           ___________________________
                No. 02-18-00012-CV
           ___________________________

          PATRICK MAHAFFEY, Appellant


                           V.

SETH WASHBURNE AND THIRSTY 13TH, LLC, Appellees



        On Appeal from the 48th District Court
                Tarrant County, Texas
           Trial Court No. 048-268735-13


        Before Sudderth, C.J.; Meier and Kerr, JJ.
           Opinion by Chief Justice Sudderth
                                       OPINION

       Appellees Seth Washburne and Thirsty 13th, LLC’s lawsuit against Appellant

Patrick Mahaffey was pending for four years before Appellees filed a notice of

nonsuit, but during the pendency of the lawsuit, Mahaffey filed a declaration invoking

rule of civil procedure 167, the offer-of-settlement rule. See generally Tex. Civ. Prac. &

Rem. Code Ann. §§ 42.001–.005 (West 2015); Tex. R. Civ. P. 167. Thereafter, on

September 28, 2016, Mahaffey made a rule 167 offer of settlement. The settlement

offer was not accepted by Appellees.

       More than a year later, on October 24, 2017, Appellees filed their notice of

nonsuit. Within two days, Mahaffey filed a motion to recover his litigation costs

pursuant to rule 167. On October 30, Appellees filed a first amended notice of

nonsuit “to provide an explanation” as to why the nonsuit was taken. The next day,

the trial court signed the order of nonsuit.

       Mahaffey filed his first amended motion to recover his litigation costs on

December 4, 2017, and a supplement to that motion on December 8, 2017. By letter

dated December 20, 2017, the trial court announced its decision to deny Mahaffey’s

motion. In it, the trial court expressed its opinion that a party who seeks to recover

litigation costs must be able to show there is a final judgment on monetary damages

that is significantly less favorable than a settlement offer, see generally Tex. Civ. Prac. &

Rem. Code Ann. §§ 42.001–.005; Tex. R. Civ. P. 167, and that a nonsuit without

prejudice does not constitute a judgment that disposes of a claim for monetary

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damages with the necessary finality to allow recovery under civil practice and remedies

code chapter 42 and rule of civil procedure 167. On that same day, the trial court

signed an order denying Mahaffey’s motion for recovery of litigation costs.

       The parties continued to dispute the issue of litigation costs in motions for

reconsideration and replies thereto until the trial court signed an order dated

January 25, 2018, denying reconsideration of its December 20 order.

       In a single issue comprising two sub-issues, Mahaffey argues that the trial court

erred by overruling and denying his motion for recovery of litigation costs because

(1) the order of nonsuit constitutes a final judgment as contemplated by chapter 42 of

the civil practice and remedies code and rule of civil procedure 167, and (2) a trial on

the merits was not required for him to be entitled to recover his litigation costs under

the applicable statutes and rules.

       In this issue of first impression, we must consider whether an order of nonsuit

may trigger the shifting of litigation costs under the offer-of-settlement rule. The

answer is both yes and no. As explained below, while an order of nonsuit, as a

“significantly less favorable judgment,” theoretically would trigger the shifting of

litigation costs under the offer-of-settlement rule, the amount that would be shifted, at

least under these facts, is limited to zero.

       The offer-of-settlement rule is found in civil practice and remedies code

chapter 42 and rule of civil procedure 167. See Tex. Civ. Prac. & Rem. Code Ann.

§§ 42.001–.005; Tex. R. Civ. P. 167. With a handful of exceptions, the offer-of-

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settlement procedure can be used for any claim that seeks monetary damages. See

Tex. Civ. Prac. & Rem. Code Ann. § 42.002(b) (excluding class actions, shareholder

derivative suits, actions by or against governmental units, actions brought under the

family code, workers’ compensation claims, and actions filed in justice or small claims

courts). But to be invoked in a particular lawsuit, a defendant 1 must first file a

declaration in compliance with the rule. See Tex. R. Civ. P. 167.2(a).

       Once a declaration has been filed, any party may make a settlement offer under

the offer-of-settlement rule. And once such an offer of settlement has been made, if

the offer is rejected, either explicitly or by operation of law, see Tex. R. Civ. P. 167.3(c)

(providing that an offer that is not withdrawn or accepted is deemed rejected), then

the rejecting party becomes liable for some of its opponent’s litigation costs2 if, in

hindsight, the judgment “awarded on the monetary claims covered by the offer is

significantly less favorable to the offeree than was the offer.” Tex. R. Civ. P. 167.4(a).

“A judgment award on monetary claims” is considered “significantly less favorable” if




       This term is broadly defined as “a party against whom a claim for monetary
       1

damages is made” and thus would include a plaintiff if the defendant filed a
counterclaim seeking monetary relief. See Tex. R. Civ. P. 167.2(a).
       2
        Litigation costs include: (1) court costs, (2) reasonable deposition costs,
(3) reasonable fees for no more than two testifying expert witnesses, and
(4) reasonable attorney’s fees, made or incurred from the time the offer was rejected
to the time of judgment. Tex. R. Civ. P. 167.4(a), (c).



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the plaintiff’s award is less than 80% of the rejected offer. See Tex. R. Civ. P.

167.4(b)(1); see also Tex. Civ. Prac. & Rem. Code Ann. § 42.004(b)(1).

       Here, there is no dispute that the declaration and offer of settlement complied

with the requisites of the rule, that Mahaffey offered Appellees $15,100 to settle the

claim, that Appellees rejected his offer, and that their subsequent nonsuit resulted in a

judgment significantly less favorable than the $15,100 Mahaffey offered. Thus, the

litigation cost-shifting mechanism of the rule was triggered.

       However, both rule 167 and chapter 42 provide limits on the amount of

litigation costs that can be shifted due to an imprudent rejection of a settlement offer.

Both provide that “the litigation costs that may be awarded to any party under this

rule” may not exceed “the total amount that the claimant recovers or would recover

before . . . subtracting as an offset an award of litigation costs” under this rule in favor

of the defendant. See Tex. R. Civ. P. 167.4(d)(2); see also Tex. Civ. Prac. & Rem. Code

Ann. § 42.004(d).

       Because Appellees nonsuited their action against Mahaffey, they took nothing

by way of judgment against him. Thus, pursuant to rule 167.4(d)(2) and section

42.004(d), any litigation costs awarded could not exceed the total amount of zero (the

amount that Appellees “recovered”). Because here the total amount of litigation costs

that could be shifted equals zero, the trial court did not err by refusing to award

Mahaffey any amount for litigation costs. We overrule Mahaffey’s two sub-issues and



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affirm the trial court’s judgment.

                                         /s/ Bonnie Sudderth

                                         Bonnie Sudderth
                                         Chief Justice

Delivered: November 15, 2018




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