In Arizona, a rejected settlement offer can carry a price tag. Under Rule 68 of the Arizona Rules of Civil Procedure, either side in a lawsuit can serve a formal "offer of judgment," and a party who turns it down and then fails to do better at trial can be ordered to pay a sanction. That makes Rule 68 one of the few procedural rules that directly changes what a claim is worth to both sides once a case is filed.
What an offer of judgment is
Rule 68 allows a party to serve on the opposing party an offer to let judgment be entered on specific terms. If the other side accepts, the court enters judgment in line with the offer. If the other side rejects it, the case goes on, but the offer stays in the background. Arizona courts have described the rule's purpose as promoting settlement and avoiding protracted litigation.
Either side can use it. A defendant can offer a sum to resolve the case, and a plaintiff can serve an offer too, which puts pressure on the defense to take a settlement figure seriously.
How the sanction works
The consequence of rejecting an offer depends on when the offer was served. According to the Arizona Supreme Court's summary of its 2021 rule changes, amendments to Rule 68(g) apply to offers of judgment served on or after January 1, 2022. For those offers, the sanction is "twenty percent of the difference between the amount of the offer and the amount of the final judgment." A court may reduce or eliminate the sanction only if it finds it "manifestly unjust," and no sanction is assessed when an action seeks solely injunctive relief.
For offers served before 2022, the older formula applied. It required the party who rejected the offer to pay the offeror's reasonable expert witness fees and double the taxable costs incurred after the offer, plus post-offer prejudgment interest on unliquidated claims. Arizona appellate decisions applying that earlier version are still published, so it is worth knowing which version a source describes.
Why this matters for claim value
Because a rejected offer can later cost money, the offer is not just a number. It shapes how each side weighs the risk of going to verdict. A plaintiff weighing a defense offer has to compare it with a realistic range of outcomes, and also with the possibility of a sanction if the verdict comes in lower. A defendant weighing a plaintiff's offer faces the same math in reverse. As the Arizona courts have explained, the comparison has to be "apples to apples," so how costs and other terms are treated in the offer can matter.
Interest rules interact with this. Under A.R.S. § 44-1201, a court may not award prejudgment interest on unliquidated damages, a category that includes future and punitive damages. The statute also sets the interest rate on most judgments at the lesser of ten percent a year or one percent plus the prime rate published in the federal reserve H.15 release, unless another statute or a written contract sets a different rate. Rule 68 is one of the narrow routes by which interest before judgment can enter the picture at all.
What Rule 68 does not do
An offer of judgment does not tell anyone what a claim is worth. That still depends on the medical evidence, the allocation of fault, the available insurance, and the deadline to file; see our explainers on why no calculator can value an Arizona injury case and on Arizona's two-year filing deadline. Rule 68 only adds a procedural consequence to the decision of whether to accept or reject a particular figure.
Because the sanction can be significant and the rule has specific timing and form requirements, anyone who receives an offer of judgment should have a licensed Arizona attorney review it promptly, before the response period runs.
This article is general legal information, not legal advice, and no article can estimate the value of a specific claim. Rule 68 text and summaries are from the Arizona Judicial Branch; statute text is from the Arizona Legislature's published A.R.S. § 44-1201.