The opinion of the court was delivered by: John F. Grady United States District Judge
Before the court is plaintiff's Motion for Entry of Judgment Pursuant to Fed. R. Civ. P. 68. For the reasons explained below, we deny plaintiff's motion.
Plaintiff is a law firm that provided legal services to the Abraham Family Trust, and to defendants Magid Abraham and Linda Boland, in connection with an arbitration proceeding. (Pl. Compl. ¶ 12.) At that time, Mr. Abraham was the president and CEO of comScore Inc., then a privately-held corporation. (Id. at ¶ 13.) On or about April 19, 2000, plaintiff, Mr. Abraham and Ms. Boland executed a letter agreement concerning the fees for plaintiff's services. (See Letter of April 19, 2000, attached as Ex. A to Defs.' Resp. to Pl.'s Mot. for Entry of Judgment Pursuant to Fed. R. Civ. P. 68.) Among other compensation, the letter agreement granted plaintiff the option to purchase up to 15,000 shares of comScore stock at the initial public offering price if and when comScore conducted an initial public offering. (Id.) comScore conducted its IPO in June 2007 at $16.50 per share. (Pl. Compl. ¶ 21.) Plaintiff alleges that it contacted Mr. Abraham about exercising the option shortly after it learned about the IPO, but that Mr. Abraham disclaimed any obligation to deliver the shares because the IPO date had already passed. (Id. at ¶¶ 28--29.) The option had, in Mr. Abraham's view, expired. Plaintiff claims that it failed to exercise its option on the IPO date only because Mr. Abraham breached his obligation to notify plaintiff that the IPO was imminent. (Id. at ¶ 30.) Plaintiff has filed this lawsuit seeking a declaratory judgment that it is entitled to purchase the shares or, alternatively, money damages for breach of the letter agreement.
On September 12, 2007, before answering plaintiff's complaint, defendants made an offer of judgment pursuant to Fed. R. Civ. P. 68. The offer states, in its entirety: Defendants, Magid Abraham, Linda Boland and the Abraham Family Trust, hereby offer pursuant to Fed. R. Civ. P. 68 to allow judgment to be taken against them obligating them to sell to Plaintiff a total of 15,000 shares of stock they own in comScore Inc. at a price of $16.50 per share subject to the conditions applicable to those shares, plus reasonable attorneys' fees and any other recoverable costs accrued to date to be determined by the Court.
(Offer of Judgment Pursuant to Rule 68, attached as Ex. A to Pl.'s Mot. for Entry of Judgment Pursuant to Fed. R. Civ. P. 68.) After receiving the offer, plaintiff contacted defendants' counsel seeking to clarify what "conditions" applied to the shares. Decl. of Peter G. Rush (hereinafter "Rush Decl.") at ¶ 3. Defendants responded by providing counsel with the restrictive legend printed on the back of the share certificates. (Id.) The legend states as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, OFFERED FOR SALE, ASSIGNED, TRANSFERRED, OR OTHERWISE DISPOSED OF, UNLESS REGISTERED PURSUANT TO THE PROVISIONS OF THAT ACT OR UNLESS AN OPINION OF COUNSEL TO THE CORPORATION IS OBTAINED STATING THAT SUCH DISPOSITION IS IN COMPLIANCE WITH AN AVAILABLE EXEMPTION FROM SUCH REGISTRATION.
The parties' current dispute involves their subsequent discussions about the legend's legal effect and whether, and under what circumstances, it would be removed to facilitate resale. According to plaintiff's counsel, defendants' attorney represented "that the offer was that the legend would be removed one year after the closing on the plaintiff's purchase of the shares." (Aff. of Daniel S. Hefter (hereinafter "Hefter Aff."), attached as Ex. 6 to Pl.'s Reply, at ¶ 3.) Defendants' attorney, Mr. Rush, recalls a somewhat different discussion. According to Mr. Rush, he explained to Mr. Hefter that it was his understanding, as someone without any securities-law expertise, that the shares were subject to a one-year holding period, at the end of which the certificate holder could ask the issuer (comScore, in this case) to remove the restrictive legend. (Rush Decl. ¶ 5.) It was Mr. Rush's understanding that the issuer generally complies with such requests. (Id.) Mr. Rush does not represent comScore, which is not a party to this lawsuit, and contends that he "repeatedly" informed Mr. Hefter of this fact. (Id. at ¶ 4.) Accordingly, he did not agree "to include a provision in the Rule 68 Offer committing comScore to remove the Legend." (Id.)
At some point after this initial discussion, but before plaintiffs accepted defendants' Rule 68 offer, Mr. Hefter consulted a securities lawyer, Mr. Tauke. Mr. Tauke spoke with defendants' counsel, as well as counsel for comScore, and requested that the parties enter into an agreement requiring comScore to remove the legend "and thereby assure a speedy sale when legally permissible." (Aff. of Dale B. Tauke (hereinafter "Tauke Aff."), attached as Ex. 4 to Pl.'s Reply, at ¶ 2.)*fn1 Mr. Tauke states that he was told during this conversation to "go ahead and prepare the agreements," (id.), although there is no indication in the affidavits that the parties had at that point agreed in principle to execute any documents.
On September 27, 2007, the day before the deadline to accept defendants' Rule 68 offer, Mr. Rush spoke with Mr. Hefter by telephone and stated that plaintiff had two options: (a) accept the Rule 68 offer, or (b) "make some sort of settlement proposal." (Rush Decl. at ¶ 7.) The following day plaintiffs filed a Notice of Acceptance including the following clause:
As clarified by defendants' counsel, the offer is to sell to the plaintiff shares that bear a legend . . . which legend would, if the offer of judgment were to be accepted, be removed one year after the closing on the plaintiff's purchase of those shares, with the obligation to remove that legend at that time being documented in a written agreement to be executed by the parties and by comScore, Inc. prior to the closing . . . . The plaintiffs hereby accept the defendants' offer of judgment as so clarified. (Pl.'s Notice of Acceptance of Defs.' Rule 68 Offer of Judgment, attached as Ex. 3 to Pl.'s Mot. for Entry of Judgment Pursuant to Fed. R. Civ. P. 68.) Three days later, Mr. Tauke sent to defendants' and comScore's counsel a draft "Stock Agreement" requiring comScore to remove the restrictive legend if certain conditions are met. (Tauke Aff. at ¶ 3; Rush Decl. at ¶ 8.)
Defendants argue that their Rule 68 offer should be enforced according to its terms, which do not purport to bind comScore or any other party to remove the restrictive legend. Although defendants entertained plaintiff's proposal to remove the legend, they argue that that proposal was an alternative to, not a clarification of, their Rule 68 offer. Plaintiff contends that comScore's obligation to remove the legend was part of the offer, which they timely accepted. Both parties seek to enforce the offer according to their understanding of its terms.
Rule 68 provides that "[a]t any time more than 10 days before the trial begins, a party defending against a claim may serve upon the adverse party an offer to allow judgment to be taken against the defending party for the money or property or to the effect specified in the offer, with costs then accrued." Fed. R. Civ. P. 68. Rule 68 offers are generally interpreted according to ordinary contract principles, with certain exceptions relevant to this case. Webb v. James, 147 F.3d 617, 620 (7th Cir. 1998). First, unlike run-of-the mill contract offers, declining a Rule 68 offer may have significant consequences for the plaintiff. If the plaintiff obtains a judgment that is not more favorable than the Rule 68 offer, then "the offeree must pay the costs incurred after the making of the offer." Fed. R. Civ. P. 68. Second, Rule 68 offers are irrevocable for a period of 10 days "as though the plaintiff had paid for a 10-day option." Webb, 147 F.3d at 620 (quoting Richardson v. National R.R. Passenger Corp., 49 F.3d 760, 765 (D.C. Cir. 1995)). Accordingly, a plaintiff may clarify the terms of an offer before making a decision "without running the risk of prematurely or inadvertently rejecting the offer." United States v. Hendricks, No. 92 C 1461, 1993 WL 226291, *2 (N.D. Ill. June 24, 1993). Indeed, clarification "furthers the purpose of the Rule," Gavoni v. Dobbs House, Inc., 164 F.3d 1071, 1076 (7th Cir. 1999), insofar as "the ...