Clients’ Section 998 Offer Was Invalid Based on Absence of Acceptance Language, So Expert Witness Fees Recoverable.
Law Offices of Roger E. Naghash v. Roy, Case No. G044785 (4th Dist., Div. 3 Dec. 4, 2012) (unpublished) is a wild dispute between former clients and an attorney arising from clients’ prior loss of a battle with his HOA which resulted in a large fee exposure. Buckle up on this one, for we now tell the facts described in an interesting 3-0 decision authored by Justice Fybel of our local Santa Ana appellate court.
Clients retained former attorney for an HOA dispute, with clients dismissing the case without prejudice during trial but then getting hit with fees in excess of $167,000 in HOA’s favor. Former attorney represented the clients on appeal and obtained a reversal of the fees award. Then, former attorney sent clients a notice of right to arbitrate in connection with a claimed overdue receivable in excess of $93,000. According to clients, one of clients had a 43 minute phone conversation in which the parties reached a “walkaway” agreement--clients would absorb the $143,000 in fees already paid to former attorney, clients would not pursue any malpractice claims, and attorney would not pursue any claims for additional fees. Apparently, attorney did not see it that way and filed a collection suit, with clients asserting estoppel and waiver as defenses and also cross-complaining for malpractice. Curiously, attorney asserted a defense to the cross-complaint based on the “modification of written contract by executed oral agreement.”
Following a bench trial, the trial judge found that a “walkaway” agreement had been reached but denied clients’ request for $15,911.25 in expert witness fees based upon a rejected CCP § 998 offer.
Both sides appealed; both sides lost.
The interesting issue on the “walkaway” agreement was that it violated State Bar Professional Conduct Rule 3-400(B), which provides that an attorney cannot settle a claim or potential claim for malpractice unless the client is informed in writing about seeking independent advice and given an opportunity to seek that advice. Of course, none of these safeguards occurred during the course of the verbal phone call, but the real issue is who had the power to void an offending agreement to the contrary. Answer: the agreement is voidable by the client, not void altogether, such that clients’ use of the oral agreement as a defense showed it was not being voided and could be enforced by clients. There was nothing illegal about the agreement, because it was simply an avoidance of future litigation by both sides. Similarly, the mutual waiver of claims constituted proper consideration for the agreement.