Code Of Civil Procedure Section 998 Offers—Burden Is On The Contesting Party To Show The Offer Was Unreasonable Or Superceded When The Judgment Was More Favorable Than The Offer

Fourth District, Division One Affirms Costs Award Under Section 998 Where Appealing Defendant Failed to Present Adequate Appellate Record to Rebut the Winning Nature of an Initial 998 Offer.

            Robles v. AutoZone, Inc., Case No. D049259 (4^th Dist., Div. 1 July 22, 2008) (unpublished) is a nice primer on burden of proof and appellate record sufficiency principles relating to pretrial offers to settle under Code of Civil Procedure section 998. 

            This appellate case reinforces these important tenets:

• When a section 998 offeror obtains a judgment more favorable than the offer, the judgment constitutes prima facie evidence of the offer’s reasonableness, with the burden being squarely on the defendant offeree to prove otherwise.  (Carver v. Chevron U.S.A., Inc., 97 Cal.App.4^th 132, 152 (2002)); and
• An initial offer to allow judgment taken under section 998 does not remain effective and may be superseded before a second trial where a second 998 offer is communicated.  (See, e.g., Distefano v. Hall, 263 Cal.App.2d 380, 384-385 (1968) [section 998 predecessor statute]; Wilson v. Wal-Mart Stores, Inc., 72 Cal.App.4^th 382, 389-390 (1999) [section 998].)

          

However, what happened to the defendant/appellant in Robles is not an isolated occurrence.  The appellant never provided a copy of the second 998 offer in the record, such that the appellate court was blindlessly charting seas of asserted error on review.  Because appellant had the burden on the issue, the Court of Appeal assumed that the original offer was effective, which meant that plaintiff easily beat the initial 998 offer of $40,000 after winning a compensatory judgment of $73,150.  The upshot is that plaintiff won $34,700.70 in costs (mainly expert witness fees) because the initial section 998 offer was not effectively rebutted.  (Here is what defendant asserted as the real facts—The initial 998 offer was superseded by a second offer for $731,500.  However, after lots of proceedings, plaintiff only won a combined compensatory and punitive damage award of $512,050, which meant that defendant actually reallocated the risks.   Alas, the appellate record was not developed to press this argument persuasively.) 

            (BLOG BONUS COVERAGE—Robles also has an extended discussion on punitive damages, with these blogs commending anyone on this subject to visit the excellent California Punitive Damages blog powered by contributors Curt Cutting, Lisa Perrochet, and Jeremy Rosen of Horvitz & Levy (cross-referenced in our home page).  In short, Robles affirmed a trial court’s reduction of a jury’s punitive damages award from $7.5 million to $438,900, which is a 6:1 ratio of punitive damages to the $73,150 compensatory damage award.  There is a discussion of constitutional limits for punitive damage awards, which may be helpful given the California Supreme Court’s decision to review Buell-Wilson v. Ford (a Fourth District, Division One decision).  Here is a memorable quote from the unpublished Robles opinion:  “Also, even a six-to-one ratio of punitive damages represents a blot on a corporation’s reputation and has a punitive effect.  The level of punitive damages imposed is not required to be so large as to impede the activities of the corporation.”  For those of you who read John Mortimer's classic tales of the fictional English barrister Horace Rumpole of the Old Bailey, the use of the word “blot” will only bring a wry smile when reading this passage from Robles, a civil case Mr. Rumpole would have never touched.¹

¹John Mortimer, The Third Rumpole Omnibus (Penguin Books 1998), p. 705 ("This man Blewitt," I said, "appears to be a considerable blot on the landscape.")