Mediation And 998: Sixth District Gives Us All Pointers On Compliance With Mediation Condition Precedent Contract Clauses And Formatting Of 998 Offers

$42,064 Fee Award and $3,583 Expert Witness Award Gets Reversed.

     The nice thing about posting on unpublished decisions (and we find an overwhelming number to be well reasoned) is that they always have pointers for litigators on what and what not to do. The next lessons involve satisfying mediation condition precedent clauses for fee recovery and properly formatting 998 offers. (For more cases in these areas, go to the left hand side of our Home Page and click on “Mediation” and “Section 998.”)

     Vasquez v. Togami, Case No. H035082 (6^th Dist. Sept. 9, 2010) (unpublished) involved a situation where plaintiff buyer and defendant seller got embroiled in a real estate purchase dispute under a CAR form contract with a standard clause indicating that a party who commences an action without first attempting to resolve the matter through mediation or a party who refuses to mediate after a request had been made is disqualified from obtaining attorney’s fees recovery under the contract fees clause. Before commencing litigation to rescind the transaction, plaintiff sent a demand letter requesting rescission and offering to mediate the matter unless was there was an agreement to rescind. Defendant never responded to the request. Litigation ensued. Defendant served a 998 offer, offering to waive costs and fees in exchange for a dismissal of the case by plaintiff. After a three-day bench trial, the court entered judgment for defendant.

     Defendant moved to recoup $42,064.67 in attorney’s fees and $5,083 in expert witness fees under the contractual fees clause and based on the 998 offer. The trial court awarded defendant the full fee request and $3,583 in expert witness costs. Plaintiff appealed.

     Plaintiff got a reversal on both the fees clause and 998 offer issues in an opinion authored by Justice Elia on behalf of a 3-0 Sixth District panel.

     With respect to the fee clause issue, the appellate court found that the undisputed evidence showed—confirmed by an express finding by the lower court--that defendant did refuse to mediate by refusing to respond to the request in plaintiff’s letter. The CAR form was clear, and the window for mediation closes suddenly if mediation is not agreed to before litigation begins. (Frei v. Davey, 124 Cal.App.4^th 1506, 1517 (2004).) As the Court of Appeal succinctly put it, “Plaintiff was not legally obligated to renew his request for mediation before filing suit.” (Slip Opn., p. 7.)

     So, what’s up on the 998 issue?

What's Up Doc?

     Here is what is up: Plaintiff failed to include a provision for defendant to accept the offer by signing a statement that the offer was accepted. This is a mandatory requirement under 998. Although no magic language is required, there must be some language for acceptance, and that was missing here. “The section 998 offer need not use any particular words to allow the offeree to indicate acceptance, but it must include some language explaining that the offeree may accept by signing a statement to that effect.” (Slip Opn., p. 10.)