Decision May Have Implications for Application of CCP § 998 in Diversity Cases.
An important decision for federal diversity cases came out yesterday from the Ninth Circuit Court of Appeal, pitting F.R.Civ.P. 68 against a state pre-trial settlement scheme in Arizona.
In Goldberg v. Pacific Indemnity Co., Case No. 09-16243 (9th Cir. Dec. 6, 2010) (for publication), the appeals court determined that Arizona Rule of Civil Procedure 68 was “trumped” by Federal Rule of Civil Procedure 68. The winning defendant made a FRCP 68 offer for $1.25 million that was not accepted, even though the defense later won a summary judgment on plaintiffs’ bad faith claim and defensed plaintiffs’ breach of contract claim. Arizona Rule 68, even more punishing than California Code of Civil Procedure section 998, allows recovery of expert witness fees and double costs to the winning offeror. The district judge denied the defense requests for recovery of these costs.
The Ninth Circuit affirmed, finding that F.R.Civ.P. 68 occupied the field and did not allow for use of Arizona Rule 68 because (1) Federal Rule 68 applies to offers by defendants, and (2) the Federal Rule does not allow a defendant to recover costs when a judgment is entered in defendant’s favor.
Along the way, the appeals court observed that F.R.Civ.P. 68 does apply to diversity cases in certain circumstances, but not others. This was one where it did and was effectively preemptive in nature.
BLOG UNDERVIEW--Goldberg may have important implications for the application of CCP § 998 in federal diversity cases. We will have to see how this pans out in future evolving jurisprudence.
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