Section 998/Section 1717: Plaintiff, Although Not Prevailing Under Section 1717, Did Beat Its Statutory Pretrial Settlement Offer Such That It Was Entitled to Postoffer Attorney’s Fees As 998 Costs From The Defense

 

Opinion Will Give Added Importance to Section 998 Costs(Fee)-Shifting.

     Well, well, we can report that there has been an interesting appellate “explosion” of opinions in the Code of Civil Procedure section 998 area. The First District, Division 5, has entered into the fray.

     In SCI California Funeral Services, Inc. v. Five Bridges Foundation, Case Nos. A126053/A126337 (1st Dist., Div. 5 Feb. 14, 2012) (certified for partial publication), one can say that plaintiff did win an easement dispute and reaped significant damages of $1.7 million but lost other claims under an option agreement that well eclipsed the damages won on the easement claim. The trial court denied plaintiff’s request for an attorney’s fees award. The appellate court agreed that this ruling was proper under Civil Code section 1717, but did find that it was entitled to postoffer fees under a successful Code of Civil Procedure section 998 offer.

     On the section 1717 rationale (in a portion of the appellate opinion that was not published), the Court of Appeal affirmed the trial court’s discretionary decision that plaintiff was not the prevailing party. After all, plaintiff had nine of thirteen claims dismissed pretrial or upon a demurrer and had another claim summarily adjudicated out of the case. On the remaining claims, plaintiff sought $8.2 million in entirety, but only won $1.7 million on the easement claim. In contrast, defendant only lost a $578,000 counterclaim. Looking at it pragmatically, the trial court certainly could conclude that plaintiff did not prevail for 1717 purposes.

     However, that was not the end of the story (or, as co-contributor Marc would say in Detective Columbo fashion, “just one more thing”). The appellate court addressed plaintiff’s entitlement to postoffer attorney’s fees because the defense did not beat plaintiff’s 998 offer of $799,000. That one was a winner!

     In a partially certified published part of the opinion, the First District concluded two things: (1) both plaintiffs and defendants can obtain postoffer attorney’s fees as costs under section 998 (Pilimai v. Farmers Ins. Exchange Co., 39 Cal.4th 133, 150-151 (2006)); and (2) plaintiff was entitled to postoffer fee recovery under section 998 even though it did not prevail for fees under Civil Code section 1717 (Scott Co. v. Blount, Inc., 20 Cal.4th 1103, 1113-1116 (1999)). There you go, section 998 has even more added teeth based on this recent opinion, even if the winning party did not get fees under another more routine contractual/statutory fee entitlement basis.