Failure to Award 998 Offer Costs Reversed, Including Refusal to Compensate For Excluded Expert Testimony Whose Admissibility Was Uncertain, But Maybe Necessary.
Above: Pocketbook considerations. 1942. Arthur S. Siegel, photographer. Library of Congress.
Here is an interesting one that we predict will engender some interesting discussion on at least the main published Civil Code section 1717 issue, if not the unpublished Code of Civil Procedure section 998 issue.
Walker v. Ticor Title Co. of Cal., Case Nos. A126701 et al. (1st Dist., Div. 1 Mar. 15, 2012) (certified for partial publication) involved a situation where a lower court did two things inspiring an appeal by title company: (1) rewarding it only a little over $884,000 in contractual attorney’s fees under Civil Code section 1717 (out of a requested over $2 million) based on plaintiffs’ inability to pay; and (2) finding defense cumulative $100,00 998 offers to be unreasonable and not awarding fees for an expert whose testimony was ruled inadmissible for trial purposes.
Actually, the defense did win a reversal on the fee and 998 rulings.
In the published portion of the opinion, the appellate court--after acknowledging that equitable considerations are appropriate for a section 1717 award--found that it was an abuse of discretion to consider financial impact on a litigant for purposes of reducing a fee award. “A reduction in an award of attorney fees otherwise determined to be reasonable on the basis of the losing party’s financial condition is not a change in the determination of the fair market value of the legal services rendered. Rather, it is an equitable reduction in the losing party’s liability for an otherwise reasonable fee. We find nothing in Civil Code section 1717 or the cases construing it that suggests contractual and statutory awards must be consistent in permitting such reductions.” (Slip Opn., p. 19.)
The unpublished portion of the opinion on the 998 issue found no objective basis justifying the conclusion that the defense 998 offers were not made in good faith. The offers were made after substantial discovery and made seven months before trial, meaning that sufficient information was available to all litigants. The cumulative settlement offer of $100,000 constituted nearly half of the compensatory damages sought by plaintiffs at trial--another indicator of good faith. Even though one expert’s testimony was ruled inadmissible, it was far from certain that the arguments against admissibility were compelling such that the denial of 998 costs on this basis was error (because the expert testimony might well have been necessary in defense of the case).
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