Consumer Statutes, Section 998: Because Defense Section 998 Offers Were Valid, Trial Judge Had To Restudy Costs And Fee Rulings To Determine If The First Defense Offer Was In Good Faith

Costs And Fee Awards Will Have To Be Reexamined.

            In Covert v. FCA USA, LLC, Case No. B303663 (2d Dist., Div. 7 Jan. 4, 2022) (unpublished), an automaker was found liable to the vehicle owner for $48,416 under a Song-Beverly Act lemon law case.  However, earlier, automaker made two separate CCP § 998 offers for $51,000 two months after the lawsuit was filed and $145,000 three weeks before trial, containing terms that plaintiff claimed were ambiguous and vague (to be discussed) even though both offers indicated that pre-acceptance fees and costs would be determined on a noticed motion if the parties could not agree to those amounts plus the base sums and the case would be dismissed rather than entry of judgment.  After plaintiff obtained some costs and significant attorney’s fees, the defense appealed and obtained a reversal with instructions on remand.

            The 2/7 DCA decided that the prior 998 offers were valid, except that the lower court needed to decide whether the first offer was premature/not made in good faith, which was not fully borne out by the record below.  However, in so doing, here are the takeaways from the appellate court, which diverged from lower court rulings as to ambiguity in the two offers:

• • • Post-offer fees not addressed. No way.  The offer quoted language from Civil Code section 1794(d) under the lemon law scheme, such that these fees were potentially in play.
    • Prejudgment/postjudgment interest not addressed. The offer was definite enough for plaintiff to assess whether prejudgment interest had to be factored in (with the lower court denying this ultimate request).  As far as postjudgment interest, the offer indicated there would be only a dismissal such that this type of interest was a “no.”
    • Failure to specify whether defendant would require a separate release. The offers did not include a release requirement, plus, any release would be limited to the claims in the case.
    • Failure to include an express good faith provision. Plaintiff offered no authority for why an offer had to include a good faith settlement provision.
    • Lack of specific payment date. Although cases had decided that the lack of a specific payment date is not an uncertainty, plaintiff controlled when the dismissal would be entered and a fee motion prosecuted, which prevented gamesmanship by the defense.
    • Lack of vehicle surrender date. Although having superficial appeal, plaintiff had plenty of information to evaluate whether to take the offer even if there was some delay on this issue.

Because factual issues remained on whether the first 998 offer was valid, the matter was remanded with instructions on what to do with respect to costs and fees depending as to how the trial judge ruled on whether the first offer was premature and not a good faith offer.  This meant that a costs/fee award to plaintiff of around $251,000 went away depending on what happened on remand, which might mean no fees to plaintiff and some costs to defense as the prevailing party.  BLOG CONCLUSION—uncertainty, uncertainty!