Dissenting Opinion Held That Section 998’s Cost-Shifting Provisions Do Not Apply Where A Plaintiff’s Less Favorable Result Came About Through Settlement Of The Case Rather Than A Litigated Result Following Trial Or Arbitration.
In Madrigal v. Hyundai Motor America, Case No. C090463 (Third Dist., April 11, 2023) (published) defendant made two Code Civ. Proc., § 998 offers to compromise which were rejected by lemon law plaintiffs. Then, after a jury was sworn in, the parties reached a settlement – with the principal amount of that settlement being less than defendant’s second 998 offer – whereby plaintiffs would dismiss with prejudice their complaint once defendant made payment and the issue of attorney fees and costs was resolved. After the trial court confirmed the terms of the settlement, plaintiffs moved for prevailing party fees of $207,438.75 and costs of $20,865.83 under section 1032(a)(4) and the Song-Beverly Act (Civ. Code, § 1794(d)). Defendant moved to strike plaintiffs’ costs memorandum and opposed their fees request on the bases that plaintiffs had failed to obtain a judgment that was more favorable to them than defendant’s second 998 offer, and therefore could not recover fees or costs incurred after the date of that second offer. The trial judge disagreed – concluding that section 998 did not apply in this case because the parties had settled and there was no trial – and awarded plaintiffs $81,142.50 in fees after some reductions and denial of plaintiffs’ requested multiplier, and $17,681.05 in costs.
Defendant appealed – bringing to the Third District a question of first impression. In a 2-1 opinion authored by Justice Krause, with Justice Duarte concurring, and Acting Presiding Justice Robie dissenting in part, the Third District held that the cost-shifting provisions of section 998 do in fact apply when an offer to compromise is rejected and the case ends in settlement because the settlement constitutes a “judgment” within the meaning of section 998.
On dissent, Acting P.J. Robie concluded that the analysis of section 998’s cost-shifting provisions should not end with the word “judgment.” Rather, he explained, that every word and phrase of a statute must be construed in context and harmonized to the extent possible with provisions relating to the same subject matter. Based on section 998’s policy to encourage the settlement of lawsuits prior to trial, Legislature’s 1997 amendment to its cost-shifting provisions to include arbitration proceedings, and an analysis of the phrase “fails to obtain” in conjunction with the word “judgment at section 998(c)(1), Acting P.J. Robie determined that section 998 applies when a plaintiff obtains a litigated result less favorable than a previously rejected section 998 offer.
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