Consumer Statutes, Section 998: Because Section 998 Does Apply To Lemon Law Cases, Fee/Costs Award Had To Be Reduced By Post-Fees Covered By Defense 998 Offer

However, Majority And Dissenting Justices Disagreed On Whether Section 998 Applied To A Litigation Ended Through A Settlement.

            Ayers v. FCA US, LLC, Case No. B315884 (2d Dist., Div. 8 Feb. 27, 2024) (published) is an interesting decision involving the interplay between the Song-Beverly Act “lemon law” fee/costs shifting provisions and pretrial offers under CCP § 998.  Section 998 prevailed in this case, although the majority and dissenting justices weighed in on the Madrigal issue being considered by the California Supreme Court—whether section 998 applies to litigation concluded through a settlement agreement.

            In a Jeep lemon law matter, the record showed that plaintiff and defendant traded numerous settlement proposals and CCP § 998 offers over a lengthy time frame, both before a lawsuit was filed and after litigation commenced.   During the course of the litigation, an appellate decision found a change in law on how to value “trade in” mitigation by the plaintiff in lemon law cases, although the law is not necessarily uniform in this area.  But, salient for the ultimate disposition in this case, the lower court granted fees and costs to plaintiff, with some reductions, but did not decide whether any defense 998 offers made any difference, although a 2018 offer would have eliminated about $74,523.50 in further fee exposure.

            The justices in the majority decided that the February 2018 CCP § 998 offer was valid and reduced the fee award to the lemon law plaintiffs.  In doing so, they recognized the following:  (1) section 998 does apply to lemon law cases, relying on Duale v. Mercedes-Benz USA, LLC, 148 Cal.App.4^th 748 (2007); (2) section 998 applies to litigation terminated by settlement, accepting the majority’s analysis in Madrigal (which is currently under review by the California Supreme Court); (3) section 998 offers do allow the court to consider changes in the law (such as on the “trade-in” reduction issue); and (4) payment and deposit terms do not render a section 998 offer uncertain. 

            Justice Viramontes, in his dissent, believed that section 998 does not apply to litigation terminated by settlement, discussing legislative history which bolstered his conclusion to the contrary given the equally susceptible competing interpretations set forth in Madrigal.