Section 998: Plaintiff Tenants’ Rejection Of Defense 998 Offers Resulted In A Painful Result . . .

After Obtaining A Total Jury Award Of $54,258, After An Offset For This Amount, Tenants Owed Defendants $510,828.54 In Fees And Costs For Rejecting Substantial 998 Defense Offers.

               If there is ever a case which shows how plaintiffs need to seriously evaluate CCP § 998 offers, McAdoo v. Wellington Prop. Co., Case Nos. A163856 et al. (1^st Dist., Div. 2 Mar. 13, 2024) (unpublished) is a case book study on the subject.  It is painful for the plaintiffs.

               In this one, two plaintiff residential tenants largely were unsuccessful in a mold/water intrusion case, where they dismissed a Civil Code section 1942.4 wrongful payment of rent claim without any agreement on costs and fees.  Defendant offered to settle under section 998, per each plaintiff, for $40,000 plus reasonable fees and costs to be awarded by the court, offers which were rejected.  Plaintiffs sent their own 998 offer settling for $550,000, which did not gain traction.  After a seven-week jury trial, plaintiffs were awarded a total of $54,258 in damages under constructive eviction/implied covenant claims after asking the jury to award them $610,000, but with the jury also deciding other claims in favor of the defense. 

               Then reality hit, as the opinion shows.  The defense moved for attorney’s fees and costs based on the successful 998 offers, which plaintiffs did not contest as far as entitlement for the defense.  Defendants asked for $1.881 million in fees and costs, with the trial court determining that $1.62 million was a reasonable lodestar award.  However, because plaintiffs argued they did not have the financial resources to satisfy this type of award, the lower court reduced that by $1.2 million down to $450,000 as to the fee component.   The trial court also awarded the defense about $115,631 in routine costs, primarily expert witness fees.  When all the math was done after offsetting the damages obtained by plaintiffs, they were owing defendants $510,828.54 based on § 998 shifting.

               Plaintiffs appealed, but they obtained no change in result.  Plaintiffs did not gain credibility with the appellate court, because their claim of poverty on appeal was belied by the record showing they both had significant six-figure incomes and assets which would support the award by the lower court.  The routine costs component was authorized by law, such that plaintiffs’ legal arguments otherwise were found not be persuasive.  Ouch!