Remand Was Order, But A Potential $575,000 To $994,000 In Expert And Attorney’s Fees Must Be Considered In “Re Do.”
Prince v. Invensure Ins. Brokers, Inc., Case Nos. G051996 et al. (4th Dist., Div. 3 May 18, 2018) (partially published; section 998 discussion published, with remaining fee discussion unpublished) is an insurance business merger discussion gone bad, with plaintiff suing for moneys owed on a payout note and defendant cross-complainant suing for unauthorized computer access and theft of trade secrets, including a violation of Penal Code section 502. Plaintiff sent two CCP § 998 offers, which were rejected. After a five-week jury trial, plaintiff won $647,706.48 on his complaint and “defensed” defendant’s cross-complaint.
Plaintiff/cross-defendant then moved to recover costs under the rejected 998 offers and reduced fees under a fee-shifting provision in Penal Code section 502 under the cross-complaint. The trial judge found the first 998 offer was invalid and the second 998 offer only applied to plaintiff’s complaint (not the defense cross-complaint), awarding only $5,272,95 out of a requested $134,682.53 in expert fees under the second 998 offer. He denied completely the request for fees under Penal Code section 502, which was a reduced $445,000 request of the $864,000 in fees expended in defending the cross-complaint because “[t]he evidence does not allow the court to allocate fees to the § 502 cause of action” given that the 502 count was not inextricably linked to the cause of action for trade secrets theft so as to allow for recovery of “intermingled” fees.
Plaintiff’s cross-appeal was successful on the costs and fees issues.
In the published discussion on the 998 issue, our local Santa Ana appellate court decided that the initial offer indeed was valid in nature. Although there was some facial ambiguity because it only mentioned plaintiff (not addressing plaintiff’s status as a cross-defendant), the other side reached out—as it can do—to seek clarification of the 998 offer, with plaintiff clarifying that the offer (for $400,000, each party bearings his/its own fees and costs) applied to the entire dispute (complaint and cross-complaint). Given that clarification (and a smart move by plaintiff), the appellate court found that the offer was certain and definite in nature, which required a remand because plaintiff prevailed by winning $647,706.48 under the complaint and “defensing” the cross-complaint after defendant/cross-complainant rejected the 998 offer. Here is the pithy observation by the appellate court: “[W]here two sophisticated parties are represented by counsel, allowing an offer to compromise to be clarified in writing after the offer was made serves the purposes of section 998. Such clarification encourages reasonable settlement offers to be accepted.” (Slip Op., at 24.)
That shifted things to the lower court’s denial of fees to plaintiff for prevailing on the cross-complaint. Penal Code section 502’s fee-shifting provision was broad in nature, stating “[i]n any action brought pursuant to this subdivision the court may award reasonable attorney’s fees.” Nothing in this statute limited the award only to a prevailing plaintiff, with the other work inextricably intertwined with the companion computer access/trade secret theft allegations. As such, the trial judge erred in denying fees on this basis such that the issue had to be remanded for further consideration.
BLOG OBSERVATION—One needs to carefully consider 998 offers. Here, the case could have been resolved for $400,000, all in, if the losing party indeed had accepted the 998 offer before trial. Instead, defendant/cross-complainant owes $647,706.48 plus another potential $575,000 - $994,000 depending on the remand result on the “re do” costs and fees issues.
Acting Presiding Justice Moore authored the 3-0 decision on behalf of the 4/3 DCA panel.