CALIFORNIA ATTORNEY'S FEES

Section 998: Third District Reverses $98,823.55 Fees/Costs Award To Lemon Law Plaintiffs Because The Settlement Reached After Plaintiffs’ Rejection Of Two 998 Offers Constituted A Judgment With A Principal Amount Below That Of The Final 998 Offer.

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.

Costs, Prevailing Party, Private Attorney General, Section 998, Trespass: Prevailing Defendant/Cross-Complainant Obtains Attorney’s Fees Under Trespass Fee Shifting Statute Despite Receiving Nominal Damages And Also Receives Routine Costs

Losing Plaintiff/Cross-Defendant Denied Private Attorney General Fee Request In Opinion With Several Cross-Over Issues. 

            Direct Action Everywhere SF Bay Area etc. v. Diestel Turkey Ranch, Case No. A162702 (1^st Dist., Div. 2 Mar. 1, 2023) (unpublished) is an opinion with many cross-over issues as identified in our main title to this post.

            In this one, plaintiff sued defendant for alleged false advertising and unfair competition violations, with defendant cross-complaining against plaintiff, as a cross-defendant, for trespass, conversion, and unfair competition.  Defendant won on both suits after an 8-day bench trial.  The lower court also determined that defendant was the prevailing party, awarding defendant/cross-complainant routine costs of $68,734.37 minus $4,950 in mediator expenses and $72,848.25 in attorney’s fees under CCP § 1021.9 (the trespass fee-shifting statute).  The lower court denied plaintiff’s request for $1,541,000 in private attorney general fees under CCP § 1021.5. 

            On appeal, the costs and fee rulings were all affirmed.  Plaintiff argued that nominal damages will not support a trespass fees award (citing treatises to that effect), but the appellate court disagreed:  “section 1021.9 does not delineate between the type of damages awarded in a trespass action, but rather states that a party ‘shall be’ entitled to its fees and costs when it prevails in an action for damages to its personal or real property resulting from trespass.”  In this case, the lower court determined that plaintiff trespassed six times resulting in the loss of two turkeys such that tangible damages did occur, awarding $8.00 in damages and a permanent injunction.  That sufficed for 1021.9 purposes:  cross-complainant suffered tangible harm even though cross-complainant failed to adduce proof of the trespass loss.  Plaintiff argued fees were unwarranted because this could have been brought as a small claims or a limited case (citing Chavez, our Leading Case #13), but that argument failed because a case praying for a permanent injunction must be brought as an unlimited matter.  Plaintiff ended by contending that cross-complainant did not beat its CCP § 998 offer, but that lacked merit because cross-complainant’s pre-offer costs well exceeded the offer on the cross-complaint and plaintiff’s 998 offer only offered a temporal permanent injunction versus the unlimited permanent injunction obtained by cross-complainant.

            With respect to plaintiff’s 1021.5 request, that was dispatched because plaintiff was not successful and was no catalyst for any changes.

            On the routine costs side, the lower court’s rulings were correct, reminding litigants and practitioners that court reporter costs are recoverable (even if the transcript costs are not) and deposition costs for witnesses not testifying at trial are allowable in the lower court’s discretion.

Consumer Statutes, Section 998: Chen v. BMW Case Now Published

Lemon Law Plaintiff Obtained Significantly Less Fees Based On Rejected Section 998 Defense Offer.

            On December 30, 2022, we posted on Chen v. BMW of North America, a Sixth District unpublished opinion in which a significantly reduced lemon law fees award to a plaintiff, who rejected a defense CCP § 998 offer, was found to be valid and reasonable.  Plaintiff was only awarded a little over $53,000 out of a requested $436,000.  We can now report that Chen was certified for publication on January 23, 2023, posted on January 24, 2023.

Section 998: Smalley Opinion Is Now Published

Shows How A Nicely Crafted 998 Offer Can Benefit A Defendant In A Lemon Law Case.

            In a December 13, 2022 post, we reviewed Smalley v. Subaru of America, Inc., a 4/3 DCA unpublished case at the time which showed how a defendant in a lemon law case crafted a nice CCP § 998 offer which limited exposure to potential fees and costs because plaintiff did not beat the 998 offer.  We can now report that the case was certified for partial publication on January 11, 2023 (although not posted until January 12). 

Section 998: Subaru’s 998 Offer Was Reasonable And Made In Good Faith, Such That Plaintiff Properly Only Awarded Pre-offer Costs And Subaru Was Properly Awarded Post-offer Costs

Plaintiff’s Appeal Of Order Staying Fee Motion To Determine 998 Offer Validity Was Non-appealable, But Validity Of The Offer Means That No Post-Offer Fees Are Due to Plaintiff On Remand (Likely).

            Smalley v. Subaru of America, Inc., Case Nos. G059904/G060441 (4^th Dist., Div. 3 December 13, 2022) (unpublished) is complementary of our July 5, 2022 post on Shakouri v. Tesla Motors, where defendant car manufacturers made nicely-crafted CCP § 998 offers in Song-Beverly Act cases so as to cut off post-offer costs and fees to the plaintiffs who did not accept the offers.

            In Smalley, Subaru made a CCP § 998 offer to plaintiff for $35,001, plus plaintiff’s election to accept $10,000 for his pre-offer costs/fees, or for plaintiff’s costs/fees to be determined by the Court, in return for a dismissal of the action and return of the vehicle to Subaru.  Plaintiff did not accept the offer, and he did not beat the offer at trial—only awarded a total recovery of $27,555.74 by the jury. The lower court found the 998 offer to be valid, awarding plaintiff $1,351.17 in pre-offer costs and Subaru $16,684.92 in post-offer costs.  The trial judge stayed plaintiff’s motion for fees based on plaintiff’s appeal of the costs/fees orders which put the validity of the 998 offer at issue, with plaintiff also appealing the stay order.

            The 4/3 DCA, in an opinion authored by Justice Motoike, affirmed the costs/fees order and dismissed the appeal of the stay order.

            The appellate court determined that the offer was certain enough to allow evaluation of the offer’s worth by plaintiff.  There was no requirement that the 998 offer have language saying that plaintiff was the prevailing party.  The 998 offer was reasonable even under plaintiff’s argument that it did not allow for his pre-offer fees of $11,508.17—rather, plaintiff could have accepted $45,000 or $35,001 plus fees and costs to be awarded by the court, the total of the jury award plus the post-offer fees still falling short of the 998 offer terms. 

            The appeal of the stay order was a non-appealable order, such that it was dismissed even though the matter will go back for a determination of plaintiff’s fees—we assume post-offer fees, which will likely be denied.

Private Attorney General, Section 998: Plaintiff Properly Denied CCP 1021.5 Fees And $700,000 Section 998 Fees In Favor Of Some Defendants Reversed

No Public Benefit Conferred By Misleading Proposition 65 Temporary Warnings, And 998 Offer Releases Were Overbroad.

     In Council for Education and Research on Toxics v. Starbucks Corporation, Case Nos. B309227 et al. (2d Dist., Div. 4 Oct. 26, 2022) (published), defendants properly won a summary judgment in a Proposition 65 case when new regulations debunked the idea that coffee roasting presented health risks which had to be disclosed.  The trial court denied plaintiff’s request for private attorney fees because any temporary warnings did not confer a public benefit given that the warnings were misleading and unnecessarily. The lower court also granted some of the defendants about $700,000 in attorney’s fees based on unaccepted CCP 998 offers.  The appellate court affirmed the fee denial, but reversed the 998 fees awards because the requested releases were overbroad in seeking release of claims over and beyond those which were the subject of the lawsuit (relying on the Ignacio and Chen decisions in so doing).

Section 998: Oral Summary Judgment Grant Cuts Off Ability To Accept A 998 Offer

Mischief Would Result If This Was Not The Consequence.

            In Trujillo v. City of Los Angeles, Case No. B314042 (2d Dist., Div. 2 Oct. 27, 2022) (published), a defendant moved for summary judgment and made a CCP 998 offer days before the hearing.  The trial court orally granted the summary judgment motion, with plaintiff then accepting the 998 offer.  The appellate court agreed with the trial court’s conclusion that the 998 offer expired upon the oral grant of the summary judgment motion against the plaintiff.

Section 998: If You Want A Settlement Agreement And Release As Part Of A 998 Offer, Make Sure To Attach One And Make Releases Narrow So As To Validate The Offer

Otherwise, Unspecified Settlement Terms Are Too Uncertain In Nature.

            K.M. v. Grossmont Union High School Dist., Case Nos. D0759571/D076833 (4th Dist., Div. 1 Oct. 25, 2022) (published) holds that if you, as a CCP offeror, want a settlement agreement or Civil Code section 1542 release as part of the 998 offer, you better attach the settlement agreement and release to the offer so the lower court can determine if the offer is valid.

            The opinion also suggests that detailing the terms of the settlement agreement/release in the offer might work, but our takeaway is it would be best to attach the entire settlement agreement/release to the 998 offer.

Section 998: Where Conditional Acceptance Was Not Unqualified, Lower Court Erred In Entering Judgment On The Qualified 998 Acceptance

Although Other Settlement Procedures Could Be Utilized, Section 998 Did Not Allow Entry Of Judgment Based On A Less Than Clear Settlement.

            Siri v. Sutter Home Winery, Inc., Case No. A161923 (1^st Dist., Div. 4 Aug. 25, 2022) (published) should remind all practitioners that CCP § 998 cannot be used as a surrogate method to adjudicate whether a settlement has been reached. 

            What happened in this matter is that the parties somewhat seemed to agree to settle, but maybe not.  It is ambiguous, with that being what led to a reversal of what occurred at the lower court level.  Plaintiff accepted a conditional 998 offer, with many future conditions attached—mainly whether prejudgment interest should be awarded.  But, the defense seemed to accede to that request, seeming to suggest that it was amenable to a future court determination of the issue, although not well documented through the actual acceptance.  The lower court determined that a binding settlement was reached under section 998, entering judgment accordingly.

            Not so fast, and no, according to the appellate court.  Section 998 requires an absolute, unqualified acceptance.  That did not occur, so the lower court result had to be reversed.  The appellate court did admit that there might be other ways to be utilized to find that a binding settlement was reached, but section 998 procedures were not one of them.

            BLOG OBSERVATION—This was probably the right result.  However, parties who do engage in negotiations under a section 998 pretrial offer and reach a “likely” agreement should simply agree to a settlement agreement or allow the 998 offeror to issue a new 998 offer which is accepted, with language such as “we agree to the number but prejudgment issues will be determined by the court in a post-acceptance noticed motion.”  We bloggers cannot predict that this will pass muster, but it something along the lines suggested by the appellate result.

Deadlines, Section 998: Plaintiff’s Acceptance Of A 998 Offer With Stipulated Fee Cap Took The Steam Out Of Later Attorney’s Fees Motion

Beyond That, The Motion Was Not Filed On 16-Court Days’ Required Notice.

            This case shows how a litigant and his attorney’s prior actions can have a dramatic impact on a later attempt to obtain more attorney’s fees through a noticed fee motion.

            In Baiocchi v. Ford Motor Co., Case No. G059143 (4th Dist., Div. 3 August 11, 2022) (unpublished) plaintiff accepted Ford’s CCP § 998 pretrial settlement offer for $27,000 for a car buyback, plus $10,000 in attorney’s fees, expenses, and costs (even though plaintiff had the option of moving for a different fee award by a motion addressed to the court, an option he did not elect although claiming otherwise later on).  Plaintiff accepted, negotiating a check which had the $10,000 capped fees in the amount of the check.  Then, after continued status conferences where plaintiff’s attorney sent a special appearance attorney despite the court wanting retained counsel to be present, and despite indications from the lower court and Ford that it wanted to see a noticed fee motion soon, plaintiff filed a Song-Beverly Act statutory motion for attorney’s fees of $179,481 (inclusive of a 1.5 multiplier) on less than the 16-court days’ required notice.  The lower court denied the motion based on lack of proper notice and on the ground that plaintiff had accepted the $10,000 fee feature of the statutory offer.

            The 4/3 DCA, in an opinion authored by Justice Goethals, affirmed.  The two bases relied on by the lower court resonated with the appellate court—especially given that plaintiff accepted the $10,000 attorney fee offer by negotiating the check. 

Consumer Statutes, Section 998: $143,624.59 Costs Award To Lemon Law Defendant, Based On A Successful CCP § 998 Offer, Is Affirmed On Appeal

Bad Faith And Lack Of Specificity Arguments Rejected.

            California’s Song-Beverly Consumer Warranty Act, known as the Lemon Law, has a pro-plaintiff attorney’s fees provision.  However, Code of Civil Procedure section 998 can tilt the risk against a defendant by cutting off post-offer fees and costs if the 998 offer is properly crafted.  Plus, the defendant can recover routine costs, which may be extensive based on expert and trial expenses, if the 998 offer was calibrated correctly to the jury verdict or court award to plaintiff.

            Shakouri v. Tesla Motors, Case No. B307273 (2d Dist., Div. 4 June 30, 2022) (unpublished) illustrates how the defendant obtained a costs award of $143,624.59 as a section 998 offeror and held to a minimum the fees and costs which could be recouped by plaintiff under the Lemon Law.

            In this one, Tesla put out a 998 offer with two options for plaintiff’s evaluation:  (1) accept $97,519.31 as a car repurchase plus consequential expenses; or (2) accept a lump sum of $115,000 for repurchase, consequential losses, and unspecified interest, plus attorney’s fees, conditioned on showing that the returned car had factory equipment (the intent being Tesla did not want to take back a stripped-down car).  In discovery responses, plaintiff confirmed that the car had no prior accident damages which had to be repaired.  Plaintiff’s pre-offer fees and costs were only about $14,500 because the 998 was made before plaintiff’s counsel expended much in resources.  Later, after about 3 years of litigation, the jury awarded plaintiff $96,145. 

            So, the issue naturally turned to whether plaintiff had beat the defense’s 998 offer.  Plaintiff moved for $907,548.24 in fees/costs, while Tesla filed a costs memorandum because it could not recover fees under the Lemon Law.  Plaintiff argued that the 998 offer was not made in good faith and lacked specificity based on the factory equipment part return language.  The trial court disagreed, awarding plaintiff $12,245.50 in pre-offer fees as the prevailing party and $2,356.03 in costs.  However, it disagreed that the 998 offer was invalid, awarding Tesla $143,624.59 in costs. 

            The appellate court affirmed plaintiff’s challenge to the Tesla cost award.  The offer was made in good faith because it was in the reasonable range of a result for plaintiff, as the ultimate jury verdict vindicated.  The factory equipment part return condition was specific enough, given that plaintiff could reasonably evaluate it—the car had no accident damage repairs and the offer simply wanted to make sure that the car was not stripped down from its mainly original condition.  The 2/4 DCA distinguished cases which made defendants the sole arbiters of “normal wear and tear,” with the condition in the offer before it being objectively verifiable in nature because Tesla was not requiring plaintiff to trace every part back to the factory.

            BLOG OBSERVATION—This case is a good one for showing that a smartly crafted section 998 pre-trial offer can be a big game changer.  Also, plaintiff’s counsel in the Lemon Law area should take advantage of case law encouraging a 998 offeree to ask for clarification or exchange information with the offeror for purposes of evaluating a 998 offer if the offeree feels it is unclear.

Experts, Prevailing Party, Section 998: Attorneys’ Fees Totaling Over $3.7 Million Plus Costs Totaling $367,192.84 Awarded To Two Prevailing Party Defendants Affirmed On Appeal.

Costs Award To One Defendant Included $209,886.89 In Expert Witness Fees Because Plaintiff Had Rejected And Failed To Beat That Defendant’s Section 998 Offer Of $50,000 Plus Waiver Of Fees And Costs.

            This next case provides a cautionary tale about the importance of giving careful consideration to reasonable section 998 offers – especially when they include a waiver of fees and costs. In SwiftAir v. Row, Case No. B306166 (2d Dist., Div. 7 May 12, 2022) (unpublished), Southwest Airlines and Row 44, the company that operated Southwest’s inflight WiFi service, defeated plaintiff’s lawsuit against them over Southwest’s decision not to license plaintiff’s software platform. Afterward, defendants each sought prevailing party attorneys’ fees and costs pursuant to the fees provisions in their contracts with plaintiff.  Southwest also claimed entitlement to fees and costs under Code Civ. Proc., § 998 because plaintiff had rejected and failed to beat Southwest’s section 998 offer of $50,000 and a waiver of fees and costs. The trial court concluded defendants were the prevailing parties and granted their motions – awarding Southwest $1,501,988.80 in attorneys’ fees and $309,362.40 in costs, which included $209,886.89 in expert fees that plaintiff unsuccessfully moved to strike, and awarded Row $2,216,117.50 in attorneys’ fees and $57,830.44 in costs.

            Plaintiff appealed – arguing that the trial court erred in its prevailing party determination because the trial court’s orders on defendants’ motion for summary adjudication and on plaintiff’s motions for judgment notwithstanding the verdict and for new trial were made in error.  This argument went nowhere because the 2/7 DCA concluded that the trial court did not err in its MSA, JNOV and new trial orders – leaving only plaintiff’s argument that the trial court erred by awarding Southwest $209,886.89 in expert witness fees because Southwest’s section 998 offer was unreasonable, and the experts were not ordered by the trial court. The 2/7 DCA found no merit to this argument.  First, section 998 (c)(1) provides an exception to the general rule that fees for experts not ordered by the trial court are not recoverable as costs. Second, although only settlement offers made in good faith – those that are reasonable under the circumstances of the case and sufficiently specific – are effective under section 998, the judgment of no liability against Southwest and its entitlement to prevailing party fees and costs was prima facie evidence that the offer, which was not a token or nominal offer, was reasonable.  (See Covert v. FCA USA, LLC, 73 Cal.App.5th 821, 832-833 (2022).) 

Costs, Prevailing Party, Section 1717, Section 998: Fifth District Deals With Various Prevailing Party Issues For Costs And Fees Award To Litigants Who Both Claimed To Have Prevailed

Plaintiff Winning Some Money Entitled To Routine Costs, But Defense Entitled To Prevailing Party Fees And Some Other Routine Costs Relating To Fee And Expert Witness Work, Some Other CCP § 998.

            Mike Murphy’s Enterprises, Inc. v. Fineline Industries, Inc., Case No. F080503 (5^th Dist. Apr. 13, 2022) (unpublished) is a good opinion to show the logical analysis of determining routine costs and fees awards where there is a mixed result and a CCP § 998 offer is involved.  Here is what the appellate court developed as the analytical framework:  (1) a court determines the prevailing party for a purpose of routine costs under CCP § 1032, with the prevailing party for 1032 purposes obtaining at least its preoffer costs; (2) if a party qualifies as a prevailing party under § 1032, the court turns to whether the prevailing party’s net monetary recovery exceeds any qualifying but rejected § 998 offer (which entails taking the amount awarded and adding preoffer interest and any properly requested costs), with costs including attorney’s fees if allowed by statute or contract); (3) in conjunction with the 998 analysis, the court must determine if the plaintiff is the prevailing party under section 1717 such that those preoffer fees may be included in the 998 net recovery analysis; (4) the court then considers the contractual provisions, the effect of section 1717 on the fees provisions, and finally the effect of the rejected 998 settlement offer such that if the net recovery is greater, the plaintiff is the prevailing party for the whole case or if the net recovery is lower, defendant will be treated as the prevailing party at all times after the settlement was made.

            In the actual case, plaintiff lost many of his contractual theories to defendant, but did win about $63,000 on his contractual claim.  Earlier in the case, defendant sent a 998 offer for $85,000 which was not accepted.  Eventually, the lower court determined defendant was the prevailing party for both fees and costs, especially under 998, awarding it about $564,300 in fees, costs, and expert witness fees—when offset against the $63,000 award to plaintiff, defendant had a favorable judgment of $501,284.95.  Plaintiff appealed.

            The Fifth District affirmed most of the trial judge’s awards, except for a routine costs award denial to plaintiff and except for taxing some of defendant’s routine costs a little.  Plaintiff was the prevailing 1032 party because it did receive positive money, such that it was entitled to its preoffer costs.  However, the trial judge was correct in determining that plaintiff properly excluded preoffer fees because he did determine that defendant was the prevailing party on the contract under section 1717, not plaintiff, in a mixed-results case—meaning that plaintiff did not have the net recovery for purposes of preoffer fees or postoffer costs.  Then, because defendant was entitled to fees and costs as prevailing party under both sections 1717 and CCP § 998, the appellate court only disagreed with the trial judge in minor respects, finding these costs were not recoverable: (1) past discovery sanctions; (2) filing costs in a separate federal action (which cannot be deemed costs awarded to a prevailing state court party); and (3) some County of Tulare production fees.  It did find that items such as CourtCall expenses and pro hac vice costs were proper.  In the end, it remanded to award plaintiff preoffer costs and to strike some defense costs items, but otherwise enter judgment pretty close to what occurred before the trial judge.

Costs, Deadlines, Requests For Admission, Section 998: 2/8 DCA Affirms Denial Of Costs Of Proof Sanctions And Untimely Fee Request, Sustains Some Costs Despite A Costs Memo Verification, And Reversed Expert Fee Award Based On Invalidity Of 998 Offer

Panoply Of Issues Addressed In This One.

            In Bogdan v. Polak, Case Nos. B306264/B309780 (2d Dist., Div. 8 Apr. 6, 2022) (unpublished), landlord won a gnarly retaliatory eviction lawsuit against tenant based on some nonsuits and an eventual jury trial.  In postjudgment proceedings, the lower court denied landlord’s attorney’s fees request as untimely, awarded some routine costs even though landlord failed to verify the costs memorandum, awarded expert witness fees under a CCP § 998 offer to landlord, and refused a costs-of-proof sanctions request for RFA denials.

            Everything was affirmed by the appellate court, except for a reversal of the expert witness award.

            Landlord’s fee motion was untimely; despite landlord’s argument that more time was allowed based on specific emergency orders during the pandemic, the appellate court found that those orders only allowed for “grace” if the litigant had difficulty filing documents, which it did on other items during the COVID-19 crisis.  The denial of tenant’s motion to tax costs was correct because attaching a costs memorandum verification is not jurisdictional and landlord substantially complied with the requirements.   However, the expert witness costs award was overturned because the CCP § 998 offer conditioned entry of any judgment on the offering party giving additional authority for the entry, which made the offer conditional and invalid.  Finally, no costs-of-proof sanctions could be awarded because the requesting party provided a table of RFAs, answers, and trial proof, but—alas!—did not provide the record citations to support the argument.

Consumer Statutes, Section 998: 4/1 DCA Decides That Pragmatic, Litigation Objective Test Governs Lemon Law Cases, Not The Net Monetary Award Test Under CCP § 1032

Section 998 Offer By The Defense Was Too Uncertain—A “Moving Target.”

            In Duff v. Jaguar Land Rover North America, LLC, Case No. D078100 (4^th Dist., Div. 1 Jan. 27, 2022) (published), the 4/1 DCA departed company from its prior approach as far as awarding lemon law fees to a prevailing plaintiff under Civil Code section 1794(d).  It earlier, in Reveles v. Toyota by the Bay, 57 Cal.App.4^th 1139, 1158 (1997), had applied a “net monetary award” test borrowed from CCP § 1032 to determine the prevailing party, even though a majority of subsequent cases had eschewed this approach and determined that a more rigorous “pragmatic, litigation objectives” test should be adopted.  The Duff court decided that the majority approach should now be followed, reversing a $684,250 attorney’s fees award where the lemon law plaintiff only obtained nominal damages of $1.00 after a determination that no actual damages were proven.  So, a remand was necessary in light of the adoption of the more rigorous pragmatic test.  The appellate court also determined that the defense CCP § 998 offer was too uncertain—a “moving target”—in offering to settle for a set repurchase amount or higher amount as could be subject to future substantiation by plaintiff. 

Prevailing Party, Section 1717, Section 998: 1/4 DCA Reverses Trial Court’s Denial Of Section 998 Fees To Defendant Who Entered Handwritten Agreement To Transfer Real Property Valued At More Than His 998 Offer.

Plaintiffs Voluntarily Dismissed Action Without Terms Of Handwritten Agreement Being Met And Property Was Never Transferred.

            In Debenedetti v. Debenedetti, Case No. A162074 (1^st Dist., Div. 4 January 24, 2022) (unpublished), plaintiff brothers, who were successor co-trustees of their father’s trust, filed an action against their brother for breach of a promissory note securing a $157,000 loan the trust had made to him. Defendant made a Code of Civil Procedure § 998 offer to settle the action for $99,500 – inclusive of all fees, costs and interest – but the parties ended up signing a handwritten agreement several days later.  The handwritten agreement provided that the action would be settled with the transfer from defendant to the trust of real property valued at more than $157,000.  Transfer of the property was contingent upon a satisfactory inspection of the property to take place within 45 days, and the handwritten agreement was to be replaced with a formal written agreement incorporating the same terms within 10 days. One year later, plaintiffs responded to the trial court’s order to show cause, re dismissal of the action, with a request for voluntary dismissal without prejudice – which the trial court granted. 

            Afterward, plaintiffs and defendant filed competing costs memorandums and motions to tax.  Additionally, defendant sought attorney fees as the prevailing party under section 998 as plaintiffs had recovered nothing because no formal written agreement was ever signed, the inspection never happened, and the property was never transferred. Additionally, defendant sought reimbursement of fees under Civil Code § 1717 based on the attorney-fee provision of the underlying promissory note.  However, based on the handwritten agreement, the trial court awarded no costs and denied defendant’s motion for fees. 

            Defendant appealed the fees denial – arguing he was entitled to fees under both section 1717 and section 998. The 1/4 DCA disagreed with defendant’s section 1717 argument – finding his claim barred under subdivision (b)(2), which states, “[w]here an action has been voluntarily dismissed or dismissed pursuant to a settlement of the case, there shall be no prevailing party for purposes of this section.”  However, defendant’s section 998 argument resulted in a reversal and remand for determination of the amount and reasonableness of fees defendant incurred post-998 offer. Because plaintiffs did not accept defendant’s section 998 offer and failed to obtain a more favorable judgment – with no formal settlement agreement ever signed and the property never transferred – defendant was entitled to recovery of costs from the time of the offer.  Citing Mon Chong Loong Trading Corp. v Superior Court, 218 Cal.App.4th 87, 93-94 (2013), the panel found defendant’s entitlement to fees was triggered when plaintiffs voluntarily dismissed the action, and irrespective of prevailing party findings under section 1717 where the dismissed action is on a contract that provides for attorney fees. (Scott Co. v Blount, Inc., 20 Cal.4th 1103, 1114 (1999) [“Under section 998, the defendant’s entitlement to costs derives not from its status as a prevailing party but from the plaintiff’s failure to accept a reasonable settlement offer.”].)

Section 998: Trial Court Properly Offset Defense CCP § 998 Costs Against Judgment Which Did Not Exceed The 998 Offer

Plaintiff Did Not Move To Tax Costs, Such That The Offset Was Proper.

            In Maximo v. Threatt, Case No. B301735 (2d Dist., Div. 7 Jan. 19, 2022) (unpublished), plaintiff won $22,260 in an automobile personal injury case, but it did not exceed the defense CCP § 998 offer.  The trial court entered judgment for the defense after offsetting $52,843.06 in section 998 cost-shifting items.  Plaintiff appealed, claiming the offset was wrong.  The appellate court affirmed.  The problem was that plaintiff never challenged the offset through filing a motion to tax costs, given that a trial court can enter judgment based on an unchallenged costs bill which is not timely challenged. 

Consumer Statutes, Section 998: Covert Decision Now Published

Case Deals With Lemon Law Section 998 Offer Terms and Validity.

            In our January 4, 2022 post, we posted on Covert v. FCA USA, LLC, Case No. B303663 (2d Dist., Div. 7 Jan. 4, 2022), unpublished at the time.  It considered CCP § 998 offers in a lemon law case, specifically what terms are appropriate and whether the offers were valid.  We can now report that the decision was certified for publication on January 11, 2022.

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!

Section 998: Prevailing Defendant’s §998 Offer For 1.6% Of The Damages Request By Plaintiff Was Unreasonable

Denial of Defense Summary Judgment Motion And Trial Judge’s Remarks That Colorable Arguments Were Made For Interpretation Of An Easement Cemented The Result.

            The defendant in 18131 Ventura Blvd., LLC v. 5223 Linley, LLC, Case No. B307958 (2d Dist., Div. 7 Dec. 14, 2021) (unpublished) won an easement interpretation dispute but only after the trial judge denied summary judgment and remarked that plaintiffs made colorable arguments about the interpretation of the scope of the easement.  Two weeks after denial of the summary judgment motion and before a 9-day bench trial, defendant served a CCP § 998 offer for $10,000, about 1.6% of the damages claimed by plaintiff.  After winning at trial, defendant sought to recover $84,126.95 in costs ($28,250.22 of which was expert fees), with the trial judge finding the 998 to be unreasonable so as to preclude any expert fee award and ultimately awarding defendant $45,492.97 in routine costs.

            Defendant appealed, but the lower court’s ruling on the invalidity of the 998 offer was affirmed.  Given what occurred at the denial of the summary judgment ruling, the offer of only $10,000 was not reasonable, and the lower court was in the best position to so determine. 

Section 998, Workers’ Compensation: 2/2 DCA Decides § 998 Is To Be Applied Before Lab. Code § 3856 In Determining If 998 Offeror Obtained Postoffer Costs Such That A Workers’ Comp. Fee Recovery Or Lien Is Not Factored Into The Net Judgment Calculus

2/2 DCA Reconciled Two Statutory Schemes In Coming To Its Conclusion.

            In Oakes v. Progressive Transportation Services, Case No. B305535 (2d Dist., Div. 2 Nov. 10, 2021) (partially published; 998 discussion published), a plaintiff employee was hurt by an employee of another company in a rear-end car accident, and plaintiff former employer’s workers compensation insurance carrier paid for various medical treatments.  Plaintiff then sued as defendants both the employee who hit him as well as that employee’s employer for negligence and negligence per se.  Plaintiff, although receiving a positive judgment through a jury trial, had nixed a prior CCP § 998 defense offer, with the question being whether plaintiff employee’s Labor Code section 3856 contingency lawyer fee recovery should be deducted from the judgment to arrive at a new number for purposes of seeing if the 998 offeror beat the judgment.  The 2/2 DCA had to reconcile two schemes, section 998 and Labor Code section 3856.  It determined that section 998 was applied first, which meant that the calculus went this way: (1) jury verdict amount plus plaintiff’s preoffer costs before the 998 offer; and (2) deduction of the defense 998 offer postoffer costs, to arrive in a net judgment amount.  Once that was done, the resulting judgment was in defendant’s favor because the postoffer costs ate up the “gross initial” judgment such that there was no judgment for lawyer contingency fees or employer’s worker’s compensation lien.  Put another way, section 988 took precedence over Labor Code section 3856.

Section 998: Trial Court’s Granting Of Former Employer’s Motion To Tax Plaintiff’s Post-§ 998 Costs Based On Plaintiff’s Failure To Accept § 998 Offer Reversed On Appeal

Former Employer Had The Burden Of Proving A Valid § 998 Offer Had Been Made, But Belatedly Attached The § 998 Offer To Its Reply Papers Instead Of Its Moving Papers

            In Snoeck v. Exaktime Innovations, Case Nos. B302178/B304054 (2d Dist., Div. 3 October 29, 2021) (unpublished), plaintiff sued former employer for violations of the Fair Employment and Housing Act (FEHA) (Gov. Code, § 12900 et seq.). After a five-day trial, the jury returned a verdict in former employer’s favor – with exception to one cause of action for which plaintiff was awarded $130,088 in damages.  Afterward, plaintiff moved to recover costs, but the trial court granted former employer’s motion to tax from the date plaintiff rejected former employer’s $500,000 Code Civ. Proc., § 998 offer to compromise, and awarded plaintiff $49,353.46 after taxing $30,056.44. 

            Plaintiff appealed and the 2/3 DCA reversed with direction that the trial court enter a new order awarding plaintiff $79,409.90 in costs.  The problem was that former employer – with the burden of proving a valid § 998 offer had been made – failed to include a copy of its § 998 offer in its moving papers. Instead, former employer attached a copy to its counsel’s reply declaration after plaintiff opposed the motion to tax based on former employer’s failure to meet its burden to demonstrate it made a valid § 998 offer, and objected on hearsay and secondary evidence grounds to defense counsel’s description of the § 998  offer.  Citing Carbajal v. CWPSC, Inc., 245 Cal.App.4th 227, 241(2016) for the general rule that new evidence is not permitted with reply papers, the panel found the trial court abused its discretion by permitting former employer to submit the § 998 offer with its reply papers.  Submitting new evidence with reply papers should be permitted only in the exceptional case and, in such an event, the other party should be allowed to respond to the new evidence - which was not the case and did not happen here.   

Costs, Experts, Section 998: Trial Court’s Costs Award To Prevailing Plaintiffs, Which Accounted For Costs From Two Trials Where First Trial Resulted In Mistrial Due To Plaintiffs’ Counsel, Affirmed On Appeal

Trial Court’s Order Awarding Costs Did Not Operate As An Improper Reconsideration Of A Previous Order, And Defendants Failed To Support With Any Authority Their Contention That Plaintiffs Could Not Recover Fees Where Their Attorney Caused Mistrial.

            In Esparza v. Win Distribution, Case No. E072880 (4^th Dist., Div. 2 October 25, 2021) (unpublished), the 4/2 DCA analyzed whether a party whose counsel’s conduct resulted in a mistrial but prevailed at a second trial can recover costs from both trials.

            A family of four personal injury plaintiffs prevailed in a second jury trial following a mistrial of the first.  Afterward, the trial court awarded plaintiffs $188,057.53 in ordinary costs which accounted for both trials after partially granting defendants’ motion to tax.  Because plaintiff husband’s portion of the award exceeded the $10 million Code Civ. Proc., § 998 offer of compromise he made to defendants, the trial court also awarded him $366,976.42 in expert witness fees plus prejudgment and postjudgment interest exceeding $2 million.

            Defendants, a commercial truck driver and his employer, appealed the judgment and argued, alternatively, that their motion to tax costs from the first trial had been improperly denied and resulted in an improper award of expert fees and prejudgment interest to plaintiffs. Relying on Mullin v. Rousseau, 112 Cal.App. 719 (1931), argued that plaintiffs could not be awarded costs for both the first and second trial when their own attorney’s closing argument prompted the mistrial. 

            The 4/2 DCA disagreed and affirmed the judgment, including the costs award.  Although Mullin also involved the plaintiff prevailing at a second trial after plaintiff’s counsel caused a mistrial in the first trial, costs for both trials being awarded to plaintiff, and defendant’s motion to tax costs from the first trial being denied – Mullin is inapposite. In Mullin, the trial court charged the costs of the first trial to plaintiff as a penalty for the attorney’s misconduct. When the trial court subsequently awarded plaintiff with those same costs from the first trial, that award operated as an order reconsidering the prior costs award – which was improper.  Here, the trial court denied defendants’ request for the attorney fees and costs of the first trial as Code Civ. Proc., § 128.5 sanctions – finding plaintiff’s counsel’s made an honest mistake during closing arguments which did not warrant the imposition of sanctions. Therefore, the trial court’s order was not improper as it did not operate as a reconsideration of a previous order.  Additionally, defendants failed to support their contention with any authority.

Section 998: $178,000 In 998 Costs-Shifting Expenses Awarded Against Medical Mal Plaintiff

Waiver Of Costs/Malicious Prosecution Claims Was A Valid Offer Given Offer Was Two Years Into The Litigation.

            In Dell v. Parmar, Case No. E073851 (4^th Dist., Div. 2 Oct. 5, 2021) (unpublished), a plaintiff in a medical malpractice case lost a jury verdict after rejecting a defense section 998 motion to waive costs and forego malicious prosecution claims.  Because the offer was made more than 2 years into the litigation, the trial judge awarded about $178,000 in costs (mainly expert witness fees) to two doctors, separately, and against plaintiff.  The appellate court affirmed.  Given that the offer was made when both sides had a lot of information, the 998 offer was not unreasonable.

Costs, Section 998, Special Fee Shifting Statutes: No Abuse Of Discretion In Attorney Fees And Costs Award Of $1,454,938.70 Against One Of Three Defendants, Without Apportionment, In Wrongful Death Case

Apportionment Of Attorney Fees Was Not Feasible As Plaintiffs’ Efforts Against The Defendants Were Inextricably Intertwined,  And The Case Could Not Have Been Presented Without Significant Expert Testimony To Determine Who Was Legally Responsible.

            In Hatcher v. Powell, Case No. B302730 (2d Dist., Div. 6 September 27, 2021) (unpublished), four defendants were sued in a consolidated wrongful death action following a single-car accident in Ventura County.  One of the defendants was the driver of the car, who lost control while attempting a left curve on a country road at almost twice the posted speed limit, in the dark of night, and with a blood alcohol level of .19 percent according to his blood test.  The other three defendants were a communications company, the construction company it had hired, and Ventura County.  Driver had hit construction equipment stored off the shoulder of the road when he lost control – killing two of his three passengers and injuring the third.   County settled out of the case, but the remaining defendants proceeded to trial where the jury returned a unanimous special verdict finding driver’s negligence was a substantial factor, but the negligence of communications and construction companies was not a substantial factor, in causing harm to the plaintiffs.  All told, according to our calculations, the jury awarded non-economic damages against driver of roughly $7.75 million and $455,000 in economic damages.  $1.9 million of that was awarded to the parents of one of the deceased passengers – parents who had made driver an unaccepted Code Civ. Proc. § 998 offer to settle for $500,000 each.

            Those parents then moved post-judgment for costs of $1,458,588.72, which included $544,493.80 in prejudgment interest, pursuant to Civ. Code § 3291 and Code Civ. Proc. § 998 (prejudgment interest running from the date of § 998 offer not accepted by defendant), and $760,000 in attorney’s fees pursuant to Code Civ. Proc. § 1021.4 (a fee-shifting statute allowing trial courts to award reasonable attorney fees to a prevailing plaintiff where the action for damages is based upon defendant’s commission of a felony offense for which that defendant has been convicted).  After minor deductions to the jury fees and for expert fees incurred prior to the § 998 offer, the trial court awarded $1,454,938.70 in fees and costs against driver.

            Although not denying liability, driver appealed – claiming the trial court abused its discretion in the amount of its award of attorney’s fees and costs – and argued communications and construction companies bore some responsibility.  However, the 2/6 DCA agreed with the trial court’s conclusions.  It was not feasible to apportion fees amongst the defendants because plaintiffs’ efforts against the defendants were inextricably intertwined, and the case could not have been presented without significant expert testimony to determine who was legally responsible.  The trial court had properly considered the time spent, reasonable hourly rates, complexity of the issues, success achieved, and skill of the attorneys in awarding fees and costs that were proportionate to the judgment obtained. (Serrano v. Priest, 20 Cal.3d 25, 48- 49 (1977); Harman v. City and County of San Francisco, 158 Cal.App.4th 407, 419 (2007).)

Section 998: $12,000 Pre-Litigation Offer, Iterated As A 998 Offer Four Months Later After Filing Of A Lawsuit, Was Reasonable And Supported Cost-Shifting In Low-Level Vehicular Personal Injury Case

Section 998 Test Focuses On Objective Reasonableness, Not Plaintiff’s Subjective Perception Of The Offer’s Fairness.

            In Mkhitarian v. Jackson, Case No. B306198 (2d Dist., Div. 5 Sept. 20, 2021) (unpublished), plaintiff in a low level, soft issue vehicular injury case rejected both a pre-trial informal offer and subsequent CCP § 998 offer for $12,000 (together with a waiver of costs) coming after her case was filed.  That was a bad judgment call, because the jury rendered a defense verdict on negligence causation grounds.  The lower court denied plaintiff’s request to tax costs because the 998 offer was unreasonable, resulting in defendant obtaining costs (including $25,440 in expert witness fees). 

            The 2/5 DCA affirmed.  Objective reasonableness of the offer, not plaintiff’s perception of its fairness, is the guiding test.  The defense offer met this standard because the subsequent formal offer four months later did not show that any more information was needed to evaluate the offer.  Here is the conclusion reached by the appellate panel: “Finally, we know of no rule that disqualifies a section 998 offer simply because it is the same as an offer made prior to litigation. A defendant’s willingness to make a pre-litigation offer should not foreclose automatically a reinstatement of the offer made four months later under the benefits of section 998. Instead that factor, like the others we have mentioned, becomes part of the mix to be considered by the trial court in exercising its discretion.”  (Slip Op., p. 9.)

Section 998: Only Mentioning CCP § 998 Or Allowing Judgment To Be Entered, Without More Precise Instructions For Accepting 998 Offer, Does Not Render A 998 Offer Valid

4/1 DCA Provides Further Guidance On Drafting Effective 998 Offers.

            Drafting effective CCP § 998 offers can be tricky, as the 4/1 DCA recognized in Finlan v. Chase, Case No. D078410 (4^th Dist., Div. 1 Sept. 15, 2021) (published).  A plaintiff lost some hefty costs and expert witness fees by not providing specific acceptance instructions in the 998 offer.  The published decision adds two nuances to the jurisprudence in this area: (1) simply incorporating by a reference to section 998, without further acceptance instructions, will not suffice; and (2) a reference to “allow judgment to be entered” is not the equivalent of specific acceptance instructions. 

Costs, Deadlines, Experts, Section 998: 4/2 DCA Dismisses Defendants’ Cross-Appeal Of Trial Court’s Order Granting Plaintiff’s Motion To Tax Majority Of $139,951.97 In Costs And Fees Sought By Defendants Under § 998

Defendants’ Cross-Appeal Was Untimely, And A Separate Appeal, Not A Cross-Appeal, Was Required For Challenging Trial Court’s Order As It Related To Defendants’ Request For Expert Witness Fees.

            In Ramirez v. Barajas, Case No. E071558 (4^th Dist., Div. 2 September 13, 2021) (unpublished), personal injury plaintiff, suing defendants for $1.4 million in damages, rejected defendants’ Code Civ. Proc., § 998 settlement offer of $350,000.  After plaintiff failed to beat that offer at trial (being awarded only $58,311.77, a result plaintiff appealed), defendants moved, under § 998, for costs and fees of $139,951.97 – which included $111,74.88 in expert witness fees.  However, because the trial court found defendants’ request to be deficient in that it failed to identify the date costs were incurred – whether pre or post-offer – it granted in its entirety plaintiff’s motion to tax and awarded defendants only $9,284.39 in ordinary litigation costs. 

            Defendants cross-appealed, but the 4/2 DCA dismissed their cross-appeal due to lack of jurisdiction. 

            First, defendants’ cross-appeal was untimely.  Under California Rules of Court, Rule 8.108(g), the deadline for the filing of defendants’ cross-appeal was within 20 days of the superior court serving them with notice of plaintiff’s appeal.  Defendants filed their notice of cross-appeal 21 days too late.

            Second, plaintiff’s notice of appeal from the judgment did not create appellate jurisdiction over the trial court’s ruling on defendants’ request for expert witness fees under § 998 – which accounted for the majority of fees sought by defendants.  A cross-appeal may challenge only the same judgment challenged by the underlying appeal, and “[a]n award of expert witness fees [under] section 998 is not incidental to the judgment but is instead a separately litigated issue” requiring a separate notice of appeal. (Fish v. Guevara, 12 Cal.App.4th 142, 148 (1993).)

Employment, Section 998: Section 998 Offer Is Invalid If Employer Did Not Attempt To Pay Undisputed Wage Amounts Before Sending Section 998 Offer

Timing Is Everything—Pay Undisputed Amount Before The 998 Offer Or Pay Later/Issue A New 998 Offer.

            Wasito v. Kazali, Case No. B308826 (2d Dist., Div. 6 Aug. 31, 2021) (published) is must reading for employers wishing to resolve unpaid wage claims through a CCP § 998 offer where undisputed wages are due.

            In essence, employees filed a complaint seeking unpaid wages, including bonuses.  Employers made a $300,000 section 998 offer.  After that 998 offer expired, employer sent a substantial check for unpaid bonuses, interest, and penalties, a check accepted by employees.  A jury found only small amounts still owed to employees, with employer arguing that the 998 offer beat the small amounts awarded by the jury.  The lower court disagreed and awarded employees $66,700 in attorney’s fees for prevailing in small amounts under Labor Code section 218.5, a one-way fee shifting statute. 

            The 2/6 DCA affirmed.  Relying on Reid v. Overland Machined Products, 55 Cal.2d 203, 206-207 (1961), which held that undisputed wages must be paid without condition, the reviewing justices found that the section 998 offer was invalid under the Labor Code provisions requiring payment of undisputed wages.  Although employer did pay the undisputed wages after the 998 offer was not accepted, that was too late as to retroactively validate it.  The employer had two choices, neither of which were met:  pay the undisputed wages before making the 998 offer or make a new 998 offer after paying the undisputed wages.

Section 998: Defendants’ Section 998 Offer Requesting Indemnification (And, Implicitly, Defense) Of Unspecified Non-Parties Made The Offer Too Vague For Enforcement

That Conclusion Erased $5,360 Expert Witness Fees Award Against Plaintiffs And In Favor Of Defendants.

            In Khosravan v. Chevron Corp., Case No. B307482 (2d Dist., Div. 7 July 6, 2021) (published), the Chevron Defendants won a summary judgment against plaintiffs after sending an unaccepted CCP §998 offer to dismiss for a waiver of costs plus indemnifying Defendants against possible future indemnification claims by unspecified non-parties.  Ultimately, the lower court granted $5,360 in expert witness fees against the unsuccessful plaintiffs, with those limited fees being the subject of the appeal.  (Other imposed routine costs were not challenged.)  Plaintiffs claimed that the non-party indemnification 998 term was incapable of ascertainment so as to render the 998 offer vague, with the appellate court agreeing because of the vagaries of ascertaining the value of the claims, both for indemnification and litigation defense reimbursement purposes.  (See also Toste v. CalPortland Construction, 245 Cal.App.4^th 362, 373 n. 6 (2016).)  Given this vagueness of being able to delineate the value of the 998 offer, the expert witness fees were reversed as a matter of law.

Experts, Section 998: Trial Court’s Denial Of Plaintiffs’ Motion To Tax $27,926.41 In Defendant’s § 998 Expert Witness Fees Affirmed On Appeal.

The Party Moving To Tax § 998 Expert Fees Has The Burden Of Showing That The Fees Are Either Not Properly Chargeable Or Unreasonable, Which Plaintiffs Failed To Do, And Substantial Evidence Supported The Trial Court’s Finding That It Was Not Inequitable To Award Expert Costs Against Plaintiffs.

            In Mass v. City of San Diego, Case No. D077680 (4^th Dist., Div. 1 June 24, 2021) (unpublished), neighbor plaintiffs appealed the trial court’s denial of their postjudgment motion to tax costs as to City’s expert witness fees of $27,926.41 pursuant to City’s Code Civ. Proc. § 998 offers that were rejected by plaintiffs.     

            The 4/1 DCA affirmed.

            Plaintiffs’ first argument – that City had the burden of establishing that its § 998 offers were not conditional on all parties accepting, and that the offers were reasonable considering the evidence available at the time the offers were made – failed because the burden was on the party moving to tax the costs.  City had the burden only to the extent plaintiffs argued that the § 998 costs claimed by City were not properly authorized.  Plaintiffs made no such argument.

            Plaintiffs’ second argument – that the trial court failed to properly consider whether the imposition on middle class homeowners of such a large cost bill would improperly discourage other homeowners from filing legitimate claims against City – was not supported with evidence justifying a finding of lack of economic resources.  In fact, the trial court had expressly found that “awarding expert costs [against Plaintiffs] is not inequitable,” and substantial evidence regarding the employment status and real estate holdings of the plaintiffs supported the trial court’s finding.

Experts, Section 998, Special Fee Shifting Statutes: 1/5 DCA Affirms Denial Of Attorney Fees To Elder Abuse Act Plaintiff And Denial Of § 998 Expert Witness Fees To Prevailing Defendants

Plaintiff Failed To Prove Harm As Required Under Welf. & Inst. Code § 15657.5(a) Because The Approximate $400,000 In Annuities Upon Which He Based Harm Had Been Returned Pursuant To A Probate Court Order More Than A Year Before Trial, But Defendants’ § 998 Offer Was Not Reasonable Nor Made In Good Faith Given The Circumstances Of The Case.

            In Lerdahl v. Milber, Case Nos. A159167/A160788 (1^st Dist., Div. 5 June 22, 2021) (unpublished), plaintiff, through the conservator of his estate, sued Diane Milber (a certified public accountant and insurance agent) and members of her family for multiple causes of action, including financial elder abuse, after Milber transferred the approximate $400,000 worth of annuities she had sold him into a trust she created that named her husband as trustee, one of their sons as successor trustee, and their other son as sole beneficiary.  Additionally, plaintiff alleged that Milber changed his beneficiary designations on the annuities to make her sons the beneficiaries.  While the action was pending, a probate court voided the trust and ordered that all assets held in the trust be turned over to the conservator of plaintiff’s estate.  About two years after plaintiff filed suit, defendants served plaintiff with a Code Civ. Proc. § 998 offer to settle for $75,000.  Plaintiff refused and the case proceeded to trial.

            The jury returned an unclear verdict – awarding plaintiff $0 in damages and $0 in punitive damages – although finding Milber obtained or retained plaintiff’s property for a wrongful use, or with the intent to defraud, or by undue influence, that plaintiff was 65 years of age or older at the time of the conduct, and that Milber was liable for damages to plaintiff and for punitive damages (but making no findings as to Milber’s husband except that he also obtained or retained plaintiff’s property, and no findings as to whether Milber and her husband acted with fraud, oppression, or malice).  Ultimately, the trial court ordered the verdict recorded and entered judgment reflecting the jury’s special verdict – concluding the jury found plaintiff had suffered no damages because the annuities had previously been returned and no other item of damages had been requested.  Additionally, the trial court denied plaintiff’s postjudgment motion for an award of attorney and conservator costs, from which plaintiff appealed, and granted plaintiff’s motion to strike or tax defendants’ memorandum of costs as to defendants’ request for $125,257.90 in expert witness fees, from which defendants appealed.

            The 1/5 DCA affirmed.  Plaintiff’s failure to establish liability for financial elder abuse precluded an award of attorney fees under the Elder Abuse and Dependent Adult Civil Protection Act (Elder Abuse Act; Welfare & Institutions Code § 15600 et seq.).  Pursuant to § 15657.5(a), to recover fees and costs, plaintiff had to allege and prove not only the existence of a duty and its breach, but also injury and causation in order to establish the defendants’ liability.  Plaintiff was unable to prove harm at trial as the only harm alleged in his complaint concerned the obtaining or retaining of his property, and the only damages sought were measured by the value of the annuities which had been returned more than a year before trial.  As the panel pointed out, plaintiff could have alleged and potentially proven harm based on something other than the value of the annuities – such as pain and suffering – and the outcome of his fees request would likely have been different.

            As to the denial of defendants’ expert witness fees, the appellate panel agreed with the trial court’s finding that defendants’ § 998 offer was not reasonable nor made in good faith given the circumstances of the case.  The § 998 offer was made almost two years into the litigation, giving rise to a reasonable inference that plaintiff had incurred “substantial costs.” Based on plaintiff’s prospect of recovering enhanced remedies under the Elder Abuse Act, including attorney fees and punitive damages, there was no abuse of discretion in the trial court’s finding.

Section 998: Arriagarazo Decision Of April 30, 2021 Now Published

Where Section 998 Offer Did Not Expressly Reference Dismissal Of Action, Entry Of Judgment By Accepting Offerees Was Proper.

            In our April 30, 2021 post, we discussed Arriagarazo v. BMW of North America, LLC, Case No. C090980 (3d Dist. May 26, 2021) (published), which was unpublished when first issued on April 30, 2021.  It held that a section 998 acceptance contemplates entry of judgment, as opposed to a dismissal of the action, unless the 998 offer expressly indicates dismissal as a condition otherwise.  The Third District certified this opinion for publication on May 26, 2021.  

Consumer Statutes, Section 998, Special Fee Shifting Statutes: Abuse Of Discretion Where Trial Court Reduced Song-Beverly Attorney Fees By Almost $100,000 Because Plaintiffs Rejected § 998 Offer That Was Only $8,500 Less Than Ultimate Settlement

The Trial Court Improperly Cut Off Fees Incurred After Plaintiffs’ Rejection Of The § 998 Offer Instead Of Engaging In A Lodestar Analysis Of The Entire Case Pursuant to Civil Code § 1794(d).

            In Reck v. FCA US LLC, Case No. A157966 (1^st Dist., Div. 1 May 24, 2021) (published), the trial court awarded attorney fees of only $30,237 ($20,158 lodestar with a .5 multiplier) out of a requested $187,247 ($124,831 lodestar with a .5 multiplier) to Song-Beverly plaintiffs.  The trial court determined the reduction was appropriate because plaintiffs beat defendant’s pretrial Code of Civil Procedure § 998 offer by only $8,500 during a mandatory settlement conference two days after trial began, and had incurred almost $100,000 in fees between the time they rejected the § 998 offer and ultimately settled.  The trial court also excluded fees incurred by plaintiffs for two unsuccessful motions.  Plaintiffs appealed.

            The 1/1 DCA reversed and remanded – finding the trial court abused its discretion by failing to base its award – pursuant to the Song-Beverly Act (California’s Lemon Law) – on “actual time expended” for hours that were “reasonably incurred.” (Civil Code § 1794(d).)   The trial court improperly cut off all attorney fees incurred after plaintiffs’ rejection of the § 998 offer instead of properly engaging in a lodestar analysis of the entire case – one where the final settlement represented more than a 10% increase over the § 998 offer and also resulted in a .5 multiplier being added to plaintiffs’ recovery. 

Section 998: Trial Court Order Awarding Postoffer Costs Against Prevailing Song-Beverly Plaintiff Affirmed On Appeal Because Plaintiff Failed To Beat Defendant’s § 998 Offer At Trial

Requirement That Plaintiff Sign A General Release Did Not Invalidate The § 998 Offer As The General Release Clearly And Unambiguously Applied Only To The Claims In The Underlying Action.

            Plaintiff received a $17,259.19 jury verdict in his Song-Beverly Consumer Warranty Act violations (California’s lemon law; Civ. Code § 1790 et seq.) action against Toyota.  However, when both parties moved post-trial to recover attorney fees and costs, the trial court awarded Toyota with its postoffer costs – finding plaintiff had failed to recover more at trial than Toyota had offered in its pretrial Code Civ. Proc. § 998 offer to compromise, which would have provided plaintiff $20,857.27 in restitution, plus $10,000 in attorney fees, and payment of the balance of plaintiff’s lease in exchange for return of the car with clear title, dismissal of the action, and execution of a general release. 

            Plaintiff appealed, arguing Toyota’s § 998 offer was invalid because it included a vague general release that would have included a Civ. Code § 1542 waiver of known and unknown claims, and was not attached to the offer itself, but the 2/8 DCA affirmed Khoshnevis v. Toyota Motor Sales, U.S.A., Case No. B301461 (2d Dist., Div. 8 April 30, 2021) (unpublished). 

            Although a § 998 offer that includes a nonmonetary component can sometimes create a situation where the trial court is unable to attach an overall value to the offer – rendering the offer invalid – that was not the case here.  The panel found Toyota’s offer capable of valuation as it clearly and unambiguously applied only to the underlying action, and the general release was limited only to the claims already being litigated.  Additionally, the panel found no authority mandating that a release itself be attached to the offer, and held it unnecessary where the offer otherwise appropriately limits the scope of the release.

Section 998: Where CCP § 998 Offer Did Not Clearly Negate Contemplation Of Entry Of Judgment In Favor Of Accepting Party, There Was No Basis To Vacate Judgment To Do Differently

Words To The Wise—As Offering Parties, Make Clear What Triggers Conclusion—If Not, Entry Of Judgment May Not Result Even Under Ambiguous Terms.

            Arriagarazo v. BMW of North America, LLC, Case No. C090980 (3d Dist. Apr. 30, 2021) (unpublished) solely related to a CCP § 998 battle, specifically, whether a section 998 offer precluded entry of judgment based on its terms.  The lesson, boiled down, is that the offeror needs to make clear what it wants done as far as resolution of the case in the 998 offer; otherwise, ambiguities may be construed against the offeror, as the drafting party.

            This case, ultimately, was decided on the basis of an ambiguous offer from the defense, which only indicated a general release would be executed but with no further resolution issues—such as a dismissal or entry of judgment.  After a lot of exchanges and a trial court decision indicating that an entry of judgment was contemplated, the Third District reversed.

            The infirmity here was that the 998 offeror needed to precisely indicate the resolution in the 998 offer.   Nothing in the offer met this requirement of a dismissal or entry of judgment.  Simply agreeing to a general release did not meet these requirements.  So, 998 offerors—make the terms of the offer clear as far as final resolution!

BLOG UPDATE: The Third District certified this opinion for publication on May 26, 2021. 

Section 998: Doctor Hit With Large Medical Malpractice Verdict And Over $2.5 Million In Prejudgment Interest, The Latter Via A Refused 998 Offer, Forfeited Challenge To Invalidity Of Offer

Challenge Never Raised Below And Doctor Took A Contrary Stance Below.

            In McCarley v. Anesthesia Service Medical Group, Case No. D074353 (4^th Dist., Div. 1 Apr. 20, 2021) (unpublished), plaintiff won a substantial medical malpractice verdict against a doctor, who rejected a CCP § 998 offer which was beaten by plaintiff after trial and resulted in adding over $2.5 million in prejudgment interest more.  On appeal, doctor challenged the 998 offer as being invalid.  The 4/1 DCA found that this challenge had been forfeited for two reasons:  (1) it had not been made in the trial court, and (2) doctor himself took a much different stance to the contrary at the trial court level, such that it would be unfair to entertain the new challenge now.

Appealability, Experts, Section 998: 2/8 DCA Declines To Consider Plaintiff’s Arguments Against Trial Court’s PostJudgment Award To Prevailing Defendants Of Section 998 Expert Witness Fees

Plaintiff’s Failure To File A Notice Of Appeal On The PostJudgment Award Deprived Appellate Court Of Jurisdiction.

            In Nash v. Romano, Case No. B303765 (2d Dist., Div. 8 April 12, 2021) (unpublished), plaintiff tenant sued her landlords after she broke her ankle while stepping on an allegedly unstable backyard paver.  The jury returned verdict in favor of landlords and the trial court entered a defense judgment – prompting an appeal by plaintiff.  Meanwhile, landlords move postjudgment for costs, which included roughly $33,000 in expert witness fees.  After the trial court denied plaintiff’s motion to tax costs, she included arguments in her appellate briefs that the trial court erred in awarding landlords with expert fees pursuant to Code Civ. Proc. § 998.

            The 2/8 DCA considered plaintiff’s appeal of the judgment and affirmed.  However, the panel declined to consider plaintiff’s arguments concerning the expert fees due to lack of jurisdiction.  Plaintiff did not include the expert fees in her notice of appeal, which indicated only that she was appealing a judgment after jury trial, and did not separately appeal the postjudgment order or award.  (Pfeifer v. John Crane, Inc., 220 Cal.App.4th 1270, 1316 (2013) [discussed in our November 4, 2013 post].)

            Plaintiff’s argument that she could not file a notice of appeal challenging the award of expert fees because the trial court never filed an order awarding the fees was of no avail as there is nothing to challenge on appeal until such an order has been entered. 

Section 998: Given That Contractual Principles Usually Govern Wording Of 998 Offers, Recent Rhode Island Case Offers Some Tips

Moral Of The Story Is To Craft Our 998 Offers Carefully As Far As Wording.

            We will tell you that Code of Civil Procedure section 998 offers, as far as substance, are usually subject to contract interpretation principles.   Although it comes from Rhode Island, we will share with you some insights from a decision which interpreted an offer of judgment provision which still has some instructiveness for drafting 998 offers in California.

            In Taylor v. Scott Motors, Inc., C.A. No. PC-2015-4284 (R.I. Super. Ct. Feb. 4, 2021), a simple consumer case turned into five years of litigation over a software update for a VW Jetta SportWagen TDI diesel station wagon between the car owner and dealership.  The dealership made an offer of judgment under Rhode Island Superior Court Rule Civil Procedure 68(a) [modeled under the federal rule] for a set sum, plus “the amount of costs (including reasonable attorney’s fees) incurred in connection with this action through the [offer] date hereof in an amount to be determined by the Court.”  Plaintiff accepted the offer, and then sought $256,000 in lodestar fees augmented positively by 20% for a total of $307,000.  The defense objected to the request based on the argument Plaintiff presented no evidence that she “incurred” any fees because she had no fee agreement with her counsel and had no legal obligation to pay them. 

            The defense arguments did not resonate.  The Rhode Island court ultimately determined that “incurred” simply meant that the counsel did the work; if defendant had wanted to make things clearer, it would best to replace the term “incurred” with “billed to and paid by Plaintiff,” clearer language which was missing and did not divest plaintiff of fee entitlement under the offer.

            Moral of the story:  be precise in drafting 998 offers; use “billed and paid by Plaintiff” rather than “incurred” if you want to narrow fee entitlement under pretrial offers.

Section 998: Costs Were Properly Assessed Under 998 Offer Because The Release Was Limited And No Authority Showed A Good Faith Settlement Determination Rendered The Offer Invalid

$4,613.61 Costs Hit, After Adjustment For Damages Award, Was The Net Result.

            In Neff v. Anderson, Case No. B306263 (2d Dist., Div. 6 Mar. 24, 2021) (unpublished), plaintiffs challenged a $4,613.61 costs award based on a CCP § 998 offer by defendant RE/MAX.  The underlying case concerned damages to plaintiffs’ personal property which was removed from their home or destroyed when being placed in a trailer and open boat parked outside their home after a foreclosure.  Plaintiffs received a jury verdict against the property caretaker and RE/MAX, after apportioning fault among various parties.  However, before the jury verdict, RE/MAX submitted a section 998 offer to Plaintiffs in the amount of $27,501 in exchange for a dismissal of the action and mutual release and subject to a good faith determination by the court.  The trial court, after some adjustments, awarded $4,613.61 in costs based on the premise the section 998 offer was valid.

            Plaintiffs’ appeal of the cost award was unsuccessful.  A fair construction of the 998 offer was that the mutual releases were hinged to the claims in the suit, not releases of other claims which could invalidate a section 998 offer.  (The attached settlement agreement narrowly applied to named RE/MAX parties and only related to claims in “this action,” certainly narrow enough on the claims and with boilerplate releases of affiliated parties of RE/MAX not invalidating the offer.)  With respect to the good faith settlement issue, “[Neff] cites no authority for the rule that a good faith finding by the court renders an offer to compromise a mere settlement offer.”  (Slip Opn., pp. 6-7.)   Costs award affirmed on appeal.