CCP § 998 Shifts Fees for Worse-Off Settlements

Ayers v. FCA US, LLC, No. B315884 (D2d8 Feb. 27, 2024).

This is a Lemon Law case involving dueling offers under Code of Civil Procedure § 998. Manufacturer made one offer. Then it made a second higher offer. And then a third that was even higher. Years go by. Then the Court of Appeal decided a case that said that if the Consumer subsequently trades the car in, the trade in value gets deducted from the cost basis that (trebled) sets the maximum damages amount. If good law,* that would lower Plaintiff’s damages by about $40k. Plaintiff then made an offer of his own, which was higher than Manufacturer’s second offer but lower than its third. Manufacturer took the deal.

Plaintiff subsequently moved for attorneys fees, which in Lemon Law cases can significantly exceed the Consumer’s recovery. Manufacturer argued, however, that the fees should be cut of at the point of its third § 998 offer, because that offer was for more money than the Consumer actually got when his own offer was accepted. The trial court ruled that § 998’s cost-shifting rule does not apply to a case that is concluded by a settlement, as opposed to a trial, and declined to tax the fees. Manufacturer appealed.

There’s a case on this point from last year. See Madrigal v. Hyundai Motor America, 90 Cal. App. 5th 385 (2023). Over a dissent, it held that § 998(c)(1)’s imposition of fee shifting if the plaintiff “fails to obtain a more favorable judgment or award” applies when the “award” is obtained by plaintiff under a settlement, instead of a judgment. A concurring and dissenting opinion disagreed, reasoning that when parties resolve a case pursuant to a settlement nobody succeeds or fails at anything. A deal is just struck. The Supreme Court granted review of Madrigal last August.** The Court, as it now often does, ruled that pending review, Madrigal could be cited for both its persuasive value and for the existence of a conflict in the Court of Appeal under the Auto Equity Sales rule.

The Court here agrees with the Madrigal majority, finding that “a plain reading of section 998, subdivision (c)(1) compels the conclusion that it applies to any litigation that terminates with the plaintiff getting less than he would have if he had accepted the defendant’s earlier section 998 offer.” The Court goes through a number of policy rationales and rejects the Consumer’s assertion that applying § 998 to a case that ends in a settlement itself discourages settlement. Perhaps the most convincing point the court makes is that a settling party that doesn’t want to be subject to fee shifting based on a prior § 998 offer is always free to demand that fee shifting be excluded from the terms of any settlement.

Justice Viramontes concurs and dissents.

He largely agrees with the concurrence and dissent in Madrigal. He thinks, at minimum, that the majority’s “plain reading” of § 998(c)(1) is not dispositive because it is susceptible to a construction based on the idea that a settlement can’t be a failure. “[A]t the very least, the statute’s use of those words calls into question whether a settlement for less than the unaccepted offer equates to a failure to obtain a more favorable judgment under section 998(c)(1).” Looking into the purpose and legislative history animating § 998, he finds that the available evidence, albeit slim, suggests that the statute is intended to apply only when a settlement offer isn’t bested by a subsequent adjudication, not just a later settlement.

Affirmed.

*, ** A week after this case was decided, the Supreme Court issued an opinion in Niedermeier v. FCA, holding that trade in value does not merit a deduction from Lemon Law damages. Entering a settlement based on assumptions about the law that subsequently change, however, does not generally invalidate the settlement. Of course, review has also been granted in Madrigal. Plaintiff here can likely get a grant-and-hold based on that and if Madrigal is reversed, Plaintiff can likely get a reversal of the ruling on § 998 fee shifting. But it is still really doubtful that he could blow up the whole settlement based on incorrect assumptions of pre-Niedermeier law. 

Section 998 Is Not the Only Settlement Show

Alvarez v. Altamont Health Servs. Corp., No. B305155 (D2d8 Mar. 4, 2020)

For an offer of judgment under Code of Civil Procedure § 998 to be valid, it must include a “provision that allows the accepting party to indicate acceptance of the offer by signing a statement that the offer is accepted.” § 998(b). There are some cases that say because an offer without such a provision is invalid, the consequences that apply for a failure to respond—potential shifting of costs—don’t apply.

This case deals with the reverse. Defendant served a § 998 offer. It did not have an acceptance provision. But Plaintiff took the deal anyway and hand wrote an acceptance on the offer document. The trial court entered judgment on the settlement. But Defendant then got cold feet about the offer and moved to vacate the judgment based on the defect. The trial court agreed, and the Court of Appeal here affirms.

The Court reviews various grounds for finding the offer nonetheless valid—statutory, contractual, and equitable—finding them all lacking.

The § 998 analysis basically seems consistent with the statute and the cases interpreting it, even if its a little counter-intuitive. There are, however, two not well developed points here that give me some pause.

First, as a matter of contract law—not specific to § 998—it seems pretty clear that the defendant made an offer—settle the case on these terms—that the plaintiff accepted. So even if there’s no right just to enter judgment under § 998, isn’t the defendant likely entitled to summary judgment on settlement and accord? Not every settlement needs to be a § 998 settlement. That’s not really contemplated here. 

Second, and similarly, there’s an estoppel issue. Defendant made a representation that Plaintiff relied on in changing its legal position. As the Evidence Code puts it: “Whenever a party has, by his own statement or conduct, intentionally and deliberately led another to believe a particular thing true and to act upon such belief, he is not, in any litigation arising out of such statement or conduct, permitted to contradict it.” Evid. Code § 623.

Here, Defendant made a statement that led Plaintiff believe it was offering to settle the case on certain terms and Plaintiff acted on that statement. Generally, that should estop Defendant from a later denial. This one did get raised—albeit only on appeal—but the Court of Appeal rejects it because, under one test that can apply for equitable estoppel—what we call the “four-element test”—there was no false statement, so equitable estoppel can’t apply. 

But as I wrote, at some length, almost eight years ago, and addressed again just last year, the four-element test, and its cousin, the five-element test, don’t fully encompass all the varieties of equitable estoppel that exist out in the wilderness of California procedure. And in particular, they do not address the core elements of the type of estoppel at issue here—a detrimental reliance on an offer or promise that is not necessarily false when made. Under the case law that applies in that context—see, e.g., Indus. Indem. Co. v. Indus. Acc. Comm., 115 Cal. App. 2d 684, 690 (1953)—there would seem to be enough to work an estoppel here. Or at least for a more thorough analysis.

So while the statutory quirks of § 998 might preclude entry of automatic judgment under its terms, it seems like either contractual rules or an estoppel should be enough to crate a binding agreement that resolves the case.

Affirmed.

Fees on a Contract

Waterwood Enters. v. City of Long Beach, No. B296830 (D2d1 Dec. 18, 2020)

Plaintiff in this breach of contract case won $45k in damages. The verdict was roughly of a prior Code of Civil Procedure § 998 offer made by Plaintiff. Relying on that fact, the trial court ruled that defendant, not plaintiff, was the prevailing party. It awarded defendant $170k in attorneys’ fees based on a fee-shifting clause in the contract. 

Section 1717 of the Civil Code addresses recovery under contracts that permit prevailing parties to recover attorneys’ fees. It defines prevailing party as “the party who recovered a greater relief in the action on the contract.” That definition governs regardless of any contrary definition in the contract. There are a few potential outcomes under §1717. When plaintiff or a defendant wins a simple unqualified win—either plaintiffs’ recovery of full damages or a defense verdict—that party prevails. But in any other scenario, the trial court has discretion to decide that one party, or the other, or neither, prevailed. 

Here the trial court made three mistakes. First, it ruled that defendant prevailed because the $45k plaintiff won was for part of damages that was basically uncontested by defendant. That, however, wasn’t supported by the record. The jury’s special verdict form provided an unallocated damages verdict. There was no way to know whether the damages were for the breach arguably conceded by defendant or for something else.

And in any event, the defendant’s “concession” was not a proper consideration. Section 1717(b)(2) specifically provides an avenue for a defendant to concede partial liability—it can tender the disputed amount. Short of that, a defendant is not entitled to credit for not fighting hard on a point during trial.

Finally, the trial court should not have compared the verdict to the § 998 offer. A comparison between what was won and “litigation objectives” is an appropriate consideration in deciding who prevailed. To make that assessment, the Supreme Court has said courts should look to, among other things, pleadings, trial briefs, and opening statements. But settlement offers should not play into that calculus.

It was thus error to determine that defendant prevailed. There was only one contract claim, and plaintiff was the only party that obtained relief. So on remand, the trial court should apply the proper standard to determine whether plaintiff was the prevailing party, or whether nobody was.

Reversed.

Statute Solving Split Is a Clarification, Not a Change

Scott v. City of San Diego, No. D074061 (D4d1 Aug. 1, 2019)

While this appeal was pending, the Legislature amended the FEHA’s costs provision to make clear that costs could not be awarded against a plaintiff who brings a non-frivolous claim, even when that plaintiff fails to beat a Code of Civil Procedure § 998 offer. The Court of Appeal here holds that the amendment was a clarification, not a change, in the law, such that the standard could be applied to pre-amendment claims. At the time the fees were awarded, there was a split of authority in the Court of Appeal interpreting the pre-amendment statute. Plus, the legislative history of the bill contained strong statements of intent to clarify, not change, the law. That was enough to get the court here comfortable with applying the “clarified” standard to the cost award in this case.

Reversed.

Quickie § 998 Offer Not in Good Faith

Licudine v. Cedars-Sinai Med. Cntr., No. B286350 (D1d2 Jan. 3, 2019)

If a Defendant turns down a Plaintiff’s valid § 998 offer and then Plaintiff beats the number at trial, Plaintiff gets to recover prejudgment interest from the date of the offer. But the offer has to be valid. And to be valid, the offer has to have been made in good faith—§ 998 exists to foster reasonable settlements, not to reward the parties for engaging in gamesmanship.

Here, Plaintiff, who made no demand in her prayer for relief, sprung a §998 offer on defendant only a few days after the answer was filed. Defendant had yet to obtain any discovery on damages. (Or basically anything else for that matter.) The Court of Appeal here affirms the trial court’s finding that the offer wasn’t in good faith. In doing so, it notes that although the good faith analysis looks to a totality of the circumstances, three factors are “especially pertinent”: “(1) how far into the litigation the 998 offer was made; (2) the information available to the offeree prior to the 998 offer’s expiration; and (3) whether the offeree let the offeror know it lacked sufficient information to evaluate the offer, and how the offeror responded.”

Affirmed.

Section 998 Offer Exclusive of Fees Is Unambiguous

Timed Out LLC v. 13359 Corp., No. B280301 (D2d1 Mar. 27, 2018)
 
In a case where attorneys’ fees are recoverable as a cost, a Code of Civil Procedure § 998 offer of judgment that offers a payment “exclusive of reasonable costs and attorneys’ fees, if any,” unambiguously permits an accepting plaintiff to move for recovery of the attorneys’ fees in the event she accepts the offer. Which means the offer made in this case was valid.

Affirmed.

Plaintiffs' Joint § 998 Offer Holds Up

Gonzalez v. Lew, No. B271312 (D2d3 Mar. 1, 2018) 
 
This is a wrongful death case arising out of a house fire where two people were killed. Plaintiffs made a joint, undifferentiated offer of judgment under Code of Civil Procedure § 998 for $1.5 million. Defendants didn’t accept it, and a jury ultimately awarded $2.6 million. So the Court awarded Plaintiff’s their expert fees and interest on the award from the date the offer expired. 

A Demand for Everything Is Apparently Not an Offer of Compromise

Arave v. Merrill Lynch, Pierce, Fenner & Smith Inc., No E061677 (D4d2, as modified, Jan. 23, 2018)

First things first. A footnote at the beginning of this 95-page opinion says “We certify this opinion for publication under California Rules of Court, rules 8.1105(b) and 8.1110, except for parts I.B., I.C., I.D., I.E., I.F., I.G., II.A.1., II.A.2., II.A.4., II.A.5., II.A.6., II.B., II.C., II.D., II.E., II.F., and II.I.” (On a publication request the court struck II.C from the footnote.) So to figure out what is actually being published, you’ll need to make a list (like literally write it down) then scroll through the opinion and figure out by process of elimination what’s not excluded.

§ 998 Shifts Costs in FEHA and POBRA Cases

Sviridov v. City of San Diego, No. D069785 (D4d3 Aug. 15, 2017)

The general rule in California is that a prevailing defendant can recover its costs. See Cal. Code Civ. Proc. § 1032(a). But there are various statutes that create an exception to that rule, permitting cost-shifting only when the claim is objectively devoid of merit. Two such statutes implicated here: The Fair Employment and Housing Act and the Public Safety Officers Procedural Bill of Rights Act. But in this case, costs weren’t awarded just because Defendant prevailed. They were awarded because Plaintiff rejected several offers of judgment under Code of Civil Procedure § 998 and failed to best the offers at trial. In a terse analysis, the Court of Appeal holds here that the FEHA and POBRA do not create exceptions to cost-shifting when it is imposed under § 998(c)(1), as opposed to § 1032.

Affirmed.

Can Kicking on a Costs Ruling

Heimlich v. Shivji, No. H062641 (D6 May 31, 2017)

About a year into an Attorney-Client fee dispute, Client made an offer of judgment under Code of Civil Procedure § 998 to settle the case for thirty grand. Attorney didn’t respond. Months after that, client sought to compel arbitration under the parties’ fee agreement. For reasons unclear, the trial court compelled the case to arbitration after summary judgment was denied, which ended in a $0 award where each party bore its own costs and fees. 

Client tried to raise the § 998 offer with the arbitrator as a basis of fee-shifting. But the arbitrator said that since her award had been rendered, she no longer had jurisdiction to address the question. As part of an effort to confirm the (lack of) award, Client asked the court to shift costs based on his beating the pre-arbitration § 998 offer. The trial court denied relief, finding that the issue should have been raised with the arbitrator before the substantive award was entered. Client appeals.

Some relevant legal points at play here. 1. § 998 was amended in 1997 to apply in arbitrations. 2. § 1293.2 permits a court upon confirmation of an arbitral award to award the same kinds of costs that are recoverable by a prevailing party in a civil litigation. 3. § 1284.2 says that, absent a contractual agreement otherwise, a party bears his own costs plus his pro rata share of the expenses of arbitration, such as the arbitrator’s fee.

Courts have generally read the interplay between 2 and 3 to mean that a court can shift court-related costs of compelling, confirming, or vacating an arbitration, but not costs incurred within the arbitral process itself. The 1997 amendments to § 998, however, change that somewhat, permitting the recovery of costs within the arbitration, even if not contractually agreed to. That’s not too controversial. But still, who decides? Generally litigants have been expected to enforce intra-arbitration cost shifting within the context of the arbitration, not afterwards.

The trouble with putting the question to the arbitrator is that with the exception of a limited authority to correct obvious or immaterial errors, the arbitrator doesn’t have much in the way of post-award jurisdiction. Cases and statues re pretty clear on that. But when it comes to a § 998 issue, that makes absolutely no sense, because an arbitrator can’t decide if a § 998 offer was bested until a decision has been rendered. Indeed, § 998 itself says that a rejected offer is inadmissible in evidence during a case on the merits.

So it’s a quintessential Catch 22. A § 998 “determination necessarily must postdate an arbitration award,” since there’s no way to adjudicate the § 998 before the award is entered, particularly when the rejection is inadmissible. But the arbitrator basically lacks jurisdiction to do that. 

Lacking many great options, and hemmed in by conflicting case law, the Court of Appeal just gets to rulin’ in the interest of common sense. It says: 1. an arbitrator can and should consider a post-award § 998 motion, and has jurisdiction to do so. 2. If the arbitrator won’t do that, he has failed to consider a submitted issue—a grounds for vacation under § 1283.4 and related case law. So the arbitrator here made that mistake.

The court thus orders the matter remanded for reconsideration by the arbitrator. But if that doesn’t work, there is some tangential dicta in a Supreme Court case that says something from which one could read—were one to squint a little and turn your head like a puppy—that a superior court can also entertain such an award if the arbitrator refuses to do so. So if the arbitrator continues to refuse, the superior court should address the issue on remand.

Reversed.

Follow the Verdict Form

Markow v. Rosner, No. B260715 (D2d1 Oct. 4, 2016).

A jury awarded damages to Plaintiffs—a patient and his wife suing for loss of consortium—in a med-mal case. The jury purported to allocate the award 60/40 between Doctor and Hospital. Hospital’s liability was based on an ostensible agency theory, not any direct fault on its own part. Hospital moved for judgment notwithstanding the verdict, on the ground that the record was clear that Doctor was an independent contractor, not an agent, and that Plaintiff knew that fact from the get-go. The trial court denied that motion, but the Court of Appeal reverses.

This Release Does Not Compute

Ignacio v. Caracciolo, No. B266930 (D2d8 Aug. 3, 2016)
 
This is another case where an insurance company gets over its skis by making a Code of Civil Procedure § 998 offer of judgment that tries to do more than just enter judgment in the case along the terms of the offer. This time, the offer includes an agreement to a broad general release, including a waiver of unknown claims under Civil Code § 1542. Plaintiff didn’t take the deal. At trial, Insurer won a verdict below the offer’s cash consideration, so it sought cost shifting. On appeal, the Court of Appeal finds the offer invalid. Problem is, when a release is broader than the claims in the case, the value of the offer vs. what was won at trail can’t really be rationally compared. Suppose, for instance, that plaintiff had some multi-million dollar claim against the insurer on some other issue that wasn’t in the case. Since the release offered was far broader than the case with respect to the releasing parties, the released parties, and the claims being released, it couldn’t be fairly valued under the § 998 calculus.

Affirmed.

Thank You, the Tentative Stands.

FWIW, this is 111 N. Hill's 500th post!

Stanford v. Rasnick, No. A145904 (D1d2 Apr. 25, 2016)

Two Defendants in an auto accident case (a father and son) made a joint $130,000 offer under Code of Civil Procedure § 998. Or perhaps more accurately, their insurance company did. The offer was not allocated between Defendants and was conditioned on Plaintiff to entering a “written settlement agreement” Plaintiff didn’t take it. After adjusting for comparative liability and adding pre-offer costs, plaintiff won a recovery of $122k—just under the § 998 amount. Both sides sought costs and both moved to tax. The court agreed with Defendants on basically all counts. It found the § 998 offer was valid and thus Plaintiff could not recover his post-offer costs while Defendants could recover their post-offer costs, as well as their expert witness costs. It further taxed Plaintiff’s pre-offer costs, finding that his share of the cost of a mediator and certain attorney service charges were “not allowed.”

The Court of Appeal reverses on both points. So far as the § 998 offer goes, to be valid, it needed to be unambiguous. If accepted, it needs to be clear on its face as to what it is being offered and accepted. If collateral litigation might be needed to suss out the terms of the deal, the offer is not valid. 

Payment in exchange for a release is clear. But conditioning an offer on entering a “settlement agreement,” particularly one of terms unspecified, is not. Although Defendants contend that they made a “a standard, insurance defense offer,” the Court isn’t buying it. Just because a practice is common doesn’t make it correct. Simply put, Plaintiff can’t be put to accepting or rejecting a § 998 offer that includes entering a “settlement agreement” when he doesn’t know what the terms of the settlement hearing are ex ante.

So far as plaintiffs’ costs go, neither mediation expenses or attorney service costs are “not allowed.” They are, instead, not automatic, but nonetheless awardable in the discretion of the court. The Court of Appeal makes the point of noting that in the extensive oral argument on the costs issue, plaintiff pointed this out and asked the court to explain any discretionary denial. The trial court’s response was curt “thank you.”* It then stood on the tentative. The Court of Appeal finds that was error because the trial court abdicated its discretion by treating the costs as categorically disallowed.

Reversed and remanded.

*The opinion notes that the oral argument on the motion was “quite lengthy” and seems exasperated—or at least puzzled—by the fact that Plaintiff sensibly pointed out some mistakes in the tentative and the trial judge did not so much as react. That, however, is not an uncommon occurrence so far as law and motion oral arguments in a California Superior Court goes. 

Indeed, given the low value many trial judges put on oral argument on law and motion matters, and the incredibly burdened dockets of the superior courts, I often wonder why they bother. It’s not like—other than in some specific circumstances like summary judgment—a court is required to hold a hearing.  Nevertheless, unlike federal courts, which frequently rule without a hearing, California state courts basically always take oral argument. But if the court doesn’t perceive any value in it, one would think that, in the aggregate, the quality of justice would likely improve were the court to just rule on the papers and put that time to some better use. 

Pre-Offer Expert Fees Unrecoverable Under § 998.

Toste v. Calportland Constr., No B256946 (D2d6 Mar. 2, 2016)

Plaintiff appeals on a grab-bag of issues after a defense verdict in a wrongful death case. The jury found one defendant negligent but no causation for any of them. There are two procedural issues: a new trial motion based on jury misconduct and the rejection of a § 998 offer.

Zero-Dollar § 998 Offer Found Reasonable

Melendrez v. Ameron Int’l. Corp., No B256928 (D2d Sept. 17, 2015)

Plaintiff lost at summary judgment in this asbestos case because his exposure was in the workplace, which meant his exclusive remedy was workers’ comp. While its SJ motion was pending, Defendant made a rather aggressive offer of judgment under Code of Civil Procedure § 998 offer, proposing a dismissal in exchange for a mutual waiver of costs and fees. Because plaintiff didn't beat hte offer, the court permitted the shifting of costs, including significant expert witness fees. Plaintiff moved to tax, arguing that the lowball § 998 offer was in bad faith and that certain expert expenses were not sufficiently related to the expert’s testimony to be recoverable. The trial court disagreed.

The court of appeal affirms. A plaintiff’s failure to beat a defendant’s § 998 offer merits a presumption that the offer was reasonable. To rebut the presumption, Plaintiff bears the burden of showing unreasonableness. While a court can consider plaintiff’s in assessing reasonableness, it’s by far the only thing that matters. Courts can also consider the amount of costs to be shifted and the plaintiff’ likelihood of prevailing. So when a defendant has a strong defense—like Defendant’s workers’ comp defense here—it can permissibly make a low offer. That’s particularly true here, where discovery was largely complete and the SJ motion pending by the time Defendant made its offer. So Defendant could make a good-faith informed assessment of the strength of Plaintiff’s case and the value of its claims.

There’s also an issue about allocation of expert fees. Defendant’s experts inspected Plaintiffs home—to which he had brought home various asbestos-containing goods from work for use in home improvement projects—for contamination. When the found asbestos, they also did significant remediation work to remove it. Work done to inspect is recoverable as part of the experts’ work in preparing to testify in the case. But work done to remove contamination is not. Here, the court finds that the trial court made a permissible allocation, excluding recovery for various work that was solely for remediation purposes. To the extent the trial court permitted recovery of some expenses whose purpose wasn’t completely clear, it was the court’s prerogative to make factual findings regarding whether any work was necessity to the expert’s testimony. So long as substantial evidence in support them, which it does, those findings don’t get disturbed on appeal.

Affirmed.

Prevailing as One Is Not Prevailing as Many

Kahn v. The Dewey Grp., No. B259679 (D2d3 Sept. 8, 2015)

Plaintiff, a mobile home tenant, alleges that twenty different defendants caused him to be exposed to harmful industrial chemicals that were disposed of on land that would later become the trailer park. All twenty defendants jointly made a Code of Civil Procedure § 998 offer of judgment for $75,000. Fourteen defendants got out on nonsuit. The other six went to a trail, where the jury deadlocked and a mistrial was declared. Although the retrial was pending, the fourteen nonsuited defendants moved to recover their proportionate share of expert costs, which the trial court granted. Plaintiff appealed.

No Piggybacking on a Co-Defendant's 998

Litt v. Eisenhower Med. Ctr., No. D067455 (D4d1 Jun. 19, 2015)

Plaintiff got hurt in a hospital cafeteria. Defendant 1, the hospital, served a Code of Civil Procedure § 998 offer of judgment on Plaintiff for $15,000, which plaintiff rejected. Plaintiff subsequently amended his complaint to add Defendant 2, the cafeteria operator. Under the cafeteria contract, Defendants 2 agreed to indemnify Defendant 1 in cases like this one. At trial, plaintiff won a $3,000 verdict, joint and several against both defendants.

Trial court holds that, for the purposes fee shifting under § 998, Defendant 1—which served the offer—is a prevailing party. But Defendant 2—which didn’t serve an offer—is not. So only Defendant 1 gets to recover its post-offer costs. But it taxeed Defendant 1’s expert witness fees because under the cafeteria contract, those fees were indemnified by Defendant 2.

On appeal, the first point is easy. A defendant that doesn’t serve a § 998 offer and loses a net recovery at trial is not a prevailing party, in any sense of that term. But the trial court erred in taxing Defendant 1’s expert witness fees. The costs statute permits the award of costs incurred, even if not paid, and § 998 shifts incurred costs. A bunch of cases in the insurance context bear out that a plaintiff can recover expert witness fees, even if the bill was paid by someone else. So Defendant 1 should have recovered its expert witness fees, even if, at the end of the day, it wasn’t on the hook to pay them. The fact that the obliged indemnitor was also a defendant in the case and not, ultimately, a prevailing party on its own, didn’t make a difference.

Reversed in part.

More Non-Judgment Judgments

Lee v. Silveira, No. F067723 (D5 as modified June 8, 2015)
 
A PI plaintiff makes a § 998 offer of judgment for a million dollars. Defendant does not accept. The verdict was more than $1 million, but the court reduced the award under Howell v. Hamilton Meats & Provisions, Inc., 52 Cal. 4th 541, 548 (2011), which says the plaintiff is entitled to a damages award in the amount of her paid medical bills, not the amounts first billed, because the bills have no relationship with economic reality. After the reduction, the award dropped below $1 million. It is pretty clear that had the jury been asked calculate damages under Howell, the plaintiff wouldn’t have beaten the offer and thus couldn’t shift her substantial expert costs to defendant. The fact that the trial court did so post-hoc shouldn’t lead to a different result. The court so holds.

The court goes on to address a second issue regarding post-judgment procedure. Like a lot of post-judgment issues, it turns on the timing of the judgment. The jury’s original verdict was reflected in a document called “Judgment on Jury Verdict,” which, notwithstanding its title, specifically noted that it was subject to post-trial adjustments for the medical expenses and prejudgment interest. Defendants moved to reduce the “judgment” for the delta between the paid and billed expenses. Plaintiff did not contest the adjustment, but argued that prejudgment interest and her expert fees should be tacked on before the court made the adjustment. The court agreed with plaintiff and ultimately entered a new, final judgment that included the interest and fees.  Defendant then moved under Code of Civil Procedure § 663 to vacate the judgment and enter a new one.

Plaintiff argued that the first “Judgment on Jury Verdict” was a bona fide judgment and thus should have been attacked by a motion for new trial. So when Defendant’s first motion was effectively denied, that was like denying a new trial motion, which is an appealable order that divests the court of jurisdiction to act further.

Problem is, an order that foresees further action by the trial court is not a judgment even if it has the word “judgment” in its title. (I really wish trial courts wouldn’t do that because of the chaos it tends to create, but it happens all the time.) So a post-verdict, pre-judgment motion directed to a remedy within the province of the trial court was entirely proper. And then when a legit final judgment did enter, a § 663 motion was an appropriate vehicle for defendant to use to have it corrected.

Affirmed.

I Want My Two Dollars . . . .

Hyundai Motor of Am. v. Superior Court, No. G051279 (D4d3 Mar. 20, 2015)

The is a Song-Beverly warranty case where the Hyundai made a full value plus attorneys’ fees offer under Code of Civil Procedure § 998 for the entire value of a car plaintiff claimed was a lemon. Plaintiff took the offer. The trial court awarded him $42k in attorneys’ fees. Plaintiff also demanded post-judgment interest on the fee award, running from the acceptance of the § 998 offer. The court declined. After all, judgment hadn’t been entered yet.

Hyundai paid off the entire fee amount—with judgment still not yet entered—but Plaintiff claimed the payout was $462.50 short for interest between the fee award hearing and the payoff. Plaintiff’s counsel then began judgment enforcement proceedings for his four hundred bucks, including noticing a judgment debtor exam of the CEO of Hyundai’s US sub. Plaintiff also filed a number of cost memos demanding ever-increasing cost awards.

Hyundai challenged the cost memos with the trial court. It determined that, notwithstanding the fact that judgment had not been entered until shortly before the hearing, its fee award was, in effect, an enforceable judgment that accumulated 10 percent post-judgment interest from the date of the order.  Hyundai took a writ.

This isn’t too hard. Post-judgment interest accrues from the entry of final judgment.  No judgment, no post-judgment interest. That includes cases where § 998 offers are accepted and judgment isn’t entered till later. And it also includes pre-judgment fee awards that are later subsumed into a final judgment. 

Writ granted.

The court of appeal goes on to explain that a peremptory writ—a writ granted without following the formal order to show cause process—is appropriate in this case. The court issued a Palma notice—a warning that it was considering entering a peremptory writ so the respondent better chime in right away. Upon reviewing plaintiff’s Palma response, it decided Hyundai’s right to relief was clear. Moreover, the court took particular notice of plaintiff’s counsel’s unprofessional move of noticing an apex judgment debtor exam of Hyundai America’s CEO to collect on a bogus $462.50 debt. The court felt like that kind of ridiculous litigation tactic required it to step in on an emergency basis.

Prejudgment Interest on Costs Denied

Bean v. Pac. Elevator Corp., No. D064587 (D4d1 Mar. 10, 2015)

Under Civil Code § 3291, if a personal injury plaintiff makes and then beats an offer of judgment under Code of Civil Procedure § 998, plaintiff gets ten percent prejudgment interest on the ultimate award from the date of the offer until judgment is entered. The court here holds that, although the statute is no model of clarity, the plaintiff is entitled to prejudgment interest only on the part of the judgment that is attributable to personal injury damages. That doesn’t include costs that are ultimately added to the judgment. So prejudgment interest under § 3291 can’t include interest on costs.

Reversed in relevant part.