General Release Invalidated §998 Offer

Thursday, August 4, 2016

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General Release Invalidated §998 Offer—C.A.

By a MetNews Staff Writer

An offer to compromise pursuant to Code of Civil Procedure §998 is ineffective for cost-shifting purposes if it is contingent upon the plaintiff execuiting a general release, the Court of Appeal for this district held yesterday.

The opinion, by Justice Laurence D. Rubin of Div. Eight, affirms the decision of Los Angeles Superior Court Judge Charles Palmer to deny the motion of a defendant to tax costs and to obtain her own costs based on the plaintiff having failed to obtain a judgment in a greater amount than that offered as a settlement.

Prior to trial, the defendant in a personal injury case, Marilynne Caracciolo, offered to pay plaintiff Yolanda Lachi Ignacio $75,000, and the offer was spurned. At trial, Ignacio was awarded a judgment in the amount of $70,000.

A general release, provided with the offer, contained stock language waiving claims “of whatever kind and nature in law, equity, or otherwise, whether now known or unknown, suspected or unsuspected, that have existed or may have existed or which do exist, or which hereinafter can, shall or may exist.”

Additionally, the release required waiving the benefits of Civil Code 1542, which provides:

“A General Release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or settlement with the debtor.”

Rubin said:

“Because the release defendant submitted to plaintiff as part of her settlement offer sought to release defendant and others from claims outside the scope of the current personal injury action, it rendered the offer invalid under section 998.”

Caracciolo cited the 1994 Court of Appeal case of Goodstein v. Bank of San Pedro, 27 Cal.App.4th 899, decided by Div. One of this district, for the proposition that coupling a §998 offer of compromise with a general release does not render §998’s cost-shifting provision inoperative. There, Presiding Justice Mildred L. Lillie (since deceased), writing for the majority, observed that “the general release in the instant case pertained only to the same action before the trial court.”

Rubin wrote:

“[A] lack of precision in terminology may have given rise to some confusion. Historically, a ‘general release’ was a release ‘which was phrased broadly enough to include unknown claims,’ while a specific release did ‘not extend to unknown claims.’…[T]he Goodstein majority upheld the validity of the section 998 offer by construing the term ‘general release’ more narrowly than its then-established common meaning. The rule to be taken from Goodstein is not that a ‘general release’ does not invalidate a section 998 offer; the rule is that a release of unknown claims arising only from the claim underlying the litigation itself does not invalidate the offer….

“But, the release here is not so limited.”

The case is Ignacio v. Caracciolo, 16 MetNews 3945.

Philip J. Layfield, and Christopher M. Blanchard of Layfield & Barrett represented Ignacio and Kathryn Albarian of Mark R. Weiner & Associates acted for Caracciolo.