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Court of Appeal:
Judgment Based on Acceptance of Faulty §998 Offer Is Void
Currey Says Failure to Include ‘Acceptance Provision’ in Statutory Offer to Compromise Renders Judgment Based on Acceptance a Nullity; Rejects Offeree’s View That ‘Pure Contract Principles’ Should Be Applied
By a MetNews Staff Writer
A judgment entered pursuant to the acceptance of a statutory offer to compromise is void if the offer did not contain an “acceptance provision,” Div. Four of the Court of Appeal for this district held yesterday.
At issue was the effect of the language in Code of Civil Procedure §998(b) that an offer must contain “a provision that allows the accepting party to indicate acceptance of the offer by signing a statement that the offer is accepted.” Without such a provision in the offer, the court held, an acceptance does not create a contract, rejecting the accepting offeree’s position that under ordinary contract principles, it does.
“A number of cases have addressed whether a section 998 offer without an acceptance provision is valid for purposes of triggering the statute’s cost-shifting provisions when the offer is not accepted, Justice Brian S. Currey wrote. “This case poses an issue of first impression: whether the purported acceptance of a section 998 offer lacking an acceptance provision gives rise to a valid judgment.”
Concluding that it does not, his opinion affirms an order by Los Angeles Superior Court Judge Teresa A. Beaudet vacating a $25,000.01 judgment in favor of the Mostafavi Law Group in its action for defamation against Mortazavi Larry Rabineau, APC, and attorney Larry Rabineau.
On May 31, 2019, Rabineau served an offer, pursuant to Code of Civil Procedure §998; Amir Mostafavi, as general counsel for the law firm, on June 20, 2019, wrote on the offer, “Plaintiff Mostafavi Law Group, APC accepts the offer,” and that day filed in the court a notice of acceptance. After judgment was entered, Rabineau had second thoughts, and moved for an order nullifying the judgment.
Beaudet noted that there were no cases as to the validity of a judgment predicated on the acceptance of a §998 offer. She pointed, however, to the 2012 decision of the Fourth District’s Div. Three in Perez v. Torres where it was held that a prevailing defendant was not entitled to $5,350 in expert witness fees because—although he would have been able to recoup such fees had the plaintiff spurned a valid §998 offer—his offer was defective in light of the absence of an acceptance provision.
Applying the reasoning in that case, Beaudet declared that “the Judgment is appropriately set aside as void.”
In his opinion affirming her order, Currey said:
“California appellate courts have consistently followed Puerta to hold that a section 998 offer lacking an acceptance provision is invalid, and therefore an offeree’s failure to accept it does not trigger any of section 998’s cost-shifting provisions….
“The trial court’s application of these cases—which involved rejection of a section 998 offer without an acceptance provision— to this case—which involves acceptance of such an offer—is a logical extension of their holdings. It also is consistent with section 998’s language and structure.”
Mostafavi Law Group argued that aside from §998, there was an offer, there was an acceptance, and there was consideration, and under “pure contract principles,” Rabineau was bound by the offer. Currey saw it differently, saying:
“[A]s the trial court correctly noted, application of general contract principles to conclude a section 998 offer is valid, even if it does not have an acceptance provision, would conflict with the language of section 998, which clearly provides otherwise.”
He also saw no merit in the law firm’s argument that equitable principles should be applied to give force to the judgment, reasoning that “stare decisis and common tenants of statutory construction direct us to adhere to the clear statutory requirement of an acceptance provision.”
The case is Mostafavi Law Group, APC v. Larry Rabineau, APC, B302344.
Mostafavi, whose office is in the Pacific Palisades, was joined by mid-Wilshire attorney Joseph S. Socher in arguing for reversal. Co-counsel on appeal with Rabineau was Virginia Narian of his West Los Angeles firm.
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