By a MetNews Staff Writer
Div. One of the Fourth District Court of Appeal yesterday invalidated an award of expert witness fees pursuant to Code of Civil Procedure §998, plus prejudgment interest, because the offers to compromise did not meet a requirement of the statute that an instruction be provided on how to accept, with the opinion declaring that strict compliance is mandatory.
Sec. 998 provides, in subd. (d), that if the plaintiff makes a settlement offer pursuant to the statute which is spurned, and the plaintiff obtains a judgment for more than what was specified in the offer, the court may, in its discretion, order the defendant to pay the plaintiff the amount reasonably spent on expert witness fees. San Diego County Superior Court Judge Earl H. Maas III made such an award to Kimberly Finlan who, as a beautician at a spa, was subjected on Feb 11, 2014 to sexual misconduct on the part of a customer, defendant Michael Chase, to whom she had been giving a facial.
That award of $7,750 was paled, however, by the jury’s reckoning of pre-judgment interest in the amount of $450,000. Civil Code §3291 provides for such interest in a personal injury action where a §998 offer is rejected and the offeree winds up in worse shape than if there had been an acceptance, with interest at 10 percent per annum kicking in “from the date of the plaintiff’s first offer pursuant to Section 998.”
Finlan, in three letters, offered to settle for $999,000. (One of the letters was possibly not received; it was undisputed that those dispatched in December 2018 and December 2019 did arrive.)
The jury set damages at $3,875,000.
Wording of Offers
The offers specified that “[p]ursuant to Section 998…, Plaintiff KIMBERLY FINLAN, offers to settle the Complaint against defendant MICHAEL CHASE for the sum of nine hundred and ninety-nine thousand dollars ($999,000.00), paid by said defendant MICHAEL CHASE and to allow judgment to be entered in favor of said plaintiff” in that amount. The letters continued:
“This offer is made pursuant to Section 998 of the California Civil Code of Procedure [sic], if such offer is not accepted within 30 days after it is made, it shall be deemed withdrawn. In the event this Offer of Compromise is not accepted by the said defendant, defendant is hereby advised that after verdict, Plaintiff intends to seek a reasonable sum to cover costs of expert witnesses, interest at the rate of ten percent (10%) per annum from the date hereof, together with all other costs as provided in Section 998.”
Chase did not accept, winding up with a judgment against him nearly four times greater.
The defendant contended that Finlan was not entitled to expert witness fees or prejudgment interest, asserting that she failed to comply with that portion of §998(b) which requires that an offer contain “a provision that allows the accepting party to indicate acceptance of the offer by signing a statement that the offer is accepted.” The subdivision adds:
“Any acceptance of the offer, whether made on the document containing the offer or on a separate document of acceptance, shall be in writing and shall be signed by counsel for the accepting party or, if not represented by counsel, by the accepting party.”
In an order of Oct. 26, 2020, Maas rejected Chase’s contention. He said that Finlan made reference to §998 in her letters and “CCP § 998, in turn, sets forth the procedure for acceptances.”
The judge went on to say:
“Here, the offer was not silent as to how it was to be accepted. By explicitly referring to CCP § 998, it encompassed the provisions of that statute which state that acceptance shall be made either in writing on the offer or in a separate document and shall be signed by counsel for the accepting party CCP § 998(b).”
Maas awarded expert witness fees in the amount of $7,750, and total costs of $30,016.62. Having declared the §998 offers valid, he denied Chase’s motion to strike the jury’s award of prejudgment interest.
Yesterday’s Court of Appeal opinion was authored by Justice William Dato, who disagreed with Maas’s approach and found no merit in Finlan’s argument that her reference in the offers to Chase “allowing judgment to be entered” satisfied the requisites of §998(b). He wrote:
“[N]either the trial court’s reasoning nor Finlan’s alternate theory provides a basis on which we could affirm. If the trial court’s incorporation-by-reference approach were sufficient to constitute an acceptance provision within the meaning of section 998, then the Legislature’s 2006 modifications to subdivision (b) adding that requirement would be rendered meaningless. And holding that a simple mention of a ‘judgment’ satisfies the statutory provision would create the same problem. Because no part of Finlan’s letters provides instructions on how Chase could have accepted, they were not valid section 998 offers.”
Dato said that reference to allowing “judgment to be entered” in an offer “is not the same thing as providing instructions that offerees can follow if they wish to accept such an offer.”
He spelled out at the outset of the opinion:
“As experienced litigators know, an offer from the opposing party to compromise pursuant to Code of Civil Procedure section 998 should be carefully reviewed, because if it is not accepted and trial produces a less favorable result, offerees might be penalized for their earlier reticence to settle by being required to pay certain litigation costs of their opponents. But offerors must exercise caution as well, and take particular care that their offers meet all of the requirements enumerated in section 998. One such requirement is the inclusion of an acceptance provision that gives offerees instructions on how to accept an offer if they choose to settle.”
The opinion reverses Maas’s “postjudgment order to the extent it allows plaintiff Kimberly Finlan to recover costs and interest that could only be awarded based on defendant Michael Chase’s failure to accept a legitimate section 998 offer.”
The case is Finlay v. Chase, 2021 S.O.S. 5114.
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