Justice Feuer Says Offer Need Not Spell Out If ‘Attorney Fees’ to Be Provided Include Those Incurred After Acceptance; Necessarily, They Do, Opinion Says
By a MetNews Staff Writer
A defendant’s statutory offer to compromise was not invalid based on a failure to specify whether or not an award of attorney fees to the plaintiff would include those incurred after the offer was accepted, the Court of Appeal for this district has held, declaring that fees for post-acceptance services are necessarily contemplated.
The opinion, which was not certified for publication, was filed Tuesday. In it, Justice Gail Ruderman Feuer of Div. Seven shot down various contentions as to the defectiveness of offers under Code of Civil Procedure §998 made by automaker FCA US, LLC (formerly “Fiat Chrysler Automobiles”).
FCA contends that it is entitled to costs in the amount of $69,178, which includes $66,951 in expert witness fees, because Eric Alvin Covert, who sued it under California’s “lemon law,” the Song-Beverly Consumer Warranty Act, had spurned its §998 offer to settle for $51,000 (as well as a later one for a greater sum) and wound up with a jury verdict for $48,416.
A plaintiff who spurns a §998 offer and fails to obtain a better result is generally subject to the statute’s cost-shifting provision. However, Los Angeles Judge Michelle Williams Court taxed its costs in total, finding the $51,000 offer to have been defective, and granted Covert $196,289 in attorney fees, pursuant to Civil Code §1794, a part of the Song-Beverly Act.
Superior Court Order
Court said in her Nov. 26, 2019 order:
“Defendant served its Offer to Compromise on October 5, 2016, in which it offered to settle the case for $51,000 and return of the subject vehicle, plus reasonable attorney fees and costs. Plaintiff objected to this offer on the ground that it was vague, ambiguous and uncertain, did not address Plaintiff’s entitlement to prejudgment or postjudgment interest, did not specify whether it would require Plaintiff to sign a separate release, did not include a provision concerning good faith settlement, and was unreasonable. The court sustains these objections and grants plaintiff’s motion to tax costs in its entirety.”
In her opinion contradicting that decision, Feuer said that the 2016 offer was valid, as was a Jan. 5, 2018 offer to settle for $145,000. However, she pointed out:
“Once the offeror shows the section 998 offer is valid, the burden shifts to the offeree to show the offer was not made in good faith.”
The case was remanded to the Superior Court for a determination as to whether the $51,000 offer was made in good faith inasmuch as it was sent only 63 days after the complaint was filed. Covert maintains that he was unable to assess at that point, given the lack of discovery, whether the offer was a reasonable one.
Feuer disagreed with Court’s assessment that there is merit to the plaintiff’s contention that the offers to compensate him for “attorneys’ fees based on actual time” expended was unclear as to whether this would include post-acceptance fees. He protested that if he were saddled with the obligation to pay the fees relating to “post-offer clarification, enforcement of the offer, or any appeals or writs following rulings related to any of the foregoing,” the fees could “essentially eviscerate” the settlement payment.
“Covert’s objection lacks merit,” the justice wrote, explaining:
“The payment provision of the section 998 offers expressly incorporated Civil Code section 1794, subdivision (d), which provides, ‘If the buyer prevails in an action under this section, the buyer shall be allowed by the court to recover as part of the judgment a sum equal to the aggregate amount of costs and expenses, including attorney’s fees based on actual time expended, determined by the court to have been reasonably incurred by the buyer in connection with the commencement and prosecution of such action.’ Covert has provided no authority for the proposition that post-offer attorneys’ fees cannot be recovered in a motion under Civil Code section 1794, subdivision (d), as fees incurred in the ‘prosecution of [the] action.’ Covert’s entitlement to fees would end only when prosecution of the action ends upon dismissal.”
Covert also argued that the offers were uncertain because they did not address whether pre-judgment or post-judgment interest was included.
As to pre-judgment interest (which Court denied), Feuer said:
“Covert’s complaint included a prayer for damages, including prejudgment interest, and thus in evaluating the section 998 offer, Covert necessarily had to weigh the amount offered against his potential trial recovery, including prejudgment interest….That Covert’s right to prejudgment interest was questionable may have made it difficult for him to estimate his likely trial recovery, but no more so than the amount of damages he was likely to recover at trial.” With respect to post-judgment interest, she commented: “Covert’s objection that the section 998 offers did not address postjudgment interest borders on the frivolous. The offers provided ‘that a judgment will not be entered,’ and thus, there would be no unpaid judgment on which interest would be owed.”
Feuer rebuffed Covert’s contention that the offers were faulty because they did not specify whether FCA would require, in addition to an acceptance, the execution of a separate settlement agreement, saying:
“The section 998 offers provided for payment ‘in exchange for dismissal of this action with prejudice in its entirety and return of the vehicle that is the subject of this lawsuit.’ This language did not create a likelihood that Covert would have to provide a release any broader than the lawsuit that was being dismissed.”
Although Court, in her order, accepted Covert’s proposition that a §998 offer is infirm if it does “not include a provision concerning good faith settlement,” Feuer noted:
“Covert fails to address in his respondent’s brief why the lack of a good faith offer component rendered the offers uncertain, or what such a component would entail. We reject Covert’s position as lacking support.”
Addressing Covert’s assertion that the failure to include a payment date in the offers rendered them infirm, Feuer countered that “the Courts of Appeal have repeatedly upheld the validity of section 998 offers without a payment date,” adding: “[U]nder FCA’s section 998 offers, Covert controlled when he would dismiss the action, and he was entitled to recover his attorneys’ fees and costs reasonably incurred in prosecuting the action. These provisions created a significant disincentive for FCA to engage in gamesmanship in delaying payment.”
The absence of a specification of a date by which the vehicle was to be surrendered also did not invalidate the §998 offers, Feuer said, remarking:
“[T]he lack of a vehicle surrender date did not prevent Covert from evaluating the value of the offers, even assuming some delay in payment, against his trial expectations.”
With the validity of both the 2016 and 2018 offers being established by the opinion, the only question left open, to be determined on remand, is whether the 2016 offer was made in good faith, in light of the timing. The dispositional paragraph of Feuer’s opinion reads:
“We reverse the trial court’s November 26, 2019 orders granting Covert’s motion to tax costs, granting in part Covert’s motion for attorneys’ fees, and denying FCA’s motion to tax costs. We remand for the court to consider whether FCA’s first section 998 offer was premature and therefore not a good faith offer under section 998. If the court finds the offer was a good faith offer, it shall award FCA its costs, including expert witness fees, reasonably incurred after the first offer was served and deny Covert his attorneys’ fees and costs. If the court finds the first offer was not made in good faith, it shall award Covert his attorneys’ fees and costs reasonably incurred prior to service of the second section 998 offer and award FCA its costs, including expert witness fees, reasonably incurred after the second offer was served. The parties are to bear their own costs on appeal.”
The case is Covert v. FCA USA, LLC, B303663.
Lisa Perrochet and John A. Taylor Jr. of the appellate law firm of Horvitz & Levy teamed with Barry R. Schirm and Ryan K. Marden of Hawkins Parnell & Young in presenting the position of FCA. Representing Covert were Steve Mikhov, Roger Kirnos, and Amy Morse of the Knight Law Group, Edward O. Lear and Rizza Gonzales of the Century Law Group, and Cynthia E. Tobisman of the appellate firm of Greines, Martin, Stein & Richland.
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