Woodland Hills personal injury lawyer Barry P. Goldberg is a frequent commentator on the C.C.P. § 998 Offer to Compromise process which allows a party in litigation to “reverse” certain costs if that party “beats” its offer at trial. In fact, Mr. Goldberg serves an Offer to Compromise in every case his office has in litigation. (Including in Uninsured Motorist and Underinsured Motorist Arbitrations!) There is simply no downside to the process and it ultimately it encourages the parties to seriously consider settlement. In a new case Gonzalez v. Lew (2nd. Dist., Feb. 1, 2018), the Court of Appeal has thrown some confusion into the mix by enforcing the reverse of costs in a joint Offer to Compromise.
Barry P. Goldberg has authored several articles warning litigators to pair down offers to compromise in cases involving multiple parties so that a single plaintiff or defendant can accept the offer from a single defendant or plaintiff. There are many reasons for this recommended simplicity which will not be addressed in detail in this article. However, suffice it to say that the fundamental fairness of being able to accept an offer from one party and not another is a critical distinction that creates clarity when it comes to reversing costs of a lawsuit.
A 998 Offer to Compromise is meant to Encourage Pretrial Settlement.
“Section 998 is intended to encourage the settlement of lawsuits prior to trial by penalizing a party who fails to accept a reasonable settlement offer. (T.M. Cobb Co. v. Superior Court (1984) 36 Cal.3d 273, 280.) “To effectuate this policy, section 998 provides ‘a strong financial disincentive to a party—whether it be a plaintiff or a defendant—who fails to achieve a better result than that party could have achieved by accepting his or her opponent’s settlement offer.’ [Citation.] At the same time, the potential for statutory recovery of expert witness fees and other costs provides parties ‘a financial incentive to make reasonable settlement offers.’ [Citation.] Section 998 aims to avoid the time delays and economic waste associated with trials and to reduce the number of meritless lawsuits. [Citations.]” (Martinez, supra, 56 Cal.4th at p. 1019.)”
Unallocated Joint Settlement Offers Should Not be Permissible under 998.
Unallocated offers from a defendant to multiple plaintiffs with separate claims where the offer is conditioned on acceptance by all are invalid. (Meissner v. Paulson (1989) 212 Cal.App.3d 785.) Such settlement offers are invalid under section 998 because, as a practical matter party receiving a joint unallocated offer may not be able to prove, as section 998 requires, that he or she obtained a more favorable result at trial—and therefore should not be subject to its cost-shifting provision. Further, the defendant’s offer, to be accepted, required both plaintiffs to consent to settlement and determine between themselves the apportionment of the settlement. (Id. At 790-91.)
Applying section 998 to unallocated joint offers “would introduce great uncertainty into this area of the law. Plaintiffs would be required to second-guess all joint offers to determine whether a failure to reach agreement with coplaintiffs would cause a risk of section 998 costs against them. We believe the Legislature did not intend to place this burden on offerees. To enforce the purpose of section 998, we find as a matter of law only an offer made to a single plaintiff, without need for allocation or acceptance by other plaintiffs, qualifies as a valid offer under section 998.” (Id.)
Courts have applied the same reasoning where a plaintiff makes an unallocated settlement offer to multiple defendants with potentially varying liability. (Taing v. Johnson Scaffolding Co. (1992) 9 Cal.App.4th 579.)
In the new Gonzalez v. Lew case, the court cited several examples where settlement offers made to multiple parties with a unity of interests were held to be valid and justified a reversal of substantial trial costs. The defendants in the Gonzalez v. Lew case cited, among other cases, the case of Hurlbut v. Sonora Community Hospital (1989) 207 Cal.App.3d 388. In Hurlbut, a personal injury case arising out of injuries sustained by an infant during birth, the child and both parents sued the hospital where the birth took place. The parents sought emotional distress damages and the child sought damages relating to her physical injuries. (Hurlbut, supra, 207 Cal.App.3d at p. 393.) Prior to trial, the three plaintiffs made a joint, unallocated settlement offer to the hospital proposing two alternatives, including structured settlement options.
The trial court in Hurlbut granted plaintiffs’ request for expert witness fees based on the settlement offer. The Court of Appeal reversed the award, and stated that the joint nature of the settlement offer “precludes a determination of whether each plaintiff received a judgment more favorable than the offer.” (Hurlbut, supra, 207 Cal.App.3d at p. 409, original emphasis.)
The Court in the new Gonzalez v. Lew case essentially disagreed with the Hurlbut reasoning. Without belaboring the Court’s extended analysis, it essentially held that where there exists a “unity of interests,” joint offers to multiple parties (and vice versa) may be permissible; as it was in the Gonzalez v. Lew case. The Court basically disregarded the statute: Section 998 applies to offers made by “a plaintiff” or “a defendant.”
The Overarching Policies Favor Encouraging Reasonable Settlements.
It is true that the overarching policies are in favor of encouraging reasonable settlements and compensating injured parties. However, this new case may inject uncertainty into the 998 process. This could encourage gamesmanship and other actions incompatible with the goal of resolving, rather than creating, legal disputes. The Gonzalez v. Lew case asserted that if plaintiffs with disparate claims want to make a global settlement offer which would put an end to the litigation at hand, they should be encouraged to do so. To that argument, who would disagree. However, it appears to be inconsistent with the statute and most case law.
If the Legislature wants to revise the statute the way the Gonzalez v. Lew court held, it would seem to be a good idea. In the meantime, parties to litigation will be taking a chance by serving joint settlement offers under 998. This will necessarily insert gamesmanship into the process rather than creating certainty.