998 OFFER INVALID FOR BEING TOO EARLY AND “GAMING THE SYSTEM”
Licudine v. Cedars-Sinai Medical Center (2019) 30 Cal.App.5th 918 provides a tutorial on early C.C.P. sec. 998 offers and, to a lesser degree, when such offers “game the system.” In Licudine, plaintiff’s minimally invasive surgery for gallbladder removal became invasive when the surgeon nicked a vein inside her abdominal cavity. Nineteen days after service of her three-page complaint on Cedars et al. for medical malpractice, she served a section 998 offer for $249,999.99, plus legal costs. Cedars objected to the 998 offer sixteen days later because it was “too soon for it to make any determination as to whether plaintiff’s [998 offer] was reasonable.” Cedars did not accept the offer prior to its expiration. A jury awarded plaintiff $5,344,557 in economic damages and $2,274,900 for noneconomic damages. The trial court reduced the noneconomic damages to $250,000, yielding a total verdict of $5,594,557. Plaintiff then filed a memorandum of costs seeking, among other things, $2,335,929.20 in prejudgment interest from the date of her 998 offer to the date of judgment. Cedars moved to strike plaintiff’s prejudgment interest request, arguing that her 998 offer was “invalid” because it was “made so early in the proceedings.” The trial court struck plaintiff’s request for prejudgment interest because it was “premature” since Cedars had not “ha[d] an adequate opportunity to evaluate the damages … at the time of the 998 offer.”
The appellate court affirmed the trial court’s order striking plaintiff’s request for prejudgment interest because the $249,999.99 sec. 998 offer was not valid. “A 998 offer is valid only if it is made in ‘good faith.’ (Citations.) A 998 offer is made in good faith only if the offer is ‘realistically reasonable under the circumstances of the particular case’ (citation) – that is, if the offer ‘carr[ies] with it some reasonable prospect of acceptance’ (Citation).” (Id. at p. 924.)
Stop reading here if Lincudine’s holding that section 998 offers can be invalid if issued too early is a sufficient warning. On the other hand, the opinion’s detailed reasoning, which follows, is particularly instructive.
Lincudine explained that the process of determining whether a 998 offer has a reasonable prospect of acceptance “is a function of two considerations, both to be evaluated in light of the circumstances ‘at the time of the offer’ and ‘not by virtue of hindsight.’ (Citations.) First, was the 998 offer within the ‘range of reasonably possible results’ at trial, considering all of the information the offeror knew or reasonably should have known? (Citation.) Second, did the offeror know that the offeree had sufficient information, based on what the offeree knew or reasonably should have known, to assess whether the ‘offer [was] a reasonable one,’ such that the offeree had a ‘fair opportunity to intelligently evaluate the offer?’” (Citations.) (Id. at 924-925.) Licudine then elaborated that “(T)hree factors are especially pertinent (in deciding whether the offeree had enough facts to evaluate the offer): (1) how far into the litigation the 998 offer was made; (2) the information available to the offeree prior to the 998 offer’s expiration; and (3) whether the offeree let the offeror know it lacked sufficient information to evaluate the offer, and how the offeror responded.” (Id. at p. 924.) As to the first factor, “Although section 998 fixes no ‘minimum period that must elapse following commencement of suit for service of a valid 998 offer’ (citation), a litigant receiving a 998 offer at the time a lawsuit is filed or soon thereafter is, as a general matter, less likely to have sufficient information upon which to evaluate that offer.” (Id. at p. 925.) In assessing the second factor, “the offeree needs information bearing on the issue of liability as well as on the amount of damages.” (Ibid.) In that regard, “Information may be obtained (1) by virtue of prior litigation between the parties (citation); (2) through prelitigation exchanges between the parties (citations); (3) through postcomplaint discovery in the case (citation); or (4) by virtue of a preexisting relationship between the parties that yields a “free flow of information.” (Citation.) ¶ As to the third factor, “An offeree may alert the offeror by (1) requesting discovery, either formally or informally (citation); (2) asking for an extension of the 998 offer’s deadline (citation); or (3) otherwise objecting to the offer (Citation.) If, after hearing the offeree’s concerns, the offeror’s response is less than forthcoming, “such obstinacy” is “potent evidence that [the] offer was neither reasonable nor made in good faith.” (Citations.) (Id. at p. 926; the opinion noted “that although section 998’s text does not itself condition validity upon an offeror’s good faith, such a requirement is necessarily implied by the statute’s purpose.” [Id. at p. 924.].)
The appellate court found that Cedars had very little meaningful, available information about liability and damages before the 998 offer expired. (Id. at p. 927-928.)
Licudine also explains that offerers “game the system” “by making … offers they can reasonably expect the [offeree] will refuse, allowing them ‘to benefit from a no-risk offer made for the sole purpose of later recovering large expert witness fees” and, if they are plaintiffs, prejudgment interest. (Citations.) The good faith requirement prevents this perversion of section 998.” (Id. at p. 925.) Licudine concluded that a $249,999.99 section 998 offer in the facts before it “raises more than a specter of gamesmanship, which … is antithetical to the legitimate operation of section 998.” (Id. at p. 928.)
Judge Michael D. Marcus (Ret.)
ADR Services, Inc.
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Los Angeles, California 90067