Mediation Message No. 43

THE WORDING OF A C.C.P. SECTION 998 OFFER TO COMPROMISE

Code of Civil Procedure section 998 offers to compromise are an integral part of the settlement process. Engle v. Copenbarger and Copenbarger (2007) 157 Cal.App.4th 165 offers a well-advised cautionary tale as to how such offers should be worded.

In that matter, Engle, a former legal assistant for Copenbarger and Copenbarger (Copenbarger), sued it for both statutory discrimination (sex harassment, sex discrimination and retaliation) and tort claims. Thereafter, Copenbarger filed a 998 offer to settle for $35,000, which provided in material part, “That the judgment … shall be in exchange for a release and discharge of any and all claims of whatever nature (substantive and procedural) which the plaintiff may have against the defendants.” Engle accepted the offer the next day.

The release that Copenbarger asked Engle to sign differed from the offer she had accepted. It referred to the relief she had sought in the complaint, which included statutory attorney’s fees, but also provided that she released Copenbarger from “any and all relief sought by virtue of Plaintiff’s Complaint as specified in the prayer or otherwise.” When Engle refused to sign the release, Copenbarger’s unsuccessfully sought to block entry of judgment and judgment for Engle was entered according to the terms of the offer.

Engle then moved, as the prevailing party, for attorney’s fees and costs. On appeal from the trial court’s denial of that motion, the appellate court held that Engle was entitled to those fees because the 998 offer to compromise had not expressly excluded them. The court noted that:

Where a section 998 offer is silent on costs and fees, the prevailing party is entitled to costs and, if authorized by statute or contract, fees. ¶ The rule is that a section 998 offer to compromise excludes fees only if it says so expressly. It is a bright-line rule: The only question is does the offer address fees or not? We are unaware of any case that suggest a broadly-worded release clause in a section 998 offer can serve to waive a prevailing party’s fee claim, and none are cited by Copenbarger. If Copenbarger meant the offer to include Engle’s attorney fees, it was a simple enough matter to spell out that condition. Certainly it was simple enough that the firm had figured it out by the next day, when it tendered a release that included fees. Id. at p. 169.

Copenbarger also contended that Engle was not entitled to fees because the statute of limitations barred recovery as to the discrimination claim and, secondly, the trial judge had properly exercised his discretion in denying the fees since there was no way to discern whether Engle had won on the discrimination or tort claims. As to the first contention, the appellate court held that “the time to raise a statute of limitations defense was prior to settlement, not after. Having elected to settle, Copenbarger cannot now complain that most of the claims against it were time-barred.” (Id. at p. 170.) Regarding the second point, the court stated that “Since sexual misconduct was the only factual basis for the action, and the facts alleged were sufficient to make out the statutory discrimination claims set out in the complaint, Engle prevailed on those claims when she obtained a favorable settlement. There is no doubt that Engle received $35,000 on the discrimination claims, and there was no leeway-or discretion-to find otherwise.” (Ibid.)

Engle v. Copenbarger and Copenbarger concluded that the trial court’s denial of the fees was an abuse of discretion and thus remanded the matter with directions that the fee motion be reconsidered “in light of the opinion.” (Id. at p. 171.)

Judge Michael D. Marcus (Ret.)
ADR Services, Inc.
1900 Avenue of the Stars, Suite 250
Los Angeles, California 90067
(310) 201-0010

Copyright Michael D. Marcus, January 2008

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