Posts Tagged ‘offers to compromise’

Mediation Message No. 97

MICHAEL D. MARCUS’S MEDIATION MESSAGE NO. 97

ACCEPTANCE LANGUAGE IN A SECTION 998 OFFER TO COMPROMISE

Rouland v. Pacific Specialty Ins. Co. (2013) 220 Cal.App.4th 280 clarified the required wording for acceptance of a Code of Civil Procedure section 998 offer to compromise. In Rouland, defendant Pacific Specialty offered to pay the two plaintiffs $5,000 and $30,000 in exchange for general releases and dismissals with prejudice and then stated, “If you accept this offer, please file an Offer and Notice of Acceptance in the above-entitled action prior to trial or within thirty (30) days after the offer is made.” (In relevant part, section 998, subd. (b) provides “The written offer shall include … a  provision that allows the accepting party to indicate acceptance of the offer by signing a statement that the offer is accepted. 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.”) The Roulands did not accept the offers. After a defense verdict, Pacific Specialty moved to recover its expert witness fees. In opposing the motion, the Roulands contended that Pacific Specialty’s offer to compromise did not satisfy section 998’s language because it had no line for them to accept the offers and had no language stating that they shall accept the offers by signing a statement that the offers are accepted.

The trial court granted the Roulands’ motion to tax Pacific Specialty’s expert fees since the section 998 demand lacked a signature space for the Rouland’s acceptance. The Court of Appeal reversed the trial court’s order because the statute does not require that “an offer to include either a line for the party to sign acknowledging its acceptance or any specific language stating the party must accept the offer by signing an acceptance statement. … The offer’s acceptance provision simply must specify the manner in which the offer is to be accepted (citations), and the only statutory requirements for a valid acceptance mandate a written acceptance signed by the accepting party or its counsel. https://advance.lexis.com/GoToContentView?requestid=06077bc1-6ccf-c5f0-ae46-a9b6f88d77be&crid=18ee76e8-8a10-45c7-96be-c9dcc7e3ede0” (Id. at p. 288.) The Court found Pacific Specialty’s offers satisfied section 998’s language “because they informed the Roulands how to accept the offers (file an “Offer and Notice of Acceptance” with the trial court).” (Ibid.) Moreover, although the offers did not expressly require a written acceptance signed by the Roulands’ counsel, “that requirement is implicit in the offers’ identified means of acceptance because any acceptance the Roulands sought to file with the court necessarily would have to be in writing and signed by their counsel.” (Ibid.)

MDM’s helpful hint: While Rouland provides that the acceptance language in a section 998 offer to compromise need not strictly comply with the terms of the statute, do not tempt an adverse ruling by too loosely applying those terms. Instead, attempt to strictly adhere to the statute’s language and use Rouland if, for some reason, opposing counsel believe, nonetheless, that the statute has not been followed.

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, April 2014

Mediation Message No. 88

MICHAEL D. MARCUS’S MEDIATION MESSAGE NO. 88

MULTIPLE SECTION 998 SETTLEMENT OFFERS

In recently decided Martinez v. Brownco Construction Co. (June 10, 2013) 56 Cal.4th 1014, the California Supreme Court held that when a plaintiff makes two successive Code of Civil Procedure section 998 offers, the defendant does not accept either offer and fails to obtain a judgment more favorable than either offer, allowing recovery of expert fees incurred from the date of the first offer is consistent with section 998‘s language and best promotes the statute’s purpose to encourage settlements.

The plaintiffs in Martinez served two section 998 settlement offers. In 2007, Mr. Martinez offered to compromise his negligence claim for $4.75 million and Mrs. Martinez offered to compromise her loss of consortium claim for $250,000. Brownco neither accepted nor rejected these offers within the statutory 30-day period. Just before the 2010 trial, Mr. Martinez and Mrs. Martinez served reduced compromise offers of $1.5 million and $100,000, respectively. Again, Brownco did not respond to these offers. At trial, Mr. Martinez obtained a judgment of $1,646,674 and Mrs. Martinez obtained a $250,000 judgment. Brownco sought an order disallowing Mrs. Martinez’s recovery of $188,536.86 in expert fees incurred after her first and before her second settlement offer. The trial court sided with Brownco and entered an order taxing the disputed expert fees. It found that the 2010 offer was the only effective one and that all prior offers had been extinguished. The Court of Appeal reversed the trial court and ordered a remand to the trial court for its discretionary determination of Mrs. Martinez’s entitlement to expert witness fees. The Supreme Court affirmed that judgment.

Before the Martinez ruling, Wilson v. Wal-Mart Stores, Inc. (1999) 72 Cal.App.4th 382 (which the trial court in Martinez relied on) and Distefano v. Hall (1968) 263 Cal.App.2d 380 had held, under the “last offer” rationale, that when a party makes successive unrevoked and unaccepted section 998 offers, the last offer is the only operative one. In concluding that the last 998 offer does not invalidate an earlier one, Martinez held it unnecessary to find the last offer rule or the first offer rule controlling in every circumstance. “Indeed, for present purposes we may assume the propriety of applying the last offer rule where, as in Distefano and Wilson, an offeree obtains a judgment or award less favorable than a first section 998 offer but more favorable than the later offer.”

Martinez examined the policy behind section 998 offers and found that allowing recovery from the first offer furthers the goals of the statute. It explained, “the Legislature sought to encourage settlement by affording the benefit of enhanced costs to parties who make reasonable settlement offers and imposing the burden of those costs on offerees who fail to obtain a result better than they could have achieved by accepting such offers. (Citation.) This purpose would be more fully promoted if the statutory benefits and burdens were to operate whenever the judgment or award is not more favorable than any of the statutory offers made. Conversely, if the statutory benefits and burdens were to run only from the date of the last offer in circumstances such as these, plaintiffs may be deterred from making early offers or from later adjusting their demands. This would inhibit settlement opportunities and be at direct odds with our prior recognition that ‘[t]he more offers that are made, the more likely the chance for settlement.’” The Court also found that the making of more settlement offers promotes the public policy of compensating injured parties.

Although defendants are not perceived ordinarily as “injured parties,” the public policy of compensating injured parties was not the principal focal point of the Martinez decision. Therefore, while Martinez held only that plaintiffs may take advantage of either their first or second 998 offers, allowing defendants to also recover their costs in such situations should be permitted since that result is also consistent with section 998‘s language and promotes the statutory purpose to encourage settlements.

Finally, Martinez reminded that, ultimately, the trial court, pursuant to statute, still retains discretion to order payment of expert witness costs incurred from the date of a first offer when a plaintiff serves two unaccepted and unrevoked statutory offers, and the defendant fails to obtain a judgment more favorable than either offer. And, in this exercise of discretion, Martinez also provided that the trial court can address any concerns it may have when considering what post-offer expert fees to award if a successful section 998 offer “results in mischief or confusion, or any gamesmanship appears.”

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 June 2013

Mediation Message No. 71

MICHAEL MARCUS’S MEDIATION MESSAGE NO. 71

THE LOCATION OF THE TRIAL, SECTION 998 OFFERS AND DAMAGES

Last month, I discussed a study in the Journal of Empirical Legal Studies which found that there is a high incidence of decision-making error by both plaintiffs and defendants in rejecting settlement proposals and going to trial or arbitration. Other interesting findings in that study are the impact of the type of trial and statutory C.C.P. sec. 998 offers on decision-making error and the tendency of juries to more likely award present rather than future and punitive damages.
Jury trials, court trials and arbitrations: Defendants committed substantially less decision error in jury trials than in court trials (22.1 v. 42.6 percent) whereas plaintiff error was considerably higher in jury trials than court trials (64.0 v. 42.6 percent). Thus, the chance of a plaintiff obtaining a higher award from a jury is offset by the risk that the jury will find for the defendant. Surprisingly, plaintiffs were much better off arbitrating their cases than trying them to a jury or judge (compare the 28.9 percent arbitration rate to that of 42.6 and 64.0 percent for court and jury trials) whereas defendants were slightly better off trying their cases before a court as opposed to an arbitrator (45.4 v. 42.6 percent for court trials).
Section 998 offers: The study found that the existence of a statutory offer by either side reduced decision error and the mean cost of error for the party making the offer but increased the error and costs for the recipient party. The study also found slight decreases in error and costs for plaintiffs when both sides served 998 offers but a substantial decrease in mean cost ($294,500 as compared to $1,299,400) for defendants when joint offers had been made. Although the purpose of 998 offers is to encourage settlements by imposing financial penalties on parties who take unreasonable settlement positions, the study thought that such offers may actually induce risk taking. The authors acknowledged that their findings are somewhat skewed because the data did not show how many cases settled because of 998 offers.
Damages: The study confirmed the anecdotal view that jurors and judges are reluctant to award both damages actually incurred and those yet to be sustained. Plaintiffs seeking only future damages faired poorly, recovering a net award 32.4 percent of the time. In contrast, they prevailed 45.2 percent when seeking only current damages. Plaintiffs seeking both present and future damages recovered a net award 47.9 percent of the time. Punitive damages claims also had an impact with juries less likely to award general or special damages when a punitive damages claim had been made.

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, August 2011

Please visit my website at www.marcusmediation.com for information about my mediation and arbitration background and experience. Copies of my previous Mediation Messages and Arbitration Insights are available by going to the articles link on the website.

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