APPEAL from a judgment of the Superior Court of Los Angeles County, Jane L. Johnson, Judge. Affirmed in part, reversed in part with directions. (Los Angeles County Super. Ct. No. BC362428).
The opinion of the court was delivered by: Suzukawa, J.
CERTIFIED FOR PUBLICATION
Code of Civil Procedure section 998 (section 998) provides that if a plaintiff does not accept a defendant's pretrial settlement offer and then fails to obtain a more favorable judgment at trial, the defendant may recover its costs incurred after the settlement offer. Here, defendant/appellant Staar Surgical Company (Staar) made two separate pretrial offers to settle plaintiff/respondent One Star's claims against it, but withdrew the second settlement offer before its statutory expiration. One Star did not accept either offer, and ultimately recovered less at trial than either of Staar's pretrial offers. The present appeal thus presents the following issue: If a defendant makes two separate pretrial settlement offers but withdraws the second offer, against which offer, if either, is the ultimate judgment measured for purposes of section 998's cost-shifting provisions?
We conclude, contrary to the trial court, that where a defendant withdraws a second section 998 settlement offer, the plaintiff's recovery must be measured against the defendant's first settlement offer for section 998 purposes. Thus, we reverse the judgment with directions to the trial court to calculate the postoffer costs to which Staar is entitled.
Staar manufactures and sells medical products and devices. One Star is a regional representative for medical equipment and supply companies, and it formerly represented Staar.
On November 27, 2006, One Star filed a complaint against Staar for breach of contract, intentional interference with contractual relations, intentional interference with prospective economic advantage, misappropriation of trade secrets, and unfair competition. The complaint alleged that Staar improperly withheld One Star's commissions and solicited One Star's employees and independent contractors. Staar filed a cross-complaint for breach of contract against One Star and James Greiling, One Star's principal, on April 4, 2007.
The trial court dismissed several of One Star's claims prior to trial. Thus, at trial One Star pursued only two claims: breach of written contract (for wrongfully deducting "consulting fees" from One Star's commissions from August 2003 to December 31, 2005) and common counts (for services performed from January 1, 2006 to the date of trial). Staar pursued its cross-claim for breach of written contract.
II. Staar's Section 998 Offers to Compromise
On September 12, 2007, Staar made a statutory offer to compromise pursuant to section 998. Staar offered "to allow judgment to be taken against STAAR and in favor of [One Star] in the amount of Sixty Five Thousand Dollars ($65,000)." One Star did not accept the offer, and it lapsed by operation of law 30 days later. (§ 998, subd. (b)(2).)
Staar made a second offer to compromise (captioned "Code of Civil Procedure Section 998 Second Offer to Compromise") on December 7, 2007. Staar offered "to allow judgment to be taken against STAAR and in favor of [One Star] in the amount of Sixty Five Thousand Dollars ($65,000), including the legal applicable rate of interest, commencing from October 3, 2006." While that offer was pending, Staar made a third offer to compromise (captioned "Code of Civil Procedure Section 998 Offer to Compromise by Complainant on Cross-Complaint") on December 14, 2007, offering "to allow judgment to be taken against Cross-Complainants and an award entered in favor of [Cross-Defendants] on the Cross-Complaint in the amount of Sixty Five Thousand Dollars ($65,000), including the legal applicable rate of interest, commencing from October 3, 2006."
One Star did not accept either the second or third offer to compromise. On December 20, 2007, Staar withdrew its second offer.
The case was tried to the court. The court found that Staar was authorized to subtract consulting fees from One Star's commissions, and thus it denied One Star's claim for breach of written contract. However, it found that One Star was entitled to recover some unpaid commissions, and it awarded One Star $41,400 on its common counts. As to Staar's ...