Los Angeles County Super. Ct. No. KC050128, Ct.App. 2/1 B226665, Elihu Berle, Judge.
Lindahl Beck, George M. Lindahl and Laura H. Huntley for Defendant and Appellant.
Baker, Burton & Lundy and Albro L. Lundy III for Plaintiffs ad Respondents.
Section 998 of the Code of Civil Procedure was enacted to encourage the settlement of lawsuits prior to trial. The statute accomplishes this purpose by providing for augmentation and withholding of the costs recoverable at trial when a party fails to achieve a result better than it could have obtained by accepting an offer of compromise or settlement conforming to statutory requirements. Among other things, section 998 provides that a defendant may be ordered to pay a reasonable sum to cover the plaintiff’s postoffer costs of expert witness services when the judgment is not more favorable than the plaintiff’s settlement offer. (§ 998, subd. (d).)
The terms of section 998 do not prohibit a party from making more than one settlement offer, but they are silent as to the effect of a party’s multiple offers. In this action, we consider whether a later offer extinguishes a previous offer for purposes of section 998’s cost-shifting provisions. We conclude that where, as here, a plaintiff makes two successive statutory offers, and the defendant 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 statutory purpose to encourage settlements.
Factual and Procedural Background
Plaintiffs Raymond Martinez and his wife, Gloria Martinez, sued defendant Brownco Construction Company, Inc. (Brownco) for damages arising out of an electrical explosion that severely injured Mr. Martinez.
Prior to trial, plaintiffs each served on Brownco two settlement offers pursuant to section 998. In August 2007, Mr. Martinez offered to compromise his negligence claim in the amount of $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. (§ 998, subd. (b)(2).) Just before trial, in February 2010, Mr. Martinez and Mrs. Martinez served reduced compromise offers of $1.5 million and $100, 000, respectively. As before, Brownco took no action.
At trial, Mr. Martinez obtained a judgment of $1, 646, 674, and Mrs. Martinez obtained a $250, 000 judgment. Plaintiffs filed a memorandum of costs seeking a total of $561, 257.14 in itemized costs. Brownco moved to tax costs, and as pertinent here sought an order disallowing Mrs. Martinez’s recovery of $188, 536.86 in expert fees incurred after her first settlement offer but before her second offer. The trial court sided with Brownco and entered an order taxing the disputed expert fees. Relying on Wilson v. Wal-Mart Stores, Inc. (1999) 72 Cal.App.4th 382 (Wilson), the court stated: “The most recently rejected offer is the only pertinent offer. All prior offers are extinguished by the subsequent offer.”
The Court of Appeal reversed, reasoning that allowance of expert fees incurred from the date of the first rejected offer is consistent with section 998’s language and purpose, and that contract principles do not compel otherwise.
We granted Brownco’s petition for review.
The question presented is this: When a plaintiff serves two unaccepted offers to compromise pursuant to section 998, and the defendant fails to obtain a judgment more favorable than either offer, does the plaintiff’s last offer extinguish the first offer for purposes of expert fee recovery under section 998? Because this issue involves the application of law to undisputed ...