Is plaintiff's initial statutory offer to settle extinguished regarding expert costs incurred after that offer yet before a second one, where judgment met or beat either offer?
In Martinez v. Brownco Construction Company, Inc. (published opinion file June 10, 2013) S200944, Gloria Martinez offered to compromise her loss of consortium claim concerning serious injuries suffered by her husband, co-plaintiff Raymond, via two settlement offers pursuant to California Code of Civil Procedure section 998. In August 2007, she offered by way of a demand for $250,000. She received no response from defendant during the statutory 30-day period to respond. Shortly before trial, in February 2010, she served a compromise offer in the lessened sum of $100,000. Again no response followed. At trial she obtained a $250,000 judgment.
Mrs. Martinez incurred $188,537 in expert fees in the time that intervened between the two 998 offers. The statute allows a party prevailing on a 998 offer to recover such fees incurred after the serving of the offer. She took the position that her August 2007 initial offer preceded the incurrence of these fees and sought this item as a recoverable cost. The trial court (Los Angeles County Superior Court) found, under Wilson v. Wal-Mart Stores, Inc. (1999) 72 Cal.App.4th 482, the most recent offer was the only pertinent offer--that this item of cost was incurred before that February 2010 offer, and thus the court disallowed its recovery. The Court of Appeal reversed based on the statute's language and purpose. After granting defendant's petition for review, the California Supreme Court ruled that where two statutory offers to compromise are served by plaintiff, and defendant fails to obtain a more favorable judgment than either offer, expert fees may be recovered from the date of the first offer.
The Supreme Court notes that nothing in the 998 statute prevents a plaintiff from making more than one compromise offer, and it is silent as to the effect of a later offer upon an earlier one. The policy behind the statute, to encourage settlements before trial, is effectuated by giving a strong financial disincentive to parties failing to achieve a better result than it could have achieved by accepting a statutory offer. Strict adherence to contract principles could stifle this strong policy. With this backdrop, the state high court scrutinized the so-called "last offer rule."
The last offer rule strongly dictated the results in Wilson, upon which the trial court relied, and in another Court of Appeal decision cited by defendant, Distefano v. Hall (1969) 263 Cal.App.2d 380. In those cases, where the judgment rendered fell in between the earlier and later of two 998 offers, the later offer extinguished the earlier one. Thus where the amount of judgment was less than a plaintiff's second offer, yet greater that an earlier offer, the later offer was the only one that mattered in determining the time period for which 998 costs could be awarded. (Distefano). Where the reverse occurred: the amount of judgment was greater than a plaintiff's second offer, yet less than an earlier offer, again the second one was the only one that mattered, and the effect was to entirely disallow any 998 costs (Wilson).