What constitutes a reasonable offer to compromise under California CCP section 998?

January 25, 2013
By Justice Steven Vartabedian (Ret.) on January 25, 2013 6:00 AM |

California CCP section 998.jpgEven in cases not involving an award of attorney fees, this question concerns significant financial consequences, in addition to awarded damages, to a non-prevailing party--not uncommonly to the tune of half a million dollars. Such was the case in Whatley-Miller v. Cooper (published opinion filed January 15, 2013, No. B237335).

Plaintiffs, the survivors of Thomas Miller, were awarded a medical malpractice verdict against defendant, a medical doctor, in the total sum of approximately 1.2 million dollars. The history of this litigation included the filing of the complaint on February 28, 2008; defendant's receipt of discovery responses, including verification of decedent's income and other financial impacts to the survivors, from plaintiffs on June 11, 2008; and plaintiffs' offer to compromise for $950,000 (each side to pay its own costs) made pursuant to Code of Civil Procedure section 998, dated June 20, 2008 (only nine days after defendant received plaintiffs' discovery response). The offer was acceptable for 30 days, after which it would be withdrawn; should plaintiffs receive a more favorable award than the offer, in addition to costs awardable under section 998, plaintiffs would be entitled to interest at the rate of 10% per annum calculated from the date of the offer (Code of Civil Procedure section 3291). Defendant neither responded nor requested more time to respond to this offer. A first trial in Los Angeles Superior Court resulted in a hung jury with respect to the claims against Dr. Cooper, followed by a plaintiffs' verdict against him.in the second trial.

After post-trial motions, the judgment was amended to reflect a principal award of $1,198,907. Plaintiffs' filed a memorandum of costs totaling $530,316, including $108,191 for expert fees and $411,100 as prejudgment interest from the date of the compromise offer. Defendant moved to strike and tax these items, in part arguing the 998 offer was extinguished after the first trial and the offer was neither made in good faith nor in compliance with procedural requirements. The trial court found the mistrial at the first trial did not affect the applicability of the offer of compromise, that the offer was reasonable and discovery produced prior to the offer gave defendant an adequate basis to respond, and the offer was not procedurally infirm. The Court of Appeal, Second Appellate District, Division Eight, affirmed.

Concerning whether the offer was reasonably made in good faith, the court observed, "depends upon the information available to the parties as of the date the offer was served." (See Westamerica Bank v. MBG Industries, Inc. (2007) 158 Cal.App.4th 109, 130.) Was the offer a reasonable prediction within the range of possible results after trial? If so, were reasons known by plaintiff to predict such a result known or reasonably should have been known to defendant?

Defendant claimed the offer was not reasonable because he was not afforded sufficient time to investigate liability and damages of this complex matter before the offer expired. But the Court of Appeal was not buying any of this. The fact the offer came a mere two months after defendant filed his answer was not dispositive. Significant discovery had been produced, especially regarding potential damages, and the offer was within Dr. Cooper's insurance policy limit. There were no special circumstances to show that at this early juncture of the case defendant's counsel lacked access to information to allow a reasonable opportunity to evaluate the case; it was especially telling that defendant failed to respond to the offer, request more information or request more time to respond. The court thus presumed the defendant had adequate information as to liability and damages in order to evaluate the offer, and chose not to respond. The offer thus met both prongs of the reasonableness test and was enforceable against defendant under section 998.

In my past experience as a judge and currently as a neutral, I have too often come across parties that don't give serious enough attention to 998 offers. I commonly hear the expression "it's too early" to take the offer seriously. The Whately-Miller opinion emphasizes it may not be too early to make a serious evaluation, especially if any discovery has been done. If there truly is not an adequate basis to evaluate a case, counsel should at least document a request for more time to evaluate the offer, rather than simply ignore it. Parties will not get much sympathy from the court if they view settlement offers too lightly, given the clogged court dockets. On the other side, parties should consider making 998 offers as early as might be reasonable to force the other side's hand.

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