The Fourth Circuit Court of Appeals recently held that the trial court erred when it failed to consider Defendants pre-offer fees/costs as part of Defendant’s CCP 998 Offer, which was silent as to costs.

Facts

Restaurant worker Samantha Martinez (Plaintiff) sued former em­ployer Eatlite One, Inc. (Defendant) for employment discrimination and related causes of action. Defendant made a Code Civ. Proc. §998 settlement offer in the amount of $12,001, which was silent as to whether pre-offer costs and fees were included.  Plaintiff rejected the offer. The case proceeded to trial and the jury found in fa­vor of Plaintiff on all claims and awarded Plaintiff $11,490 in damages. The parties filed competing memoranda of costs and motions to strike or tax each other’s costs. Plaintiff also filed a motion for attorney fees, which defendant opposed.

The trial court granted Plaintiff’s motion to strike Defendant’s costs and denied Defendant’s motion to strike or tax Plaintiff’s costs. The court also granted Plaintiff’s mo­tion for attorney fees and awarded $4,095.07 in costs and $60,000 in pre-offer and post-offer attorney fees to Plaintiff.

Analysis

Code Civ. Proc., Section 998, sub­division (c)(1) provides: “If an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, the plaintiff shall not recover his or her post-offer costs and shall pay the defendant’s costs from the time of the offer. In addition, … the court or arbitrator, in its discretion, may require the plaintiff to pay a reasonable sum to cover post-offer costs of the services of expert witnesses … .” To determine “whether the plaintiff obtains a more favor­able judgment, the court … shall exclude the post-offer costs.” (Id., subd. (c)(2)(A).)

Here, the trial court added the amount of all fees/costs incurred by Plaintiff (pre-offer) to the jury’s award and determined that this combined amount (amount of judgment plus pre-offer fees/costs) exceeded the amount of defendant’s 998 offer. The trial court reasoned that Defendants 998 offer “was silent as to excluding costs or attorneys’ fees [so] pre-offer costs, including attorneys’ fees are added to the amount of the verdict for the purposes of deciding whether the ‘judgment’ was greater than the … 998 offer.”  The court entered an amended judgment including the fees/costs awarded to Plaintiff.

Although Defendant’s 998 offer was silent as to whether it included fees/costs, the Court of Appeal determined that section 998 language specifying that post-offer costs are excluded for purposes of determining whether Plaintiff obtained a more favorable judgment necessarily implies that pre-offer costs are included.

The Court relied on Engle v. Copenbarger & Copenbarger, LLP (2007) 157 Cal.App.4th 165 to support its finding that the trial court should have considered whether Plaintiff’s pre-offer fees/costs increased the value of the 998 offer—not only the value of Plaintiff’s judgment.  In Engle, the Court held that a party that accepts a 998 offer is entitled to fees/costs unless they are excluded by the offer.  Thus, under Engle “the value of defendant’s 998 offer, which was silent on costs, included $12,001 plus plaintiff’s pre-offer costs and fees defendant would have been liable for if plaintiff had accepted the offer.”

The court determined that because the pre-offer fees/costs should be added to both Plaintiff’s jury award and Defendant’s 998 offer, which was silent as to costs, Plaintiff’s judgment was not greater than Defendant’s offer.

So calculated, the $11,490 jury award was less than Defendant’s §998 offer of $12,001. Because Plaintiff did not obtain a more favorable judgment after trial, the trial court erred in awarding post-offer costs and fees to Plaintiff and in denying post-offer costs to Defendant.

Conclusion

At the end of its opinion the court of appeal provided that it believes the bench and bar would be well served if the Leg­islature amended section 998 to clarify how costs and fees should be addressed in a 998 offer. To be cautious, any CCP 998 offer should specifically state whether fees and costs are included.

Samantha Martinez v. Eatlite One, Inc., C.A. 4th; October 3, 2018; G055096  

Douglas R. Livingston joined the firm in 2007 and has over 23 years of experience in the areas of Personal Injury, Products Liability, Construction Defect, and Real Estate law (including Landlord/Tenant issues).