The Court of Appeals for the Second Appellate District recently affirmed the trial court’s ruling that a plaintiff’s Code of Civil Procedure section 998 offer was not made in good faith where the offer was made just 19 days after service of the plaintiff’s medical malpractice complaint and five days after the defendant hospital filed its answer.

Background

A physician at defendant Cedars-Sinai Medical Center accidentally nicked a vein during gallbladder surgery on plaintiff Dionne Licudine, who was an aspiring law student.  This resulted in a more intrusive surgery, a long hospital stay, and residual abdominal complaints. Licudine subsequently sued the hospital, and at least two of the surgeons, for medical malpractice.

Nineteen days after filing her complaint and five days after Cedars answered and served Licudine with a request for statement of damages and written discovery, Licudine served Cedars with a CCP section 998 offer for $249,999.99, plus legal costs. Six days later, Cedars served Licudine with an objection to the 998 offer on the basis that it was too soon for Cedars to make a determination whether the offer was reasonable because Cedars had not had the opportunity to fully investigate the action.

Cedars did not accept the offer and the case went to trial. Licudine ultimately obtained a net verdict of $5,594,557 against Cedars, after a reduction for the statutory cap on non-economic damages. Licudine then filed a memorandum of costs, which included a request for $2,335,929.20 in prejudgment interest from the date of her 998 offer to the date of the judgment.

Trial Court

The trial court struck Licudine’s request for prejudgment interest, finding that Licudine’s 998 offer was premature because Cedars had not had an adequate opportunity to evaluate the damages in the case at the time of the offer.  Licudine argued that the trial court erred in finding that her 998 offer was invalid. She argued that she sent a letter and discovery responses the day before the offer expired.

Appeals Court

While Licudine had the burden of showing that her 998 offer was valid, Cedars had the burden of establishing that the offer was not made in good faith, the requirements of validity and good faith established by case law rather than the language of the statute. On appeal, it was Licudine’s burden to prove that the trial court had abused its discretion, which was the sole standard for review.

The appellate court opined that a CCP 998 offer is made in good faith only if it is realistically reasonable under the circumstances of the particular case, and carries with it some reasonable prospect of acceptance. That is a function of two considerations, both to be evaluated in light of the circumstances at the time of the offer: (1) was the offer within the range of reasonably possible results of trial, considering all of the information the offeror knew or reasonably should have known; and (2) did the offeror know that the offeree had sufficient information, based on what the offeree knew or reasonably should have known, to assess whether the offer was a reasonable one, such that the offeree had a fair opportunity to intelligently evaluate the offer, with information bearing on liability as well as on the amount of damages.

Factors to be considered in evaluating the good faith of the offer include (1) how far into the litigation the 998 offer was made, (2) what information bearing on the reasonableness of the 998 offer was available to the offeree prior to the offer’s expiration and (3) whether the offeree alerted the offeror that it lacked sufficient information to evaluate the offer and, if so, how the offeror responded.

The appellate court held that the trial court did not abuse its discretion in concluding that Cedars lacked sufficient information to evaluate the offer, given the short timing of the offer, Licudine’s “bare-bones” complaint and lack of pre-litigation notice, Licudine’s limited discovery responses containing only, in essense, cursory details of the issue of liability and damages. Further, Licudine never responded to Cedars’ notification of its concern that it was too soon to make any determination as to the reasonableness of Licudine’s offer.

Conclusion

The appellate court’s ruling in this case reinforces the importance of the amount and timing of a CCP 998 offer from the standpoint of the offeror, and, from the offeree’s standpoint, the absolute necessity of the offeree’s notification to the offeror that it lacks sufficient information to evaluate the offer. The case also provides substantive criteria for later evaluating the legitimacy of an offeree’s claim to have had insufficient information with which to determine the reasonableness of the offer.

Victoria Townsend joined the firm in 2018 and has experience in the areas of personal injury, products liability, construction defect, homeowners association liability, and landlord-tenant dispute.