Raymond Martinez, et al. v. Brownco Construction Company, Inc.
Filed June 10, 2013
California Code of Civil Procedure Section 998 provides that if a settlement offer made by a plaintiff is not accepted, and the defendant fails to obtain a more favorable judgment or award in any action or proceeding, the court or arbitrator, in its discretion, may require the defendant to pay a reasonable sum to cover post-offer costs of the services of expert witnesses. The terms of section 998 are silent as to the effect of a party’s multiple offers. In Martinez, the California Supreme Court considered whether a later offer extinguishes a previous offer for the purposes of section 998’s cost-shifting provision. The Court held that where a plaintiff makes two successive statutory offers, and the defendant fails to obtain a judgment more favorable than either offer, the plaintiff is allowed to recover expert fees incurred from the date of the first offer.
Plaintiffs Raymond Martinez and his wife, Gloria Martinez, sued defendant Brownco Construction Company, Inc. for damages arising out of an electrical explosion that severely injured Mr. Martinez. Mrs. Martinez offered to compromise her loss of consortium claim for $250,000 in August 2007, and later reduced her demand to $100,000 in February 2010. Brownco neither rejected nor accepted these offers within the statutory 30 day period, and the case proceeded to trial. At trial, Mrs. Martinez obtained a $250,000 judgment. Brownco moved to disallow Mrs. Martinez from recovering $188,537 in expert fees incurred after her first settlement offer, but before her second offer. The trial court sided with Brownco, and the Court of Appeal reversed.
In its review, the Supreme Court of California first considered the applicability of the “last offer rule” applied by the Court of Appeal in Distefano v. Hall (1968) 263 Cal.App.2d 380 and Wilson v. Wal-Mart Stores, Inc. (1999) 72 Cal. App. 4th 382. Under the “last offer rule,” when a party makes successive unrevoked and unaccepted section 998 offers, the last such offer is the only operative offer with respect to the statutory benefits and burdens. The Court distinguished Mrs. Martinez’s case from Distefano and Wilson based on their facts. In both these cases, defendants made two offers, one which was more than the plaintiff obtained at trial, and one which was less. Unlike the offers in Distefano and Wilson, both of Mrs. Martinez’s settlement offers were lower or the same as the amount plaintiff obtained at trial.
The Court ultimately held that, where a plaintiff serves two unaccepted and unrevoked statutory offers, and the defendant fails to obtain a judgment more favorable than either offer, the trial court retains discretion to order payments of expert witness costs incurred from the date of the first offer. The Court explained that “although the statute does not definitively answer the question before us, its terms are not contravened by allowing Mrs. Martinez to recover expert fees incurred” after her first settlement offer in addition to her second settlement offer. The court reasoned that this rule would further the goals of section 998 by encouraging settlement, and promote public policy by allowing parties more flexibility to adjust their settlement demands in response to newly discovered evidence. The Court opined that this rule would not confuse the section 998 process, and, since the award of expert fees is discretionary, courts can address any concerns of “mischief or gamesmanship.”
The judgment of the Court of Appeal was affirmed, and the case was remanded to the trial court for its discretionary determination of Mrs. Martinez’s entitlement to expert fees.
The full opinion can be viewed at the California Supreme Court’s web site at:
http://www.courts.ca.gov/opinions/documents/S200944.PDF
(This article is reprinted verbatim with permission from Newsflash published by the Association of Defense Counsel of Northern California and Nevada)