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Court of Appeal:
Settlement Offer Not Invalidated by Alternative Proposal
Fourth District’s Div. One Rejects Proposition Set Forth in Recent Decision of Los Angeles-Based Panel
By a MetNews Staff Writer
Div. One of the Fourth District Court of Appeal yesterday rejected the conclusion of this district’s Div. Two, expressed in an Oct. 10 decision, that two simultaneous offers to compromise a lawsuit, pursuant to Code of Civil Procedure §998, are generally ineffective.
Under subd. (c)(1) of §998:
“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.”
The Oct. 10 opinion and that rendered yesterday concern whether a plaintiff whose judgment was for an amount less than proposed by the defendant in one of two offers may be awarded post-offer attorney fees and costs where plaintiff’s other offer was too uncertain to be valid.
Both opinions say yes—but in the Oct. 10 decision, Justice Brian M. Hoffstadt, writing for the majority, declared that if both offers had been valid, neither could be given effect—a position with which Justice Joan K. Irion yesterday expressed disagreement.
Hoffstadt’s Opinion
Hoffstadt, in Gorobets v. Jaguar Land Rover North America, LLC, posed the question:
“Is a 998 offer sufficiently certain if it consists of two offers made at the same time to the same party and leaves it to the offeree which offer to accept[?]”
He answered, “no,” explaining:
“[W]hat makes simultaneous offers ineffective is that they are too uncertain for the trial court, at the back end, to determine whether the judgment was better or worse than the multiple valid offers.”
It is only because of the offers was deemed invalid that the award of fees and costs by Los Angeles Superior Court Judge Monica Bachner was upheld.
“Where, as here, we know at the back end that one of the two simultaneous offers is invalid, there remains a single valid offer against which the judgment can be compared,” Hoffstadt said. “The uncertainty defect is gone.”
Hypothetical Provided
In explaining why he views simultaneous §998 offers to be generally invalid, Hoffstadt set forth an example:
“If the offeree rejects the simultaneous offers to settle for a lump sum of $100,000 and a lump sum of $200,000, and if the jury returns a verdict for the offeree of $150,000, how is the court to assess whether the offeror did better or worse than the verdict? The verdict is between the $100,000 and $200,000 offers, and is accordingly worse for the offeror than one offer but better than the other. Because the offers were made at the same time, a court cannot rely on the timing of the offers to dictate which is the operative one.”
Irion countered in yesterday’s opinion:
“When faced with two simultaneous offers, a trial court can simply look at each offer separately to determine whether either of them exceeded the amount of the verdict. In the hypothetical posed by Gorobets, because the $200,000 offer exceeded the $150,000 verdict, that offer would operate to shift costs, but the $100,000 offer would not.”
‘Machiavellian Litigants’
Hoffstadt commented in Gorobets that if simultaneous offers could be made, “particularly Machiavellian litigants will be sure to cover the waterfront by making simultaneous offers for all possible outcomes in an attempt to ensure that at least one of those offers will trigger cost shifting under section 998.”
Irion responded:
“When faced with two simultaneous offers, a trial court can simply look at each offer separately to determine whether either of them exceeded the amount of the verdict. In the hypothetical posed by Gorobets, because the $200,000 offer exceeded the $150,000 verdict, that offer would operate to shift costs, but the $100,000 offer would not.”
She expressed the view that “any downsides” to giving effect to a valid offer, not withstanding a contemporaneous infirm offer, “are outweighed by the benefit of promoting early settlement.”
Award Reversed
Yesterday’s opinion reverses a $276,104.61 award of attorney fees and costs in favor of Maritza Zavala who sued Hyundai Motor America under the Song-Beverly Consumer Warranty Act, known as the “lemon law.” That award was made notwithstanding that the judgment, pursuant to a jury’s verdict, was for $23,122.44 and Hyundai had made a statutory offer of $65,000.
Riverside Superior Court Judge Harold W. Hopp did not give effect to the $65,000 offer because, at the same time, it was proposed, in the alternative, that a dispute resolution process be employed rather than specifying the amount Hyundai would pay. That offer, the judge found, was impermissibly vague, and that compelling Zavala “to choose between this uncertain amount and $65,000 makes the offer invalid.”
Irion pointed out that §998(b) “simply states that ‘any party may serve an offer in writing upon any other party to the action to allow judgment to be taken or an award to be entered in accordance with the terms and conditions stated at that time” and “says nothing about a prohibition on multiple simultaneous offers.”
The ordinary rule, she noted, is that a party, presented with more than one settlement offer, may choose which, if any, to accept. She observed that “Zavala has identified no persuasive reason why that general principle should not apply here” so as to permit Hyundai “to make an offer to compromise that contains two separate and alternative options.”
The case is Zavala v. Hyundai Motor America, D082747.
Representing Hyundai on appeal were and Jennifer T. Persky of the Torrance office of Nelson Mullins Riley & Scarborough and Robert L. Wise of the firm’s Richmond, Virginia office and Brian Takahashi, Richard L. Stuhlbarg and Carissa Casolari of Bowman and Brooke in Torrance. Acting for Zavala were Roger Kirnos of Knight Law Group in Century City and Cynthia E. Tobisman and Joseph V. Bui of the mos-Wilshire firm of Greines, Martin, Stein & Richland.
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