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California Court of Appeal Opinion Re: Code of Civil Procedure Section 998 Offers and Howell Issu

The California Court of Appeal, Fifth Appellate District (Fresno), recently issued an opinion in Lee v. Silveira (May 15, 2015, F067723) 236 Cal.App.4th 1208, analyzing whether defendants failed to receive a more favorable judgment under Code of Civil Procedure section 998 based on a comparison between plaintiff’s “offer and an intermediate judgment . . . that included an award for past medical expenses in the full amount billed to [plaintiff], rather than the smaller amount actually paid by her insurer under the rates the insurer negotiated with the medical providers.” (236 Cal.App.4th at p.1211.) The Court of Appeal held that “for the purposes of determining whether a defendant failed to obtain a more favorable judgment under section 998, . . . any negotiated rate differential included in a jury’s verdict should be subtracted from the judgment or award before it is compared to the offer to compromise ‘for the simple reason that the injured plaintiff did not suffer any economic loss in that amount.’” (Ibid. quoting Howell v. Hamilton Meats & Provisions, Inc. (2011) 52 Cal.4th 541, 548.)

Plaintiff sued defendants for injuries sustained in a car accident. Defendants did not accept plaintiff’s Code of Civil Procedure section 998 offer to compromise in the amount of $1 million. The trial court denied defendants’ motion in limine based upon Howell principles, concluding that the amount of billed medical expenses was relevant to the question of reasonable past medical expenses, future medical expenses and pain and suffering. The court stated that it would reduce the verdict to reflect the amount of paid medical expenses. The jury’s special verdict awarded plaintiff $1,027,014 in damages. The parties “stipulated that the amount of billed medicals was $274,514.12 and the amount of paid medicals for was $109,251.61.” (Id. at p. 1212.)

The trial court granted defendants’ post trial motion for a reduction of the jury verdict, which reduced the award for past medical expenses from the amount billed to the amount actually paid. (Id. at p. 1213.) The trial court awarded plaintiff prejudgment interest and expert witness fees based on plaintiff’s Code of Civil Procedure section 998 offer. (Ibid.) The trial court later reversed itself and granted defendants’ motion to vacate and modified the judgment to exclude plaintiff’s prejudgment interest and expert witness fees. The trial court modified the judgment amount to $877,098.26. Plaintiff appealed. (Id. at p. 1214.)

The Court of Appeal affirmed the trial court’s order granting defendant’s motion to vacate and modify the judgment. “[T]he issue can be phrased as what judgment or award did the defendant obtain.” (Id. at p.1218, italics in original.) Because the statute does not define the word “obtain,” the appellate court inferred “that the Legislature intended it to be given its ordinary meaning.” (Ibid.) “[T]he verb ‘obtain’ suggests an active connection between the defendants’ conduct of the litigation and the judgment achieved.” (Ibid.)

Here, “defendants’ decision to reject the $1 million offer to compromise and go to trial brought about a judgment requesting them to pay $877,098.26.” (Id. at p.1219.) Defendants were not liable to pay the special verdict award of $1,027,014 “because that document expressly stated it was subject to amendment following the hearing concerning ‘the stipulated reduction for plaintiffs’ past medical expenses.’” (Ibid.) The $1,027,014 figure “was never more than a transitional figure and not the one obtained.” (Ibid.) Thus, “the trial court correctly reduced the jury verdict by the negotiated rate differential before making the section 998 comparison and concluding the judgment obtained by the defendants was more favorable than the offer to compromise for $1 million.” (Id. at p. 1211.)

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