Daily Blast April 29, 2016

Earlier this week, the Court of Appeal, First Appellate District, Division Two (San Francisco), issued an opinion in Sanford v. Rasnick (Apr. 25, 2016, A145704) __ Cal.App.4th __, analyzing whether a Code of Civil Procedure section 998 offer (“998 offer”) requiring plaintiff to agree to enter into a “settlement agreement and general release” was valid.  (Slip opn., pp. 3, 9.)  The Court of Appeal concluded the inclusion of a settlement agreement requirement in a 998 offer invalidates the offer.  (Id. at p. 9.)

The case arose from a vehicle collision.  (Slip opn., p. 1.)  Defendants served a 998 offer after discovery closed.  (Id. at p. 2.)  The offer lapsed and the parties tried the case.  (Id. at pp. 1, 3.)  The jury returned a verdict for less than the 998 offer.  (Id. at pp. 1, 4.)  The 998 offer included a term requiring plaintiff to execute a “settlement agreement and general release.”  (Id. at pp. 3, 9.)  The trial court rejected plaintiff’s argument that such condition invalidated the offer, citing one case that allowed a 998 offer requiring “mutual release of all current claims.”  (Id. at p. 9, italics added.)  The court found the 998 offer valid and awarded defendants expert witness fees and other costs.  (Id. at p. 1.)  Plaintiff appealed.  (Id. at p. 6.)

The Court of Appeal reversed.  (Slip opn., p. 12.)  The Court of Appeal reasoned that while case law allows for releases in a 998 offer, a release is not a settlement agreement.  (Id. at p. 9.)  The court expressed concern that the terms of a settlement agreement could be problematic.  (Ibid.)  For example, it might include a provision that invalidates a section 998 offer, such as a waiver of all known and unknown claims, or it might implicate the protection of a lienholder, which risks attorney discipline.  (Id. at pp. 9-10.)  Notably, the anticipated terms of the settlement agreement in this case were never disclosed.  (Id. at p. 3.)  Settlement agreements are often the subject of much negotiation and the required “settlement agreement” left plaintiff with no understanding of what he would be required to agree to.  (Id. at p. 10.)  The court rejected defendants’ explanation that requiring plaintiff to execute a document entitled “settlement agreement and release” was standard in the automobile insurance defense context, noting this standard or common practice does not make the 998 offer valid.  (Id. at p. 9.)  Accordingly, the Court of Appeal ruled the 998 offer invalid and instructed the trial court to deny defendants’ costs.  (Id. at pp. 1, 12.)

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