Daily Blast - October 4, 2018 - Lewis Brisbois Bisgaard & Smith LLP

New California Appellate Decision Is a Plot Twist in the Never Ending Story of Construing 998 Offers

Today, in Martinez v. Eatlite One, Inc. (Oct. 3, 2018, G055096) (Orange County) __Cal.App.5th__, the Court of Appeal issued an opinion that addresses offers to compromise made pursuant to Code of Civil Procedure section 998 (“998 offer”). The Court held that a plaintiff does not obtain a judgment more favorable than a defendant’s 998 offer that is silent as to costs unless the jury’s award plus pre-offer costs and fees is greater than the amount of the defendant’s 998 offer plus plaintiff’s pre-offer costs and fees. (Slip. Opn., pp. 5-6.)

Samantha Martinez (“Martinez”) sued Eatlite One, Inc. (“Eatlite”) for employment discrimination and obtained a verdict for $11,490 in damages. (Slip. Opn., p. 2.) Prior to trial, Martinez did not respond to Eatlite’s 998 offer in the amount of $12,001, which was deemed withdrawn. (Id.at pp. 2-3.) After judgment, Martinez sought, and was awarded, her post-offer costs and attorney fees. (Ibid.) The trial court ruled that Martinez obtained a more favorable judgment under section 998 because the offer did not address costs and fees and Martinez’s pre-offer costs and fees added to the jury’s award exceeded Eatlite’s offer. (Id. at p. 3.)

The Court of Appeal reversed the portions of the trial court’s postjudgment orders awarding post-offer costs and attorney fees to Martinez and denying post-offer costs to Eatlite. (Slip. Opn., p. 6.) Although Eatlite’s 998 offer was silent as to whether it included costs and fees, the Court determined that section 998 language specifying that post-offer costs are excluded for purposes of determining whether Martinez obtained a more favorable judgment necessarily implies that pre-offer costs are included. (Id. at p. 4.)

The Court also relied on Engle v. Copenbarger & Copenbarger, LLP (2007) 157 Cal.App.4th 165 in support of the proposition that the trial court should have considered whether Martinez’s pre-offer costs and fees increased the value of the 998 offer—not only the value of Martinez’s judgment. (Slip. Opn., p. 5.) In Engle, the Court held that a party that accepts a 998 offer is entitled to costs and fees unless they are excluded by the offer. (Ibid.) Thus, under Engle “the value of defendant’s 998 offer, which was silent on costs, necessarily included $12,001 plus plaintiff’s pre-offer costs and fees defendant would have been liable for if plaintiff had accepted the offer.” (Ibid.)

Because the pre-offer costs and fees should be added to both Martinez’s jury award and Eatlite’s 998 offer, which was silent as to costs, Martinez’s judgment was not greater than Eatlite’s offer. (Slip. Opn., pp. 5-6.) Martinez thus did not obtain a “more favorable judgment” under section 998 and was not entitled to her post-offer costs and fees. (Id. at p. 6.) Further, Eatlite should not have been denied its post-offer costs. (Ibid.)

The Court then concluded that an amendment to section 998 clarifying how costs and fees should be addressed in a 998 offer would benefit both the bench and bar. (Slip. Opn., p. 6.)