Court of Appeal Reverses $800,000 In Attorney's Fees and Costs.
On February 7, 2019, California's Second District Court of Appeal, Division Six, Justice Gilbert Presiding, reversed a trial court award of $582,000 in attorney's fees and $215,000 in litigation costs, awarded pursuant to California Code of Civil Procedure ("CCP") section 998. The beneficiaries of this huge reversal of $797,000 in fees and costs were two very happy clients at The Law Office of Patrick Santos.
Attorney Patrick Santos first filed the appeal back in September of 2014, nearly 1,600 days ago, 52 months ago, or 4 and a half years ago. The unlimited civil appeal was complex and involved 53-volumes of trial court Clerk Transcripts ("CT"), at 300 pages per volume, the CT was just shy of 16,000 pieces of paper. That was before the Reporter Transcripts ("RT"), for a trial that lasted 29-court days, and 4-calendar months, with opening arguments in October 2013, and closing arguments in January 2014. The trial took place in Ventura County's Central District, The Hall of Justice, before the Honorable Henry J. Walsh.
Seasoned appellate attorney Patrick Santos presented more than ten separate and independent reasons why the Court of Appeal should have struck down the $797,000 in fees and costs. The Court of Appeal held "[b]ecause we find the first one dispositive, we need not address the others." (Unpub. Opn., p. 16, ¶ 3.) Mr. Santos argued that a case decided on August 3, 2016, also out of the Second District Court of Appeal, Division Eight, was controlling on the validity of the CCP section 998 offers to compromise. (Ignacio v. Caracciolo (2016) 2 Cal. App. 5th 81) (Ignacio).
Mr. Santos' argument was highly unique because the Ignacio case was decided 2-years after his appeal was even filed. Any half-witted appellate attorney will tell you that an attorney cannot make new arguments to the Court of Appeal where said argument was not first made to the trial court, in the first instance. Mr. Santos was able to bypass this appellate waiver rule, as he himself made the very argument that the Ignacio Court would later hold is controlling law. Seeing as how Mr. Santos had nothing to do with the Ignacio case, his arguments and his reliance on the Ignacio case was somewhat prophetic.
The take away for anyone attempting to draft an enforceable CCP section 998 offer, while complying with Ignacio, is to limit the offer to only the claims being litigated in that particular action. Do not attempt to offer and/or require the dismissal and/or releases of claims that are outside the scope of the current case being litigated. This rule is not that hard to comply with, as Mr. Santos argued on appeal.
For example, in Ignacio, the CCP section 998 offer to compromise proposed the release of “‘any and all claims, demands, liens, agreements, contracts, covenants, action, suits, causes of action, obligations, controversies, debts, costs, expenses, damages, judgments, orders, and liabilities of whatever kind and nature in law, equity, or otherwise, whether now known or unknown, suspected, or unsuspected, that have existed or may have existed or which do exist, or which hereinafter can, shall or may exist.’” (Ignacio, supra, p. 88.) The offer in Ignacio also contained a waiver of Civil Code section 1542. (Ibid.) Such an unlimited release goes well beyond the scope of the litigation, and renders the offer invalid under section 998. (Id. at p. 89; but see Linthicum v. Butterfield (2009) 175 Cal.App.4th 259, at p. 272 ["a [CCP section 998 offer requiring] release of unknown claims arising only from the claim underlying the litigation itself does not invalidate the offer.”] (Linthicum).)
In Mr. Santos' appeal, paragraph (v) of the section 998 offers stated "[t]he parties to this offer are to respectively bear their own costs and attorney fees incurred both in relation to the within action and with respect to any other litigation involving any of the parties to the within action.” Thus, an acceptance of the offers would have required Mr. Santos' clients to release any claims to costs and attorney fees incurred not only in the current litigation, but also in any other existing or future litigation involving the parties.
While the rule is tricky, the 998 offer drafter needs to be careful when formulating offers to compromise in the future, and pay attention to the keen distinction between the offer in Linthicum, supra, and the offer in Ignacio. Remember what the underlying problem is, and this will help you determine whether your 998 offer goes beyond the scope of the current lawsuit: can the parties receiving your offer clearly evaluate their monetary worth? Or are they unable to “pinpoint the value of the various potential unfiled claims” without engaging “in wild speculation bordering on psychic prediction”? (see e.g., Valentino v. Elliott Sav-On Gas, Inc. (1988) 201 Cal. App. 3d 692, at 699.) If so, your offer may not be enforceable.
Seasoned litigators know how critical section 998 offers to compromise are, especially in hotly contested litigation - - and even more especially in cases involving contracts providing for attorney's fees. Remember first your offer must be made in good faith. Sending a token offer or a grandstanding offer is useless. Remember second your offer must be capable of reasonable certain calculation. Without that, the offeree (person receiving the offer) is not able to weigh the pros and cons of accepting or rejecting your offer.
Use the judicial council form provided - - and only if you must - - attach additional terms. However, be very careful with what terms you include. Remember you are making "an offer", and think first-year contract law. The most basic of contract law principles are found in the Restatement on Contracts, section 33, which defines “certainty” in an offer, and explains that an offer, although made, “cannot be accepted so as to form a contract unless the terms of the contract are reasonably certain.” Restatement section 33 subd. (3) states “[t]he fact that one or more terms of a proposed bargain are […] uncertain may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance.”]) Think basic. An amount of money. A clear conclusion.
~Author Patrick Santos is a trial attorney and an appellate practitioner in California. He has civil and criminal cases pending in Ventura, Santa Barbara, Los Angeles, San Diego, San Bernardino, Riverside, Sacramento, Orange, and San Benito Counties. Call today for a free consultation.