Monday, June 10, 2013

Martinez v. Brownco (Cal. Supreme Ct. - June 10, 2013)

Here's a decision from the California Supreme Court that makes total sense.

You don't even need to know anything about anything to figure out the right answer.  Let's make it a multiple choice question:

On May 1, Plaintiff makes a pretrial Section 998 settlement offer for $200,00.  That offer expires by not being accepted within 30 days.  On December 1, right before trial, plaintiff makes a lower 998 offer for $100,000, which defendant rejects as well.  At trial, plaintiff recovers $250,000.

After trial, Plaintiff moves to recover $50,000 in expert witness fees that she incurred in October.  Section 998 allows parties to recover such postoffer expenses if they obtain a judgment at trial more favorable than their pretrial offer.  The policy justification for this rule is to encourage settlement.

Can Plaintiff recover these expenses?

A.  Yes, because her pre-October offer of $200,000 was less than the amount ($250,000) she successfully recovered at trial.

B.  No, because her December offer wiped out her expired May offer, so there was no pre-October offer that was less than the amount she recovered at trial.

(If this was a real law school multiple choice exam, I'd manufacture distracting (C) and (D) choices that made no sense, but I'm going to make things easy.  It's either (A) or (B).)

Whatcha think?

The correct answer is (A).  Which makes eminent, total sense to me.  As well as to each of the justices of the California Supreme Court.

There's a series of opinions in the Court of Appeal that adopt the underlying reasoning of (B) and say that when a party makes a second 998 offer any previous offer is deemed to have never existed.  Those cases never made any sense at all to me, either as a matter of contractual doctrine or settlement policy.  So I'm glad to see the California Supreme Court hold otherwise.  (POSTSCRIPT - A reader rightly e-mailed me and noted that I had urged the California Supreme Court to grant review in this case last year.  So I'm glad to see that happen as well.  Though sad to see that my memory is apparently so utterly shot.)

You can make two (or more) 998 offers without necessarily totally negating the initial offers.  That's a good rule.  Glad to see it's (now) the law.