Key Decisions

July 2013 – Expert Fees Were Recoverable Despite Multiple 998 Offers

(filed under: Key Decisions | July 22, 2013)

Expert Fees Were Recoverable Despite Multiple 998 Offers

Martinez v. Brownco Construction Company, Inc.
(Cal. Ct. of App., 2d Dist.), filed June 10, 2013, published June 10, 2013

KEY FACTS

Raymond Martinez was injured in an electrical explosion at work.  He and Gloria, his wife, sued Brownco Construction Company, which had performed demolition work at the job site, for negligence and loss of consortium. 

Raymond served Brownco with a statutory offer to compromise pursuant to section 998 in the amount of $4,750,000.  Gloria offered to compromise for $250,000.  Brownco neither accepted nor rejected the offers, and they expired.

Some time later, Raymond offered to compromise for $1,500,000.  Gloria’s offer was $100,000.  Brownco took no action on these offers either, and they expired.

At trial, the Martinezes presented excerpts from the videotaped deposition of Brownco’s foreman, Dwayne Taylor, who could not be located.

During closing argument to the jury, Martinez’ counsel used a PowerPoint presentation.

Judgment was entered awarding Raymond $1,646,674 and Gloria $250,000.

After trial, the Martinezes sought $561,257.14 in itemized costs, including $11,956 for editing and presenting video excerpts of Taylor’s deposition, $87,282.86 for the PowerPoint presentation used during closing argument, $188,536.86 in expert fees incurred after their first section 998 offers but before their second offers, and $64,555.45 in expert fees incurred after the second set of offers.

Brownco moved to tax the cost items for the video presentation of Taylor’s deposition, the PowerPoint, and the $188,536.86 in expert fees incurred between first and second offers.  It argued the recording of Taylor’s deposition was not reasonably necessary for trial, because attorneys could simply have read the questions and answers into the record, as is normally done when a witness is unavailable for trial.  Brownco argued the PowerPoint presentation was similarly unnecessary.  Brownco also argued Gloria was not entitled to expert fees incurred before her second 998 offer to compromise.

The Court of Appeal held that it was not an abuse of discretion for the trial court to have allowed the cost of editing Taylor’s deposition.  It noted that the trial court asked the jury whether it preferred to have the deposition transcript read or to see video excerpts and that it responded that having the transcript read was “boring.”  It also noted in connection with the motion to tax costs, the trial court observed, among other things: (1) it is important to keep the jury’s attention, and (2) in reading a transcript, “you don’t get the same intonation and inflections as the original testimony, you get somebody who is supposed to read the testimony dry.”  The cost of editing the video was reasonably necessary to enable the parties to expediently and effectively present just the relevant portions of Taylor’s testimony and to ensure that only pre-approved portions of it were played.

The court disallowed the cost of the PowerPoint presentation.  It found that although the presentation was helpful to the Martinezes, it was not necessary.  Only the cost of “[m]odels and blowups of exhibits and photocopies of exhibits,” are allowed when they are merely helpful, but not necessary.  The court distinguished cases involving the presentation of evidence to the jury from the one before it, where the presentation was only part of argument.

The court allowed the experts’ fees incurred between Gloria’s first settlement offers in addition to those incurred after the second one.  It reasoned that when the first offer lapsed, Gloria’s right to expert fees “vested,” and nothing — other than not obtaining a better result — could deprive her of the benefit gained from having made the offer.  The court noted that its ruling would promote early settlements and that if the trial court felt that the offering party was engaging in gamesmanship in making early offers, it had discretion not to allow certain fees.

HOLDING & REASONING

The California Supreme Court granted review.  It framed the question as:  “When a plaintiff serves two unaccepted offers to compromise pursuant to section 998, and the defendant fails to obtain a judgment more favorable than either offer, does the plaintiff’s last offer extinguish the first offer for purposes of expert fee recovery under section 998?”

In answering the question, the Court recited the purpose of section 998, which is to provide a financial incentive for litigants to make reasonable settlement offers and also to reasonably evaluate offers they receive.

The Court dis not hold that the last offer controls.   Rather, it observed that Brownco failed to get a better result than either of Gloria’s offers.

Section 998’s policy of encouraging settlements is better served by not applying the general contract principle that a subsequent offer entirely extinguishes a prior offer.  Not only do the chances of settlement increase with multiple offers, but to be consistent with Section 998’s financial incentives and disincentives, parties should not be penalized for making more than one reasonable settlement offer.  Nor should parties be rewarded for rejecting multiple offers where each proves more favorable than the result obtained at trial.  The Court held that where a plaintiff serves two unaccepted and unrevoked statutory offers, and the defendant fails to obtain a judgment more favorable than either offer, the trial court retains discretion to order payment of expert witness costs incurred from the date of the first offer.

ANALYSIS

Ultimately, the determination of the effect of multiple offers is left to the sound discretion of the trial court.  The trial court is in the best position to assess the offers, their timing, and the ultimate result of the trial — and to assess what is reasonable under the circumstances.  Such a result will likely reduce gamesmanship in connection with settlement offers.