As many are aware, California has adopted a Statutory Offer to Compromise scheme under Code of Civil Procedure Section 998 which allows a prevailing party, including a defendant, to recover expert witness fees if an offer is timely served before trial and the offering party achieves a better net result at trial. Although Code of Civil Procedure Section 998 does not expressly permit "joint offers", the Courts have also embraced joint offers as coming within the statute. [See Persson v. Smart Inventions, Inc. (2005) 125 Cal.App.4th 1141, Winston Square Homeowner's Association v. Centex West, Inc. (1989) 213 Cal.App.3rd 282 ("Winston Square"), Fortman v. Hemco, Inc. (1989) 211 Cal.App.3d 241 ("Fortman")].
An issue that has arisen, however, is whether a prevailing defendant which has joined in a joint Statutory Offer to Compromise can recover expert witness fees when less than all of the defendants that joined in the Statutory Offer to Compromise have had claims adjudicated against them. Some courts, such as in Winston Square, a construction defect case where a joint offer was made and all but one defendant settled (and the non-settling defendant then prevailed at a bifurcated trial), have embraced an "Absolute Prevailing Party" approach and awarded expert witness fees to a prevailing defendant even though there was no judgment against the other jointly offering defendants. Other courts, such as in the Fortman matter, a products liability case involving a vehicle door where a child and her mother sued the vehicle manufacturer, issued a joint offer for $1,000,000, and the mother dismissed before trial but her daughter was awarded damages of more than $23,000,000, have adopted a "Comparison" approach which focuses on whether a determination can be made that a more favorable judgment had been obtained by looking at all of the facts in the case.
Significant light has been shed on this question by the California Court of Appeal, Second Appellate District, in Kahn v. The Dewey Group, et al. (2015) WESTLAW 5227645 ("Kahn"). In the Kahn case, plaintiff Brian Kahn alleged that from 1996 to 2011 he had been a resident of a mobile home park located in San Fernando, California. Some time prior to 1996, the defendants, for which 20 were named, had either themselves or their predecessors in interest used the land on which the mobile home park sat as an industrial waste disposal site. Kahn alleged that, based upon the use of the property as an industrial waste site, hazardous gases had been released to which Kahn had been exposed, causing him to suffer various injuries.
Suit was filed in February 2011. In September 2013, all 20 defendants jointly made a Statutory Offer to Compromise pursuant to Code of Civil Procedure Section 998 in the amount of $75,000. The Offer was characterized as a "joint offer of judgment". Plaintiff Kahn did not accept the offer.
Trial commenced in March 2014. On May 1, 2014, the trial court granted a nonsuit as to 14 of the 20 defendants and judgments were entered in favor of those defendants. As to the six remaining defendants, the trial went to a jury as against them. After six days of deliberation, the jury advised the trial court that it was deadlocked, and the trial court declared a mistrial. A retrial of the case against the six non-settling defendants remains pending.
In June 2014, the 14 dismissed defendants filed a Memorandum of Costs asserting, among other things, 70 percent of jointly incurred expert fees. The prevailing defendants' calculated their share of the expert fees to be $206,090. Plaintiff Kahn filed a Motion to Strike or Tax Costs challenging the timeliness of service of the Memorandum of Costs (which is not the subject of this article)1 and arguing that the dismissed defendants were not entitled to recover expert fees under Code of Civil Procedure Section 998 because no judgment had yet been entered as to the six non-settling defendants. The trial court denied the Motion to Strike or Tax Costs and awarded expert fees.
1 The trial court and the Court of Appeal ruled that the prevailing defendants' Memorandum of Costs, which counsel served 17 days after electronic service of the Notice of Entry of Judgment, was still timely as the additional two days called for under Code of Civil Procedure section 1010.6 (which provides two additional days to respond in the event of electronic service) applies to all parties, even the party which served the document by electronic service (and triggered the deadline in the first place).
On appeal, and as relevant to this article, the Court of Appeal discussed the "Absolute Prevailing Party" approach as embraced in Winston Square as well as the "Comparison" approach as discussed in Fortman, and ruled that the Comparison approach was better reasoned. The Court of Appeal also reiterated that joint offers by defendants are permissible. The Court of Appeal then ruled that, because there had been no judgment against the six non-settling defendants, the trial court had acted prematurely in awarding expert fees and remanded the matter with instructions that the issue of expert witness fees be ruled upon following the entry of judgments against the six non-settling defendants.
The Kahn decision explains that joint offers to compromise, while generally valid, require a determination of the claims against all of the defendants which served the joint offer before expert fees can be awarded. A victory for less than all of the defendants will not suffice. A question remains as to whether other Courts of Appeal will follow the "Comparison" approach as the Court in Kahn did. A question perhaps also left unanswered by the Kahn case is what impact a pre-trial settlement by a defendant which joined in a Statutory Offer will have on the remaining (non-settling) defendants.
About the Authors: Edward F. Morrison, Jr. is the founding partner and Larry A. Schwartz is Of Counsel to The Morrison Law Group, a professional corporation. Their biographies can be viewed at www.morrisonlawgroup.com.
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