Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. PC041440 Margaret L. Oldendorf, Judge.
Hanger, Steinberg, Shapiro & Ash, Jody Steinberg, Josephine N. Baurac for Defendants and Appellants.
R. Rex Parris Law Firm, Stephen K. McElroy, Ashley N. Parris for Plaintiffs and Respondents.
ARMSTRONG, Acting P. J.
Defendants Sandra Ayoub and Susie Haley appeal the post-judgment award of costs in this personal injury lawsuit stemming from a motor vehicle accident in which plaintiff Bruce Ganson was injured. At trial, Mr. Ganson obtained a jury verdict in excess of the offer to compromise which he made pursuant to Code of Civil Procedure section 998, while the jury rendered a defense verdict on the loss of consortium claim of Sandy Ganson, Mr. Ganson's wife. We determine that the trial court acted within its discretion in awarding Mr. Ganson pre-judgment interest and expert witness fees, and in taxing the costs of defending Mrs. Ganson's claim. We therefore affirm the judgment.
FACTUAL AND PROCEDURAL SUMMARY
On October 9, 2005, Mr. Ganson was injured when, while riding his motorcycle, he was struck by a vehicle driven by Ms. Ayoub and owned by Ms. Haley.
On September 25, 2007, Mr. Ganson filed a complaint for negligence against defendants, while Mrs. Ganson brought a claim for loss of consortium.
On August 6, 2008, the Law Office of Marsha Munemura, defendants' counsel of record, served on plaintiffs' counsel an association of attorney stating that it had associated the Law Offices of Hanger, Steinberg, Shapiro & Ash as counsel for defendants.
Pursuant to Code of Civil Procedure section 998, on or about August 19, 2008, Mr. Ganson delivered identical offers to compromise to each defendant, which proposed "to have judgment taken against defendant [] for herself and no others..." in the amount of $499,999.99. These offers were sent to defendants' counsel, the Law Offices of Marsha Munemura, but were not mailed to defendants' newly-associated counsel. That law firm, the Law Offices of Hanger, Steinberg, Shapiro & Ash, was substituted in as defendants' counsel on or about September 18, 2008. The offers to compromise expired without being accepted, and the case proceeded to trial.
Mrs. Ganson also served identical 998 offers on defendants, offering to settle her claims for $34,999.99. These offers were not accepted.
The jury returned its verdict on September 25, 2009. As defendants conceded at the beginning of the trial that their negligence caused Mr. Ganson's injuries, the sole issue for the jury on his claim was the amount of damages incurred. In a special verdict, the jury awarded Mr. Ganson $24,981 in past economic loss, including lost earnings; $50,000 in past non-economic loss; $424,217 in future economic loss, including lost earnings and medical expenses; and $50,000 in future non-economic loss, for a total of $549,198. The jury returned a defense verdict on Mrs. Ganson's loss of consortium cause of action.
Following trial, Mr. Ganson sought an award of $84,154, representing prejudgment interest as well as $51,083 in expert witness fees on account of defendants' rejection of his 998 offer. Defendants filed a memorandum of costs directed at Mrs. Ganson. Both sides challenged the other's memorandum of costs. After a November 30, 2009 hearing on these matters, the trial court awarded Mr. Ganson $70,215 in costs, finding that his 998 offer was properly made. The court awarded defendants $2,055, half of the costs requested.
On appeal, defendants challenge the costs awarded by the trial court. They first assert that the award of expert witness fees and prejudgment interest was improper, as Mr. Ganson's section 998 offer was invalid. They also maintain that the trial court erred in taxing their costs vis-à-vis Mrs. Ganson.
DISCUSSION
Defendants challenge the trial court's award of expert witness fees and prejudgment interest pursuant to the provisions of Code of Civil Procedure section 998 and Civil Code section 3291. We begin with a review of those statutes.
Further statutory references are to this code unless otherwise indicated.
Section 998, subdivision (d) provides: "If an offer made by a plaintiff is not accepted and the defendant fails to obtain a more favorable judgment or award in any action or proceeding other than an eminent domain action, the court or arbitrator, in its discretion, may require the defendant to pay a reasonable sum to cover postoffer costs of the services of expert witnesses, who are not regular employees of any party, actually incurred and reasonably necessary in either, or both, preparation for trial or arbitration, or during trial or arbitration, of the case by the plaintiff, in addition to plaintiff's costs." Civil Code section 3291 provides, in relevant part: "If the plaintiff makes an offer pursuant to [section 998] which the defendant does not accept prior to trial or within 30 days, whichever occurs first, and the plaintiff obtains a more favorable judgment, the judgment shall bear interest at the legal rate of 10 percent per annum calculated from the date of the plaintiff's first offer pursuant to [section 998] which is exceeded by the judgment, and interest shall accrue until the satisfaction of the judgment."
"The purpose of section 998 is to 'encourage settlement by providing a strong financial disincentive to a party – whether it be a plaintiff or a defendant – who fails to achieve a better result than that party could have achieved by accepting his or her opponent's settlement offer.' (Bank of San Pedro v. Superior Court (1992) 3 Cal.4th 797, 804.) As applied in the present case, '[t]he basic premise of section 998 is that [litigants] who reject reasonable settlement offers and then obtain less than the offer should be penalized for continuing the litigation. The harsh result of section 998 is that the [litigant] not only loses the right to recover his or her [postoffer] costs, but must also pay the [adverse party's] postoffer costs.' (Meister v. Regents of University of California (1998) 67 Cal.App.4th 437, 450.) Simply put, section 998 'penalizes a [litigant] who fails to accept what, in retrospect, is seen to have been a reasonable offer.' (Harvard Investment Co. v. Gap Stores, Inc. (1984) 156 Cal.App.3d 704, 713.)" (Mesa Forest Products, Inc. v. St. Paul Mercury Ins. Co. (1999) 73 Cal.App.4th 324, 330.)
In the trial court below, and again on appeal, defendants argue that Mr. Ganson's offers to compromise were invalid for three reasons: First, they were not properly served on defendants; second, they were ambiguous and did not apportion liability between the two defendants; and third, they were not "realistically reasonable."
1. Propriety of service of the offers to compromise
Plaintiffs served their offers to compromise on defendants' attorney of record, Charles Wessler at the Law Office of Marsha Munemura, on or about August 15, 2008. Defendants maintain that the section 998 offers were invalid because they were not also served on the law offices of Hanger, Steinberg, Shapiro & Ash, which had filed and served an Association of Counsel nearly two weeks earlier.
"It is settled that the attorney of record has the exclusive right to appear in court for his client and to control the court proceedings, so that neither the party himself [citations], nor another attorney [citations], can be recognized by the court in the conduct or disposition of the case. [Citations.] If the attorney of record, however, associates another attorney with him, it rests with them to divide the duties concerning the conduct of the cause. [Citations.]" (Wells Fargo & Co. v. San Francisco (1944) 25 Cal.2d 37, 42.) "The responsibility for performing the bulk of those duties may be given to the associated counsel, or may be retained by the lead counsel." (Streit v. Covington & Crowe (2000) 82 Cal.App.4th 441, 445-446.) "Consequently, notice to one attorney of record for a particular party is sufficient to satisfy due process requirements." (Youngworth v. Stark (1991) 232 Cal.App.3d 395, 407.)
Moreover, as defense attorney Steinberg indicated to the trial court, "Obviously eventually we got notice. The question is when? When does it run? How do we know when to respond? So let's say it is the 36th day. Can I still accept that? I mean, that becomes the issue. If it is not properly done, then we don't have to worry about when it runs and all those things."
Notwithstanding that he was not served, counsel acknowledged that he had actual notice of 998 offers. Thus, if Mr. Steinberg wished to accept the offers, he had a good argument that he had 30 days after he learned of them to accept them. However, in order to make that argument, defendants would have had to have accepted the offers within those 30 days. Because they did not, they cannot complain that they were not provided with sufficient time to respond to the offers.
In short, we find no flaw in the trial court's ruling that the 998 offers were properly served.
2. Clarity of the offers
Defendants next argue that the 998 offers were ambiguous and therefore invalid: "As shown by the 998 offers on their face, plaintiff's intent to settle all claims was far from clear. Each offer to settle for $499,999.99 was directed to a specific defendant 'and no other, ' suggesting that dismissal of the case against all defendants could only be accomplished by an aggregate payment of $1 million." Defendants acknowledge that the language of the offer to the effect that "Said judgment to be offset by any amounts paid by any other joint tortfeasor" made clear that Mr. Ganson sought to settle the lawsuit against both defendants for a total payment of $500,000. They point out, however, that the clarifying language regarding offsets based on payments made by a joint tortfeasor was omitted from the Notices of Acceptance which accompanied the offers. Thus, "had each defendant accepted the offer and filed the letters of acceptance with the court, it would have appeared a stipulated judgment had been reached for nearly $1 million."
Even if we this were so, there is no requirement that a party must accept an offer to compromise by signing the Notice of Acceptance prepared by the other party. Thus, if defendants wished to accept the 998 offers on their terms, they could have simply prepared their own notices of acceptance which mirrored the language of the offers, and thus obliterated the potential ambiguity.
Defendants also rely on Taing v. Johnson Scaffolding Co. (1992) 9 Cal.App.4th 579, 586 to argue that the offers were ineffective because they did not apportion the payment between the defendants: "To be effective, an offer to multiple parties under section 998 must be explicitly apportioned among the parties to whom the offer is made so that each offeree may accept or reject the offer individually." (Ibid.; see also Santantonio v. Westinghouse Broadcasting Co. (1994) 25 Cal.App.4th 102, 112.) The reason for this rule was succinctly stated in Taing, supra, at page 586: "[I]f a plaintiff elects to submit a section 998 offer in cases involving multiple defendants, the offer to any defendant against whom the plaintiff seeks to extract penalties for nonacceptance must be sufficiently specific to permit that individual defendant to determine the exact amount plaintiff is seeking from him or her." Otherwise, an unreasonable defendant could refuse to pay his fair share, resulting in the reasonable defendant's burden of paying costs pursuant to section 998.
That rationale is not operative in this case, where both defendants were represented by the same counsel provided by the insurance carrier which had control of the defense of the case. (See Bihun v. AT&T Information Systems, Inc. (1993) 13 Cal.App.4th 976, 1001 [Taing does not apply when defendants' potential liability is joint and several].) In short, defendants' counsel will not be heard to argue that the 998 offers should have allocated the $500,000 between Ms. Ayoub and Ms. Haley because counsel may have taken an unreasonable position with respect to one of its clients, to the detriment of the other.
3. Reasonableness of 998 offer
In order to invoke the cost-shifting provisions of section 998, a statutory offer to compromise must be made in good faith. (Clark v. Optical Coating Laboratory, Inc., (2008) 165 Cal.App.4th 150, 185.) "'Whether a section 998 offer was reasonable and made in good faith is left to the sound discretion of the trial court.' (Nelson v. Anderson (1999) 72 Cal.App.4th 111, 134.) 'In reviewing an award of costs and fees under Code of Civil Procedure section 998, the appellate court will examine the circumstances of the case to determine if the trial court abused its discretion in evaluating the reasonableness of the offer or its refusal.' (Carver v. Chevron U.S.A., Inc. (2002) 97 Cal.App.4th 132, 152.) '"The burden is on the party complaining to establish an abuse of discretion, and unless a clear case of abuse is shown and unless there has been a miscarriage of justice a reviewing court will not substitute its opinion and thereby divest the trial court of its discretionary power. [Citations.]"' (Nelson v. Anderson, at p. 136.)" (Clark v. Optical Coating Laboratory, Inc., supra, 165 Cal.App.4th at pp. 185-186.)
Good faith requires that the offer be "'realistically reasonable under the circumstances of the particular case.' [Citation.]" (Jones v. Dumrichob (1998) 63 Cal.App.4th 1258, 1262.) "The reasonableness of the offer depends upon the information available to the parties as of the date the offer was served." (Westamerica Bank v. MBG Industries, Inc. (2007) 158 Cal.App.4th 109, 130.) "If the offer is in a range of reasonably possible results and the offeree has reason to know the offer is reasonable, then the offeree must accept the offer or be liable for costs under Code of Civil Procedure section 998." (Thompson v. Miller (2003) 112 Cal.App.4th 327, 339, quoted in Arno v. Helinet Corp. (2005) 130 Cal.App.4th 1019, 1025.)
"'As a general rule, the reasonableness of a [998] offer is measured, first, by determining whether the offer represents a reasonable prediction of the amount of money, if any, defendant would have to pay plaintiff following a trial, discounted by an appropriate factor for receipt of money by plaintiff before trial, all premised upon information that was known or reasonably should have been known to the defendant. It goes without saying that a defendant is not expected to predict the exact amount of his exposure. If an experienced attorney or judge, standing in defendant's shoes, would place the prediction within a range of reasonably possible results, the prediction is reasonable." (Mesa Forest Products, Inc. v. St. Paul Mercury Ins. Co., supra, 73 Cal.App.4th at p. 333, quoting Elrod v. Oregon Cummins Diesel, Inc. (1987) 195 Cal.App.3d 692, 699.)
'''If the offer is found reasonable by the first test, it must then satisfy a second test: whether [the offeror's] information was known or reasonably should have been known to [the offeree]. This second test is necessary because the section 998 mechanism works only where the [offeree] has reason to know the offer is a reasonable one. If the [offeree] has no reason to know the offer is reasonable, then [he] cannot be expected to accept the offer." (Mesa Forest Products, Inc. v. St. Paul Mercury Ins. Co., supra, 73 Cal.App.4th at p. 333, quoting Elrod v. Oregon Cummins Diesel, Inc., supra, 195 Cal.App.3d at p. 699.) Thus, the "[r]easonableness of the offer depends upon the information available to the parties as of the date the offer was served." (Westamerica Bank v. MBG Industries, Inc., supra, 158 Cal.App.4th at pp. 129-130; Arno v. Helinet Corp., supra, 130 Cal.App.4th at pp. 1025-1026.)
After citing the fact that the verdict was roughly equal to the settlement offer plus costs awarded by the court, the trial court found that the offer was not a token offer lacking good faith, but a reasonable approximation of the sum defendants would be required to pay following a trial. As noted above, that conclusion is reviewed for an abuse of discretion.
Defendants maintain that the 998 offer was not reasonable, and was not made in good faith, for the following reasons: In August 2008, when Mr. Ganson served his 998 offers, defendants were not in possession of information which would render the offers reasonable. That is to say, at that point in time, defendants had the following information regarding Mr. Ganson's medical condition: he had had a single surgery within a week of the accident; he had returned to work; his gait was normal; there was no swelling, bruising or scarring; both of his ankles showed full range of motion; x-rays of his feet and ankles showed no evidence of fractures; and he had received no medical treatment for over a year, since approximately mid-July 2007. Defendants learned that Mr. Ganson was scheduled to undergo further surgery at his deposition, after the 998 offers had expired. Thus defendants argue that, at the relevant time period, they did not know or have reason to know that Mr. Ganson would have any significant future medical expenses. "The information was not made available or simply did not exist to permit defendants to fully evaluate the offer when made."
Most cases which rule that a 998 offer to compromise was not made in good faith concern the situation in which one among several defendants makes a lowball offer to compromise, often on the eve of trial. (See, e.g., Elrod v. Oregon Cummins Diesel, Inc., supra, 195 Cal.App.4th 692 [offer of $15,001 in a case in which the jury returned a verdict in excess of $1 million, of which $335,000 was apportioned to defendant, who was entitled to an offset of $500,000 based on joint tortfeasors' good faith settlement]; Wear v. Calderon (1981) 121 Cal.App.3d 818 [offer of $1 by one of the drivers in an auto accident which injured plaintiff; verdict in plaintiff's favor against the other driver only]; Pineda v. Los Angeles Turf Club, Inc. (1980) 112 Cal.App.3d 53 [defense offer, a month before trial, of $2,500; judgment for defendants].) In such cases, where the trial court found that there was no realistic prospect that the offeree would accept the offer, the 998 offer was deemed not to have been made in good faith.
We have found no cases which declare a 998 offer to lack good faith or be unreasonable because the defendants were not kept abreast of the progress of the plaintiff's healing. And we have a fundamental problem with defendants' argument. That all of their information indicated that the 998 offer was grossly excessive leads to one of two conclusions: either the offer was not made with the good faith expectation that it might be accepted (although there is no obvious benefit to making an excessive demand if Mr. Ganson's damages were actually much less than the offer), or defendants did not understand the nature of Mr. Ganson's injuries and the extent of a potential damage award. Defendants do not accuse Mr. Ganson of misrepresenting his medical condition, or otherwise deceiving them into believing that his damages were slight when in fact they were not. Thus, when defendants received the 998 offer and determined that it was not reasonable given their understanding of Mr. Ganson's injuries, it was incumbent upon them to determine the reason for the discrepancy. Defendants chose to assume that the offer was not made in good faith. As the jury verdict established, that was not the case.
In sum, defendants have failed to establish that the trial court abused its discretion in awarding Mr. Ganson's costs pursuant to section 998.
4. Propriety of trial court's taxation of costs
Defendants also appeal the trial court's award of costs to them in their defense of the claims of Mrs. Ganson. Defendants explain that "the lower court essentially cut in half the costs requested by Ayoub and Haley, and yet did not accord the same splitting of costs when ruling on appellants/defendants['] motion to strike or tax costs pertaining to Bruce Ganson's memorandum of costs."
The question of whether a cost item is authorized is one of statutory interpretation subject to de novo review. (Wilson v. Wal-Mart Stores (1999) 72 Cal.App.4th 382, 389-390.) If authorized, the burden is on the party seeking to tax costs to demonstrate that they were not reasonable or necessary to the litigation. (Ladas v. California State Auto. Assn. (1993) 19 Cal.App.4th 761, 774.) The trial court's determination that a cost item was reasonably necessary to the litigation is reviewed for abuse of discretion. (Ibid.)
In their memorandum of costs, defendants included the $600 filing fee to answer the plaintiffs' complaint, $1,065 in jury fees, $790 cost to take Mrs. Ganson's deposition, and $1,655 in court reporter fees. Defendants made no attempt to segregate the fees incurred solely on account of Mrs. Ganson's loss of consortium claim from those which they would have incurred in the defense of Mr. Ganson's claim even had Mrs. Ganson not sued them. The trial court determined that half of the costs sought related solely to Mrs. Ganson's cause of action, while the remainder would have been incurred even in the absence of that claim.
Defendants assert that the trial court's attempt to apportion the costs incurred between Mr. Ganson's prevailing claim and Mrs. Ganson's unavailing claim contravenes section 1032. However, they cite no authority in support of the argument, and we find no merit in it. As the prevailing parties, defendants were entitled to recover from Mrs. Ganson the costs which they incurred on account of her claim. The trial court's determination that one-half of defendants' costs were incurred by reason of Mrs. Ganson's claim is reasonable. The trial court did not abuse its discretion in taxing defendants' costs.
DISPOSITION
The judgment is affirmed.
We concur: KRIEGLER, J., KUMAR, J.
Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.