Opinion
G053809
05-15-2018
MALCOLM JOHNSON, Plaintiff and Respondent, v. SHAYAN SAFAI, Defendant and Appellant.
Law Offices of Cleidin Z. Atanous and Cleidin Z. Atanous for Defendant and Appellant. Niddrie Addams Fuller, John S. Addams; and Case C. Barnett for Plaintiff and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2013-00637005) OPINION Appeal from a postjudgment order of the Superior Court of Orange County, Gregory H. Lewis, Judge. Reversed and remanded. Law Offices of Cleidin Z. Atanous and Cleidin Z. Atanous for Defendant and Appellant. Niddrie Addams Fuller, John S. Addams; and Case C. Barnett for Plaintiff and Respondent.
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Shayan Safai appeals from the trial court's postjudgment order denying her expert witness fees after finding her pretrial Code of Civil Procedure section 998 offer did not shift those costs to Malcolm Johnson, who failed to prevail in his personal injury action against Safai following an accident on the 405 freeway. (All further statutory references are to the Code of Civil Procedure unless noted.) Safai contends the court erred in concluding her offer of compromise was invalid under the then-recent decision in Sanford v. Rasnick (2016) 246 Cal.App.4th 1121 (Sanford). Under Sanford and the de novo standard that governs our review where there are no disputed facts, as here, we explain that Safai's offer was valid. We therefore reverse the trial court's order and remand for the court to determine the expert witness fees to which Safai is entitled under section 998's cost-shifting provisions.
I
FACTUAL AND PROCEDURAL BACKGROUND
Johnson sued Safai alleging he suffered a herniated disk in his lower back after a multi-car collision at less than 10 miles per hour, in which Safai's car pushed Johnson's vehicle into the car in front of him. Both parties retained multiple doctors as medical experts, but Safai also presented testimony from a biomechanical engineer who explained the low speed impact could not have caused plaintiff's disc injury. The jury credited the engineer's testimony, and consequently entered a defense verdict, which we upheld under the deferential substantial evidence standard. (Johnson v. Safai (Aug. 24, 2017, G053280) [nonpub. opn.].)
In September 2014, Safai had served on Johnson a pretrial "Statutory Offer to Compromise Pursuant to C.C.P. § 998." In relevant part, the offer stated: "Under Code of Civil Procedure § 998, Defendant(s), Shayan Safai, offer(s) to compromise the above-entitled action pursuant to the following conditions: [¶] 1. Defendant(s) to pay to plaintiff(s), Malcolm Johnson, the amount of $125,000.00. [¶] 2. Plaintiff enter a dismissal, with prejudice, of the above-entitled action. [¶] 3. Plaintiff(s) to execute a general release of all claims."
The offer also warned "that if you do not accept the offer, you will be obligated to pay Defendant(s') costs of suit, including but not limited to a reasonable sum to cover the services of expert witnesses, unless you obtain a more favorable judgment at the time of trial. This offer is inclusive of all liens in the case." The offer duly noted section 998 specified a limited time "within which to accept the offer," and concluded: "If you accept this offer, please date and sign the acceptance form below and return same to [Safai's attorneys'] office."
Johnson never responded to the offer, and when Safai prevailed at trial, she filed a postjudgment motion to recoup her costs under section 998, including $96,192.86 in expert witness fees. After a hearing, the trial court entered a minute order denying the motion, relying on Sanford and explaining that "where the terms of the settlement agreement are undisclosed, the statutory offer cannot be enforced." The court also noted generally, "There are potential issues concerning lienholders, unknown claims as well as other matters."
The trial court's minute order further explained the decision denying the motion as follows: "There is no dispute that a statutory [section 998] offer can be conditioned on agreeing to a release. The critical issue is whether the terms of the settlement are unconditional and known. In Sanford, [which included both a general release and an unspecified settlement agreement that was not attached to the offer,] the settlement agreement was not described or revealed. Plaintiff would have to guess what the terms of the settlement agreement w[ere]. If Defendant ha[d] included an example of the proposed release, the terms of the offer would be reasonably certain. In the present case, the ambiguity of the terms of the statutory offer defeats its effectiveness."
Safai now appeals.
II
DISCUSSION
A prevailing party's recoverable costs generally omit "[f]ees of experts not ordered by the court," unless "expressly authorized by law." (§ 1033.5, subd. (b), (b)(1); see Gonzalez v. Lew (2018) 20 Cal.App.5th 155, 160 (Gonzalez) ["expert witness fees are recoverable in some circumstances"].) Section 998 furnishes the necessary authorization to recover a defendant's expert witness fees when the plaintiff rejects a pretrial settlement "offer made by a defendant" and, at trial, "the plaintiff fails to obtain a more favorable judgment or award." (§ 998, subd. (c)(1).)
Section 998 encourages the early resolutions of lawsuits "by penalizing a party who fails to accept a reasonable settlement offer." (Gonzalez, supra, 20 Cal.App.5th at p. 161.) "'To effectuate this policy, section 998 provides "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." [Citation.] At the same time, the potential for statutory recovery of expert witness fees and other costs provides parties "a financial incentive to make reasonable settlement offers." [Citation.] Section 998 aims to avoid the time delays and economic waste associated with trials and to reduce the number of meritless lawsuits. [Citations.]'" (Id. at p. 161.)
Vague or ambiguous offers to settle are not enforceable under section 998; rather, the terms of the offer must be certain. (Witkin, Cal. Procedure (5th ed. 2008) Proceedings Without Trial, § 86, p. 514 [offer invalid "if its terms and conditions make it . . . difficult to place a value on the offer" due to ambiguity].) No "'magic language'" is necessary, but "the offer must be sufficiently specific to permit the recipient meaningfully to evaluate it and make a reasoned decision whether to accept it, or reject it and bear the risk he may have to shoulder his opponent's litigation costs and expenses." (Berg v. Darden (2004) 120 Cal.App.4th 721, 727, 731.) In other words, "the offeree must be able to clearly evaluate the worth of the extended offer." (Ibid.) Consequently, the party extending the offer bears the burden of drafting it with clarity, and the offer must be construed strictly in the recipient's favor. (Ibid.) Where interpretation of the offer does not involve extrinsic evidence, we determine de novo whether the offer is enforceable under section 998. (Westamerica Bank v. MBG Industries, Inc. (2007) 158 Cal.App.4th 109, 130 (Westamerica Bank).)
The trial court's reliance on Sanford as a basis to deny expert fees is misplaced. There, a motorcyclist recovered a $122,000 judgment against two codefendants, a driver who ran a stop sign and her father, who owned the car; the amount was less than the defendants' $130,000 pretrial offer to settle the matter. The reviewing court explained the offer was fatally ambiguous where it required "'"execution and transmittal of a written settlement agreement"'" with unknown terms, separate and apart from accepting the defendants' offer under section 998. (Sanford, supra, 246 Cal.App.4th at pp. 1125, 1129-1131.) The offer also required a general release among its terms, which posed no obstacle to enforceability because "[t]he case law does allow for releases. [Citations.]" (Id. at p. 1130.)
But as Sanford explained, "a release is not a settlement agreement, and the [defendants] have cited no case, and we have found none, holding that a valid section 998 offer can include a settlement agreement, let alone one undescribed and unexplained." (Sanford, supra, 246 Cal.App.4th at p. 1130.) The court noted that no "communication from the [defendants'] counsel ever disclose[d] any of the terms that they planned to put into the 'written settlement agreement' required as a condition to accepting their offer." (Id. at p. 1125.) While the defendants justified the further settlement agreement condition "as being standard in the automobile insurance defense context," the court observed: "Maybe it is common. Or standard. Maybe not. That does not make it valid." (Id. at p. 1130-1131.)
Instead, Sanford noted that the process of coming to settlement terms can be "problematical" and "the subject of much negotiation," "[a]s most experienced trial lawyers and judges appreciate." (Sanford, supra, 246 Cal.App.4th at p. 1131.) "For example, settlement agreements typically contain a waiver of all claims 'known and unknown,' a provision that has been held to invalidate a section 998 offer. [Citations.]" (Ibid.) In contrast, by statutory command, a general release "does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release . . . ." (Civ. Code, § 1542; cited in Sanford, at p. 1131.) In sum, Sanford explained that where the defendants' "required 'settlement agreement' was not described or revealed," the plaintiff could have no clear "understanding what he would have to agree to," and therefore, defendants' decision to insert the requirement "'in their section 998 offer invalidated the offer.'" (Sanford, at pp. 1131-1132.)
Sanford has no application here, however, where Safai's offer required a general release, but not a further settlement agreement on undefined terms. As Sanford expressly recognized, a valid section 998 offer may include a general release. (Sanford, supra, 246 Cal.App.4th at p. 1130, citing Linthicum v. Butterfield (2009) 175 Cal.App.4th 259, 270 [offer required "mutual release of all current claims"]; see Goodstein v. Bank of San Pedro (1994) 27 Cal.App.4th 899, 905 [offer required "'"execution and transmittal of a General Release"'"]; see also Calvo Fisher & Jacob LLP v. Lujan (2015) 234 Cal.App.4th 608, 630 [valid demand for general release in offer] .
Johnson's reliance on Chen v. Interinsurance Exchange of the Automobile Club (2008) 164 Cal.App.4th 117 (Chen) does not aid him. There, the defendant insurance company's demand in its section 998 offer for a "'"general release of all claims"'" (id. at p. 120) was ambiguous because the litigation between the parties involved plaintiffs' two insurance claims, but the plaintiffs' presented extrinsic evidence they had a third claim pending with the insurer. (Id. at pp. 120-121 [ambiguity whether "'"all claims"'" release extended to "the separate kitchen flooding incident that had not been part of their lawsuit"].) As Chen explained, to be valid and enforceable, a section 998 offer "must not dispose of any claims beyond the claims at issue in the pending lawsuit." (Chen, at p. 121.) Chen elaborated: "That limitation exists because of the difficulty in calculating whether a jury award is more or less favorable than a settlement offer when the jury's award encompasses claims that are not one and the same with those the offer covers." (Ibid.) For example, in Valentino v. Elliott Sav-On Gas, Inc. (1988) 201 Cal.App.3d 692, 700-701 (Valentino), the defendant's $15,000 offer was conditioned on plaintiff also releasing claims other than those being litigated, and the value of those claims was uncertain, rendering the relative value of the $15,000 offer fatally uncertain.
Here, in contrast, nothing in the record suggests additional claims between the parties to which Safai's $125,000 settlement offer might extend. Instead, Safai's offer by its terms was limited to settling Johnson's lawsuit against her, specifying twice that Safai made the offer "to compromise the above-entitled action" and requiring, if Johnson accepted the offer, "dismissal . . . of the above-entitled action." California follows the objective theory of contracts, under which objective intent, "'as evidenced by the words of the contract, . . . controls interpretation,'" rather than a party's unexpressed, subjective understanding. (Founding Members of the Newport Beach Country Club v. Newport Beach Country Club, Inc. (2003) 109 Cal.App.4th 944, 956; see Chinn, supra, 166 Cal.App.4th at p. 183 [applying contract interpretation principles to section 998 offers].) Nothing in the language of Safai's offer suggests her stipulation for a "release of all claims" between the parties extended beyond those included in "the above-entitled action." Indeed, in the absence of extrinsic evidence of other potential claims as in Chen and Valentino, we cannot conjure a speculative possibility of such claims to render Safai's offer invalid.
Additionally, unlike the offer in Sanford, Safai's offer addressed the possibility of liens by other stakeholders besides the parties. To be clear, there is no "authority holding a defendant must take into consideration any liens pending against a possible settlement or judgment when evaluating his [or her] case for the purpose of making a settlement offer." (Culbertson v. R. D. Werner Co., Inc. (1987) 190 Cal.App.3d 704, 708.) But Sanford addressed the possibility of liens in relation to the further settlement agreement contemplated there, noting that such agreements "can, and frequently do, implicate the protection of lienholders." (Sanford, supra, 246 Cal.App.4th at p. 1131.) Unlike a general release between the parties in a valid section 998 offer, the necessity of further settlement proceedings in Sanford, which might or might not include negotiation of existing or potential liens, gave the plaintiff "no understanding what he would have to agree to" in the unspecified future settlement. (Sanford, supra, 246 Cal.App.4th at p. 1131.)
In contrast, Safai's $125,000 offer had the added clarity of specifying it was "inclusive of all liens." This language established Johnson would be responsible for any liens asserted against his recovery, and case law has approved these provisions in section 998 offers. As one court recently explained, an offer designating the plaintiff "'"will be responsible for all medical expenses/liens"'" is valid and "comports with section 998" as "nothing more than a reminder of [plaintiff's] obligation to pay the medical expenses and liens." (Toste v. CalPortland Construction (2016) 245 Cal.App.4th 362, 374.)
Notably, the litigation here did not involve any cross-claims, only Johnson's claims against Safai arising from the accident. (Cf. Westamerica Bank, supra, 158 Cal.App.4th at pp. 133-135 [a section 998 offer may propose to resolve all claims alleged in a complaint while leaving the claims between the same parties in a cross-complaint unresolved, and vice versa].) Accordingly, in the absence of a cross-complaint, there is no reason to suspect Safai's lienholders, if any, would have a basis to assert the lien against Johnson's settlement proceeds from the resolution of his complaint against Safai, when Safai recovered nothing. While any lienholders on Johnson's side of the ledger conceivably could assert those liens against his recovery, he was in the best position to determine their existence and amount when evaluating Safai's offer. Consequently, the lien provision did not invalidate her offer.
In a new argument on appeal, Johnson asserts that Safai's offer was invalid because it overstated the consequences of rejecting it. Johnson observes that while section 998, subdivision (c)(1), leaves the recovery of expert witness fees under a valid pretrial offer to the court "in its discretion," Safai's offer warned that "if you do not accept the offer, you will be obligated to pay Defendant(s') costs of suit," including reasonable expert witness fees. (Italics added.) Johnson argues Safai "should not be able to take advantage of the statute's penalty provision after misstating it in the offer," suggesting the tactic, even if unintentional, "could coerce an unwanted settlement." Johnson also invokes the principle that "[n]o one can take advantage of his own wrong." (Civ. Code, § 3517.)
In the absence of evidence Johnson felt coerced, his failure to raise the argument below forfeits it (Perez v. Grajales (2008) 169 Cal.App.4th 580, 591) because factual matters are peculiarly for the trial court's consideration. (See, e.g., Bialo v. Western Mut. Ins. Co. (2002) 95 Cal.App.4th 68, 73 [reviewing court ignores "facts not presented and litigated in the trial court"].) Moreover, even overlooking the forfeiture, the argument has no merit as Johnson demonstrably was not coerced, instead rejecting Safai's offer despite the allegedly coercive term.
Johnson also suggests the offer warned of a "much harsher penalty" by suggesting he would be liable for all Safai's costs throughout the litigation, rather than from the time of the offer. Johnson recognizes that at the time of Safai's offer, section 998 "authorized an award of expert fees incurred both before and after the compromise was made," correctly citing Regency Outdoor Advertising, Inc. v. City of Los Angeles (2006) 39 Cal.4th 507, 532. But Johnson complains Safai's offer failed to disclose that rejecting the offer would only expose him to nonexpert costs incurred postoffer. As discussed, however, Johnson forfeited the argument, and it fails in any event for the lack of coercion demonstrated by Johnson's rejection of the offer. --------
III
DISPOSITION
We reverse the trial court's order denying Safai's motion to recover her expert witness fees and remand the matter for the court to consider Johnson's challenges to the recoverable amount of those costs, which the court did not reach in light of its ruling. Safai is entitled to her costs on appeal.
ARONSON, ACTING P. J. WE CONCUR: FYBEL, J. IKOLA, J.