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Reyes v. Chevron U.S.A., Inc.

California Court of Appeals, Sixth District
Jul 10, 2008
No. H031843 (Cal. Ct. App. Jul. 10, 2008)

Opinion


SUSAN REYES, et al., Plaintiffs and Respondents, v. CHEVRON U.S.A., INC., Defendant and Appellant. H031843 California Court of Appeal, Sixth District July 10, 2008

NOT TO BE PUBLISHED

Santa Cruz County Super. Ct. No. CV146344

ELIA, J.

Numerous plaintiffs sued Chevron U.S.A., Inc. (Chevron) based on a predecessor company's release of toxic substances into the surrounding area. After a jury found in Chevron's favor, the company sought its costs under Code of Civil Procedure section 998. The trial court granted plaintiffs' motion to tax costs, and Chevron appeals. We find no abuse of discretion, however, and therefore must affirm the postjudgment order.

All further statutory references are to the Code of Civil Procedure.

Background

This action arose from the contamination of a site occupied by the California Spray-Chemical Company ("Cal-Spray"). After Cal-Spray was purchased by Chevron's predecessor, Standard Oil of California, the residents of an adjacent property successfully sued Chevron for negligence. In the present action, hundreds of plaintiffs living in various "zone[s] of contamination" alleged that they, too, had been harmed by the Cal-Spray contamination.

Plaintiffs' fourth amended complaint asserted 11 causes of action for nuisance, trespass, fraudulent concealment, negligent misrepresentation, negligence, and strict liability for an ultrahazardous activity. The trial court set a bellwether trial and ordered the parties to select three plaintiffs each "in order to get a representative sampling of verdicts." Eventually only four of those plaintiffs were before the jury.

On January 5, 2007, seven days before the "trial call" date, Chevron offered to settle the case for $2,001.00 each to Guerrero, Reyes, and Valverde, with each party to bear its own costs and attorney fees. Plaintiffs declined.

On February 14, 2007, Chevron's motion for nonsuit was granted as to one plaintiff, Edgar Guillen. Two days later the jury returned a verdict in Chevron's favor as to the remaining three. Bridgette Guerrero was found not to have been exposed to lead and arsenic from Chevron operations, while Susan Reyes and Ruben Valverde were found to have been exposed to those substances but suffered no harm resulting from the exposure. Judgment was thereupon entered for Chevron as to all four bellwether plaintiffs.

Chevron submitted its memorandum of costs pertaining to each of the three plaintiffs whose allegations were tried by the jury. The company requested $42,386.47 for defending against Bridgette Guerrero, $53,042.04 for the claim of Ruben Valverde, and $69,336.91 for that of Susan Reyes. Of those expenses, the largest amounts ($33,054.83, $35,307.33, and $51,207.33, respectively) were for expert witness fees.

Plaintiffs moved to tax costs, challenging some costs as excessive and contesting the expert fees as not recoverable under section 998. Plaintiffs argued that those fees should be struck because Chevron had made only a token offer to compromise shortly before trial, when substantial costs had already been incurred; consequently, the offer "did nothing to promote settlement" and must be deemed to have been in bad faith. Chevron disputed the assertion that the offer was in bad faith; it pointed out that the $2,001 per plaintiff was "enhanced" by the waiver of costs.

At the hearing on plaintiffs' motion, the trial court pointed out that defense costs are not considered in determining whether a section 998 offer was made in good faith. The court further suggested that a prior settlement of $1,102 per plaintiff would be a setoff against any recovery, if a stipulation to that effect existed. The court concluded that Chevron's settlement offers were "token or nominal and, therefore, not in good faith." After making other rulings related to the reasonableness of specific cost items, the court granted plaintiffs' motion to tax the costs attributed to expert witness fees.

Discussion

Expert witness fees are not ordinarily recoverable as costs. (§ 1033.5, subd. (b).) Section 998, however, augments permissible costs to include those fees where a settlement offer has been made. (§ 998, subd. (a).) Subdivision (c)(1) of section 998 covers costs and fees where there has been a settlement offer by a defendant. This provision states, in relevant part: "If an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, the plaintiff shall not recover his or her postoffer costs and shall pay the defendant's costs from the time of the offer. In addition, in any action or proceeding other than an eminent domain action, the court or arbitrator, in its discretion, may require the plaintiff to pay a reasonable sum to cover 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 during trial . . . of the case by the defendant."

The policy underlying section 998 "is plain. It 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. (This is the stick. The carrot is that by awarding costs to the putative settler the statute provides a financial incentive to make reasonable settlement offers.)" (Bank of San Pedro v. Superior Court (1992) 3 Cal.4th 797, 804; see also Heritage Engineering Const., Inc. v. City of Industry (1998) 65 Cal.App.4th 1435, 1439.)

Chevron acknowledges that an order granting a motion to tax costs is an exercise of the trial court's sound discretion which will not be disturbed on appeal absent a clear abuse resulting in a miscarriage of justice. (Arno v. Helinet Corp. (2005) 130 Cal.App.4th 1019, 1025; Thompson v. Miller (2003) 112 Cal.App.4th 327, 339.) As applied to an award or denial of expert witness fees, this principle likewise confines our review to the abuse-of-discretion standard. (Jones v. Dumrichob (1998) 63 Cal.App.4th 1258, 1262.) Chevron's further suggestion that we review the trial court's exercise of discretion "de novo, as a matter of law," is unsupported by the authority it cites.

In exercising its discretion to grant or deny post-offer expert witness fees to the successful party, a trial court may consider whether the offer appeared reasonable at the time it was made. Whether a section 998 offer is reasonable is determined by looking at the circumstances existing when the offer was made, including the information that was available to both parties. (Elrod v. Oregon Cummins Diesel, Inc. (1987) 195 Cal.App.3d 692, 699.) Chevron's favorable verdict at trial entitled it to the presumption that its offer was reasonable, and plaintiff had the burden in the trial court of showing its unreasonableness. (Nelson v. Anderson (1999) 72 Cal.App.4th 111, 134.) Nevertheless, it is Chevron's burden in this court to show that the trial court abused its discretion in determining that appellant's offer was not reasonable under the circumstances existing at the time of the offer. (Ibid.)

Some courts have emphasized that a plaintiff has no obligation to accept a token or nominal offer "unless it is absolutely clear that no reasonable possibility exists that the defendant will be held liable. . . . [I]f there is some reasonable possibility, however slight, that a particular defendant will be held liable, there is practically no chance that a plaintiff will accept a token or nominal offer of settlement from that defendant in view of the current cost of preparing a case for trial." (Wear v. Calderon (1981) 121 Cal.App.3d 818, 821; accord, Elrod v. Oregon Cummins Diesel, Inc., supra, 195 Cal.App.3d at p. 698.)

These courts have underscored the good-faith aspect of a settlement offer, attributing good faith to a reasonable offer. The resulting analysis is the same. "Good faith requires that the pretrial offer of settlement be 'realistically reasonable under the circumstances of the particular case.' " (Jones v. Dumrichob, supra, 63 Cal.App.4th at p. 1262, quoting Wear v. Calderon, supra, 121 Cal.App.3d at p. 821.)

On the other hand, "[e]ven a modest or 'token' offer may be reasonable if an action is completely lacking in merit." (Nelson v. Anderson, supra, 72 Cal.App.4th at p. 134.) "When a defendant perceives himself to be fault free and has concluded that he has a very significant likelihood of prevailing at trial, it is consistent with the legislative purpose of section 998 for the defendant to make a modest settlement offer. If the offer is refused, it is also consistent with the legislative intent for the defendant to engage the services of experts to assist him in establishing that he is not liable to the plaintiff. It is also consistent with the legislative purpose under such circumstances to require the plaintiff to reimburse the defendant for the costs thus incurred." (Culbertson v. R. D. Werner Co., Inc. (1987) 190 Cal.App.3d 704, 710-711.)

In this case Chevron pointed out that the offer included a waiver of costs, which "had an economic value of $5,000-$10,000." It further argued that the deposition testimony given by experts for both sides had established that plaintiffs' impaired physical conditions were not caused by exposure to lead or arsenic from the former Cal-Spray site. Thus, Chevron argued, the parties knew at the time of the offer that the lawsuit had little chance of success. The trial court rejected the first point, reasoning that "if there is a reasonable possibility of liability, defendants cannot justify a settlement [offer] solely on the basis of anticipated defense costs." In adopting its tentative ruling, the court implicitly found that a reasonable possibility of liability existed when measured from the standpoint of the parties. It also noted that a settlement by another defendant, a remediation consulting firm, of just over $1000 per plaintiff, was to have been allocated to any final judgment against Chevron. Thus, the court determined that the offer was not reasonable in light of the facts known to the parties at the time the offer was made.

On the limited pre-trial record before us, we cannot find abuse of discretion here. Even if liability was not a close issue, the trial court could have concluded that in the circumstances before them, plaintiffs, as offerees, did not have "reason to know the offer [was] a reasonable one." (Nelson v. Anderson, supra, 72 Cal.App.4th at p. 135.) Chevron makes much of the court's mention of the prior action in which the plaintiff recovered from Chevron. Chevron argues that it was a prejudicial abuse of discretion to consider that case in determining the present cost issues. The court did not, however, expressly rely on the prior outcome in its decision; it is therefore unnecessary to distinguish that case from the appeal before us. In any event, it was not unreasonable for the court to determine that the current plaintiffs' proximity to the Cal-Spray site, together with the conclusive fact that Chevron had previously been found negligent, created the potential for a finding of liability by Chevron. "Whether we would have made the same determination in the first instance is immaterial, since this court reviews the trial court's exercise of discretion." (Elrod, supra, 195 Cal.App.3d. at p. 702.) Because the court does not appear to have exercised that discretion in an arbitrary, capricious or patently absurd manner, its ruling must be upheld. (Cf. Culbertson v. R. D. Werner Co., Inc, supra, 190 Cal.App.3d at p. 710.)

In the trial of the underlying lawsuit, the jurors were instructed that they were bound by the previous jury finding that Chevron had been negligent in causing lead and arsenic to travel from its property onto other property in Watsonville.

Disposition

The order is affirmed.

WE CONCUR: RUSHING, P. J., BAMATTRE-MANOUKIAN, J.


Summaries of

Reyes v. Chevron U.S.A., Inc.

California Court of Appeals, Sixth District
Jul 10, 2008
No. H031843 (Cal. Ct. App. Jul. 10, 2008)
Case details for

Reyes v. Chevron U.S.A., Inc.

Case Details

Full title:SUSAN REYES, et al., Plaintiffs and Respondents, v. CHEVRON U.S.A., INC.…

Court:California Court of Appeals, Sixth District

Date published: Jul 10, 2008

Citations

No. H031843 (Cal. Ct. App. Jul. 10, 2008)