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By: Gretchen S. Carner
California Code of Civil Procedure section 998 settlement offers (“998 offer”) are valuable settlement tools, often under-utilized in prevailing party attorneys’ fees cases. The California Court of Appeal has bolstered defendants’ ability to confidently make valid 998 offers, exclusive of attorneys’ fees, so that a motion for attorneys’ fees can be brought after acceptance of the offer.
The California Court of Appeal recently held that a defendant’s 998 offer to pay the plaintiff $12,500 “exclusive of reasonable costs and attorney[ ] fees, if any” was clear and unambiguous. (Timed out LLC v. 13359 Corp. (Feb. 27, 2018, No. B280301) ___Cal.App.5th___ [2018 Cal. App. LEXIS 262].) In Timed Out LLC v. 13359 Corp., plaintiff sued defendant for misappropriation of a model’s right of publicity under Civil Code section 3344 (section 3344). Section 3344(a) provides for “prevailing party” attorneys’ fees and costs. After trial, the court awarded plaintiff $4,483.30 “exclusive of any costs [or] attorneys’ fees that may be set by noticed [m]otion.”
Defendant submitted a cost bill that included post-offer attorneys’ fees and costs. Plaintiff moved to strike the cost bill on the grounds, among others, that the 998 offer was invalid because the terms “exclusive of attorneys’ fees, if any” was ambiguous. The Court of Appeal concluded that the usual and ordinary meaning of the term “exclusive of” in this context is that the settlement amount did not include fees and costs, and that one could not fairly interpret the phrase “if any” to require a concession that plaintiff may not be entitled to any attorney fees if it accepted the 998 offer. The 998 offer did not deny Plaintiff’s right to recover attorneys’ fees and costs, nor could it have reasonably been interpreted to do so. The offer provided that Defendant would pay $12,500, which was ‘exclusive of,’ meaning not including, reasonable costs and attorneys’ fees. Where a 998 offer does not expressly preclude the recovery of fees and costs, a prevailing party may seek them. Defendant was awarded its post-offer attorneys’ fees and costs.
The take away here is that defendants in any case where statutory attorneys’ fees and costs are at stake, should think about serving early 998 offers to cut off and limit their potential liability for significant attorneys’ fees that quickly add up during protracted litigation. In addition, if the plaintiff does not obtain an award greater than defendant’s 998 offer (plus plaintiff’s actual award of attorneys’ fees and costs), the defendant is entitled to recover its post-offer attorneys’ fees and costs. This should give great pause to plaintiff’s counsel who have weak or meritless cases.
If you have any questions or would like more information, please contact Gretchen Carner at [email protected].