73 Cal.App.5th 821
Cal. Ct. App.2022Background
- Plaintiff Eric Covert bought a 2011 Dodge Ram that he alleged had recurring defects and filed a Song‑Beverly Act action (breach of express and implied warranty; fraudulent concealment).
- FCA served two Code of Civil Procedure § 998 offers: first 63 days after filing for $51,000 (plus reasonable fees/costs under Civ. Code § 1794(d)); second on the eve of trial for $145,000 with materially identical nonmonetary terms.
- Covert objected to the first offer as vague, premature, and uncertain (payment timing, vehicle surrender, releases, interest, good‑faith component); he did not object to the second offer.
- Jury returned verdict for Covert on express warranty only, awarding $48,416 (less than both offers). Trial court sustained Covert’s objections to the first offer, awarded Covert fees/costs under §1794(d), and denied FCA’s motion to tax costs.
- On appeal the Court of Appeal held both §998 offers were valid, but remanded because the trial court failed to consider whether the first offer was made in good faith (premature). Court directed awarding of costs/fees depending on that good‑faith determination.
Issues
| Issue | Covert's Argument | FCA's Argument | Held |
|---|---|---|---|
| Were FCA’s §998 offers sufficiently certain/valid despite nonmonetary terms? | Offers were vague/uncertain (no payment date, vehicle surrender date, release terms, interest, good‑faith element). | Offers were specific enough; incorporation of §1794(d) and dismissal/return language allowed valuation; no payment date or surrender date required invalidation. | Offers were valid and sufficiently definite to be evaluated under §998. |
| Does a defendant’s valid §998 offer that exceeds the plaintiff’s judgment bar plaintiff’s recovery of post‑offer fees/costs under Civ. Code §1794(d)? | §1794(d) entitles prevailing buyer to fees; applying §998 to bar those fees conflicts with the Song‑Beverly Act. | §998’s settlement incentives apply to buyers too; Murillo and policy favor enforcing §998 to encourage settlement and limit postoffer fees when offer exceeded recovery. | A valid, reasonable defendant §998 offer that exceeds the plaintiff’s recovery precludes plaintiff’s recovery of postoffer attorneys’ fees and costs under §1794(d). |
| Was FCA’s first §998 offer made in good faith (timing/prematurity)? | The offer was premature (served 63 days after filing, before meaningful discovery) so Covert lacked information to evaluate willfulness, penalties, or fraud. | FCA argued Covert had adequate information in the detailed complaint and plaintiffs’ counsel had used similar offers in other cases. | Trial court failed to decide this; appellate court remanded for the trial court to determine in the first instance whether the first offer was made in good faith. |
| If a valid §998 offer is enforceable, are expert witness fees and other costs shifted to plaintiff? | Covert asserted §998 offers were invalid so costs (including expert fees) should remain his. | FCA argued that because its offer exceeded the verdict, Covert must pay defendant’s costs after the offer (including expert fees) and cannot recover postoffer fees. | If first offer is found in good faith, FCA is entitled to its costs (including expert fees) incurred after that offer and Covert loses postoffer §1794(d) fees; if not, Covert keeps fees/costs before the second offer and FCA gets costs after second offer. |
Key Cases Cited
- Murillo v. Fleetwood Enterprises, Inc., 17 Cal.4th 985 (1998) (Supreme Court: §998 applies with §1032 and does not conflict with Song‑Beverly fee provision; §998’s settlement incentives govern cost shifting).
- Duale v. Mercedes‑Benz USA, LLC, 148 Cal.App.4th 718 (2007) (extends Murillo’s reasoning to hold a defendant’s valid §998 offer that exceeds plaintiff’s recovery bars plaintiff’s postoffer Song‑Beverly fees).
- Goodstein v. Bank of San Pedro, 27 Cal.App.4th 899 (1994) (an offer providing payment in exchange for dismissal with prejudice may be treated as enforceable under §998).
- Licudine v. Cedars‑Sinai Medical Center, 30 Cal.App.5th 918 (2019) (burden shifts to offeree to prove an otherwise valid §998 offer was not made in good faith).
- Valentino v. Elliott Sav‑On Gas, Inc., 201 Cal.App.3d 692 (1988) (nonmonetary terms in a §998 offer are permissible but must be sufficiently certain to permit valuation).
- Khosravan v. Chevron Corp., 66 Cal.App.5th 288 (2021) (discusses §998 validity standards and practical application).