66 Cal.App.5th 288
Cal. Ct. App.2021Background
- Plaintiffs Gholam (later deceased) and Malekeh Khosravan sued Chevron Corp., Chevron U.S.A. Inc., and Texaco Inc. alleging Khosravan contracted mesothelioma from asbestos exposure at the Abadan refinery, which plaintiffs attributed to defendants’ predecessors. Malekeh was later substituted as successor in interest.
- On October 9, 2019 the Chevron defendants served Code of Civil Procedure §998 offers: mutual waiver of costs in exchange for dismissal with prejudice, release of all future claims (including wrongful death), and indemnity against claims by nonparties; offers expired in 30 days if not accepted.
- The Khosravans did not accept; Chevron moved for summary judgment, which the trial court granted; this court affirmed (Khosravan I) that Chevron did not owe a duty of care.
- Chevron sought costs (~$33,900), including expert witness fees (~$19,673). The trial court struck part of the expert fees but awarded $5,360 in expert fees and $15,564 total costs. Malekeh appealed only the expert-fee award.
- Malekeh argued the §998 offers were invalid because the indemnity term made the offers impossible to value (potential future claims by heirs/third parties), so Chevron could not shift expert witness costs; she also argued the offers were token/bad-faith.
- The Court of Appeal reversed: the indemnity provision rendered the §998 offers incapable of reasonable valuation, so Chevron failed to prove the judgment was more favorable than the offers; the matter was remanded to recalculate costs.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Validity of §998 offers that require plaintiffs to indemnify defendants against future nonparty claims | Indemnity makes the offer impossible to value; court would have to speculate about likelihood and cost of future claims | Indemnity is valueless because any third-party claims would be meritless; even if not, Civil Code §2778 limits exposure and provides standards | Offer invalid under §998 because indemnity provision defies accurate valuation; defendants failed to carry burden that judgment was more favorable |
| Whether the judgment in defendants’ favor is prima facie evidence the offers were reasonable | Judgment cannot overcome the unquantifiable indemnity term; indemnity may exceed any monetary difference | Judgment shows offers were reasonable and supports cost shifting under §998 | Judgment did not establish offers were more favorable because the offers’ nonmonetary indemnity term prevented reliable comparison |
| Effect of alleged meritlessness of potential third‑party claims on valuation | Meritlessness does not eliminate obligation to indemnify defense costs; uncertainty remains | If claims are meritless, indemnity has no practical value so offer is effectively equivalent to mutual waiver | Court rejects claim that meritlessness renders indemnity valueless; Civil Code §2778 shows indemnitor may still owe defense costs, so valuation remains speculative |
| Whether offers were token/bad-faith or coercive toward heirs | Offers were token, unreasonable, and might coerce heirs; bad-faith argument raised | Offers were legitimate settlement attempts to obtain full protection from future liability | Court did not decide bad-faith/coercion issues; reversed on valuation grounds and remanded, noting it need not reach bad-faith claims |
Key Cases Cited
- Valentino v. Elliott Sav‑On Gas, Inc., 201 Cal.App.3d 692 (1988) (release of unfiled or nonparty claims can make a §998 offer unquantifiable)
- Fassberg Constr. Co. v. Housing Auth. of City of Los Angeles, 152 Cal.App.4th 720 (2007) (offer terms that make valuation exceedingly difficult should not support cost shifting)
- Toste v. CalPortland Constr., 245 Cal.App.4th 362 (2016) (indemnity clause tied to third‑party claims can render a §998 offer invalid for valuation purposes)
- Ignacio v. Caracciolo, 2 Cal.App.5th 81 (2016) (burden is on offeror to demonstrate a §998 offer is valid; broad releases can invalidate offers)
- Olson v. Automobile Club of S. Cal., 42 Cal.4th 1142 (2008) (statutory framework governs entitlement to costs)
- Menges v. Dep’t of Transp., 59 Cal.App.5th 13 (2020) (validity of a §998 offer reviewed de novo; ambiguity construed against proponent)
- Adams v. Ford Motor Co., 199 Cal.App.4th 1475 (2011) (a more favorable judgment can be prima facie evidence of the offer’s reasonableness)
- Crawford v. Weather Shield Mfg., Inc., 44 Cal.4th 541 (2008) (Civil Code §2778 interprets indemnity obligations to include defense costs)