90 Cal.App.5th 385
Cal. Ct. App.2023Background
- Plaintiffs sued Hyundai under the Song-Beverly Act over a defective 2012 Elantra; Hyundai made two CCP § 998 offers (the operative one dated May 26, 2017 for $55,556.70 plus fees) that plaintiffs did not accept.
- On the first scheduled trial day the parties orally stipulated under CCP § 664.6 to settle: Hyundai would pay $39,000 and plaintiffs could move for attorney fees and costs to be decided by the trial court; payment would precede dismissal with prejudice.
- Plaintiffs moved for fees and costs of about $228,000; Hyundai opposed, invoking § 998 and arguing plaintiffs failed to obtain a more favorable judgment than the May 2017 offer and thus should be denied/postoffer costs shifted.
- The trial court ruled § 998 does not apply to cases ending in settlement, substantially reduced the requested fees for reasonableness, and awarded plaintiffs about $98,823.55 in fees and costs.
- On appeal the Court of Appeal found it had jurisdiction under the collateral-order doctrine and reversed, holding § 998 applies where the settlement operates as a judgment (including § 664.6 dismissals) and that the trial court should have considered § 998 when awarding costs and fees.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether CCP § 998 cost-shifting applies when parties settle for less than an earlier unaccepted § 998 offer | Section 998 does not apply to settlements; statute contemplates judgments after trial | § 998 applies; settlement that yields dismissal with prejudice is a functional judgment, so cost-shifting can be triggered | § 998 applies to settlements that function as final judgments; trial court erred not to apply it |
| Whether an oral § 664.6 settlement/dismissal counts as a "judgment" under § 998 | A settlement is not the same as a judgment for § 998 purposes | A § 664.6 settlement that results in dismissal with prejudice is the functional equivalent of a judgment | A § 664.6 settlement can be a "judgment" for § 998; the statute’s term "judgment" is construed broadly |
| Appealability of the trial court’s fee/cost order before formal dismissal is filed | Order not appealable until final judgment/dismissal is entered | Collateral order doctrine permits immediate appeal because the fee order is final as to the collateral matter and directs payment | Court had jurisdiction under the collateral-order doctrine and reached the merits |
| Whether the trial court properly exercised discretion in awarding fees without applying § 998 | Trial court reasonably exercised discretion and reduced fees for duplicative/unreasonable billing | § 998 should have been applied to limit postoffer costs and could alter recoverable amount | Remanded due to error in failing to apply § 998; appellate disposition reversed trial ruling on § 998 application |
Key Cases Cited
- DeSaulles v. Community Hospital of Monterey Peninsula, 62 Cal.4th 1140 (Cal. 2016) (settlement/dismissal can be functional equivalent of judgment for purposes of enforcement and § 998)
- Martinez v. Brownco Construction Co., 56 Cal.4th 1014 (Cal. 2013) (contract principles may guide § 998 but not where they defeat statute’s purpose)
- Mon Chong Loong Trading Corp. v. Superior Court, 218 Cal.App.4th 87 (Cal. Ct. App. 2013) (voluntary dismissal can constitute failure to obtain a more favorable judgment under § 998)
- Duale v. Mercedes-Benz USA, LLC, 148 Cal.App.4th 718 (Cal. Ct. App. 2007) (§ 998 applies in Song-Beverly Act cases; fee awards are ‘‘costs’’ under offer statute)
- T. M. Cobb Co. v. Superior Court, 36 Cal.3d 273 (Cal. 1984) (general contract law may apply to § 998 offers so long as it does not defeat the statute’s purpose)
- Apex LLC v. Korusfood.com, 222 Cal.App.4th 1010 (Cal. Ct. App. 2013) (collateral-order doctrine can make an interlocutory fee order appealable)
- Varney Entertainment Group, Inc. v. Avon Plastics, Inc., 61 Cal.App.5th 222 (Cal. Ct. App. 2021) (discusses implied revocation/inconsistent-action doctrines and effect on § 998 offers)
- Goodstein v. Bank of San Pedro, 27 Cal.App.4th 899 (Cal. Ct. App. 1994) (endorsement of broad reading of “judgment” to include dismissal with prejudice)
- Wohlgemuth v. Caterpillar Inc., 207 Cal.App.4th 1252 (Cal. Ct. App. 2012) (treating pretrial dismissal with prejudice as tantamount to judgment for fee statutes)
- Wilson v. Wal-Mart Stores, Inc., 72 Cal.App.4th 382 (Cal. Ct. App. 1999) (last-offer rule: later unaccepted § 998 offers can supersede earlier ones)