90 Cal.App.5th 385
Cal. Ct. App.2023Background
- Plaintiffs Oscar and Audrey Madrigal sued Hyundai under the Song‑Beverly Act over a defective 2012 Elantra; Hyundai served two Code of Civil Procedure § 998 offers (including a May 26, 2017 offer for $55,556.70 plus fees) that plaintiffs did not accept.
- On the first day of trial, after the jury was sworn, the parties orally stipulated under § 664.6 to settle: Hyundai would pay $39,000; plaintiffs could file a motion for fees and costs to be decided by the court; dismissal with prejudice would occur after payment.
- Plaintiffs moved for fees (~$207,438.75) and costs; Hyundai argued § 998 barred plaintiffs from recovering post‑offer costs and sought to strike or tax post‑May 26, 2017 costs because the settlement was for less than its § 998 offer.
- The trial court rejected Hyundai’s § 998 defense (reasoning § 998 applies only to judgments after trial) but substantially reduced the fee request on reasonableness grounds and awarded reduced fees and costs.
- Hyundai appealed; the Court of Appeal accepted jurisdiction under the collateral‑order doctrine and reversed, holding § 998’s cost‑shifting provisions can apply when a case ends in settlement that functions as a “judgment” (e.g., a dismissal with prejudice under § 664.6).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 998 cost‑shifting applies when a case resolves by settlement rather than trial | § 998 does not apply to cases resolved by settlement | § 998 applies; a settlement that results in dismissal with prejudice can trigger cost‑shifting if less favorable than an earlier § 998 offer | Reversed trial court: § 998 can apply to settlements that effectively produce a judgment/dismissal with prejudice |
| Whether the § 664.6 oral settlement constitutes a “judgment” for § 998 purposes | The settlement is not a “judgment” for § 998 so the statute is inapplicable | A dismissal with prejudice/stipulated settlement under § 664.6 is the functional equivalent of a judgment | Held that § 664.6 settlement functioned as a judgment for § 998’s comparison between offer and result |
| Whether Hyundai’s earlier § 998 offer was rendered inoperable by the later settlement or other contract doctrines (merger/last‑offer) | Settlement and contract doctrines (merger/last offer) extinguish or merge prior offers, so § 998 cannot be applied | The settlement left fees and costs open; Hyundai did not intend to waive § 998 and may raise it in opposition to fee motion | Court rejected merger (oral § 664.6 settlement) and found no operative extinguishment here; § 998 remained available |
| Appealability: is the fees & costs order reviewable absent a final dismissal? | Implicit: order not appealable until final judgment | Order is collateral and directs payment, so collateral‑order doctrine permits immediate appeal | Court exercised jurisdiction under the collateral order doctrine and reached the merits |
Key Cases Cited
- DeSaulles v. Community Hosp. of Monterey Peninsula, 62 Cal.4th 1140 (Cal. 2016) (compromise/dismissal may be legal equivalent of judgment for enforcement and § 998 purposes)
- Martinez v. Brownco Construction Co., 56 Cal.4th 1014 (Cal. 2013) (contract principles may govern § 998 offers where consistent with statute; interpretive guidance on successive offers)
- T. M. Cobb Co. v. Superior Court, 36 Cal.3d 273 (Cal. 1984) (contract law governs § 998 process only if it does not defeat statute’s purpose)
- Mon Chong Loong Trading Corp. v. Superior Court, 218 Cal.App.4th 87 (Cal. Ct. App. 2013) (voluntary dismissal can trigger § 998 cost shifting when plaintiff fails to obtain a more favorable judgment)
- Wilson v. Wal‑Mart Stores, Inc., 72 Cal.App.4th 382 (Cal. Ct. App. 1999) (last‑offer rule: later statutory offer can extinguish earlier one for § 998 purposes)
- Goodstein v. Bank of San Pedro, 27 Cal.App.4th 899 (Cal. Ct. App. 1994) (dismissal with prejudice is tantamount to 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; statutory fee awards are “costs” for § 998 analysis)
- On‑Line Power, Inc. v. Mazur, 149 Cal.App.4th 1079 (Cal. Ct. App. 2007) (dismissal with prejudice constitutes final disposition for § 998)
- Varney Entertainment Group, Inc. v. Avon Plastics, Inc., 61 Cal.App.5th 222 (Cal. Ct. App. 2021) (implied revocation/inconsistent action may extinguish prior § 998 offer in certain circumstances)
- Apex LLC v. Korusfood.com, 222 Cal.App.4th 1010 (Cal. Ct. App. 2013) (attorney‑fee orders can be appealable as collateral orders in appropriate circumstances)