Timed Out LLC v. 13359 Corp., B280301

Background

Timed Out LLC (assignee of model Eva Pepaj) sued 13359 Corp. for unauthorized use of Pepaj’s likeness under common law and Cal. Civ. Code § 3344, which mandates attorney fees and costs for the prevailing party.
Defendant served a Code of Civil Procedure § 998 offer for “the total sum of Twelve Thousand Five Hundred Dollars ($12,500) exclusive of reasonable costs and attorney fees, if any,” which expired without acceptance before trial.
After a two-day bench trial, the trial court found defendant liable and awarded Timed Out $4,483.30 (exclusive of fees/costs), then held a noticed motion on fees and costs.
The trial court concluded the § 998 offer was valid and its wording preserved plaintiff’s right to seek fees and costs; nonetheless, because plaintiff’s postjudgment recovery (when compared to the offer plus preoffer fees/costs) was not more favorable than the offer, § 998(c)(1) penalties applied.
The trial court awarded plaintiff only preoffer fees/costs and awarded defendant postoffer fees/costs, resulting in a net award to defendant; Timed Out appealed, challenging the trial court’s interpretation of the offer.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the § 998 offer’s phrase “exclusive of reasonable costs and attorney fees, if any” was ambiguous/invalid	The phrase (and “total sum”) is ambiguous and could be read to include or exclude fees; citation to Goodstein and the “if any” qualifier created uncertainty, so the offer was invalid	The ordinary meaning of “exclusive of” excludes fees from the $12,500; “if any” does not waive fees; offer clearly preserved right to seek fees later	Court: “exclusive of” means fees/costs are excluded from the $12,500; offer valid and not ambiguous (de novo review)
Whether plaintiff was the prevailing party entitled to fees under § 3344 and whether all fees (pre- and postoffer) count when comparing recovery to the § 998 offer	Timed Out argued it achieved its litigation objectives and is the prevailing party; fees and costs (including preoffer) should be considered when comparing outcomes	Defendant argued the judgment was less than its § 998 offer so defendant achieved its objective and § 998 penalties apply	Court: Plaintiff was prevailing under § 3344 (so entitled to preoffer fees); but comparison for § 998 purposes requires adding preoffer fees/costs to the judgment — plaintiff did not obtain a more favorable result than the offer, so § 998(c)(1) penalties applied
Whether a § 998 offer must use Judicial Council form language to preserve fees	Plaintiff: defendant should have used form language explicitly stating “Plus costs under CCP § 1032 and attorney’s fees…”	Defendant: no specific form language required; plain statutory/contract principles govern; silence or absence of express waiver preserves fee motions	Court: Form not required; statutory and contract principles control; silence on waiver means fees may be claimed later; explicit waiver required to preclude fees

Key Cases Cited

Goodstein v. Bank of San Pedro, 27 Cal.App.4th 899 (discusses enforceability of 998 offers and fee allocations)
On-Line Power, Inc. v. Mazur, 149 Cal.App.4th 1079 (treats offer language and fee recovery under § 998)
Elite Show Services, Inc. v. Staffpro, Inc., 119 Cal.App.4th 263 (applies contract interpretation to § 998 offers)
Engle v. Copenbarger & Copenbarger, LLP, 157 Cal.App.4th 165 (holds fee waiver must be express in a § 998 offer)
Whatley-Miller v. Cooper, 212 Cal.App.4th 1103 (clarifies that nonstandard acceptance documents or form variations do not necessarily create ambiguity in a § 998 offer)
MacQuiddy v. Mercedes-Benz USA, LLC, 233 Cal.App.4th 1036 (ambiguous nonmonetary condition in offer can invalidate a § 998 offer)
Barella v. Exchange Bank, 84 Cal.App.4th 793 (§ 998 offers are strictly construed in favor of offeree; de novo review of offer interpretation)
Heritage Eng’g Constr., Inc. v. City of Industry, 65 Cal.App.4th 1435 (preoffer fees/costs are added to judgment when comparing to a § 998 offer)