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PRETRIAL SETTLEMENT OFFER PLUS A MUTUAL WAIVER OF COSTS WAS REASONABLE WHERE PLAINTIFF’S CHANCE OF PREVAILING AT TRIAL WAS SLIM
Billie Jean Adams, et al. v. Ford Motor Company
(Cal. App. Crt. 2011)
In Billie Jean Adams, et al. v. Ford Motor Company, the California Court of Appeals ruled that defendant Ford Motor Company’s pretrial statutory settlement offer of $10,000 plus a mutual waiver of costs was reasonable where Plaintiffs’ alleged damages were over $2,000,000 but Plaintiffs’ chances of prevailing at trial were slim. Based upon a jury verdict returned in Ford’s favor, Ford was entitled to collect expenses in excess of $185,000, including expert witness fees incurred prior to extending a statutory settlement offer.
Factual Background
Richard Adams (“Richard”) died from mesothelioma, a form of cancer commonly associated with exposure to asbestos. Richard’s wife, Billie Jean, and their three children (collectively “Adams”), filed a lawsuit against numerous defendants, including Ford Motor Company (“Ford”), alleging that Richard’s exposure to the parties’ respective products, which contained asbestos, caused his death.
As to Ford, Adams alleged that Richard was exposed to high levels of asbestos dust while replacing brake pads manufactured by Ford (Richard owned five Ford vehicles, on which he performed his own maintenance). Adams settled or dismissed their claims with most of the defendants prior to trial. Settlement amounts ranged from $70,000 to $2,000.
Shortly before trial, Ford served a California Code of Civil Procedure section 998 Offer to Compromise (“998 Offer”) on Adams for $10,000 and a mutual waiver of costs. Adams rejected Ford’s 998 Offer and the case proceeded to trial. At trial, the jury returned a verdict in Ford’s favor, finding that Ford did not manufacture, sell, or distribute the brakes that Richard used on his cars.
Ford subsequently filed a memorandum of costs for $185,000, which included $167,000 in expert witness fees. Adams filed a motion to tax Ford’s expert witness fees, arguing that Ford’s 998 Offer was made in bad faith in light of the damages sought in the complaint and the costs incurred for trial. Adams also argued that Ford was only entitled to collect expert witness fees incurred after Ford’s 998 Offer was made. The trial court denied Adams’ motion. Adams filed this appeal.
The Appellate Court’s Holding
On appeal, the Appellate Court affirmed the trial court’s award of costs in favor of Ford. In so ruling, the Adams Court began its analysis by discussing the purpose of Section 998. 1
The purpose of Section 998, Adams notes, is to encourage settlement of litigation without trial. “A good faith requirement is read into Section 998 to effectuate the purpose of the statute. Good faith in turn requires that the settlement offer be ‘realistically reasonable under the circumstances of the particular case.’” Thus, the offer must “carry with it some reasonable prospect of acceptance.”
The Adams Court next turned to Adams’ motion to tax Ford’s expert witness costs. This analysis, the Adams concluded, turned on two factors: (1) the reasonableness of Ford’s 998 Offer and (2) the reasonableness of Ford’s expert witness costs.
i. Reasonableness of Ford’s 998 Offer
The Adams Court explained that “where the offeror obtains a judgment more favorable than its offer, the judgment constitutes prima facie evidence showing the offer was reasonable.” (Citing Santantonio v. Westinhouse Broadcasting Co. (1994) 25 Cal.App.4th 102, 117.) Based upon the defense verdict in Ford’s favor, the burden shifted to Adams to show that Ford’s 998 Offer was unreasonable.
In determining the reasonableness of a 998 Offer, Adams discussed two additional factors that should be considered: first “the defendant must reasonably believe that the plaintiff might accept his offer, and the plaintiff must have access to the facts that influenced the defendant’s determination that the offer was reasonable;” and second, whether the 998 Offer has value beyond its monetary value.
In arguing that Ford’s 998 Offer was unreasonable, Adams cited their $2,000,000 damage claim, combined with the hundreds of thousands of dollars in costs. The Adams Court rejected this argument, stating that Ford’s offer could not be evaluated simply in comparison to what Adams sought. Rather, the offer should be measured in light of the likelihood that Adams would prevail at trial. The Adams Court cited the trial court’s statements that “automotive friction” cases are very difficult to prove, and that evidence introduced against Ford was “pretty attenuated.” Thus, Adams should have known that the “chances of prevailing at trial were slim,” especially in light of the discovery performed in the case. In light of this “slim” chance of prevailing, Adams should have evaluated Ford’s 998 Offer in light of that “reasonable probability.”
As to the value of Ford’s 998 Offer, there was significant value beyond the monetary $10,000 value. The mutual waiver of costs had significant value and would have protected Adams from exposure to Ford’s expert fees of $160,000.
ii. Reasonableness of Ford’s Expert Costs
Noting that a verified memorandum of costs is prima facie evidence of the propriety of the items listed on it, the Adams Court explained that the burden on the party challenging those costs is to demonstrate that they were not reasonable or necessary. Adams’ only argument regarding the experts’ fees listed in Ford’s memorandum was that they were “exorbitant” and therefore unreasonable. The Court rejected Adams’ argument based upon their failure to show that Ford’s expert witness fees were unreasonable or unnecessary for trial.
Finally, Adams argued that Section 998(c) only gave the trial court discretion to award expert witness costs incurred after Adams rejected Ford’s 998 Offer. The Adams Court held that Adams’ reading of Section 998 was erroneous. While Section 998(d) limits a plaintiff’s ability to recover expert witness costs to those incurred after a 998 Offer was refused, Section 998(c) does not contain such a limitation, and therefore gives a trial court discretion to award a prevailing defendant all expert witness costs, whether incurred before or after the 998 Offer was made (citing Regency Outdoor Advertising, Inc. v. City of Los Angeles (2006) 39 Cal.4th 507, 532-533.)
If you need a copy of these opinions or would like to discuss these issues please contact us.
Frank T. Sabaitis
Brad A. Byszewski
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1. All further section reference is to the California Code of Civil Procedure unless otherwise noted.
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