Bremer Whyte Brown & O'Meara

On October 21, 2011, the California Court of Appeal, Second Appellate District, published the case of Billie Jean Adams v. Ford Motor Company (2011 DJDAR 15491.)

In this case, Billie Jean Adams and her three children sued Ford Motor Company (“Ford”) for the alleged wrongful death of their husband and father.  Right before trial, Ford served on all plaintiffs a Code of Civil Procedure section 998 offer to compromise for $2,500 per plaintiff, and a waiver of costs.  The offers were rejected, and the case proceeded to trial, where Ford received a defense verdict.  Thereafter, Ford submitted a cost bill in the amount of $185,741.82, including $167,570 in expert witness fees.

Plaintiffs filed a motion to tax costs, arguing that the settlement offers were unreasonable, and that the experts were not reasonably necessary for Ford’s preparation for trial.  Plaintiffs also challenged Ford’s argument that it was entitled to recover expert witness fees which were incurred before the offer was made.

The trial court found the offers to be reasonable and in good faith, found that the costs were reasonable, and found that Ford was entitled to recover its expert witness costs incurred from the beginning of the case, not just after the offer.  An appeal ensued, and the Court of Appeal agreed with the trial court.

The Court of Appeal discussed the language of, and purpose of, a C.C.P. section 998 offer to compromise.  Basically, it is intended to encourage settlements.  In regard to reasonableness, the court found that receiving a result which is actually better than the offer is prima facie evidence that the offer was reasonable.  The court also stated that an evaluation of the evidence is permitted in a motion to tax costs, including evidence from the defense side which undermines a plaintiff’s case which was available for consideration at the time of the offer.  Finally, the court discussed that where value beyond the monetary award is offered, this additional consideration must be considered in determining the value of the offer.  In this case, a waiver of costs was offered, and as the cost bill was substantial, the court stated that the value of the waiver of costs is included in the analysis of what is reasonable.

In regard to the reasonableness of the costs themselves, the court entertained evidence of the tasks that the experts performed, and what their importance was to Ford at trial.  The court also accepted evidence of what Ford paid in other cases for expert witnesses.

The above has been discussed in numerous other Court of Appeal decisions and does not break much in the way of new ground.  On the “reasonableness” side, the case reinforced prior decisions which hold that virtually any offer will be considered “reasonable” if the offering party obtains a better result at trial. But what is critical in the decision is the Court of Appeal’s determination that a trial court is free to award not just post-offer expert witness costs, but all expert witness costs incurred from the beginning of the case.

C.C.P. section 998 (c) (1) states in relevant part as follows:

“If an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, the plaintiff shall not recover his or her postoffer costs and shall pay the defendant’s costs from the time of the offer.  In addition…the court or arbitrator, in its discretion, may require the plaintiff to pay a reasonable sum to cover costs of the services of expert witnesses…actually incurred and reasonably necessary in either, or both, preparation for trial or arbitration, or during trial or arbitration, of the case by the defendant.”  (Emphasis added)

The Court of Appeal found that all expert fees can be awarded, not just those incurred from the time of the offer.  The Court of Appeal found that the language highlighted above from the statute did not apply to expert fees.

This ruling is critical.  Defense lawyers and clients are regularly faced with the dilemma regarding when to make a C.C.P. section 998 offer to compromise.  Defendants want to be able to recover the maximum amount of expert fees, but at the same time do not want to make an “end game” offer early in litigation, and establish a floor for the next round of settlement discussions which has the potential to drive settlement numbers higher.  Now, defendants need not worry.  Defendants can make a C.C.P. section 998 offer to compromise on trial’s door step and remain comfortable that the trial judge has the discretion to award expert witness fees from the beginning of the case.        

Defendants must be aware that the converse is also true.  If plaintiff makes an offer to compromise, and the offer is rejected, plaintiff could in the judge’s discretion recover his or her expert fees from the beginning of the case.  No longer can a defendant simply ignore or formally reject an offer to compromise late in a case knowing that post-offer expert fees might not be substantial.