Expert Fees Properly Awarded Under Offer of Judgment

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In Martinez v. Brownco Construction Co. Inc., the California Supreme Court decided a unique issue under California’s offer of judgment procedure, Code of Civil Procedure Section 998. The court concluded that a second statutory offer does not extinguish a previous offer for purposes of Section 998’s cost shifting provisions.

The plaintiffs sued a construction company for personal injuries. Prior to trial, the two plaintiffs both served the defendant with settlement offers pursuant to Code of Civil Procedure Section 998. In the second offer, the plaintiffs submitted reduced offers of judgment. The defendant did not respond to any of the offers within the period provided for acceptance.

Both plaintiffs ultimately obtained a judgment in excess of the statutory offers. The plaintiffs sought to recover expert costs under Section 998, back to the date of the first offer of judgment. The defendant opposed the motions under the cost shifting provision of Section 998. The trial court determined that the second offer was the only one to be considered under Section 998. The trial court concluded that the first offers were extinguished, as a matter of law, by the subsequent offers. The Court of Appeal reversed the trial court’s ruling.

The California Supreme Court reviewed the decision by the Court of Appeal. The Court noted that Section 998 was enacted to encourage settlements. The Court also noted that the statute is silent about the impact of multiple settlement offers. The Court analyzed whether a later Section 998 offer extinguished a previous offer as a matter of law. The Court concluded that where a plaintiff serves two unaccepted Section 998 offers, and the defendant fails to obtain a judgment more favorable than either offer, the first offer remains effective for purposes of cost shifting.