In SCI California Funeral Services Inc. v. Five Bridges Foundation, 2012 DJDAR 2018 (2012), the California Court of Appeal, First Appellate District decided an important decision under California Code of Civil Procedure Section 998(d).
The underlying record and the appellate decision are extremely lengthy and detailed. This blog post focuses solely on the issues implicated by the court’s decision concerning Code of Civil Procedure Section 998(d), the California offer of judgment statute.
SCI California Funeral Services Inc. (“SCI”) entered into a contract with an entity subsequently acquired by Five Bridges Foundation.The contract related to an agreement to purchase all of the assets of a cemetery.
The asset purchase agreement stated that SCI would acquire real estate.The deal also included an option to buy extra acreage and an easement to post business signs. SCI did not receive the option or easement in a timely manner. As a result, SCI filed suit against Five Bridges, alleging causes of action for breach of contract. Five Bridges countersued SCI for numerous business torts.
Prior to trial, SCI made an offer to resolve the case via a CCP § 998 offer. Five Bridges rejected the offer tendered by the plaintiff. Later, the trial court ruled in favor of SCI, awarding the plaintiff substantially more than the 998 offer it had tendered to the defendant.
The judge ruled that Five Bridges was liable for failure to meet the contractual obligation concerning the easement. SCI moved for an award of post‑offer attorney fees under Code of Civil Procedure Section 998(d).The trial court denied the motion.
SCI also moved for its reasonable attorney fees under California Civil Code § 1717, a different statutory basis for the award of fees. The trial court also denied the fee request under that statute. SCI filed an appeal of the trial court’s decision.
The court of appeal partially reversed the decision of the trial court.
The court noted that under California Civil Procedure Section 1032, the prevailing party in litigation is entitled to recover statutory costs in any action or proceeding. SCI argued on appeal that because it was entitled to a cost award under CCP Section 1032, it was also entitled to its reasonable attorney fees.
Section 998(d) provides that if an offer made by a plaintiff is not accepted and the defendant fails to obtain a more favorable judgment, the defendant may be required to pay post‑offer costs of services of expert witnesses in addition to the plaintiff’s costs. In addition, under CCP § 1033.5, that statute sets forth the categories of recoverable costs under CCP § 1032. Section 1033.5 includes “attorney fees when authorized by contract.”
The court of appeal stated that because SCI was the party with a “net monetary recovery,” it was deemed the prevailing party. In response, Five Bridges argued that under Section 998(d), SCI was only entitled to expert witness fees, and not post‑offer attorney fees. The court of appeal rejected the argument and held that under that statute, expert witness fees are an additional item of costs awardable to a plaintiff, and thus, are not the sole item of costs available to a plaintiff that recovers in excess of a pretrial offer. The court ruled that SCI was entitled to its reasonable attorney fees too.