Court Opinion

ID: 9750883
Source: CourtListenerOpinion
Date Created: 2023-08-28 15:44:09.591049+00
Date Added: 2024-06-11T07:26:26.823504
License: Public Domain

JOHNSON, J.
I respectfully dissent.
My concerns about the majority opinion center on a single issue. Was the defendant’s offer a valid Code of Civil Procedure Section 998 offer despite the fact it included a demand the plaintiff sign a “general release,” not just a termination of this particular cause? I believe the answer is no, it was not. That is, I construe section 998 as limiting the terms of a statutory offer to the precise cause which will go to trial before the court if the offer is not accepted.
In my view, this very court actually decided this issue in a unanimous opinion six years ago. (Valentino v. Elliot Sav-On Gas, Inc. (1988) 201 Cal.App.3d 692 [247 Cal.Rptr. 483] review den. Aug. 18, 1988.) In that opinion, we characterized the issue as follows: “[W]e confront a fundamental issue in the interpretation of California’s settlement incentive scheme. May costs be shifted against a prevailing party who rejected a statutory settlement offer (under Code Civ. Proc., § 998) that would have required this party to forego other lawsuits as well as dismissing the one involved in the case at trial?” (201 Cal.App.3d at p. 694.) That sounds nearly identical to the issue before us in this case, where a party rejected a settlement offer including a general release “that would have required it to forego other lawsuits as well as dismissing the one involved in the case at trial.”
*912The majority opinion is correct in stating there are factual differences between Valentino and the instant case. But the Valentino rationale is broad enough to decide this case as well. Furthermore, principles of statutory construction and policy considerations underlying that rationale strongly support a rule against allowing Code of Civil Procedure section 998 offers to include a requirement the offeree sign a “general release.”
In Valentino, the defendant made a Code of Civil Procedure section 998 offer of $15,000. In order to obtain this sum, however, plaintiff not only had to dismiss her current personal injury action but also release defendant, its attorneys and insurance carrier “from any and all claims and causes of action arising out of appellant’s claims including insurance bad faith and violation of Insurance Code section 790.03.” (201 Cal.App.3d at p. 695.) In its inclusion of a broad general release as part of the section 998 offer, Valentino is virtually identical to the instant case.
There was a somewhat different outcome at trial, however. In Valentino, the plaintiff received a judgment of $9,750 while the instant case ended in a defense verdict. Still, what the plaintiff won in Valentino fell short of the defendant’s Code of Civil Procedure section 998 offer. Consequently, if that offer were considered valid, despite the inclusion of a general release, the defendant would have been entitled to the cost shifting allowed under section 998. Indeed the trial court awarded the defendant $13,244.40 in costs, leaving the plaintiff a net loser.
This court reversed in Valentino specifically because the defendant’s Code of Civil Procedure section 998 offer incorporated a general release not just a settlement of the case before the court. “Other terms or conditions of a statutory offer may effectively negate the monetary term of the offer. . . . (T)he other terms and conditions may reduce the actual value of the monetary term so that a damage award in a lesser sum actually would be ‘more favorable’ not less favorable than the statutory offer the defendant made. ...”
“. . . Evaluated in the light of this (general release), the monetary term of the offer is not really $15,000 to settle the causes of action at issue in the instant case. Instead that $15,000 is diluted by the worth of other present and future possible causes of action (the plaintiff) must surrender in order to receive the defendant’s cash. (Italics in original.) Most or indeed all of the $15,000 actually may represent a payment to be released from potential bad faith or other claims against the insurance company, the lawyer, or the (defendant) rather than a payment to settle the instant case. . . .
“. . .In retrospect, of course, (plaintiff’s) bad faith claim appears valueless and it is hard to conjure any other claims she could file .... But *913the value of these claims must be measured as of the time (defendant) made its statutory offer and without benefit of hindsight.
“To pinpoint the value of the various potential unfiled claims [plaintiff] might have had at the time of the statutory offer or in the future . . . , would require the court to engage in wild speculation bordering on psychic prediction. Merely identifying all the potential claims would take some clairvoyance as well as the collection of a host of facts unrelated to the merits of the instant case. . . . After all the potential causes of action had been identified, the court would then have to gather further facts about the apparent probabilities of success and possible recoveries for each as they would have appeared at the time of the statutory offer. Then it would have had to arrive at estimates as to all these variables and calculate an estimated value for each individual potential claim, cumulate those estimated values, and determine whether the total exceeded [the difference between defendant’s section 998 offer and plaintiff’s recovery in the case on trial]. . . .
“It would be hard enough for a trial court to place a value on a condition requiring the plaintiff to dismiss a single specific lawsuit she had already filed against the defendant in another court. But when the condition mandates surrender of an array of potential lawsuits ... the task becomes impossible. Even if it were possible, it would not be worth the cost. Recalling the underlying purpose of section 998 is to promote judicial economy, this court is not about to encourage defendants to add conditions to their statutory offers which introduce so much uncertainty to those offers the courts must spend hours or days sorting them out to determine whether plaintiffs have achieved a more favorable result at trial.” (201 Cal.App.3d at pp. 697-701, italics added.)
As the language quoted above demonstrates, this court in Valentino disapproved the inclusion of general releases in Code of Civil Procedure section 998 offers and gave several reasons for its position. While some of those reasons are more relevant when the plaintiff wins something in the specific case on trial, most of them apply even if that specific case results in a defense verdict. As our Valentino opinion highlighted, when the section 998 offer includes a general release we cannot be certain whether any of the monetary offer was addressed to the single case before the court. As we held in Valentino, “. . . indeed all of the [monetary offer] may represent a payment to be released from . . . other claims . . . rather than a payment to settle the instant case.” (201 Cal.App.3d at p. 698.) Moreover, as further, discussed in Valentino, the difficulties and costs of determining whether that *914is true are present whether the trial of the single case before the court ends in a defense or plaintiff’s verdict. If we allow section 998 offers to include general releases, judicial economy—a major goal of section 998—suffers in either instance.
In my view, then, the lesson of Valentino is that Code of Civil Procedure section 998 offers which include general releases—or require dismissal of causes other than the one before the court on this occasion—are invalid from the inception. Nor is their validity restored just because the trial happens to result in a defense verdict. The fatal vices identified in Valentino remain.
Still, Valentino only surfaced some of the problems inherent in Code of Civil Procedure section 998 offers which include general releases. There are others.
First, a general release clause in a Code of Civil Procedure section 998 offer places the offeree in an untenable position. It requires the offeree to risk section 998 cost-shifting in this case in order to preserve his rights to pursue other litigation against his opponent.
The opposing party could make a monetary offer that was quite reasonable for settlement of this case, but unreasonable as an offer to settle both this case and any other actual or potential litigation between the parties. If such an offer nevertheless is to be considered a valid Code of Civil Procedure section 998 offer, it places the offeree in a terribly unfair dilemma. If the offeree accepts the offer, he signs away his rights to pursue other causes of action against the offeror. In doing so, he will be giving up probable recoveries which, when added to the probable recovery in this case, might substantially exceed the section 998 offer in this case. On the other hand, if he rejects what he knows to be a reasonable offer for this case—and, moreover, an offer he will have a hard time surpassing in this case—he is forced to run the considerable risk he will have to pay his opponent’s costs in this case.
Second, by placing a general release clause in a Code of Civil Procedure section 998 offer an offeror obtains an unfair advantage. The offeror is allowed to impose the pressure of cost-shifting in a case which is before the court to force settlement of other actual or potential cases which are not before the court. This is not the purpose of section 998 and its cost-shifting provisions. The purpose of section 998 is to encourage reasonable settlement of the cause which is before the court, not to provide one party with additional leverage to impose its terms in other disputes which may exist between the parties.
*915Indeed if settlement of other actual and potential lawsuits can be embraced in a Code of Civil Procedure section 998 offer, there is no reason the offeror could not include requirements the offeree do all kinds of other things unrelated to the cause being litigated before the court, such as a promise to buy a million widgets from the offeror, or whatever.
Third, the offeree is only allowed to count his recovery in this case in determining whether he achieved a more favorable judgment than the offer. Hence the Code of Civil Procedure section 998 offer itself should only be allowed to embrace settlement of this case. If we allow the section 998 offer to embrace the settlement of other actual and potential cases, then logic dictates we should count the recoveries or potential recoveries in those other cases in determining whether the offeree achieved an outcome more favorable than the section 998 offer. In most instances, that would require waiting for several years after the judgment in the present case was entered, which doesn’t seem practical. But it does highlight the absurdity of allowing a section 998 offer to include a “general release” or any other language purporting to resolve other actual or potential litigation between the parties while only allowing the offeree to count his recovery in the case before the court when determining whether that recovery exceeded the section 998 offer.
Fourth, nothing in the language of section 998 itself suggests it contemplates an offer which covers anything other than the causes of action which are before the court in the precise cause which is otherwise going to trial. The courts certainly have understood that language to be so limited. “[T]he reasonableness of a defendant’s offer . . . represents a reasonable prediction of the amount of money, if any, defendant would have to pay plaintiff following a trial, . . .” (Elrod v. Oregon Cummins Diesel, Inc. (1987) 195 Cal.App.3d 692, 699 [241 Cal.Rptr. 108].) The offer thus does not embrace the amount of money the defendant might have to pay the plaintiff in causes of action which will not be resolved at the trial of the litigation in which the offer is made. Consequently, the offer cannot require the plaintiff to terminate or abstain from pursuing those other causes of action as the price of receiving the monetary consideration the defendant tenders.
Fifth, the legislative purpose of the Code of Civil Procedure section 998 legislation is furthered by limiting the offer to the precise cause which otherwise is going to trial. That purpose is to encourage settlement of individual cases which are in litigation on fair and reasonable terms and thereby save the courts and litigants the costs of trial. “. . . [S]ection 998 achieves its purpose by punishing a party who fails to accept a reasonable offer from the other party.” [Italics added.] (Hurlbut v. Sonora Community *916Hospital (1989) 207 Cal.App.3d 388, 408 [254 Cal.Rptr. 840].) For reasons described above, this legislative purpose is distorted and defeated if the courts allow section 998 offers to encompass “general releases” and similar terms going beyond the precise cause which is otherwise going to trial.
The majority seeks to characterize the “general release” in this case as somehow confined to the precise causes of action that were being litigated in this case. Thus, according to that opinion, the offer does not suffer from any of the vices which bother me.
While it might be reassuring and certainly would have saved me time and effort to accept that narrow view of this general release, I was unable to do so. Other terms of this offer required the offeree to dismiss with prejudice all the claims which were the subject of the cause before the court in this action. A “general release” confined to those causes of action would be mere surplusage—a completely redundant term. Res judicata takes care of any concern as to the possible revival of the dismissed claims and does so at least as effectively as would a “release” of those causes of action.
So when the offer contained a separate and distinct term requiring a “general release” in addition to dismissal of the claims actually before the court, what is the reasonable interpretation of that term? I submit the term meant what it normally means—a general relinquishment of all causes of action, whether embraced in complaints already filed in the courts or ones which might be filed in the future. This meaning of the phrase “general release” has become a recognized term of art in the law and among lawyers. It is a term with a settled meaning. Indeed that settled meaning even has been recognized in statutes. (See, e.g., Civ. Code, § 1542.)
Accordingly, when defendant made a Code of Civil Procedure section 998 offer embodying as one of its conditions this common term of art—a demand for a “general release”—the plaintiff could only place one reasonable construction on that part of the defendant’s offer. If he were to receive the money the defendant was offering he would be required to execute a standard “general release,” not just dismiss his present cause. As commonly used among lawyers, in judicial decisions and in statutes, such a release would bar actual or potential causes of action beyond those embodied in the specific litigation that would go to trial if he rejected the offer.
If this is the proper reading of the “general release” condition included in this Code of Civil Procedure section 998 offer—and I submit it is the most and perhaps the only reasonable reading of that part of the offer—then that section 998 offer is infected with all the vices discussed earlier in this *917opinion. For those reasons, the section 998 offer is unreasonable and invalid. Accordingly, it cannot be the basis of a cost-shifting award under section 998 and that award should be reversed.