BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Hannah-Beth Jackson, Chair
2015-2016 Regular Session
AB 1141 (Chau)
Version: June 3, 2015
Hearing Date: June 16, 2015
Fiscal: No
Urgency: No
RD
SUBJECT
Civil actions
DESCRIPTION
Under existing law, if a plaintiff rejects a 998 settlement
offer made by the defendant and fails to receive a better award
at trial, the plaintiff may, at the court's discretion, be
required to pay the defendant's pre and post-offer expert
witness costs. However, if a defendant rejects the plaintiff's
998 settlement offer and fails to receive a more favorable
judgment or award at trial, the court only has the discretion to
order the defendant to pay the plaintiff's post-offer expert
witness costs.
This bill would equalize the treatment of expert witness costs
when a settlement offer is rejected under section 998 of the
Code of Civil Procedure such that both plaintiffs and defendants
could only recover post-offer expert witness costs.
This bill would also reenact a provision allowing parties to
stipulate to summary adjudication of an issue that does not
dispose of a cause of action, upon approval of the court, as
specified, that sunset on January 1, 2015.
BACKGROUND
The Code of Civil Procedure contains various provisions that
seek to encourage settlement to avoid costly and unnecessary
trials and that otherwise seek to quickly dispose of cases or
claims (or settle issues) where there is no triable issue of
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fact. Two of those sections, Section 998 relating to pre-trial
settlement offers and Section 437c relating to summary judgments
and summary adjudications, are the subjects of this bill.
Section 998 of the Code of Civil Procedure allows for the
imposition of monetary sanctions against parties to civil
actions that decline pre-trial settlement offers and
subsequently fail to obtain a more favorable outcome at trial.
Prior to 2005, the party that declined the offer and failed to
obtain a better award at trial would have to pay the other
party's expert witness costs. Then in 2005, amendments were
made to an Assembly Judiciary Committee omnibus bill, AB 1742
(Committee on Judiciary, Ch. 706, Stats. 2005), wherein the word
"post-offer" was added to the provision requiring a defendant to
pay the plaintiff's expert witness costs when the defendant
rejects the plaintiff's settlement offer and fails to do better
at trial. That word was not added to the counterpart provision
requiring a plaintiff to pay the defendant's costs in a parallel
situation, creating what is presumed to be an unintended
disparity in the treatment of plaintiffs and defendants with
regard to consequences of rejecting what would have been a more
favorable pre-trial settlement offer.
Separately, in 2011, SB 384 (Evans, Ch. 419, Stats. 2011) was
enacted to create court efficiencies by encouraging settlement
of certain issues in a case by way of summary adjudication
stipulations. By way of background, pursuant to Section 437c of
the Code of Civil Procedure, after the filing of a lawsuit,
either party to an action may move for summary judgment by
contending that the action has no merit or that there is no
defense thereto. Essentially, the party filing the motion is
claiming that all necessary factual issues are resolved and need
not be tried by the court because they are so one-sided. If the
court finds that there is no triable issue as to any material
fact and that the moving party is entitled to a judgment as a
matter of law, then the motion must be granted (which generally
disposes of the whole case). If an issue of fact is presented,
the court must permit trial thereof, though it may also find
that certain other issues "are without substantial controversy"
and grant summary adjudication as to those issues. SB 384 added
provisions to that statute to allow parties to move for the
summary adjudication of an issue that does not completely
dispose of the cause of action, affirmative defense, or issue of
duty, as long as both parties stipulated and the court
determined and ordered that the motion would further the
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interests of judicial economy. On January 1, 2015, the summary
adjudication provisions that were enacted by SB 384 were
inadvertently allowed to sunset.
This bill, co-sponsored by the California Defense Counsel and
the Consumer Attorneys of California, would correct the above
Section 998 disparity to ensure that a party rejecting a
pre-trial settlement pays the post-offer costs of the
settlement-offering party in a situation where the
settlement-rejecting party fails to obtain a better award at
trial. This bill would also reinstate the now-sunsetted summary
adjudication provisions of Section 437c, indefinitely.
CHANGES TO EXISTING LAW
1. Existing law provides that a party may move for summary
adjudication in any action or proceeding if it is contended
that the action has no merit or that there is no defense to
the action or proceeding. (Code Civ. Proc. Sec. 437c(f).)
Existing law provides that a motion for summary adjudication
shall be granted only if it completely disposes of a cause of
action, an affirmative defense, a claim for damages, or an
issue of duty. (Code Civ. Proc. Sec. 437c(f).)
This bill would authorize a motion for summary adjudication of
an issue, even if it would not dispose of a cause of action,
an affirmative defense, or an issue of duty, upon the
stipulation of the parties and a prior determination by the
court that the motion will further the interests of judicial
economy by reducing the time required for trial or
significantly increasing the ability of the parties to settle.
This bill would also include provisions for the filing of the
stipulation, as specified.
This bill would make other technical, nonsubstantive changes.
2. Existing law provides that, not less than 10 days before
trial or arbitration of a civil action, any party may serve an
offer in writing upon any other party to the action to allow
judgment to be taken or an award to be entered in accordance
with the terms and conditions stated at that time, as
specified. (Code Civ. Proc. Sec. 998(b).)
Existing law further provides that if an offer made by a
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defendant is not accepted, and the plaintiff fails to obtain a
more favorable judgment or award, the plaintiff shall not
recover his or her post-offer costs and shall pay the
defendant's costs from the time of the offer. In addition, in
any action or proceeding other than an eminent domain action,
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, who are not regular employees of
any party, actual incurred and reasonably necessary in either,
or both, preparation for trial or arbitration, or during trial
or arbitration, of the case by the defendant. (Code Civ.
Proc. Sec. 998(c)(1).)
Existing law further provides that if an offer made by a
plaintiff is not accepted and the defendant fails to obtain a
more favorable judgment or award in any action or proceeding
other than an eminent domain action, the court or arbitration,
in its discretion, may require the defendant to pay a
reasonable sum to cover postoffer costs of the services of
expert witnesses, who are not regular employees of any party,
actually incurred and reasonably necessary in either, or both,
preparation for trial or arbitration, or during trial or
arbitration, of the case by the plaintiff, in addition to
plaintiff's costs. (Code Civ. Proc. Sec. 998(d) (emphasis
added).)
This bill would conform the provision requiring a plaintiff to
cover the defendant's "costs" (i.e. both pre-and post-offer
costs) to the provision requiring a defendant to cover the
plaintiff's "post-offer costs," only, so that both parties
would only need to pay the post-offer costs of the other
party, if the former declines an offer to settle and fails to
obtain a more favorable judgment or award.
COMMENT
1. Stated need for the bill
According to the author, "AB 1141[:] (1) reenacts and makes
permanent the provisions in statute relating to summary
adjudication that inadvertently sunsetted and (2) creates equity
between defendants and plaintiffs by allowing both defendants
and plaintiffs to seek [ ] post offer costs for expert
witnesses." With respect to the first part of the bill, the
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author writes:
SB 384 (Evans, 2011) set forth the procedure for bringing a
summary adjudication motion. First, the parties whose claims
or defenses are at issue are required to submit to the court a
joint stipulation setting forth the issues to be adjudicated,
with a declaration from each stipulating party demonstrating
that a ruling on the motion will further the interests of
judicial economy by reducing the time to be consumed at trial
or by significantly increasing the likelihood of settlement.
Next, within fifteen days of receiving the stipulations and
declarations, the court is required to notify the submitting
parties as to whether the motion may be filed. If the court
does not allow the motion to be filed, the parties may request
an informal conference to permit further evaluation of the
stipulations. Upon such a request, the court is required to
conduct the informal conference. Because the parties and the
court have to agree to the filing of a motion for summary
adjudication on a legal issue or claim of damages, there is no
possibility for either party to file a motion for purposes of
delay or harassment. Unlike the law prior to SB 384, one side
cannot unilaterally file a motion for summary adjudication.
Unfortunately, the provisions of SB 384 inadvertently
sunsetted on January 1, 2015 eliminating a legal tool that
promotes judicial economy.
With respect to the second section of the bill, the author
explains:
In 2005, an amendment to AB 1742 created an unintended
inequity between plaintiffs and defendants regarding
settlement offers under [Code of Civil Procedure (CCP)]
Section 998. As the statute currently reads, when a plaintiff
rejects a 998 settlement offer and fails to receive a better
judgment at trial, he or she can be subject to an award of
both pre and post offer expert fees paid by the defendant,
under subdivision (c)(1). However, if the defendant rejects a
plaintiff's 998 offer and fails to do better at trial, the
plaintiff can only seek "post offer costs of the services of
expert witnesses." CCP [Sec.] 998, subd. (d).
This disparity in application of CCP [Sec.] 998 can have a
very negative effect even in cases that never go to trial. If
the parties exchange 998 settlement offers near the trial
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date, during negotiations the plaintiff has to consider facing
potentially all of the defendant's expert fees, while the
defendant is only concerned with the plaintiff's post-offer
expert fees. This inequity in application of CCP [Sec.] 998
applies more pressure on plaintiffs to settle than [it does
on] defendants. Such an application was never intended by the
Legislature.
The Supreme Court confirmed this disparity in Regency Outdoor
Advertising, Inc. v. City of Los Angeles, 39 Cal.4th 507, 532
(2006). Following the language in the statute, the Court
held that defendants are entitled to both pre-offer and
post-offer costs under section 998(c). Id. at 533. The Court
noted in a footnote that plaintiffs could also receive expert
fees regardless of if they were incurred pre or post-offer up
until a 2005 amendment. Id. at n. 13. The word "post offer"
was inserted into subdivision (d) by AB 1742 (2005-06), and
was enacted as Chapter 706 of the laws of 2005. However, the
2005 amendment was not intended to create this inequity as the
change was not mentioned in the bill's analysis. AB 1141 would
resolve this situation by applying CCP [Sec.] 998 equally to
both the plaintiffs and defendants.
2. Bill creates parity for the recovery of expert witness fees
Section 998 of the Code of Civil Procedure seeks to encourage
the early settlement of cases by reducing a plaintiff's recovery
when a plaintiff rejects a defendant's offer and then fails to
obtain a more favorable judgment or award. Generally, if a
settlement offer made by a defendant is not accepted and the
plaintiff fails to obtain a more favorable judgment or award,
the plaintiff can be ordered by the court or arbitrator to pay a
reasonable sum to cover the defendant's expert witness costs.
(Code Civ. Proc. Sec. 998(c)(1).) In contrast, due to a change
made to this section in 2005, if an offer made by a plaintiff is
not accepted and the defendant fails to obtain a more favorable
judgment or award, the court or arbitration, in its discretion,
may only require the defendant to pay a reasonable sum to cover
the plaintiff's "post-offer" expert witness costs. (Code Civ.
Proc. Sec. 998(d) (emphasis added).)
This bill seeks to address the above-described disparate
treatment of plaintiffs and defendants for purposes of paying
expert witnesses costs in relation to a rejected settlement
offer. As noted above, this appears to be the product of an
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unintended error in a 2005 omnibus bill. (See also Background
for more.) While omnibus bills are traditionally intended to be
non-substantive and non-controversial, the addition of the word
"post-offer" to one, but not both, of the provisions relating to
the payment of litigant costs, has had a very substantive
effect. As explained by co-sponsor Consumer Attorneys of
California:
[ . . . ] This disparity in application of CCP [Sec.] 998 can
have a very negative effect even in cases that never go to
trial. Under current law, if a plaintiff rejects a [Sec.] 998
offer to compromise and does not receive a more favorable
result at trial, the court may order the plaintiff to pay for
all of the defendant's expert costs both before and after the
offer was made. However, if a defendant rejects a [Sec.] 998
offer and fails to achieve a more favorable result at trial,
the language of the statute provides that defendant only has
to pay for the plaintiff's postoffer expert costs. This places
more pressure on the plaintiff to settle while also creating
an incentive for defendants to prolong the case until
substantial expert costs have been incurred because the
statutory penalty is not tied to the timing of the offer.
AB 1141 would correct the inadvertent legislative oversight
and inequity of 998 offers on plaintiffs [ . . . ].
In support, the Conference of California Bar Associations
writes:
There is no apparent reason for [the current] inequity, nor
does it comport with the purpose of the statute, which is to
encourage parties to accept reasonable offers to compromise by
cutting off the non-accepting party's right to recover
postoffer costs and allowing the offering party to recover
expert fees incurred in having to proceed forward with trial.
To the contrary, the section creates an incentive for a
defendant to delay service of a statutory offer until
substantial expert costs have been incurred because the penal
nature of the statute is not tied to the timing of the offer.
[ . . . ] This bill will enable the statute to work the way it
was intended, providing equal incentive to both parties to
make offers to compromise and equal penalty if they refuse a
compromise offer and fail to do better at trial.
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3. Bill reenacts summary adjudication provisions that
inadvertently sunset on January 1, 2015
As noted in the Background, certain provisions allowing for
parties to make a motion for the summary adjudication of issues
in a matter, upon stipulation of the parties and determination
by the court that the motion would further interests of judicial
economy were unintentionally allowed to sunset on January 1,
2015.
As explained by co-sponsor California Defense Counsel:
[ . . . ] Language negotiated several years ago between
plaintiffs, defense and judges permits the filing of motions
for summary adjudication of issues, even when those issues
would not completely dispose of a cause of action, but only
where the plaintiff, defense and judge agree that resolution
of the issue through summary adjudication would increase the
chances of settlement or reduce the length of a trial. In
other words, the summary adjudication issue is by stipulation
only.
This summary adjudication language inadvertently sunsetted at
the end of the 2014 and the language in AB 1141 restores the
prior language in its entirety. The provision helps
contribute to judicial economy and efficiency, so important in
our currently overburdened civil courts.
In support, Judicial Council of California concurs that "[t]he
partial summary adjudication scheme is designed for cases where
both the parties and the court agree that such motions will
enhance judicial economy and/or help promote settlements. It
represents an innovative and flexible approach to motion
practice that, in appropriate cases, may serve to speed up final
resolution of the case while at the same time guarding against
unnecessary delays by allowing the court to control its use."
As a matter of public policy, given the challenges faced by the
courts under continued budget constraints and the resulting
delays in civil litigation, it is important this state find and
increase court efficiencies and help trials progress more
expeditiously. This bill would appear to be in line with that
objective by reinstating these summary adjudication provisions
that were allowed to lapse.
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4. Opposition to prior version of the bill
The prior version of this bill would have removed the word
"post-offer" from the Section 998 provision that currently
limits the defendant's responsibility to pay the plaintiff's
post-offer expert witness costs, so that both defendants and
plaintiffs, alike, could be ordered to pay the other party's
pre- and post-offer expert witness costs as a result of
rejecting a settlement offer that was more favorable than the
award actually received at trial. That portion of the bill
received opposition from: American Insurance Association;
Association of California Insurance Companies; California
Building Industry Association; California Chamber of Commerce;
Civil Justice Association of California; Cooperative of American
Physicians; Personal Insurance Federation of California; The
Doctors Company. (Those same organizations, however, also write
in support the summary adjudication provisions of the bill.)
As reflected in the June 3, 2015 version of this bill, in
response to those concerns, the co-sponsors have amended the
bill to achieve equity, instead, by inserting the post-offer
limitation into both provisions, so that both plaintiffs and
defendants, alike, can only be ordered to pay their opposing
party's post-offer expert witness costs. As a result of those
amendments, the opposition has indicated that they are now
neutral on the Section 998 portion of the bill.
Support : American Insurance Association (with respect to
Section 437c summary adjudication provisions only); Association
of California Insurance Companies (with respect to Section 437c
summary adjudication provisions only); California Building
Industry Association (with respect to Section 437c summary
adjudication provisions only); California Chamber of Commerce
(with respect to Section 437c summary adjudication provisions
only); Civil Justice Association of California (with respect to
Section 437c summary adjudication provisions only); Conference
of California Bar Associations; Cooperative of American
Physicians (with respect to Section 437c summary adjudication
provisions only); Judicial Council of California (with respect
to Section 437c summary adjudication provisions only; no
position on Section 998 provisions); Personal Insurance
Federation of California (with respect to Section 437c summary
adjudication provisions only); The Doctors Company (with respect
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to Section 437c summary adjudication provisions only)
Opposition : None Known
HISTORY
Source : California Defense Counsel; Consumer Attorneys of
California
Related Pending Legislation : None Known
Prior Legislation :
SB 384, (Evans, Ch. 419, Stats. 2011) See Background
AB 1742 (Committee on Judiciary, Ch. 706, Stats. 2005) See
Background
Prior Vote :
Assembly Floor (Ayes 48, Noes 29)
Assembly Judiciary Committee (Ayes 8, Noes 1)
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