BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 1141| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 1141 Author: Chau (D) Amended: 6/3/15 in Senate Vote: 21 SENATE JUDICIARY COMMITTEE: 7-0, 6/16/15 AYES: Jackson, Moorlach, Anderson, Hertzberg, Leno, Monning, Wieckowski ASSEMBLY FLOOR: 48-29, 4/23/15 - See last page for vote SUBJECT: Civil actions SOURCE: California Defense CounselConsumer Attorneys of California DIGEST: This bill reenacts 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. This bill also removes a disparity under existing law relating to Section 998 settlement offers by ensuring that both plaintiffs and defendants, alike, could be ordered to pay the "post-offer" costs of the other party as a consequence of rejecting a Section 998 settlement offer and failing to ultimately obtain a more favorable award. ANALYSIS: AB 1141 Page 2 Existing law: 1)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. 2)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. 3)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. 4)Provides that 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 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. 5)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 AB 1141 Page 3 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: 1)Reenacts sunsetted provisions of the summary judgment statute that 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. Also reenacts sunsetted provisions that provide for the filing of the stipulation, as specified. 2)Conforms 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. 3)Makes other make other technical, nonsubstantive changes. 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 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. AB 1141 Page 4 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, Chapter 706, Statutes of 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, Chapter 419, Statutes of 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 interests of judicial economy. On January 1, 2015, the summary adjudication provisions that were enacted by SB 384 AB 1141 Page 5 were inadvertently allowed to sunset. This bill, co-sponsored by the California Defense Counsel and the Consumer Attorneys of California, corrects 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 also reinstates the now-sunsetted summary adjudication provisions of Section 437c, indefinitely. Comments As stated by 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 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 AB 1141 Page 6 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 writes: 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 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 AB 1141 Page 7 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. FISCAL EFFECT: Appropriation: No Fiscal Com.:NoLocal: No SUPPORT: (Verified6/19/15) California Defense Counsel (co-source) Consumer Attorneys of California (co-source) American Insurance Association Association of California Insurance CompaniesCalifornia Building Industry Association California Chamber of CommerceCivil Justice Association of CaliforniaConference of California Bar Associations Cooperative of American PhysiciansJudicial Council of California Personal Insurance Federation of California The Doctors Company OPPOSITION: (Verified6/19/15) None received ARGUMENTS IN SUPPORT: The Judicial Council, in support of the summary adjudication provisions of this bill, writes 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 AB 1141 Page 8 unnecessary delays by allowing the court to control its use." Judicial Council has no position on the bill's proposed changes to Section 998. Also in support of the summary adjudication provisions are: 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. Notably, due to amendments taken on June 3, 2015, these organizations have removed their opposition to the portion of the bill relating to Section 998 settlement offers. ASSEMBLY FLOOR: 48-29, 4/23/15 AYES: Alejo, Bloom, Bonilla, Bonta, Brown, Burke, Calderon, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Roger Hernández, Holden, Irwin, Jones-Sawyer, Levine, Lopez, Low, McCarty, Medina, Mullin, Nazarian, O'Donnell, Perea, Quirk, Rendon, Rodriguez, Santiago, Mark Stone, Thurmond, Ting, Weber, Williams, Atkins NOES: Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang, Chávez, Dahle, Beth Gaines, Gallagher, Grove, Hadley, Harper, Jones, Kim, Lackey, Linder, Maienschein, Mathis, Mayes, Melendez, Obernolte, Olsen, Patterson, Steinorth, Wagner, Waldron, Wilk, Wood NO VOTE RECORDED: Campos, Ridley-Thomas, Salas Prepared by:Ronak Daylami / JUD. / (916) 651-4113 6/19/15 15:43:16 **** END **** AB 1141 Page 9