BILL ANALYSIS
AB 732
Page 1
Date of Hearing: May 2, 2001
ASSEMBLY COMMITTEE ON JUDICIARY
Darrell Steinberg, Chair
AB 732 (Wayne) - As Introduced: February 22, 2001
SUBJECT : CIVIL PROCEDURE: SETTLEMENT OFFERS
KEY ISSUE : Should existing law be clarified to provide that
TAXPAYERS not HAVE TO PAY FOR monetary sanctions ASSESSED
BECAUSE PUBLIC PROSECUTORS CHOOSE NOT TO ACCEPT pre-trial
settlement offers in civil law enforcement lawsuits?
SYNOPSIS
This Bill, Sponsored By The Attorney General, The California
District Attorneys Association, And The Los Angeles District
Attorney's Office, Seeks To Clarify That Where A Public
Prosecutor Refuses A Pre-Trial Settlement Offer Arising Out Of A
Civil Law Enforcement Action, Certain Monetary Sanctions
Applicable To Private Parties Do Not Apply. Under Code Of Civil
Procedure Section 998, Parties To A Civil Action May Be Subject
To Monetary Sanctions For Failing To Accept A Pre-Trial
Settlement Offer If, At The Subsequent Trial Or Arbitration, The
Refusing Party Obtains A Less Favorable Judgment Or Award Than
The Terms Of The Offer. While These Sanctions Have Generally
Been Understood Not To Apply To Public Prosecutors Bringing
Civil Law Enforcement Lawsuits, Sponsors Of This Measure Point
To A Recent Superior Court Decision Which Supports The Need To
Clarify The Law In This Area. Sponsors Note That Current Law
Was Designed To Address The Problem Of Unreasonable Private
Litigants, Whose Delay In Negotiating A Resolution As To
Monetary Damages Created An Undue Burden On The Courts. Public
Prosecutors, Proponents Point Out, Are Distinct Because They May
Generally Obtain Only Injunctive Or Restitutionary Relief In
Civil Enforcement Actions. Additionally, Proponents Assert That
By Subjecting Public Prosecutors, And Therefore Taxpayers, To
Monetary Sanctions, Their Obligation To Serve The Public
Interest May Be Compromised By Economic Considerations.
SUMMARY : Allows public prosecutors to refuse settlement offers
arising out of law enforcement actions without the threat of
monetary sanctions for failing to obtain a more favorable
judgment. Specifically, this bill exempts public prosecutors,
and therefore taxpayers, from the imposition of monetary fines
AB 732
Page 2
for the failing to accept a pre-trial settlement offer in a
civil law enforcement actions brought in the name of the people.
EXISTING LAW :
1)Provides that, in a civil action, either party may make an
offer of settlement ten days or more prior to commencement of
trial or arbitration. (Code of Civil Procedure section
998(b). All further references are to this code section
unless otherwise stated.)
2)Allows the court or arbitrator, in its discretion, to sanction
a party refusing such an offer by requiring them to pay the
offering party's court costs and expert witness costs, where
the
refusing party fails to obtain a more favorable judgment or
reward. (Section 998 (c)(1), (d), (e).)
3)Exempts from the abovementioned sanctions, offers made by
plaintiffs in eminent domain actions. (Section 998(g).)
FISCAL EFFECT : This bill as currently in print is not keyed
fiscal.
COMMENTS : In commenting on the need for this measure, the
author writes:
The Attorney General, district attorneys, and city
attorneys statewide actively bring civil law enforcement
lawsuits to protect the public under our state's potent
statutes banning unfair competition and deceptive
practices. Environmental units and fraud units also bring
civil enforcement lawsuits. . . . Section 998 [See above
"Existing Law"] was enacted in 1971 to deal with the
problem of unreasonable private litigants burdening the
courts with trials in tort and contract lawsuits where
reasonable parties could agree on money damages. Since
1971, 998 has been used many times in private lawsuits,
but never applied to public enforcement actions. The
accepted view was that public enforcement actions were
exempt from these sanctions because, among other things,
998 specifically speaks of offsets against any "damages"
awarded in these actions, and public prosecutors are not
empowered to recover damages in their enforcement actions
AB 732
Page 3
(which are generally limited by statute to injunctions,
penalties, and victim restitution).
Applying this sanction intended for private parties to law
enforcement actions is bad public policy and a threat to
the sound exercise of prosecutorial discretion. Public
Prosecutors have the duty to "seek justice, not merely to
convict" (see ABA Code of Prof. Resp., Canon 7) and thus
should never be forced or pressured to settle law
enforcement actions on terms not in the best interests of
the public out of concern for 998 monetary exposure. . .
.
The policies of 998 do not rationally apply to public law
enforcement cases. . . . Most all of law enforcement cases
involve complex equitable remedies, including injunctive
relief, which aren't easily measured in dollar terms. . . .
An order directing the People to pay a 998 sanction for
the exercise of prosecutorial discretion offends our
traditions of prosecutorial independence and may actually
be a violation of the separation of powers doctrine.
Background . In 1971, the Legislature added Section 998 to the
Code of Civil Procedure, which allowed for the imposition of
monetary sanctions against parties to civil actions who failed
to accept pre-trial settlement offers and subsequently obtained
a less favorable judgment at trial or arbitration. The purpose
of this law, relating to the imposition of court costs and
expert witness expenses following the rejection of a pre-trial
settlement offer, was articulated by the California Supreme
Court in Brown v. Nolan (1979) 159 Cal. Rptr. 469. There, the
Court held that the purpose of Section 998 was to "encourage the
settlement of litigation without trial." Furthermore, the Court
noted that, "[Section 998's] effect is to punish the plaintiff
who fails to accept a reasonable offer from a defendant."
Nothing in the Court's opinion or the legislative record
indicates that Section 998 sanctions were ever intended to apply
to actions seeking injunctive or restitutionary relief, however.
Since the time of its enactment until very recently, this
interpretation of the scope of Section 998's had gone
unchallenged. However, last year a Superior Court judge in Los
Angeles reached the unprecedented conclusion in a civil unfair
competition trial that Section 998 sanctions applied to public
AB 732
Page 4
prosecutors. Although the prosecution prevailed over a number
of other defendants in that case, because of one defendant's
successful defense, taxpayers, as represented by the Attorney
General's Office (AG), were ordered to pay $513,302 in Section
998 sanctions.
SHOULD EXISTING LAW BE CLARIFIED TO PROVIDE THAT PUBLIC
PROSECUTORS NOT BE ASSESSED MONETARY SANCTIONS FOR FAILING TO
ACCEPT PRE-TRIAL SETTLEMENT OFFERS IN CIVIL LAW ENFORCEMENT
LAWSUITS ? Proponents of this bill point to three main arguments
in support of their position. First, these groups assert that
it was not the intent of the Legislature to include civil
enforcement lawsuits among the actions subject to the current
monetary sanctions regime. In support of this position, the AG
writes that, "[i]n it's three decades of existence, this statute
[Section 998 et seq .] imposed for has never been applied to
public enforcement actions until last year." The California
District Attorney's Association (CDAA) comments that, Section
998 was enacted to alleviate burden on courts created by
"unreasonable litigants" who fail to resolve issues of monetary
damages "where reasonable parties could agree on monetary
damages." Moreover, in examining the plain language of the
statute, the AG notes its explicit reference to "damages"
awarded in civil actions. In contrast to this reference, public
prosecutors, the AG continues, are generally limited to
injunctive remedies, penalties, or victim's restitution. These
remedies, the author writes, are distinct from the normal
remedies sought in private civil actions because they cannot be
easily reduced to monetary values.
Proponents next assert that it would be "bad public policy" to
subject public prosecutors to monetary sanctions for failing to
accept pre-trial settlement offers because their attention may
be diverted away from their obligation to "seek justice."
Elaborating on this point, the AG writes, "[i]n order to ensure
the public's protection, public prosecutors should not be
deterred from seeking the full measure of justice" and that they
"should not be pressured [by] monetary concerns to settle law
enforcement actions." The Consumers for Auto Reliability and
Safety (CARS) describe the potential dilemma facing public
prosecutors as a "Hobson's choice of risking exposure for a
defendant's high-priced legal maneuvering or being victimized."
Thus, the central concern in this vein is the potential for
public prosecutors to compromise their obligation to the public
in order to protect against burdensome penalties and sanctions.
AB 732
Page 5
Finally, the importance of allowing prosecutors discretion with
respect to enforcement actions, proponents state, is underscored
by the fact that most enforcement actions are brought to protect
the public under consumer protection, fraud, and environmental
harm statutes. Thus, the Los Angeles District Attorney's Office
writes that, for "[m]any California prosecutors - - especially
[those] in smaller counties," the possibility of monetary
sanctions may deter them enforcing the law at all in these areas
rather than risk unpredictable sanctions." Also commenting on
the necessity of this measure, CARS states that, "[a]s
consumers, citizens, and taxpayers, we depend on . . . [public
prosecutors] to protect us. . . ." Furthermore, CARS concludes
that, "[w]ithout [this bill], many vital consumer protection
laws would be rendered meaningless."
REGISTERED SUPPORT / OPPOSITION :
Support
Attorney General's Office (co-sponsor)
California District Attorney's Association (co-sponsor)
Los Angeles District Attorney's Office (co-sponsor)
Consumers for Auto Reliability and Safety
Opposition
None on file
Analysis Prepared by : Richard Miadich / JUD. / (916) 319-2334