California Court Denies Attorneys’ Fees Despite 998 Settlement

On January 23, 2019, the California Court of Appeal denied a plaintiff’s request for attorneys’ fees and costs pursuant to a Code of Civil Procedure section 998 offer. See Linton v. County of Contra Costa, 31 Cal. App. 5th 628 (2019).

Background

In Linton, the plaintiff filed a lawsuit against the County of Contra Costa under the California Disabled Persons Act (“DPA”) and Unruh Civil Rights Act (“Unruh”) for injuries she suffered in an accident after falling from her wheelchair while being transported in a county paratransit van. Although the parties had numerous settlement discussions, these discussions all failed because the plaintiff insisted on both a settlement amount for damages and a separate right to seek attorneys’ fees. After years of litigation, the plaintiff eventually made a settlement offer pursuant to Section 998 for $250,001 “Plus costs under Code of Civil Procedure section 1032 and attorney’s fees allowed by law as determined by the court.” The defendants accepted this offer.

After the trial court entered judgment pursuant to the Section 998 offer, the plaintiff filed a motion for attorneys’ fees. The defendants opposed this motion, arguing that she was not entitled to attorneys’ fees because both the DPA and Unruh require a finding of liability, whereas the Section 998 offer did not include such a finding. The trial court agreed with the defendants and refused to grant the plaintiff’s motion for attorney’s fees.

On appeal, the plaintiff contended that she was entitled to prevailing fees under two theories: First, she argued she was the prevailing party under the definition set forth in Code of Civil Procedure section 1032. Second, she argued that that extrinsic evidence demonstrated she believed the 998 offer would entitle her to recover attorneys’ fees. The latter theory relied on principles of contract interpretation, or that the phrase “attorney’s fees allowed by law” was ambiguous, thus requiring the court to interpret it in the sense in which the plaintiff believed that the defendants understood it.

The Court of Appeal’s Decision

The court of appeal rejected the plaintiff’s first argument, or that she was the prevailing party under the definition set forth in Code of Civil Procedure section 1032. As the court reasoned, the 998 offer was silent as to whether the defendants had in fact violated the DPA or the Unruh. Because the 998 offer was silent as to liability, the plaintiff was not a prevailing party within the meaning of those statutes or Code of Civil Procedure section 1032.

The court of appeal also rejected the plaintiff’s second argument, or that extrinsic evidence demonstrated she believed the 998 offer would entitle her to recover attorneys’ fees. The court of appeal found that the phrase at issue was not ambiguous; rather, the plaintiff misunderstood the law. Because a mistaken understanding of the law does not allow for reforming an agreement, the court found in favor of the defendants.

Looking Forward

Linton demonstrates the care attorneys must take when drafting and accepting 998 offers of settlement. If the parties intend a 998 offer to include both a settlement amount and a separate right for attorneys’ fees pursuant to fee-shifting statutes, the 998 offer must clearly state that the defendant is liable. Because defendants are unlikely to admit to liability in settlement agreements or 998 offers, the parties should instead draft 998 offers that set forth a contractual right to those fees. As the Linton court stated, that language must clearly provide for “costs and attorneys’ fees in an amount to be determined by the court.”

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