Plaintiffs often attempt to expose a defendant to the statutory risks associated with failure to accept a CCP §998 offer by serving such an offer early in the litigation. In this case, the Appellate Court discussed whether a CCP §998 offer made shortly after an answer had been filed prior to adequate time to investigate could be determined to have been made in good faith thereby entitling the plaintiff to prejudgment interest.
Plaintiff brought a medical malpractice action against a hospital and physician arising out of gallbladder removal surgery. Five days after the hospital had filed an answer, plaintiff served a CCP §998 offer in the amount of $249,999.99, plus legal costs. Judgment was entered in favor of the patient in the amount of $1,045,000. The trial court denied plaintiff’s request for prejudgment interest based on a determination the early CCP §998 settlement offer was not made in good faith. The patient appealed.
The Appellate Court noted that a plaintiff that prevails at trial is statutorily entitled to prejudgment interest starting from the date she makes a settlement offer, so long as that offer is valid and the subsequent verdict is more favorable than the rejected offer. An offer is valid and could support a later award of costs if the offeror knew that the offeree had reasonable access to the facts necessary to intelligently evaluate the offer. The Appellate Court identified three factors that are especially pertinent in determining whether an offeree had enough facts to evaluate an offer: 1) how far into the litigation the offer was made; 2) information available to the offeree prior to offer’s expiration; 3) whether the offeree let offeror know it lacked sufficient information to evaluate the offer, and 4) how the offeror responded.
The Appellate Court noted that, although the statute governing offers to compromise fixes no minimum period that must elapse following commencement of suit for service of a valid offer, a litigant receiving such an offer at the time a lawsuit is filed or soon thereafter is, as a general matter, less likely to have sufficient information upon which to evaluate that offer. A settlement offeree can alert the offeror that it lacks sufficient information to evaluate the offer by: 1) requesting discovery, either formally or informally; 2) asking for an extension of the offer’s deadline; or 3) otherwise objecting to the offer. If the offeror’s response to the offeree’s concerns regarding lack of sufficient information is less than forthcoming, such obstinacy is potent evidence that the offer was neither reasonable nor made in good faith, and therefore does not support an award of costs to the offeror if the offer is rejected.
The Appellate Court held that generally, although the offeror has the burden of showing that an offer is valid, it is the offeree who bears the burden of showing that an otherwise valid offer was not made in good faith. In a case where the patient made the offer just 19 days after serving the complaint and just five days after the hospital filed an answer, the patient’s complaint listed no specifics as to injuries suffered or amount of damages sought, the information provided by patient did not indicate which physician was responsible for any negligence, and patient did not respond when hospital stated it was too soon to determine whether settlement offer was valid, the trial court acted within its discretion in finding the settlement offer was not made in good faith and therefore did not support an award of prejudgment interest.
When served with a CCP §998 offer early in litigation, a defendant must inform the plaintiff it has insufficient information upon which to determine whether the offer is reasonable. The defendant should notify the plaintiff what additional information it requires and request an extension of time within which to respond to the offer.
For a copy of the complete decision, see: Licudine v. Cedars-Sinai Medical Center