(Published in the May 2021 issue of the “North County Lawyer” magazine of the North County Bar Association)
The law is chock full of technicalities. Lawyers earn their keep by finding them and exploiting them to their client's benefit. Lately, lawyers are also exploiting them to avoid their own mistakes.
Last summer, I wrote an article that was published in the July issue of this North County Lawyer magazine entitled “APPEALS COURT AFFIRMS A LAWYER'S LICENSE TO STEAL! (SPLITTING FEES REQUIRES WRITTEN CONSENT, SOMETIMES).” It was about a personal injury attorney who got the Appellate Court to void his own fee splitting agreement with another attorney because he overlooked a technicality when drafting it. Reeve v. Meleyco, (2020) 46 Cal.App.5th 1092, (reh'g denied, review denied). In that article I wrote “An unscrupulous lawyer might purposely fail to get the client's written consent and then later claim lack of compliance with the rule to weasel out of the obligation to the referring attorney. That would be stealing you say!” In that case, the lawyer only got the client's written acknowledgement of notice and understanding of the fee split arrangement. The court held that was not enough to show written client “consent” to the fee split arrangement. Thus, no referral fee was owed.
Well, here we go again. In Mostafavi Law Group, APC v. Larry Rabineau APC B302344, 2nd Dist 3-3-2021, two law firms were the litigants in a defamation action. The defendant lawyer served a Code of Civil Procedure §998 (hereafter CCP 998) offer to compromise for $25,000.01 upon the plaintiff lawyer, who accepted it and obtained entry of judgment upon it. The parties disagreed over whether both plaintiffs (Mostafavi individually and his law corporation) must execute a release to be paid. Thus, the offeror defendant lawyer filed a motion to set aside the judgment under Code of Civil Procedure section 473, subdivision (d) asking the court to hold that his offer and the resulting judgment upon it were void because his offer did not describe how to accept it. Both the trial court and Division Four of the Second Appellate District agreed that the CCP 998 offer and the resulting judgment were void because the statute requires that the offer contain an “acceptance provision.” Code of Civil Procedure §998(b) specifies that the offer “shall” include among other things “a provision that allows the accepting party to indicate acceptance of the offer by signing a statement that the offer is accepted.”
The accepting plaintiff attorney argued to no avail that the offer's omission of an acceptance provision was harmless, as the “sole purpose” of requiring section 998 offers to contain such a provision is “to make it clear that written acceptance is required.” This seems logical, but technicality prevailed. This case posed an issue of first impression where the offer had been accepted. The court relied upon a line of California Appellate Court rulings involving cases where the offer was rejected. Those courts held that a section 998 offer lacking an acceptance provision is invalid, and therefore an offeree's failure to accept it does not trigger any of section 998's cost-shifting provisions. (See Perez v. Torres (2012) 206 Cal.App.4th 418, 424 [defendant's section 998 offer was invalid because “the plain language of the statute requires all offers to contain an acceptance provision”]; Boeken v. Philip Morris USA Inc. (2013) 217 Cal.App.4th 992, 1004 [“Because [plaintiff's] section 998 offer did not include the required acceptance provision, the offer was invalid. [Citations.]”]; Bigler-Engler v. Breg, Inc. (2017) 7 Cal.App.5th 276, 331 [plaintiff was not entitled to costs under section 998 because her offer “did not include an acceptance provision” and “therefore did not comply with the statute”]). The court also relied upon Saba v. Crater (1998) 62 Cal.App.4th 150, 153-154 where the offer was held invalid because it was made orally on the record at a deposition rather than in writing as proscribed by the statute. Even experienced trial lawyers have made this drafting error, as did the plaintiff attorney in the above mentioned Boeken v. Philip Morris USA Inc., where the jury awarded $12.8 million to a son whose father died of lung cancer that he developed from smoking Philip Morris cigarettes. The ineffective CCP 998 was for $4.95 million, which offer Philip Morris did not accept.
The Mostafavi Law Group, APC v. Larry Rabineau APC court was also not persuaded by the accepting plaintiff's equitable argument that voiding the judgment would allow the defendant to unfairly benefit from his own drafting errors and avoid the duties and consequences of his own offer based on a technical deficiency that he created. Since the court held that the offer was void, the court also rejected the accepting plaintiff attorney's argument that his written acceptance created a binding contract under ordinary contract principles of offer and acceptance. The court relied upon Martinez v. Brownco Construction Co.(2013) 56 Cal.4th 1014, 1020.) in which the Supreme Court held that general contract principles should not apply where they would conflict with the language of section 998.
There a a few noteworthy ramifications of the case law on this issue for your practice. First, case law holds that no magical language is required, and that the requisite notice of how to accept the offer in writing can be implied merely by including a place to sign accepting the offer. See Whatley-Miller v Cooper (2013) 212 Cal.App.4th 1103, 1110. Rouland v Pacific Specialty Ins. Co. (2013) 220 Cal.App.4th 280, 285. This case law approves of the Judicial Council Form Civ-090 “Offer to Compromise” despite its lack of any instructions for how to accept the offer, since it includes a signature line for acceptance of the offer. Secondly, the burden is now on the offeree to make sure the offer contains the requisite acceptance provision, so that an acceptance of the offer can be enforced as a judgment. If a party wants to accept an offer that lacks an acceptance provision, the best course of action may be to inform the offeror of the drafting error and await a compliant offer. An unscrupulous lawyer might purposely draft a non-compliant offer, never intending to abide by it, but rather solely as a litigation leverage tactic to see if the offeree would bite at it. That would be cheating you say!
In this author's opinion, the Appellate Court should not have ignored the fact that the parties involved were attorneys, and attorneys do not need to inform each other on the law. For example, an insurer must inform a claimant of the statute of limitations for filing a lawsuit on a claim, unless the claimant is represented by counsel. See California Code of Regulations, title 10, § 2695.7(f). Perhaps a better ruling would be that an improperly drafted offer should be voidable only by the accepting offeree. Perhaps CCP 998 should be changed to only require a statement about how to accept the offer when it is made to a non-attorney party. Someone should propose that change to the California Conference of Bar Associations! Imaging the headache and heartache felt by the accepting plaintiff attorney in the meager $25,000 offer case discussed above. Even worse, imagine being the attorney with a published case for all eternity about your mistake. One that is discussed in every civil litigation review course for years to come. Maybe even taught in law school! Yikes!
The court writes that “Section 998, subdivision (b) sets forth the mandatory requirements that an offer and acceptance must satisfy in order to be valid under the statute.” However, courts have also enforced CCP 998 offers that require the plaintiff to provide defendant with a general release of all claims relating to the pending litigation and dismiss the case with prejudice, rather than take judgment against Defendant. (See the seminal case of Goodstein v. Bank of San Pedro (1994) 27 Cal. App. 4th 899, 905, 907-908.) Such decisions clearly allow an offer that does not abide by the following unambiguous language of CCP 998:
.…(b)…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. The written offer shall include a statement of the offer, containing the terms and conditions of the judgment or award,…(1) If the offer is accepted, the offer with proof of acceptance shall be filed and the clerk or the judge shall enter judgment accordingly. In the case of an arbitration, the offer with proof of acceptance shall be filed with the arbitrator or arbitrators who shall promptly render an award accordingly….
The court in Goodstein rationalized as follows:
“The word “judgment” in Code of Civil Procedure section 998 indicates that the statute contemplates that an offer to compromise which is accepted will result in the final disposition of the underlying lawsuit; the statute does not indicate any intent to limit the terms of the compromise settlement or the type of final disposition. The acceptance of the instant compromise agreement calling for a voluntary dismissal with prejudice would have finally disposed of the complaint as effectively (see Code Civ. Proc., § 581d) as one calling for entry of judgment in favor of plaintiff.” In light of the foregoing, we conclude that the instant offer to compromise meets the requirements of subdivision (b) of Code of Civil Procedure section 998. 27 Cal. App. 4th at 906
In this authors opinion, the Goodstein twist on the meaning of “judgment” exhibits some high flying judicial gymnastics. Parties settle claims by compromise release and dismissal to avoid entry of judgment. So, the mandatory provisions of CCP 998 are not really all that “mandatory.” They are apparently subject to some judicial manipulation. For what it is worth, note that the above appellate decisions tend to favor the defendant in this area of law. The defendant attorney in the Mostafavi case should have drafted his offer to require a release and dismissal in accordance with the Goodstein decision. Doing that would have saved a lot of time, money, and grief for both sides.
Also of interest is that the defendant attorney offeror in the Mostafavi case sought relief for his mistake under Code of Civil Procedure section 473, subdivision (d) which allows a court to set aside a void judgment. He did not need to seek relief for his mistake under subdivision (b) which permits a court to relieve a party or his or her legal representative from a judgment, dismissal, order, or other proceeding taken against him or her through his or her mistake, inadvertence, surprise, or excusable neglect. A party who seeks relief under subdivision (b) must demonstrate that the attorney's mistake, inadvertence, or general neglect was “excusable.”
The seminal case allowing relief under Code of Civil Procedure section 473, subdivision (d) from a CCP 998 offer mistakenly drafted incorrectly is Zamora v. Clayborn Contracting Group, Inc. (2002) 28 Cal. 4th 249, 254, in which the mistake in question was a typographical error by counsel's assistant. In Zamora, the legal assistant who prepared the 998 offer inadvertently wrote that judgment could be entered against the firm's client instead of in favor of the client. In determining whether an attorney's mistake or inadvertence is excusable, the court inquires whether a reasonably prudent person under the same or similar circumstances might have made the same error. Zamora, 28 Cal. 4th 249, 258; accord Pazderka v. Caballeros, Dimas, Alang (1998) 62 Cal. App. 4th 658, 671. Relief from attorney error is available only for mistakes “anyone could have made.” Zamora, 28 Cal.4th 249, 258. The California Supreme Court stated:
“Here, the trial court reasonably concluded that the mistake made by Zamora's counsel was excusable. The erroneous substitution of the word ‘against' for the phrase ‘in favor of' is a clerical or ministerial mistake that could have been made by anybody. While counsel's failure to review the document before sending it out was imprudent, we cannot say that his imprudence rendered the mistake inexcusable under the circumstances. Indeed, appellate courts have routinely affirmed orders vacating judgments based on analogous mistakes made by an attorney or his or her staff. For example, courts have set aside judgments where: (1) The attorney mistakenly checked the ‘with prejudice' box instead of the ‘without prejudice' box . . . .”28 Cal.4th at 259.
There are an abundance of other decisions about attorneys seeking relief from their mistakes in drafting CCP 998 offers as well as in other lawyering activities. I neither have time nor toner to review all of them. As long as there attorneys, there will be legal technicalities for them to exploit to seek relief from their mistakes, and apparently Courts willing to forgive them, or not. Hey, it depends!
*Russell S. Kohn, Esq. was president of the BANSDC in 2004 and is a former BANSDC Director and Personal Injury Section Chairman. Kohn Law Office is located in Oceanside and represents injury victims in the area of plaintiff personal injury law. Mr. Kohn does not make mistakes that require help from the court. He can be reached at (760) 710-0190 and [email protected].