Primer on Allocation of Preoffer/Postoffer Costs in Instructive Decision.
Code of Civil Procedure section 998, as we should know by now, is a legislatively-mandated statute that modifies the general routine costs provision of CCP § 1032 by augmenting or withholding the costs normally allowable under section 1032. Put another way, section 998 establishes a procedure for costs shifting upon a party’s refusal to settle. (Westamerica Bank v. MBG Industries, Inc., 158 Cal.App.4th 109, 128 (2007).)
The Fifth District, in Warfield v. Chandler, Case No. F059208 (5th Dist. May 27, 2011) (unpublished), offers us a great primer on how sections 998 and 1032 operate for purposes of determining the prevailing party and then what must be done to augment/withhold recovery of certain costs depending on who “won” the 998 costs-shifting battle.
Warfield involved a situation where plaintiff rejected a 998 offer that exceeded the award she ultimately received from the jury. (Under 998, in this situation, plaintiff may only recover preoffer costs, plaintiff cannot recover postoffer costs, and defendant may recover postoffer costs.) The trial court, however, got a little confused because the postoffer costs incurred by the defense exceeded the total judgment in plaintiff’s favor, so that it then decided the defendant was the costs prevailing party–awarding preoffer costs to the defense pursuant to section 1032(b). Plaintiff appealed this costs ruling.
In a twist we see often, even though it agreed there was error, the appellate court affirmed because plaintiff appealed the prior judgment without appealing the postjudgment order relating to costs. That meant the court was without jurisdiction to hear the matter. (Kajima Engineering and Construction, Inc. v. Pacific Bell, 103 Cal.App.4th 1397, 1402 (2002).) However, the appellate court discussed the issue so it “may preclude repetition of the error” by the trial judge.
The lower court should have followed this two-step methodology rather than dub someone the prevailing party after doing the preoffer/postoffer calculus: (1) the trial court determines the prevailing party utilizing the general rule of section 1032 and determine recoverable costs as permitted by section 1033.5; and (2) the trial court then augments or withholds the amount determined in step one pursuant to the dictates of section 998. “After these two steps are completed, the trial court’s cost award is complete.” The main flaw was that the trial court did not have authority to award a defendant preoffer costs pursuant to section 998(c).
We thank Justice Cornell, on behalf of a 3-0 panel, for the 998/1032 primer.