Second District Reminds Us That the Two Concepts Are Distinct in Nature in Unpublished Decision.
Sometimes succinct opinions contain gems. That happens to be the case with Tennen v. Finstad, Case No. B202404 (2d Dist., Div. 2 Aug. 6, 2008) (unpublished). This decision reinforces that “prevailing party” principles at issue under Civil Code section 1717 do not have relevance in determining if a litigant obtains recovery of postoffer costs (routine, expert, and attorney’s fees) under Code of Civil Procedure section 998.
In Tennen, one tenant (out of two) and new owners/landlords eventually went to trial. Before trial, landlords served remaining tenant with a section 998 offer for $15,001. Tenant allowed the offer to expire. Following trial, tenant was awarded $2,475 in damages against a different party than the 998-offering landlords. Landlords moved for an award of attorney’s fees and costs of almost $128,000 based on the theory that their 998 offer was successful. Tenant opposed, with the lower court denying landlords’ motions for attorney’s fees and costs. The reason: landlords were not “prevailing parties,” because the ultimate result was mixed—tenant won some award, a non-offering party got a small award, and landlords avoided exposure altogether. The lower court thought it was a draw throughout. Landlords appealed.
The fee/cost denial ruling was wrong, the Second District, Division Two, determined in a 3-0 decision authored by Justice Ashmann-Gerst. The upshot: landlords won their section 998 wager.
Because statutory construction of section 998 was involved, review was de novo.
Landlords made a 998 offer for $15,001, and tenant only recovered $2,475 against a different party and on a different cause of action. Hence, landlords correctly structured the 998 offer so as to be entitled to an award of postoffer costs and attorney’s fees.
The primary flaw in the trial court’s reasoning was engrafting “prevailing party” considerations into the section 998 analysis of who was the successful litigant. Relying on Scott Co. v. Blount, Inc., 20 Cal.4th 1103, 1114 (1999), the appellate panel in Tennen determined that “[u]nder section 998, the defendant’s entitlement to costs derives not from its status as a prevailing party but from the plaintiff’s failure to accept a reasonable settlement offer.” Because a defendant proffering a section 998 offer basically concedes it will not prevail, it makes no logical sense that “prevailing party” principles can be amalgamated into section 998 without rendering the provision nugatory.
Because the trial court did not pass on the reasonableness of landlords’ requested fees/costs, the matter was remanded so it could set the amount of reasonable postoffer attorney’s fees and costs—and, as an added bonus, landlords also were entitled to costs of appeal for winning a reversal of the fee/cost denial.