Second District, Division Four Also Rejects That Letter Containing Purported CCP Section 998 Offer Was Valid Where Opposing Party Not Given Full Statutory Period Within Which to Accept.
Presiding Justice Epstein, writing for a 3-0 panel of the Second District, Division Four, recently authored an interesting opinion in which attorney’s fees were not allowed under either Civil Code section 1717 or Code of Civil Procedure section 998. We digest the decision below, which is Glencoe v. Neue Sentimental Film AG, Case No. B203931 (Nov. 25, 2008) (certified for publication).
The facts go like this. Landlord sued tenant for delinquent rent under a lease with a fees clause as well as related entities under the theory they were tenant’s alter egos. (This alter ego theory potentially meant the fees clause allowed recovery to the winner of the alter ego contest under Reynolds Metals, one of our Leading Cases.) A bench trial proceeded against one of the related entities, with the lower court bifurcating the case to hear the alter ego liability phase first. Landlord moved for judgment under Code of Civil Procedure section 631.8, but the lower court did not rule and indicated it wanted to review extensive evidence submitted by both sides. Before any ruling was made on the section 631.8 motion, landlord voluntarily dismissed the action with prejudice. Related entity claimed it prevailed, moving for recovery of attorney’s fees based on the fees clause under Civil Code section 1717 or based on a pretrial letter settlement offer postured under Code of Civil Procedure section 998. The lower court refused to award fees, prompting an appeal that was affirmed upon review.
The section 1717 issue was settled based on the literal language of subdivision(b)(2), which “bars recovery of section 1717 attorney fees regardless of when the dismissal is filed” given that (b)(2) contains no temporal limitation. (See Topanga and Victory Partners v. Toghia, 103 Cal.App.4th 775, 782 n. 3 (2002), reviewed in our
June 19, 2008 post.) In reaching this conclusion, Justice Epstein distinguished other situations—where rulings or judgment had “ripened to the point of inevitability” (e.g., demurrer sustained without leave, demurrer sustained with leave but no amendment timely filed, and summary judgment ruling because there was no opposition)—from the situation before the panel, where the plaintiff dismissed the action with prejudice before any ruling was made. “Its intent was to end the litigation, not to manipulate the judicial process to avoid its inevitable end. This was entirely proper.” (Slip Opn., at p. 4.)
Related entity did not fare well on its section 998 argument. Section 998 allows 30 days for acceptance or, if made 10 days before trial or arbitration, acceptance prior to either of these events. Defendant’s offer—made much prior to trial—allowed well under 30 days for acceptance, which legally meant that the offer was revoked so as to not function as an “offer” for purposes of cost benefits under section 998. (See Marcey v. Romero, 148 Cal.App.4th 1211, 1216 (2007).)
This case well illustrates that a litigant who does not “hold his cards too long” way well be able to dismiss before a dispositive ruling where there is still some doubt as to the outcome, avoiding attorney’s fees exposure under section 1717 by deft decision making.