In Licudine v. Cedars-Sinai Medical Center, No. B286350, the Court of Appeal, Second Appellate District, Division Two, recently held that there are three factors especially pertinent to determine whether a Statutory Offer to Compromise pursuant to Code of Civil Procedure §998 is valid and made in good faith: (1) how far into the litigation the 998 offer was made; (2) the information available to the offeree prior to the expiration of the offer; and (3) whether the offeree advised the offeror that it lacked sufficient information to evaluate the offer and how the offeror responded.
The case arose from an medical malpractice lawsuit against Cedars-Sinai Medical Center (Cedars) and other defendants in connection with a gallbladder removal surgery in February 2012. On January 15, 2013, Plaintiff filed a three-page Complaint alleging that the defendants’ provision of medical services was “below the standard of care” which resulted in personal injuries, medical expenses, lost wages and earning capacity, and “other damages and injuries to be proven but which at this time are unknown.” Cedars was not served with the Complaint until May 23, 2013 and it filed its Answer and served discovery and a request for statement of damages on June 6, 2013.
On June 11, 2013, Plaintiff served a 998 offer to Cedars in the amount of “$249,999.99, plus legal costs.” On June 27, 2013, Cedars served Plaintiff with a written objection to the offer noting that it had only served its Answer five days prior to the service of Plaintiff’s offer and it was too soon for it to determine whether the offer was reasonable because Cedars “had not had an opportunity to fully investigate this action.” The offer expired on July 16, 2013.
The matter proceeded to trial, the jury found Cedars liable and awarded damages. Both Cedars and Plaintiff moved for a new trial on damages which was granted and the issue of damages was retried. After the second trial, Plaintiff filed a memorandum of costs seeking, among other things, $2,335,929.20 in prejudgment interest from the date of her 998 offer to the date of judgment. The trial court struck Plaintiff’s request for prejudgment interest finding that her offer had been “premature” because Cedars had not had “an adequate opportunity to evaluate the damages” at the time of the offer. Plaintiff appealed.
In its analysis which relied on myriad case law on the subject, the Court of Appeal noted that although section 998’s text does not condition validity upon an offeror’s good faith, that requirement is necessarily implied because it is meant “to encourage the settlement of lawsuits prior to trial.” The Court further noted that whether a 998 offer has a reasonable prospect of acceptance must be evaluated in light of the circumstances “at the time of the offer” and “not by the virtue of hindsight.” Not only must the 998 offer be within the “range of reasonably possible results” at trial, but also the offeror must know whether the offeree had sufficient information to evaluate the offer, including information bearing on the issues of liability and damages. Finally, if the offeree alerted the offeror that it lacked sufficient information to evaluate the offer and the offeror’s response was less than forthcoming, that is evidence that the offer was neither reasonable nor made in good faith.
Accordingly, the Court of Appeal agreed with the trial court that, at the time of Plaintiff’s 998 offer, Cedars had very little information available to it on the issues of liability and damages to make an intelligent determination as to the reasonable amount of damages prior to the expiration of the offer.
The Licudine holding underscores the importance of evaluating information regarding liability and damages upon the receipt of an early 998 offer. If such information is insufficient, a prompt objection to the offer should be made and include a statement that the offeree lacks sufficient information to intelligently evaluate liability and damages at that time as the offer is premature. By the same token, if a party receives such an objection to their 998 offer, meet and confer efforts should be made to determine what information is needed and whether the time to respond to the 998 offer should be extended.
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