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Date: 04-14-2020
Case Style:
Chad Anthony v. Xiaobin Li
Case Number: A156640
Judge: Petrou, J.
Court: California Court of Appeals First Appellate District, Division Three on appeal from the Superior Court, County of San Francisco
Plaintiff's Attorney: Douglas A. Applegate
Defendant's Attorney: Douglas A. Sears
Description:
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Plaintiff and appellant Chad Anthony (Anthony) filed a personal injury
lawsuit against defendant and respondent Xiaobin Li (Li). Anthony prevailed
at trial and sought to recover costs under Code of Civil Procedure sections
998 and 1032 and Li moved to tax (or strike) costs.1 The court granted the
motion, in part, denying reimbursement for expert witnesses, mediation, and
court reporter fees. We see no merit to Anthony’s challenge to the court’s
ruling and affirm.
FACTUAL AND PROCEDURAL BACKGROUND
In 2016, Anthony filed a lawsuit seeking to recover damages for
personal injuries sustained in a 2014 car accident between him and Li in San
Francisco. At the time of the accident, Li resided out of the United States
1 All further unspecified statutory references are to the Code of Civil
Procedure.
2
and was driving a vehicle rented from PV Holding Corporation (PV Holding),
doing business as Avis Rent-A-Car. He purchased a $1 million liability
insurance policy from PV Holding, which was self-insured for its own
liability. The complaint alleged causes of actions for “motor vehicle” and
“general negligence” and named as defendants Li (driver of vehicle) and PV
Holding (owner and entruster of vehicle).
Anthony served the summons and complaint on PV Holding as a named
defendant, and separately served the pleadings on Li as a named defendant
by service on PV Holding under Civil Code former section 1936 [now and
hereinafter referred to as “section 1939.33” 2]. Li and PV Holding,
represented by the same counsel, filed separate answers and separate
discovery responses.
2 Civil Code section 1939.33 provides, in pertinent part: “(a) When a
rental company enters into a rental agreement in the state for the rental of a
vehicle to any renter who is not a resident of this country and, as part of, or
associated with, the rental agreement, the renter purchases liability
insurance, . . ., from the rental company in its capacity as a rental vehicle
agent for an authorized insurer, the rental company shall be authorized to
accept, and if served . . ., shall accept, service of a summons and complaint
and any other required documents against the foreign renter for any accident
or collision resulting from the operation of the rental vehicle within the state
during the rental period. . . . (b) Within 30 days of acceptance of service of
process, the rental company shall provide a copy of the summons and
complaint and any other required documents . . . to the foreign renter by
first-class mail, return receipt requested. (c) Any plaintiff, . . ., who elects to
serve the foreign renter by delivering a copy of the summons and complaint
and any other required documents to the rental company pursuant to
subdivision (a) shall agree to limit his or her recovery against the foreign
renter and the rental company to the limits of the protection extended by the
liability insurance. (d) . . . . (e) Notwithstanding any other law, the
requirement that the rental company accept service of process pursuant to
subdivision (a) shall not create any duty, obligation, or agency relationship
other than that provided in subdivision (a).”
3
In December 2017, the parties agreed to participate in voluntary
private mediation pursuant to a JAMS standard form agreement. The
agreement provided, in pertinent part, that the parties “agree to divide the
professional fees and additional fees as follows: 50% [named counsel](Chad
Anthony); 50 % [named counsel] (Xiaobin Li, et al.); and as set forth in the
neutral’s Fee Schedule.” Each party further agreed “to pay its share of the
estimated fees and expenses to be received by JAMS at least 14 calendar days
prior to the session.” The parties paid the requested fees, and participated in
mediation that ultimately was not successful. Four months later, in April
2018, Anthony filed a voluntary dismissal in favor of PV Holding.
In June 2018, Anthony served a section 998 offer, seeking to
compromise the action subject to the following terms and conditions:
“Pursuant to Code of Civil Procedure [s]ection 998, Plaintiff, CHAD
ANTHONY, hereby offers to allow judgment to be taken against Defendants,
XIAOBIN LI, PV HOLDING CORPORATION, and in favor of Plaintiff,
CHAD ANTHONY, in the sum of five hundred thousand dollars and no cents
($500,000.00), each side to bear its own fees and costs.” The attached
“[NOTICE OF ACCEPTANCE OF OFFER TO COMPROMISE],”
read: “Comes now Defendants, XIAOBIN LI, PV HOLDING
CORPORATION, by and through their attorney of record with full and
specific authority in the circumstances, and ACCEPT the within OFFER TO
COMPROMISE to allow judgment to be entered against Defendants
XIAOBIN LI, PV HOLDING CORPORATION and in favor of Plaintiff CHAD
ANTHONY in the sum of five hundred thousand dollars and no cents
($500,000.00), each side to bear its own fees and costs.” Neither Li nor PV
Holding accepted the offer.
4
In July 2018, Li alone made a section 998 offer to settle all claims
against him for $175,001.00, in exchange for (1) “a dismissal with prejudice of
plaintiff’s complaint against defendant;” (2) Anthony’s execution and
acceptance of the terms stated in an attached document releasing all claims
for damages sought or could be sought by Anthony as a result of the incident
described in the complaint, and (3) each party bearing their own attorney fees
and costs. The attached release sought to release Li and unspecified agents,
employees, insurers, and corporate entities. Anthony did not accept the offer.
In September 2018, the parties jointly hired a court reporting service,
US Legal Support, to record the trial proceedings. Counsel signed a
memorandum of understanding prepared by US Legal Support, which
provided that the “parties . . . agree to share equally the fees for court
reporting services rendered in the matter referred above [Anthony v.
Li]. Services for this matter will be charged at the rates attached. Each
party will be invoiced an equal share of the per diem fee and charges
associated with the original transcript.” Anthony was billed and paid his
share of court reporter fees.
In October 2018, following a ten-day trial, a jury returned a verdict
finding Li negligent and awarding Anthony damages of $650,235.00.
Following entry of judgment, Anthony served a memorandum of costs for
$83,048.06, seeking in pertinent part: $62,082.50 for section 998 post-offer
expert witness fees; $2,650 for mediation fees, and $6,561.62 for court
reporter fees. Li filed a motion to tax (or strike) costs, which was opposed by
Anthony. The parties waived oral argument.
The court granted the costs motion, in part, taxing expert witness,
mediation, and court reporter fees. The court taxed expert witness fees
because Anthony’s section 998 offer “was joint and not apportioned. The offer
5
was made on June 5, 2018 and was directed to two defendants, one of which
had been dismissed on April 12, 2018. The offer was ambiguous and not
effective to burden defendant Li with the fees of [Anthony’s] expert
witnesses.” The court taxed mediation and court reporter fees because “[t]he
papers show that the counsel agreed to split the fees equally, and it is
undisputed that each party paid half of the fees incurred. The parties did not
reserve the right to seek relief from that agreement or to seek prevailing
party fees notwithstanding that agreement. The parties are bound by their
agreement.”
Anthony’s timely appeal ensued.
DISCUSSION
I. The Expert Witness Fees were Properly Taxed as the Section 998
Offer was Invalid
Reviewing the validity of the section 998 offer de novo (Barella v.
Exchange Bank (2000) 84 Cal.App.4th 793, 797-798), we find Anthony did not
make a valid section 998 offer since it was conditioned on acceptance by
multiple defendants and was directed at a party that had already been
dismissed with prejudice from the action. Therefore, the trial court correctly
taxed expert witness fees.
A. General Guidelines Regarding Section 998 Offers
Section 998 provides that “any party may serve an offer in writing upon
any other party to the action to allow judgment to be taken . . . in accordance
with the terms and conditions stated at the time. The written offer shall
include a statement of the offer, containing the terms and conditions of the
judgment . . ., and a provision that allows an accepting party to indicate
acceptance of the offer by signing a statement that the offer is accepted. Any
acceptance of the offer . . . shall be in writing and signed by counsel for the
6
accepting party, or if not represented by counsel, by the accepting party.” (Id.,
subd. (b).) “If an offer made by a plaintiff is not accepted and the defendant
fails to obtain a more favorable judgment . . ., the court . . . in its discretion
may require the defendant to pay a reasonable sum to cover post offer costs of
the services of expert witnesses . . . in addition to plaintiff’s costs.” (Id., subd.
(d).)
Section 998 offers must be “clear and specific. First, from the
perspective of the offeree, the offer must be sufficiently specific to permit the
recipient meaningfully to evaluate it and make a reasoned decision whether
to accept it, or reject it and bear the risk he may have to shoulder his
opponent’s litigation costs and expenses. [Citation.]” (Berg v. Darden (2004)
120 Cal.App.4th 721, 727 (Berg).) Second, “section 998 offers must be written
with sufficient specificity because the trial court lacks authority to adjudicate
the terms of a purported settlement. ‘Section 998 was designed to encourage
settlement of disputes through a straightforward and expedited
procedure.’ [Citation.] Once the offer is accepted, the clerk or court performs
the purely ministerial task of entering judgment according to the terms of the
parties’ agreement. (§ 998, subd. (b)(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.’].)” (Berg, supra, at p. 727.) Consequently, “[t]he party
extending the statutory offer of compromise bears the burden of assuring the
offer is drafted with sufficient precision to satisfy the requirements of section
998 [Citations.] To that end, a section 998 offer is construed strictly in favor
of the party sought to be subjected to its operation. [Citations.]” (Berg, supra,
at p. 727.)
7
B. The Offer May Not Require Acceptance by Multiple Parties
As a general rule, “ ‘a section 998 offer made to multiple [defendants] is
valid only if it is expressly apportioned among them and not conditioned on
acceptance by all of them.’ ” (Burch v. Children’s Hospital of Orange County
Thrift Stores, Inc. (2003) 109 Cal.App.4th 537, 544 (Burch); see Peterson v.
John Crane, Inc. (2007) 154 Cal.App.4th 498, 513 [“we will leave intact the
bright-line rule that a separate offer (or an apportioned and unconditional
joint offer) should be extended to each party”].) There are exceptions to the
rule barring the making of an unapportioned offer to multiple defendants, for
example “where . . . there is . . . a single injury, and where as joint
tortfeasors they would be jointly and severally liable, an unapportioned
section 998 settlement offer made to both is valid.” (Steinfeld v. FooteGoldman Proctologic Medical Group, Inc. (1996) 50 Cal.App.4th 1542, 1550.)
However, “[e]ven if a section 998 . . . offer is allocated among individual
defendants,” or an unallocated joint offer is made to defendants jointly and
severally liable, the offer is still not valid if it is “conditioned on acceptance by
all defendants.” (Wickware v. Tanner (1997) 53 Cal.App.4th 570, 576
(Wickware).)
Anthony’s section 998 offer “is a single document” directed at
“defendants” Li and PV Holding; “it offers to take judgment” in a lump sum of
$500,000.00 “only against” both Li and PV Holding, “and not against one” or
the other, and it requires both Li and PV Holding “and not any one defendant
in the singular, [to] accept the offer.” (Wickware, supra, 53 Cal.App.4th at p.
577.) Hence, Anthony’s offer was invalid as a matter of law because it was
conditioned on acceptance by both defendants. (Wickware, supra, at p. 577
[rejecting an argument that a section 998 offer to compromise is
8
unconditional unless it specifically provides that all offerees must accept the
offer].)
C. The Offer May Not be Directed at a Dismissed Party
Because PV Holding had been dismissed with prejudice, it had “the
effect of an absolute withdrawal” of Anthony’s claim against PV Holding and
left PV Holding as though it “had never been a party,” rendering the court
“ ‘without jurisdiction to act further [against PV Holding] . . . , and any
subsequent orders of the court’ ” would be “ ‘simply void’ ” as against PV
Holding. (Paniagua v. Orange County Fire Authority (2007) 149 Cal.App.4th
83, 89.)
Anthony could have avoided a finding of invalidity as to Li by serving a
section 998 offer solely to Li (even if he had served a separate offer to PV
Holding). (Burch, supra, 109 Cal.App.4th at p. 551 [as recommended by Weil
and Brown, California Practice Guide: Civil Procedure Before Trial, “ ‘[a]void
the uncertainty’ ”; “ ‘[s]erve separate demands on each defendant’ ”].)
Instead, and without explanation, Anthony choose to direct his one section
998 offer to both Li and PV Holding; an offer that required entry of judgment
against both defendants and acceptance of the offer by both defendants.
On appeal, Anthony contends that, post dismissal of PV Holding, Li
and PV Holding remained “one and the same” for the purposes of a section
998 offer because he included PV Holding as an insurer. However, there is
nothing in the offer from which defendants could or would reasonably
conclude Anthony was seeking entry of judgment against PV Holding as the
insurer responsible for any judgment entered against Li.
Anthony also argues that although PV Holding was no longer an
independently liable party, “as the insurer . . . [it] was still a party to whom a
9
settlement offer was properly tendered” (italics added). 3 Anthony
acknowledges a section 998 offer could not be directed at a party’s insurer at
the time he made it. (See, e.g., Najera v. Huerta (2011) 191 Cal.App.4th 872,
879; Arno v. Helinet Corp. (2005) 130 Cal.App.4th 1019, 1025-1026.)
However, he argues that it was proper because, shortly before the trial court’s
ruling in this case, the law changed to permit a section 998 offer to an insurer
pursuant to Meleski v. Estate of Albert Hotlen (2018) 29 Cal.App.5th 616
(Meleski). Even assuming Meleski allows a party to direct a section 998 offer
to an insurer under the circumstances here, an issue we need not address,
the case does not assist Anthony as his section 998 offer in no way advised
defendants that the offer was directed at PV Holding as the insurer
responsible for any judgment entered against Li. Hence, it was invalid.
Finally, Anthony complains Li was not a proper party to whom to direct
a section 998 offer because Li was named as a defendant solely to reach
insurance as allowed under Civil Code section 1939.33, and Li was not
participating in the action which was being litigated by PV Holding, as the
“real party” insurer. Anthony thus contends that “[a]ddressing the
settlement offer solely to a non-participating foreign national who did not
even know about the lawsuit, and against whom [Anthony] was not allowed
to collect since he had agreed to limit his recovery to insurance, was . . . an
inadequate approach.”
3 Anthony asserts in his opening brief that PV Holding “was still
vicariously responsible” under Civil Code section 1939.33 for Li’s negligent
driving. However, in his reply brief, Anthony concedes the statutory duties of
PV Holding, in its capacity as a rental company, “were indeed limited to
acting as a service agent.”
10
We disagree. Li was a proper party defendant to whom Anthony could
direct a section 998 offer. Had the section 998 offer been directed solely to Li,
and rejected, any judgment entered against Li after trial, which exceeded the
offer, would have permitted Anthony to seek a discretionary award of expert
witness fees. The fact that Anthony would then have to bring a second direct
action against PV Holding, as the insurer, to recover any judgment and
statutory cost award entered against Li (Ins. Code, § 11580, subd. (b)(2)), did
not make a section 998 offer solely to Li “an inadequate approach.” To accept
Anthony’s argument that his section 998 offer should be deemed valid based
on the happenstance that the action was being litigated by an insurer would
add uncertainty to the use of section 998 offers. “It is in the best interests of
the parties and the court that section 998 offers be as clear, straightforward
and thorough as possible . . . [t]o advance the important purposes of clarity of
understanding and ministerial ease discussed above. . . .” (Berg, supra, 120
Cal.App.4th at p. 728.)
We therefore conclude the trial court did not err and we affirm the
order taxing expert witness fees as an item of costs.
II. Mediation and Court Reporter Fees
Anthony argues the trial court erred in taxing mediation and court
reporter fees because the court improperly read into the parties’ agreements
to share costs a “provision waiving the right to claim court reporter or
mediation fees as items of costs” by a prevailing party. Because the parties’
agreements did not address whether shared fees could be later claimed as
items of costs by a prevailing party, Anthony asserts the proper treatment of
shared litigation expenses “is one to be decided by resort to public policy, the
goal of the statutory cost-recovery provisions and the reasonable expectations
of the parties.” We find Anthony’s arguments unavailing.
11
“In the absence of an authorizing statute, each party must bear its own
costs of litigation. [Citation.]” (Carr Business Enterprises, Inc. v. City of
Chowchilla (2008) 166 Cal.App.4th 25, 30 (Carr Business
Enterprises).) Section 1032 gives a “prevailing party” the right to recover the
costs of litigation. Section 1033.5 allows for the recovery of specific costs,
including court reporters (subd. (a)(11)) and mediation fees (subd.
(c)(4)). However, where, as in this case, the parties agree to share costs
during litigation, the courts will enforce those agreements as written under
the principles that “[w]hen the language of a document is unambiguous, we
are not free to restructure the agreement,” and “if the parties [] wanted to
allow recovery of the apportioned fee by the prevailing party as an item of cost,
they were free to spell this out in their agreement,” but such a provision will not
be read into the agreement. (Carr Business Enterprises, supra, at p.
30 [prevailing party not entitled to recover referee fees as an item of costs
because parties’ agreement was “unambiguous: Each side is to pay 50 percent
of the fee charged by the referee;” court would not read unambiguous
agreement to share referee’s costs as an agreement that the prevailing party
would only “ ‘front’ one-half of the referee’s costs”]; see Howard v. American
National Fire Ins. Co. (2010) 187 Cal.App.4th 498, 539-540 [prevailing
parties not entitled to recover JAMS private judge fees as an item of costs
because parties agreed that one half of the fees would be borne by the parties;
parties’ agreement to share the costs “does not say that the fees will be
advanced equally, but that the fees will be ‘divide[d]’ and ‘borne’ equally;”
“the plain meaning of the parties’ agreement is inescapable: the parties
agreed to split the cost of the JAMS judge equally”].) Anthony’s reliance on
Quiles v. Parent (2018) 28 Cal.App.5th 1000 is misplaced as it is factually
inapposite and does not warrant a different result. (Id. at p. 1012 [court
12
found Carr Business Enterprises inapplicable because one party had failed to
participate in mediation].)
Finally, we are not persuaded by Anthony’s argument that upholding
the trial court’s ruling will have “far ranging consequences.” Anthony
contends “the cost of pre-trial depositions are almost always split in some
fashion by the parties attending the deposition,” and yet those costs “are
expressly recoverable as necessary litigation costs and are routinely awarded,
as they were here,” and by applying the “ ‘no sharing’ rule to court reporter
costs and mediation expenses, but not to depositions, the trial court not only
erred but was inconsistent as well.” In so arguing, Anthony relies on Charton
v. Harkey (2016) 247 Cal.App.4th 730, a case focused on the apportionment of
costs between jointly represented prevailing parties that does not apply to the
case before us. Here, we see no inconsistency in the court’s taxing mediation
and court report fees, but allowing recovery of deposition fees. There is no
evidence the parties agreed to share deposition fees in any fashion, and Li did
not seek to tax deposition costs.
Because the parties agreed to share mediation and court reporter fees
equally, without providing for the later recovery of those shared fees by a
prevailing party, we see no error or abuse of discretion in the trial court’s
taxing those fees as items of costs.
Outcome: The December 14, 2018 order is affirmed. Plaintiff is awarded costs on appeal.
Plaintiff's Experts:
Defendant's Experts:
Comments: