A Case Of First Impression.
Section 998 offers belong to the armamentarium of litigators engaged in settling cases, because the potential of such offers to shift costs can be a source of negotiating leverage. Hence, our blog about ADR has a sidebar category "Section 998 (Settlements)".
In Varney Entertainment Group, Inc. v. Avon Plastics, Inc., No. G058903 (4/3 2/23/21) (Goethals, Aronson, Fybel), the court had to decide whether defendant/appellant Avon's second offer to settle extinguished its pending section 998 offer. "Section 998 is silent about the revocability of statutory offers to compromise, but our Supreme Court has held that section 998 offers are fully revocable prior to acceptance." That would seem to make this an easy case to decide (and perhaps it was easy to decide). However, the case had unusual facts that made it a case of first impression.
Plaintiff Varney alleged two causes of action, one for breach of contract, and one alleged in an amended complaint after a year of litigation, for unauthorized use of Varney's name and likeness in violation of Civil Code section 3344. Defendant Avon offered to settle the entire lawsuit for $250,000 for a stipulated judgment pursuant to section 998. Defendant then offered to settle just the contract cause of action for $191,626.03. Plaintiff Varney accepted the offer as to the single contract cause of action, and on the eve of trial, dismissed the section 3344 cause without prejudice, later filing a new complaint for unauthorized commercial use of name, voice, signature, photograph, and likeness in Tennessee.
So now you see the twist: Varney would claim the stipulated judgment on one cause of action completely superseded Avon's 998 offer to settle the entire lawsuit, and thus no cost shifting should be permitted to Avon under section 998. Avon would claim that the voluntary dismissal of Varney's second cause of action meant that Avon had bested its $250,000 998 offer, entitling Avon to attorney fees it incurred after serving its section 998 offer.
Justice Goethals presented the issue: "does a later offer to enter into a stipulated judgment on only one cause of action extinguish an earlier pending section 998 offer covering all causes of action?" The answer is yes, the stipulated judgment did extinguish the earlier 998 offer. A different result would inject uncertainty into the 998 process.
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