On July 23, 2013, in the case of Mon Chong Loong Trading Corp. v. Superior Court (2013 WL381168), the California Court of Appeal held that a voluntary dismissal without prejudice following a Section 998 offer that was not accepted triggers the cost-shifting provisions of California Code of Civil Procedure Section 998.
In this case, the plaintiff slipped and fell at a supermarket and sued for negligence and premises liability. Defendant made a Section 998 settlement offer. Plaintiff did not respond to the offer, did not appear for an independent medical exam, and did not exchange expert information. Just before trial, plaintiff filed a voluntary dismissal of the action without prejudice.
Defendant filed a memorandum of costs seeking, among other things, expert witness fees incurred in preparing for trial. The trial court granted the plaintiff’s motion to tax defendant’s costs with respect to the expert witness fees and stated: “The Defendant is not entitled to recover its expert fees pursuant to C.C.P. Section 998 because this case did not result in any ‘Judgment or Award’ more favorable than its offer.”
In disagreeing with the trial court, the Court of Appeal examined the relevant portion of the statute:
“If an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award . . . the court or arbitrator . . . in its discretion, may require the plaintiff to pay a reasonable sum to cover costs of the services of expert witnesses . . . actually incurred and reasonably necessary in . . . preparation for trial or arbitration . . . . ” (§ 998, subd. (c)(1); italics added.)
The Court of Appeal held that the plaintiff’s voluntary dismissal without prejudice constitutes a failure to obtain a more favorable judgment or award and triggers trial court discretion to award expert witness costs to the defendant. Writing for the panel, Justice Croskey explained:
A plaintiff may fail to obtain a more favorable judgment or award by failing to obtain any award at all, as in the case of voluntary dismissal. The law already recognizes this fact. Indeed, voluntary dismissal of a lawsuit is always conditioned “upon payment of costs,” even if the dismissal is without prejudice and the potential exists, as in this case, for a refiling of the same action. (§ 581 subd. (b)(1); § 1032 subd. (a)(4); Cano v. Glover, supra 143 Cal.App.4th at p. 331; Cal. Rules of Court, rule 3.1700(a)(1)).
Accordingly, the trial court was directed to reconsider the plaintiff’s motion to tax the cost bill as to the expert costs and exercise its discretion under C.C.P. Section 998.
Mediation typically results in a comprehensive written agreement that expressly addresses the settling parties’ costs and expenses. Section 998 offers are used as a “carrot and stick” to try to leverage a settlement. But, if your strategy is to voluntarily dismiss without accepting a 998 offer, don’t forget that the trial court may award expert witness costs following dismissal.