making a dealFor a simple statute, at least in concept, California Code of Civil Procedure section 998 has generated a lot of published appellate opinions over the years. This is the statute that authorizes Offers to Compromise and specifies what happens if they are accepted or not.

The latest skirmish in the 998 war is whether attorney fees are covered when the 998 offer says that all parties are to bear their own costs. In some contexts “costs” are costs and “fees” are fees, while in others “costs” may include court costs (e.g., filing “fees” [just to make it more confusing]), attorney fees and expenses (e.g., deposition expenses).

In this recent 998 case, the fight over attorney fees over-shadowed the underlying case involving the rights of a disabled person.

The plaintiff sued the Los Angeles County Metropolitan Transportation Authority (MTA) because one of its drivers refused to allow plaintiff to board a bus with her “companion dog.” The MTA served plaintiff a Code of Civil Procedure section 998 offer to compromise for $2,501.00, with each party to bear their own costs. Plaintiff accepted the offer.

Thereafter, plaintiff filed a motion for statutory attorney fees under the Americans with Disabilities Act and the California statutes protecting the civil rights of the disabled. Plaintiff argued that the offer to compromise did not preclude statutory attorney fees, because the offer only excluded costs, not attorney fees.

The trial court disagreed and denied plaintiff’s motion.  The court of appeal affirmed, based upon sections 998, 1032, and 1033.5 of the Code of Civil Procedure.  A party who accepts a 998 offer is considered the prevailing party under section 1032.  Allowable costs under section 1032 are listed in section 1033.5. Section 1033.5(a)(10) provides that attorney fees are allowable costs under section 1033.5 when authorized by contract, statute, or law.

In Martinez v. Los Angeles County Metropolitan Transportation Authority, filed May 23, 2011, Division One of the Second Appellate District held, “Unless the offer expressly states otherwise, an offer of a monetary compromise under section 998 that excludes ‘costs’ also excludes attorney fees.”

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