In Ignacio v. Caracciolo, 2016 WL 4131379, Plaintiff was a pedestrian who was injured when she was struck by Defendant’s vehicle. Plaintiff sued defendant for motor vehicle and general negligence.
Defendant’s counsel eventually conveyed to Plaintiff’s counsel a settlement offer under Cal. Civ. Proc. Code §998. The offer was for $75,000 plus costs incurred as of the date of service of the offer, in exchange for a release and dismissal without prejudice of Plaintiff’s complaint. Attached to the offer was an exemplar release, which required the release of claims “of whatever kind and nature in law, equity, or otherwise, whether now known or unknown, suspected or unsuspected, that have existed or may have existed or which do exist, or which hereinafter can, shall or may exist.”
The exemplar release also required waiver of the protections of Cal. Civ. Proc. Code §1542, which provides that a general release does not extend to claims not known or suspected at the time of execution of the release.
Plaintiff did not accept the settlement offer. At trial, Plaintiff was awarded a judgment in the amount of $70,000. Because this was less than the $75,000 settlement offer, Defendant argued the cost-shifting procedures of section 998 applied. Defendant sought to tax Plaintiff’s costs and to obtain her own costs.
The trial court ruled that Defendant’s settlement offer was invalid under section 998, and denied defendant’s motion to tax plaintiff’s costs. Defendant appealed.
The California Court of Appeal found Defendant’s section 998 settlement offer was invalid, so she may not recover costs under section 998’s cost-shifting provision. The post judgment order was affirmed.
It is well-established law that a purported section 998 offer, which requires the release of claims and parties not involved in the litigation, is invalid. This is because it is difficult to determine whether a jury award is more or less favorable than a settlement offer when the jury’s award includes claims that are not one and the same with those the offer covers. Ambiguity as to whether the offer includes claims beyond the current litigation is enough to render the offer invalid under section 998.
The language of the exemplar release requiring the release of “any and all claims, demands, agreements, contracts, covenants, actions, suits, causes of action, obligations, controversies, debts, costs, expenses, damages, judgments, orders, and liabilities of whatever kind and nature in law, equity, or otherwise, whether now known or unknown, suspected or unsuspected, that have existed or may have existed or which do exist, or which hereinafter, can shall, or may exist” is extremely broad, and includes many claims beyond those at issue in the lawsuit. The Civil Code section 1542 waiver refers to the release as a “full release,” and implies the release is a “general release.”
Defendant cited Goodstein v. Bank of San Pedro, 27 Cal. App. 4th 899, 907–08 (1994), for the proposition that a general release does not necessarily invalidate a section 998 offer. But the majority in Goodstein upheld the validity of the offer because it interpreted the reference to a “general release” as referring only to the litigation in which it was offered. The Goodstein rule is that a release of unknown claims that arise only from the claim underlying the litigation does not necessarily invalidate the offer.
But in this case, the release is not so limited. It applies not just to claims arising out of the accident, but to “any and all claims . . . whether now known or unknown, suspected or unsuspected, that have existed or may have existed or which do exist, or which hereinafter can, shall or may exist.” This goes far beyond the scope of the litigation, so the offer is invalid under section 998.
Part 4 of the release states, “including but without, in any respect, limiting the generality of the foregoing, any and all claims that were, or might, or could have been alleged in connection with an accident that occurred on or about April 10, 2013, and are the subject of the lawsuit entitled Ignacio v. Caracciolo, filed in the Los Angeles Superior Court, bearing case number BC511878” (emphasis added).
Defendant pointed to the latter part of this language to argue that the release was limited to accident-related claims, but this completely ignored the first part of the language, which states the release is not in any way limited to accident-related claims.