A recent appellate decision is notable for two reasons. First, it has to be one of the shortest published opinions on record -- the text fits on one page. Second, it holds that when a Code of Civil Procedure section 998 offer includes the phrase, "each side to bear their own costs," the word "costs" includes any attorney fees available to the offeree as a prevailing party. The case is Martinez v. Los Angeles County Metropolitan Transportation Authority 2011 Cal.App. LEXIS 620 (2d Dist.).
In Martinez, the Transit Authority made a 998 offer to plaintiff stating that it "offers to Compromise the above-captioned matter for the total sum of $2,501.00 each side to bear their own costs." Plaintiff accepted and later moved for statutory attorney fees under the ADA. The trial court denied the motion and the court of appeal affirmed.
Generally, a "party who secures a recovery by accepting a section 998 offer is entitled to costs and [attorney] fees unless they are excluded from the offer." (Engle v. Copenbarger & Copenbarger, LLP (2007) 157 Cal.App.4th 165, 168-169.) And in Engle, where the 998 offer was silent as to costs and fees, the offeree was entitled to both. But, according to Martinez, "Unless the offer expressly states otherwise, an offer of a monetary compromise under section 998 that excludes "costs" also excludes attorney fees."
As the appellate court put it, a party accepting a 998 offer is entitled to costs under Code of Civil Procedure section 1032. And section 1033.5 subdivision (a)(10) provides that attorney fees are allowable costs under section 1032, when authorized by contract, statute, or law. Thus, "it follows that when a section 998 offer provides that each party will bear its own costs the word "costs" refers to all the costs described in section 1033.5, including attorney fees."
So, should you simply say "each side to bear its own costs" when making 998 offers? Why not say "each side to bear its own costs and attorney fees"? Here's a thought: A decision of the Second District Court of Appeal is not binding on the other state appellate courts. And one thing is certain, if you are trying to truly resolve the matter for your client, as opposed to say, generating an appeal to defend, why trust only the magic words?