2010-00072318-CU-CD

Donald Holsapple vs. Reynen & Bardis Development LLC

Nature of Proceeding: Motion to Tax Costs

Filed By: Schoech, Matthew R.

Plaintiffs Robert and Rachel Book, Marie Maschmeyer, Charles and Gertie King, Bruce
and Janet Cann, and Julie Texeira’s Motion to Tax Costs granted, for the reasons set
forth, below:

This action is a construction defect case involving the owners of 45 single family
homes in Rancho Murieta. Wallace-Kuhl & Associates was hired to prepare soils
reports and to oversee the preparation of soil and foundations.

Plaintiffs are owners of five homes who challenge Item 8 of the Cost Bill, Expert
Witness Fees claimed in the amount of $8,588.05 ($1,717.61 per plaintiff) on the
ground that the underlying 998 offer was invalid and not made in good faith. Plaintiffs
further contend that the fees claimed are unreasonable and not adequately calculated.

In August of 2012, defendants prevailed on a motion for summary judgment against 34
of the 45 homeowners. In December of 2012, defendants Wallace Kuhl & Associates
and Doug Kuhl made a joint offer to compromise addressed to plaintiffs of 11 homes.
In January of 2013, three of the owners accepted the 998 offers. In July of 2013, the
remaining eight homeowners went to an MSC. Three of the remaining eight owners
accepted $10,000 each in settlement. Defendant contends that $10,000 each was
offered solely to avoid the expense of trial.

The December 2012 998 offers were as low as $1,000 and as high as $5,750 per
home. Plaintiffd contend that their claimed costs of repairs were in the hundreds of
thousands of dollars and that the value of the 45 homeowners cases exceeded $2,200,000. However, the 998 offers were made after defendants prevailed against 34
of the plaintiffs on their Motion for Summary Judgment on the statute of limitations
issue.

On August 9, 2013, the plaintiffs and defendants entered into a stipulated settlement in
which plaintiffs took nothing, defendants were entitled to recover costs, and plaintiffs
would be added to a previously filed appeal. (Ex D, Schoech Decl.) The Appeal
concerns the statute of limitations issues as to the plaintiffs’ claims.

Defendants are claiming their costs of expert fees under CCP 998 because the
plaintiffs rejected the 998 offers and did not obtain a better result at trial. Pursuant to
CCP 998(c)(1):

“If an offer made by a defendant is not accepted and the plaintiff fails to obtain a more
favorable judgment or award, the plaintiff shall not recover his or her postoffer costs
and shall pay the defendant’s costs from the time of the offer. In addition, in any action
or proceeding other than an eminent domain action, 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, who are not regular employees of any party, actually
incurred and reasonably necessary in either, or both, preparation for trial or arbitration,
or during trial or arbitration, of the case by the defendant.”

An offer made pursuant to Code of Civil Procedure section 998 is presumed to have
been reasonable and the opposing party bears the burden of showing otherwise.”
Thompson v.Miller (2003) 112 Cal.App.4th 327, 338-339.

A good faith requirement is read into section 998 in order to effectuate the purpose of
the statute. Bates v Prebyterian Intercommunity Hosp., Inc. (2012) 204 Cal.App.4th
201, 220. “Good faith requires that the pretrial offer of settlement be ‘realistically
reasonable under the circumstances of the particular case. …’ [Citation.] The offer
‘must carry with it some reasonable prospect of acceptance. [Citation.]’ [Citation.]” (
Jones v. Dumrichob (1998) 63 Cal.App.4th 1258, 126). Whether the offer is
reasonable “depends upon the information available to the parties as of the date the
offer was served.” ( Westamerica Bank v. MBG Industries, Inc. (2007) 158 Cal.App.4th
109, 130 ).

Plaintiffs contend that the 998 offers are too uncertain to evaluate when an offer is
made jointly by two defendants who have different liabilities. “When multiple
defendants have jointly made a settlement offer to a single plaintiff without indicating
how the offer is to be allocated among them, it has been held too uncertain to result in
section 998 penalties.” Arno v Helinet Corp . (2005) 130 Cal.App.4th 1019, 1026. “[T]
he party offering the settlement bears the burden of demonstrating that a section 998
offer is valid, and the offer must be strictly construed in favor of the party subjected to
its operation.” Persson v Smart Inventions, Inc. (2005) 125 Cal.App.4th 1141, 1170.
Plaintiffs contend that since the liability of Dave Kuhl, as an individual, is different from
the liability of Wallace & Kuhl Associates, that the offer is too uncertain to be
evaluated. However, plaintiff has presented no evidence that it sought damages from
the principal for only his work on the project. Defendants contend that these parties
were alleged to be jointly and severally liable for all damages arising from the
geotechnical work. The Court rejects plaintiffs’ argument that the offer was uncertain
for failure to apportion the offer between the jointly and severally liable defendants. A
single offer to compromise is properly read as an offer by each defendant to plaintiff
that judgment be taken against each one of them, jointly and severally.

Defendants contend that the offers were made in good faith given the fact that the
Court had dismissed 34 of the plaintiffs claims on the statute of limitations issue, and
on the ground that the same statute of limitations issue applied to these plaintiffs’
homes. Expert witness fees awarded under CCP 998(c)(1) include both pre and post-
offer costs. Regency Outdoor Advertising Inc. v City of Los Angeles (2006) 39 Cal.4th
507.

“Whether a Section 998 offer was reasonable and made in good faith is left to the
sound discretion of the trial court.” Clark v. Optical Coating Laboratory, Inc. (2008) 165
Cal. App. 4th 150,185. The “good faith” of the offer is dependent upon the facts and
circumstances at the time the offer is made. Burch v. Childrens Hosp. of Orange
County Thrift Stores, Inc. (2003) 109 Cal.App.4th 537, 548.

The Court finds based on the procedural posture of this case, including the successful
summary judgment motion against 34 of the plaintiffs, that the 998 offer was in good
faith. The fact that three of the remaining eleven plaintiffs accepted the offer is
evidence that it was not merely a token offer that had no reasonable possibility of
acceptance. The fact that these five plaintiffs have stipulated that judgment be entered
against them (as long as they are added to the appeal) is also evidence that the offers
were not bad faith token offers. As a general proposition, there appears to be little
dispute that even a modest or token offer may be reasonable if an action is completely
lacking in merit. Hartline v. Kaiser Foundation Hospitals (2005) 132 Cal.App.4th 458,
471. “There is no per se violation of the good faith requirement just because the offer
does not tender a net monetary sum. [Citation.] In a particular case, a waiver of costs
may be an offer of significant value.” (Hartline, supra, 132 Cal.App.4th at p. 471).

Plaintiffs next argue that the costs claimed were not reasonable. Pursuant to Jones v
Dubrichhob (1998) 63 Cal.App.4th 1258, 1266 1267, once a cost bill is challenged, the
party seeking the costs must submit supporting documents to establish the
reasonableness of the fees. Defendant’s opposition contains no declarations or
supporting evidence regarding the reasonableness of the costs. The opposition
merely states that it will submit the invoices in camera, however plaintiffs are entitled to
notice of the supporting documents to address the issue of their reasonableness.

CRC 3.1700(a)(1) relating to prejudgment costs states, in pertinent part, that the
memorandum of costs shall be verified by a statement of the party, attorney, or agent
that to the best of his or her knowledge the items of cost are correct and were
necessarily incurred in the case.

Initial verification will suffice to establish the reasonable necessity of the costs claimed.
There is no requirement that copies of bills, invoices, statements, or any other such
documents be attached to the memorandum. Only if the costs are put in issue via a
motion to tax costs must supporting documentation be submitted. Jones, supra, at
page 1267.

The burden of proof is on defendants to support the reasonableness of the fees
claimed. The only discussion of the reasonableness of the fees is in the points and
authorities, and there is no evidence presented to support the arguments made.
Therefore, even though the Court finds that the 998 offer was in good faith, the Court
is not awarding the expert fees because defendants have not established the reasonableness of the expert fees sought.

The minute order is effective immediately. No formal order pursuant to CRC Rule
3.1312 or further notice is required.