Mostafavi Law Group, APC v. Larry Rabineau, APC

61 Cal.App.5th 614

275 Cal.Rptr.3d 821

MOSTAFAVI LAW GROUP, APC, Plaintiff and Appellant,

v.LARRY RABINEAU, APC, et. al., Defendants and Respondents.

B302344

Court of Appeal, Second District, Division 4, California.

Filed March 3, 2021

Mostafavi Law Group, Amir Mostafavi ; Joseph S. Socher, Los Angeles, for Plaintiff and Appellant.

Law Offices of Larry Rabineau, Larry Rabineau and Virginia Narian, Los Angeles, for Defendants and Respondents.

CURREY, J.

INTRODUCTION

The Legislature enacted Code of Civil Procedure ¹ section 998 to encourage and expedite settlement of lawsuits before trial. To effectuate this purpose, the statute simultaneously promotes the extension and acceptance of reasonable pretrial offers to compromise. The "policy is plain. It is to encourage settlement by providing a strong financial disincentive to a party—whether it be a plaintiff or a defendant—who fails to achieve a better result than that party could have achieved by accepting his or her opponent's settlement offer. (This is the stick. The carrot is that by awarding costs to the putative settler the statute provides a financial incentive to make reasonable settlement offers.)" ( Bank of San Pedro v. Superior Court (1992) 3 Cal.4th 797, 804, 12 Cal.Rptr.2d 696, 838 P.2d 218.)

Section 998, subdivision (b) requires, among other things, that a party seeking to take advantage of the statute serve on an opposing party a written offer to have judgment entered on specified terms. Most important, for purposes of this appeal, the written offer "shall" contain what has come to be known as an "acceptance provision." ( Perez v. Torres (2012) 206 Cal.App.4th 418, 422, 141 Cal.Rptr.3d 758 ( Perez ); Boeken v. Philip Morris USA Inc. (2013) 217 Cal.App.4th 992, 1001, 159 Cal.Rptr.3d 195 ( Boeken ).) Specifically, the statute states that the written offer "shall" include "a provision that allows the accepting party to indicate acceptance of the offer by signing a statement that the offer is accepted." ( § 998, subd. (b).)

A number of cases have addressed whether a section 998 offer without an acceptance provision is valid for purposes of triggering the statute's cost-shifting provisions when the offer is not accepted. This case poses an issue of first impression: whether the purported acceptance of a section 998 offer lacking an acceptance provision gives rise to a valid judgment.

Here, defendants and respondents Larry Rabineau, APC, and Larry Rabineau (collectively, "Rabineau") served plaintiff and appellant Mostafavi Law Group (MLG) with a statutory offer to compromise. The offer did not specify how MLG could accept it. Nevertheless, MLG's counsel hand-wrote MLG's acceptance onto the offer itself and filed a notice of acceptance with the trial court. Thereafter, the court entered judgment in favor of MLG pursuant to section 998, subdivision (b)(1).

Rabineau filed a motion to vacate the judgment under section 473, subdivision (d). He argued his section 998 offer was invalid because it lacked an acceptance provision. Consequently, Rabineau contended, the judgment stemming from the offer's acceptance was void and should be set aside. The trial court agreed and granted Rabineau's motion.

On appeal, MLG contends the trial court erred by vacating the judgment because its ruling: (1) lacks support in caselaw; (2) contradicts the policies and purposes underlying section 998 ; and (3) violates principles of contract law and equity.

For the reasons discussed below, we conclude the trial court correctly found the judgment was void. Accordingly, we affirm.

FACTUAL AND PROCEDURAL BACKGROUND

In November 2015, plaintiff Amir Mostafavi and his law firm, MLG, filed their operative complaint, which asserted a claim for defamation per se, among others, against Rabineau. The case was litigated extensively over the next several years. Although the parties attended a mediation on May 28, 2019, they were unable to settle.

On May 31, 2019, Rabineau served MLG with a "Statutory Offer to Compromise" pursuant to section 998. The offer stated, in its entirety: "TO PLAINTIFF, MOSTAFAVI LAW GROUP, AND TO ITS COUNSEL OF RECORD: [¶] Pursuant to California Code of Civil Procedure § 998 [sic], Defendant [sic], LAW OFFICES OF LARRY RABINEAU AND LARRY RABINEAU, offer to compromise the above-entitled action for the sum of $25,000.01. [¶] PLEASE TAKE NOTICE that if this Offer to Compromise is not accepted within the time specified by § 998 [sic] of the Code of Civil Procedure and Plaintiff fails to obtain a more favorable judgment, Plaintiff is not entitled to recover court costs (despite being a ‘prevailing party’) and must pay the offering defendants’ costs from the time of the offer." (Italics and underlines in original.)

On June 20, 2019, Mostafavi, acting as MLG's counsel, hand-wrote the following onto the section 998 offer: "Plaintiff Mostafavi Law Group, APC accepts the offer." That same day, MLG filed a notice of the offer's acceptance, along with proof thereof, with the trial court and sent a copy to Rabineau. After receiving MLG's notice of acceptance, on June 21, 2019, Rabineau told MLG he would "draft and send ... a settlement agreement for ... signature" before paying the settlement amount.

On June 28, 2019, the trial court entered judgment in favor of MLG pursuant to section 998.² Three days later, MLG sent a copy of the judgment to Rabineau and requested "timely payment according to the judgment." In response, Rabineau reiterated that before remitting payment, he "require[d] [MLG] to sign a settlement agreement," under which "[e]ach party [would] bear [its] own fees and costs."

Soon thereafter, the parties got into a dispute over whether MLG could enforce the judgment, and thereby require Rabineau to pay the amount set forth in the section 998 offer, even though it had not signed any proposed settlement agreement. When they were unable to resolve the matter, Rabineau filed a motion to set aside the judgment under section 473, subdivision (d).³ He argued: "The [ section] 998 [offer] [MLG] accepted did not have an acceptance provision and is therefore invalid. As such, the judgment that was entered pursuant to [MLG's] acceptance of the [ section] 998 [offer] is void." Rabineau argued in the alternative that if the trial court found the offer was valid, it should amend the judgment to include both MLG and Mostafavi. On this point, Rabineau asserted MLG was Mostafavi's alter ego, and that "[a]n absolute injustice would occur if the [trial court] finds the judgment for $25,000 against [Rabineau] valid and still permits Mr. Mostafavi to proceed to trial" against him.⁴

Following a hearing, the trial court granted Rabineau's motion. Explaining the rationale behind its ruling, the court stated: "The Court notes that neither party cites to any case dealing with the situation where a defective section 998 offer was actually accepted. Therefore, without any authority to the contrary, the Court follows the rule as set forth in [ Puerta v. Torres (2011) 195 Cal.App.4th 1267, 124 Cal.Rptr.3d 922 ( Puerta )]—‘the manner of acceptance must be indicated in the offer.’ [Citation.] Moreover, where a section 998 offer is found to be invalid, any portion of a judgment that results from the section 998 offer is similarly invalid. [Citation.] Because the Judgment was entered pursuant to section 998, and in particular, Code of Civil Procedure section 998, subdivision (b)(1), the Court finds that the Judgment is appropriately set aside as void." (Footnotes omitted.) The trial court also rejected Rabineau's contention that MLG was Mostafavi's alter ego, noting it was not supported by sufficient evidence and "a number of the trial documents prepared by the parties in this case indicate that there was ambiguity on both sides as to who were the remaining parties in this matter."

MLG timely appealed.

DISCUSSION

I. Statutory Framework and Standard of Review

" Section 998 concerns pretrial offers to compromise." ( Puerta , supra , 195 Cal.App.4th at p. 1270, 124 Cal.Rptr.3d 922.) The statute "was designed to encourage settlement of disputes through a straightforward and expedited procedure." ( Bias v. Wright (2002) 103 Cal.App.4th 811, 819, 127 Cal.Rptr.2d 137.)

Pursuant to section 998, subdivision (b) : "Not less than 10 days prior to commencement of trial ..., any party may serve an offer in writing upon any other party to the action to allow judgment to be taken or an award to be entered in accordance with the terms and conditions stated at that time. The written offer shall include a statement of the offer, containing the terms and conditions of the judgment or award, and a provision that allows the accepting party to indicate acceptance of the offer by signing a statement that the offer is accepted. Any acceptance of the offer, whether made on the document containing the offer or on a separate document of acceptance, shall be in writing and shall be signed by counsel for the accepting party[.]"

"If the offer is accepted, the offer with proof of acceptance shall be filed and the clerk or the judge shall enter judgment accordingly." ( § 998, subd. (b)(1).) However, "[i]f 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." ( § 998, subd. (c)(1).) The trial court also has discretion to "require the plaintiff to pay a reasonable sum to cover postoffer costs of the services of expert witnesses[.]" (Ibid. )

Where, as here, "the issue to be decided [on appeal] is purely one of statutory construction, the question is one of law subject to our de novo review. [Citation.]" ( People v. Superior Court (Ortiz) (2004) 115 Cal.App.4th 995, 999, 9 Cal.Rptr.3d 745, overruled on other grounds in People v. Watson (2007) 42 Cal.4th 822, 831, 68 Cal.Rptr.3d 769, 171 P.3d 1101.)

II. Arguments Based on Caselaw and Policy

As noted above, section 998,...