Mostafavi Law Group, APC v. Larry Rabineau, APC

Filed 3/3/21
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION FOUR
MOSTAFAVI LAW GROUP, B302344
APC,
Los Angeles County
Plaintiff and Appellant, Super. Ct. No. BC565480
v.
LARRY RABINEAU, APC, et. al.,
Defendants and
Respondents.
APPEAL from an order of the Superior Court of Los
Angeles County, Teresa A. Beaudet, Judge. Affirmed.
Mostafavi Law Group, Amir Mostafavi; Joseph S. Socher,
for Plaintiff and Appellant.
Law Offices of Larry Rabineau, Larry Rabineau and
Virginia Narian, for Defendants and Respondents.
INTRODUCTION
The Legislature enacted Code of Civil Procedure1 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.)
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 (Perez); Boeken v. Philip Morris USA Inc. (2013) 217
Cal.App.4th 992, 1001 (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
1 All undesignated statutory references are to the Code of
Civil Procedure.
2
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.
3
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
2 Section 998, subdivision (b)(1) states: “If the offer is
accepted, the offer with proof of acceptance shall be filed and the
clerk or the judge shall enter judgment accordingly.”
4
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
3 Section 473, subdivision (d) provides, in relevant part: “The
court . . . may, on motion of either party after notice to the other
party, set aside any void judgment or order.”
4 Mostafavi was both a plaintiff in his own right, and counsel
for his law firm, MLG. Rabineau’s section 998 offer, however, was
directed only to MLG, not Mostafavi. And the judgment was
entered only in favor of MLG, not Mostafavi himself. Mostafavi is
not a party to this appeal.
5
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 (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.) 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.)
Pursuant to section 998, subdivision (b): “Not less than 10
days prior to commencement of trial . . . , any party may serve an
6
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, overruled on other
grounds in People v. Watson (2007) 42 Cal.4th 822, 831.)
II. Arguments Based on Caselaw and Policy
As noted above, section 998, subdivision (b) provides, in
pertinent part: “The written offer shall include . . . a provision
that allows the accepting party to indicate acceptance of the offer
7
by signing a statement that the offer is accepted.” (Emphasis
added.)
MLG concedes Rabineau’s section 998 offer “did not have
any statement at all regarding acceptance,” and thus did not
comply with the statutory language requiring an acceptance
provision. Nevertheless, MLG maintains the judgment is valid
and enforceable because the terms of the offer were clear and
unambiguous and MLG accepted the offer in writing. In other
words, MLG appears to contend that because it accepted the offer
in writing, the offer’s omission of an acceptance provision was
harmless, as the “sole purpose” of requiring section 998 offers to
contain such a provision is “to make it clear that written
acceptance is required.” In support of its position, MLG
emphasizes: (1) prior caselaw did not address the validity of a
judgment following the acceptance of a section 998 offer lacking
an acceptance provision; and (2) section 998’s “goals of
eliminating uncertainty, requiring written acceptance, and
encouraging settlement would be defeated by a rule which voided
the [judgment] where the offeree has communicated an
unqualified, written acceptance of a clear and unambiguous
offer.”
Like MLG, we have not located any California appellate
court decisions addressing the validity of a judgment stemming
from acceptance of a section 998 offer lacking an acceptance
provision. Nevertheless, we conclude the trial court’s ruling—that
such a judgment is void—has ample support in existing caselaw
and accepted principles of statutory construction.
In Puerta, the Court of Appeal addressed whether a section
998 offer without an acceptance provision is valid for purposes of
triggering the cost-shifting provisions set forth in section 998,
8
subdivision (c). (Puerta, supra, 195 Cal.App.4th at p. 1269.) In
resolving this issue, the court applied two “fundamental
principles of statutory construction”: (1) where statutory
language is clear and unambiguous, courts must give effect to its
plain meaning; and (2) courts generally construe the word
“shall” as mandatory. (Id. at pp. 1272-1273.) Based on those
principles, the court held section 998, subdivision (b) “sets forth
two mandatory requirements about what shall be included in a
section 998 offer: the offer shall be written, and it shall contain
a provision stating that the recipient can accept the offer ‘by
signing a statement that the offer is accepted.’” (Id. at
p. 1273.) The court concluded that because “[t]he offer at
issue . . . contained nothing regarding acceptance, only the terms
of the offer itself and its expiration date,” the offer was “invalid
under the plain language of the statute[.]” (Ibid.)
California appellate courts have consistently followed
Puerta to hold that a section 998 offer lacking an acceptance
provision is invalid, and therefore an offeree’s failure to accept it
does not trigger any of section 998’s cost-shifting provisions.5
(See, e.g., Perez, supra, 206 Cal.App.4th at p. 424 [defendant’s
section 998 offer was invalid because “the plain language of the
statute requires all offers to contain an acceptance provision”];
Boeken, supra, 217 Cal.App.4th at p. 1004 [“Because [plaintiff’s]
section 998 offer did not include the required acceptance
5 Section 998, subdivisions (c) and (e) govern cost-shifting
where “an offer made by a defendant is not accepted and the
plaintiff fails to obtain a more favorable judgment or award[.]”
(§ 998, subds. (c) & (e)). Subdivision (d) applies where “an offer
made by a plaintiff is not accepted and the defendant fails to
obtain a more favorable judgment or award[.]” (Id., subd. (d).)
9
provision, the offer was invalid. [Citations.]”]; Bigler-Engler v.
Breg, Inc. (2017) 7 Cal.App.5th 276, 331 [plaintiff was not
entitled to costs under section 998 because her offer “did not
include an acceptance provision” and “therefore did not comply
with the statute”].)
The trial court’s application of these cases—which involved
rejection of a section 998 offer without an acceptance provision—
to this case—which involves acceptance of such an offer—is a
logical extension of their holdings. It also is consistent with
section 998’s language and structure. Section 998, subdivision (b)
sets forth the mandatory requirements that an offer and
acceptance must satisfy in order to be valid under the statute.
(See § 998, subd. (b).) When those requirements are met,
subdivisions (b)(1) and (c) through (e) delineate the consequences
that may follow depending on whether the offer is accepted (entry
of judgment) or not (cost-shifting). (See id., subds. (b)(1) & (c)-(e).)
If failure to accept an offer lacking an acceptance provision does
not trigger the cost-shifting consequences set forth in
subdivisions (c) through (e) (Puerta, supra, 195 Cal.App.4th at p.
1273; Boeken, supra, 217 Cal.App.4th at p. 1004), then purported
acceptance of such a defective offer likewise cannot trigger the
consequences in subdivision (b)(1) and give rise to an enforceable
judgment. This is so because where a section 998 offer is invalid
based on its failure to satisfy all of the “statutorily required
elements[,] . . . there is nothing for the receiving party to accept”
in the first place. (Perez, supra, 206 Cal.App.4th at p. 426.)
This conclusion is supported by Saba v. Crater (1998) 62
Cal.App.4th 150 (Saba). While Saba was based on a prior version
of section 998 that did not require offers to include an acceptance
10
provision, the opinion is instructive on the validity of a judgment
stemming from the acceptance of a defective offer. (Id. at p. 153.)
In Saba, the defendant’s counsel made a section 998 offer
orally on the record at a deposition. (Saba, supra, 62 Cal.App.4th
at p. 152.) After failing to obtain a formal written offer after the
deposition, the plaintiff’s counsel served the defendant with a
written acceptance and moved for entry of judgment pursuant to
section 998, subdivision (b)(1). (Ibid.) The trial court found that
“a valid section 998 offer had been made and accepted” and
entered judgment in the plaintiff’s favor. (Ibid.) The Court of
Appeal reversed, holding the judgment was defective because,
among other things, the offer was not in writing as required by
statute. (Id. at pp. 153-154.) Saba therefore demonstrates
acceptance of an offer that fails to comply with all of section 998’s
requirements does not result in a valid judgment. (See ibid.)
Additionally, we reject MLG’s contention that a rule
requiring offers to include an acceptance provision in order to
give rise to an enforceable judgment under section 998,
subdivision (b)(1) will defeat the statute’s goals of “eliminating
uncertainty” and “encouraging settlement.” On the contrary, it is
an application of the “bright-line rule” articulated in Perez, which
“require[s] the parties to comply with the provisions [of section
998] the Legislature has deemed necessary” by “invalidating an
offer when it omits an acceptance provision, or any other
statutorily required provision[.]” (Perez, supra, 206 Cal.App.4th
at pp. 425-426.) Contrary to MLG’s argument, we agree with the
Perez court that adherence to this “bright-line rule will eliminate
confusion and uncertainty” and “encourage settlements[.]” (Id. at
p. 426.) Specifically, consistent application of this rule will ensure
parties can efficiently discern: (1) whether an offer extended or
11
received is valid and capable of acceptance based on its
compliance with all of section 998’s requirements; (2) the specific
actions that must be taken to accept an offer, as defined by the
offeror; and (3) the consequences that may flow from an offer’s
acceptance or rejection. Adopting a rule requiring section 998
offers to include an acceptance provision to be valid, whether they
are rejected or accepted, adds consistency and predictability to
section 998’s operation. This may incentivize litigants to utilize
this “straightforward and expedited procedure” to settle disputes
before trial. (Bias v. Wright, supra, 103 Cal.App.4th p. 819.)6
III. Arguments Based on Contract Principles and Equity
A. Contract Principles
MLG contends we should apply “pure contract principles”
to conclude the judgment is valid. Specifically, MLG argues that
because Rabineau’s offer was “unambiguous” and its acceptance
was “clear and unqualified,” the parties exhibited a “clear intent”
to enter into a “binding agreement” for entry of judgment under
section 998, subdivision (b)(1); consequently, it asserts, the
6 We note that had Rabineau’s section 998 offer contained an
acceptance provision, and had it been accepted in accordance
with that provision, Rabineau could not have later conditioned
payment of the settlement funds on MLG’s execution of a
settlement agreement containing terms not specified in the offer,
as he tried to do in this case. Rabineau’s attempt to introduce
additional terms outside of the offer is inconsistent with the plain
language of section 998, subdivision (b), which requires the offer
itself to “contain[] the terms and conditions of the judgment or
award.”
12
“resulting judgment is cannot [sic] be voided.” Put differently,
MLG contends “pure contract principles” require the conclusion
that the offer was valid and capable of giving rise to an
enforceable judgment under section 998, notwithstanding its
omission of an acceptance provision. We are not convinced.
Our Supreme Court has acknowledged that, “[b]ecause the
process of settlement and compromise is a contractual one,
[general contract law] principles may, in appropriate
circumstances, govern the offer and acceptance process under
section 998. [Citation.]” (Martinez v. Brownco Construction
Co. (2013) 56 Cal.4th 1014, 1020.) The Supreme Court has
made clear, however, that these principles should not apply
where, as here, their “application would conflict with section
998 . . . . [Citation.]” (Ibid.) Specifically, as the trial court
correctly noted, application of general contract principles to
conclude a section 998 offer is valid, even if it does not have an
acceptance provision, would conflict with the language of section
998, which clearly provides otherwise. (See § 998, subd. (b); see
also Perez, supra, 206 Cal.App.4th at p. 424, fn. omitted [“The
plain language of [section 998] requires all offers to contain an
acceptance provision.”].)
Additionally, relying on Civil Code section 1654, MLG
contends we should conclude the offer was valid because
Rabineau drafted it, and should be held responsible for any
“ambiguity” regarding its validity. Section 1654 of the Civil Code
states: “In cases of uncertainty not removed by the preceding
rules, the language of a contract should be interpreted most
strongly against the party who caused the uncertainty to exist.”
(Emphasis added.) This interpretive rule has no relevance here,
however, as MLG does not point to any ambiguity in the terms of
13
the offer which would require further construction. Indeed, as
noted above, MLG asserts on appeal that the offer “was
unambiguous.”
B. Equity
Relying on “principles of . . . equity,” MLG contends the
judgment should be enforced because to hold otherwise would
allow Rabineau to unfairly benefit from his own “drafting errors”
and “avoid the duties and consequences of [his] own offer based
on a technical deficiency [he himself] created.” Again, we are not
persuaded.
As an initial matter, we note Rabineau acknowledges he
made several errors in drafting the section 998 offer, including
failing to include an acceptance provision and failing to direct the
offer to both plaintiffs listed on the operative complaint. But we
disagree with MLG’s conclusion that we should overlook
Rabineau’s failure to comply with a statutory requirement based
entirely on its view of what is fair. Instead, stare decisis and
common tenants of statutory construction direct us to adhere to
the clear statutory requirement of an acceptance provision
“without regards to what occurred in this particular case or the
tactics of a party.” (Boeken, supra, 217 Cal.App.4th at p. 1004).
We “cannot ignore the . . . statute to achieve a more desirable
result.” (Perez, supra, 206 Cal.App.4th at p. 424, italics omitted.)
Finally, MLG asserts Rabineau should be equitably
estopped from challenging the validity of judgment. Arguably,
this argument has been forfeited, as MLG did not raise it before
the trial court. (See Bigler-Engler v. Breg, Inc., supra, 7
Cal.App.5th at pp. 331-332.) In any event, because the judgment
14
MLG seeks to enforce is the product of section 998, we are not
convinced that the doctrine of equitable estoppel can be used to
escape the statute’s requirements. Moreover, MLG has not shown
the elements of equitable estoppel have been satisfied, as the
record does not reflect Rabineau made any misrepresentations of
material fact to MLG, or that MLG relied on any such
misrepresentations to its detriment. (See Simmons v. Ghaderi
(2008) 44 Cal.4th 570, 584 [application of equitable estoppel
requires satisfaction of all of the following elements: “(a) a
representation or concealment of material facts; (b) made with
knowledge, actual or virtual, of the facts; (c) to a party ignorant,
actually and permissibly, of the truth; (d) with the intention,
actual or virtual, that the ignorant party act on it; and (e) that
party was induced to act on it. [Citation.]”].)
15
DISPOSITION
The order vacating the judgment is affirmed. Respondents
shall recover their costs on appeal.
CERTIFIED FOR PUBLICATION
CURREY, J.
WE CONCUR:
WILLHITE, Acting P. J.
COLLINS, J.
16