Jose VASQUEZ–GARCIA et al., Plaintiffs and Respondents, v. VONS COMPANIES, INC. et al., Defendants and Appellants; City of Rosemead, Defendant and Respondent.
This case involves Code of Civil Procedure section 998 settlement offers made by a plaintiff to employer and employee defendants in a respondeat superior situation. A plaintiff made separate statutory settlement offers to the employer and employee, which were not accepted, and subsequently obtained a joint judgment against the defendants which was more favorable than the offer made to the employee and less favorable than the offer made to the employer. The trial court awarded plaintiff his expert witness costs pursuant to Code of Civil Procedure section 998 and prejudgment interest pursuant to Civil Code section 3291 against both defendants. On appeal, these defendants contend the trial court erred.
We conclude that if a plaintiff's separate statutory settlement offers to employee and employer defendants in a respondeat superior situation are rejected, plaintiff may be awarded expert witness costs and prejudgment interest as to a defendant against whom the plaintiff obtains a judgment more favorable than the offer made to that defendant. Such costs and interest, however, may not be awarded as to a defendant against whom a more favorable judgment is not obtained. Accordingly, we modify the judgment to vacate the award of expert witness costs and prejudgment interest against the employer and affirm the award against the employee.
This case also concerns the proper allocation of a jury verdict between defendants, when some percentage of the fault is attributable to an independent contractor employer of the injured plaintiff for which another defendant is vicariously liable under the peculiar risk doctrine. We consider the effect of the recent Supreme Court case, Privette v. Superior Court (1993) 5 Cal.4th 689, 21 Cal.Rptr.2d 72, 854 P.2d 721, on such an allocation. We conclude the trial court erred in allocating the verdict and modify the judgment accordingly.
As modified, we affirm the judgment.
On April 26, 1990, plaintiff and respondent Jose Vasquez–Garcia was employed by Raymor Electric. Raymor Electric had contracted with defendant and respondent City of Rosemead (the City) to install traffic devices in the City. In the course and scope of his employment with Raymor Electric, on the afternoon of April 26, 1990, Jose Vasquez–Garcia was in the bucket of a “cherry picker” at an intersection in the City installing traffic devices. A vehicle owned by defendant and appellant the Vons Companies, Inc. and driven by defendant and appellant Major Allen I. Anderson in the course and scope of his employment with Vons collided with the cherry picker. The collision knocked Jose Vasquez–Garcia out of the bucket causing him personal injuries. Plaintiff and respondent Teresa Flores–Garcia is the wife of Jose Vasquez–Garcia.
Plaintiffs sued defendants and others for personal injuries arising out of the collision. Jose Vasquez–Garcia asserted causes of action against Anderson and Vons for negligence and negligent entrustment and against the City for negligence, dangerous condition of public property and peculiar risk of harm. Teresa Flores–Garcia sued for loss of consortium. Jose Vasquez–Garcia pursued his workers' compensation remedies against Raymor Electric. A workers' compensation lien in the amount of $107,000 was filed.
Jose Vasquez–Garcia made statutory offers to compromise Anderson's liability in the amount of $99,000 and Vons's liability in the amount of $699,000. Teresa Flores–Garcia made statutory offers to compromise Anderson's liability in the amount of $24,000 and Vons's liability in the amount of $49,000. None of these offers to compromise were accepted.
Plaintiffs' negligent entrustment theory of liability was abandoned prior to trial; plaintiffs proceeded against Vons solely on a respondeat superior theory. After a jury trial, the jury returned a special verdict finding that Vons/Anderson and the City had been negligent and their negligence had caused damages to Jose Vasquez–Garcia in the amount of $552,000 and Teresa Flores–Garcia in the amount of $10,000. The negligence of Vons and Anderson was not separately determined. The jury further found the City had hired Raymor Electric to perform work which was likely to create a special risk of bodily harm to others unless special precautions were taken; a reasonable person in the City's position should have recognized the work was likely to create such a special risk; Raymor Electric failed to exercise reasonable care to take precautions at the work site; and Raymor Electric's negligence was the cause of injury to plaintiffs. The jury apportioned liability to Vons/Anderson 30 percent, the City 20 percent and Raymor Electric 50 percent.
The trial court reduced the gross amount of Jose Vasquez–Garcia's verdict by the amount of the workers' compensation lien, resulting in a net judgment of $445,000. The trial court apportioned the net judgment between Vons/Anderson and the City on the basis of their proportionate share of culpability, allocating 60 percent of the verdict to Vons/Anderson resulting in a judgment of $267,000 and 40 percent of the verdict to the City resulting in a judgment of $178,000. A similar apportionment of the Teresa Flores–Garcia verdict resulted in a judgment against Vons/Anderson in the amount of $6,000 and against the City in the amount of $4,000.1 The trial court further imposed against Vons/Anderson expert witness costs pursuant to Code of Civil Procedure section 998 in the amount of $32,560.09 and prejudgment interest pursuant to Civil Code section 3291 in the amount of $60,422.40. The balance of the costs were apportioned 60 percent to Vons/Anderson and 40 percent to the City.
Vons and Anderson appealed from the judgment. The City did not appeal.
I. Apportionment of the Verdict
There is no dispute in this appeal as to the amount of the damages awarded by the jury to Jose Vasquez–Garcia ($552,000) or to Teresa Flores–Garcia ($10,000). There is also no dispute as to the amount of workers' compensation benefits received by Jose Vasquez–Garcia ($107,000), which should be used to offset the gross verdict. Finally, there is no dispute as to the allocation of fault to Vons/Anderson (30 percent), the City (20 percent) and Raymor Electric (50 percent). We note that since the damages were not divided between economic and noneconomic damages, no question concerning the proper allocation of noneconomic damages pursuant to Proposition 51 is before us. (Cf. DaFonte v. Up–Right, Inc. (1992) 2 Cal.4th 593, 7 Cal.Rptr.2d 238, 828 P.2d 140.) We further note that since the City has not appealed from the judgment, no question concerning its vicarious liability for the negligence of Raymor Electric under the peculiar risk doctrine is properly before us. (Privette v. Superior Court, supra, 5 Cal.4th 689, 21 Cal.Rptr.2d 72, 854 P.2d 721.) 2
We start with the proposition that Jose Vasquez–Garcia is entitled to a net judgment of $445,000 and Teresa Flores–Garcia is entitled to a judgment of $10,000. Having thus separated the wheat from the chaff, the only question for us to determine is the proper allocation of the judgments to which plaintiffs are indisputably entitled between Vons/Anderson and the City in accordance with the verdicts of the jury.
Prior to our Supreme Court's decision in Privette v. Superior Court, supra, 5 Cal.4th 689, 21 Cal.Rptr.2d 72, 854 P.2d 721, a person who hired an independent contractor to perform inherently dangerous work was liable to third parties as well as employees of the independent contractor for the negligence of the independent contractor. (Id. at p. 696, 21 Cal.Rptr.2d 72, 854 P.2d 721.) This became known as the peculiar risk doctrine. Under this doctrine, the person hiring an independent contractor under such circumstances became vicariously liable for the negligence of the independent contractor. (Id. at pp. 695–696, 21 Cal.Rptr.2d 72, 854 P.2d 721; Miller v. Stouffer (1992) 9 Cal.App.4th 70, 84–85, 11 Cal.Rptr.2d 454.) Questions arose as to whether the peculiar risk doctrine should be applied in favor of an employee of the independent contractor. In Privette, our Supreme Court concluded that the applicability of the workers' compensation scheme precluded such a result. (Privette v. Superior Court, supra, 5 Cal.4th at p. 702, 21 Cal.Rptr.2d 72, 854 P.2d 721.) Following Privette, a person who hires an independent contractor may still be vicariously liable to third parties injured by the negligence of the independent contractor provided the third parties are not the independent contractor's employees injured in the course and scope of their employment. Thus, the peculiar risk doctrine survives Privette to the extent it is applied to non-employee third parties.
It appears that our Supreme Court's holding in Privette would have precluded the City's vicarious liability for the negligence of Raymor Electric for the injuries to Raymor Electric's employee, Jose Vasquez–Garcia. If the City were not vicariously liable for the negligence of Raymor Electric, the trial court's apportionment of the verdict would have been proper. In the absence of vicarious liability, the amounts paid under workers' compensation are to be deducted from the gross verdict and then the net judgment is to be apportioned between tortfeasors on the basis of their proportionate share of culpability. (Cf. Paradise Valley Hospital v. Schlossman (1983) 143 Cal.App.3d 87, 91–92, 191 Cal.Rptr. 531.) However, the City was found to be vicariously liable under the peculiar risk doctrine and did not raise the inapplicability of the peculiar risk doctrine in the trial court. Nor did the City appeal from the judgment. Accordingly, it remains vicariously liable for the negligence attributed by the jury to Raymor Electric.
Accordingly, Vons/Anderson is liable to Jose Vasquez–Garcia for 30 percent of the gross verdict ($165,600) and the City is liable for 70 percent of the gross verdict less the amount paid under workers' compensation ($279,400). There is no merit to appellants' suggestion that they should only be required to pay 30 percent of the net judgment. Since the City is vicariously liable for the negligence of Raymor Electric, the City is entitled to the sole benefit of the workers' compensation benefits paid on Raymor Electric's behalf. Similarly, Vons/Anderson is liable to Teresa Flores–Garcia for 30 percent of the verdict ($3,000) and the City is liable for 70 percent of the verdict ($7,000).
II. Statutory Settlement Offer
This case involves the interplay of the statutory settlement offer provisions of the Code of Civil Procedure (§ 998), the good faith settlement provisions of the Code of Civil Procedure (§§ 877 and 877.6) and the common law doctrine of respondeat superior. We are concerned with the proper nature of a plaintiff's statutory settlement offers to employee and employer defendants, where the employer is liable only vicariously for the negligence of the employee in the course and scope of employment. Specifically, we must determine whether separate offers of differing amounts made to the employee and employer defendants justify the imposition of the penalties provided for in Code of Civil Procedure section 998 and Civil Code section 3291, where the offers are not accepted by either defendant, and the plaintiff obtains a judgment more favorable than one of the offers but less favorable than the other.
The complaint in this case alleged that Vons was the owner of the vehicle driven by Anderson in the course and scope of Anderson's employment with Vons. The complaint asserted theories of respondeat superior and negligent entrustment against Vons and negligence against Anderson. Jose Vasquez–Garcia made statutory settlement offers to Anderson in the amount of $99,000 and to Vons in the amount of $699,000. Neither of the settlement offers was accepted. After the statutory settlement offers, but prior to trial, plaintiffs abandoned their negligent entrustment theory against Vons and proceeded to trial on the sole theory that Anderson had been negligent and Vons was vicariously liable for Anderson's negligence under the doctrine of respondeat superior. The special verdict grouped Vons and Anderson together and included no separate findings concerning their individual negligence or comparative fault. The verdict found Vons/Anderson liable for 30 percent of Jose Vasquez–Garcia's $552,000 damages, i.e., $165,600. The trial court determined that Jose Vasquez–Garcia had obtained a more favorable judgment than his rejected statutory settlement offer and ordered Vons/Anderson to pay expert witness costs and prejudgment interest pursuant to Code of Civil Procedure section 998 3 and Civil Code section 3291.4
Appellants contend the trial court erred in imposing against them expert witness costs and prejudgment interest pursuant to Code of Civil Procedure section 998 and Civil Code section 3291. They argue that the statutory settlement offers made to them individually must be combined to determine whether Jose Vasquez–Garcia obtained a more favorable judgment against them. Thus, they assert the combined judgment of $165,600 was not more favorable than the combined settlement offer of $798,000. They also argue that a contrary rule would inhibit settlement and is inherently unfair in the context of the vicarious liability of an employer for the negligence of an employee under the doctrine of respondeat superior. They conclude that a joint statutory settlement offer is required where one defendant is only vicariously liable for the negligence of a codefendant. We are not persuaded by these arguments.
Any party to an action may serve any other party with a statutory offer to compromise within the meaning of Code of Civil Procedure section 998. If the offer is accepted, the offer and acceptance are filed with the court and judgment is entered in accordance with the settlement. (Code Civ.Proc., § 998, subd. (b)(1).) Such a judgment is “deemed to be a compromise settlement.” (Code Civ.Proc., § 998, subd. (f).) If the offer is not accepted, certain adverse consequences may flow from the failure to accept the offer. (Code Civ.Proc., § 998, subd. (c), (d) and (e).)
As a general rule, a plaintiff submitting a statutory settlement offer in cases involving multiple defendants must submit to each defendant an offer “sufficiently specific to permit that individual defendant to determine the exact amount plaintiff is seeking from him or her.” (Taing v. Johnson Scaffolding Co. (1992) 9 Cal.App.4th 579, 586, 11 Cal.Rptr.2d 820; compare Bihun v. AT & T Information Systems, Inc. (1993) 13 Cal.App.4th 976, 998–1001, 16 Cal.Rptr.2d 787, disapproved on other grounds in Lakin v. Warkins Associated Industries (1993) 6 Cal.4th 644, 664, 25 Cal.Rptr.2d 109, 863 P.2d 179 [joint statutory settlement offer to defendant employer and its employees not so manifestly unjust as to relieve employer of waiver caused by failing to raise issue of unapportioned settlement offer in the trial court].) If a statutory settlement demand is addressed separately to multiple defendants, “any such defendant can accept the demand and seek a good faith settlement determination. If the settlement is made in good faith, the settling defendant terminates any further liability to the plaintiff and any codefendants seeking indemnity.” (Taing v. Johnson Scaffolding Co., supra, 9 Cal.App.4th at p. 584, 11 Cal.Rptr.2d 820; Code Civ.Proc., §§ 877, 877.6.) In determining whether a plaintiff has received a judgment against a defendant which is greater than plaintiff's statutory offer to that defendant, it is not appropriate to apply a mechanical rule, but rather the test is whether it can be determined that the plaintiff has in fact received a judgment against the defendant which is more favorable than the statutory offer. (Stallman v. Bell (1991) 235 Cal.App.3d 740, 746, 286 Cal.Rptr. 755; Winston Square Homeowner's Assn. v. Centex West, Inc. (1989) 213 Cal.App.3d 282, 294, 261 Cal.Rptr. 605; Fortman v. Hemco, Inc. (1989) 211 Cal.App.3d 241, 263, 259 Cal.Rptr. 311.)
An employer is vicariously liable to third persons under the doctrine of respondeat superior for the negligence of its employee in the course and scope of employment. (Civ.Code, § 2338.) The employer is vicariously liable not because the employer was at fault, but because “justice requires that the enterprise be responsible for the risks of conducting its business.” (Mesler v. Bragg Management Co. (1985) 39 Cal.3d 290, 302, 216 Cal.Rptr. 443, 702 P.2d 601; accord Miller v. Stouffer, supra, 9 Cal.App.4th at p. 84, 11 Cal.Rptr.2d 454.) Where a judgment is entered against an employer and employee in a respondeat superior situation, they are required to contribute a single pro rata share of the judgment, “as to which there may be indemnity between them.” (Code Civ.Proc., § 876, subd. (b).) 5 A plaintiff may settle an action against an employee without affecting plaintiff's rights against the vicariously liable employer. (Mayhugh v. County of Orange (1983) 141 Cal.App.3d 763, 766, 190 Cal.Rptr. 537; Ritter v. Technicolor Corp. (1972) 27 Cal.App.3d 152, 153, 103 Cal.Rptr. 686; cf. Lama v. Comcast Cablevision (1993) 14 Cal.App.4th 59, 64, 17 Cal.Rptr.2d 224.) It is well established that the release of an employee does not release the employer from liability even where the sole basis for recovery from the employer is vicarious liability for the negligent conduct of the employee. (Mesler v. Bragg Management Co., supra, 39 Cal.3d at pp. 302–303, 216 Cal.Rptr. 443, 702 P.2d 601; Mayhugh v. County of Orange, supra, 141 Cal.App.3d 763, 190 Cal.Rptr. 537; Ritter v. Technicolor Corp., supra, 27 Cal.App.3d at p. 153, 103 Cal.Rptr. 686.) The employer is merely entitled to a credit against any subsequent judgment against it for any amounts paid to plaintiff by the employee to obtain the settlement. (Code Civ.Proc., § 877, subd. (a).)
While it is true that a judgment in favor of the employee exonerates the employer, settlement with the employee does not have the same effect. (Mesler v. Bragg Management Co., supra, 39 Cal.3d at p. 303, 216 Cal.Rptr. 443, 702 P.2d 601.) “A judgment in favor of the [employee] means that under our system of law the plaintiff should not recover under the circumstances presented. A settlement has no such implication; it means simply that the parties have agreed to resolve their problems outside the courtroom. Thus liability of the [employer] ․ has not been disproved. (See Sampay v. Morton Salt Co. (La.1981) 395 So.2d 326, 328.) [‘Although the employer and employee are not joint tortfeasors, they are nonetheless each obligated for the same thing—total reparation of the damages to the victim. The derivative nature of the employer's liability is of no concern to the victim, and he can compel either the employer or the employee to compensate him for the whole of his damages'].) The liability of the [employer] ․ is not affected by the route the [employee] ․ chooses to take in disposing of the action.” (Id. at pp. 303–304; cf. Milicevich v. Sacramento Medical Center (1984) 155 Cal.App.3d 997, 1001–1004, 202 Cal.Rptr. 484; compare with Burton v. Gardner Motors, Inc. (1981) 117 Cal.App.3d 426, 432, 172 Cal.Rptr. 647 [reaching contrary result where owner of vehicle subject to limited secondary liability pursuant to Vehicle Code section 17150].)
A plaintiff is entitled to settle with the more culpable employee for a relatively modest amount, for example where the employee has no substantial assets, and yet may still pursue the more solvent but less culpable employer for full compensation for the plaintiff's damages. (Mesler v. Bragg Management Co., supra, 39 Cal.3d at p. 304, 216 Cal.Rptr. 443, 702 P.2d 601.) If the plaintiff's statutory offers to settle with the employee and the employer are unfair or not made in good faith, the plaintiff may not obtain the benefits of Code of Civil Procedure section 998. (Culbertson v. R.D. Werner Co., Inc. (1987) 190 Cal.App.3d 704, 708–709, 235 Cal.Rptr. 510; Pineda v. Los Angeles Turf Club, Inc. (1980) 112 Cal.App.3d 53, 63, 169 Cal.Rptr. 66.) Similarly, if the settlement with the employee is unfair or not in good faith, the employee will not obtain the benefits of the good faith settlement statutes. (Far West Financial Corp. v. D & S Co. (1988) 46 Cal.3d 796, 815, 251 Cal.Rptr. 202, 760 P.2d 399; Code Civ.Proc., §§ 877, 877.6.)
The statutory settlement offer and good faith settlement provisions of the Code of Civil Procedure promote the Legislature's objective of encouraging settlement of lawsuits prior to trial. (Taing v. Johnson Scaffolding Co., supra, 9 Cal.App.4th at p. 583, 11 Cal.Rptr.2d 820; Far West Financial Corp. v. D & S Co., supra, 46 Cal.3d at p. 810, 251 Cal.Rptr. 202, 760 P.2d 399.) It is true that a nonsettling defendant may pay more after trial than its proportionate share of the liability and a settling defendant may pay less in settlement than it would after trial. (Far West Financial Corp. v. D & S Co., supra, at p. 816, 251 Cal.Rptr. 202, 760 P.2d 399.) This “minor departure from a theoretically precise allocation of loss which the statute sanctions is simply the price that nonsettling defendants uniformly bear to promote the settlement of litigation.” (Id. at p. 817, 251 Cal.Rptr. 202, 760 P.2d 399.) A nonsettling vicariously liable defendant is in no different position than any other minimally culpable tortfeasor. (Ibid.)
Accordingly, we conclude that a plaintiff may properly make separate statutory settlement offers to employee and employer defendants even where the employer is only vicariously liable for the negligence of the employee. If the offers are rejected and the plaintiff subsequently obtains a judgment, the plaintiff may be awarded the appropriate penalties as to a defendant against whom a judgment more favorable than the statutory settlement offer has been obtained.
We return to the facts of the present case. We note at the outset that at the time of the statutory settlement offers, plaintiffs were still pursuing Vons not only on a vicarious liability theory, but also on a negligent entrustment theory. The existence of this separate theory of liability is sufficient in and of itself to justify plaintiffs' separate statutory settlement offers to Vons and Anderson. (But see Bihun v. AT & T Information Systems, Inc., supra, 13 Cal.App.4th at p. 1001, 16 Cal.Rptr.2d 787.) Secondly, we note that there is absolutely no justification for the imposition of expert witness costs and prejudgment interest against Vons. Jose Vasquez–Garcia did not obtain a judgment against Vons which was more favorable than the statutory settlement offer he made to Vons. Accordingly, the trial court erred in imposing expert witness costs and prejudgment interest against Vons. Jose Vasquez–Garcia has conceded this issue.
Since we have concluded that a plaintiff may make separate statutory offers of settlement to a defendant employer and a defendant employee in a respondeat superior situation, we necessarily conclude that the separate statutory settlement offer made by Jose Vasquez–Garcia to Anderson was proper. We next address whether Jose Vasquez–Garcia obtained a judgment against Anderson more favorable than the statutory offer Jose Vasquez–Garcia made to Anderson. The answer is clearly in the affirmative. Jose Vasquez–Garcia offered to settle with Anderson for $99,000. He obtained a judgment for which Anderson is liable in the amount of $165,600. The judgment is without question more favorable than the statutory settlement offer. (Hilliger v. Golden (1980) 107 Cal.App.3d 394, 400, 166 Cal.Rptr. 33 [improper to apportion judgment where defendants jointly and severally liable]; Brown v. Nolan (1979) 98 Cal.App.3d 445, 451, 159 Cal.Rptr. 469 [same]; Miller v. Stouffer, supra, 9 Cal.App.4th at p. 84, 11 Cal.Rptr.2d 454 [under doctrine of respondeat superior the liability of employer is co-extensive with the liability of employee].) Accordingly, Anderson is properly subject to the statutory penalties for failure to accept the statutory settlement offer of Jose Vasquez–Garcia. Appellants' complaints of unfairness and inhibition of settlement have been addressed and rejected by the Supreme Court in an analogous situation in Far West Financial Corp. v. D & S Co., supra, 46 Cal.3d at pages 814–817, 251 Cal.Rptr. 202, 760 P.2d 399.
As a final matter, Anderson contends he should not be liable for all the expert witness costs of Jose Vasquez–Garcia. Anderson asserts he should be liable for only his proportionate share of these costs, i.e., 30 percent. He cites no authority for this proposition.
The plaintiff who obtains a judgment against a defendant more favorable than a rejected statutory settlement offer may be awarded expert witness costs. (Code Civ.Proc., § 998, subd. (d).) “Whether to award such costs is expressly within the discretion of the trial court.” (Syverson v. Heitmann (1985) 171 Cal.App.3d 106, 114, 214 Cal.Rptr. 581.) “It is well settled that the purpose of this section is to encourage the settlement of litigation without trial. Its effect is to punish the [offeree] who fails to accept a reasonable offer from [the offeror].” (Culbertson v. R.D. Werner Co., Inc., supra, 190 Cal.App.3d at p. 711, 235 Cal.Rptr. 510, italics in original.)
Since Jose Vasquez–Garcia obtained a judgment against Anderson more favorable than the rejected settlement offer, the trial court had discretion to award Jose Vasquez–Garcia his expert witness costs against Anderson. The trial court exercised its discretion in favor of awarding all of the expert witness costs against Anderson. Anderson's argument that he should bear only his proportionate share of the costs is without merit. Assuming the trial court could have properly awarded Jose Vasquez–Garcia only 30 percent of his expert witness costs, it was not an abuse of discretion for it to refuse to do so. The City is not liable for expert witness costs under Code of Civil Procedure section 998. If Anderson were to pay only 30 percent of these costs, Jose Vasquez–Garcia would be uncompensated for the balance. More importantly, the payment of expert witness costs under these circumstances is designed to be a penalty which punishes the defendant for refusing a reasonable settlement offer by the plaintiff. There is nothing in the nature of a penalty which requires it to be limited to a defendant's proportionate share of the judgment.
The judgment is modified as follows. Jose Vasquez–Garcia is awarded a net judgment in the amount of $445,000 apportioned to Vons/Anderson in the amount of $165,600 and to the City in the amount of $279,400. Teresa Flores–Garcia is awarded a judgment in the amount of $10,000 apportioned to Vons/Anderson in the amount of $3,000 and to the City in the amount of $7,000. Code of Civil Procedure section 998 expert witness costs and Civil Code section 3291 prejudgment interest are awarded against Anderson only. In all other respects, the judgment is affirmed as modified. Anderson is to bear Jose Vasquez–Garcia's costs on appeal. The other parties are to bear their own costs on appeal.
GRIGNON, Associate Justice.
TURNER, P.J., and GODOY PEREZ, J., concur.