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Thomann v. Fouse (07/02/2004) sp-5824
Thomann v. Fouse (07/02/2004) sp-5824
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
TARA THOMANN, )
) Supreme Court No. S-10865
Appellant, )
) Superior Court No.
v. ) 4FA-01-236 CI
)
SETH FOUSE, ) O P I N I O N
)
Appellee. ) [No. 5824 - July 2, 2004]
)
Appeal from the Superior Court of the State
of Alaska, Fourth Judicial District,
Fairbanks, Charles R. Pengilly, Judge.
Appearances: Ward Merdes, Merdes & Merdes,
P.C., Fairbanks, for Appellant. Laura L.
Farley and Stacy K. Steinberg, LeGros,
Buchanan & Paul, Anchorage, for Appellee.
Before: Bryner, Chief Justice, Matthews,
Eastaugh, Fabe, and Carpeneti, Justices.
BRYNER, Chief Justice.
I. INTRODUCTION
Tara Thomann sued Seth Fouse for personal injuries
arising from a car accident. Fouse unsuccessfully offered to
settle the claim for $25,000 plus medical payments assumed by
[Fouses] insurance carrier for resolution in a subsequent
arbitration. A jury later returned a verdict resulting in an
award that the superior court found to be lower than the pretrial
offer. The court thus entered a judgment awarding post-offer
costs and attorneys fees to Fouse under Civil Rule 68. Because
Fouse acknowledged below that the agreement for future
arbitration raised a murky issue as to the status of Thomanns
medical bills, we reverse the award of post-offer costs and fees,
holding that the offer of judgment was too indefinite to support
an award under Rule 68.
II. FACTS AND PROCEEDINGS
Seth Fouse caused an auto collision that injured Tara
Thomann, a passenger in the other car. Thomann sued Fouse for
money damages. Fouse acknowledged liability, and a jury trial on
damages was scheduled to start before Superior Court Judge
Charles R. Pengilly on September 16, 2002. Meanwhile Thomanns
insurer, GEICO, had paid the medical bills she incurred after the
accident.
About six weeks before trial, Fouse sent Thomann the
following offer of judgment:
NOTICE IS HEREBY GIVEN that Defendant,
Seth Fouse, in accordance with Alaska Rule of
Civil Procedure 68, herein offers to allow
judgment to be taken against him in the sum
of TWENTY FIVE THOUSAND DOLLARS ($25,000),
exclusive of awardable Rule 79 costs,
prejudgment interest at the statutory rate,
and Rule 82 attorneys fees. This offer
represents new money and is offered in
addition to the medical payments which have
been assumed by Defendant Fouses insurance
carrier for resolution in a subsequent
arbitration. This offer is not to be
construed as an admission of liability.[1]
Documents later filed in superior court by Fouse
revealed that State Farm had agreed to a binding arbitration with
GEICO concerning the allocation of [Thomanns] medical expenses
and that State Farm had promised to pay any amount ordered paid
by the arbitrator. An arbitration had been set for January 10,
2003 about four months after the scheduled trial. Thomann was
not a party to the arbitration, and the record provides no
indication that she knew of it before receiving Fouses offer of
judgment. Fouses superior court pleadings did not include a copy
of State Farms arbitration agreement with GEICO, and the record
provides no evidence of its terms more definitive than the
description given above.
Thomann did not accept Fouses settlement offer of
judgment, and the case proceeded to trial. The jury awarded
Thomann $29,018.88, a total that included the entire amount
Thomann claimed at trial for medical expenses, $9,418.88.
Thomann moved for an award of attorneys fees, asserting
that she had prevailed in the action. Fouse opposed her motion
and moved for fees himself, arguing that he was the prevailing
party under Civil Rule 68 because his offer of judgment surpassed
Thomanns verdict. In opposition to Fouses position, Thomann
argued that Fouses pretrial offer lacked specificity and was too
vague to be enforced; alternatively, she argued, her verdict
exceeded the pretrial offer. The superior court determined Fouse
to be the prevailing party under Rule 68, and entered a judgment
awarding post-offer costs and attorneys fees in his favor.
Thomann appeals the award of Rule 68 fees.
III. DISCUSSION
On appeal Thomann renews the arguments she advanced
below, contending that the pretrial offer of judgment was too
indefinite to be enforced and that she prevailed in any event
because the jurys verdict bettered Fouses offer. We consider
only the first of these issues whether Fouses pretrial offer was
sufficiently definite to be enforceable under Civil Rule 68
since it is dispositive.
An offer of judgments compliance with Rule 68 is a
question of law, which we review independently.2 When a party
declines an offer of judgment and then fares worse at trial than
under the offer, Rule 68 allows the offering party to claim post-
offer costs and attorneys fees.3 But to support an award of
costs and fees under that rule, the pretrial offer must comport
with the rules requirements.4 In deciding whether an offer meets
the requirements of Rule 68, we must view the offers terms as a
reasonable offeree would have understood them at the time the
offer was made.5
One of the protections afforded by the Civil Rule 68
procedure is that the offer of judgment must be definite. This
protection is designed to avoid post-trial litigation concerning
the meaning of the offer.6 In keeping with this purpose, we have
recognized that, to comply with Rule 68, an offer of judgment
must specify a definite sum and must be unconditional.7 Because
this requirement basically concerns the specificity of the offer
rather than its communication of a monetary amount, however, we
have recognized that nonmonetary provisions in an offer of
judgment can also be valid, so long as they are unambiguous and
unconditional.8 Accordingly, we have enforced offers containing
nonmonetary references to an insurers lien for medical payments
when the amount of the payments was undisputed and the meaning of
the reference was otherwise unconditional and unambiguous.9
In the present case, the contested part of the offer of
judgment is its provision specifying that Fouses offer to pay
Thomann $25,000 was in addition to the medical payments which
have been assumed by Defendant Fouses insurance carrier for
resolution in a subsequent arbitration.
Fouse characterizes this language as an unambiguous and
unconditional commitment by State Farm to extinguish GEICOs lien
for medical payments: Fouse simply acknowledged the lien and
stated he would pay the lien,[10] whatever the amount. This is a
valid offer of judgment. According to Fouse, then, [t]he
resolution of the arbitration between Fouses insurer and Geico is
not relevant.
But Thomann disputes this characterization, arguing
that the offers express dependence on a future arbitration in
which GEICO and State Farm agreed to a fight over the amount of
Thomanns medical payments undermined her ability to assess the
offers true value. Thus, Thomann insists, the offer is too
indefinite in failing to define what it offers beyond $25,000
and requiring additional litigation to liquidate that amount.
In our view, Thomanns position has merit. On its face,
the August 2 offer of judgment does not unambiguously say that
State Farm made an unconditional commitment to satisfy GEICOs
subrogated claim through arbitration. At most it hints that this
might be the case while literally conditioning State Farms duty
to reimburse Thomanns medical payments on a resolution in a
subsequent arbitration that the offer leaves undescribed.
Nothing in the record indicates that Thomann had independent
knowledge of the arbitration agreement when she received Fouses
offer, or that she had any definitive way to ascertain how the
subsequent arbitration might affect her medical damages claim.
Fouse insists that the pending arbitration was
irrelevant to Thomanns claim and suggests that she should have
known this to be the case. Yet we do not think it fair to expect
Thomann to gamble on this assumption. Since the offer of
judgments manifest purpose was to propose clear terms for a
settlement of Thomanns claims, upon receiving the offer, Thomann
had no reason to expect that its express reference to the outcome
of a subsequent arbitration had nothing to do with those claims
particularly because Fouse could easily have omitted the
reference if in fact he regarded it as an irrelevant detail and
meant only to offer a straightforward payoff of the medical
claim. At best, then, even if Fouse meant it to be irrelevant,
the presence of this detail invited confusion and could
reasonably have led Thomann to wonder what effect the subsequent
arbitration might have on her medical claim.
Indeed, the record confirms that State Farms agreement
to arbitrate on the issue of damages triggered general confusion
over the status of Thomanns medical claims. On August 9, 2002, a
week after sending Thomann the offer of judgment, Fouse filed a
motion in limine, seeking to admit evidence at trial of State
Farms agreement to arbitrate on medical damages. Fouses motion
asserted that this evidence proved that Defendant has agreed to
pay all of Plaintiffs medical, hospital, or similar expenses
incurred as a result of the vehicle accident. In a memorandum
accompanying his motion, Fouse asserted that [t]he fact
arbitration has not yet occurred and Defendant has not been
apportioned his share of Plaintiffs medical expenses is not
relevant to any issue to be decided by the jury. To support his
assertion, Fouse attached an affidavit signed by a State Farm
claims representative, attesting that State Farm and GEICO have
agreed to binding arbitration with regard to the allocation of
Plaintiffs medical expenses. State Farm has promised to pay any
amount ordered paid by the arbitrator.
Thomann opposed this motion on August 20, contesting
Fouses characterization of the agreement and disputing the
existence of any meaningful settlement of the medical damages
claim: First, State Farm hasnt paid a dime of [Thomanns] medical
bills. They havent promised to pay plaintiffs medical expenses.
. . . Rather, State Farm is fighting with GEICO over it[s]
obligation to pay this debt as well. Thomann also asserted that
GEICO had never requested her not to seek reimbursement for its
medical payments. Furthermore, Thomann claimed, if GEICO were to
make such a request at this late date, it would be unfair to
Thomann because she has already turned down an offer of judgment
from Fouse/State Farm, based in part upon her belief that she
must repay GEICO from the proposed amount.
On August 26, 2002, Fouse replied to Thomanns
opposition by formally withdrawing his motion to allow evidence
of the medical claims payment. Fouses withdrawal expressly
conceded that [t]he issue of who has paid or who has promised to
pay Plaintiffs medical bills reasonably related to the car
accident at issue is murky enough that a compromise is necessary.
At oral argument before this court, Fouses counsel
suggested that the withdrawal of Fouses motion to admit evidence
was prompted by a separate argument advanced in Thomanns
opposition to the motion Thomanns argument that this evidence
was barred by the collateral source provisions of AS 09.17.070.
Yet Fouses concession of murkiness was not limited to the
question of admissibility under the statute, but rather
explicitly extended to the more general issue of who had paid or
promised to pay Thomanns medical bills reasonably related to the
car accident. Given Fouses express concession that the question
of who had promised to pay [Thomanns] medical bills reasonably
related to the car accident remained murky on August 26, we see
no basis to conclude that three weeks earlier, when Fouse sent
his August 2 settlement offer, Thomann should reasonably have
understood it as embodying an unambiguous and unconditional
commitment by State Farm to settle her entire medical claim.
IV. CONCLUSION
Because Fouses offer of judgment was indefinite in its
proposed disposition of Thomanns medical claims, we hold that it
failed to meet the requirements of Rule 68 and could not support
an award of costs and attorneys fees in favor of Fouse.11 We thus
REVERSE and REMAND for entry of judgment without regard to the
offer.
_______________________________
1 Emphasis added.
2 Jaso v. McCarthy, 923 P.2d 795, 801 (Alaska 1996).
3 Alaska Civil Rule 68 (2002), which applies to cases
filed after 1997, provides in relevant part:
(a) At any time more than 10 days before the
trial begins, either the party making a claim
or the party defending against a claim may
serve upon the adverse party an offer to
allow judgment to be entered in complete
satisfaction of the claim for the money or
property or to the effect specified in the
offer, with costs then accrued. . . .
(b) If the judgment finally rendered by the
court is at least 5 percent less favorable to
the offeree than the offer, or, if there are
multiple defendants, at least 10 percent less
favorable to the offeree than the offer, the
offeree, whether the party making the claim
or defending against the claim, shall pay all
costs as allowed under the Civil Rules and
shall pay reasonable actual attorney fees
incurred by the offeror from the date the
offer was made as follows:
. . . .
(3) if the offer was served 90 days or less
but more than 10 days before the trial began,
the offeree shall pay 30 percent of the
offerors reasonable actual attorney fees.
4 Grow v. Ruggles, 860 P.2d 1225, 1227 (Alaska 1993)
(finding trial court assessing costs and attorneys fees under
Rule 68 may not consider offers that fail to comply with this
rule) (citing Myers v. Snow White Cleaners & Linen Supply, Inc.,
770 P.2d 750, 753 (Alaska 1990)).
5 Bayly, Martin & Fay, Inc., of Alaska v. Arctic Auto
Rental, Inc., 517 P.2d 1406, 1407 (Alaska 1974); cf. Hayes v.
Xerox Corp., 718 P.2d 929, 937 (Alaska 1986) (In order to give
legal effect to the parties reasonable expectations, the court
examines the written agreement itself and also extrinsic evidence
regarding the parties intent at the time the contract was made.).
6 Myers, 770 P.2d at 752-53 (citation omitted).
7 Davis v. Chism, 513 P.2d 475, 481 (Alaska 1973); accord
Cook Schuhmann & Groseclose, Inc. v. Brown & Root, Inc., ___ P.3d
___, Op. No. 5817 at 11 (Alaska, June 18, 2004); Farr v. Stepp,
788 P.2d 35, 37 (Alaska 1990).
8 Cook Schuhmann & Groseclose, ___ P.3d ___, Op. No. 5817
at 11.
9 See, e.g., Jaso, 923 P.2d at 801-02; Grow, 860 P.2d at
1227-28.
10 GEICOs lien is in reality a claim that was assigned by
law to GEICO in the amount of the medical expenses that it paid
on behalf of Thomann. We have explained such claims as follows:
When an insurer pays expenses on behalf
of an insured it is subrogated to the
insureds claim. The insurer effectively
receives an assignment of its expenditure by
operation of law and contract. If the
insurer does not object, the insured may
include the subrogated claim in its claim
against a third-party tortfeasor. Any
proceeds recovered must be paid to the
insurer, less pro rata costs and fees
incurred by the insured in prosecuting and
collecting the claim. But the subrogated
claim belongs to the insurer. The insurer
may pursue a direct action against the
tortfeasor, discount and settle its claim, or
determine that the claim should not be
pursued.
Ruggles v. Grow, 984 P.2d 509, 512 (Alaska 1999) (citation
omitted).
11 Cf. Grow, 860 P.2d at 1227.
