Jackman v. Jewel Lake Villa One

170 P.3d 173, 2007 Alas. LEXIS 135, 2007 WL 3227614

• Court: Alaska Supreme Court
• Decided: November 2, 2007
• Docket: S-11715
• Status: Published

Opinions

OPINION

BRYNER, Chief Justice.

I. INTRODUCTION

April Jackman fell and injured herself on a staircase at her apartment complex, the Jewel Lake Villa Apartments. After Jackman received medical treatments for her injuries, one of Jewel Lake's insurers paid $3,474 to cover these expenses. Jackman later sued Jewel Lake for failing to maintain the staircase. Jewel Lake sent Jackman a $1,400 offer of judgment, but she failed to accept the offer and her case went to trial The jury found that Jackman's damages totaled $7,147.23 and that Jewel Lake bore fifty-one percent of the fault. Jewel Lake moved for enhanced attorney's fees under Civil Rule 68 claiming that its offer of judgment: exceeded the jury's verdict. To determine the value of the verdict in comparison to the pretrial offer, the superior court first reduced the total amount awarded to reflect Jewel Lake's fifty-one percent share of the damages; it then subtracted from this amount the advance medical expenses paid by Jewel Lake's insurer. This yielded a net final judgment lower than the pretrial offer, so the court awarded enhanced fees to Jewel Lake. Jackman appeals this award. We reverse. Jewel Lake's insurer apparently paid Jackman's expenses unconditionally, without any indication that it based the payments on Jewel Lake's potential fault. Because Jewel Lake failed to establish the payments' actual basis, we hold that, for purposes of applying Rule 68, the payments should have been treated as reducing the jury's total award of damages, not just the damages reflecting Jewel Lake's share of the fault. Since this method results in a judgment more favorable than Jewel Lake's pretrial offer, we remand for entry of a modified judgment.

IL FACTS AND PROCEEDINGS

The basic facts of this case are undisputed. April Jackman injured herself when she slipped and fell on an icy stairway in the Jewel Lake Villa Apartments, the apartment complex where she resided. Jackman's injuries required medical treatment; Jewel Lake's insurers paid Jackman a total of $3,474 to reimburse her expenses. These reimbursements appear to have been paid unconditionally; nothing in the record suggests that they were based on Jewel Lake's potential fault for the accident.

Jackman later sued the owners and managers of the Jewel Lake Villa Apartments {collectively "Jewel Lake"), alleging that they negligently caused the accident by failing to keep the stairway free of snow and ice. Her complaint sought to recover damages exceeding $75,000 for past and future medical expenses, lost wages, and diminished earning capacity. p

After the parties conducted discovery, Jewel Lake made an offer of judgment to Jackman, proposing "to allow entry of judgment for plaintiff April L. Jackman in this action for ONE THOUSAND FOUR HUNDRED DOLLARS AND ZERO CENTS ($1,400.00), inclusive of Rule 82 attorney's fees, allowable costs and pre-judgment interest." Jackman did not accept the offer, and the case proceeded to a jury trial.

Before trial Jewel Lake moved to offset the medical expenses it had already paid from any judgment amount determined by the jury. (Jackman opposed this motion as premature, arguing that the jury should be allowed to determine the full extent of her damages and that the medical payments should be deducted from the judgment based on the jury's verdict. "To allow an offset of judgment now," Jackman contended, "would distort in defendants' favor the potential judgment amounts on which the parties have based offers of judgment." Jewel Lake did not oppose Jackman's request to postpone the deduction, and the superior court adopted this approach, ruling that, if the jury reached a verdict for Jackman, "the judgment amount shall be offset by the amount of prior payment made to the plaintiff by the defendants' insurer for the plaintiff's medical treatment and expenses."

After hearing the evidence at trial, the jury returned a verdict finding that Jewel Lake and Jackman were both negligent; the verdict apportioned. fifty-one percent of the fault to Jewel Lake and forty-nine percent to Jackman. The verdict also found that Jack-man had suffered total damages of $7,147.28. Accordingly, Jewel Lake's lability for its proportionate share of the fault totaled $3,645.00-fifty-one percent of $7,147.23.

Jewel Lake moved for attorney's fees under Alaska Civil Rule 68.¹ Under this rule, a party whose pretrial offer of judgment is rejected becomes entitled to claim a specified percentage of its attorney's fees,² payable from the time of the offer, "[i}f the judgment finally rendered by the court is at least 5 percent less favorable to the offeree than the offer." ³ Jewel Lake argued that the $8,474 payment for medical expenses should be set off from the jury verdict against it in order to arrive at a final judgment for the purposes of Rule 68. Considering the $8,474 in advance medical payments and the additional $1,400 cash offer that Jackman would have received if she had accepted the offer, Jewel Lake contended that the jury's verdict left her with a recovery that was at least five percent less favorable than the offer of judgment. '

Jackman opposed Jewel Lake's Rule 68 motion. Although she did not dispute that her judgment would ultimately need to be reduced to reflect the advance payments she had received for her medical expenses, Jack-man insisted that the court should make this deduction only after calculating the full amount of her judgment. In Jackman's view, the medical payments could not properly be considered in comparing the amount of the offer to the amount of her award, since the offer had failed to mention the medical payments: "From the plain terms of the defendants' offer it would have been impossible for plaintiff to ascertain that defendants intended the 'actual' value of their offer to be $1,400 plus $3,474 more for purposes of a potential Rule 68 motion."

The superior court resolved this dispute in Jewel Lake's favor. In determining that the judgment was less favorable than the offer, the court started with the jury's finding of total damages-$7,147.23. Given the jury's fifty-one percent allocation of fault to Jewel Lake, the court calculated Jewel Lake's proportionate share of the damages to be $3,645.09. Adding projected pretrial interest ($10.35) and attorney's fees ($780.09), the court estimated that Jewel Lake's total lfability under the verdict would be $4,380.53. The court next deducted the full amount of the medical expenses already paid by Jewel Lake's insurers ($3,474); this resulted in an outstanding liability of $906.58, ⁴ which the court described as the maximum amount payable to the plaintiff under the jury's verdict. Comparing this figure to the $1,400 Jackman would have received under the pretrial offer, the court found her recovery at trial to be lower than the threshold required to trigger attorney's fees under Rule 68-a judgment at least five percent less favorable than the offer.⁵ For easy reference, we set out the superior court's calculations below:

Order Attorney Fees

Verdict = $7147.28

Defendant's Liability = 51

$3645.09

Interest = 05 x 1.21 x [8645.09-3474 = 171.09]0 35 10.

Verdict + Prejudgment Interest = $8650.44

Rule 82 Attorney Fees .20

$ 730.09

Verdict, interest, attorney fees $4380.58

Less set off $3474.00

Maximum amount of payable to plaintiff per verdict = $ 906.53

Rule 68 Offer = $1400.00

$140.00

10% less favorable $1260.00

5% less favorable $1330.00

Based on these calculations, the superior court granted Jewel Lake's motion for attorney's fees and costs under Rule 68. The court ultimately awarded Jewel Lake $24,746 in attorney's fees and $1,188.97 in costs. This yielded a final judgment for Jewel Lake totaling $25,934.97 and a final judgment for Jackman of $181.44.

Jackman appeals.

III. DISCUSSION

On appeal, Jackman challenges the superior court's ruling that Jewel Lake was entitled to attorney's fees under Rule 68 because its offer of judgment exceeded Jack-man's judgment at trial. Because "Jewel Lake's offer ... contained no mention of credit for advance payment" of her medical expenses, Jackman reasons that "it was error for the trial court to have essentially modified the terms of the offer by reducing the judgment by the amount of advance payments before making the Rule 68 comparison."

Jewel Lake responds that its pretrial offer of judgment implicitly called for payment in addition to the medical expenses that had already been reimbursed: "The Offer of Judgment itself already included an offset for the funds advanced. The parties understood that if Jackman accepted the offer she would receive $1,400 in 'new money'". Even though the offer failed to specify that the advance funds would be credited as an offset against any judgment received by Jackman, Jewel Lake insists that the offset was proper. While acknowledging that this point has not been squarely addressed in Alaska, Jewel Lake points to cases from other jurisdictions that support its proposition.⁶

These arguments require us to determine the meaning of Jewel Lake's offer of judgment and the proper method for caleu-lating the comparative values of the offer and Jackman's judgment for purposes of applying Rule 68. Questions concerning an offer of Judgment's meaning and whether the offer complies with Rule 68 raise issues of law, which we review independently.⁷

As indicated above, Jackman's initial premise is that Jewel Lake's offer of judgment could not reasonably be construed as a "new money" offer-that is, as an offer of $1,400 in addition to any advance medical payments Jackman had already received from Jewel Lake's insurers-because the offer failed to mention advance payments. But this premise fails under Rules v. Sturn.⁸ There, the defendant made a lump-sum offer plus interest, costs, and Rule 82 attorney's fees, but failed to mention advance payments that had already been made.⁹ After the plaintiff accepted the offer and the superior court entered a judgment reflecting the lump-sum offer, the defendant attempted to reduce the judgment by subtracting the amount of the previously paid medical expenses.¹⁰ We rejected the attempt as improper under Rule 68, holding that an offer of judgment that remains silent as to prior payments will ordinarily not be subject to an implied offset.¹¹ In other words, it must be deemed to be a new-money offer.

In light of Rules, Jewel Lake's offer of judgment must be viewed as an unambiguous proposal to pay Jackman $1,400 in addition to any medical payments she might have received from Jewel Lake's insurers But while the offer's silence concerning the medical payments creates no ambiguity as to the offer's value, it generates uncertainty as to the proper method for crediting those payments in applying Rule 68's directive to compare the offer's value against the value of the "judgment finally rendered" by the court.¹² As Jewel Lake acknowledges, the point has never been directly resolved in Alaska.

.. Jackman insists that this uncertainty should be resolved by ignoring the advance payments completely for purposes of applying Rule 68. But this approach makes little sense. It is undisputed that Jackman received the advanced payments from Jewel Lake's insurer and that those payments compensated her for injuries included in her pending lawsuit-injuries she suffered when she slipped and fell on the Jewel Lake case. Jackman thus had no right to recover these medical expenses again as part of the jury's award; nor did she have any legitimate basis for including those payments in calculating her awards of prejudgment interest, costs, and attorney's fees. For these reasons, it was proper to deduct the advance payments from Jackman's award before comparing her judgment to the pretrial offer for purposes of determining Jewel Lake's right to attorney's fees under Rule 68.

The more difficult problem here lies in determining the correct method for deducting the advance payments from the: jury award in order to compare the award to the pretrial offer. Here, as illustrated by the superior court's calculations set out in our statement of facts, the court initially divided the full jury award, $7,147.23, to derive Jewel Lake's fifty-one percent share of the damages: $3,645.09. After adjusting for interest, costs, and attorney's fees, the court subtracted the full amount of the advance medical payments from Jewel Lake's share of the damages to arrive at a "maximum amount ... payable" of $906.58 under the verdict. Comparing this estimate of Jackman's maximum final judgment to Jewel Lake's pretrial offer of $1,400 in new money, the court concluded that Jackman fared substantially worse by going to trial, thus entitling Jewel Lake to enhanced attorney's fees and costs under Rule 68.

The trial court's approach treated the medical expense payments as pure liability payments-payments meant to compensate Jackman only for Jewel Lake's proportionate share of the fault, Yet as we noted at the outset of this opinion, the record fails to disclose the specific basis for the medical payments. Jewel Lake's insurer appears to have unconditionally reimbursed Jackman for her medical expenses: there is no indication of any reservations or restrictions suggesting that the reimbursements were paid as compensation for Jewel Lake's potential share of the fault. Absent evidence establishing the actual basis for the insurer's payments, we see no obvious grounds for crediting the entire amount of the advance payments against the portion of the jury verdict reflecting Jewel Lake's share of the fault. As the party asserting a claim for enhanced fees under Rule 68, Jewel Lake bore the burden of supporting its claim.

Jewel Lake contends that Jackman waived this point by failing to object to the superior court's specific method of calculating the offset. We disagree. Jackman's arguments below called into question the proper method under Rule 68 for crediting "old money" payments when a "new money" offer of judgment fails to address the subject. As Jewel Lake acknowledges, this question has never been squarely raised in Alaska and remains undecided. Because the proper method of calculation under Rule 68 presents an unresolved question of law, the parties' opposing views on the point do not confine our decision. Instead, "(olur duty is to adopt the rule of law that is most persuasive in light of precedent, reason, and policy." ¹³ Accordingly, we reject the claim of waiver and turn to the question whether the trial court correctly deducted the entire amount of the advance medical payments from the portion of damages reflecting Jewel Lake's share of the total fault.

Jewel Lake proposes two justifications for the superior court's approach. First, Jewel Lake insists that the superior court needed to deduct the advance payments from Jewel Lake's share of the total damages in order to protect Jewel Lake against paying more than its fair share of the damages as determined by the jury's allocation of fault. To be sure, Alaska law requires personal injury damages to be apportioned on the basis of comparative fault; ¹⁴ but it hardly follows that an insurer's unconditional and unexplained reimbursements of medical expenses should routinely be treated as having been paid on account of the defendant's fault. Because it is not self-evident that such payments will invariably represent future damages awardable in an "action based on fault," ¹⁵ we see no justification for assuming that they necessarily reflect the defendant's potential share of the fault. Absent case-specific evidence establishing that the payment in question was actually based on potential fault, then, it simply lowers the total damages still to be paid, leaving all negligent parties responsible for their proportionate share of the harm.

Second, Jewel Lake suggests that deducting advance payments from its share of the verdict was necessary to prevent a double recovery by Jackman. Yet deducting advance payments from the jury's total award poses a risk of double recovery only if we assume that those payments were made on the basis of the defendant's potential fault. In any other case, the deduction prevents the plaintiff from recovering twice by lowering the defendant's share of the award as well as the plaintiff's. Barring some evidence showing that the advance payments actually reflected the defendant's potential share of the fault, then, the danger of double recovery does not justify deducting such payments exclusively from the defendant's share of the damages.

In short, both of Jewel Lake's proposed justifications mistakenly assume that an insurer's unconditional advance payments of medical expenses must necessarily be payments based on fault. Here, the trial court record shows only that, before litigation commenced, one of Jewel Lake's insurers unconditionally paid for medical expenses incurred by Jackson as a result of her accident. In this situation, without additional information establishing the actual basis for the insurer's advance payments, the record provides no solid ground for assuming that the payments covered only those limited portions of Jack-man's expenses reflecting Jewel Lake's potential share of fault for her accident; nor does the record provide a sound reason to fear that either double recovery or double payment would result if the payments were credited-as the record suggests they should be-against the total damages Jackson sustained.

For these reasons, we hold that when a defendant seeking Rule 68 fees claims an offset for medical expenses paid to the plaintiff without reservation or restriction before suit was filed, the advance payments must be deducted from the total award of damages to establish the final judgment's comparative value unless the defendant shows that the payments actually compensated the plaintiff for liability based on the defendant's fault.¹⁶

Applying this method here results in a judgment for Jackman that exceeds Jewel Lake's $1,400 offer of judgment.¹⁷ Accordingly, we vacate the judgment, reverse its order awarding Rule 68 fees to Jewel Lake, and remand the case for entry of a modified judgment consistent with this opinion.

IV. CONCLUSION

We VACATE the final judgment, REVERSE the award of attorney's fees and costs to Jewel Lake, and REMAND for entry of judgment in Jackman's favor.

1 . Alaska Rule of Civil Procedure 68 provides in part:

(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's fees incurred by the offeror from the date the offer was made. ...

2 . Under Alaska Rule of Civil Procedure 68(b)(1)-(3), the amount of allowable fees varies depending on the timing of the offer. The variations are irrelevant here.

3 . When a case involves multiple defendants, Rule 68(b) requires the rejecting offeree to fare worse than the offer by at least ten percent. Alaska R. Civ. P. 68(b). Here, although Jackman's action named multiple individuals and business entities as defendants, the parties agreed to treat all the defendants as a single entity, so the rule's five percent threshold applies.

4 . This amount appears in the original superior court order and reflects a five-dollar mistake: the correct sum of the projected pretrial interest and Jewel Lake's share of damages is $3,655.44. Because this mistake had no effect on the superi- or court's decision and is immaterial here as well, we retain the uncorrected sum in this illustration.

5 . Alaska R. Civ. P. 68(b).

6 . Specifically, Jewel Lake cites Russell v. Ashe Brick Co., 267 S.C. 640, 230 S.E.2d 814, 815 (1976) for the proposition that "[the nonexis- * tence of a receipt delineating the obvious desire to credit the payment against any future liability secured on the same claim is without legal significance."

7 . Jaso v. McCarthy, 923 P.2d 795, 801 (Alaska 1996).

8 . Rules v. Sturn, 661 P.2d 615 (Alaska 1983).

9 . Id. at 616.

10 . Id.

11 . Id. at 617-18.

12 . See Alaska R. Civ. P. 68(b).

13 . Guin v. Ha, 591 P.2d 1281, 1284 n. 6 (Alaska 1979).

14 . AS 09.17.060 ("In an action based on fault seeking to recover damages for injury or death to a person or harm to property, contributory fault chargeable to the claimant diminishes proportionately the amount awarded as compensatory damages for the injury attributable to the claimant's contributory fault, but does not bar recovery.").

15 . See id.

16 . We note by analogy that this approach is similar to methods adopted in other jurisdictions for offsetting funds paid under statutorily required no-fault medical payments policies. See Norman v. Farrow, 880 So.2d 557, 559-61 (Fla.2004) (requiring offset for no-fault benefits before reduction by the percentage of the plaintiff's fault because plaintiff barred by statute from recovering damages in personal injury accident for expenses payable under no-fault policy); Hickenbottom v. Schmidt, 626 P.2d 726, 727 (Colo.App.1981) (deducting payable personal injury protection benefits from total damages award before reducing judgment by percentage of plaintiff's comparative negligence).

17 . A rough estimate of the comparative values (without allowing for pretrial interest, attorney's fees or costs on the judgment finally rendered for Jackman) is as follows:

Corrected Calculation

Total Damages Found by Jury $7147.23

Reduction by Amount of Advance Medical Payments -$3474.00

Subtotal $3673.23

Reduction of Total Unpaid Damages To Reflect Jewel Lake's 51% of Fault x .51

Estimated Value of Total Judgment for Jackman (not including her prejudgment interest or costs & fees $1873.34

Subtract Value of Jewel Lake's Offer of Judgment -$ 1400

Comparative Value of Judgment Over Offer +$473.34