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You can search the entire site. or go to the recent opinions, or the chronological or subject indices. 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,


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.


          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.


          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


          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.
          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.
          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
     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

     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
Ruggles  v.  Grow,  984  P.2d 509, 512  (Alaska  1999)  (citation

     11    Cf. Grow, 860 P.2d at 1227.