Case Summary

Zhou vs. Unisource Worldwide, Inc.
California, 2007

On June 17, 2003 Barreto, an employee of Unisource Worldwide, lost control of the truck he was driving and crashed into the rear of a Volvo sedan. This caused the Volvo to slam into the back of Zhou’s van while it was stopped at a red light. A year later, Zhou filed a law suit alleging he had suffered severe injuries as a result of the accident that led to three separate surgeries.

Subsequently on the March 1, 2004 Zhou was involved in a second motor vehicle accident in a parking lot involving Donna Thorntill who backed into his van as she was leaving. A month after the event State Farm Insurance Company, Thorntill’s carrier, received a letter from Zhou requesting payment for the repair of Zhou’s van and the cost of a rental car. Said letter further asserted that the accident increased the previous injuries he sustained from the first incident and also elaborated on his condition that stated “I went some more rehab program, now I can just barely drive for short distance, like shopping and go to hospital to continue my rehab program. I can’t travel or go to work for right now.’

On July 7, 2004 Zhou sent a second letter to State Farm, urging for a ‘quick and confidential settlement for this without lawyer’s involvement’ but not asking for a specific amount but commented that, ‘Right now, based on the medical treatments and one surgery I had, and the one more surgery for my neck, by the time I finished, the minimum medical bills for this case will be at least over $100,000 or more. I know if I told my lawyer [about] this new car accident on March 1, my lawyer would probably hold your insurance company responsible for at least to share for the medical bills and any other loss (wage loss and other losses), and your lawyer will argue with Unisource[‘s] lawyer to decide who is responsible for how much percent of this medical bills and other compensation . . . I really do not want [to] complicate this issue, because my life and medical treatment is already complicated enough.’

The letter further stated that ‘the major reason of my neck and low back [pain] was caused by the car accident of June 17, 2003,’ but insisting ‘this new car accident did complicate my medical treatments, and increase my back and neck pain substantially.’ This letter also suggested that Zhou had hoped to avoid surgery for his neck and lower back, but, as a result of the second accident, ‘the doctors think there is no way to avoid the surgery to get fully recovered.’ Zhou explained he had not yet told his lawyer about the second accident.

Zhou moved in limine for an order excluding the two letters he had written to State Farm, invoking Evidence Code sections 1152, subdivision (a) and 352. The trial court granted the motion, explaining that statements made during the negotiation of a settlement, not only the offer to compromise itself, are inadmissible to prove liability for a loss or damage. The trial concerned solely the question of damages as Unisource and Baretto admitted liability to the charges. The defense claims that Zhou’s injuries and medical expenses were not solely due to the collision caused by Barreto’s negligence, but were also the product of other conditions and unrelated accidents.

During the course of the trial, Zhou testified that the second accident did increase the pain suffered during the first accident to some degree but explained that the increased discomfort returned to its previous state within a short period of time. The jury returned a verdict in Zhou’s favor after trial for the total amount of $1,423,295.24. Unisource and Barreto’s motion for a new trial on the ground of excessive damages was denied.

Unisource and Barreto contend that:
a.) the trial court misapplied section 1152, subdivision of the Evidence Code (a),
b.) the trial court committed prejudicial error when it excluded as part of settlement negotiations the two letters Zhou wrote to State Farm.

The relevant portion of Section 1152, subdivision (a), provides, ‘Evidence that a person has, in compromise . . . furnished or offered or promised to furnish money or any other thing . . . to another who has sustained . . . loss or damage, as well as any conduct or statements made in negotiation thereof, is inadmissible to prove his or her liability for the loss or damage or any part of it.’ Section 1154 further provides, ‘Evidence that a person has . . . offered . . . to accept a sum of money or any other thing . . . in satisfaction of a claim, as well as any conduct or statements made in negotiation thereof, is inadmissible to prove the invalidity of the claim or any part of it.”

Both provisions are in pursuance of the public policy in favor of the settlement of disputes without litigation. Furthermore the rule prevents parties from being deterred from making offers of settlement and discussions that may lead to settlement of disputes. The statute itself is clear and unequivocal that statements made by parties during settlement negotiations may not be used as admissions in later litigation.

Unisource and Barreto argue that the trial court erred in excluding the Zhou letters because the statements concerning the injuries he suffered because of the subsequent accident cannot be considered part of the offer of compromise because neither letter included a specific offer to discount his claims or suggested in what way he might be prepared to compromise his demands. Furthermore, such letters were not offered for the purpose of proving Thorntill’s liability or the invalidity of Zhou’s claim on the second incident.

The trial court did not abuse its discretion in finding the letters constituted settlement discussions which is covered by the Evidence Code as part of “any conduct or statements made in negotiation” of a settlement simply because of the lack of pecuniary offer to compromise or settlement demand. The Appellate court concede that Unisource and Barreto are correct that a letter listing what in the opinion of the sender is payable to him and demanding compliance, even under threat of legal action, is, a bill and not a settlement offer or a document in settlement negotiations covered by the subsection 1152 and1154 of the Evidence Code. However it is not unheard of for a party, in a settlement dispute, to encourage the other party to make the preliminary offer, such is the case in the disputed letters of Zhou.

However, section 1154 only excludes admission of evidence of statements made in such negotiations to show the invalidity of the claim. In essence if the lawsuit was against Donna Thorntill then the two letters would be inadmissible. However, the case involves different parties who do not disclaim liability but merely the extent thereof and since the evidence is offered to show the invalidity of a separate claim and not offered to disprove the merits of the claim under negotiation, the trial court erred in denying admission as Evidence to Zhou’s letters.

However, the trial court’s error in excluding evidence is grounds for reversing a judgment only if the appellant demonstrates a miscarriage of justice, that a different result would have been probable if the error had not occurred. In this case, Unisource and Barreto have failed to establish they were prejudiced by the trial court’s erroneous exclusion of the Zhou’s letters.

Counsel for the defense was successfully brought to light the fact of Zhou’s own failure to discuss his condition with health professionals aggravated his condition. With this being brought for consideration, it was implicitly suggested that Zhou was merely exaggerating the extent of his injuries sustained from the crash caused by Barreto. Certainly, Zhou attempted to downplay the long-term effects of the second accident.

Furthermore, with the aim of reducing the damages that Zhou would stand to recover, Unisource’s counsel focused heavily on Zhou’s physical examination immediately preceding June 17, 2003. These examinations failed to reflect any back pain, fractures or broken teeth as Zhou contended. It is the theory of the defense that Zhou falsely claimed that he had lost consciousness during the crash andhad hit the left side of his forehead against the steering wheel. Zhou’s claim fails, according to the defense, as is highlighted by his inconsistent statements which are not corroborated by his medical records. ‘It was three days later when [Zhou] went to Dr. Lee, and that’s when all of this treatment started spiraling out of control. Because notwithstanding the relatively benign and mild symptoms as identified in these hospital records, he treated on a continuous basis from June 20, 2003, all the way through December 2003.’

Defense counsel rightly emphasized the fact that dental treatment was not sought until September 2004. This fate does not coincide with either of the vehicular accidents (dated June 2003 and March 2004, respectively.) Furthermore, it is quite clear from Zhou’s letter to State Farm that he made no reference whatsoever to any mouth or dental injuries.

Lastly, defense contended that Zhou’s doctors knowingly performed unnecessary procedures and overcharged for the same with the aim of inflating Zhou’s claim to damages in the course of litigation.

Despite defense’s efforts, the jury was not inclined in the defendant’s favor. However, it did find that a reduction of economic damages (from $190,000 to $173,295.24) was appropriate.

My analysis of the facts of the case leads me to the conclusion that should this case be appealed, the defendant can put forward a solid case. I believe that the letters of admission of contributory liability addressed to State Farm were under or even miss-appreciated. Such letters, should they be admitted in the trial proceeding would be reasonably reduced.

Furthermore, further investigation and re-examination of the evidence may prove that the surgeries performed on Zhou may not have been necessary at all without the subsequent accident.

Reference

• D Barker, Colin Padfield ‘Law’ Oxford : Butterworth-Heinemann, 2007.
• Frederic Bastiat ‘Low’ 12 th Media Services, 2017.