Under the California Code of Civil Procedure (the “CCP”), a statutory offer to compromise (codified as the CCP section 998 offer) allows for either the plaintiff or defendant to propose a reasonable, good faith offer of settlement. A 998 offer (the “offer”) is beneficial to both parties as it saves time, money, and resources. It shortens the time of the legal process and gives the other party a financial incentive to resolve matters with ease. Furthermore, since a 998 offer can potentially shift one party’s costs to the other party, it encourages both parties to reconsider the circumstances of the case before proceeding to trial.
What Costs Can Be Shifted in a 998 Offer?
The following costs may be shifted to a party who rejects a 998 offer if the rejecting party fails to obtain a more favorable judgment than the rejected 998 offer:
- Certain legal fees
- Document filing fees
- Jury fees
- Expert witness fees below a certain threshold
- Some costs associated with investigations
How Do I Make a 998 Offer?
Section 998 of the CCP specifically outlines the requirements for making a 998 offer, which includes:
- The 998 offer must be made in writing by either party at least 10 days before trial or arbitration.
- The offer must state the terms and conditions of the offer, specifically refer to section 998 of the CCP, and include a provision allowing the other party to indicate acceptance by signing.
- The offer must be reasonable and be made in good faith.
For the offer to be valid, it must be accepted within 30 days after it is made or before arbitration and trial (whichever occurs first). If it is not accepted, it is deemed withdrawn and cannot be presented in trial or arbitration as evidence.
What is a “Reasonable” Offer?
As aforementioned, the 998 offer must be reasonable. But what does “reasonable” entail exactly?
For an offer to be “reasonable”, it must:
- Realistically foreshadow the outcome of the case as it would play out at trial.
- Accurately reflect an estimated amount of damages that a jury would award the plaintiff in a trial.
When evaluating the reasonableness of the offer, the court will look at whether both parties had sufficient facts and information about the merits of the claims in the lawsuit. This includes considering liability and damages sought by the plaintiff.
What Happens If the Offer is Rejected?
The other party may reject the offer and opt to go to trial if they believe that a more favorable judgment can be won in court. However, certain potential penalties may apply if a party rejects the 998 offer and fails to receive a more favorable judgment in court. For example, if the plaintiff rejects the defendant’s 998 offer and fails to obtain a more favorable judgment or award in court, the plaintiff may not be permitted to recover his or her post-offer costs (see section 998(c)(1)).
For more information about 998 offers, how to make a 998 offer, and the potential risks and benefits of making one, please contact us at info@mnklawyers.com.
This material is provided for informational purposes only. It is not intended to constitute legal advice, nor does it create a client-lawyer relationship between MNK Law and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material.
