California Code of Civil Procedure section 998 provides a mechanism whereby a litigant can offer to have judgment entered against him or her in an amount and on terms that the litigant specifies. If the opponent rejects the statutory offer and the offeror obtains a more favorable judgment than he or she would have received had the offer been accepted, the opponent cannot recover his or her post-offer costs and must pay the offeror’s post-offer costs, as well as the reasonable costs the offeror incurred for the post-offer services of expert witnesses. Thus, Section 998 offers can be effective weapons to settle cases and recover expenses in the litigation to which a litigant may not otherwise be entitled.

Recent cases have tacked on a “good faith” requirement to Section 998 offers. Thus, an offeror can rigorously follow the Statute, prevail with a more favorable verdict at trial, and still be denied recovery of his post-offer costs and expert witness fees even though the Statute requires that they be recoverable.

In Licudine v. Cedars-Sinai Med. Center, (2d Dist., Div. 2 Jan. 3, 2019) a determination that a Section 998 offer was not made in good faith cost the offeror $2.335 million in prejudgment interest on a jury verdict of $5,594,557 where the defense rejected an early-on Section 998 offer for $249,999.99.

The trial and appellate courts found three factors were especially pertinent to an evaluation as to whether the offer was made in good faith: (1) how far into the litigation the offer was made; (2) the information available to the offeree prior to the 998 offer’s expiration (such as voluntary exchanges of information or pre-existing relationships between the parties); and (3) whether the offeree let the offeror know it lacked sufficient information to evaluate the offer, and how the offeror responded.

In Licudine, the offer was made 19 days after the plaintiff filed a “bare bones” complaint; it was clear the hospital needed more discovery information to evaluate the offer; and the defense requested more information. The Courts found that, under such circumstances, the Section 998 offer could be disregarded.

If your business is involved in litigation a Section 998 offer may have many advantages and you should vet them with your attorney. However, do not expect them to result in fee-shifting if you get a more favorable verdict if you made the offer early in the litigation before significant informal or formal discovery occurs.

The information presented is not intended to be, and does not constitute, “legal advice.” Because each situation varies, and only brief summary information is provided here, you should not use this information as a basis for action unless you have independently verified with your own counsel that it applies to your particular situation.