From Smalley, More Thoughts and Law About CCP 998 Offers

California Code of Civil Procedure 998 offers can seem straight forward. You make an offer to settle. And if you beat that offer at trial, then you can seek certain costs per CCP 998, which may include costs for expert witnesses. And those expert costs can be…well, costly.

But while CCP 998 offers can seem straight forward, there are definitely nuances and law to understand.

This recent case Smalley v. Subaru of America*, filed December 13, 2022 and published January 11, 2023, discusses some important law regarding CCP 998 offers.

To begin, what happened in Smalley:

This is a lemon-law car case. Defense offered to settle with Plaintiff for a certain amount along with some conditions. Plaintiff did not accept this offer, went to trial. At trial, Plaintiff succeed in proving liability and damages…but did not beat Defense’s 998 offer.

Specifically, Defense’s 998 offer was this:

“$35,001, plus fees and costs of either $10,000 or the reasonable amount of fees and costs incurred to that date, to be determined by the court, in exchange for dismissal of the action with prejudice and transfer of title to and possession of the vehicle.”

This case gives a great cite from another case about 998 offers, and it’s this:

“[The policy behind section 998] is to encourage settlement by providing a strong financial disincentive to a party—whether it be a plaintiff or a defendant—who fails to achieve a better result than that party could have achieved by accepting his or her opponent’s settlement offer. (This is the stick. The carrot is that by awarding costs to the putative settler the statute provides a financial incentive to make reasonable settlement offers.)”

There are a few things to unpack in this Smalley case.

First, can you give conditional statements in a CCP 998 offer?

Yes, yes you can. Here’s the law on this:

“To be valid, an offer under section 998 may include nonmonetary terms and conditions, but it must be unconditional. ‘[F]rom the perspective of the offeree, the offer must be sufficiently specific to permit the recipient meaningfully to evaluate it and make a reasoned decision whether to accept it, or reject it and bear the risk he may have to shoulder his opponent’s litigation costs and expenses. Thus, the offeree must be able to clearly evaluate the worth of the extended offer.’”

So here, Defense’s 998 offer has this conditional statement: “$35,001, plus fees and costs of either $10,000 or the reasonable amount of fees and costs incurred to that date, to be determined by the court….” And this is fine, per the Court.

Next, what must the other party have to evaluate a CCP 998 offer:

Here’s the direct language from this case regarding this:

“Whether an offer is made in good faith is based on whether, at the time it was made, it carried a reasonable prospect of acceptance by the offeree. ‘First, was the 998 offer within the ‘range of reasonably possible results’ at trial, considering all of the information the offeror knew or reasonably should have known? Second, did the offeror know that the offeree had sufficient information, based on what the offeree knew or reasonably should have known, to assess whether the ‘offer [was] a reasonable one,’ such that the offeree had a “fair opportunity to intelligently evaluate the offer’?”

Last, what happens if a Party objects to the CCP 998 offer?

Sometimes one party will serve a 998 on another party, and the receiving Party will object. Saying something like “I don’t have enough information to evaluate your offer.” Or, as lawyers, we like to add objections, so it could read “Objection, we don’t have enough info to evaluate your offer.”

If the other side objects, must you respond? The answer is no. Here’s the law:

“Nothing in California law requires a response by an offering party when the offeree raises objections or questions regarding the offer.”

In this case the Court says neither “was precluded from making another section 998 offer within the statutory time period or another type of settlement offer. But the failure to do so is not bad faith.”

*Cited as 2022 WL 18276885, as of 1/30/23