Litigation Warrior Series – the CCP 998 Offer to Compromise!
When you are in litigation, it is usually the goal of most parties to try to settle it as quickly as possible (assuming they can achieve their objectives in the case). This is because the costs, stress and uncertainty of litigation and possible public jury trial are overwhelming to many litigants. One of the tools that are available to both Plaintiff’s and Defendants is the 998 statutory offer of compromise. This blog will explain some of the main points of this important litigation tool.
What is a 998 offer?
The 998 offer is basically defined as an offer one party to a litigation (or contractual arbitration) makes to another party to let the other party know “this is the minimum liability you will face” (if you are a Plaintiff) or “this is the maximum recovery you are going to be able to get (if you are a Defendant making the 998 offer). The 998 offer to compromise, in a nutshell, lets the other party know that if they are not able to do better at trial than the amount of the 998 offer that was made, then you will pay the other parties legal costs that arise in the litigation.
CASE HYPOTHETICAL: Let’s say you are a Plaintiff in a financial elder abuse lawsuit in California. Let’s say a Defendant real estate broker and real estate attorney defrauded you out of a piece of property and you are claiming a million dollars in damages representing the lost equity in the property. After you have done some initial discovery (ex. form interrogatories, depositions, special interrogatories, and request for production of documents), you feel strongly about your case, but the appraiser in the case raised some questions and doubts about your million dollar loss, and instead, it looks like $750,000 is a strong figure you think you will be able to prove at trial. What your real estate lawyer could do is to make a 998 statutory offer to compromise to the Defendant’s attorney for $749,000. By making this offer, you are giving the other party 30 days to accept this offer, and if they do not, and let’s assume you go to trial and win your case and the jury awards $850,000, you will be entitled to seek recovery of your attorney fees (under the financial elder abuse statute, NOT under the 998 offer) and the costs of the litigation, expert witness fees, depositions costs etc., because the Defendant failed to accept your 998 offer.
So as you can see, whether or not a 998 is accepted can have a profound effect financially in any arbitration case in California.
Bonus Materials: Click here to watch Attorney Steve discuss the CCP 998 offer to compromise. Make sure to click on the RED “V” in the corner of the video to SUBSCRIBE to our FREE legal VIDEO updates!!
CCP 998 statutory law
Here is the text of the law:
998. (a) The costs allowed under Sections 1031 and 1032 shall be withheld or augmented as provided in this section.
(b) Not less than 10 days prior to commencement of trial or arbitration (as provided in Section 1281 or 1295) of a dispute to be resolved by arbitration, any party may serve an offer in writing upon any other party to the action to allow judgment to be taken or an award to be entered in accordance with the terms and conditions stated at that time. The written offer shall include a statement of the offer, containing the terms and conditions of the judgment or award, and a provision that allows the accepting party to indicate acceptance of the offer by signing a statement that the offer is accepted. Any acceptance of the offer, whether made on the document containing the offer or on a separate document of acceptance, shall be in writing and shall be signed by counsel for the accepting party or, if not represented by counsel, by the accepting party.
(1) If the offer is accepted, the offer with proof of acceptance shall be filed and the clerk or the judge shall enter judgment accordingly. In the case of an arbitration, the offer with proof of acceptance shall be filed with the arbitrator or arbitrators who shall promptly render an award accordingly.
(2) If the offer is not accepted prior to trial or arbitration or within 30 days after it is made, whichever occurs first, it shall be deemed withdrawn, and cannot be given in evidence upon the trial or arbitration.
(3) For purposes of this subdivision, a trial or arbitration shall be deemed to be actually commenced at the beginning of the opening statement of the plaintiff or counsel, and if there is no opening statement, then at the time of the administering of the oath or affirmation to the first witness, or the introduction of any evidence.
(c) (1) If an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, the plaintiff shall not recover his or her postoffer costs and shall pay th
What are the requirements of a valid CCP 998 offer?
Here are a few of the requirements and rules to keep in mind
1. A 998 offer must be in writing and should reference CCP 998. Make sure to sign the offer.
2. Either party can serve one on the other.
Attorney Steve Tip: If there are multiple Defendants in a case, for example, a Plaintiff does not need to offer a global settlement to all, but rather, can make a 998 offer to one or more defendants at their discretion. Make sure to properly serve the adverse party you are sending a 998 offer to.
3. The offer to compromise should set an amount certain or state other terms and conditions. It should also have a signature block or other means of acceptance (but any clear manner that will indicate acceptance will normally suffice). You should not state terms or conditions that don’t deal with the subject matter of the current litigation.
4. Generally should not contain non-monetary relief (such as requests for injunction or other conditions that are tough to quantify or are not “capable of valuation”). However, you can have things like “turn over property” or “dismissal of case with waiver of claims.” At the end of the day, make sure your offer is SPECIFIC. In Berg v. Darden, 120 Cal. App. 4th 721, 727, 15 Cal. Rptr. 3d 829, 833 (2004), as modified (July 16, 2004) the Court noted:
“There are two important reasons statutory compromise offers must be clear and specific. First, from 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……Second, section 998 offers must be written with sufficient specificity because the trial court lacks authority to adjudicate the terms of a purported settlement.”
5. Must be served on the other party at least 10 days prior to the trial (See California Code of Civil Procedure 998(b))
6. If the 998 is accepted, the Court clerk is informed and the case will ultimately be dismissed. The acceptance must be unequivocal and not add new terms (similar to how things work in a real estate transaction whereby changing terms of an offer to purchase real estate, or adding new terms works as a counter-offer). This point was discussed in Bias v. Wright, 103 Cal. App. 4th 811, 820, 127 Cal. Rptr. 2d 137, 143 (2002) which held:
“Whether an acceptance under section 998 is oral or written, it must be “absolute and unqualified” as required by Civil Code section 1585. Section 998, subdivision (b)(1) further requires that proof of such an acceptance must be filed for judgment to be entered, although the statute does not require that the proof of acceptance be filed within any particular time frame. For the reasons explained below, we conclude Wright did not accept the offer in a timely, absolute and unqualified manner as required by section.”
7. If the offer to compromise is not accepted within 30 days, it is deemed withdrawn, and is not admissible at trial.
8. Where a statute allows “attorney fees to the prevailing party” winning on the 998 statutory offer to compromise may be considered as evidence that the party is the “prevailing party“
9. Even though the 998 offer is open for 30 days, the party who made the offer can always revoke it prior to 30 days just like any other offer can be revoked prior to acceptance by the other party (i.e. basic contract law rules apply). Note however, that a revoked 998 offer does not trigger the cost-shifting effects of the statute as noted in Marcey v. Romero, 148 Cal. App. 4th 1211, 1215-16, 56 Cal. Rptr. 3d 402, 405 (2007):
“A Revoked Offer Does Not Trigger The Cost–Shifting Provisions of Section 998
In T.M. Cobb, the plaintiff made a section 998 offer but, when additional discovery during the 30–day period revealed the defendant was more culpable, plaintiff issued a written revocation of the offer prior to the end of the statutory period. However, the defendant (after receiving the revocation and apparently still within the statutory period) nevertheless filed a purported acceptance of the offer…. the court reasoned that because the settlement and compromise process embodied in section 998 involves contractual elements, the courts may resort to general contract principles to interpret the gaps in the statutory language as long as those principles “neither conflict with the statute nor defeat its purpose. The court applied the general contract principle that an offer may be revoked by the offeror any time prior to acceptance to reach the conclusion that an offer made pursuant to section 998 could be revoked prior to expiration of the statutory period as long as it had not yet been accepted.”
11. The offers must be made in good faith with a reasonable expectation that they might be accepted.
Attorney Steve Tip: There is a sample 998 judicial council form you can use or create your own pleading.
What does a Plaintiff get if the Defendant does not accept the 998 offer and fails to do better at trial?
There are mandatory and discretionary awards to the party who prevails on the 998 offer. Costs incurred after the 998 offer to compromise was made is usually awarded. Expert witness fees may also be awarded. Attorney fees are only awarded if permitted by a contract or a statute (ex. the California financial elder abuse laws allow for attorney fees. Some contracts also award attorney fees if a party prevails in litigation). Pre-judgement interest may also apply. Here is a list of the things that can be recovered as “costs” (these are set out in California code of civil procedure section 1033.5):
(a) The following items are allowable as costs under Section 1032:
(1) Filing, motion, and jury fees.
(2) Juror food and lodging while they are kept together during trial and after the jury retires for deliberation.
(3) (A) Taking, video recording, and transcribing necessary depositions, including an original and one copy of those taken by the claimant and one copy of depositions taken by the party against whom costs are allowed.
(B) Fees of a certified or registered interpreter for the deposition of a party or witness who does not proficiently speak or understand the English language.
(C) Travel expenses to attend depositions.
(4) Service of process by a public officer, registered process server, or other means, as follows:
(A) When service is by a public officer, the recoverable cost is the fee authorized by law at the time of service.
(B) If service is by a process server registered pursuant to Chapter 16 (commencing with Section 22350) of Division 8 of the Business and Professions Code, the recoverable cost is the amount actually incurred in effecting service, including, but not limited to, a stakeout or other means employed in locating the person to be served, unless those charges are successfully challenged by a party to the action.
(C) When service is by publication, the recoverable cost is the sum actually incurred in effecting service.
(D) When service is by a means other than that set forth in subparagraph (A), (B), or (C), the recoverable cost is the lesser of the sum actually incurred, or the amount allowed to a public officer in this state for that service, except that the court may allow the sum actually incurred in effecting service upon application pursuant to paragraph (4) of subdivision (c).
(5) Expenses of attachment including keeper’s fees.
(6) Premiums on necessary surety bonds.
(7) Ordinary witness fees pursuant to Section 68093 of the Government Code.
(8) Fees of expert witnesses ordered by the court.
(9) Transcripts of court proceedings ordered by the court.
(10) Attorney’s fees, when authorized by any of the following:
(11) Court reporter fees as established by statute.
(12) Court interpreter fees for a qualified court interpreter authorized by the court for an indigent person represented by a qualified legal services project, as defined in Section 6213 of the Business and Professions Code or a pro bono attorney as defined in Section 8030.4 of the Business and Professions Code.
(13) Models and enlargements of exhibits and photocopies of exhibits may be allowed if they were reasonably helpful to aid the trier of fact.
(14) Any other item that is required to be awarded to the prevailing party pursuant to statute as an incident to prevailing in the action at trial or on appeal.
What items are NOT recoverable as costs?
(b) The following items are not allowable as costs, except when expressly authorized by law:
(1) Fees of experts not ordered by the court.
(2) Investigation expenses in preparing the case for trial.
(3) Postage, telephone, and photocopying charges, except for exhibits.
(4) Costs in investigation of jurors or in preparation for voir dire.
(5) Transcripts of court proceedings not ordered by the court.
(c) Any award of costs shall be subject to the following:
(1) Costs are allowable if incurred, whether or not paid.
(2) Allowable costs shall be reasonably necessary to the conduct of the litigation rather than merely convenient or beneficial to its preparation.
(3) Allowable costs shall be reasonable in amount.
(4) Items not mentioned in this section and items assessed upon application may be allowed or denied in the court’s discretion.
(5) When any statute of this state refers to the award of “costs and attorney’s fees,” attorney’s fees are an item and component of the costs to be awarded and are allowable as costs pursuant to subparagraph (B) of paragraph (10) of subdivision (a). Any claim not based upon the court’s established schedule of attorney’s fees for actions on a contract shall bear the burden of proof. Attorney’s fees allowable as costs pursuant to subparagraph (B) of paragraph (10) of subdivision (a) may be fixed as follows: (A) upon a noticed motion, (B) at the time a statement of decision is rendered, (C) upon application supported by affidavit made concurrently with a claim for other costs, or (D) upon entry of default judgment. Attorney’s fees allowable as costs pursuant to subparagraph (A) or (C) of paragraph (10) of subdivision (a) shall be fixed either upon a noticed motion or upon entry of a default judgment, unless otherwise provided by stipulation of the parties.
Attorney’s fees awarded pursuant to Section 1717 of the Civil Code are allowable costs under Section 1032 of this code as authorized by subparagraph (A) of paragraph (10) of subdivision (a).
Who can make a CCP 998 offer, a Plaintiff or a Defendant?
Ads mentioned above, the offer is available for both parties. The rationale is to try to promote a settlement and end the litigation or arbitration.
What is the purpose of a 998 offer to compromise?
To entice the opposing party to agree to accept the offer at risk of incurring additional financial charges if they don’t “beat the 998” offer.
How long does a 998 offer last?
30 days. Keep in mind additional days may apply if the 998 offer is served by mail (typically adds five days)
Can a CCP 998 offer be revoked prior to being accepted?
Yes. General contract law rules apply. If something changes after you make the offer, you can revoke your 998 if the other party has not already accepted it.
Contact a litigation and arbitration law firm to analyze your case or take your case over.
We can help you in Plaintiff and Defendant cases, and can help you when to determine when is the best time to make a 998 offer. The best time is usually as early as possible after you have a solid grasp of the facts, and feel confident on the minimum amounts you are going to recover. We can represent business, real estate, personal injury, intellectual property and insurance litigation case. Call us at (877) 276-5084. You can also fill out the contact form below to receive more information. We offer flexible legal fees, and can take some cases on a full or partial contingency fee basis.
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