Earlier this week, the state Supreme Court decided Martinez v. Brownco Construction Co. Inc., S200944. The issue was when it comes to two or more valid CCP section 998 offers, each of which is exceeded by the amount of the judgment, which offer shifts costs/fees? The state's high court affirmed the Second District's decision that the earliest offer can shift fees. The Supreme Court rejected application of a bright line rule holding that the last valid offer is always the operative offer.
In Martinez, the plaintiff made a valid 998 offer for $250,000, which expired without being accepted. Much later, the plaintiff made another valid offer for $100,000, which was also not accepted. The plaintiff obtained a $250,000 judgment. Then the plaintiff sought expert witness fees from the date of the earlier 998 offer. (The swing between the two 998 offers was no small matter: $188,000.) Applying what is known as the "last offer rule," the trial court decided that the plaintiff's second offer "extinguished the first for all purposes" such that fees could only shift from the later offer. The Court of Appeal reversed, holding that when a plaintiff makes two or more reasonable 998 offers all of which are valid and expire by operation of law, the plaintiff can shift expert witness fees based upon the earliest offer.
The Supreme Court granted review in light of the contradiction between the "last offer rule" and the earliest offer result in Martinez. In deciding Martinez, the Court rejected automatic application of the "last offer rule" to multiple valid offer cases such as Martinez. But the Court also appeared to embrace the "last offer rule" in a different kind of situation, those in which the earlier 998 offer hits and the later 998 offer misses. As the Court put it, "[F]or present purposes we may assume the propriety of applying the last offer rule where . . . an offeree obtains a judgment or award less favorable than a first section 998 offer but more favorable than the later offer."
Now that Martinez has been decided, what is the current state of multiple 998 offer case law?
Multiple Valid Offers Hit: As Martinez itself holds, the earliest of the offers can shift fees.
Earlier Valid Offer Hits, Last Valid Offer Misses: As the Court stated in Martinez, the "last offer rule" still has validity here and carries an "assumption of propriety" given that the offeree obtained a more favorable judgment than that last 998 offer. See also, Wilson v. Wal-Mart Stores, Inc. (1999) 72 Cal.App.4th 382, 389-390 and discussion of same, in Martinez.
Subsequent Offer Made While Time To Accept Prior Offer Still Running: The making of a subsequent 998 offer while the time to accept a prior offer is still ticking invalidates the prior offer for cost/fee shifting purposes. Thus, if it later turns out that the second offer was technically invalid, the offeror cannot fall back on the earlier offer because the offeree was deprived of the statutory time to accept it. See Palmer v. Schindler Elevator Corp. (2003) 108 Cal.App.4th 154, 157-158.
Pending Offer Revoked, Earlier Valid Offer Hits: If the offeror revokes a subsequent offer prior to acceptance or the running of the statutory period, an earlier valid offer that was not accepted can shift costs/fees. See One Star, Inc. v. Staar Surgical Co. (2009) 179 Cal.App.4th 1082, 1093-1094.
Despite the categorizations above, in Martinez the Supreme Court steered clear of confirming a bright line rule that would always apply in multiple offer situations. As the Court put it, "we need not find the last offer rule or the first offer rule controlling in all circumstances." (Emphasis original.) The Court reiterated that trial courts retain substantial discretion to address offers that result "in any mischief or confusion, or [when] any gamesmanship appears . . ." So it appears that there are no bright line rules in multiple offer cases. But, it is also apparent that there are general rules, described above, that counsel should consult when navigating section 998's deep water.