Plaintiffs: Reject §998 Settlement Offers at Your Peril

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Last week on CEBblog™, we discussed the consequences of a defendant rejecting a settlement offer under CCP §998 and then getting creamed at trial. But §998 is an equal opportunity statute with consequences for plaintiffs too.

When a plaintiff rejects a pretrial settlement offer and then doesn’t get a more favorable judgment at trial or in contractual arbitration, the plaintiff may not recover any costs incurred after the offer was made and must pay the defendant’s costs from the time of the offer. CCP §998(c)(1); Scott Co. v Blount, Inc. (1999) 20 C4th 1103, 1112.

Here are some key aspects to a defendant’s recovery under §998:

  • Recoverable costs may include defendant’s expert witness fees. The court or arbitrator may require the plaintiff to pay a reasonable amount to cover the defendant’s costs for expert witness services, including fees paid by the defendant to depose plaintiff’s own expert witness in preparation for trial. Chaaban v Wet Seal, Inc. (2012) 203 CA4th 49, 53. Police officers are deemed to be expert witnesses for these purposes. CCP §998(f).
  • Recoverable costs come out of any damage award. The costs recoverable under §998, from the time of the offer, are deducted from any damages awarded in favor of the plaintiff. And if the costs awarded to the plaintiff under §998 are more than the amount of the judgment, the defendant is awarded the net amount with judgment for defendant entered accordingly. CCP §998(e).
  • The early defendant catches the most costs. Early service of a §998 offer assures the defendant of recovering a larger portion of costs from the plaintiff who fails to obtain a result more favorable than the offer.
  • Defendant also gets costs as the prevailing party. Costs are also allowed under CCP §§1031-1032 to the defendant as the “prevailing party,” to the extent these sections apply. CCP §998(a). See CCP §1033.5 (listing costs allowable). Given the interaction among CC §1717 (attorney fees in contract actions), CCP §998, and CCP §1032, it’s possible in a contract action that both parties can be the prevailing party for purposes of recovering costs under §1032. For example, in Scott Co. v Blount, Inc. (1999) 20 C4th 1103, 1112, the plaintiff was entitled to preoffer costs under a contractual attorney fee provision because it was the prevailing party in the actual judgment (see CC §1717), but it wasn’t entitled to postoffer costs under CCP §998 because it failed to obtain a judgment more favorable than the defendant’s offer. Under §998, the defendant was entitled to postoffer attorney fees, even though the plaintiff actually prevailed at trial by being awarded judgment. 20 C4th at 1113.

Section 998 is a powerful litigation tool. On the use of §998 offers by both sides, turn to CEB’s California Civil Procedure Before Trial, chapter 47. And check out CEB’s On Demand program Using and Responding to CCP §998 Offers for expert discussion on how both plaintiffs and defendants can use §998 offers to their advantage and the risks of not accepting such an offer.

© The Regents of the University of California, 2014. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

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Topics:  Litigation Strategies, Section 998, Settlement

Published In: Civil Procedure Updates, Civil Remedies Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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