State high court to hear settlement offer fee-shifting arguments

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If a plaintiff makes a reasonable settlement offer, and it expires by operation of law, and then makes a second offer, does the latter extinguish the first for purpose of cost shifting provisions of section 998 sub-divison? On May 8th, the state high court will hear arguments in a case that will try to answer this very question. ”The swing in cost shifting between an early offer and a later offer can be substantial.”

The court’s decision could go either way. “In Wilson v. Wal-Mart Stores, Inc., 72 Cal.App.4th 382 (1999), the 3rd District Court of Appeal announced the rule that only the last valid offer can shift fees.”  According to Wilson, “a plaintiff might be encouraged to maintain a higher settlement demand on the eve of trial and refuse to settle a case that should otherwise be settled…”  But then again, why should the “evolutionary aspect” of lawsuit limit fee shifting? If a reasonable offer was made at the time, the plaintiff should have accepted it, or “accept the potential consequences of refusal.” Also, the case may result “in subsequent lower offers, not just higher ones – meaning that the pressure tactics Wilson articulated might not even occur.” Moreover, the purpose of the Legislature is to encourage settlement and Wilson holding creates incentives that work against the Legislature. So, “how will the high court decide this issue?”

A certified appellate specialist, law professor and Archer Norris partner, Gary A. Watt handles writs and appeals in all California appellate courts, including the Supreme Court, and the United States Court of Appeals for the Ninth Circuit. He is also director of the Hastings Appellate Project

This article was originally published in the Daily Journal and subscription-based Daily Journal website at www.dailyjournal.com.