Subsequent 998 Offer Does Not Extinguish Prior Offer

  To encourage settlement of lawsuits prior to trial the legislature enacted section 998 of the Code of Civil Procedure which provides for statutory offers in compromise. It accomplishes its purpose by augmenting or withholding recoverable costs when a party fails to achieve a result better that it could have obtained by accepting a conforming offer.

  Section 998 offers may alter the general rule that a prevailing party is entitled to costs. Such offers may also alter the general rule that costs do not include expert witness fees unless those experts are court ordered. Pursuant to section 998 expert witness fees are recoverable when a judgment or award following the nonacceptance of a pretrial settlement offer triggers its operation.

  Section 998 provides, in part: “(d)  If an offer made by a plaintiff is not accepted and the defendant fails to obtain a more favorable judgment or award in any action or proceeding . . . , the court or arbitrator, in its discretion, may require the defendant to pay a reasonable sum to cover postoffer (emphasis added) costs of the services of expert witnesses, who are not regular employees of any party, actually incurred and reasonably necessary in either, or both, preparation for trial or arbitration, or during trial or arbitration, of the case by the plaintiff, in addition to plaintiff’s costs.”

  Thus, a plaintiff may recover postoffer costs of expert witness services pursuant to section 998 if:  (1) the plaintiff makes an offer to compromise that conforms to the statutory time and content requirements; (2) the defendant does not accept the offer; and (3) the defendant does not obtain a more favorable result in the action.

  In Martinez v. Brownco the California Supreme Court was confronted with the following question: “When a plaintiff serves two unaccepted offers to compromise pursuant to section 998, and the defendant fails to obtain a judgment more favorable than either offer, does the plaintiff’s last offer extinguish the first offer for purposes of expert fee recovery under section 998,” so that plaintiff may recover expert fees only from the date of the last offer?

  The court determined that the purpose of encouraging pretrial settlement is more fully promoted if the statutory benefits and burdens were to operate whenever the judgment or award is not more favorable than any of the statutory offers made. Therefore, neither the last offer or first offer rules are applicable in such a circumstance — the policy of encouraging settlements is better served by not applying the general contract principle that a subsequent offer extinguishes a prior offer.

  The holding: Where plaintiff has made two unaccepted and unrevoked statutory offers, and defendant fails to obtain a judgment more favorable than either offer, the trial court retains discretion to order payment of expert witness costs incurred from the date of the first offer.

  The court distinguished the holding from the circumstance where the last offer rule is applicable, i.e., where an offeree obtains a judgment less favorable than a first section 998 offer but more favorable than the later offer. The court also noted the difference between treatment of section 998 offers made by a defendant which allows a court, in its discretion, to award a defendant expert fees incurred both preoffer and postoffer after a defense settlement offer where the plaintiff fails to obtain a more favorable judgment or award.

  I consult with clients and accept cases involving the making and acceptance of section 998 offers in compromise, including motions to tax costs. For other types of cases I accept, please scroll my Home and My Practice pages. If you are seeking a legal consultation or representation, please give me a call at 818.971.9409. – Michael Daymude

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