For What It Is Worth-When Is A California Statutory Offer To Compromise Reasonable?

Recently in Essex Insurance Company v. Heck [(2010) 186 Cal.App.4th 1513] a California
Court of Appeal had occasion to review the circumstances under which a
statutory offer to compromise under California Code of Civil Procedure section
998 will be deemed reasonable. Section 998 provides that a written settlement
offer to allow judgment to be entered against the offeror, which contains the
terms and condition of the judgment, can be made at least ten days before
trial.  If the litigant to whom the
offer is directed rejects it, and then fails to obtain a more favorable result
at trial, that litigant will not be considered a prevailing party for purposes
of recovering “post-offer” costs. 
The rejection of a section 998 settlement offer coupled with the failure
to obtain a better result at trial gives rise to the possibility that the court
will require the party who rejected the offer to pay the offeror’s expert witness expenses.  Civ.Proc.Code § 998(c)-(e). 

In
order to be valid a section 998 offer must, in addition to satisfying the
statutory requirements, be “realistically reasonable under the circumstances of
the particular case.”  See Jones
v. Dumrichob
(1998) 63 Cal.App.4th
1258, 1262.  When a litigant who
made a section 998 offer obtains a judgment that is more favorable than the
offer, the offer is presumed to be reasonable and the rejecting party
bears the burden of showing that it was not made in good faith.  Thompson v. Miller (2003) 112 Cal.App.4th 327, 338-339.  However, a token offer made with no
reasonable prospect of acceptance will not pass the good faith test.  Essex Ins. Co. v. Heck, supra, 186 Cal.App.4th at 1528.

Whether
a section 998 offer is reasonable is a decision that is left to the discretion
of the trial court.  A modest
settlement amount, or even an offer that consists of only an agreement to waive
costs, can pass muster so long as the offer reflects a realistic effort to
compromise the dispute.  Compare
Pineda v. Los Angeles Turf Club, Inc.
(1980) 112 Cal.App.3d 53 [$2500 offer to settle wrongful death case held to be
unrealistic] with Essex Ins. Co. v. Heck, supra, 186 Cal.App.4th 1513 [section 998 offer
consisting of waiver of costs and waiver of the right to sue for malicious
prosecution deemed reasonable].

The
bottom line is that a CCP section 998 offer is not a pro forma procedural device that can be used to shift expert
witness costs to your opponent. To take advantage of section 998, the stage must
be set by crafting an offer so that it can be defended later as realistic given
the facts presented in the case.

[This post is provided for informational purposes only.  It is not intended nor should it be construed as creating an
attorney client relationship.]

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