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The Unobjectionable 998 Offer to Compromise

Posted by AgnewBrusavich | Apr 05, 2021 | 0 Comments

Various routine objections by defendants have become commonplace in consumer litigation. Undoubtedly, many of you have encountered the templated responses to your offers to compromise, namely:

  • The statutory offer was made with no “reasonable prospect of acceptance” and is therefore “not realistically reasonable under the circumstances.” Licudine v. Cedars-Sinai Medical Center (2019) 30 Cal.App.5th 918, 924.
  • The offer to compromise is not in good faith as required under Elrod v. Oregon Cummings Diesel, Inc. (1987) 195 Cal. App.3d 692, 698-699.

Now, more than ever given the pandemic-related court delays, it is important that we keep the pressure on the defense and not let statutory demands lose their efficacy by being dismissed with the use of such boilerplate objections. Never leave the defense with the last word.

I. The Valid 998 Offer

The California Code of Civil Procedure section 998 states that a written offer shall include:

  1. a statement of the offer, containing the terms and conditions of the judgment or award, and
  2. a provision that allows the accepting party to indicate acceptance of the offer by signing a statement that the offer is accepted.

C.C.P. § 998(b) further states that any “acceptance of the offer, whether made on the document containing the offer or on a separate document of acceptance, shall be in writing and shall be signed by counsel for the accepting party ….”

The recent case of Mostafavi Law Group, APC v. Larry Rabineau, APC, et al., (Cal. Ct. App., Mar. 3, 2021, No. B302344) 2021 WL 803685, involved a C.C.P. § 998 offer from Rabineau which did not contain an “acceptance provision” pursuant to subdivision (b) of C.C.P. § 998. Mostafavi hand wrote an acceptance of the $25,000.01 offer and filed it with the trial court and judgment was entered.

Rabineau moved to set aside the judgment claiming his own 998 offer contained numerous drafting errors, including the
failure to have an acceptance provision. The trial court agreed and vacated the judgment. The Court of Appeal affirmed, holding that a 998 offer must conform to the statute, including the requirement of an acceptance provision.

II. Cumulative Offers

There may have been a time when you served multiple statutory offers under C.C.P. § 998 and wondered whether the
subsequent offer made the previous offer void. This issue was put to rest in Martinez v. Brownco Construction Co. (2013) 56 Cal.4th 1014, 1024-25. The California Supreme Court held that if each offer meets the statutory time and content requirements of California Code of Civil Procedure section 998, subdivision (b), and offer the responsive party failed to accept any offer and failed to obtain a judgment more favorable than any offer, the offering party can recover expert fees incurred after any offer that exceeds the verdict, regardless of the other offers made, before or after.

The California Supreme Court reasoned that the goals of section 998 “would be 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.”
(Id. at 1025; emphasis added.) The court also acknowledged that to hold otherwise would hamper settlement opportunities by discouraging plaintiffs from making early offers or from adjusting their initial demands. (Id.)

As litigation proceeds, reevaluate your client's case to determine if a revised 998 offer is indicated. Has discovery revealed weaknesses in liability or damages? Have you gone through a settlement process and walked away with a revised, lower demand? If so, convert your last, lower demand into a new 998 offer.

III. Standard of the Good Faith Demand

In determining whether a statutory offer was made in good faith, courts look at information available to the offeree regarding liability and damages. (Nelson v. Anderson (1999) 72 Cal.App.4th 111, 135; Barba v. Perez (2008) 166 Cal.App.4th 444,450-451.) When assessing the information available to the offeree, courts are to look at the relevant circumstances. (Arno v. Helinet Corp. (2005) 130 Cal.App.4th 1019, 1026.) Some of those circumstances include: (1) how far into the litigation the statutory offer is made; (2) what information bearing on the reasonableness was available to the offeree prior to the expiration of the offer;and (3) whether the offeree alerted the offeror that it lacked sufficient information to evaluate the offer and, if so, how did the offeror respond?

Although the party making a statutory offer generally has the burden of showing that the offer is valid (Timed Out LLC v.13359 Corp. (2018) 21 Cal.App.5th 933, 942; Barella v. Exchange Bank (2000) 84 Cal.App.4th 793, 799); it is the offeree who bears the burden of showing that an otherwise valid offer was not made in good faith. (Elrod v. Oregon Cummins Diesel,
(1987) 195 Cal.App.3d 692, 700; Nelson, supra, 72 Cal.App.4th at 134.)

A. Timing of Offer

While there is no minimum period that must elapse before a statutory offer is made, courts have found that receiving an
offer at the time the lawsuit is filed or soon thereafter, makes it less likely that a litigant has sufficient information to evaluate the offer. (Barba, supra, 166 Cal.App.4th at 452; Najera v. Huerta (2011) 191 Cal.App.4th, 872, 875-876; Whatley-Miller v. Cooper (2013) 212 Cal.App.4th 1103,1112-13.)

Offers to compromise are an extremely effective tool if timed right. Serving one that is premature could be a waste of time.
Although case law provides no floor, make sure the opposing side has had sufficient time to gather facts that support the reasonableness of your offer.

B. Reasonableness of Offer

When evaluating the sufficiency of information available to the offeree, courts refer to information obtained (1) by virtue of prior litigation between the parties (Bender v. County of Los Angeles (2013) 217 Cal.App.4th 968, 989); (2) through pre-litigation exchanges between the parties (Barba, supra, 166 Cal.App.4th at 450-451); (3) through post-complaint discovery in the case (Whatley-Miller, supra, 212 Cal.App.4th at 1113); or (4) by virtue of pre-existing relationship between the parties
that yields a “free flow of information” (Barba, supra, 166 Cal.App.4th at 450).

In other words, the information known to the responding party is not limited to information obtained through discovery. The court considers information acquired from all phases of litigation, pre-litigation, prior litigation and even the pre-existing relationship between the parties.

C. Offeree Notification of Insufficient Information

An offeree may alert the offeror that the information is insufficient by(1) requesting discovery, either formally or informally (Barba, supra, 166 Cal.App.4th at 450 451); (2) asking for an extension to respond to the offer (Whatley-Miller, supra, 212Cal. App.4th at 1107, 1114); or (3) otherwise objecting to the offer (Najera, supra, 191 Cal.App.4th at 878-879). If, after hearing the offeree's concerns, the offeror's response is less than forthcoming, “such obstinacy” is “potent evidence that [the] offer was neither reasonable nor made in good faith.” (Barba,supra, 166 Cal.App.4th at 451; Najera,supra, 191 Cal.App.4th at 878.)

This point is often forgotten. To bolster your position that your offer is made in good faith and reasonable, make sure you keep discussions open with the opposing party. Meet and confer to pin down exactly what information, if any, defense counsel is missing to assist in evaluating your offer. For example, proposing an extension to respond to your demand until an upcoming deposition has concluded might be beneficial. Chances are that this may lead to advancements in negotiations or perhaps establish that the objections to your offer are simply smoke and mirrors.

At the successful conclusion of your trial, your trial judge will consider the validity of your 998 offer on a case-by
case basis, looking at what the offeree knew about the merits and value of the claim, which may include an evaluation
of what the offeror made available for consideration by the offeree and how any claims of insufficient information were responded to. Consider serving your 998 offer with a cover letter laying out what information the defense has as to liability, causation, and damages. When your 998 offer is responded to with a boilerplate objection, reply by providing the information requested and consider offering an extension. These good faith efforts to provide more information or time are often ignored, putting the onus back on the defense to justify its position.

While 998 offers are not to be filed with the court unless accompanied by an acceptance, always utilize a proof of service with all 998 communications to make your record complete after your verdict for C.C.P. § 998 motions.

With the disruptions caused to our civil justice system by the COVID-19 pandemic, being able to position your client
to obtain mandatory pre-judgment interest at 10% and discretionary expert witness costs is now more important than ever. By
making your 998 offer effectively unobjectionable, you will increase the likelihood of reaping the benefits of C.C.P. § 998 as well as increase the chances of a pre-trial settlement.

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