Woodland Hills car accident attorney Barry P. Goldberg has written several articles regarding the use of Code of Civil Procedure section 998 Offers to Compromise. In fact, his west San Fernando Valley personal injury law office uses 998 Offers to Compromise in every case in litigation, including uninsured and underinsured motorist arbitrations in order to shift the costs of litigation to the insurance companies. In some manner, every article from the Goldberg office has advised counsel to serve the 998 Offer to Compromise in the exact proper format— 1. Capable of Acceptance; and 2. Specific as to terms and singular as to party.

A great amount of confusion has arisen in California and with actively practicing lawyers regarding the use of CCP 998 Offers to Compromise either to customize a settlement or to prompt settlement discussions by making the Offer “all inclusive.” Although it may be true that an insurer may be required to respond to settlement overtures in both the third party and first party contexts, to actually shift costs, the CCP 998 statutory rules must be religiously followed. In fact, in most Offers to Compromise, defendants want to avoid the entry of a judgment.

In the recent case of Mostavi Law Group, APC v. Larry Rabineau (2^nd Dist, March 3, 2021) the Court was faced with the precise problem that has arisen over the last several years of counsel failing to serve CCP 998 Offers to Compromise in the exact proper form. In this case, the defendant served an Offer to Compromise. However, The Offer did not specify how plaintiff could accept it. Accordingly, plaintiff’s counsel hand wrote an acceptance onto the offer itself and filed the notice of acceptance with the court. The court entered judgment pursuant to 998 (b)(1).

Defendant moved to vacate the judgment arguing that his own Offer to Compromise was invalid because it lacked an acceptance provision. The trial court agreed and set aside the judgment. Although there is some conflicting case law and enforcing a settlement is consistent with the section’s policy and purpose, the court of appeal affirmed. The Court went through a complete and in-depth analysis of section 998.

The Court pointed out that the Legislature enacted Code of Civil Procedure section 998 to encourage and expedite settlement of lawsuits before trial. To effectuate this purpose, the statute simultaneously promotes the extension and acceptance of reasonable pretrial offers to compromise. The “policy is plain. It is to encourage settlement by providing a strong financial disincentive to a party—whether it be a plaintiff or a defendant—who fails to achieve a better result than that party could have achieved by accepting his or her opponent’s settlement offer. (This is the stick. The carrot is that by awarding costs to the putative settler the statute provides a financial incentive to make reasonable settlement offers.)” (Bank of San Pedro v. Superior Court (1992) 3 Cal.4th 797, 804.)

However, the code has specific instructions. Section 998 (b) requires, among other things, that a party seeking to take advantage of the statute serve on an opposing party a written offer to have judgment entered on specified terms. Most important, for purposes of this appeal, the written offer “shall” contain what has come to be known as an “acceptance provision. Specifically, the statute states that the written offer “shall” include “a provision that allows the accepting party to indicate acceptance of the offer by signing a statement that the offer is accepted.” (§ 998 (b), emphasis added.) It provides:

“Not less than 10 days prior to commencement of trial . . . , any party may serve an offer in writing upon any other party to the action to allow judgment to be taken or an award to be entered in accordance with the terms and conditions stated at that time. The written offer shall include a statement of the offer, containing the terms and conditions of the judgment or award, and a provision that allows the accepting party to indicate acceptance of the offer by signing a statement that the offer is accepted. 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[.]”

“If the offer is accepted, the offer with proof of acceptance shall be filed and the clerk or the judge shall enter judgment accordingly.” (§ 998, subd. (b)(1).) However, “[i]f an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, the plaintiff shall not recover his or her postoffer costs and shall pay the defendant’s costs from the time of the offer.” (§ 998, subd. (c)(1).) The trial court also has discretion to “require the plaintiff to pay a reasonable sum to cover postoffer costs of the services of expert witnesses[.]”

Applying the statute to the facts, the Court did not find that there was a binding contract and that equitable principles would not establish an equitable estoppel. This is important for those law firms that use the section 998 Offers to Compromise for its true purpose— to shift litigation costs— as opposed to merely a settlement overture. Based on the foregoing, we recommend that the 998 Offer to Compromise not deviate from the exact form and that the Offer be capable of acceptance. Do not copy the defendant/insurer’s form. The insurers do not want a judgment entered against its own insured.

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Barry Goldberg