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Tim Kowal     April 24, 2020

If you've been involved in litigation, you likely are aware of the "CCP 998 offer." CCP § 998 is a statutory carrot-and-stick to entice parties to make reasonable offers, and to threaten penalties for rejecting reasonable offers.

A 998 offer may be made any time up to 10 days before trial or arbitration. The objective is to make, or accept, a reasonable offer, defined as an amount that is less than what the court ultimately awards.

If a party rejects a reasonable settlement - that is, fails to obtain a better award than the offer - that party must pay the other party's costs incurred after the offer was made.

A 998 offer can change the entire outcome of a case, as happened in Scott Co. v. Blount, Inc. (1999) 20 Cal.4th 1103. There, subcontractor Scott Co. alleged $2 million in cost overruns and delays concerning the San Jose Convention Center project. Blount made a 998 offer to pay Scott $900,000 to settle. Scott countered, demanding $1.5 million. Negotiations failed, and the parties went to trial.

So Scott's number to beat was $900,000 - if Scott failed to get a better outcome than that, it would have to pay up to Blount.

Scott did prevail, but only received a judgment of $442,000. Scott was still entitled to its pre-offer costs of $226,000, bringing its total award to a little over $668,000.

Less than $900,000.

This meant Blount was entitled to its post-offer costs - $633,000 in attorney fees and costs, plus $247,000 in expert fees, for a total of $881,000.

This flipped the outcome of the case: instead of writing a check to the judgment creditor, Blount, despite having a freshly-entered judgment against it, was entitled to receive $212,000 for its trouble.

The litigant who ignores the effects of a CCP 998 offer might win at checkers only to realize the game was chess, and he's been beaten.

Tim Kowal is an appellate specialist certified by the California State Bar Board of Legal Specialization. Tim helps trial attorneys and clients win their cases and avoid error on appeal. He co-hosts the Cal. Appellate Law Podcast at CALpodcast.com, and publishes summaries of cases and appellate tips for trial attorneys. Contact Tim at [email protected] or (949) 676-9989.
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