What You May Not Know: 998 Offers
Something that is often encountered in personal injury litigation in California is what is commonly referred to as a “998 Offer.” Clients are constantly surprised by the 998 Offer as many have never heard of it. Code of Civil Procedure § 998 is quite lengthy; however, the part that relates most pertinently to plaintiff’s personal injury practice is the following:
(c) (1) If 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… the court or arbitrator, in its discretion, may require the plaintiff to pay a reasonable sum to cover 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 defendant.
C.C.P. § 998(c)(1) [emphasis added].
This Section has the potential to have serious consequences for plaintiffs (and defendants if plaintiffs file a 998 offer). Assuming the defense has made a 998 offer of $25,000.00, this is what such an offer could mean to the plaintiff: If you proceed to trial and receive less than the $25,000.00 offer, the plaintiff is potentially liable for the costs incurred by the defendant after the time of the offer. Thus, in this scenario, the plaintiff would have to pay her own attorneys’ fees and costs, as well as the costs incurred by the defense. The defense’s costs in such a scenario could easily be in the tends of thousands of dollars. Bear in mind that this is true even if the final award or judgment is $24,999.99 and even if you “win” your case. This leaves a plaintiff with the spectre of getting a jury verdict in her favor yet receiving nothing by way of judgment after costs and fees are paid.
Thus, the 998 Offer creates a substantial disincentive to “roll the dice” and take one’s case to trial if one is unsure of the probability of recovering more than the 998 offer.
The 998 offer is not just a tool to be used by the defense. At Heiting & Irwin, we regularly send out 998 offers to defendants, demanding they offer the plaintiff a reasonable settlement. When made by plaintiffs [under Section 998(d)], these offers work essentially the same way outlined above, creating financial disincentives for the defendant to proceed to trial when the plaintiff has made a reasonable demand for settlement. If the plaintiff ultimately recovers greater than her own 998 Offer, the defendant may have to pay the costs incurred by the plaintiff since the date of her offer.