On April 4, 2019, Vadim Gorobets sued Jaguar Land Rover North America, LLC based on allegations the defendant had violated the Song-Beverly Consumer Warranty Act (California’s “lemon law”).  On October 15, 2020, defendant served a supposed 998 offer to plaintiff, which went unanswered and eventually expired. The case went to trial in March 2022. While plaintiff received a favorable jury verdict, the court left it up to the parties to litigate any potential awards for attorney’s fees and costs at a future time. On November 3, 2022, the court determined defendant’s 998 offer was valid, which meant Section 998’s provisions regarding cost-shifting were applicable. Plaintiff appealed the court’s decision on the grounds the defendant made two simultaneous offers, which constituted a “moving target” as opposed to a valid offer, and one of the two offers was invalid.

In determining what Section 998 allows, the appellate court took into consideration “the statutory text”[i] and “the public policy underlying section 998.”[ii] As to the former, essentially “Section 998 is meant ‘to encourage the settlement of lawsuits prior to trial’.”[iii] As to the latter, the purpose of the public policy behind a 998 offer is multi-fold. Such offers

(1) encourage parties to make more offers that will result in settlements that compensate the injured party;[iv]

(2) discourage offers aimed at gaming the system;[v]

(3) increase predictability by providing litigants with ‘bright line rules’ giving ‘clear direction’ rather than rules that ‘spawn disputes over the operation of section 998;’[vi] and

(4) ensure ‘flexibility’ so parties can make new offers ‘when [they] discover new evidence.[vii]

To be valid, a 998 offer “(1) must be ‘sufficiently’ ‘certain,’ ‘specific,’ or ‘definite’ in its terms and conditions[viii] (2) must be unconditional[ix] and (3) must be made in ‘good faith’.”[x]  Further still, the sufficiency aspect of a 998 offer is broken into two additional factors. The first is whether the offeree can evaluate the worth of the offer, thus making a “reasoned decision” to accept or decline the offer on the face of its terms and conditions. The second is whether said terms and conditions allow the trial court to ascertain if “the judgment is more favorable than the offer.”[xi]

The issue before the court was two-pronged.  On the one hand, defendant made two offers to plaintiff simultaneously, and while parties may issue several 998 offers to an opposing party, such offers are to be made one by one, not all at once. Hence, the last offer made would be considered the operative offer and the one to gauge whether a “subsequent judgment is more or less favorable.”[xii] Although, simultaneous offers comply with the sufficiency factor, they do not meet the second factor due to their degree of uncertainty.

Furthermore, one of defendant’s offers was a category-based offer involving hypothetical amounts and a third-party arbiter who would be involved if there were any disputes. With respect to this, the court held “that an offer to pay amounts to which an offeree is statutorily entitled and to shunt any disputes over entitlement to those amounts to a third-party arbiter is not sufficiently certain to be valid under section 998.”[xiii]

In the end, the court determined that because one of the two simultaneous offers was invalid, the other offer was revived and applicable. Therefore, “[b]ecause plaintiff failed to obtain a more favorable judgment than that offer at trial, the trial court was correct in ruling, pursuant to Section 998, that plaintiff is limited to recovering his pre-offer costs and attorney fees and is required to pay Land Rover’s post-offer costs.”[xiv]

When developing a defense strategy, the usage of a 998 offer should be kept in mind as a straightforward means to an end: settlement. A 998 offer is cost-effective, since settlements can be reached, which keeps down litigation expenses by avoiding protracted litigation. Alternatively, it may result in cost-shifting. However, prior to serving a 998 offer, the offeror should ensure that the terms and conditions of the offer align with the aforementioned; otherwise, an effective tool may end up being invalid.

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Sources

[i] T.M. Cobb Co. v. Superior Court, 36 Cal.3d 273, 277 (1984).

[ii] Martinez v. Brownco Construction Co., 56 Cal.4th 1014, 1021, 1026 (2013).

[iii] Cobb, 36 Cal.3d at 280.

[iv] Martinez, 56 Cal.4th at 1019, 1021.

[v] Id. at 1021.

[vi] Sanford v. Rasnick, 246 Cal.App.4th 1129-1130 (2016).

[vii] Martinez, 56 Cal.4th at 1021.

[viii] Fassberg Construction Co. v. Housing Authority of City of Los Angeles, 152 Cal.App.4th 764-766 (2007).

[ix] Barella v. Exchange Bank, 84 Cal.App.4th 793, 799 (2000).

[x] Licudine v. Cedars-Sinai Medical Center, 30 Cal.App.5th 918, 924-925 (2019).

[xi] Fassberg, 152 Cal.App.4th at 764.

[xii] Wilson v. Walmart Stores, Inc., 72 Cal.App.4th 382, 391 (1999).

[xiii] Gorobets v. Jaguar Land Rover North America, LLC, 105 Cal.App.5th 913 (2024).

[xiv] Id.