Is a CCP 998 Offer with two options automatically invalid? Gorobets v. Jaguar Land Rover North America, LLC

The California Supreme Court recently held this case about CCP 998 offers: Gorobets v. Jaguar Land Rover North America, LLC.

CCP 998 offers can be very, very important. If the opposing party makes a 998 offer against you, and if it's valid and if you fail to overcome that 998 offer, it can have severe consequences, like paying for certain costs, including expert fees, and also paying for interest charged against the offer.

I've recently blogged about another case that held about CCP 988 offers: “Beating Your CCP 998 May Not Be Enough — You May Have to Show It Was Reasonable When You Made It”.

So, back to Gorobets.

Here's the setup: Defendant serves a CCP 998 offer on plaintiff. But instead of one number, the offer gives plaintiff a choice between two separate sets of terms.

Choice one: a flat $85,000.

Choice two: a more particular, more complicated arrangement — reimbursement by category, with itemization, proof, and a process to fight about anything disputed.

Plaintiff picked neither and went to trial.

…at trial the jury came back at roughly $76,155.27.

Defendant moves to shift costs per CCP 998. Plaintiff's answer: that 998 was invalid, because you can't put two alternative offers in one 998.

The Court of Appeal agreed with plaintiff on that framing, calling it "two simultaneous offers" and holding that section 998 categorically bars them. The Supreme Court took the case, and reversed that part of the reasoning.

The main rule

The holding is short, and it is worth reading in the Court's own words:

"[W]e hold that a statutory offer of compromise presenting an offeree with a choice between two alternative sets of terms is not categorically barred by section 998."

So two alternatives in a single 998 is fine. The catch is that it has to be clear, and it has to comply with the statute. And the Court also gives guidance to what "clear" looks like:

"An offer may be held sufficiently certain if it clearly delineates the specific terms attributable to each choice; the proposed choices are mutually exclusive, so that only one choice can be selected; and the offer clearly communicates how the offeree's acceptance is to be conveyed."

To work through this analysis, the Courts use a two-prong path:

"(1) the offer is clearly structured to present a specific choice between mutually exclusive and clearly defined sets of settlement terms; and (2) at least one set of terms is capable of valuation at the time of the offer."

On "capable of valuation," the Court adopted the certainty test our lower courts had already built, and it runs in two directions. The terms have to let the offeree "evaluate it and make a reasoned decision whether to accept it, or reject it and bear the risk he may have to shoulder his opponent's litigation costs and expenses." And the terms have to let the court later determine whether the judgment "is more favorable than the offer." Both are measured as of the time the offer was made, "and without the benefit of hindsight." And the burden is on the offeror to prove the offer was sufficiently certain.

Then the comparison. Once you have at least one valid alternative, the question is whether the offeree beat the highest-valued valid alternative. If not, CCP 998 cost argument can apply. As the Court put it, "[i]t matters little if the offeree also rejected a set of valid settlement terms of lower value."

Which is why this case was easy. Nobody disputed the $85,000 lump sum could be valued. The verdict came in around $76,000. Court's words: "the trial court's job could not have been more straightforward in light of the $85,000 lump sum alternative."

Per the Court here: “we have never held that an offer must be ‘simple.’” Although it need not be too difficult: “If a settlement offer ‘contains terms that make it ‘exceedingly difficult or impossible to determine the value of the offer[,] . . . a court should not undertake extraordinary efforts to attempt to determine whether the judgment is more favorable to the plaintiff.”

The Court discusses CCP 998 along with contract principles: “An ‘offer may contain a choice of terms from which the offeree is given the right to make a selection in his acceptance,’ and the ‘acceptance of one alternate proposition constitutes a binding contract.’”

So with CCP 998 offers, a party may be able to give alternative offers. The Court says this “[a]n offer may be held sufficiently certain if it clearly delineates the specific terms attributable to each choice; the proposed choices are mutually exclusive, so that only one choice can be selected; and the offer clearly communicates how the offeree’s acceptance is to be conveyed.”