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Court of Appeal:
CCP §998 Offer With Two Options Is Generally Ineffective
Majority, in Opinion by Hoffstadt, Says Exception Is Where One of Two Simultaneous Proposals Is Legally Invalid, Meaning There Is, in Reality, Only One Offer, Thereby Removing Uncertainty; Ashmann-Gerst Dissents
By Kimber Cooley, associate editor
Div. Two of this district’s Court of Appeal, in a 2-1 decision, held yesterday that Code of Civil Procedure §998, which incentivizes settlement by shifting litigation costs, does not apply if the proposal contains two alternative offers unless one option is legally invalid.
Under the statute, a party who makes a reasonable settlement offer that is spurned may obtain a greater share of fees post-litigation and one who rejects attempts to resolve the matter may be forced to forfeit portions of such recovery.
The section provides that where “an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment…, the plaintiff shall not recover…postoffer costs and shall pay the defendant’s costs from the time of the offer.” Jurisprudence has established that the cost-shifting provision is only triggered if the offer is sufficiently certain in its terms.
The question arose in lemon-law litigation arising after plaintiff Vadim Gorobets filed a complaint, in April 2019, asserting claims under the Song-Beverly Consumer Warranty Act against Jaguar Land Rover North America LLC relating to his lease of a new 2016 Land Rover LR4. Under the terms of the lease, the plaintiff agreed to pay $32,502.54 over 42 months.
Gorobets alleges that the car suffered from steering, engine, and braking defects, among other problems, which persisted even after he brought the vehicle to a Land Rover dealership for repairs. Eighteen months after the plaintiff filed suit, Land Rover served the plaintiff with a purported offer under §998.
Under the terms of the offer to compromise, Gorobets could accept a lump sum payment of $85,000 or choose to receive reimbursement for what he paid for the use of the car, providing itemization of all costs. If he selected the second option, any disputed amounts would be resolved by the plaintiff’s choice from among delineated dispute resolution processes.
The case proceeded to trial and the jury found Land Rover liable, awarding damages to the plaintiff in the amount of $76,155.
Attorney Fee Award
On Feb. 3, 2023, then-Los Angeles Superior Court Judge Monica Bachner (now a mediator/arbitrator) found that Land Rover’s settlement offer was valid and denied the plaintiff’s request for $543,413.34 in attorney fees as the prevailing party at trial. The judge awarded the plaintiff only $22,492, the amount attributable to fees incurred before any offer was made.
Bachner also ruled that Land Rover was entitled to costs incurred after making the settlement offer, totaling $14,591.77, finding that the $85,000 offered was more favorable than the damages award post-trial.
Justice Brian M. Hoffstadt authored the majority opinion, joined by Justice Victoria M. Chavez, affirming the judgment, finding that the proposal offering two simultaneous offers was not permitted by §998 but that the second option was legally invalid due to a lack of clarity caused by the contemplation of the use of a third-party arbiter. He wrote:
“[W]hat makes simultaneous offers ineffective is that they are too uncertain for the trial court, at the back end, to determine whether the judgment was better or worse than the multiple valid offers. Where, as here, we know at the back end that one of the two simultaneous offers is invalid, there remains a single valid offer against which the judgment can be compared. The uncertainty defect is gone.”
Justice Judith Ashmann-Gerst dissented, asserting that there is a fundamental unfairness in forcing the plaintiff to absorb costs “as a repercussion of our determination over four years after the offers were made that one of those offers was invalid.”
Simultaneous Offers
Hoffstadt said that for an offer to be sufficiently unambiguous under §998 the terms must be clear in two ways—they must be sufficiently certain that the party receiving the offer can evaluate its worth and must be clear enough for the trial court to determine whether the judgment obtained is more favorable than the offer.
He acknowledged that case law has established that nothing in §998 prevents a party from making multiple, separate offers but said “simultaneous offers do not satisfy the second, trial court-focused requirement of sufficient certainty because they interfere with the trial court’s ability, at the time the case is resolved, to determine ‘whether the judgment is more favorable than the offer.’ ”
The jurist wrote:
“Recognizing simultaneous offers as being effective under section 998 would empower litigants to game the system…through the practice of making multiple offers that cover all possible outcomes and, when all of the offers are rejected, arguing to the trial court that cost shifting under section 998 applies because the ultimate outcome of the case is better for the offeror than at least one of those offers.”
Invalid Option
Turning to the second option in the settlement proposal by Land Rover, Hoffstadt reasoned that the “offer does satisfy the first, offeree-focused requirement of sufficient certainty because it does not interfere with an offeree’s ability to ‘evaluate the worth of the offer and make a reasoned decision’ about whether to accept it.”
However, he concluded:
“[A]n offer to pay statutorily enumerated categories of damages subject to proof and that shunts any legal or factual disagreements to a third-party arbiter does not satisfy the second, trial court-focused requirement of sufficient certainty because such an offer precludes a trial court, at the time the case is resolved, from determining ‘whether the judgment is more favorable than the offer.’ ”
Under those circumstances, he opined:
“[O]ne of Land Rover’s two offers—namely, the offer to pay an unspecified amount corresponding to various categories of damages under the Act—is invalid. However, no one disputes that the other of Land Rover’s two offers—namely, the offer to pay a sum certain of $85,000—is valid. So we are faced with the following question: When an offeree makes two simultaneous offers, one of which is invalid and the other valid, is that really simultaneous offers that render the independently valid offer ineffective?
“We conclude that the answer is no.”
Likening the present case to one in which a party makes two separate offers but later withdraws second—a circumstance under which the first proposal will be considered revived under §998 jurisprudence—he commented that “[e]ven if we deem the making of simultaneous offers to render both offers ineffective at the time they are made, a court’s subsequent recognition of the invalidity of one of the two offers revives the sole valid offer.”
Hoffstadt added:
“We also do not see how our analysis “reward[s]” offerors because the making of simultaneous offers renders all of them ineffective except in the happenstance, present here, where all but one of them are later declared invalid. An offeror in this situation is in the same position as an offeror who made a single, valid offer in the first place. We see no advantage, and hence no reward.”
Dissenting View
Ashmann-Gerst said, “I agree with my colleagues that a Code of Civil Procedure section 998 offer is not ‘sufficiently certain if it consists of two offers made at the same time to the same party and leaves it to the offeree which offer to accept’ ” but took issue with the conclusion that simultaneous offers could be remedied.
She wrote:
“[I]n my opinion, the simultaneous offers by Land Rover (one offeror) to plaintiff (one offeree) were inherently ineffective under section 998. When viewed together, which is how they were presented to plaintiff, Land Rover’s simultaneous offers were not sufficiently certain for plaintiff to evaluate.”
The jurist continued:
“[A]s the majority recognizes, enforcing the bright line ban on simultaneous offers would ‘obligate litigants to make their offers one-at-a-time instead of all at once.’ Allowing Land Rover to benefit here defeats this purpose.”
The case is Gorobets v. Jaguar Land Rover North America LLC, B327745.
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