Multiple § 998 Offers: Which One Controls?

The California Code of Civil Procedure § 998 is a powerful tool for settlement purposes.  (For the full text of the statute, click here.)  If a plaintiff makes a § 998 offer and the defendant rejects the offer or allows it to expire, and the defendant does not achieve a better result at trial, then the plaintiff may be entitled to expanded costs—such as its expert witness fees—incurred after the offer was made.  The same applies in reverse: if a defendant makes a § 998 offer which is not accepted, and the plaintiff does not achieve a better result at trial, then the defendant may be entitled to expanded costs.  (Note that in both cases, the rejecting party must obtain a better result than the offer to avoid the cost-shifting effect.  A tie goes to the offeror.)

When there are multiple § 998 offers, things get a bit more confusing.  In Distefano v. Hall, 263 Cal. App. 2d 380 (1968) (link here), the Court of Appeal applied basic contract law principles to reach its determination that a subsequent § 998 offer extinguishes an earlier offer.

In DiStefano, the defendants made an offer for $20,000, and the plaintiff obtained an award of $28,500, which was reversed on appeal.  The defendants then made a 10,000 offer, and on retrial, the plaintiff recovered $12,559.96.  Defendants attempted to recover their post-offer costs dating back to the first $20,000 offer.  The court held that the latter offer extinguished the first one, and awarded the defendants none of their costs.

In T.M. Cobb Co. v. Superior Court, 36 Cal. 3d 273 (1984) (link here), the California Supreme Court approved of the DiStefano court’s reasoning, and said that general contract law principles may properly govern the statutory offer and acceptance process so long as they “neither conflict with the statute nor defeat its purpose.”  Id. at 280.

In Martinez v. Brownco Construction Co., Inc. (link here), the state Supreme Court was confronted with a slightly different situation, and rejected the “last offer” rule in that instance.  In Martinez, the plaintiff Mrs. Martinez made two settlement offers, one for $250,000 early in the case, and another for $100,000 shortly before trial.  At trial, she obtained a $250,000 award.  The issue is whether she could recover her costs from the date of the first offer, or only from the date of the second offer.

The Court reasoned that applying the DiStefano rule to these facts would actually frustrate the intent behind § 998.  The policy behind § 998 is to encourage the parties to settle, and applying the rule in this case limiting Mrs. Martinez to the costs incurred after only the second offer would discourage her (and others) from making more reasonable settlement offers as trial approached.

Instead, the Court held that allowing Mrs. Martinez to recover costs from the date of the first offer better fulfilled the purposes of § 998, stating “[w]here, as here, a plaintiff serves two statutory offers to compromise, and the defendant fails to obtain a judgment more favorable than either offer, recoverability of expert fees incurred from the date of the first offer is consistent with section 998’s language and best promotes the statutory purpose to encourage the settlement of lawsuits before trial.

Author: Amy Howse

Where Do I Have to File My Lawsuit? Venue Selection Clauses May Now Be Enforceable

One issue that frequently arises in contract disputes is where to litigate the dispute.  This particularly becomes an issue when the parties to the contract are located in different states or countries, but can also arise when the parties are situated in different counties within the same state.

Forum selection clauses generally determine which state or country is the permissible location for litigating disputes.  Because the laws of states and countries vary, forum selection clauses are typically more about which choice of law will apply than about the physical location where the lawsuit will be brought.  The courts have long held that forum selection clauses are generally enforceable.  See The Bremen v. Zapata Off-Shore Company, 407 U.S. 1 (1972); Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585 (1991).

Venue selection clauses are a slightly different animal.  Venue selection clauses attempt to prescribe which location within a state will hear the dispute.  Thus, venue selection clauses aren’t about choice of law, they are about the convenience to one or more of the parties of litigating in a certain county.  If you have parties located in neighboring counties, the burden of litigating in one county versus the other is relatively small.  However, if one party is located in Shasta County, for example, and the other is in Orange County, the travel costs for one of the party’s attorneys, clients, and witnesses can add significant expense to the cost of litigating.

Back in 1929, the California Supreme Court decided that venue selection clauses were unenforceable.  General Acceptance Corp v. Robinson, 207 Cal. 285 (1929).  The court reasoned that the legislature was tasked with determining the appropriate venue for lawsuits, and the parties to a contract couldn’t change that.

However, in Battaglia Enterprises v. Superior Court, 215 Cal. App. 4th 309 (2013), the Court of Appeal determined that if multiple venues would be appropriate under the Code of Civil Procedure, and one of those venues is the one designated by the contract’s venue selection clause as the exclusive venue for disputes, that Court would enforce the clause and require the parties to litigate in that venue.

In light of this recent development, companies and individuals should take a fresh look at their contracts and determine whether a venue selection clause would be helpful.  The cost of having to litigate a dispute in a distant county could vastly outweigh the price of having an attorney review your key contracts in advance.  Give us a call if you’d like some assistance in reviewing your key contracts.

Battaglia Enterprises v. Superior Court, 215 Cal. App. 4th 309 (2013).

Author: Amy Howse