The vast majority of California employment cases resolve through settlement. The reasons for this are simple: trials are uncertain, time-consuming, very expensive.

Section 998 of California Code of Civil Procedure exists to encourage parties to reach settlements before trial by creating a financial disincentive to plaintiffs or defendants who fail to gain a better result at trial than they could have received by accepting his or her opponent's settlement offer.

Specifically, if a section 998 offer is made by a defendant and the plaintiff fails to obtain a more favorable judgment or award at trial, then the plaintiff who refused the 998 offer cannot collect any of their own post offer costs and must pay the defendant's post offer costs. Similarly, if a 998 offer is made by a plaintiff and the defendant fails to obtain a more favorable judgment or award at trial, then the defendant has to pay the plaintiff's post offer costs. 

Section 998 authorizes parties to make these offers of settlement ten or more days before the commencement of the trial or arbitration of their disputes. If the 998 offer is then accepted within thirty days prior to trial or arbitration, the trial court must enter judgment consistent with the offer.

However, what happens if a plaintiff fires off an email accepting a defendant's 998 offer only minutes after a court orally grants the defendant's motion for summary judgment, effectively defeating the plaintiff's claim? This is exactly the question the Court of Appeal addressed in Trujillo v. City of L.A. (CA2/2 B314042 10/27/22).

The plaintiff, Trujillo, sued the City of Los Angeles for negligence for failing to maintain a city sidewalk, resulting in her injury. The city moved for summary judgment and made a settlement offer for $30,000 pursuant to Code of Civil Procedure section 998 just a few days before the summary judgment hearing. The trial court orally granted summary judgement in favor of the city. Four minutes later, Ms. Trujillo shot off an email to the city's attorney purporting to accept the city's $30,000 section 998 offer. Act fast!

Of course, the City objected to the attempt to accept its 998 offer, after the Court ruled at the hearing on its summary judgment motion. The trial court entered judgment in favor of the City and Trujillo appealed.

The Court of Appeal held that a 988 offer can only be accepted when an actual dispute still exists. The Court further reasoned that allowing Trujillo to accept the city's 988 offer after a grant of summary judgment would go completely against the very purpose of section 998--the encouragement of early settlements. If the law did allow a party the option of accepting a settlement offer even after a court had resolved their dispute, that party would have no incentive to accept any offer before trial as any rational person would simply wait in lieu of the court's ruling. 

The upshot is that Parties and their counsel need to carefully consider the implications and timing rules of section 998 offers. Don't wait!