Effective: January 1, 2006 West's Ann.Cal.C.C.P.

998

Currentness (a) The costs allowed under Sections 1031 and 1032 shall be withheld or augmented as provided in this section. (b) Not less than 10 days prior to commencement of trial or arbitration (as provided in Section 1281 or 1295) of a dispute to be resolved by arbitration, any party may serve an offer in writing upon any other party to the action to allow judgment to be taken or an award to be entered in accordance with the terms and conditions stated at that time. The written offer shall include a statement of the offer, containing the terms and conditions of the judgment or award, and a provision that allows the accepting party to indicate acceptance of the offer by signing a statement that the offer is accepted. Any acceptance of the offer, whether made on the document containing the offer or on a separate document of acceptance, shall be in writing and shall be signed by counsel for the accepting party or, if not represented by counsel, by the accepting party. (1) If the offer is accepted, the offer with proof of acceptance shall be filed and the clerk or the judge shall enter judgment accordingly. In the case of an arbitration, the offer with proof of acceptance shall be filed with the arbitrator or arbitrators who shall promptly render an award accordingly. (2) If the offer is not accepted prior to trial or arbitration or within 30 days after it is made, whichever occurs first, it shall be deemed withdrawn, and cannot be given in evidence upon the trial or arbitration. (3) For purposes of this subdivision, a trial or arbitration shall be deemed to be actually commenced at the beginning of the opening statement of the plaintiff or counsel, and if there is no opening statement, then at the time of the administering of the oath or affirmation to the first witness, or the introduction of any evidence. (c)(1) If an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, the plaintiff shall not recover his or her postoffer costs and shall pay the defendant's costs from the time of the offer. In addition, in any action or proceeding other than an eminent domain action, the court or arbitrator, in its discretion, may require the plaintiff to pay a reasonable sum to cover costs of the services of expert witnesses, who are not regular employees of any party, actually incurred and reasonably necessary in either, or both, preparation for trial or arbitration, or during trial or arbitration, of the case by the defendant. (2)(A) In determining whether the plaintiff obtains a more favorable judgment, the court or arbitrator shall exclude the postoffer costs. (B) It is the intent of the Legislature in enacting subparagraph (A) to supersede the holding in Encinitas Plaza Real v. Knight, 209 Cal.App.3d 996, that attorney's fees awarded to the prevailing party were not costs for purposes of this section but were part of the judgment. (d) If an offer made by a plaintiff is not accepted and the defendant fails to obtain a more favorable judgment or award in any action or proceeding other than an eminent domain action, the court or arbitrator, in its discretion, may require the defendant to pay a reasonable sum to cover postoffer costs of the services of expert witnesses, who are not regular employees of any party, actually incurred and reasonably necessary in either, or both, preparation for trial or arbitration, or during trial or arbitration, of the case by the plaintiff, in addition to plaintiff's costs. (e) If an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, the costs under this section, from the time of the offer, shall be deducted from any damages awarded in favor of the plaintiff. If the costs awarded under this section exceed the amount of the damages awarded to the plaintiff the net amount shall be awarded to the defendant and judgment or award shall be entered accordingly. (f) Police officers shall be deemed to be expert witnesses for the purposes of this section. For purposes of this section, plaintiff includes a cross-complainant and defendant includes a cross-defendant. Any judgment or award entered pursuant to this section shall be deemed to be a compromise settlement. (g) This chapter does not apply to either of the following: (1) An offer that is made by a plaintiff in an eminent domain action.

998. Withholding or augmenting costs following rejection or acceptance of offer to allow judgment

(2) Any enforcement action brought in the name of the people of the State of California by the Attorney General, a district attorney, or a city attorney, acting as a public prosecutor. (h) The costs for services of expert witnesses for trial under subdivisions (c) and (d) shall not exceed those specified in Section 68092.5 of the Government Code. (i) This section shall not apply to labor arbitrations filed pursuant to memoranda of understanding under the Ralph C. Dills Act (Chapter 10.3 (commencing with Section 3512) of Division 4 of Title 1 of the Government Code). Cal. Civ. Proc. Code 998 (West)

Attorney fees
Defendant's settlement offer, which, by its terms, was only open five days, well short of the period designated in statute governing offers to compromise, was, once revoked, no longer an offer for purposes of the cost benefits of such statute, and thus defendant was not entitled to attorney fees based on that statute. Glencoe v. Neue Sentimental Film AG (App. 2 Dist. 2008) 85 Cal.Rptr.3d 800, 168 Cal.App.4th 874, review denied.Costs 194.50 Statute allowing a defendant to recover costs, including attorney's fees when authorized by statute, if a judgment is less favorable than the defendant's offer of settlement does not grant greater rights to attorney's fees than those provided by the underlying statute, but rather merely expands the group of those who are treated as prevailing parties and who therefore may be entitled to attorney's fees as prevailing parties under the relevant statute. Mangano v. Verity, Inc. (App. 6 Dist. 2008) 84 Cal.Rptr.3d 526, 167 Cal.App.4th 944.Costs 194.50 Employer and former supervisor could not recover attorney's fees as costs, even though they were the prevailing parties in employee's California Fair Employment and Housing Act (FEHA) action and FEHA authorizes the award of attorney's fees to the prevailing party, as FEHA only allowed defendants to recover attorney's fees if the action was without any legal or factual foundation; statute authorizing costs allowed recovery of attorney's fees when authorized by statute, but FEHA did not authorize an award of attorney's fees to defendants in the action absent a showing that the lawsuit was unreasonable, frivolous, meritless, or vexatious. Mangano v. Verity, Inc. (App. 6 Dist. 2008) 84 Cal.Rptr.3d 526, 167 Cal.App.4th 944.Civil Rights 1773 Employee was entitled to seek attorney fees against former employer after settling his action for unpaid wages pursuant to a statutory offer of compromise made by former employer; offer of compromise, which called for a dismissal with prejudice rather than entry of judgment, was silent about attorney fees, and as such, it could not reasonably be interpreted to exclude their recovery. On-Line Power, Inc. v. Mazur (App. 2 Dist. 2007) 57 Cal.Rptr.3d 698, 149 Cal.App.4th 1079.Compromise And Settlement 12 An award of attorney fees to prevailing plaintiff in an amount greater than plaintiff owed his attorney under their contingency agreement was proper; the contingency agreement did not bar plaintiff's recovery of reasonable attorney fees provided under stock redemption agreement between the parties, and

amount was not limited to fees actually incurred. Persson v. Smart Inventions, Inc. (App. 2 Dist. 2005) 23 Cal.Rptr.3d 335, 125 Cal.App.4th 1141, review denied, on remand 2005 WL 4857880.Corporations And Business Organizations 1343 Because applicable statutory and rule provisions set forth a procedure for determining the amount of attorney fees to be awarded pursuant to a contractual provision, the fact that a settlement offer did not specify a particular amount of attorney fees did not leave the matter open for the parties' future agreement, nor did it create an uncertainty that rendered it unenforceable. Elite Show Services, Inc. v. Staffpro, Inc. (App. 4 Dist. 2004) 14 Cal.Rptr.3d 184, 119 Cal.App.4th 263.Costs 42(2) Surety on payment bonds for public works project had independent statutory obligation to pay a successful claimant's attorney fees, and thus, fact that general contractor had been relieved, under offer of judgment statute, from paying subcontractor's post-offer attorney fees did not relieve surety of its obligation to pay subcontractor's post-offer attorney fees. Scott Co. of California v. United States Fidelity & Guaranty Ins. Co. (App. 6 Dist. 2003) 132 Cal.Rptr.2d 89, 107 Cal.App.4th 197, review denied.Costs 194.50 A district court should not rely on informal negotiations and hindsight to determine whether further litigation was warranted and, accordingly, whether attorney fees should be awarded; otherwise, plaintiffs with meritorious claims may be improperly dissuaded from pressing forward. Greene v. Dillingham Construction, N.A., Inc. (App. 1 Dist. 2002) 124 Cal.Rptr.2d 250, 101 Cal.App.4th 418.Costs 194.50 The trial court was not precluded from awarding attorney fees to employee, who prevailed on a harassment claim brought against his employer under the Fair Employment and Housing Act (FEHA), for the attorney time expended after the employee rejected the employer's settlement offer; the cost-shifting statute did not apply to the informal settlement offer made during the course of a confidential mediation session, and the penalty would frustrate the public policy favoring settlement that was served by mediation. Greene v. Dillingham Construction, N.A., Inc. (App. 1 Dist. 2002) 124 Cal.Rptr.2d 250, 101 Cal.App.4th 418.Costs 194.50 Used car purchasers, in their suit against finance company, did not waive their right to recover attorney fees when they accepted finance company's offer to compromise; attorney fees were not within scope of the compromise agreement, as offer specifically encompassed all damages and injunctive claims asserted by the purchasers, but omitted any mention of a claim for attorney fees. Ritzenthaler v. Fireside Thrift Co. (App. 3 Dist. 2001) 113 Cal.Rptr.2d 579, 93 Cal.App.4th 986.Compromise And Settlement 12 A compromise agreement that expressly settles all damages and injunctive claims, but nothing more, cannot reasonably be interpreted as including a settlement of the plaintiffs' right to recover attorney fees. Ritzenthaler v. Fireside Thrift Co. (App. 3 Dist. 2001) 113 Cal.Rptr.2d 579, 93 Cal.App.4th 986.Compromise And Settlement 12 Counsel's mistaken belief that settlement offer which he submitted on behalf of

defendant included issues of attorney fees and costs was not a proper basis for reconsideration of judgment entered upon parties signed offer to compromise; counsel's declaration regarding his mistake did not disclose any new facts, such as would permit trial court to reconsider its judgment. Pazderka v. Caballeros Dimas Alang, Inc. (App. 1 Dist. 1998) 73 Cal.Rptr.2d 242, 62 Cal.App.4th 658, rehearing denied, review denied.Judgment 90 Counsel's intrinsic mistake that settlement offer which he submitted on behalf of defendant included issues of attorney fees and costs was not the kind of mistake that would permit trial court to vacate judgment entered upon parties' signed offer to compromise. Pazderka v. Caballeros Dimas Alang, Inc. (App. 1 Dist. 1998) 73 Cal.Rptr.2d 242, 62 Cal.App.4th 658, rehearing denied, review denied.Judgment 90 Judgment entered upon signed offer to compromise settles only those issues which would have been resolved at trial, and does not dispose of costs and attorney fee issues, which are an incident of judgment unless expressly made a part thereof. Pazderka v. Caballeros Dimas Alang, Inc. (App. 1 Dist. 1998) 73 Cal.Rptr.2d 242, 62 Cal.App.4th 658, rehearing denied, review denied.Judgment 91 Even if prior settlement negotiations indicated that one party had made a mistake about whether its offer to compromise included costs and attorney fee issues, other parties had no duty to apprise counsel for the first party that an offer to compromise must expressly include attorney fees. Pazderka v. Caballeros Dimas Alang, Inc. (App. 1 Dist. 1998) 73 Cal.Rptr.2d 242, 62 Cal.App.4th 658, rehearing denied, review denied.Costs 42(2)Costs 194.50 Tenants were entitled to reasonable attorney fees and costs in action brought against landlord for wrongfully attempting to recover possession of rental unit, as total of preoffer costs and attorney fees, punitive damages, and trebled general damages exceeded the settlement offer made by the landlord before trial. Kelly v. Yee (App. 1 Dist. 1989) 261 Cal.Rptr. 568, 213 Cal.App.3d 336.Costs 194.50 Attorney fees to which plaintiff was entitled in litigation by reason of parties' contract were not costs under this section which were to be considered in determining whether plaintiff recovered more favorable judgment than that offered by defendant. Encinitas Plaza Real v. Knight (App. 4 Dist. 1989) 257 Cal.Rptr. 646, 209 Cal.App.3d 996, review denied.Costs 42(5) In action on real estate contract which provided for recovery of attorney fees by prevailing party, parties who accepted offer of compromise could recover attorney fees as an item of costs after judgment where compromise agreement was silent on costs and fees. Lanyi v. Goldblum (App. 1 Dist. 1986) 223 Cal.Rptr. 32, 177 Cal.App.3d 181.Costs 194.48 In lessor's action against lessee for waste and breach of lease, lessee was entitled to specific findings as to what portion of attorney fee awarded to lessor represented fees for services rendered to lessor up to date of lessee's statutory settlement offer, and if damages and fees incurred up to offer did not exceed amount of offer, lessee was entitled to reduction of judgment by subtracting costs incurred after offer. Harvard Inv. Co. v. Gap Stores, Inc. (App. 1 Dist. 1984) 202 Cal.Rptr. 891, 156 Cal.App.3d 704.Appeal And Error 1151(2)Trial 391

Where construction contractor sued for amount due on construction contract, foreclosure of mechanic's lien, and attorney's fees and construction site owners counterclaimed for faulty construction, delay in completion, fraud and attorney's fees, and denied liability under the contract, contractor who recovered on his cause of action, even though some of his claims were rejected or reduced was the successful party and, therefore, was properly awarded attorney's fees. Distefano v. Hall (App. 1 Dist. 1968) 69 Cal.Rptr. 691, 263 Cal.App.2d 380.Mechanics' Liens 310(3) Attorney fee was not costs within 997 (repealed; see, now, this section). Cirimele v. Shinazy (App. 1 Dist. 1954) 124 Cal.App.2d 46, 268 P.2d 210.

A plaintiff obtaining a recovery less than the amount of the defendant's settlement offer qualifying for cost-shifting remains entitled to recover its preoffer costs, while the defendant is entitled to recover postoffer costs. Guerrero v. Rodan Termite Control, Inc. (App. 1 Dist. 2008) 78 Cal.Rptr.3d 344, 163 Cal.App.4th 1435.Costs 42(4) Under procedure for shifting costs if the prevailing party obtains a judgment less favorable than a pretrial settlement offer made by the other party, the prevailing party is precluded from recovering its own postoffer costs and must pay its opponent's postoffer costs, including expert witness fees, if awarded in the court's discretion. Elite Show Services, Inc. v. Staffpro, Inc. (App. 4 Dist. 2004) 14 Cal.Rptr.3d 184, 119 Cal.App.4th 263.Costs 42(4)Costs 187 The reasonableness of pretrial settlement offers under rule awarding a plaintiff costs in the event that the final judgment is not less than the amount of the settlement offer must be made in light of the circumstances existing at the time of the offer and not by virtue of hindsight. Burch v. Children's Hospital of Orange County Thrift Stores, Inc. (App. 4 Dist. 2003) 135 Cal.Rptr.2d 404, 109 Cal.App.4th 537, review denied.Costs 42(2) An offeree of a pretrial settlement offer, under rule awarding a plaintiff costs in the event that the final judgment is not less than the amount of the settlement offer, cannot be expected to accept an unreasonable offer. Burch v. Children's Hospital of Orange County Thrift Stores, Inc. (App. 4 Dist. 2003) 135 Cal.Rptr.2d 404, 109 Cal.App.4th 537, review denied.Costs 42(2) Accident victim's unapportioned pretrial settlement offer to truck driver's employers and other defendants, under rule awarding costs if final judgment is not less than the amount of offer, was not valid, as defendants could have been found liable but not jointly and severally liable, and thus victim was not entitled to prejudgment interest and fees from employers even though all defendants had later agreed to joint and several liability; at time of offer, truck lessor's liability could have been limited based on theory of owner/lessor rather than under any doctrine of respondeat superior, and liability also could have been limited to several under comparative negligence principles. Burch v. Children's Hospital of Orange County Thrift Stores, Inc. (App. 4 Dist. 2003) 135 Cal.Rptr.2d 404, 109 Cal.App.4th 537, review denied.Costs 42(2) Trial court did not abuse its discretion in finding that pretrial offer to settle made

by defendants was a valid section 998 offer, and thus did not abuse its discretion in awarding to defendants pursuant to section 998 their costs including expert witness fees, even though offer did not include an entry of judgment and even though plaintiff prevailed in action, obtained a jury verdict of $8,174, but as a result of award of fees under section 998 ultimately owed defendants nearly $100,000; section 998 would not retain any vitality if in each case in which it came into play a plaintiff could argue that the judgment declaring wrongdoing by defendant was worth more than the monetary amount offered in settlement. American Airlines, Inc. v. Sheppard, Mullin, Richter & Hampton (App. 2 Dist. 2002) 117 Cal.Rptr.2d 685, 96 Cal.App.4th 1017.Costs 42(2)Costs 187 Song-Beverly Act provision expressly allowing recovery of costs by prevailing buyers in lemon cases does not prevent court from exercising its discretion to award prevailing seller expert fees as part of costs when buyer rejects settlement offer for amount greater than buyer's ultimate recovery; Song-Beverly Act provision does not set forth express exception to general statute allowing recovery of costs by prevailing parties, and statute allowing parties whose settlement offers are rejected to recover expert fees augments general statute allowing prevailing parties to recover costs. Murillo v. Fleetwood Enterprises, Inc. (1998) 73 Cal.Rptr.2d 682, 17 Cal.4th 985, 953 P.2d 858, rehearing denied.Antitrust And Trade Regulation 396 Allocating one third of defense costs awarded to each of three unsuccessful age discrimination plaintiffs, each of whom rejected reasonable 998 offer of compromise, was not an abuse of discretion, even though complaining plaintiff was offered lowest percentage of claimed economic losses. Santantonio v. Westinghouse Broadcasting Co. (App. 2 Dist. 1994) 30 Cal.Rptr.2d 486, 25 Cal.App.4th 102.Costs 42(1) Awarding amounts charged by two economists retained by defendants in age discrimination suit for economists' own preparation and trial time, as well as portion of charges for staff economists and other skilled employees who helped witnesses in that preparation, as costs against plaintiffs who refused reasonable 998 offer of compromise was not abuse of discretion. Santantonio v. Westinghouse Broadcasting Co. (App. 2 Dist. 1994) 30 Cal.Rptr.2d 486, 25 Cal.App.4th 102.Costs 42(1) Award of costs based upon litigant's rejection of reasonable 998 offer of compromise can be reversed only for an abuse of discretion. Santantonio v. Westinghouse Broadcasting Co. (App. 2 Dist. 1994) 30 Cal.Rptr.2d 486, 25 Cal.App.4th 102.Appeal And Error 984(1) Plaintiff was not entitled to prejudgment interest following superior court's entry of judgment from arbitration award in amount equal to plaintiff's unaccepted offer to compromise, with each party to bear its own costs; judgment was not more favorable to plaintiff than her offer. Wagy v. Brown (App. 3 Dist. 1994) 29 Cal.Rptr.2d 48, 24 Cal.App.4th 1.Interest 39(2.20) When opposing party has rejected settlement offer and fails to obtain more favorable judgement, trial court may, in its discretion, make award of expert witness fees. Fish v. Guevara (App. 6 Dist. 1993) 15 Cal.Rptr.2d 329, 12 Cal.App.4th 142.Costs 42(4)

For purposes of this section which provides that if offer made by defendant is not accepted and plaintiff fails to obtain more favorable judgment, plaintiff must pay defendant's costs from time of offer, only an offer made to single plaintiff without need for allocation or acceptance by other plaintiffs qualifies as valid offer. Meissner v. Paulson (App. 3 Dist. 1989) 260 Cal.Rptr. 826, 212 Cal.App.3d 785.Costs 42(4) Defendant was not entitled to costs against plaintiffs, even though plaintiffs rejected defendant's joint offer of settlement and trial court found that one plaintiff received less favorable result; settlement offer was not apportioned between defendants. Meissner v. Paulson (App. 3 Dist. 1989) 260 Cal.Rptr. 826, 212 Cal.App.3d 785.Costs 42(4) Settlement offer which would have required plaintiff to forego other lawsuits as well as dismissing the one involved in the case at trial was ineffective to shift costs to the plaintiff when the money judgment which she eventually recovered was less than the amount of money offered by the defendant. Valentino v. Elliott Sav-On Gas, Inc. (App. 2 Dist. 1988) 247 Cal.Rptr. 483, 201 Cal.App.3d 692, rehearing denied and modified, review denied.Costs 42(4) Where defendant made statutory offer to settle case for $6,001, which was refused by plaintiff, and jury subsequently awarded plaintiff only $4,000 in damages, plaintiff was not entitled to recover its own costs, and was required to pay defendant's costs, from time of statutory offer, and defendant's subsequent oral offer, also refused, did not revoke statutory offer for purposes of such apportionment of costs. Gallagher v. Heritage (App. 4 Dist. 1983) 192 Cal.Rptr. 614, 144 Cal.App.3d 546.Costs 42(4) Where defendant's offer of compromise, although providing for apportionment between plaintiffs of aggregate sum offered, had to be accepted by both plaintiffs, defendant was not entitled to recover costs from one plaintiff, who received less favorable verdict than compromise offer. Hutchins v. Waters (App. 1 Dist. 1975) 123 Cal.Rptr. 819, 51 Cal.App.3d 69.Costs 42(4) Under former 998 (see, now, this section), trial judge was obliged to deny plaintiffs' costs where jury's award was less than amount offered to plaintiffs in settlement of their personal injury action. Pomeroy v. Zion (App. 1 Dist. 1971) 96 Cal.Rptr. 822, 19 Cal.App.3d 473.Costs 42(4) Statutory offer of compromise under 997 (repealed; see, now, this section) by defendant in amount of $2,300 to three plaintiffs prior to trial was nullity for failing to designate amount offered to each plaintiff individually and statutory provision of that section that plaintiff who failed to obtain judgment more favorable than compromise could not recover costs was not applicable to bar recovery of costs to plaintiffs who recovered judgments in amount less than statutory offer. Randles v. Lowry (App. 2 Dist. 1970) 84 Cal.Rptr. 321, 4 Cal.App.3d 68.Costs 42(2) Even though plaintiff did not accept offer of judgment made by defendant pursuant to 997 (repealed; see, now, this section) and failed to obtain more favorable judgment, plaintiff could recover his costs accruing before offer of judgment and he was to be charged with defendant's costs from time of offer. Bennett v. Brown (App. 3 Dist. 1963) 28 Cal.Rptr. 485, 212 Cal.App.2d

685.Costs 42(2) Costs incurred by plaintiff after offer of judgment made by defendant pursuant to 997 (repealed; see, now, this section) must be excluded in determining whether plaintiff has obtained more favorable judgment within portion of that section relating to costs. Bennett v. Brown (App. 3 Dist. 1963) 28 Cal.Rptr. 485, 212 Cal.App.2d 685.Costs 42(5) Where amount for which defendant offered to allow judgment to be taken against him pursuant to 997 (repealed; see, now, this section) exceeded amount of verdict in favor of plaintiff plus costs incurred by plaintiff before offer of judgment, plaintiff failed to obtain more favorable judgment and could not recover his costs incurred after offer of judgment and must pay defendant's costs incurred after such offer, even though verdict plus plaintiff's total costs bill exceeded offer of judgment. Bennett v. Brown (App. 3 Dist. 1963) 28 Cal.Rptr. 485, 212 Cal.App.2d 685.Costs 42(5) Where defendant, before the trial, served on plaintiff an offer to allow judgment to be taken for $500, which offer was not accepted, and on the trial plaintiff obtained a judgment for $400, the trial court properly allowed plaintiff the costs which he had incurred before the offer, and charged him with the costs which accrued after the offer. Douthitt v. Finch (1890) 84 Cal. 214, 24 P. 929. In the case of Fairchild-Gilmore-Wilton Co. v. Southern Refining Co. (1910) 158 Cal. 264, 110 P. 951, the court said: That part of section 997 which provides that, if a plaintiff fails to obtain a more favorable judgment than that involved in an offer of compromise, he cannot recover costs, simply and clearly means that even if, after the refusal of the offer, he should receive a judgment for an amount within the superior court's jurisdiction but less than for the amount offered, he would not be entitled to costs.