In past rulings, courts have held parties to a strict standard when setting forth the terms and conditions of a California Code of Civil Procedure Section 998 Offer to Compromise (“998 Offer”).  However, in a recent Court of Appeal decision, Prince v. Invensure Insurance Brokers (2018, WL 2276603), the Fourth District Court allowed the party to clarify the terms of an otherwise ambiguous 998 Offer.  The Court reasoned such clarification encourages reasonable settlement offers to be accepted and hence, if the 998 offer is denied after the clarification occurs, then the offering party is entitled to post-offer costs.

Background

In Prince, the jury returned a verdict in favor of plaintiff Prince for $647,706.48. Plaintiffs filed a memorandum of costs, which included expert costs. Defendant Invensure, moved to tax these costs. Plaintiff’s claim for expert expenses rested on two 998 Offers served on defendant Invensure.  The first, dated January 24, 2014, was in the amount of $400,000. The second, dated March 11, 2014, was in the amount of $500,000, but specifically stated it was to resolve the First Amended Complaint only.  Neither offer made any mention of cross-defendant ERM.  Both 998 Offers used standard Judicial Council forms, and both 998 Offers were denied by Invensure.

The trial court granted the motion to tax costs, in part, but limited plaintiff’s claim for expert fees to a single expert related to plaintiff’s damages alleged in the First Amended Complaint.  The trial court ruled plaintiff’s first 998 Offer was fatally ambiguous and unenforceable, but the plaintiff’s second 998 Offer was valid.

Rationale

The Court of Appeal found the January 998 Offer valid. In reaching its ruling, the Court of Appeal focused on the parties’ actual intent, stating, “where two sophisticated parties are represented by counsel, allowing an offer to compromise to be clarified in writing after the offer was made serves the purpose of Section 998.  Such clarification encourages reasonable settlement offers to be accepted.  Permitting a rule of overly strict construction of the language of the offer, despite the parties’ actual knowledge of the other’s intent, would frustrate this purpose rather than serve it.

After the January 998 Offer was made, a series of email correspondence ensued between the parties’ counsel.  Defendant Invensure’s counsel stated if the 998 Offer was intended to dispose of the entire action (including the Cross-Complaint), it was rejected.  But if the 998 Offer referred only to the Complaint, then Invensure would like an additional week to consider the offer.

In response, plaintiff’s counsel confirmed the offer was indeed intended “to dispose of the entire action.” Such clarification removed any uncertainty that the Cross-Complaint was also intended to be included.  Thus, the offeree’s intent was clear and defendant Invensure knew exactly what the 998 Offer intended – to dispose of the entire action (including the Cross-Complaint).  Accordingly, defendant Invensure’s rejection of the January 998 Offer, precluded it from escaping the statutory mandate to pay plaintiff’s post-offer costs.

Ruling

The Court found these emails to clarified the ambiguities within the initial 998 Offer and ruled the clarification made the initial 998 Offer valid. The Court of Appeal remanded that issue to the trial court for further consideration regarding the expert witness fees due to plaintiff.

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