For various reasons, a defendant may make successive CCP 998 offers during the pre-trial phase of litigation. If the matter goes to trial and plaintiff does not obtain an outcome greater than the first or second 998 Offer, is the defendant entitled to costs from the date of the first CCP 998 Offer? Answer: Yes.
Code of Civil Procedure section 998, subdivision (c)(1) states:
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 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 defendant. (Civ. Proc. Code § 998.)
In Martinez v. Brownco Construction Co., Inc. (2013) 56 Cal.4th 1014, the California Supreme Court held that where “a plaintiff makes two successive statutory offers, and the defendant fails to obtain a judgment more favorable than either offer, allowing recovery 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 settlements.” (Id. at p. 1017.) It held that in a case where a “plaintiff made two statutory offers, and defendant failed to obtain a judgment more favorable than either,” section 998’s “policy of encouraging settlements is better served by not applying the general contract principle that a subsequent offer entirely extinguishes a prior offer.” (Ibid. [original italics].) It explained, parties should not “be rewarded for rejecting multiple offers where each proves more favorable than the result obtained at trial.” (Ibid.)