Court of Appeal Endorses Early Use of Code of Civil Procedure Section 998 Offers of Judgment

I’ve blogged often on California’s Code of Civil Procedure Section 998 – recent previous posts are here and here.  Briefly, Section 998 is our version of FRCP 68, and can be effective for obtaining pre-judgment interest, and for shifting both enhanced costs (primarily expert costs, which can be substantial) and sometimes attorneys’ fees.

Some of the open questions have been these:  When the case is brand new, and there has effectively been no time for discovery, can one party set up the other for cost and fee shifting by sending out an offer of judgment, with thirty days to respond?  Can the party receiving the offer object that it is premature?  It now appears that the answers to these questions are “yes” and “no.”

Barba v. Perez (2008) ___ Cal.App.4th ___ (3rd Dis., C05428) was a personal injury case.  Nine days after filing, plaintiff served defendant with the summons, complaint and a Section 998 offer to compromise for $99,999.99.  The case went to trial, and the jury awarded $117,053.432.  So Plaintiff beat the offer.

When the plaintiff sought pre-judgment interest and enhanced costs, the defendant contested on the ground that “[i]t is unreasonable to expect that [he], when first faced with the service of summons and a complaint, would have a reasonable basis to believe an offer to compromise was fair,” and he “had absolutely no basis to determine if the offer was reasonable.”  The trial court granted enhanced costs and interest.

Held:  affirmed.  The trial court had discretion to award interest and enhanced costs, and there is no waiting period for an offer of judgment: 

"Even assuming a situation . . . where a defendant has no information about the plaintiff’s damages when served with an early section 998 offer, defense counsel may request that plaintiff provide informal discovery on the damage issue and/or allow an extension of time to respond to the demand.  If plaintiff’s counsel refused to accord the defendant these courtesies and unyieldingly insisted that defendant respond without information, such conduct could then be presented to the trial court when it considered whether to award special fees and costs.”