This case decision Mostafavi Law Group, APC v. Larry Rabineau, APC (filed March 3, 2021) is a technical one…but can be an important one.
The case deals with 998 offers, and specifically how those offers must be drafted to be enforceable if accepted.
What is a 998 offer?
It’s based off California Code of Civil Procedure section 998, and is an offer made before trial to settle at a certain money amount. Basically, if a 998 is offered and not accepted, it sets the bar for what the verdict must be at trial. For example, if the Jury awards a verdict above the 998 amount, Plaintiff gets to recover costs of the trial from Defendant (costs, like expert witness fees, etc.). But if the Jury awards under the 998 amount, Defendant gets to recover fees from Plaintiff. The rationale is section 998 “provides a financial incentive to make reasonable settlement offers.”
What happened here?
These facts kind of read like a Bar Exam fact pattern..
Defendant offered a 998 to Plaintiff. I’ll put below their 998 in full.
CCP 998(b) requires a specific place for the 998 to be accepted by the other party: “the written offer ‘shall’ include ‘a provision that allows the accepting party to indicate acceptance of the offer by signing a statement that the offer is accepted.’”
Defendant’s 998 did NOT specify how Plaintiff could accept the offer. And the timeline plays out: Plaintiff accepts by handwriting on Defendant’s offer “Plaintiff Mostafavi Law Group, APC accepts the offer.” Plaintiff files the signed 998 with the Trial Court, Defendant tells Plaintiff that Defendant will “draft and send…a settlement agreement for…signature” before paying the settlement amount, and the Trial Court accepts the 998. Then Defendant refuses to pay the 998, Defendant files a motion to set aside the 998, and the Trial Court grants that motion by Defendant—leaving Plaintiff without payment.
There is no case law directly on-point with what happened here, so this is a novel issue.
Plaintiff argues the 998 is enforceable based on “pure contract principles” and equity. The Court disagrees, saying a 998 is only enforceable if you draft and accept a 998 exactly as the code requires. “[C]onsistent application of this rule will ensure parties can efficiently discern” what is a valid 998 and not. “[T]his ‘bright-line rule will eliminate confusion and uncertainty’ and ‘encourage settlements[.]’” “Adopting a rule requiring section 998 offers to include an acceptance provision to be valid, whether they are rejected or accepted, adds consistency and predictability to section 998’s operation. This may incentivize litigants to utilize this ‘straightforward and expedited procedure’ to settle disputes before trial.”
The 998 here in full
“TO PLAINTIFF, MOSTAFAVI LAW GROUP, AND TO ITS COUNSEL OF RECORD: [¶] Pursuant to California Code of Civil Procedure §998 [sic], Defendant [sic], LAW OFFICES OF LARRY RABINEAU AND LARRY RABINEAU, offer to compromise the above-entitled action for the sum of $25,000.01. [¶] PLEASE TAKE NOTICE that if this Offer to Compromise is not accepted within the time specified by §998 [sic] of the Code of Civil Procedure and Plaintiff fails to obtain a more favorable judgment, Plaintiff is not entitled to recover court costs (despite being a `prevailing party’) and must pay the offering defendants’ costs from the time of the offer.”