Quick Hits
- In Gorobets v. Jaguar Land Rover North America, LLC, the Supreme Court of California held that a 998 offer can present two alternatives if the options are clearly stated and at least one option is sufficiently certain to permit accurate valuation at the time the offer is made.
- The court held that a valid alternative-choice 998 offer must clearly delineate the specific terms for each choice, specify that only one option may be selected, and communicate how to accept the offer.
- Although this case involved a car-lease dispute, the same legal principles apply to 998 offers in employment-related disputes.
California’s Code of Civil Procedure Section 998 encourages parties to resolve lawsuits early by attaching financial penalties to parties that reject a reasonable settlement offer. The settlement offer must be presented at least ten days before a trial or arbitration begins, and the recipient has thirty days (or until the start of trial) to accept it. If a plaintiff rejects a defendant’s 998 offer and loses or prevails for less than the offer after trial, that plaintiff cannot recover post-offer costs and may be required to pay the defendant’s post-offer costs. If a defendant rejects a plaintiff’s 998 offer, and the final judgment is more favorable to the plaintiff than the 998 offer, the defendant may be forced to pay the plaintiff’s post-offer costs.
Background on the Case
Vadim Gorobets leased a car and later sued the manufacturer, Jaguar Land Rover, alleging defects in nearly every major vehicle system. He brought claims for breach of warranty and breach of the duty to return the vehicle from service without defects within thirty days.
On October 15, 2020, Jaguar Land Rover served a section 998 offer with two choices.The first was a lump-sum payment of $85,000 in exchange for the vehicle’s return with clear title. The second choice proposed that Jaguar Land Rover would reimburse Gorobets for expenses he incurred, including transportation charges, manufacturer-installed options, loan interest, rental charges, sales tax, license fees, registration fees, incidental or consequential damages, and any amount owed on the auto loan.
Gorobets rejected both choices. A jury awarded him $76,155.27 in damages.Both parties then moved to recover costs and to strike or tax the other’s cost claims. Gorobets sought $76,118 in general costs and $543,413 in attorney fees. Jaguar Land Rover argued Gorobets forfeited post-offer costs because he rejected a valid 998 offer and failed to obtain a more favorable result at trial. Gorobets countered that the 998 offer was invalid because its terms lacked sufficient specificity to permit accurate valuation.
The trial court ruled that the 998 offer was valid. It awarded Jaguar Land Rover post-offer costs and denied Gorobets’s request for post-offer attorneys’ fees. Gorobets appealed. The appellate court held that 998 offers may not present multiple alternatives, and that the only valid offer was the lump-sum offer.
Supreme Court of California Ruling
In affirming the trial court’s award, the Supreme Court of California rejected the Court of Appeal’s conclusion that alternative-choice offers are inherently uncertain. The higher court further held that “a 998 offer can be valid so long as the offer is structured so that it clearly presents the alternatives available to the offeree, and at least one of the two independent sets of terms is sufficiently certain to permit an accurate valuation at the time the offer is made.”
Permitting alternative choices “increases the likelihood of an early settlement by providing the parties with the flexibility to explore multiple avenues toward resolution at once, rather than forcing them into a more time-consuming process that requires them to make and evaluate offers one at a time,” the court stated. “Alternative-choice offers allow the parties to communicate and explore those preferences more rapidly and efficiently, potentially shortening the path to common ground.”
Explaining steps in the legal analysis, the court stated, “When asked to determine the validity of an alternative-choice 998 offer on a motion for cost-shifting, the trial court first determines whether the offer is structured to make the provided sets of terms clear and the manner of selection between them evident. In this regard, the 998 offer must delineate the specific terms attributable to each choice presented and provide that the offeree must affirmatively choose one or the other set of terms by way of acceptance.”
“Once it determines that the alternative-choice 998 offer is sufficiently clear in structure, the trial court then considers whether either set of terms is sufficiently certain to permit valuation at the time the offer was made and whether that value of at least one valid alternative is higher than judgment or award ultimately achieved,” the court continued. The party seeking cost-shifting bears the burden of proving validity.
Key Takeaways
Section 998 offers can be a valuable strategic tool, and this case gives employers more flexibility in using the tool. It reinforces the notion that Section 998 promotes early settlements through financial incentives. Businesses looking to settle a case with a 998 offer may consider presenting alternative choices, but should be careful to state the terms clearly.
One open question remains. Because Gorobets rejected both alternatives outright, the court had no occasion to decide whether an offeror can still invoke cost-shifting based on the certain alternative, if the offeree instead accepts the uncertain one. Businesses may want to ensure both alternatives are as clear as possible to avoid this ambiguity.
Ogletree Deakins’ San Diego office will continue to monitor developments and will post updates on the California and Manufacturing blogs as additional information becomes available.
Tracie L. Childs is a shareholder in Ogletree Deakins’ San Diego office.
Katie M. Greenbaum is an associate in Ogletree Deakins’ San Diego office.
This article was co-authored by Leah J. Shepherd, who is a writer in Ogletree Deakins’ Washington, D.C., office.
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