If a 998 Offer to Compromise is Ambiguous, The Court will Allow any Ambiguity to be Clarified when Considering the Offer’s Validity

If a 998 Offer to Compromise is Ambiguous, The Court will Allow any Ambiguity to be Clarified when Considering the Offer’s Validity

05.23.2019

Prince v. Invensure Insurance Brokers (2018) WL 2276603 allows a party to clarify the terms of an ambiguous California Code of Civil Procedure section 998 offer to compromise (998). Such clarification encourages reasonable settlement offers to be accepted and thus, if the 998 offer is denied after the clarification occurs, the offering party is entitled to post-offer costs.

In Prince, the jury returned with a verdict in favor of Plaintiff Duncan Prince in the amount of $647,706.48. Plaintiffs filed a memorandum of costs, which included expert costs. Defendant and Cross-Complainant, 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 and the second, dated March 11, 2014, was in the amount of $500,000, but specifically stated that it was to resolve the First Amended Complaint only. Neither offer made any mention of Cross-Defendant ERM. Both used standard Judicial Council forms and were ultimately denied by Defendant Invensure.

The trial court granted the motion to tax costs in part, and limited Plaintiff’s claim for expert fees to a single expert which related to Plaintiff’s damages within the First Amended Complaint. The trial court ruled that Plaintiff’s first 998 offer was ambiguous and the Plaintiff’s second 998 offer was valid.

However, the Court of Appeal found the January 998 offer to be 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.”

In this instance, after the January 998 offer was made, a string of email correspondence ensued amongst counsel. Defendant Invensure’s counsel stated that if the 998 offer was intended to dispose of the entire action (including the Cross-Complaint), it was rejected; but if referred only to the Complaint, 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. Defendant Invensure knew exactly what the 998 offer included – disposing 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.

As such, the Court found these emails to clarify the ambiguities within the initial 998 offer and determined that 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.