998 Offers: Tricky Business

Janssen Malloy LLP attorney and partner Michael J. Crowley previously wrote about a particular litigation tool, the California Code of Civil Procedure section 998 offer to compromise, linked to here. A recent decision by the California Second District Court of Appeal underscored why parties in litigation should seek the advice of experienced counsel when such an offer has been made in their case.

In Timed Out, LLC v. 13359 Corp., B280301, plaintiff, a professional model, sued a bar and restaurant for using her likeness without her permission in advertising for its St. Patrick’s Day event. The statute she sued under, Civil Code section 3344, provides that the prevailing party shall be entitled to attorney fees and costs. Prior to trial, and before the cutoff for making such an offer, the defendant made a 998 offer to pay plaintiff “the total sum of $12,500, exclusive of reasonable costs and attorney fees, if any.” After a bench trial, the court found defendant misappropriated plaintiff’s likeness and awarded $4,483.30 as damages. After briefing and argument by the parties, the trial court awarded pre-offer attorney fees and costs to plaintiff, and post-offer fees and costs to defendant, such that defendant, in a nifty bit of legal jiu-jitsu, wound up recovering more in fees and costs from plaintiff than plaintiff did from defendant for damages plus pre-offer fees and costs. Plaintiff appealed.

The Court of Appeal affirmed. The purpose of section 998 offers is to encourage the settlement of litigation prior to trial. Courts essentially treat 998 offers like any other contract and apply ordinary principles of interpreting a contract. Although perhaps awkwardly worded, defendant’s offer was neither ambiguous nor internally contradictory, as plaintiff argued.

Why this technical discussion of the 998 procedure? Plaintiff won the battle (trial) but lost the war by winding up having to pay money to defendant despite the judge finding that the defendant was liable for the tort of misappropriation. I have heard opposing counsel say and read letters by attorneys stating, “This 998 is invalid and unenforceable because it’s ambiguous” offhandedly and with more confidence than was warranted. As this case and others like it demonstrate, trial and appellate courts recognize that the legislature has encouraged them to enforce section 998 offers as a means of getting cases settled, and in the heat of the moment some attorneys may not appreciate how effectively such an offer has changed the strategic positions of the parties in the case. An individual, business, or nonprofit involved in litigation where a section 998 offer has been made needs advice from well-informed trial counsel. Janssen Malloy LLP’s experienced attorneys have litigated these issues and are prepared to assist you consider its options and make a wise, fully-informed decision in your case.