Significant Changes to 998

The CA Supreme Court recently held in Madrigal v. Hyundai Motor America that cost shifting provisions of 998 apply not only to when a party obtains a less favorable verdict than what was offered but also when a party obtains a less favorable settlement. Madrigal says this can be applied in favor of both plaintiffs and defendants.

For example: Plaintiff serves a 998 for $100k. Defendant lets the offer expire and after further discovery settles the case for $150k. Now defense would be liable to plaintiff for all costs and fees recoverable under 998 after the date of the offer.

Similarly, if a defendant serves a 998 offer to compromise of $150K and plaintiff eventually settles (after offer has expired) for $100K, plaintiff is then liable to defendant for all costs and fees recoverable under 998 after the date of the offer.

Parties certainly contract can contract out of this with their settlement agreement language.