Ambiguous Scope of 998 Offer Forfeits Potential Post-Offer Cost Recovery

In Yolanda Ignacio v. Marilynne Caracciolo (No. B266930), the California Court of Appeal for the Second District found that a settlement offer seeking to release a party from claims outside the scope of the litigation at issue is invalid, and therefore does not provide a foundation for subsequent cost-shifting under California Code of Civil Procedure (“CCP”) section 998.

This dispute arose from a personal injury action in which the defendant automobile driver provided the plaintiff, an injured pedestrian, with a $75,000 settlement offer pursuant to CCP section 998. The offer included broad language releasing defendant from “any and all claims. . . whether now known or unknown, suspected or unsuspected, that have existed or may have existed or which do exist, or which hereinafter can, shall or may exist…” The offer also included a provision waiving the protection of CCP section 1542, which specifies that general releases do not extend to all claims unknown at the time of the release. The plaintiff rejected this offer, and was awarded a $70,000 judgment at trial. The defendant subsequently sought post-offer costs under CCP section 998, as the judgment was less than her $75,000 pretrial offer.

Based on a challenge brought by the plaintiff, the trial court found the defendant’s settlement offer was invalid because it required a general release of all claims beyond the instant litigation, and thus denied the defendant’s motion for costs. On appeal, the Court of Appeal performed an independent review of the settlement offer. The Court acknowledged that CCP section 998 establishes a cost-shifting procedure when a prevailing party receives a less favorable judgment than a pretrial offer submitted by the opposing party. However, like the trial court, it held the language in the defendant’s settlement offer was impermissibly ambiguous in scope as it did not specify whether the offer would encompass claims beyond the current litigation. As a result, the Court reiterated that the defendant’s offer was not valid under CCP section 998, and therefore no cost-shifting was in order.

Overall, the Ignacio decision demonstrates the importance of carefully tailoring settlement offers made pursuant to CCP section 998, which are an essential tool for cost recovery in litigation.

This document is intended to provide you with information about general liability law related developments. The contents of this document are not intended to provide specific legal advice. This communication may be considered advertising in some jurisdictions.

August 4, 2016