TL;DR — Key Takeaways
- A section 998 offer is a formal settlement offer that changes who pays litigation costs if the other side rejects it and then does worse at trial.
- It can be served any time up to 10 days before trial or arbitration begins, and it stays open for 30 days or until trial, whichever comes first.
- If a plaintiff rejects a defendant’s offer and fails to obtain a more favorable judgment, the plaintiff loses post-offer costs and pays the defendant’s.
- Expert witness fees are discretionary in both directions, and only expert fees incurred after the offer are recoverable.
- Section 998 shifts costs. It does not create a right to attorney’s fees where none otherwise exists.
- An offer made too early, or structured as a choice between alternatives, may be held invalid. California appellate courts reached different results on alternative offers in late 2024, and the question is open.
A section 998 offer to compromise is a written settlement offer that carries a statutory consequence: if the party who receives it turns it down and then fails to do better at trial, that party absorbs a cost shift. It is one of the few tools in California civil procedure that changes the other side’s risk without going to a judge, and it is used less than it should be.
What section 998 actually does
Code of Civil Procedure section 998 modifies the ordinary cost rules. Without it, the prevailing party recovers its costs under section 1032. With a rejected 998 offer in the picture, the arithmetic changes.
When a defendant makes the offer. If the plaintiff rejects it and fails to obtain a more favorable judgment, the plaintiff cannot recover its post-offer costs and must pay the defendant’s post-offer costs (section 998(c)(1)). This is the version that gets a plaintiff’s attention, because a plaintiff can win the case and still end up worse off than if the offer had been accepted.
When a plaintiff makes the offer. If the defendant rejects it and fails to obtain a more favorable judgment, the court may award the plaintiff post-offer costs plus expert witness fees (section 998(d)).
The asymmetry in the statutory language matters. Under subdivision (c), the shift of ordinary costs is the consequence; under subdivision (d), the court “may” award the additional expert fees. Expert fees are discretionary in both directions rather than automatic.
The timing rules
These are mechanical and they are where offers most often fail.
When you can serve it. Any time until 10 days before trial or arbitration commences (section 998(b)). Serve it on the eleventh day and you are outside the statute.
How long it stays open. Thirty days, or until trial or arbitration begins, whichever happens first. If it is not accepted in that window it is deemed withdrawn.
How acceptance works. Acceptance must be in writing, signed by the offeree or the offeree’s counsel, and filed with proof of acceptance (section 998(b)(1) and (b)(2)). A judgment or award entered on an accepted offer is treated as a compromise settlement.
What happens to an unaccepted offer. It cannot be given in evidence at trial except to determine costs after the verdict. The jury does not hear about it.
Who can make one. Either side, and both sides can have offers outstanding at the same time. There is no requirement that a plaintiff go first, and no penalty for making an offer that is not accepted, beyond being bound if it is.
One more timing point, and it is the one that catches sophisticated parties: an offer served too early can be invalid. The question courts ask is whether the offeree had enough information to evaluate it. The governing analysis weighs how far into the litigation the offer came, what information the offeree actually had, and whether the offeree told the offeror it lacked the information it needed. A token offer served with the complaint, before any discovery has happened, is vulnerable on exactly that ground.
If you have received a 998 offer and are working out whether to accept it, the clock is short. Call Bay Legal at (650) 668-8000 in Northern California or (213) 668-8000 in Southern California.
How the comparison is actually run
The phrase that carries the consequence is more favorable judgment, and working out whether a judgment beat an offer is less obvious than it sounds.
The comparison is between the offer and the judgment, but the judgment figure used for the comparison is adjusted. Pre-offer costs the offeree would have been entitled to recover are generally added to the verdict before the comparison is made, on the reasoning that those costs were already earned when the offer arrived. Post-offer costs are not, because those are the costs the statute is allocating.
Interest, attorney’s fees where they are recoverable, and any statutory adjustments can all enter the calculation. The practical consequence is that a verdict which looks slightly better than the offer on its face can still fail the comparison once the adjustments are made, and a party who assumed it had beaten the offer can find it has not.
This is worth modeling before you reject an offer rather than after the verdict, because by then the arithmetic is fixed.
What section 998 does not do
Two misunderstandings are worth clearing up directly.
It does not create a right to attorney’s fees. Section 998 shifts costs, and expert fees within the court’s discretion. Attorney’s fees become recoverable as costs only where an independent contract or statute makes them so. If your case has no fee clause and no fee-shifting statute, a rejected 998 offer does not convert your fees into a recoverable item. This is a frequent overstatement about the statute. The general rule is covered in who pays attorney’s fees in California.
It does not shift pre-offer expert costs. Since a change operative January 1, 2016, only expert fees incurred after the offer was made are recoverable under the statute. Expert costs are also capped by reference to Government Code section 68092.5 (section 998(h)). Work your expert did before the offer stays with you.
The mistake that invalidates an offer
An offer has to be capable of valuation. The offeree needs to be able to compare the offer against the likely judgment, which means the terms have to be certain enough to price.
Offers get into trouble when they bundle conditions that are hard to value, when they lump multiple parties into a single undifferentiated sum, or when they require the offeree to accept non-monetary terms of uncertain worth.
An area to watch: offers that present alternatives. Two California Courts of Appeal addressed simultaneous or alternative offers in late 2024 and did not land in the same place. One decision held that two simultaneous offers leaving the recipient to choose between them lacked the required certainty. Another held that an offer containing two independent options was valid where one of them was specific and certain on its face. Both are recent, both come from the same appellate district, and the California Supreme Court has not resolved the tension. Until it does, an alternative-structure offer carries real risk of being held unenforceable, and a party relying on one to shift costs may find the shift does not happen.
That is a drafting problem with a straightforward answer: a single, clear, self-contained number is harder to attack than a clever structure.
How to use it as leverage
The practical value of a 998 offer is that it converts a settlement conversation into a risk calculation with a number attached. Before the offer, the other side is weighing whether they might win. After a well-timed offer, they are weighing whether they will beat a specific figure, and what it costs them if they do not.
That works best when:
- The offer is credible. A number far below any realistic outcome invites a challenge to its good faith and does not move anyone.
- The timing is right. Late enough that the other side has the information to evaluate it, early enough that meaningful costs remain to be shifted. An offer served after most of the expense is already incurred shifts less.
- Your own exposure is understood. Making an offer means you may be bound by it. Make one you would be content to have accepted.
- The other side can evaluate it. An offer the recipient cannot price is an offer a court may later refuse to enforce. If your claim involves multiple defendants, or non-monetary relief, the structure needs care.
A defendant who is confident about liability and uncertain about damages often gets more from a 998 offer than from a motion. A plaintiff with a strong documented claim can use one to put the defendant’s cost exposure in front of them in writing.
There is a timing interaction worth planning around. Expert costs are frequently the largest recoverable item, and only post-offer expert fees count. An offer made before expert work begins therefore puts a far larger sum at stake for the recipient. An offer made after the experts have been retained, deposed, and paid shifts a much smaller sum, whatever the headline number says. If the cost shift is the point of the exercise, the offer generally belongs earlier in the case than most parties serve it, subject to the prematurity limits described above.
Our post on filing as leverage covers the broader question of how litigation steps function in a negotiation, and is my lawsuit worth it works through the cost-benefit framework a 998 analysis sits inside.
If you have received one
Three things, in order.
Diary the deadline. Thirty days, or the start of trial. Missing it is not curable.
Value the claim honestly. The comparison is not offer versus what you hope for. It is offer versus the judgment you are realistically likely to obtain, discounted by the risk of losing, plus your cost exposure if you reject and fall short.
Check the offer’s validity. Was it served in time? Is it specific enough to price? Did you have the information to evaluate it, and did you say so in writing if you did not? An invalid offer does not shift anything, and whether it is valid is worth assessing before you treat the number as a floor.
Bay Legal handles both sides of these analyses. Reach us at (650) 668-8000, (213) 668-8000, or through baylegal.com/contact-us.
Frequently Asked Questions
What is a 998 offer in California?
It is a formal written settlement offer made under Code of Civil Procedure section 998. Its distinguishing feature is the cost consequence: if the party receiving it rejects it and then fails to obtain a more favorable judgment, that party generally loses its post-offer costs and may have to pay the other side’s, and may face expert fees as well.
How long do I have to accept a 998 offer?
Thirty days from service, or until trial or arbitration begins, whichever comes first. If you do not accept within that window the offer is deemed withdrawn. The deadline is not extendable by inaction, so calendar it the day the offer arrives.
Does rejecting a 998 offer mean I pay the other side’s attorney’s fees?
Usually not. Section 998 shifts costs and, at the court’s discretion, expert witness fees. Attorney’s fees are recoverable as costs only where a contract or a statute independently makes them recoverable. If neither applies in your case, a rejected offer does not put the other side’s attorney’s fees on you.
Can a 998 offer be made too early?
Yes. An offer served before the other side has enough information to evaluate it can be held invalid and unenforceable for cost-shifting purposes. Courts look at how far the case had progressed, what the recipient knew, and whether the recipient told the offeror it lacked the information it needed.
When is the latest I can serve a 998 offer?
No later than 10 days before trial or arbitration commences. An offer served inside that window does not carry the statutory consequences, even if it is otherwise a perfectly reasonable settlement proposal.
