(Martinez v. Brownco Construction Co. (2013) 56 Cal.4th 1014)

Until June 11, 2013 it was uncertain whether a later CCP 998 offer of compromise extinguished prior offers by the same party. That uncertainty is over. The Supreme Court resolved a split of appellate districts in Martinez v. Brownco Construction Co. (2013) 56 Cal.4th 1014, rejecting the Last Offer Rule applied in Distefano v. Hall (1968) 263 Cal.App.2d 380 [69 Cal. Rptr. 691] (Distefano) and Wal-Mart Stores, Inc. v. Wilson (1999) 72 Cal.App.4th 382. The Supreme Court rejected the Distefano/Wilson approach, and affirmed the “all offers count” rule applied by the appellate court in Martinez v. Brownco. The reasoning for holding that all of the offers count was as follows:

... Not only do the chances of settlement increase with multiple offers (T. M. Cobb, supra, 36 Cal.3d at p. 281), but to be consistent with section 998’s financial incentives and disincentives, parties should not be penalized for making more than one reasonable settlement offer. Nor should parties be rewarded for rejecting multiple offers where each proves more favorable than the result obtained at trial. Accordingly, we hold that where, as here, a plaintiff serves two unaccepted and unrevoked statutory offers, and the defendant fails to obtain a judgment more favorable than either offer, the trial court retains discretion to order payment of expert witness costs incurred from the date of the first offer.

In addition to encouraging the making of more settlement offers, this conclusion promotes the public policy of compensating injured parties. As discussed, the policy of compensating injured parties is best served by according parties flexibility to adjust their settlement demands in response to newly discovered evidence. (T. M. Cobb, supra, 36 Cal.3d at pp. 281–282.) This can be accomplished by allowing a plaintiff who made an early settlement offer to “either propose a new offer in light of the newly discovered evidence or proceed to trial and present all the evidence in an attempt to be compensated fairly by the trier of fact’s decision” (id. at p. 282) without having to forfeit the statutory benefits flowing from the early offer.

At the same time, holding a defendant responsible for expert witness costs in situations such as this will not confuse the section 998 process or give rise to disputes over the status of a statutory offer. To the contrary, such holding is easily applied and is consistent with the terms of the statute in permitting augmentation of costs whenever “an offer made by a plaintiff is not accepted and the defendant fails to obtain a more favorable judgment or award … .” (§ 998, subd. (d).) Predictability of the process will not be upset by inapplicability of the last offer rule in cases where each statutory offer proves either equal or more favorable to the offeree than the judgment or award at trial.

Finally, section 998 expressly states an award of expert witness fees is discretionary. (§ 998, subd. (d).) Accordingly, if a later offer results in mischief or confusion, or any gamesmanship appears, the court may address such concerns when considering what post-offer expert fees to award. In this regard, we note section 998 allows a court, in its discretion, to award a defendant expert fees incurred both before and after a defense settlement offer where the plaintiff fails to obtain a more favorable judgment or award. (§ 998, subd. (c)(1); see ante, fn. 3.) We are confident that, as in those situations, the discretion conferred upon trial courts suffices as a meaningful check against mischief and gamesmanship.

As a result, a party can make as many 998 offers at it wants to, without being concerned that giving a new offer extinguished the previously given offer(s). It also means that you still have to worry about the earlier offers even when a party sends an improved 998.