Code of Civil Procedure section 998 offers rest upon a simple concept. As one Court of Appeal put it, 998 offers "encourage settlement by providing a strong financial disincentive to a party--whether it be a plaintiff or a defendant--who fails to achieve a better result than that party could have achieved by accepting [a 998] settlement offer. (This is the stick. The carrot is that by awarding costs to the putative settler the statute provides a financial incentive to make reasonable settlement offers.)" (Bank of San Pedro v. Superior Court (1992) 3 Cal. 4th 797, 804.) But if the carrot and stick is a simple concept, it's the actual business that can be complicated.

The starting point is a valid offer that a trial court finds to be "reasonable and made in good faith." (See, e.g., Nelson v. Anderson (1992) 72 Cal.App.4th 111, 134.) A recent Court of Appeal decision aptly demonstrates a wrinkle--the tricky business of serving a 998 offer with a complaint. Wait a minute, can you do that? The answer is, "it depends."

In Najera v. Huerta, 2011 Cal.App.LEXIS 16, the Court of Appeal agreed with the trial court that a 998 offer served with a plaintiff's complaint was not reasonable or made in good faith. Therefore, although the plaintiff obtained a much more favorable judgment at trial, shifting of expert witness fees and prejudgment interest (under Civil Code section 3291) to the tune of almost $100K, was denied. Yet, as plaintiff contended on appeal, another case, Barba v. Perez (2008) 166 Cal.App.4th 444, 450-451, held that a 998 offer served with the summons and complaint was not unreasonable or made in bad faith, and fees were shifted.

So what gives?

According to the Fifth District in Najera, Barba is unique on its facts. There, although the 998 offer was served with the complaint, "the parties had a close, semifamilial relationship, and there was free flow of information between them." (Barba, supra, 166 Cal.App.4th at p. 450.) And, information had actually been provided in conncetion with the 998 offer. But Barba also recognized that when information is sparse, and requests for extensions of the time to respond or for information are rejected or ignored, "such obstinacy would be viewed as potent evidence that plantiff's offer was neither reasonable nor made in good faith."

In contrast, in Najera, although plaintiff served the insurance carrier with a prelitigation demand letter, when the carrier asked for more information, none was provided. The next thing that happened was service of the complaint and the 998 offer. When panel counsel received the new file including the 998 offer, 17 days had already run. And when defense counsel wrote to plaintiff's counsel objecting to having insuffiicient time to learn the facts of the case and substantiate the damages, the response was merely that plaintiff's counsel considered the offer in good faith in light of its amount, $50K, compared to the prior policy limits demand letter. Thus, Najera concludes that unlike Barba, "there were no special circumstances present to show that at that early (and time critical) juncture . . . defendant's counsel had access to information or a reasonable opportunity to evaluate plaintiff's offer within the 30-day period."

So what are the takeways? If counsel receives a 998 offer with service of the complaint (or later), and it appears facially valid, ask for the necessary time and information to evaluate the case including an extension of the expiration date of the 998 offer. Document the exchanges. As for plaintiff's counsel, if maximizing the fee-shifting potential of a 998 offer by service with the complaint is a must, then make sure that reasonable requests for information are accomodated. Otherwise, absent unusual circumstances like those in Barba, your 998 offer will probably be found unreasonable and lacking good faith. Or, to borrow the dissenting justice in Barba's phrase, "the wicked slider in plaintiff's arsenal" may nevertheless fail to make it anywhere near the strike zone.