California Courts Diverge on Validity of Simultaneous Offers to Compromise
Litigation is expensive and increasingly shaped by the strategic use of cost-shifting tools. California’s Code of Civil Procedure section 998 (“CCP 998” or “998 offers”) empowers parties to shift litigation costs if their settlement offers are rejected and the final outcome does not exceed those offers. However, two 2024 appellate decisions Zavala v. Hyundai Motor America (Fourth District) and Gorobets v. Jaguar Land Rover North America, LLC (Second District) — now conflict on whether multiple, simultaneous 998 offers can be valid. Under Zavala, at least one clear, stand-alone offer may still be enforced, while Gorobets suggests simultaneous offers might invalidate cost-shifting entirely. Because courts in different districts are now applying the law in divergent ways, parties must adapt their settlement strategies based on venue, timing, and clarity of each offer.
Introduction: High Stakes and Shifting Costs
Litigation rarely ends with the verdict alone; the associated fees, expert costs, and interest can dwarf an actual award. In one widely discussed case, a modest $23,122 judgment ballooned to over $500,000 in requested attorney fees. CCP 998 was designed to encourage settlements and mitigate costly outcomes, but its usefulness depends on strict compliance with statutory rules — and, as recent rulings demonstrate, on the particular district’s interpretation of those rules. Counsel proposing multiple choices for structuring a settlement may be tempted to serve more than one 998 offer at the same time. But while the Fourth District in Zavala does not automatically condemn that practice, the Second District in Gorobets has effectively declared simultaneous offers too uncertain for a court to enforce, putting cost-shifting at risk.
CCP 998 was designed to encourage settlements and mitigate costly outcomes, but its usefulness depends on strict compliance with statutory rules — and, as recent rulings demonstrate, on the particular district’s interpretation of those rules. Counsel proposing multiple choices for structuring a settlement may be tempted to serve more than one 998 offer at the same time. But while the Fourth District in Zavala does not automatically condemn that practice, the Second District in Gorobets has effectively declared simultaneous offers too uncertain for a court to enforce, putting cost-shifting at risk.
Recent Developments: Two different panels of the California Court of Appeal reached opposite conclusions in late 2024, throwing CCP 998 strategy into flux. |
Background and Policy Underpinnings of CCP 998
California adopted CCP 998 to reduce court congestion and incentivize realistic settlement. The statute rewards a party who makes a fair settlement offer (in writing, with a clear acceptance path) by shifting expert fees and other post-offer costs if the offeree fails to obtain a more favorable result at trial. Over the decades, courts have underscored three pillars for a valid 998 offer: (1) clarity and specificity, (2) good faith in its creation, and (3) a clean mechanism for acceptance.
Why Multiple Offers?
Practitioners often employ multiple offers to provide various resolution structures (for instance, a lump sum vs. a conditional formula) or to hedge against uncertain valuations. Yet, in light of Zavala and Gorobets, parties must question whether the risk of losing cost-shifting leverage outweighs the benefit of providing the opposing side multiple pathways to settle. For additional insight into the legislative history and strategic use of CCP 998 in everyday practice, click here.
Key Case One: Zavala v. Hyundai Motor America (Fourth District)
Complete Procedural History
The Zavala lawsuit began in Riverside County Superior Court in early 2023 under the Song-Beverly Consumer Warranty Act (“Song-Beverly Act”). After fact discovery completed and expert designations had been served, Hyundai served two 998 offers in a single document. Trial commenced in January 2024, and the plaintiff obtained a verdict below one – but not both – of Hyundai’s 998 offers. Hyundai then moved for post-offer costs and fees. The trial court denied the motion, holding that simultaneous offers fatally undermined CCP 998’s certainty requirement. Hyundai appealed, and in December 2024, the Fourth District reversed in consolidated appeals (case nos. D082747 and D082940).
Factual Background and Detailed Offer Analysis
In Zavala, the plaintiff alleged Hyundai failed to repurchase or repair a defective vehicle in violation of the Song-Beverly Act. During settlement talks, Hyundai provided two 998 options:
- $65,000 Lump Sum: A straightforward offer promising $65,000 in exchange for a dismissal with prejudice, arguably covering all fees and costs up to the date of acceptance.
- Formula-Based Alternative: A “statutory” approach involving restitution, mileage offsets, and possible incidental damages, with any dispute resolved through additional motion practice.
The plaintiff rejected both options, went to trial, and secured a net award under $65,000. In post-trial motions, Hyundai argued that the lump-sum offer should trigger cost-shifting.
Comprehensive Holding and Court’s Reasoning
The Fourth District unanimously held that the presence of at least one valid, self-contained offer within a combined 998 offer document remains enforceable, even if the other portions of that offer are invalid. Although the court concluded that the formula-based offer which made up the second part of Hyundai’s 998 offer had too many contingencies and uncertain amounts and was therefore invalid on its own, the lump-sum option was sufficiently concrete and simple to be a valid option. The justices emphasized the practical reality that a single, concrete sum can be compared to the final verdict without undue confusion. Therefore, the court concluded that when multiple offers are served together, at least one “facially certain” offer can remain valid if it stands independently. The appellate opinion recognized that the formula-based alternative was too open-ended: it demanded post-acceptance litigation or referee determinations to finalize the settlement amount. However, it did not taint the entire CCP 998 package, because Hyundai plainly segregated the “clean” $65,000 figure.
As of January 2025, no petition for review has been filed in the California Supreme Court in Zavala.
Procedural Deadlines: Under CCP 998, an offer must remain open for 30 days or until trial begins, whichever is earlier. |
Key Case Two: Gorobets v. Jaguar Land Rover North America, LLC (Second District)
Complete Procedural History
Gorobets originated in Los Angeles County Superior Court in mid-2023. After a year of discovery and multiple pretrial motions, Jaguar Land Rover served two 998 offers concurrently in September 2024. The trial court ruled one of those offers was enforceable, but in October 2024, the Second District reversed (case no. B327745). This final appellate ruling invalidated the entire cost-shifting scheme.
Factual Background and Detailed Offer Analysis
Similar to Zavala, the plaintiff in Gorobets alleged breach of warranty, and Jaguar’s CCP 998 proposals similarly contained lump-sum and more formula-based options:
- Lump-Sum Proposal: A lump-sum figure slightly above the perceived vehicle value.
- Formula-Based Proposal: A second option involving restitution, potential civil penalties, and mileage offsets requiring additional calculations.
The plaintiff rejected both, choosing to test the liability at trial. Although Jaguar hoped the simpler offer might suffice for cost-shifting, the court ultimately disagreed.
Comprehensive Holding and Court’s Reasoning
The Second District held that presenting two simultaneous offers created “inherent uncertainty,” leaving the trial court unable to determine which offer the plaintiff needed to “beat.” According to the court, CCP 998’s overriding principle is that each side should know precisely the settlement benchmark. Multiple concurrent proposals blur that benchmark and thus undermine the entire cost-shifting mechanism. Unlike the Fourth District’s ruling in Zavala, the Gorobets court was unwilling to simply ignore the arguably invalid formula-based option and focus only on the lump-sum proposal.
Dissenting Opinion
Gorobets features a short but noteworthy dissent: The dissenting justice argued that if each option within the 998 offer is self-contained, then the offeree can evaluate each option separately, meeting CCP 998’s clarity requirement. Policy-wise, the dissent saw synergy with Zavala’s approach: at least one definite figure remains the “true” offer for post-verdict comparison. While the majority dismissed that logic, the dissent underscores an internal tension: if well-drafted offers can be neatly separated, is there truly “uncertainty”?
As of early 2025, there is no formal petition for California Supreme Court review on file for Gorobets, though observers expect one may still emerge.
Practical Takeaway: The Gorobets dissent could gain traction if the Supreme Court reviews the matter, possibly leading to a compromise standard. Until then, it is persuasive but non-binding language in the Second District. |
Practical Implications and Geographic Divide
The discrepancy between Zavala and Gorobets effectively splits California into a “flexible” region (Fourth District) and a “strict” region (Second District). Parties litigating in San Diego or Riverside may combine a straightforward lump-sum with a secondary formula-based proposal, secure in the knowledge that at least one valid offer might remain enforceable. In Los Angeles or Ventura, however, that same strategy risks forfeiting cost-shifting entirely.
Circuit-Specific Practice Tips: Fourth District (Zavala Territory): Second District (Gorobets Territory): |
Looking Ahead: Potential Supreme Court Review
Many expect the California Supreme Court to address the conflict between Zavala and Gorobets. This high-stakes scenario could yield a bright-line rule barring simultaneous offers or a more nuanced approach that aligns with Zavala. Practitioners across the state are watching for an official announcement, though a final resolution may still be months or even years away. For further discussion of how the courts have extended 998’s reach in settlement scenarios, including the Third District’s take in Madrigal v. Hyundai Motor America, click here.
Conclusion: Charting a Safe Course
For now, CCP 998 strategy in California depends heavily on venue. Every district agrees that an offer must be concrete, quantifiable, and made in good faith – however, the impact of multiple offers on the determined “clarity” of the offer varies. In the Fourth District, Zavala provides room to serve multiple offers so long as at least one option offered is a clear lump sum. In the Second District, Gorobets effectively warns counsel to avoid presenting more than one offer at once.
Ultimately, until the California Supreme Court steps in, clarity rules. The best insurance against an invalid 998 offer is to keep it simple, well-documented, and straightforward. If multiple settlement options are truly necessary, then one must carefully weigh the risk, draft each offer in a separate instrument (especially in Los Angeles County), and confirm each stands on its own without cross-conditional language. Doing so can preserve vital cost-shifting leverage and keep your settlement strategy nimble, even in this ever-evolving legal landscape.
For more information, or specific guidance, please contact Robert Kubler.