California Supreme Court Upholds Alternative-Term Section 998 Settlement Offers
In-house counsel overseeing California state court civil litigation must update settlement and cost-shifting risk protocols, after the state Supreme Court ruled alternative-term Section 998 offers are valid if at least one option is sufficiently certain.
The California Supreme Court resolved a split in state appellate precedent by holding that Code of Civil Procedure section 998 settlement offers may include mutually exclusive alternative sets of terms, provided the offer clearly lays out the available options and at least one alternative is sufficiently certain to permit accurate valuation at the time the offer is made. The ruling reinforces section 998’s core policy of encouraging early settlement by giving offerors greater flexibility to craft tailored, case-specific offers. Defendants may now pair complex, hard-to-value settlement terms with a clear, easily valued lump-sum alternative, while offerees must evaluate all valid alternatives against their expected trial recovery to avoid adverse cost-shifting if they reject a more favorable offer.