By Mark G. Cunningham

            The other day I was talking with a defense lawyer who had just finished a jury trial. He was proud to say that the verdict was considerably less than the statutory offer he had served on plaintiff about a year ago. When he added up his ordinary and expert costs he was excited at the prospect of wiping out the verdict and maybe even getting a judgment against the plaintiff. I hated to burst his bubble, but I told him not to get too excited. Just because a 998 offer is served does not mean a judge will automatically enforce it.
            Code of Civil Procedure, § 998 (c)(1) provides that “If an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, the plaintiff shall not recover his or her postoffer costs and shall pay the defendant's costs from the time of the offer. In addition, in any action or proceeding other than an eminent domain action, the court or arbitrator, in its discretion, may require the plaintiff to pay a reasonable sum to cover costs of the services of expert witnesses, who are not regular employees of any party, actually incurred and reasonably necessary in either, or both, preparation for trial or arbitration, or during trial or arbitration, of the case by the defendant.”
            The purpose of subd. (c), which provides a trial court with the discretion to require a plaintiff to pay the defendant's costs incurred after the plaintiff refuses to accept a settlement offer and fails to obtain a more favorable judgment, is to encourage the settlement of litigation without trial. The statute's effect is to punish the plaintiff who fails to accept a reasonable offer from a defendant. See, Culbertson v. R.D. Werner Co., (1987), 190 C.A. 3d. 704.
            Section 998 offers are subject to a good faith requirement. See, Elrod v. Oregon Cummins Diesel, Inc. (1987) 195 C.A. 3d 692, 698.
            A judgment that is more favorable than the offer is prima facie evidence that the offer was reasonable. The burden is on the offeree to prove unreasonableness. See, Santantonio v. Westinghouse Broadcasting Co., (1994) 25 C.A. 4th 102, 117.
            The reasonableness of a settlement offer is evaluated in light of the circumstances existing at the time the offer is made and is left to the discretion of the trial court. Elrod at 699-700.
            Two objective tests must be satisfied to determine whether a defendant's offer is reasonable. The first test is premised on information that was known or reasonably should have been known by the defendant. The court evaluates whether, based on such information, the defendant's offer represents a reasonable prediction of the amount of money, if any, defendant would have to pay plaintiff following a trial. The second test is premised on information known, or that should have been known, by the plaintiff. Elrod at 699.
            I advised my friend that there are several California decisions that discuss and apply Elrod to a variety of factual situations. He best review those decisions and be prepared to argue to the trial court why his offer was reasonable when it was made. Although he was confident the offer was reasonable, he left my company a bit more sober with the realization that in the end, enforcement of a statutory offer is left to the sound discretion of the trial court, and therefore, one should never get too excited that an offer will be enforced.