A California Court of Appeal recently decided that California Code of Civil Procedure section 998’s (CCP 998) cost-shifting provisions apply when an offer to compromise is rejected and the case ends in settlement rather than in a judgment after trial. The case is Madrigal v. Hyundai Motor America, No. C090463, 2023 WL 2883009, *10-11 (Cal. Ct. App. Apr. 11, 2023). In a split decision, the Madrigal Court held that, because the settlement provided for a payment to the plaintiff that was less than the amount of the defendant’s CCP 998 offers to compromise, and because the settlement agreement did not identify plaintiff as the prevailing party or provide that each party was responsible for its own attorney’s fees and costs, the defendant was the prevailing party and was entitled to recover its costs pursuant to CCP 998. Madrigal is a reminder to litigants and counsel to be careful when a CCP 998 offer to compromise has been made, including when negotiating settlement agreements after a CCP 998 offer has expired or been rejected.
