What happens if I turn down a settlement offer (a 998 offer) in California?

A "998 offer" is a formal written settlement offer made under Code of Civil Procedure section 998. It is one of the most important tools in California civil cases because it changes who pays costs at the end, and it often decides whether a case settles. This page explains the current version of the statute, last amended by Statutes 2024, chapter 444 (SB 577), effective January 1, 2025, and how it fits with the general cost rules. For an overview of how a case moves from complaint to trial, see our civil litigation page.

How does a 998 offer work, step by step?

1. The offer is written. Any party may serve a written offer to allow judgment to be taken (or an award entered, in an arbitration) on stated terms. Section 998(b) requires a statement of the offer with the terms and conditions of the judgment, and a provision that lets the other side accept by signing a statement that the offer is accepted.
2. It is served in time. The offer must be served not less than 10 days before trial, or before an arbitration under section 1281 or 1295. Trial counts as started at the plaintiff's opening statement or, if there is none, when the first witness is sworn or evidence is introduced (section 998(b)(3)).
3. The other side decides. If the offer is not accepted before trial or within 30 days after it is made, whichever comes first, it is deemed withdrawn and cannot be mentioned at trial (section 998(b)(2)).
4. Acceptance is in writing. An acceptance must be in writing and signed by the accepting party's lawyer, or by the party if unrepresented. The offer and proof of acceptance are filed, and the clerk or judge enters judgment (section 998(b), (b)(1)). The resulting judgment is deemed a compromise settlement (section 998(f)).
5. If it is rejected, the case goes on. Nothing is owed because of the rejection itself. The offer is set aside until the case ends.
6. After judgment, the comparison. The court compares the judgment with the rejected offer. In deciding whether the plaintiff did better, it excludes the plaintiff's postoffer costs (section 998(c)(2)(A)).
7. Costs are claimed. Under California Rules of Court, rule 3.1700, the prevailing party serves and files a memorandum of costs within 15 days after service of notice of entry of judgment or dismissal, or within 180 days after entry of judgment, whichever is first. A motion to strike or tax costs is due 15 days after service of the memorandum, with more time if it was served by mail or electronically.

What can a rejected 998 offer cost?

The consequences depend on who made the offer. Section 998 defines "plaintiff" to include a cross-complainant and "defendant" to include a cross-defendant (section 998(f)).

"Costs" are defined elsewhere. Section 1032(b) gives a prevailing party costs as a matter of right unless a statute says otherwise, and section 1033.5 lists what counts.

Under section 1033.5(c), allowable costs must be reasonably necessary to the litigation rather than merely convenient, must be reasonable in amount, and are allowable if incurred, whether or not paid.

What changes the answer?

Who made the offer

A defendant's rejected offer has the sharper effect: the plaintiff loses postoffer costs, pays the defendant's postoffer costs, and may be ordered to pay expert costs (section 998(c)(1)). A plaintiff's rejected offer lets the court order the defendant to pay the plaintiff's postoffer expert costs on top of the plaintiff's ordinary costs (section 998(d)). Either side can use the statute, so a plaintiff who is served with an offer can answer with one of their own.

What "more favorable" means

Section 998(c)(2)(A) tells the court to leave out postoffer costs when it decides whether the plaintiff beat the offer. Subdivision (c)(2)(B) adds that the Legislature meant to supersede a court decision that had treated attorney's fees awarded to the prevailing party as part of the judgment rather than as costs for this purpose. The comparison can be close, so the way an offer is worded, including how it handles costs and fees, matters.

Whether the contract or a statute awards attorney's fees

Section 1033.5(a)(10) treats attorney's fees authorized by contract, statute or law as costs, and section 1033.5(c)(5)(B) says fees awarded under Civil Code section 1717 are allowable costs. When a fee clause or fee statute is in play, the money riding on a 998 offer can be far larger than filing fees and deposition bills. Our page on recovering attorney fees in a California contract case explains how those clauses work. If you are drafting a contract now, see how to protect your business with strong contracts.

How large the case is

If a case filed as an unlimited civil case ends in a judgment that could have been rendered in a limited civil case, section 1033(a) leaves costs to the court's discretion. In a limited civil case where the plaintiff recovers less than the small claims limit, section 1033(b) can restrict or deny costs. If your dispute is small, compare small claims court and hiring a lawyer in Los Angeles County before filing.

Whether the case is in court or arbitration

Section 998 applies to arbitrations under section 1281 or 1295, but not to labor arbitrations under memoranda of understanding governed by the Ralph C. Dills Act (section 998(i)). It also does not apply to an offer made by a plaintiff in an eminent domain action, or to enforcement actions brought by the Attorney General, the Insurance Commissioner, a district attorney or a city attorney acting as a public prosecutor (section 998(g)). A separate rule, section 1141.21, shifts costs against a party who rejects a judicial arbitration award, asks for a new trial, and does not do better.

Timing

An offer served fewer than 10 days before trial does not meet section 998(b). An offer that sits unanswered for 30 days, or until trial starts, is withdrawn. Calendar both dates the day an offer arrives. If yours is an injury case, our page on how long a personal injury case takes in Los Angeles County walks through the stages before trial.

A worked example

For example, imagine a hypothetical contractor who sues a Glendale homeowner for $60,000 over a remodeling contract. The case is filed in the Los Angeles Superior Court; our page on what to expect at the Stanley Mosk Courthouse covers the downtown process. Six months before trial, the homeowner serves a 998 offer to allow judgment for $30,000. The contractor lets the 30 days pass, so the offer is withdrawn.

At trial, the contractor wins $25,000. Leaving out the contractor's postoffer costs, $25,000 is less than $30,000, so the contractor did not get a more favorable judgment. As an illustration of the arithmetic only: say the contractor had $2,000 in costs before the offer and the homeowner had $8,000 in allowable costs after it. Under section 998(c)(1), the contractor keeps the right to the $2,000 in preoffer costs as the party with a net monetary recovery, recovers none of its own postoffer costs, and owes the homeowner's $8,000, which section 998(e) deducts from the damages: $25,000 plus $2,000, minus $8,000, leaves $19,000. The court could also order the contractor to pay a reasonable sum toward the homeowner's postoffer expert costs.

The real numbers would depend on what the court finds allowable and reasonable, and on whether the contract has a fee clause. The point of the example is the decision the contractor faced during those 30 days, not a prediction about any case.

Common mistakes with 998 offers

• Letting the 30 days slip by. Silence is a rejection. If you need more information to decide, raise it right away, because the clock does not wait.
• Accepting informally. An acceptance must be written and signed by counsel, or by the party if unrepresented. A phone call or a casual reply may not be enough.
• Comparing the offer to the wrong number. The court excludes postoffer costs when it decides whether the plaintiff did better, so do not add them to the verdict when you run the comparison.
• Making a vague offer. The offer must state the terms and conditions of the judgment and include a way to accept by signing. Unclear terms invite a fight over whether the offer counts.
• Serving it too late. Fewer than 10 days before trial or arbitration does not satisfy the statute.
• Forgetting the cost deadline. Under rule 3.1700, the memorandum of costs has a short deadline after notice of entry of judgment. Missing it can forfeit costs the offer was meant to secure.

What to do this week

1. Write down the date the offer was served and how (mail, personal delivery or electronic service), and count 30 days.
2. Check the trial date and confirm the offer arrived at least 10 days before it.
3. List the costs each side has spent so far and expects to spend through trial, including expert witnesses.
4. Read your contract for an attorney fee clause, and check the filing deadline issues on our page about deadlines to sue for breach of contract or property damage if any claim has not been filed yet.
5. Ask your lawyer for a realistic range of outcomes at trial, and compare its low end, after costs, with the offer.
6. Decide whether to accept, reject or answer with your own 998 offer, and do it in writing before the deadline.

Frequently asked questions

Can a plaintiff make a 998 offer?

Yes. Section 998(b) lets any party serve one. If a defendant rejects a plaintiff's offer and then fails to get a more favorable result, the court may order the defendant to pay the plaintiff's postoffer expert witness costs in addition to ordinary costs (section 998(d)).

Will the judge or jury know about the offer?

No. Section 998(b)(2) says an offer that is not accepted is deemed withdrawn and cannot be given in evidence at the trial or arbitration. It matters only after the result is in.

What if I was sued and the offer came with the complaint?

The offer runs on its own 30-day clock, separate from your deadline to respond to the complaint. Our page on how long you have to respond to a lawsuit in California covers the response deadline, which you should handle first.

Does a 998 offer shift attorney fees?

Section 998 shifts "costs," and section 1033.5(a)(10) counts attorney's fees as costs when a contract, statute or law authorizes them. Whether postoffer fees move in a particular case depends on that underlying fee right, so have a lawyer review the fee clause or statute before you rely on it. For workplace cases, see who pays the lawyer in a California employment case.

Can I still settle after rejecting a 998 offer?

Yes. Rejecting a 998 offer ends that offer, not the chance to settle. Parties can keep talking, and section 998(b) lets any party serve a written offer up to 10 days before trial or arbitration.

How long do I have to claim costs after winning?

Rule 3.1700 requires the memorandum of costs within 15 days after service of notice of entry of judgment or dismissal, or within 180 days after entry of judgment, whichever is first. The other side then has 15 days to move to strike or tax costs.

How can Glendale Law help?

We help clients in Glendale and across Los Angeles County decide whether to accept, reject or answer a 998 offer, and we draft offers that meet the statute. Our article on what to expect in the civil litigation process shows where settlement offers fit in a case. Call (818) 244-9000 or request a consultation, ideally before the 30 days run.