Filed 2/27/24

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION EIGHT

JACOB AYERS,

Plaintiff and Respondent,

v.

FCA US, LLC,

Defendant and Appellant.

B315884

Los Angeles County 

Super. Ct. No. BC623368

APPEAL from a judgment of the Superior Court of Los 

Angeles County. Teresa A. Beaudet, Judge. Reversed and 

remanded with directions.

Horvitz & Levy, Lisa Perrochet, John A. Taylor, Jr., Curt 

Cutting; Hawkins Parnell & Young, Barry R. Schirm and Mari 

Kiridjian for Defendant and Appellant.

Knight Law Group, Steve Mikhov, Roger Kirnos; Wirtz 

Law, Richard M. Wirtz; Greines, Martin, Stein & Richard, 

Joseph V. Bui and Cynthia E. Tobisman for Plaintiff and 

Respondent.

___________________________
2

This is an appeal of a costs judgment in favor of plaintiff 

Jacob Ayers entered after he and defendant FCA US, LLC (FCA)

settled “lemon law” causes of action he asserted under the 

Song-Beverly Consumer Warranty Act (Song-Beverly), Civil Code 

section 1790 et seq.

We conclude Code of Civil Procedure1 section 998 operates 

in this case to cut off plaintiff’s right to attorney fees incurred 

after February 16, 2018, the date FCA made a valid and good 

faith offer to compromise the action.

Accordingly, we reverse and remand for entry of a modified 

judgment in accordance with this opinion.

BACKGROUND

FCA manufactures and sells motor vehicles, including 

Jeeps. Plaintiff purchased a new Jeep Grand Cherokee in March 

2013. The total sale price of the vehicle was $57,300.

Plaintiff experienced numerous problems with the Jeep 

during his first three years of ownership. Frustrated, he asked 

FCA to repurchase it in November 2015. FCA refused. Plaintiff 

retained counsel. 

In March 2016, after plaintiff opted out of a class action 

settlement pertaining to vehicles like his, FCA made a written 

offer to repurchase plaintiff’s Jeep. His counsel contacted FCA to 

discuss settlement but no settlement was reached. Plaintiff then 

sued. 

Plaintiff’s complaint included causes of action against FCA 

for violations of Song-Beverly and fraudulent inducement. 

Remedies under Song-Beverly include restitution equal to the 

price paid for the vehicle as well as discretionary civil penalties 

1 Undesignated statutory references are to the Code of Civil 

Procedure. 
3

in an amount up to double a buyer’s actual damages (i.e., 

potentially three times the price paid). (Civ. Code, § 1794, 

subds. (b), (c), § 1793.2, subd. (d).)

In July 2016, about a month after plaintiff filed his 

complaint, FCA served plaintiff with an offer to compromise 

pursuant to section 998. As discussed in greater detail below, a 

plaintiff who rejects a reasonable offer of settlement made 

pursuant to section 998 and then fails to obtain a more favorable 

judgment is subject to certain burdens under the statute. Among 

these is that the plaintiff cannot recover from the defendant 

postoffer costs to which the plaintiff might otherwise have been

entitled, and the plaintiff may become liable for certain postoffer 

costs of the defendant. (See § 998, subd. (c)(1).) FCA’s July 2016 

offer was to buy back plaintiff’s Jeep for $61,000 and pay his 

reasonable costs and attorney fees pursuant to Civil Code 

section 1794, subdivision (d) (Song-Beverly’s fee-shifting 

provision) in exchange for dismissal of the lawsuit with prejudice. 

Plaintiff did not accept the offer and continued to litigate.

About a year later, in August 2017, FCA served a second 

section 998 offer with the same terms as the first, except FCA 

proposed to pay plaintiff $122,000. Again, plaintiff did not accept 

the offer and continued to litigate.

In February 2018, FCA served a third section 998 offer 

with the same terms as the first two, except FCA again increased 

the amount it would pay plaintiff—this time to $143,498. Again, 

plaintiff did not accept the offer and continued to litigate.

In August 2019, plaintiff made a section 998 offer of his 

own, seeking payment of $163,409 in exchange for the Jeep. 

After FCA rejected this offer. Plaintiff renewed it less than eight 

weeks later and FCA rejected it again.
4

In January 2020, after driving the Jeep for seven years, 

plaintiff traded it in for a new vehicle. Plaintiff received a credit 

of $13,000 for the Jeep in the trade. 

Several months later, plaintiff’s trade-in took on new

significance. In October 2020, Division One of this court held, as 

a matter of first impression, that Song-Beverly’s restitution

remedy “does not include amounts a plaintiff has already 

recovered by trading in the vehicle at issue” and excluded such 

amounts from the calculation of Song-Beverly penalties. 

(Niedermeier v. FCA US LLC (2020) 56 Cal.App.5th 1052, 1061, 

review granted Feb. 10, 2021, S266034.) Thus, in the wake of 

Niedermeier, a Song-Beverly plaintiff’s maximum possible 

recovery was reduced by three times the amount of a trade-in.2 

Plaintiff’s maximum potential recovery here was thus reduced by 

$39,000.

In January 2021, a few months after Niedermeier issued, 

plaintiff served FCA with another section 998 offer, this one for 

$125,000 plus costs, expenses and attorney fees pursuant to Civil 

Code section 1794, subdivision (d) as agreed by the parties or 

determined by the trial court in lieu of agreement. Like FCA’s 

section 998 offers, it provided for dismissal of the lawsuit with 

prejudice. Unlike FCA’s section 998 offers, it specified the timing 

of payment and gave plaintiff certain rights in the event of 

default. FCA accepted the offer. 

2 Two Court of Appeal decisions have since rejected 

Niedermeier (Figueroa v. FCA US, LLC (2022) 84 Cal.App.5th 

708, 714; Williams v. FCA US LLC (2023) 88 Cal.App.5th 765, 

772), leaving to a trial court’s discretion how to account for the 

effect of a vehicle trade-in when calculating restitution and

penalties under Song-Beverly. (Auto Equity Sales, Inc. v. 

Superior Court (1962) 57 Cal.2d 450, 456.)
5

The parties failed to agree on the amount of Civil Code 

section 1794, subdivision (d) costs, expenses and attorney fees 

payable to plaintiff. Accordingly, plaintiff filed a motion to 

determine these amounts, requesting $220,852.50 in attorney 

fees and $40,512.75 in costs, for a total of $261,365.25. FCA 

opposed the motion on numerous grounds. As relevant here, FCA 

argued its February 2018 section 998 offer precluded plaintiff 

from recovering $74,527.50 in fees incurred after the date of that 

offer. Relatedly, and again in reliance on section 998, FCA 

separately moved to tax plaintiff’s costs incurred after FCA 

served its February 2018 offer.

By a written order dated July 26, 2021, the trial court 

rejected FCA’s section 998 arguments on two independent 

grounds, despite finding that “[p]laintiff could have received a 

larger settlement award if he had accepted the earlier settlement 

instead of waiting to propose a later, smaller award after a Court 

of Appeals’ decision affected the calculus.” First, it held that 

section 998’s limitations on expense and cost recovery do not 

apply when the case is resolved by a pretrial settlement. Second, 

it held an intervening change in law that reduced the maximum 

amount plaintiff could recover at trial exempted him from the 

usual consequences of section 998. The trial court cited no 

authority for these holdings. 

On January 31, 2022, the trial court entered a judgment in 

favor of plaintiff for attorney fees and costs totaling $187,747.75

($73,617.50 less than plaintiff requested). The reduction had 

nothing to do with FCA’s section 998 arguments.

FCA timely appealed the trial court’s July 26, 2021 order 

granting plaintiff’s motion for attorney fees and costs and 

denying in part FCA’s motion to tax. We treat FCA’s notice of 
6

appeal, filed September 24, 2021, as a timely appeal of the 

January 31, 2022 costs judgment entered on the order appealed. 

(See Cal. Rules of Court, rule 8.104(d).)

DISCUSSION

1. Section 998 and Standard of Review

Section 998 provides, in relevant part, that “the costs 

allowed under Sections 1031 and 1032 shall be withheld or 

augmented” as follows: “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, . . . the court or arbitrator, in its 

discretion, may require the plaintiff to pay a reasonable sum to 

cover postoffer 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.” (§ 998, subds. (a), (c)(1).)

To trigger the operation of section 998, an offer must be 

valid and made in good faith. An offer is valid if it (i) complies 

with the statutory requirements that it be in writing, contain the 

terms of the offer, include a mechanism for acceptance, and 

provide for entry of judgment or a legal equivalent if accepted

(Perez v. Torres (2012) 206 Cal.App.4th 418, 425 (Perez); see also

§ 998, subd. (a)); and (ii) is “sufficiently specific to allow the

recipient to evaluate the worth of the offer and make a reasoned

decision whether to accept the offer” (Fassberg Construction Co.

v. Housing Authority of City of Los Angeles (2007)

152 Cal.App.4th 720, 764 (Fassberg)). An offer is made in good

faith if it “is ‘ “ realistically reasonable under the circumstances 
7

of the particular case” ’ [citation]—that is, if the offer ‘ “carr[ies] 

with it some reasonable prospect of acceptance” ’.” (Licudine v.

Cedars-Sinai Medical Center (2019) 30 Cal.App.5th 918, 924

(Licudine).)

We review questions of statutory interpretation de novo. 

(Curtis Engineering Corp. v. Superior Court (2017) 

16 Cal.App.5th 542, 546.) When interpreting a statute, we must 

“ ‘ “ ‘ “determine the Legislature’s intent so as to effectuate the 

law’s purpose.” ’ ” ’ ” (Los Angeles Unified School Dist. v. Superior 

Court (2023) 14 Cal.5th 758, 768.) To accomplish this, we must 

“ ‘ “ ‘ “first examine the statutory language, giving it a plain and 

commonsense meaning. We do not examine that language in 

isolation, but in the context of the statutory framework as a 

whole in order to determine its scope and purpose and to 

harmonize the various parts of the enactment. If the language is 

clear, courts must generally follow its plain meaning unless a 

literal interpretation would result in absurd consequences the 

Legislature did not intend. If the statutory language permits 

more than one reasonable interpretation, courts may consider 

other aids, such as the statute’s purpose, legislative history, and 

public policy.” [Citation.] “Furthermore, we consider portions of 

a statute in the context of the entire statute and the statutory 

scheme of which it is a part, giving significance to every word, 

phrase, sentence, and part of an act in pursuance of the 

legislative purpose.” ’ ” ’ ” (Ibid.)

While the question of whether a plaintiff obtained a more

favorable result is ordinarily left to the trial court’s discretion

(Linthicum v. Butterfield (2009) 175 Cal.App.4th 259, 270), where

the question turns on our statutory construction and the
8

application of that construction to undisputed facts, our review is

independent (Lee v. Silveira (2015) 236 Cal.App.4th 1208, 1214).

2. Section 998 Applies to Awards Pursuant to Civil 

Code Section 1794, Subdivision (d) Attorney Fee and 

Cost Awards

Plaintiff argues that attorney fee and cost awards in favor 

of buyers under Civil Code section 1794, subdivision (d) 

(Song-Beverly’s fee-shifting provision) are entirely exempt from 

section 998. We disagree.

Section 998 applies to all “costs allowed under 

Sections 1031 and 1032.” (§ 998, subd. (a).) Only section 1032 is 

relevant here. Section 1032, subdivision (b) entitles a prevailing 

party, as defined in subdivision (a)(4), “to recover costs in any 

action or proceeding,” unless “otherwise expressly provided by 

statute.” For purposes of section 1032, costs include attorney fees 

authorized by contract, statute, or law. (§ 1033.5, subd. (a)(10).)

Relying on Murillo v. Fleetwood Enterprises, Inc. (1998) 

17 Cal.4th 985, 992, superseded by statute as stated in Toste v. 

CalPortland Construction (2016) 245 Cal.App.4th 362, 375, 

plaintiff contends that a buyer’s right to recover costs under 

Song-Beverly is wholly independent of section 998, and 

section 998 therefore does not apply. Murillo concerned the 

prevailing sellers’ right to costs under sections 998, 

subdivision (c) and 1032, subdivision (b). (Murillo, at p. 988.) In 

rejecting the buyer’s argument that Song-Beverly’s cost-shifting 

provision Civil Code section 1794, subdivision (d) was the 

exclusive cost-shifting provision applicable to Song-Beverly

actions, the court explained as follows: “On the one hand, if a 

buyer should prevail in an action under [Song-Beverly], he or she 

is entitled to costs, expenses, and attorney fees as set forth in 
9

Civil Code section 1794(d). On the other hand, if a seller should 

prevail in an action brought under [Song-Beverly], it is entitled to 

costs under section 1032(b).” (Murillo, at p. 992.) Murillo did not 

hold, and does not support plaintiff’s contention, that section 998 

does not apply to lemon law cases. 

The year after Murillo was decided, our Supreme Court 

made clear that section 998 applies to cost awards that are

independent of section 1032—i.e., where the right to recovery is 

merely incorporated by reference through the definitions in 

section 1033.5. Scott Co. v. Blount, Inc. (1999) 20 Cal.4th 1103 

(Scott) concerned apportionment of costs after the plaintiff 

rejected the defendant’s section 998 offer and obtained a less 

favorable judgment at trial. (Scott, at p. 1106.) The primary 

costs at issue were attorney fees. The action involved a contract 

that contained an attorney fee provision only for enforcement 

actions taken by the defendant. Only by operation of Civil Code 

section 1717 did the plaintiff have any claim to attorney fees. 

(See Scott, at p. 1106 [explaining § 1717 makes any contractual 

attorney fees provision mutual, “even if it is written otherwise”].) 

The Scott court recognized section 998 applied both to the 

defendant’s contractual right to attorney fees and the plaintiff’s 

statutory right to the same. By operation of section 998, the 

plaintiff was entitled to recover costs up until the date of the offer

(Scott, at p. 1112), and the defendant was entitled to recover costs 

incurred after the offer (id. at p. 1113). Even though the 

defendant was not the prevailing party as defined in 

section 1032, the court explained, it was “treated for purposes of 

postoffer costs as if it were the prevailing party.” (Scott, at 

p. 1114.)
10

Under the circumstances of Scott, the cost entitlements 

were symmetrical because this is what the substantive statutory 

and contractual rights to those costs commanded. (Scott, supra, 

20 Cal.4th at pp. 1113-1114.) But the Scott court recognized its 

holding would apply to asymmetrical cost entitlements in 

situations where the Legislature has “made a policy decision to 

treat prevailing plaintiffs and prevailing defendants differently 

for purposes of attorney fees and other costs.” (Id. at p. 1115,

fn. 3.) In such instances, “[s]ection 998 takes these differences as 

it finds them . . . . Thus, if the case is governed by a statute 

under which a prevailing plaintiff but not a prevailing defendant 

is entitled to attorney fees, then a defendant who does not prevail 

but is nonetheless entitled to its postoffer costs under section 998 

is not entitled to its postoffer attorney fees as part of these costs,

even though the prevailing plaintiff may obtain its preoffer 

attorney fees as part of its preoffer costs.” (Ibid., italics added.) 

It cited Murillo—again, a Song-Beverly case—as its sole 

illustration of section 998 applying to a statutory scheme 

involving asymmetrical cost entitlements. (Scott, at p. 1115.) 

While dicta, Scott’s discussion of how section 998 would 

apply under the exact procedural posture of this case is highly 

persuasive. (Candelore v. Tinder, Inc. (2018) 19 Cal.App.5th 

1138, 1149 [“the dictum of the Supreme Court, ‘while not 

controlling authority, carries persuasive weight and should be 

followed where it demonstrates a thorough analysis of the issue 

or reflects compelling logic.’ ”].)

Several years after Scott, in a Song-Beverly action where 

the plaintiff failed to obtain a judgment more favorable than the 

defendant’s section 998 offer, the court in Duale v. Mercedes-Benz 

USA, LLC (2007) 148 Cal.App.4th 718 (Duale) applied
11

section 998 just as Scott presaged: It allowed the plaintiffs their 

preoffer attorney fees as part of their preoffer costs because they 

were allowed under Civil Code section 1794, subdivision (d) and 

within the ambit of section 1032, subdivision (b); and it allowed 

the defendant its postoffer costs under section 1032, 

subdivision (b), which did not include attorney fees because no 

statute provided for them. (Duale, at pp. 724, 726.) It denied the 

plaintiffs their postoffer costs, including those provided under 

Civil Code section 1794, subdivision (d). (Duale, at p. 726.)

In the decade and a half since Duale was decided, the 

Legislature amended section 998 (see Stats. 2015, ch. 345, § 2) 

but did nothing to supersede Duale’s holding. Moreover, no 

published appellate decision has parted ways with Duale, and 

those that have cited Duale have done so favorably. (See 

Madrigal v. Hyundai Motor America (2023) 90 Cal.App.5th 385,

397, fn. 8 (Madrigal) [following Duale], review granted Aug. 30,

2023, S280598; Smalley v. Subaru of America, Inc. (2022) 87

Cal.App.5th 450, 460-461 [same]; Covert v. FCA USA, LLC (2022)

73 Cal.App.5th 821, 836 [same] (Covert).) “[W]here the

Legislature amends a statute without altering a consistent and

long-standing judicial interpretation of its operative language,

courts generally indulge in a presumption that the Legislature

has ratified that interpretation.” (People v. Escobar (1992)

3 Cal.4th 740, 750-751.)

Plaintiff calls our attention to In re Marriage of Green

(1989) 213 Cal.App.3d 14, and Arave v. Merrill Lynch, Pierce,

Fenner & Smith, Inc. (2018) 19 Cal.App.5th 525, 553, which

exempted particular proceedings and claims (in family law and

under the Fair Employment and Housing Act (FEHA; Gov. Code,

§ 12900 et seq.), respectively) from the operation of section 998
12

because of specialized cost provisions governing those

proceedings and claims. (Marriage of Green, at p. 24 [discussing

family law statutes making need and ability to pay relevant to

cost shifting and authorizing cost shifting as a sanction]; Arave,

at p. 552 [certain cost shifting under FEHA limited to frivolous

claims].) These are not Song-Beverly cases, and the provisions

prompting the judicial exemptions in Marriage of Green and

Arave and do not exist in Song-Beverly.

Plaintiff argues Song-Beverly’s specific cost provisions in

Civil Code section 1794, subdivision (d) nonetheless require a

similar exemption. We are not persuaded. We view the

provisions of section 1794, subdivision (d) as the prototypical

“policy decision to treat prevailing plaintiffs and prevailing 

defendants differently for purposes of attorney fees and other 

costs” which “[s]ection 998 takes . . . as it finds them.” (Scott, 

supra, 20 Cal.4th at p. 1115, fn. 3.) We further note that the 

Legislature promptly amended Government Code section 12965, 

subdivision (b) to adopt the section 998 exemption announced in 

Arave (see Stats. 2018, ch. 955, § 5), rendering legislative inaction 

in response to Duale all the more meaningful.

Like our sister courts and the Legislature, we will not

depart from Duale. And in response to plaintiff’s policy

arguments, we specifically adopt Duale’s conclusion that

section 998, subdivision (c) and Civil Code section 1794,

subdivision (d) can operate in harmony to effectuate their

respective legislative purposes: Song-Beverly “allows prevailing 

injured car buyers to recover attorney fees and costs in order to 

render such lawsuits ‘economically feasible’ [citation]; but 

declining to award such a buyer postoffer attorney fees and costs 

if he has refused a reasonable pretrial settlement offer does not 
13

defeat that purpose. An injured plaintiff may be encouraged to 

sue by the prospect of recovering his costs if successful, but no 

articulated public policy is served by allowing him to maintain a 

lawsuit that loses its economic viability by virtue of the seller’s 

willingness to settle on terms better than those a jury will 

award.” (Duale, supra, 148 Cal.App.4th at p. 728.)

3. Section 998 Applies Even Where the Litigation Is 

Terminated by Settlement

Having concluded section 998 applies in Song-Beverly 

actions, we next consider whether it applies where the litigation 

is terminated by settlement. We agree with the majority in 

Madrigal, supra, 90 Cal.App.5th 385, review granted, that it 

does.3

3 Plaintiff asks that we take judicial notice of (a) the

Supreme Court’s order granting review of Madrigal; and (b) a 

litany of documents filed in support of and in opposition to such 

review. As to the former, we are obliged to know whether 

authority we rely upon is under review by the Supreme Court. 

(See Cal. Rules of Court, rule 8.1115(e).) Judicial notice of 

Madrigal’s review status is therefore unnecessary. We 

nevertheless grant plaintiff’s request because it concerns a state 

record offered as evidence of its legal effect. (Evid. Code, § 452, 

subd. (d); Linda Vista Village San Diego Homeowners Assn., Inc. 

v. Tecolote Investors, LLC (2015) 234 Cal.App.4th 166, 185 

[“[W]hen courts take judicial notice of the existence of court 

documents, the legal effect of the results reached in orders and 

judgments may be established.”].) 

As to the documents filed in support of and in opposition to 

review, plaintiff’s request is denied. Plaintiff offers these 

documents for the legal arguments and hearsay assertions 

contained therein. Regarding the arguments in the Madrigal

papers, plaintiff had a full opportunity to present his arguments 
14

a. Nothing in the text of section 998 excludes 

cases that end in settlement

By its terms, section 998 cuts off the plaintiff’s right to 

recover costs incurred after the date of a section 998 offer where 

(i) “an offer made by a defendant is not accepted”; and (ii) “the 

plaintiff fails to obtain a more favorable judgment or award.” 

(Id., subd. (c); see also Mon Chong Loong Trading Corp. v. 

Superior Court (2013) 218 Cal.App.4th 87, 94 (Mon Chong) [“By 

its plain language, it requires that the plaintiff who refused the 

reasonable settlement offer obtain a more favorable judgment or 

award in order to avoid [cost withholding or augmentation under 

section 998].”].)

The Madrigal majority explained that a defendant’s valid 

section 998 offer imposes “a burden on the plaintiff” who rejects 

it—“the obligation to obtain a judgment more favorable than the 

unaccepted offer.” (Madrigal, supra, 90 Cal.App.5th at p. 398, 

review granted.) Whether the plaintiff met this burden is 

in this court. That similar arguments were made in another 

proceeding is not relevant to the disposition of this appeal. (See 

People v. McKinzie (2012) 54 Cal.4th 1302, 1326 [court will only 

take judicial notice of relevant matter], overruled in part by 

People v. Scott (2015) 61 Cal.4th 363, 391; cf. People v. 

Lamoureux (2020) 57 Cal.App.5th 136, 144, fn. 5 [denying judicial 

notice of appellate briefing in appeal addressing related legal 

issue].) Regarding purported evidence contained in the Madrigal 

papers, while we are permitted to take judicial notice of the 

existence of court documents, we cannot accept as true factual 

contentions contained therein. (Sosinsky v. Grant (1992)

6 Cal.App.4th 1548, 1566 [“ ‘[A] court cannot take judicial notice 

of hearsay allegations as being true, just because they are part of 

a court record or file.’ ”].)
15

assessed upon the termination of the litigation. (Mon Chong, 

supra, 218 Cal.App.4th at p. 93.)

Here, the litigation terminated by settlement, and the trial 

court declined to apply section 998 for that reason. Even though 

section 998 contains no express settlement exception, plaintiff 

contends the trial court was correct because section 998 does not 

apply to settlements “by its plain terms.” We disagree.

Plaintiff’s textual analysis relies on language in the 

operative subdivision (c)(1)4 of section 998, as well as language in 

subdivisions (d) and (e). We address these in turn.

i. Section 998, subdivision (c)(1)

Section 998, subdivision (c)(1), provides that a plaintiff who 

rejects a reasonable offer of settlement and then fails to obtain a 

more favorable judgment is subject to certain burdens under the 

statute. (Ibid.) Plaintiff here argues that a plaintiff who settles 

postoffer does not “fail[] to obtain a more favorable judgment or 

award” for two reasons. First, he contends the act of settling 

“subsumes and extinguishes th[e] 998 offer” under the contract 

law doctrine of merger. Second, adopting the Madrigal 

concurring and dissenting opinion’s understanding of the word 

“fail,” he argues settlement cannot be a “failure” because it is “not 

defeat, loss, abandonment, or involuntarily falling short. It’s a 

compromise, without winners or losers.” 

4 In his respondent brief, plaintiff cites section 998, 

subdivision (d) for language that also appears in 

subdivision (c)(1), but subdivision (d) does not, as plaintiff 

describes it, “penalize[] plaintiffs.” Rather, it penalizes 

defendants. (§ 998, subd. (d).) Thus, we read plaintiff’s citation 

to subdivision (d) as an intended reference to subdivision (c)(1), 

which does penalize plaintiffs.
16

Plaintiff’s contract law argument fails because the doctrine 

of merger does not apply here. The doctrine of merger in contract 

law affects the interpretation and enforcement of contracts by 

providing that a written agreement supersedes prior discussions, 

negotiations, and agreements. (See generally Bradford v.

Southern California Petroleum Corp. (1944) 62 Cal.App.2d 450,

461 [“As a general rule, all prior negotiations and stipulations 

concerning the subject matter of a contract are considered 

merged therein when the contract is executed.”].) This case does

not present any dispute about the interpretation or enforceability

of FCA’s February 2018 section 998 offer. To the extent it was

not rejected, it expired 30 days after it was made under

section 998, subdivision (b)(2). FCA does not seek to enforce

contract rights under the February 2018 offer. The rights FCA

now seeks to enforce are those arising under section 998 as a

consequence of FCA making, and plaintiff not accepting, the offer. 

As to whether voluntary settlement can be a “ ‘fail[ure] to

obtain a more favorable judgment,’ ” we agree with the Madrigal

majority the answer is yes, and that there is no ambiguity in the

term “ ‘fail[ure].’ ” (Madrigal, supra, 90 Cal.App.5th at p. 407,

review granted.) “The phrase ‘fail[ure] to obtain a more favorable

judgment’ means what it says—the plaintiff fails to, or does not,

meet its obligation at the conclusion of the lawsuit to obtain a

judgment more favorable than the amount stated in the offer to

compromise.” (Ibid.)

Here, when plaintiff declined FCA’s February 2018 offer, he 

did so because he viewed it as “insufficient in amount.” Put 

another way, he was holding out for more. Setting aside the 

claimed value in other aspects of the settlement relative to FCA’s 

February 2018 offer, discussed at part 5.c., post, he did not get 
17

more. This is a failure under any common understanding of the 

word “fail.”

ii. Section 998, subdivisions (e) and (f)

Section 998, subdivision (e) provides, in relevant part: “If 

an offer made by a defendant is not accepted and the plaintiff 

fails to obtain a more favorable judgment or award, the costs 

under [section 998], from the time of the offer, shall be deducted 

from any damages awarded in favor of the plaintiff.”

Plaintiff argues the word “damages” in subdivision (e)

excludes from section 998’s coverage cases that end in settlement 

because a plaintiff who settles receives no damages award. In 

support, he points to subdivision (f) deeming “[a]ny judgment or 

award [entered pursuant to section 998] a compromise 

settlement,” as opposed to an adjudication, and contends only 

adjudicated judgments, and not judgments entered by settlement, 

can result in damages. 

Plaintiff’s reading of section 998, subdivision (e) misses a 

key point. Subdivision (e) says if a plaintiff fails to get a result 

more favorable than the defendant’s offer, then the defendant’s 

costs will be offset from “any damages awarded in favor of the 

plaintiff.” (§ 998, subd. (e).) The word “any” before “damages 

awarded” embraces the possibility that there will be no damages 

awarded. (See Colombrito v. Kelly (2d Cir. 1985) 764 F.2d 122, 

129 [phrase “ ‘any . . . fees awarded to the defendants’ ” embraced 

“possibility that no fee award might be made”]; Pardini v.

Allegheny Intermediate Unit (3d Cir. 2008) 524 F.3d 419, 425 [the

word “any” in order directing court to “ ‘determine . . . the amount

of any attorney[] fees’ ” expressed that an attorney fee award was

merely possible; not certain].) Section 998 may operate in the

absence of a damages award, as may be the case where a later
18

settlement terminates the litigation or, as was the case in Mon

Chong, the case ended in voluntary dismissal. (See Mon Chong,

supra, 218 Cal.App.4th at p. 93.)

We are not persuaded by plaintiff’s argument that the

“plain terms” of section 998 exclude cases that end in settlement. 

We think a plain reading of section 998, subdivision (c)(1)

compels the conclusion that it applies to any litigation that

terminates with the plaintiff getting less than he would have if

he had accepted the defendant’s earlier section 998 offer. 

(Madrigal, supra, 90 Cal.App.5th at p. 399, review granted [“By

its plain terms, section 998 does not exclude cases that end in

settlement, or limit its cost-shifting provisions to cases that end

in a judgment after trial . . . .”].)

Because we find no ambiguity in the relevant terms of

section 998, we will not resort to legislative history to divine a

different meaning. (Rider v. City of San Diego (1998) 18 Cal.4th

1035, 1053 [where statute is unambiguous, “the legislative

history . . . is irrelevant”].) We deny plaintiff’s motion for judicial

notice of legislative history materials on that basis. (See Hughes 

Electronics Corp. v. Citibank Delaware (2004) 120 Cal.App.4th 

251, 266, fn. 13 [“As a general matter, judicial notice is not taken 

of matters irrelevant to the dispositive points on appeal.”].) The 

legislative history plaintiff asks us to judicially notice is also 

irrelevant because it does not disclose any legislative intent to 

exclude settlements from section 998.

b. Applying section 998, subdivision (c)(1) to

litigation that terminates in settlement does

not yield absurd results

Where, as here, the plain terms of section 998 do not

exclude litigation that ends in settlement, we must apply the
19

statute as written unless doing so would yield absurd results. 

(See, e.g., Cassel v. Superior Court (2011) 51 Cal.4th 113, 119;

Metcalf v. County of San Joaquin (2008) 42 Cal.4th 1121, 1131.)

To determine whether a possible result is absurd, we must

consider the apparent purpose of the statute. (Cf. Coalition of

Concerned Communities, Inc. v. City of Los Angeles (2004) 34

Cal.4th 733, 737 [absurdities to be avoided are consequences not

intended by the Legislature].)

“[T]he policy behind section 998, subdivision (c) . . . is plain. 

It is to encourage settlement by providing a strong financial

disincentive to a party—whether it be a plaintiff or a defendant—

who fails to achieve a better result than that party could have

achieved by accepting his or her opponent’s settlement offer. 

(This is the stick. The carrot is that by awarding costs to the

putative settler the statute provides a financial incentive to make

reasonable settlement offers.)” (Bank of San Pedro v. Superior

Court (1992) 3 Cal.4th 797, 804 (Bank of San Pedro), superseded

by statute on another ground as stated in Quiles v. Parent (2017)

10 Cal.App.5th 130, 144.) By this carrot-and-stick approach, the

statute “encourage[s] both the making and the acceptance of

reasonable settlement offers.” (Scott, supra, 20 Cal.4th at

p. 1114.)

Though promoting settlements before trial is paramount

because of the “time delays and economic waste” trials entail

(Martinez v. Brownco Construction Co. (2013) 56 Cal.4th 1014,

1019 (Martinez)), “section 998’s purpose is also to encourage early

settlement” (id. at p. 1024, fn. 8, italics added). All phases of

litigation have costs. The earlier reasonable settlement offers are

made and accepted, the less the costs incurred.
20

Plaintiff offers a litany of policy concerns and supposed

unintended consequences of a plain reading of section 998,

subdivision (c)(1), but only one rises to the level of a truly absurd

result. According to plaintiff, applying section 998 to litigation

that ends in settlement would make settlement after an

unaccepted section 998 offer “all but impossible.” If that were

true, it would indeed be an absurd result, but we see things quite

differently.

We disagree with plaintiff’s suggestion that a plaintiff who

does not accept a section 998 offer must litigate his case to

conclusion in order to satisfy his burden of obtaining a “judgment

or award” more favorable than the settlement offer. “[T]he term

‘judgment’ in section 998 is meant to include its functional

equivalents, such as dismissal of a case with prejudice” or other

final determination of the parties’ rights. (Madrigal, supra, 90

Cal.App.5th at p. 400; see also id. at pp. 401-402, review

granted.) Thus, where a defendant’s section 998 offer goes

unaccepted and the litigation later concludes in a settlement, the

proper inquiry under section 998 is whether the final settlement

is more favorable than the earlier section 998 offer. (Madrigal, at

pp. 400-401.)

Although this rule was first definitively announced in

Madrigal, it is not so novel as plaintiff claims. The word

“judgment” in section 998 has long been interpreted far more

broadly than an adjudicated judgment or award. The court in

Goodstein v. Bank of San Pedro (1994) 27 Cal.App.4th 899

(Goodstein) recognized that “judgment” within the meaning of 

section 998, subdivision (b) embraced an offer proposing a 

voluntary dismissal with prejudice. (Goodstein, at p. 906.) It 

explained, “[t]he word ‘judgment’ in . . . section 998 indicates that 
21

the statute contemplates that an offer to compromise which is 

accepted will result in the final disposition of the underlying 

lawsuit; the statute does not indicate any intent to limit the 

terms of the compromise settlement to the type of final 

disposition.” (Ibid.) Our Supreme Court endorsed this flexible 

interpretation in DeSaulles v. Community Hospital of Monterey

Peninsula (2016) 62 Cal.4th 1140, 1155. The presumption that a

word carries a consistent meaning throughout the statute in

which it appears is “especially apt” for interpreting section 998 

because subdivision (c)(1) “requires a comparison between the 

terms and conditions of the ‘judgment’ proposed [pursuant to 

subdivision (b)] and the ‘judgment’ ultimately obtained by 

plaintiffs.” (Madrigal, supra, 90 Cal.App.5th at p. 400, review 

granted.)

Plaintiff’s other policy arguments go to the wisdom of the

statute as written but do not describe any other potential

absurdity. “ ‘If [a] construction does not result in patently absurd

results, we may not construe a statute contrary to its plain

language and ostensible intent merely because we disagree with

the wisdom thereof.’ ” (Fireman’s Fund Ins. Co. v. Superior Court

(2011) 196 Cal.App.4th 1263, 1280.) In any event, we think

plaintiff’s concerns are overblown.

Plaintiff urges that applying section 998, subdivision (c)(1)

to litigation that ends in settlement would, among other things,

create obstacles to settlement by introducing a new cost variable

to the equation; “spawn massive amounts of complicated postsettlement litigation”; incentivize defendants to make early, “low

ball” offers; and generally “penaliz[e] a plaintiff for settling.”

First, to state the obvious, parties are free to settle on

whatever terms they want. In this case, the terms included
22

deferring resolution of plaintiff’s entitlement to fees to the court if

no consensual resolution could be reached. The parties agreed

FCA would retain “any argument or objection to the fees and

costs sought by Plaintiff.” They did not have to settle on these

terms. They could have settled the cost issue together with the

underlying claims. This would have eliminated the need for any

motions to the court and for this appeal.

We further reject plaintiff’s contention that requiring the

parties to account for the effect of section 998, subdivision (c)(1) is

an insurmountable obstacle to settlement. Settlement

negotiations require parties, and their attorneys, to understand

their prospects for recovery after litigation and the risks and

costs of continued litigation. Once a plaintiff has declined a

defendant’s section 998 offer, the calculus necessarily changes. 

This is by design. Again, section 998 “provid[es] a strong

financial disincentive to a party . . . who fails to achieve a better

result than that party could have achieved by accepting his or her

opponent’s settlement offer.” (Bank of San Pedro, supra,

3 Cal.4th at p. 804.)

We fail to see how it would be desirable to deprive a

defendant of the benefits of having made an early, reasonable

settlement offer if the case later resolves by settlement. Doing so

would encourage defendants to go to trial rather than settle

because only by litigation could they qualify for statutory benefits

they sought in making the unaccepted section 998 offer. 

(Madrigal, supra, 90 Cal.App.5th at p. 405, review granted.) In

negotiating settlements after an earlier section 998 offer goes

unaccepted, parties can and must account for the impact the

unaccepted section 998 offer has on their prospects in litigation

and thus what constitute reasonable settlement terms. 
23

(Cf. Madrigal, at p. 405 [“[A] plaintiff need only factor any

operative section 998 offer into a comprehensive settlement, and

either try to negotiate a fixed amount of costs or attorney fees, or

bargain for a waiver of any rights under section 998 from the

defendant.”].)

As to plaintiff’s concerns that applying section 998 as

written would force plaintiffs to “accept measly offers that have

little connection to the case’s actual value,” case law has already

addressed this. A settlement offer that is not made in good faith,

including because it is not reasonable, does not trigger

application of section 998. (Licudine, supra, 30 Cal.App.5th at

p. 924.) As plaintiff acknowledges, whether a particular offer is

made in good faith depends, in part, on “whether the offeree was

given a fair opportunity to intelligently evaluate the offer.” 

(Najera v. Huerta (2011) 191 Cal.App.4th 872, 878.) Courts have

discretion to disregard section 998 offers made when the parties

have unequal access to information and the offeror resists the

offeree’s efforts to become educated about the basis for the offer. 

(See Najera, at pp. 878-879; see also Licudine, at pp. 924-926.)

Finally, we reject plaintiff’s refrain that applying

section 998, subdivision (c)(1) in these circumstances would

“penalize” plaintiffs for settling in contravention of the

Legislature’s intent. The only penalty under subdivision (c)(1) is

for not settling on reasonable terms offered earlier and failing

later to obtain a more favorable result. This penalty is central to

advancing the statutory purpose. (See Bank of San Pedro, supra,

3 Cal.4th at p. 804.) Applying it in accordance with its terms, as

we do here, only furthers such purpose.
24

4. Section 998 Makes No Exception for an Intervening

Change in Law

The trial court held section 998 was inapplicable as a

matter of law because Niedermeier reduced the most plaintiff 

might have recovered at trial. Without citation to authority, the

court stated: “the earlier, larger offer was not accepted by

Plaintiff reasonably based on existing case law. Section 998 was

not meant to penalize plaintiffs for engaging in good faith

negotiations to settle based on the evolving information and case

law before them.”

Nothing in the text of section 998 says a change in the law

relieves a nonaccepting offeree of his burden to obtain a more

favorable result to avoid the statute’s adverse consequences. 

Therefore, we again must consider whether adding a change-inthe-law exception to the statutory text is necessary to avoid

absurd results. We conclude it is not.

The offeree who ignores section 998’s encouragement to

accept a reasonable offer assumes the risk of not obtaining a

more favorable result. (Madrigal, supra, 90 Cal.App.5th at

p. 398, review granted [“a burden of sorts arises for a plaintiff

who rejects a valid offer to compromise under section 998—the

obligation to obtain a judgment more favorable than the

unaccepted offer”].) The obstacles to obtaining a more favorable

result can come from a variety of sources, expected and

unexpected. As plaintiff notes, “[n]ew post-offer facts or

post-offer authorities may change the calculus of the case . . . [o]r

the plaintiff may be diagnosed with a grave illness that makes

the prospect of drawn-out litigation a taller task.” Even without

such unexpected changes in circumstances, trials are inherently

risky. “[T]he vagaries of litigation, including the possibility of 
25

juror misconduct or reversal on appeal, which increases the 

opposing party’s costs, are part of the risk inherent in rejecting a 

section 998 offer.” (Saakyan v. Modern Auto, Inc. (2002)

103 Cal.App.4th 383, 392.)

We see no reason to insulate a nonaccepting offeree from

one form of risk while subjecting him to all the others when the

Legislature did not see fit to do so. Indeed, risk is the animating

force behind section 998. An offeree who refuses a reasonable

offer both assumes the risk of failing to obtain a more favorable

result and is subjected to increased stakes in the form of added

costs. Limiting the risk an offeree assumes when choosing to

pursue a more favorable result goes against the statutory design

and purpose.

Here, plaintiff refused FCA’s offer that was more than

83 percent of the absolute most he could have hoped to get at trial

at the time.

5 He then continued to litigate for almost three years.

A lot can change in the law in three years. Again, nothing in the

statute excuses an offeree from considering the risk of changes in

the legal landscape when evaluating a reasonable settlement

offer made pursuant to section 998.

Nevertheless, plaintiff claims caselaw exempts him from

operation of section 998 “for accepting less based on new factual

and legal developments that take place only after the offer was

made.” In support, he discusses only Guerrero v. Rodan Termite 

5 Plaintiff’s trial counsel described FCA’s February 2018 

offer in Song-Beverly “lingo” as a “2 1/2[x]” offer, meaning 

purchase price restitution plus 150 percent of the purchase price 

as a civil penalty. As civil penalties are capped at double the 

actual damages, a “3x” award is the best plaintiff could have done 

at trial.
26

Control, Inc. (2008) 163 Cal.App.4th 1435 (Guerrero). Guerrero is 

easily distinguishable. 

Guerrero involved a homebuyer’s claims against the seller, 

the dual real estate agent for both buyer and seller, and a termite 

inspector relating to conditions discovered in the home after the 

close of escrow. The termite inspector made a $5,000 section 998 

offer, which the buyer declined. (Guerrero, supra, 163

Cal.App.4th at p. 1438.) The buyer later settled with the real 

estate agent for $34,000. The trial court approved it as a good 

faith settlement pursuant to section 877. The buyer then 

proceeded to trial against the termite inspector and obtained a 

verdict in the amount of $15,600. After offsetting the settlement 

with the real estate agent, the trial court entered judgment for 

$0. (Guerrero, at p. 1439.)

The termite inspector argued that it was entitled to cost 

shifting under section 998 because its $5,000 offer was more than 

the $0 judgment after trial. (Guerrero, supra, 163 Cal.App.4th at 

p. 1439.) The Guerrero court disagreed. Observing that the 

buyer both recovered more and obtained a verdict in excess of the 

offer amount, the court found “no reason to give [the termite 

inspector] a windfall benefit because [the real estate agent] later 

decided to settle for an amount that offset [the buyer’s] verdict 

against [the termite inspector].” (Id. at p. 1441.)

Guerrero might have been of use to plaintiff if his January 

2021 settlement offer, when added to the amount he received in 

credit for trading in his Jeep, exceeded FCA’s February 2018 

offer. Under those circumstances, plaintiff might have been able 

to argue that he, like the plaintiff in Guerrero, achieved an 

aggregate recovery that exceeded what FCA offered. But he only 

got $13,000 in trade for the Jeep, and when added to the 
27

$125,000 FCA ultimately paid in settlement, plaintiff still 

recovered about $5,500 less than the $143,498 FCA offered 

three years earlier.

Plaintiff asks us to excuse, as the trial court did, the 

shortfall in his ultimate recovery because Niedermeier made it 

impossible to obtain the recovery he was holding out for when he 

declined to accept FCA’s February 2018 offer. Plaintiff simply 

offers no authority that failing to accept an earlier, more 

favorable settlement is excused when the omnipresent risk of an 

adverse change in law manifests to reduce ultimate recovery.

We note the concurring and dissenting opinion in Madrigal 

considered it unfair for section 998 to operate in this very context. 

(See Madrigal, supra, 90 Cal.App.5th at p. 423 (conc. & dis. opn. 

of Robie, Acting P.J. [“Under the majority’s interpretation, if a 

plaintiff rejected a reasonable section 998 offer prior to 

Niedermeier and later agreed to settle for a lesser amount 

because of [Niedermeier], the cost-shifting provision of 

section 998(c)(1) would necessarily apply to the plaintiff’s 

detriment. . . . Should the plaintiff be penalized due to a 

subsequent change in the law? I believe not.” (Citation 

omitted.)].)

These subjective policy judgments are for the Legislature to 

resolve, not us. The Legislature made no subsequent-change-inlaw exception to section 998’s “more favorable” requirement. We 

find nothing absurd in letting an offeree who does not accept a 

settlement that was reasonable when made bear the risk of being 

unable to top it due to such a change. Again, section 998 is 

designed to “encourage both the making and the acceptance of

reasonable settlement offers.” (Scott, supra, 20 Cal.4th at
28

p. 1114.) The greater risk the offeree bears in rejecting it, the

more likely he is to accept a reasonable settlement offer.

5. Was FCA’s February 2018 Offer More Favorable Than

the Ultimate Resolution of the Case?

Before we address arguments about whether the ultimate 

result was more favorable than FCA’s February 2018 offer, we 

must consider whether the February 2018 offer was valid and 

whether it is reasonably susceptible to valuation. (See Fassberg,

supra, 152 Cal.App.4th at p. 766 [where section 998 offer’s

nonmonetary terms make it “exceedingly difficult or impossible to

determine the value of the offer to the plaintiff,” courts “should

conclude that the offer is not sufficiently specific or certain to 

determine its value and deny cost shifting”].)

a. FCA’s February 2018 offer was valid

The trial court expressly declined to decide whether FCA’s

February 2018 offer was valid. We have discretion to address the

question because our review is independent. (Roberts v. Los

Angeles County Bar Assn. (2003) 105 Cal.App.4th 604, 615-616

[“[W]e can address that question as it is subject to independent 

review.”]; Covert, supra, 73 Cal.App.5th at p. 832 [“ ‘ “We

independently review whether a section 998 settlement offer was

valid.” ’ ”].)

FCA’s February 2018 offer was facially valid because it

complied with the statutory requirements, and its terms were

sufficiently specific to permit plaintiff to make an informed

decision about whether to accept it. (Perez, supra, 206

Cal.App.4th at p. 425.) It was in writing, provided for dismissal

with prejudice (which is equivalent to a judgment (Goodstein,

supra, 27 Cal.App.4th at p. 905)), and had a space for plaintiff to

accept the offer (see § 998, subd. (b)). Moreover, its economic
29

terms were unambiguous. Plaintiff would return the Jeep to

FCA, FCA would pay plaintiff a sum certain, and FCA would pay

plaintiff’s reasonable costs, expenses and attorney fees pursuant

to Civil Code section 1794, subdivision (d).

Plaintiff argued in the trial court that FCA’s February 2018

offer was invalid because it (i) called for dismissal of the action

rather than entry of judgment and yet specified no time for

payment or for return of the vehicle; (ii) failed to address interest;

and (iii) “included a Goodstein provision.” To the extent good

faith is properly considered essential to the validity of an offer

(see, e.g., Licudine, supra, 30 Cal.App.5th at p. 924 [“[a] 998 offer

is valid only if it is made in ‘good faith’ ”]), plaintiff (who bore the

burden to show its absence (id. at p. 926)) did not argue good

faith was lacking. Of particular note, he did not argue the offer

was not reasonable when made. 

Plaintiff’s undeveloped contentions about the validity of

FCA’s February 2018 offer do not persuade us that it was invalid. 

The court in Covert rejected similar arguments in deeming valid

an offer by FCA containing terms virtually identical to those

involved in this case. (See Covert, supra, 73 Cal.App.5th at

pp. 829, 838-841.)

b. The nonmonetary terms of FCA’s February 2018

offer and later January 2021 settlement did not

render them incomparable

Plaintiff argues “[i]t’s impossible to say whether the

ultimate settlement was more favorable than the rejected 998

offers given its nonmonetary terms.” He says the following

nonmonetary terms in the settlement, that were not in FCA’s

February 2018 offer, have an unquantifiable value: (i) FCA was

obligated to pay within 60 days; (ii) plaintiff was entitled to
30

interest in the event of late payment; (iii) plaintiff’s dismissal

obligation was conditioned on receipt and clearance of all funds;

(iv) the trial court retained jurisdiction to enforce the settlement;

and (v) there was no prohibition on entry of judgment.

“A judgment is more favorable to the plaintiff than a prior 

settlement offer only if the value of the plaintiff’s recovery in the 

judgment, exclusive of the plaintiff’s postoffer costs, exceeds the 

value of the offer.” (Fassberg, supra, 152 Cal.App.4th at p. 764.) 

Plaintiff is correct that nonmonetary terms may have material

value that must be accounted for in the comparison. Section 998

“does not describe the ‘offer’ in monetary terms nor authorize

cost-shifting every time the monetary value of the damage award

is less than the monetary ‘term’ of the defendant’s statutory offer.

Instead an ‘offer’ includes all its terms and conditions and must

be evaluated in the light of all those terms and conditions.” 

(Valentino v. Elliott Sav-On Gas, Inc. (1988) 201 Cal.App.3d 692,

697 (Valentino).) If the nonmonetary terms make it “exceedingly

difficult or impossible to determine the value of the offer to the

plaintiff[,] . . . a court should not undertake extraordinary efforts

to attempt to determine whether the judgment is more favorable

to the plaintiff” but should instead “conclude that the offer is not

sufficiently specific or certain to determine its value and deny

cost shifting . . . .” (Fassberg, supra, 152 Cal.App.4th at p. 766.)

We think the differences between FCA’s February 2018

offer and the ultimate January 2021 settlement are immaterial to

comparing the two offers as a matter of law. Even if this were

not the case, as discussed in part 5.c., post, they are immaterial

under the facts of this case.

The archetypal application of section 998 entails a

comparison between, on the one hand, a settlement proposal to
31

terminate litigation made any time between the commencement

of the case and 10 days before trial; and, on the other hand, a

judgment after trial. There are inherent differences between

these alternative resolutions that must be ignored for section 998

to maintain its vitality. For example, in American Airlines, Inc.

v. Sheppard, Mullin, Richter & Hampton (2002) 96 Cal.App.4th

1017, 1030 (American Airlines), the defendant law firm made a

section 998 offer to pay the plaintiff, its former client, $59,200 in

exchange for dismissal with prejudice. “The offer did not provide

for entry of judgment . . . .” (American Airlines, at p. 1030.) The

case went to trial and the jury awarded plaintiff just $8,174 in

damages. (Id. at p. 1031.) In opposing cost shifting under

section 998, the plaintiff argued its litigation objective “was to

obtain a declaration of [the defendant’s] wrongdoing, rather than

to obtain a monetary judgment.” (American Airlines, at p. 1056.) 

The court held that allowing plaintiffs to argue “any judgment

declaring wrongdoing by the defendant is worth more than the

monetary amount offered in settlement” would vitiate

section 998. (American Airlines, at p. 1056.)

We think the same must be true of the settlement

boilerplate plaintiff relies on here to distinguish between FCA’s

February 2018 offer and the ultimate January 2021 settlement. 

Settlements frequently contain terms governing basic

implementation—such as outside performance dates, sequence of

performance, and enforcement features—that judgments do not. 

Judgments are governed by their own set of rules such as

interest, deadlines for payment, and rights of enforcement. (See,

e.g., § 685.010 [statutory postjudgment interest]; § 683.010

[subject to exceptions, judgment immediately enforceable];
32

§§ 695.010-695.070 [rules governing enforcement of money

judgments].)

Settlement permits the parties to agree to convenient

implementation terms other than those provided by statute to

enforce a judgment. That does not make it “impossible” to

compare a settlement with a judgment or other resolution. If

section 998 required comparison of the relative value of rights in

the event of a hypothetical default in payment under the

settlement agreement, that would deprive section 998 offerees of

the flexibility to propose alternative implementation terms in

settlement offers. Courts have long protected the flexibility to

propose alternative implementation terms while still preserving

rights under section 998. (See, e.g., Goodstein, supra,

27 Cal.App.4th at p. 905 [payment in exchange for dismissal

qualifies as “judgment” for purposes of § 998]; American Airlines,

supra, 96 Cal.App.4th at p. 1056 [declining to value benefits of

actual judgment in comparing to section 998 offer of payment in

exchange for dismissal].) We reject plaintiff’s arguments that

would undermine this.

Plaintiff cites two cases in which nonmonetary terms

rendered the settlement offer incomparable to the ultimate

resolution. These cases are Valentino, supra, 201 Cal.App.3d 692

and Barella v. Exchange Bank (2000) 84 Cal.App.4th 793. In

Valentino, the nonmonetary term was a release in the section 998

offer that encompassed claims not asserted in the lawsuit. 

(Valentino, at p. 699.) The Valentino court recognized these

claims had inherent, material value but to ascertain that value

would require “pure guesswork.” (Id. at p. 700.) Thus, they

“introduced an imponderable which ma[de] it impractical if not

impossible to accurately and fairly evaluate the offer.” (Id. at
33

p. 699.) In Barella, a defamation action, the nonmonetary term

was a confidentiality provision in the section 998 offer. Giving

primary consideration to the principle “that our ‘[s]ociety has a

pervasive and strong interest in preventing and redressing

attacks upon reputation,’ ” the Barella court held that “a

settlement offer that by its terms cannot be made public[] cannot

be effective under section 998.” (Barella, at p. 801.) It reasoned

that “the value to a particular plaintiff of public vindication (or,

conversely, the negative value of confidentiality) is so highly

subjective and elusive that no court can determine its monetary

worth.” (Ibid.)

Notably, each of these cases concerned substantive

settlement terms—a release of unmade claims or a confidentiality

agreement—not terms governing basic implementation. We

think terms that do nothing more than ensure reasonably prompt

performance, like those involved here, must be disregarded for

purposes of comparing offers and outcomes under section 998,

subdivision (c)(1). To ascribe such terms value would be to

presume parties offering to settle would not have followed

through if their offers were accepted. This is contrary to the

premise that underlies section 998: that if the offeree had

accepted the offer, the litigation would have ended. Moreover,

disregarding the basic implementation terms in this case for

purposes of performing the section 998, subdivision (c)(1)

comparison removes uncertainty from the section 998 process

because it allows parties to focus on substantive terms in

exchanging offers without fear that any nonsubstantive deviation

from a prior offer would affect their rights under section 998 (or

inserting nonsubstantive terms to evade the consequences of

having rejected an earlier reasonable offer). (See Martinez,
34

supra, 56 Cal.4th at p. 1021 [“[A] court should assess whether the

particular application injects uncertainty into the section 998

process. If a proposed rule would encourage gamesmanship or

spawn disputes over the operation of section 998, rejection of the

rule is appropriate.”].)

Disregarding the implementation and default terms in the

final settlement, plaintiff’s “later, smaller award” he achieved

through his January 2021 settlement offer was not more

favorable than the “larger settlement award” FCA offered in

February 2018 as a matter of law. 

c. FCA’s February 2018 offer was more favorable

even when accounting for the ultimate January

2021 settlement’s additional terms

Even if we agreed with plaintiff that we need to account for

the value of the final January 2021 settlement’s implementation

and default terms, there is no basis to conclude that their value

exceeds the shortfall between FCA’s February 2018 “larger

settlement award” and the “later, smaller award” he proposed

and FCA accepted. 

Plaintiff touts the additional terms as “ensur[ing] quick

and enforceable payment.” But if we are to value how promptly

plaintiff was entitled to be paid under the ultimate January 2021

settlement, we must consider when he might have been paid

under FCA’s February 2018 offer. And when we consider relative

enforceability, we must consider the relevant rights, incentives,

and burdens under each.

As to prompt payment, the final January 2021 settlement’s

provision for payment within 60 days was not better than FCA’s

February 2018 offer. That offer lacked a term specifying the

timing of payment. As a result, it was due immediately and FCA
35

had a reasonable time in which to pay it upon demand. (Civ.

Code, § 1657; Wilson v. Zorb (1936) 15 Cal.App.2d 526, 535

[agreement to pay money without time provision entitled

promisee to make a demand for payment and gave promisor

“a reasonable time thereafter within which to make payment”];

Integrated, Inc. v. Alec Fergusson Electrical Contractor (1967)

250 Cal.App.2d 287, 295 [where payment is due immediately,

payor must be allowed “such reasonable time as may be

necessary to process payment”].) Although what is “reasonable”

is a question of fact, it is inconceivable that, if plaintiff had

accepted FCA’s February 2018 offer, he would have been paid

later than he was under the January 2021 settlement.

6 Indeed,

FCA had a strong incentive to pay the settlement promptly. 

Under the terms of the agreement, FCA was liable for plaintiff’s

attorney fees to the extent provided in Civil Code section 1794,

subdivision (d), and plaintiff controlled the timing of dismissal.

“These provisions created a significant disincentive for FCA to 

engage in gamesmanship in delaying payment.” (Covert, supra,

73 Cal.App.5th at p. 840.)

We likewise perceive no value in the provisions addressing

plaintiff’s rights in the event of FCA’s default in payment. Had

plaintiff accepted FCA’s February 2018 offer and FCA then

refused to pay, plaintiff, who presumably would not have

dismissed his action at that point, would have been able to seek

enforcement of the agreement from the court without filing a new

action. Again, whatever costs he might have reasonably incurred

6 Plaintiff requests judicial notice of evidence to show FCA 

has not always paid settlements promptly. We deny this request 

of materials not before the trial court as irrelevant. (Covert, 

supra, 73 Cal.App.5th at p. 831, fn. 8.)
36

in that effort would have been recoverable from FCA pursuant to

Civil Code section 1794, subdivision (d) and the terms of the

settlement. In short, FCA would have borne the cost of any

enforcement, relieving plaintiff of any burden of undertaking it.

DISPOSITION

The judgment of the trial court is reversed. The matter is 

remanded to the trial court with instructions to enter a new 

judgment exclusive of any costs, as such term is used in 

section 1032, subdivision (b), incurred by plaintiff after 

February 16, 2018 (the date of FCA’s February 2018 section 998 

offer). FCA to recover costs on appeal.

GRIMES, Acting P. J.

I CONCUR:

WILEY, J.
1

VIRAMONTES J., Concurring and Dissenting.

I agree with the majority that Code of Civil Procedure 

section 998, subdivision (c)(1)’s (section 998(c)(1)) mandatory costshifting provision applies to awards in favor of buyers in SongBeverly actions under Civil Code section 1794, subdivision (d). 

I do not agree, however, that section 998(c)(1)’s cost-shifting 

provision applies to a litigation terminated by settlement. 

I believe the language of section 998(c)(1) is ambiguous as to its 

applicability in the settlement context. However, after 

examining the legislative history and purpose behind the statute

as discussed in the concurring and dissenting opinion in 

Madrigal v. Hyundai Motor America (2023) 90 Cal.App.5th 385

(Madrigal), I find that section 998(c)(1)’s mandatory cost-shifting 

provision should not apply here where the litigation was 

terminated by settlement. Therefore, I respectfully dissent.

Section 998(c)(1) provides, “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 postoffer 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.”

“ ‘As in any case involving statutory interpretation, our 

fundamental task here is to determine the Legislature’s intent so 

as to effectuate the law’s purpose.’ [Citation.] The well-
2

established rules for performing this task require us to begin by 

examining the statutory language, giving it a plain and 

commonsense meaning. [Citation.] We do not, however, consider 

the statutory language in isolation; rather, we look to the 

statute’s entire substance in order to determine its scope and 

purposes. [Citation.] That is, we construe the words in question 

in context, keeping in mind the statute’s nature and obvious 

purposes. [Citation.] We must harmonize the statute’s various 

parts by considering it in the context of the statutory framework 

as a whole. [Citation.] If the statutory language is unambiguous, 

then its plain meaning controls. If, however, the language 

supports more than one reasonable construction, then we may 

look to extrinsic aids, including the ostensible objects to be 

achieved and the legislative history.” (Los Angeles County 

Metropolitan Transportation Authority v. Alameda Produce 

Market, LLC (2011) 52 Cal.4th 1100, 1106–1107.) 

Here, the majority adopted the reasoning of the majority in 

Madrigal, which found no ambiguity in the phrase “fails to obtain 

a more favorable judgment.” (Madrigal, supra, 90 Cal.App.5th at 

p. 407.) “The phrase ‘fails to obtain a more favorable judgment’ 

means what it says—the plaintiff fails to, or does not, meet its 

obligation at the conclusion of the lawsuit to obtain a judgment 

more favorable than the amount stated in the offer to 

compromise.” (Ibid.) Thus, according to the majority, there is no 

settlement exception to section 998(c)(1)—a settlement for less 

than the unaccepted section 998 offer is a failure to obtain a more 

favorable judgment. While the majority’s reading is one 

interpretation supported by the plain language of section 

998(c)(1), it is not the only one. 
3

As the concurring and dissenting opinion in Madrigal

explained, we must “ ‘give effect and significance to every word 

and phrase of [the] statute,’ including section 998(c)(1)’s directive 

that it will apply ‘when the plaintiff fails to obtain a judgment 

more favorable than a previously rejected or withdrawn offer to 

compromise.’ ” (Madrigal, supra, 90 Cal.App.5th at p. 413, 

original italics.) “The plain meaning of ‘fail’ and the association 

of that word with a result obtained by the plaintiff indicates 

section 998(c)(1)’s cost-shifting provision applies only when the 

plaintiff’s unilateral action results in a judgment less favorable 

than a previously rejected or withdrawn offer to compromise.” 

(Madrigal, at p. 413.) 

I agree with the concurring and dissenting opinion in 

Madrigal that the plain language supports an interpretation 

precluding application of section 998(c)(1)’s cost-shifting provision 

to litigations terminated via settlement. This is because a 

settlement is not a failure of either party, rather, it is a voluntary 

resolution of a dispute that does not necessarily reflect a party’s 

liability or nonliability or the merits of action. (See Ludwig v. 

Superior Court (1995) 37 Cal.App.4th 8, 27.) Further, 

settlements are not always “functionally the equivalent of 

judgments, such that reference to one infers or includes the 

other.” (Mares v. Baughman (2001) 92 Cal.App.4th 672, 676.) 

“While either will generally bring an end to a lawsuit, a 

settlement is an agreement between the parties to a dispute 

regarding how that dispute will be resolved. On the other hand, 

a judgment in a civil matter is the imposition of a resolution on 

the parties to a dispute as determined by a court. [Citation.] 

A judgment has implications that a settlement does not. 

[Citations.] Further, the mere fact that a party to a settlement 
4

may seek to transform it into a judgment for enforcement 

purposes [citation] does not mean that the one is necessarily the 

equivalent of the other.” (Id. at pp. 676–677.) Thus, “ ‘fails to 

obtain’ may reasonably be understood to refer to the result 

flowing from the plaintiff’s unilateral action rather than a result 

flowing from a compromise between opposing parties.” 

(Madrigal, supra, 90 Cal.App.5th at p. 414.) 

While I do not go as far as my dissenting colleague in 

Madrigal to conclude the use of the words “fails to obtain” gives 

section 998(c)(1) only one possible meaning (Madrigal, supra,

90 Cal.App.5th at p. 410), I find, at the very least, the statute’s 

use of those words calls into question whether a settlement for 

less than the unaccepted offer equates to a failure to obtain a 

more favorable judgment under section 998(c)(1). 

Because section 998(c)(1) is equally susceptible to the 

competing interpretations as discussed in Madrigal, I find it 

necessary to examine the legislative history and purpose behind 

section 998(c)(1) to determine whether it applies to a mutually 

agreed-upon settlement. (California Forestry Assn. v. California 

Fish & Game Commission (2007) 156 Cal.App.4th 1535, 1545.) 

Although nothing in the legislative history definitively 

establishes whether or not a settlement for less than the 

unaccepted offer is a failure to obtain a more favorable judgment

under section 998(c)(1), I find to the extent the legislative history 

supports either interpretation, it tends to support the conclusion 

that the Legislature did not intend to have section 998(c)(1) apply 

to the circumstances before us where the litigation ends in a 

mutually agreed-upon settlement. (See Madrigal, supra, 

90 Cal.App.5th at p. 415.) 
5

Section 998(c)(1)’s cost-shifting provision has been a part of 

California law since 1851. “ ‘The section was substantially the 

same as the New York Code of Procedure, section 385[,] which 

was derived from the Field Code (First Rep. [of] the Com[rs.]. on 

Prac. & Pleadings, Code Proc., § 338 (1848)) except that the New 

York provision allowed ten days for acceptance, while the 

California provision allowed five.’ ” (Madrigal, supra, 90 

Cal.App.5th 385 at pp. 415–416, citing T.M. Cobb Co. v. Superior 

Court (1984) 36 Cal.3d 273, 286 (dis. opn. of Broussard, J.).) “The 

Field Code explained the intended offer to compromise language, 

as adopted in California in section 998’s predecessor and which 

included the ‘fails to obtain’ language as it remains in section 998 

today, was intended to ensure that, when a plaintiff rejects an 

offer to compromise, ‘but carries on the action, in order to recover 

a greater amount, he does it at the hazard of paying costs to the 

defendant, if he shall fail to establish a greater claim.’ [Citation.] 

The ‘principal benefit hoped’ for was ‘to save the time of courts 

and witnesses, and the expense to parties, in proving the amount 

of damages, in case the right to recover in the action, shall be 

established.’ ” (Madrigal, at p. 416, italics omitted.) 

Thus, the early legislative history of section 998(c)(1) 

reflects a legislative intent to conserve precious court resources 

by incentivizing settlements that would circumvent a full 

adjudication of the merits necessary to establish a relatively less 

valuable claim. It follows then that section 998(c)(1) would not 

apply to litigations terminated by settlement because a 

settlement does not legally establish anything regarding the 

underlying claim. (Madrigal, supra, 90 Cal.App.5th at p. 416.) 

“[A] settlement does not result in a winner or a loser.” (Id. at 

p. 414.) And “the fact of settlement says nothing about a 
6

defendant’s liability, his nonliability, his freedom from fault, or 

his culpability.” (Zalta v. Billips (1978) 81 Cal.App.3d 183, 190.) 

I also find telling our Legislature’s amendment of 

section 998 under Senate Bill No. 73 (1997–1998 Reg. Sess.), 

which expanded the statute “to apply to arbitration proceedings 

in the same way it applies to judicial proceedings, and amended 

the cost-shifting provision to clarify that postoffer costs are 

excluded for purposes of determining if the plaintiff obtained a 

judgment more favorable than a previously rejected section 998 

offer.” (Madrigal, supra, 90 Cal.App.5th at pp. 416–417, citing 

Stats. 1997, ch. 892, § 1, pp. 6389–6391.) 

The Legislature’s use of the term “award” shows an intent 

to apply section 998(c)(1)’s cost-shifting provision only in those 

instances where the litigation ends after an adjudication. 

An arbitration award, which is confirmed and becomes a 

judgment (Code Civ. Proc., §§ 1286 and 1287), is generally the 

result of a final adjudication on the merits by the arbitrator (see 

Lonky v. Patel (2020) 51 Cal.App.5th 831, 844, citing Code Civ. 

Proc., § 1283.4 [“[A]n ‘award’ as a written ruling that ‘include[s] a 

determination of all the questions submitted to the arbitrators 

the decision of which is necessary in order to determine the 

controversy’ ”].)

While this is not an arbitration settlement, I also note that 

our decision as well as the Madrigal majority could create a twotiered system, where settlements are subject to section 998(c)(1)’s 

cost-shifting provision in the litigation context but not 

arbitration. For example, while an accepted valid section 998 

offer in arbitration will result in an award, the same cannot be 

said for a non-section-998 settlement offer and acceptance. 

Generally, in arbitration, when the parties settle, the arbitration 
7

is withdrawn or dismissed, and the parties and the arbitrator are 

bound by the terms of the settlement agreement. But there is no 

resulting award. Thus, applying section 998(c)(1) in the 

settlement context could potentially create divergent outcomes 

for those parties who settle in arbitration versus parties who 

settle in the trial court. This is contrary to the legislative intent 

in amending section 998 to apply to arbitrations by placing 

“parties in arbitration on equal footing with parties to civil 

actions.” (Heimlich v. Shivji (2019) 7 Cal.5th 350, 361–362.)

It is also notable that when the Legislature considered 

whether to expand section 998 to apply to arbitrations, “it 

considered various analyses that repeatedly stated section 998 

(which then applied only in judicial proceedings) applies when a 

party rejects a settlement offer and subsequently fails to do 

better at trial. For example, the analyses explained Senate Bill 

No. 73 (1997–1998 Reg. Sess.) would revise the law awarding 

costs against a party who rejected a section 998 offer and ‘fails to 

do better at trial’ by excluding postoffer costs from the calculation 

of whether the party does better than the rejected section 998 

offer, by specifying a plaintiff who rejects a section 998 offer and 

‘fails to do better at trial’ must pay the defendant’s costs from the 

date of the offer, and by making the provision applicable to 

‘contractual and medical malpractice arbitrations.’ (Assem. Com. 

on Judiciary, Analysis of Sen. Bill No. 73 (1997–1998 Reg. Sess.) 

as proposed to be amended July 16, 1997, p. 2; Sen. Com. on 

Judiciary, Analysis of Sen. Bill No. 73 (1997–1998 Reg. Sess.) as 

amended May 1, 1997, p. 1; Sen. Rules Com., Off. of Sen. Floor 

Analyses, Analysis of Sen. Bill No. 73 (1997–1998 Reg. Sess.) as 

amended Aug. 25, 1997, p. 1; Sen. Rules Com., Off. of Sen. Floor 

Analyses, 3d reading analysis of Sen. Bill No. 73 (1997–1998 Reg. 
8

Sess.) as amended May 20, 1997, pp. 1–2; Sen. Rules Com., Off. of 

Sen. Floor Analyses, 3d reading analysis of Sen. Bill No. 73 

(1997–1998 Reg. Sess.) as amended July 21, 1997, p. 1; Sen. 

Rules Com., Off. of Sen. Floor Analyses, 3d reading analysis of 

Sen. Bill No. 73 (1997–1998 Reg. Sess.) as amended Aug. 11, 

1997, p. 1; Sen. Rules Com., Off. of Sen. Floor Analyses, 3d 

reading analysis of Sen. Bill No. 73 (1997–1998 Reg. Sess.) as 

amended Aug. 25, 1997, p. 1.)” (Madrigal, supra, 90 Cal.App.5th 

at p. 417.)

I also find that precluding the application of section 

998(c)(1)’s cost-shifting provision to settlements is consistent with 

the statute’s purpose, which our Supreme Court explained is to 

create an incentive for settlement by “authoriz[ing] an award of 

costs to a party that makes a pretrial settlement offer when the 

opponent rejects the offer and obtains a lesser result at trial.” 

(Heimlich v. Shivji, supra, 7 Cal.5th at p. 356, citing Martinez v. 

Brownco Construction Co. (2013) 56 Cal.4th 1014, 1019.) 

“ ‘Section 998 aims to avoid the time delays and economic waste 

associated with trials and to reduce the number of meritless 

lawsuits.’ ” (Madrigal, supra, 90 Cal.App.5th at p. 418, quoting 

Martinez v. Brownco, at p. 1019.) 

While the majority emphasizes section 998(c)(1)’s purpose 

to encourage early settlements, its interpretation would come at 

the expense of the parties’ ability to settle later as the litigation 

progresses. “Although settlements achieved earlier rather than 

later are beneficial to the parties and thus to be encouraged, our 

public policy in favor of settlement primarily is intended to 

reduce the burden on the limited resources of the trial courts. 

The trial of a lawsuit that should have been resolved through 

compromise and settlement uses court resources that should be 
9

reserved for the resolution of otherwise irreconcilable disputes.” 

(Wilson v. Wal-Mart Stores, Inc. (1999) 72 Cal.App.4th 382, 390–

391.)

I believe the majority’s holding will also discourage 

plaintiffs from settling and instead encourage them to take their 

chances at trial, if a plaintiff’s counter-section 998 offer were to 

shift the costs back to the plaintiff. Indeed, plaintiffs who have 

rejected an initial section 998 offer will be disinclined to offer or 

accept any subsequent settlement offer that is arguably less 

favorable than the first section 998 offer, given the added risk 

that plaintiff would have to absorb its own costs and use 

settlement funds to cover the defendant’s costs. Conversely, 

defendants would be more likely to reject a settlement offer that 

might be more favorable to the plaintiff than a prior 998 offer 

thereby precluding a defendant from shifting costs to the 

plaintiff. Accordingly, both parties would have more incentive to 

go to trial regardless of how the litigation develops and the 

parties’ evolving insight into the merits of their respective cases.

The majority also notes that the present dispute between 

the parties could have been avoided if they simply accounted for 

the attorney fees and costs in the settlement rather than 

reserving any arguments or objections to fees and costs. Indeed, 

as the majority points out, the parties could have settled on any 

terms, including the cost issue together with the underlying 

claims. While settlement on those terms was theoretically 

possible, the facts are that the parties were unable to do so. 

This is evidence that the additional burden of necessarily 

including fees and costs into every settlement injects additional 

complications and difficulties to resolving the case, which is 

contrary to the statute’s purpose. 
10

Finally, there is at least some indication that the majority’s 

decision is upsetting the status quo and is contrary to the 

historical understanding of section 998(c)(1). As stated 

previously, some version of section 998(c)(1)’s cost-shifting 

provision has been California law for at least 170 years. 

However, only in the last year has an appellate court reached the 

issue. When we consider the fact that the overwhelming majority 

of civil cases resolve in settlements, and that only two recent 

California appellate courts, including the case at bar, have ever 

had to address the issue may reflect a general understanding by 

the trial courts and the parties that section 998(c)(1)’s costshifting provision does not apply to settlements. (See Madrigal, 

supra, 90 Cal.App.5th at pp. 417–418.)

For the foregoing reasons, I would affirm the trial court’s 

order and award.

VIRAMONTES, J.