California § 998 Offers: How They Shift Costs and Fees

California Code of Civil Procedure § 998 is one of the most powerful settlement tools in California civil litigation, and one of the most under-deployed by parties who don’t fully understand it. A properly structured § 998 offer can shift tens of thousands of dollars in costs — and in some cases attorneys’ fees — based on a single procedural step.

This article explains what § 998 offers actually do, when they shift fees in addition to costs, and the practical considerations that determine whether a § 998 offer is worth making.

What § 998 actually does

A § 998 offer is a formal written settlement offer made under the statute. The mechanics:

• Either party can serve a § 998 offer on any other party at any point during the litigation
• The offer must be in writing, must reference § 998 explicitly, and must specify the terms of settlement
• The offer remains open for a defined period — typically 30 days, or until trial begins, whichever is earlier
• If the offer is accepted, the parties settle on those terms
• If the offer is rejected (or expires unaccepted), the offer itself is generally inadmissible at trial — but the cost-shifting consequences kick in if the rejecting party fails to obtain a more favorable result

The cost-shifting is the core of § 998’s power. It imposes real financial consequences on a party who refuses a reasonable offer and then fails to do better than the offer at trial.

What gets shifted

Two categories of cost get shifted under § 998:

Standard costs

The party who rejected the § 998 offer and failed to better it:

• Cannot recover their own post-offer costs
• May be ordered to pay the offering party’s post-offer costs
• Faces shifting of expert witness fees in many circumstances

Standard costs include filing fees, service costs, deposition costs, expert fees, and other litigation costs recoverable under California Code of Civil Procedure §§ 1032 and 1033.5. For matters with significant expert costs, the § 998 shifting can run into tens of thousands of dollars.

Attorneys’ fees in some circumstances

§ 998 also shifts attorneys’ fees in matters where the underlying contract or statute provides for fee shifting. In California civil litigation involving a fees clause:

• A § 998 offer triggers cost-shifting per the standard rules
• AND fee-shifting under the contract or statute may apply to post-offer fees as well

The result: a party with a contractual or statutory fee-shifting right who rejects a § 998 offer and fails to better it can lose their post-offer fees on top of paying the other side’s post-offer costs.

When § 998 offers work best

A § 998 offer is most useful when:

• The case has substantial discovery or expert cost ahead.The offer’s value comes from the post-offer cost shift; if the case is largely complete, there’s less to shift.
• The offer is in a range the rejecting party will struggle to better.The whole point is to put the rejecting party in the position of either accepting or risking the cost shift. Offers that are clearly unreasonable from the rejecting party’s perspective don’t move the matter.
• The contract or applicable statute includes attorneys’ fees provisions.§ 998 offers in fee-shifting contexts have much greater bite.
• The timing is right.Too early and the offering party hasn’t developed enough record to make a credible offer; too late and there’s nothing left to shift. The sweet spot is typically after substantial discovery but well before trial.

When § 998 offers backfire

Several patterns to watch:

Offers that are too low (from the plaintiff side).A plaintiff who serves a § 998 offer, then fails to recover at or above the offer at trial, doesn’t get the cost shift. The defendant’s cost-shift rights stay intact.

Offers that are too high (from the defendant side).A defendant’s § 998 offer that’s above what the plaintiff is realistically going to recover at trial gives the plaintiff a strong incentive to accept — but if rejected, the defendant has effectively communicated their case valuation, which may inform the plaintiff’s settlement posture going forward.

Offers with unreasonable conditions.§ 998 offers must be realistic. An offer with conditions designed to make acceptance difficult (extensive carve-outs from the release, unusual payment terms, demands for confidentiality going beyond standard scope) can be deemed not a good-faith offer — which forfeits the cost-shifting.

Multiple-defendant and multiple-claim cases.§ 998 offers in cases with multiple defendants or claims have specific allocation rules. An undifferentiated offer to multiple defendants, or an offer that doesn’t cleanly resolve all claims against a particular defendant, can fail to trigger shifting.

Action step

Treat § 998 offers as strategic decisions, not procedural formalities. The amount, the timing, and the scope all matter — and the cost-shifting consequences run in both directions. A § 998 offer that’s rejected and not bettered shifts costs against the rejecting party; a § 998 offer that’s accepted ends the case on the offering party’s terms.

How offers should be structured

A § 998 offer that maximizes its strategic effect typically:

• Cites § 998 expressly.The statute requires the offer to be made “pursuant to” the statute; missing the reference can defeat the offer.
• Specifies a complete settlement.All claims, all parties, with mutual releases and dismissal language. Partial offers create allocation problems.
• States the dollar amount clearly.Or, for non-monetary settlements, states the terms with sufficient specificity that a court can determine whether the rejecting party bettered the offer at trial.
• Includes mutual releases and standard dismissal language.Failing to include these can complicate enforcement of an accepted offer.
• Specifies who pays costs through the offer date.The default rule is that each side pays their own costs through the offer date, but the offer can specify otherwise.

Practical timing

For most California civil cases, the strategic windows for § 998 offers are:

• After preliminary motions are decided— when the legal posture of the case is clearer and offers can be calibrated realistically
• After substantial document discovery— when the documentary record can support specific damages numbers
• Before deposition of the most expensive expert— to preserve the cost-shift potential on expert fees
• Before mandatory settlement conference— to put the conference in the shadow of a real shifting deadline

When to involve counsel

§ 998 offer practice is technical enough that any meaningful California civil matter benefits from counsel involvement in making and responding to offers. The procedural requirements, the timing decisions, and the response calculus all matter.

Related practice pages and guides

• The California Civil Litigation Process— for how § 998 offers fit in the broader procedural arc
• Should You File a Lawsuit?— for the upstream cost-to-recovery analysis
• Contract Disputes— for fee-shifting contracts where § 998 has the most leverage

Speak with counsel

If you have a California civil matter where a § 998 offer may be worth making — or where you have received one and are deciding how to respond —request a case evaluationorcontact our office. The evaluation is complimentary.