Section 998 Is Not the Only Settlement Show

Alvarez v. Altamont Health Servs. Corp., No. B305155 (D2d8 Mar. 4, 2020)

For an offer of judgment under Code of Civil Procedure § 998 to be valid, it must include a “provision that allows the accepting party to indicate acceptance of the offer by signing a statement that the offer is accepted.” § 998(b). There are some cases that say because an offer without such a provision is invalid, the consequences that apply for a failure to respond—potential shifting of costs—don’t apply.

This case deals with the reverse. Defendant served a § 998 offer. It did not have an acceptance provision. But Plaintiff took the deal anyway and hand wrote an acceptance on the offer document. The trial court entered judgment on the settlement. But Defendant then got cold feet about the offer and moved to vacate the judgment based on the defect. The trial court agreed, and the Court of Appeal here affirms.

The Court reviews various grounds for finding the offer nonetheless valid—statutory, contractual, and equitable—finding them all lacking.

The § 998 analysis basically seems consistent with the statute and the cases interpreting it, even if its a little counter-intuitive. There are, however, two not well developed points here that give me some pause.

First, as a matter of contract law—not specific to § 998—it seems pretty clear that the defendant made an offer—settle the case on these terms—that the plaintiff accepted. So even if there’s no right just to enter judgment under § 998, isn’t the defendant likely entitled to summary judgment on settlement and accord? Not every settlement needs to be a § 998 settlement. That’s not really contemplated here. 

Second, and similarly, there’s an estoppel issue. Defendant made a representation that Plaintiff relied on in changing its legal position. As the Evidence Code puts it: “Whenever a party has, by his own statement or conduct, intentionally and deliberately led another to believe a particular thing true and to act upon such belief, he is not, in any litigation arising out of such statement or conduct, permitted to contradict it.” Evid. Code § 623.

Here, Defendant made a statement that led Plaintiff believe it was offering to settle the case on certain terms and Plaintiff acted on that statement. Generally, that should estop Defendant from a later denial. This one did get raised—albeit only on appeal—but the Court of Appeal rejects it because, under one test that can apply for equitable estoppel—what we call the “four-element test”—there was no false statement, so equitable estoppel can’t apply. 

But as I wrote, at some length, almost eight years ago, and addressed again just last year, the four-element test, and its cousin, the five-element test, don’t fully encompass all the varieties of equitable estoppel that exist out in the wilderness of California procedure. And in particular, they do not address the core elements of the type of estoppel at issue here—a detrimental reliance on an offer or promise that is not necessarily false when made. Under the case law that applies in that context—see, e.g., Indus. Indem. Co. v. Indus. Acc. Comm., 115 Cal. App. 2d 684, 690 (1953)—there would seem to be enough to work an estoppel here. Or at least for a more thorough analysis.

So while the statutory quirks of § 998 might preclude entry of automatic judgment under its terms, it seems like either contractual rules or an estoppel should be enough to crate a binding agreement that resolves the case.

Affirmed.