Reported / Citable
Background
Margaret Meehan prevailed in a personal-injury suit arising from a collision between her bicycle and a semi-trailer driven by Jaime Aguirre for R & Y Castellanos Trucking. After finding both sides negligent, the Los Angeles Superior Court assigned 85 percent of the fault to the defendants and 15 percent to Meehan. It awarded her $1.25 million, reduced to $1,062,500 for comparative negligence.
Before trial, Meehan made four offers under Code of Civil Procedure section 998, California’s settlement-offer statute that can shift certain costs when the recipient rejects an offer and then does worse at trial. Her first three offers were for $1 million. Her fourth and final offer was for $2 million. The defendants accepted none of them. After judgment, Meehan sought nearly $1 million in costs, including about $326,000 in expert fees and $313,500 in prejudgment interest measured from her first offer.
The trial court treated the final $2 million offer as controlling. Because Meehan’s judgment plus allowable costs did not exceed that offer, it denied the expert fees and interest. The court also disallowed about $175,000 for a trial technician and costs associated with a day-in-the-life video, finding that Meehan had not supplied invoices or other evidence showing that the expenses were reasonable and necessary. Meehan appealed the costs order.
The Court’s Holding
The Court of Appeal affirmed. It adopted the “last offer rule” for the situation in which a plaintiff makes several valid, unrevoked section 998 offers and the ultimate recovery exceeds an earlier offer but not the final one. In that setting, the last offer is the benchmark for deciding whether the plaintiff qualifies for section 998 benefits. The rule gives the parties a single, predictable comparison point while allowing them to revise settlement positions as discovery and trial preparation change the value of the case.
The court rejected Meehan’s argument that the California Supreme Court had displaced that rule. Prior decisions allowing recovery from the date of an earlier offer involved judgments that beat every offer, not a judgment falling between successive offers. Meehan’s $1,062,500 recovery, even when combined with allowable costs, remained below her final $2 million demand. She therefore could not recover discretionary expert-witness costs under section 998.
The same conclusion defeated her claim for 10 percent prejudgment interest under Civil Code section 3291. Although that statute refers to interest running from the first qualifying offer, a plaintiff must first satisfy section 998’s threshold by obtaining a result more favorable than the operative offer. The court also upheld the reduction of other litigation costs. A trial technician and an unused day-in-the-life video were not categorically recoverable items, so Meehan bore the burden of documenting their necessity and reasonable amount. The absence of invoices and supporting declarations permitted the trial court to tax those costs.
Key Takeaways
- When a plaintiff makes multiple valid, unrevoked section 998 offers and the judgment falls between them, the final offer controls eligibility for cost-shifting benefits.
- An earlier, lower offer does not preserve expert-fee recovery after the plaintiff serves a later, higher offer that the eventual judgment fails to beat.
- Civil Code section 3291’s reference to the plaintiff’s first offer determines when interest begins only after the plaintiff satisfies the operative section 998 comparison.
- Discretionary litigation expenses require evidence. Counsel should preserve invoices and declarations explaining why trial-technology and demonstrative-evidence costs were reasonably necessary and reasonable in amount.
- Successive offers should be modeled with the potential verdict and recoverable pre-offer costs in mind because a later demand can replace a more favorable cost-shifting benchmark.
Why It Matters
The decision gives California litigators a clear warning about escalating section 998 demands. A later offer is not merely another settlement opportunity; when the verdict lands between the old and new numbers, it can erase the cost-shifting leverage created by the earlier offer. Plaintiffs should reassess damages, comparative-fault risk, and provable costs before increasing a demand. Defendants evaluating exposure can generally focus on the most recent valid, unrevoked offer rather than every prior demand.
The ruling also reinforces the practical difference between incurring a trial expense and proving that it is recoverable. For technology vendors, demonstrative evidence, and similar discretionary items, contemporaneous invoices and a record connecting the expense to the presentation of the case may determine whether a prevailing party receives reimbursement.