Ayers v. FCA US, LLC

Filed 2/27/24
CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION EIGHT

JACOB AYERS, B315884
Los Angeles County
Plaintiff and Respondent,
Super. Ct. No. BC623368

v.

FCA US, LLC,

Defendant and Appellant.

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.
___________________________
 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.

2
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.

3
 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.)

4
 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

5
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

6
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

7
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

8
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.)

9
 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

10
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

11
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

12
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

13
 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.’ ”].)

14
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.

15
 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

16
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

17
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

18
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.

19
 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

20
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 post-
settlement 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

21
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.

22
(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.

23
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-in-
the-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

24
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.

25
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

26
$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-in-
law 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

27
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

28
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

29
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

30
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];

31
§§ 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

32
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,

33
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

34
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.)

35
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.

36
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 cost-
shifting provision applies to awards in favor of buyers in Song-
Beverly 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-

1
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.

2
 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

3
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.)

4
 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

5
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 two-
tiered 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

6
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.

7
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

8
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.

9
 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 cost-
shifting 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.

10