Dateline: July, 2010, Issue 4
California Code of Civil Procedure Section 998 is a statutory cost-shifting mechanism designed to encourage settlement and penalize unreasonable settlement positions.
Any party can serve a written '998 offer' on the other party while a case is pending, up to 10 days before trial commences. A party who does not accept an adverse party's 998 offer and obtains a worse result at trial may be liable for the adverse party's court costs, expert witness fees, and, in personal injury cases, interest from the date of the offer.
Kiser and colleagues (2008) studied the role of 998 offers in plaintiff and defendant decisions to settle or go to trial in 847 California cases. These researchers defined a mistaken decision to go to trial occurring when a settlement proposal was rejected that turned out to be the same as or more favorable than the actual trial award.
These researchers found that when a 998 offer was made, mistaken decisions to go to trial increased, although serving and receiving parties were affected differentially.
Serving a 998 offer reduced mistaken decisions to go to trial (and the dollar amount of those mistakes) for the serving party, and increased mistaken decisions to go to trial (and the cost of those mistakes) for the recipient party.
998 offers increased mistaken decisions, especially for parties receiving the offers.
Source Kiser, R. L., Asher, M. A., & McShane, B. B. (2008). Let's not make a deal: An empirical study of decision making in unsuccessful settlement negotiations. Journal of Empirical Legal Studies, 5, pp. 551-591.