In Madrigal v. Hyundai Motor America, the Supreme Court today holds Code of Civil Procedure section 998 — which reduces a plaintiffs’ recoverable costs and requires them to pay certain defense costs when they don’t get a “judgment or award” that is “more favorable” than a defense offer they didn’t accept — applies in cases resolved by settlement unless the settlement provides otherwise.
Horvitz & Levy filed an amicus curiae brief supporting the prevailing defendant.
The court’s unanimous opinion by Justice Carol Corrigan recognizes, “The rule we articulate here may operate to incentivize further settlement negotiations in some circumstances and to discourage them in others, depending upon the litigants’ evaluation of their own strategic positions.” However, the court says, “Section 998 purposely places on the party who rejects a reasonable offer the risk that changed circumstances might lead to a worse result. [Citation.] This limitation on flexibility is a feature of the scheme, not a bug.”
The court affirms a 2-1 Third District Court of Appeal published opinion.
