In Gorobets v. Jaguar Land Rover North America, LLC (Aug. 6, 2026, S287946), the California Supreme Court resolved an important question concerning statutory offers to compromise under Code of Civil Procedure section 998. May a single offer give the receiving party a choice between two different sets of settlement terms? The Court held that section 998 does not categorically prohibit such an offer. An "alternative choice-offer" may trigger section 998's cost-shifting provisions if it clearly identifies the available alternatives and at least one alternative is sufficiently certain to permit an accurate valuation when the offer is made.
The decision gives litigants greater flexibility in structuring settlement proposals, but it also places renewed emphasis on careful drafting. An offer that presents unclear, overlapping, or difficult-to-value terms may still fail to qualify for statutory cost-shifting.
The Settlement Offer and Trial Result
The plaintiff leased a new Land Rover in 2015 and subsequently experienced numerous alleged defects involving the vehicle's steering, suspension, engine, transmission, electrical system, brakes, and other components. After unsuccessful repair efforts, he sued the manufacturer under the Song-Beverly Consumer Warranty Act (Civ. Code §1790 et seq.), seeking restitution, damages, civil penalties, attorney fees, and costs.
During the litigation, the manufacturer served a section 998 offer containing two alternative methods of settlement. Under the first alternative, it would pay the plaintiff $85,000 in exchange for the return of the vehicle with clear title. The second alternative provided for reimbursement of several categories of expenses generally tracking the restitution remedies available under the Song-Beverly Act. Any disagreement over the plaintiff's entitlement to additional amounts would be submitted to a dispute-resolution process selected by the plaintiff.
Both options addressed attorney fees and costs. the plaintiff could accept the offer by checking a box corresponding to the selected alternative and signing the form. He allowed the offer to expire without accepting either choice. A jury later awarded him $76,155.27, an amount below the $85,000 lump-sum alternative. The jury declined to award a civil penalty because it did not find that the manufacturer had willfully violated the Song-Beverly Act.
The plaintiff sought more than $543,000 in attorney fees and approximately $76,000 in costs. The manufacturer argued that section 998 barred recovery of the plaintiff's post offer costs because the judgment did not exceed its earlier settlement proposal. The trial court agreed. It limited the plaintiff to his pre-offer attorney fees and costs and awarded the manufacturer his post offer costs. The court of appeal affirmed the award, although it concluded that section 998 generally did not permit a party to present multiple settlement choices in a single offer.
The Supreme Court affirmed the cost award but rejected the Court of Appeal's reasoning.
The Supreme Court Rejects a Categorical Prohibition
Code of Civ. Proc. §1032, subd. (b) provides that "the right to recover costs at the conclusion of a civil action belongs to the prevailing party." Madrigal v. Hyundai Motor America (2025) 17 Cal.5th 592, 602. The purpose of section 998 is to encourage litigants to settle lawsuits and it penalizes parties who reject valid statutory offers to compromise. It is also established law that section 998 "permits a party to make a subsequent offer after a previous one has bene rejected." Martinez v. Brownco Construction Co. (2013) 56 Cal.4th 1014, 1017.
Nothing in the language of section 998 prohibits a written offer from presenting two alternative sets of terms, however. Section 998 requires an offer to state the proposed terms and conditions and provide a method for written acceptance. It does not require every offer to contain only one possible form of relief. Nor does it prevent the offeree from accepting by selecting between clearly defined alternatives.
The Court also rejected the characterization of the proposal as two "simultaneous offers." Under ordinary contract principles, an offer may permit the offeree to choose between alternative sets of terms. Acceptance of either alternative forms a binding agreement. H.S. Crocker Co. v. McFaddin (1957) 148 Cal.App.2d 639, 645.
The manufacturer's proposal operated in that manner. The plaintiff could accept one alternative or the other, but he could not accept both or combine accepted terms from each. If he accepted either choice, a settlement would be formed under the terms selected. If he accepted neither, the entire offer would be rejected. That structure, the Court held, is consistent with both general contract principles and section 998's settlement-promoting purpose.
The Two-Part Certainty Test
Although alternative-choice offers are permissible, they remain subject to section 998's certainty requirements. The Supreme Court held that an offer must be sufficiently certain from two perspectives:
- First, the offeree must be able to evaluate the proposal when it is made and reach a reasoned decision about whether to accept it. The receiving party must be able to assess the concrete value of the proposal against the risks and anticipated recovery associated with continued litigation.
- Second, the trial court must be able to value the rejected offer later and compare it with the judgment or award ultimately obtained. If the terms make valuation exceedingly difficult or impossible, the offer cannot support cost shifting. Fassberg Construction Co. v. Housing Authority of Los Angeles (2007) 152 Cal.App.4th
In both instances, the court must evaluate the offer as of the date it was made, without relying on hindsight. The party seeking section 998 cost shifting bears the burden of establishing that the offer was valid and sufficiently certain.
A Framework for Evaluating Alternative-Choice Offers
The Court established a practical framework for trial courts reviewing these offers. A court must first determine whether the offer clearly presents the alternatives available to the offeree. The offer should:
- Delineate the terms attributable to each alternative
- Make the alternatives mutually exclusive
- Require the offeree to select one alternative and the method of acceptance, and
- Clearly explain how acceptance must be communicated.
If the offer satisfies these structural requirements, the court must separately consider whether either alternative could be fairly valued at the time the offer was made.
The Court found that at least one alternative must be sufficiently certain to support cost shifting. It is not necessary for every alternative to qualify. If the judgment or award exceeds the highest-valued valid alternative, section 998 cost shifting does not apply. If the result does not exceed that alternative the statutory penalty may be imposed.
This approach focuses the comparison on the most valuable enforceable opportunity the offeree rejected. In the Court's view, a party who declines a valid settlement alternative and then obtains a less favorable result has assumed the precise risk section 998 was enacted to create.
In the current case, the court did not decide whether the manufacturer's more complicated reimbursement and dispute-resolution alternative was independently valid. That issue was not presented for review. The $85,000 lump-sum alternative, however, was undisputedly capable of accurate valuation. It provided a straightforward benchmark against which the plaintiff's judgment could be measured. Since the plaintiff recovered approximately $76,000 after rejecting the opportunity to settle for $85,000, he failed to obtain a more favorable result.
The presence of a potentially invalid second alternative did not defeat the independently valid lump-sum choice. The trial court therefore properly applied section 998's cost-shifting consequences.
Flexibility Does Not Eliminate the Need for Precision
The Court viewed alternative-choice offers as consistent with section 998's purpose of promoting early settlement and reducing the expense of prolonged litigation. Allowing parties to present two paths to resolution may advance negotiations more efficiently than requiring a series of separate offers. The structure may be particularly useful when the governing law already provides alternative remedies. The Song-Beverly Act, for example, permits a qualifying consumer to elect between replacement and restitution. An alternative-choice offer may allow a manufacturer to account for those different remedies within a single settlement proposal.
The Court cautioned, however, that flexibility cannot come at the expense of clarity. A proposal containing an extensive menu of provisions that the offeree may combine, or one requiring the offeree to supply material terms, may not be sufficiently definite for section 998 purposes. Likewise, an offeror who inundates an opponent with confusing alternatives may face a finding that the offer was not made in good faith. The court limited its holding to an offer containing two discrete alternatives. It expressed no opinion on whether an offer presenting more than two choices could satisfy section 998.
Practical Implications for California Litigants
The decision offers several lessons for parties making or evaluating section 998 offers.
- Offerors should treat each alternative as a complete, self-contained settlement proposal. The document should specify which terms apply to each choice, prevent the offeree from mixing provisions, and provide an unmistakable method for selecting and accepting one alternative. Including a rapidly quantifiable option, such as a lump-sum payment, may provide a clear valuation benchmark even if the other alternative is more complex.
- Parties should also be cautious about relying on an open-ended valuation procedure. A provision that leaves material financial terms for later negotiation or adjudication may not be sufficiently certain to support cost shifting. Although one valid alternative can preserve the offer, uncertainty creates avoidable litigation over its enforceability.
- Officers, meanwhile, must evaluate each clearly presented alternative on its own merits. Rejecting an offer carries potential consequences if any valid alternative exceeds the eventual recovery. When the available time or information is insufficient, the offeree should consider requesting an extension or additional information. The court noted that an offeror's refusal to provide reasonably necessary time or information may bear on whether the offer was reasonable and made in good faith. Barba v. Perez (2008) 166 Cal.App.4th 444, 451.
- Finally, the decision underscores the potentially substantial consequences of rejecting a section 998 offer in a fee-shifting case. Here, the difference between the offer and the verdict was less than $9,000 but the cost consequences dramatically reduced the plaintiff's recoverable attorney fees and costs.
Conclusion
Gorobets expands the range of permissible settlement structures under section 998 while retaining meaningful protections against uncertain or strategically confusing offers. A party may now present two mutually exclusive paths to settlement in one statutory offer, provided the choices are clearly defined and at least one can be fairly valued when made.
The decision does not relax section 998's demand for precision. Instead, it recognizes that flexibility and certainty can coexist. For litigants and counsel, the central lesson is straightforward. An alternative-choice offer can be effective, but only if the document leaves no doubt about the choices presented, the terms attached to each choice, and the manner in which the offer may be accepted.
