The Recorder, “California Supreme Court Opens the Door to Alternative-Choice Section 998 Offers,” by Katherine S. Catlos, Esq., 9-8-2026

Kaufman Dolowich’s Katherine S. Catlos, San Francisco Partner, recently authored an article in The Recorder examining a recent California Supreme Court decision that gives litigants greater flexibility in structuring Section 998 settlement offers by permitting alternative-choice offers, while establishing safeguards to ensure that such offers remain sufficiently certain and capable of valuation.

Read the full article below. 

California Supreme Court Opens the Door to Alternative-Choice Section 998 Offers

By Katherine Catlos, Kaufman Dolowich LLP

Sept. 8, 2026

A settlement offer under Code of Civil Procedure Section 998 can alter the allocation of litigation costs and the economics of continuing a lawsuit through trial.

But how much flexibility does a party have in structuring that offer? In Gorobets v. Jaguar Land Rover North America, No. S287946 (Cal. Aug. 6, 2026), the California Supreme Court answered that question, unanimously rejecting a categorical rule that would invalidate a Section 998 offer simply because it gives the recipient a choice between two alternative, independent offers to settle.

The decision gives California lawyers more flexibility under Section 998 and establishes safeguards to ensure that alternative-choice offers remain sufficiently capable of valuation for Section 998’s cost-shifting framework.

Section 998 Is About More Than Settlement

Section 998 is designed to encourage the early settlement of lawsuits by attaching potential financial consequences if a party rejects a qualifying offer.

A party makes a written offer to resolve the case on specified terms including a provision allowing the recipient to accept by signing the offer. If rejected, a qualifying offer may alter the ordinary allocation of costs when the offeree fails to obtain a more favorable judgment or award. Depending on which party made the offer, those consequences can include changes to the recovery of post-offer costs, including potential liability for attorney fees and expert witness fees, these consequences explain why the validity of Section 998 offers can be significant.

Two Paths to Settlement

The dispute in Gorobets arose under California’s Song-Beverly Consumer Warranty Act, where the plaintiff leased a new 2016 Land Rover LR4 that developed defects within the first six months that repair attempts did not resolve. In October 2020, Jaguar Land Rover North America served a Section 998 offer, its second in the case, presenting two alternatives: an $85,000 lump-sum payment for return of the vehicle with clear title, or reimbursement for specified Song-Beverly-related categories, including transportation charges, manufacturer-installed options, loan interest, rental charges and collateral charges such as sales tax, license, registration and other official fees. The reimbursement alternative waived the statutory mileage offset, required the plaintiff to substantiate claimed amounts and supplied procedures for resolving reimbursement disputes. Under either alternative, the manufacturer would waive its own costs and pay $7,500 in attorney fees and costs or, at the plaintiff’s election, allow the court to fix a reasonable amount with the plaintiff designated as the prevailing party. To accept, the plaintiff had to check a box next to one alternative and sign the offer.

The plaintiff accepted neither alternative and allowed the offer to lapse. A jury later awarded $76,155.27 in net damages, consisting of base payments, finance charges, taxes and fees and incidental damages, reduced by an offset for vehicle usage. The jury found no willful violation of the Act, so it awarded no civil penalty, which is why the verdict landed below the $85,000 alternative and placed the offer’s validity at the center of the post-judgment cost dispute.

In the post-judgment dispute, the trial court found the offer valid, reasoning that the plaintiff had been given a sufficiently specific and unconditional $85,000 alternative that he chose not to accept. A divided Court of Appeal affirmed the awards but reached them by a different route, characterizing the proposal as two simultaneous offers and holding that Section 998 does not permit multiple offers made to the same party at the same time. It then concluded that the reimbursement alternative was independently incapable of valuation, leaving only the lump-sum alternative for comparison. A partial dissent agreed that simultaneous offers cannot be sufficiently certain and would have reversed the post-offer cost award outright.

The Supreme Court rejected a categorical prohibition and held that a proposal permitting the offeree to select between two distinct sets of settlement terms is a single offer, not two simultaneous offers, because only one set may be accepted. The Court set a two-step inquiry. First, the offer must be structured to delineate the specific terms attributable to each choice, make the choices mutually exclusive and state how acceptance is to be communicated. Second, at least one alternative must be sufficiently certain to permit valuation as of the time the offer was made, without the benefit of hindsight. The comparison then asks whether the offeree failed to obtain a judgment or award more favorable than the highest-value valid alternative, and not, as the Court of Appeal had framed it, whether the offeror fared better or worse than the verdict.

The Court’s decision focused on structural clarity and fair valuation, not the mere presence of settlement choices. The stakes of that ruling were considerable. Because the verdict did not exceed the $85,000 alternative, the plaintiff, who had sought $76,118.32 in costs and $543,413.34 in attorney fees as the prevailing buyer under the Act, was limited to pre-offer costs of $5,238.22 and pre-offer attorney fees of $22,492, and was ordered to pay the manufacturer $14,591.77 in post-offer costs. The Supreme Court affirmed that portion of the judgment while rejecting the Court of Appeal’s categorical rule against alternative-choice offers.

Flexibility Comes With Drafting Risk

After Gorobets, counsel have greater room to structure alternatives that reflect the realities of a dispute. But more choices can also create uncertainty.

The Court did not decide whether an offer presenting more than two discrete settlement choices would satisfy Section 998, although it acknowledged that such an offer could conceivably qualify. It cautioned that any alternative a party later seeks to enforce must itself be independently capable of accurate valuation, both by the offeree when the offer is made and by the court in hindsight, and that the offer as a whole must satisfy the structural clarity requirements. Additional choices therefore increase drafting risk without providing greater cost-shifting protection, unless each choice a party intends to rely on independently satisfies that burden.

Counsel should thus ask before serving an alternative-choice offer: If the case proceeds to judgment, will a court be able to determine whether the recipient obtained a more favorable result?

Draft With the End in Mind

An end-in-mind perspective may be the most useful takeaway from Gorobets.

When drafting an alternative-choice offer, counsel should ensure the choices are clearly delineated and mutually exclusive, so that the offeree may accept one but not mix and match terms among them. The offer should explain how acceptance is to be communicated.

Counsel should draft each alternative with sufficient precision to support enforcement if accepted. For Section 998 cost-shifting purposes, however, the offer as a whole must satisfy the structural requirements, and at least one alternative must be sufficiently certain and capable of valuation.

Counsel should then consider valuation from both ends of the process. A valid alternative should permit the offeree to assess its value when the offer is made and allow a court, after judgment, to determine its value as of the time it was made, without the benefit of hindsight. Monetary terms should be ascertainable. Nonmonetary terms should be described precisely enough to permit fair valuation. Conditions should not leave essential terms uncertain in a way that prevents meaningful evaluation or later valuation.

Because the offeror bears the burden of establishing the offer’s validity when seeking Section 998 cost shifting, drafting ambiguities can work against the party hoping to invoke the statute.

Counsel evaluating an opponent’s offer should conduct the same analysis in reverse. The existence of multiple choices, standing alone, is no longer a basis for treating the offer as categorically invalid. The more productive questions concern structural clarity, certainty, fair valuation and, where multiple alternatives are valid, comparison against the highest-value, valid alternative.

For business defendants, the decision creates an opportunity to align Section 998 strategy with commercial settlement objectives. A defendant might pair a fixed monetary alternative that provides a readily ascertainable benchmark for cost shifting with another option tailored to the dispute. This flexibility may help businesses pursue commercial settlement objectives while preserving Section 998’s potential cost protections.

More Flexibility—and New Questions

Gorobets removes a categorical barrier to alternative-choice settlement structures, but it does not eliminate Section 998 validity disputes. Future challenges may focus on structural clarity, whether an alternative is independently valid and sufficiently certain, and whether its value can be determined as of the time the offer was made.

Katherine S. Catlos is a partner in the San Francisco office of Kaufman Dolowich. She represents businesses in commercial and employment law litigation and other matters before California state and federal courts.

Reprinted with permission from the Sept. 8, 2026 edition of “The Recorder” © 2026 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or reprints@alm.com.