In Gorobets v. Jaguar Land Rover North America, LLC (2026) 20 Cal. 5th 501, the California Supreme Court considered whether a settlement offer that permits an offeree to choose between two distinct sets of settlement terms as a form of acceptance can qualify as a valid offer for cost-shifting purposes under California Code Civil Procedure section 998.
Factual and Procedural Background
Plaintiff Gorobets leased a vehicle from Jaguar North America and within six months, the vehicle developed various defects that remained unresolved despite Jaguar’s repeated repair opportunities. After Jaguar failed to replace the vehicle or provide restitution, Plaintiff filed a lawsuit under the Song-Beverly Act for breach of warranty and related claims. Jaguar thereafter served a Section 998 offer containing two mutually exclusive settlement options:
(1) Lump-sum option: Jaguar would pay Plaintiff $85,000 in exchange for the vehicle’s return with clear title; or
(2) Restitution-based option: Jaguar would reimburse Plaintiff for recoverable expenses—including transportation charges, manufacturer-installed options, financing and rental charges, taxes, registration fees, other official fees, and incidental or consequential damages, and any amount owed on a loan or other amount necessary for the return of the vehicle with a clear title. Under this option, Plaintiff was required to itemize and substantiate the reimbursement amounts claimed. Jaguar would pay all undisputed amounts after submission of the itemization, and Plaintiff could select a specified judicial process to resolve any dispute over the remaining amounts.
Under either alternative, Jaguar would waive its costs and pay either $7,500 in attorney fees and costs, or at Plaintiff’s election, have a reasonable amount determined by the court, with Plaintiff designated as the prevailing party. Regardless of the option chosen, Plaintiff would request a dismissal of the action with prejudice within five business days after receiving payments. The last page of the offer included a table of each alternative option, and Plaintiff was required to check a box next to the set of terms selected and to sign the form. Plaintiff did not accept either option and the offer expired. A jury subsequently awarded Plaintiff $76,155.27 in damages and Plaintiff sought to recover $76,118.31 in general costs, in addition to, attorneys fees. Jaguar asserted Plaintiff was not entitled to post-offer costs because of the rejection of the 998 offer and failing to achieve a more favorable outcome—seeking $14,612.17 of its post-offer costs and limiting Plaintiff to pre-offer costs. Plaintiff challenged the offer as invalid because its terms lack sufficient specificity to permit accurate valuation.
The trial court held that Jaguar’s 998 offer was valid because the $85,000 option was “sufficiently specific and unconditional”, imposed the cost-shifting penalty, and limited Plaintiff to his pre-offer costs of $5,238.22 and pre-offer attorney fees of $22,492. The Court of Appeals affirmed. Although the Court of Appeals held that section 998 prohibits a party from making “multiple offers to the same party at the same time,” it determined that the restitution-based alternative was “independently” invalid. This left just one valid offer – the $85,000 lump sum, which exceeded Plaintiff’s recovery.
The California Supreme Court upheld the award, holding that such offers with independent, settlement alternatives can be valid so long as: (1) the offer is structured so that it clearly presents the alternatives available to the offeree, and (2) at least one of the two independent sets of terms is sufficiently certain to permit an accurate valuation at the time the offer is made. The Court also rejected the appellate court’s reasoning, noting that the statutory language of section 998 does not prohibit an alternative-choice offer, and an offer that requires selecting between sets of terms is not inherently uncertain nor defeats of the purpose of section 998.
Key Takeaways
- Using Alternative Options to Promote a Realistic Settlement: Presenting alternatives can help parties explore settlement preferences more efficiently. Select terms you, as the employer, are prepared to perform, and support each alternative with the available damages evidence.
- Clearly Identify Each Alternative & Method for Acceptance for Each: Identify each proposed settlement alternative, specify the terms applicable to each, and provide a clear method for selecting and accepting one option. Do not leave material terms open for future negotiation.
- Use a Reliable Valuation Method: If proposing a monetary alternative, state the amount and payment terms precisely. Account for how any benefits, releases, or other obligations affect its value, and ensure the employee has sufficient information to meaningfully evaluate the offer.
- Address Attorneys’ Fees and Costs Expressly: State whether the settlement amount includes fees and costs, provides a fixed additional amount, or excludes them (leaving it for judicial determination).
- Assess Exposure Based on the Claims Alleged: Evaluate the applicable FEHA provisions, wage statutes, and any contractual fee provisions before relying on an offer to recover defense costs or limit the employee’s fee recovery.
- Promptly Evaluate Employee Offers: Analyze each alternative, the acceptance deadline, and the financial consequences of rejection. Do not assume a section 998 offer is unenforceable merely because it presents alternative settlement options.
Please contact a Nukk-Freeman & Cerra team member if you have any questions or would like further assistance.