One March 20, 2025, the California Supreme Court ruled in Madrigal v. Hyundai Motor America that California Code of Civil Procedure Section 998 can bar plaintiffs from recovering litigation costs if they enter a pre-trial settlement that is less favorable than a prior defense offer. 

The general rule in California is that a “prevailing party” may recover all litigation costs as a matter of right. CCP Section 998 modifies this general rule in cases where the defense makes a qualifying settlement offer. Under Section 998, if a plaintiff rejects or fails to timely accept a qualifying settlement offer and then “fails to obtain a more favorable judgment or award,” the plaintiff may no longer recover post-offer litigation costs. This rule is designed to encourage reasonable pre-trial settlements. Parties often contract around this rule by providing for the allocation of costs and fees in settlement agreements.Continue Reading California Supreme Court Clarifies that CCP Section 998’s Cost-Shifting Rule Applies to Pre-Trial Settlements