In a pivotal ruling for California civil litigation, the California Supreme Court ruled on August 6, 2026, that Code of Civil Procedure (“CCP”) section 998 settlement offers can present alternative sets of terms within a single offer. Overturning a decision by the Second Appellate District Court of Appeal, the Supreme Court held in Gorobets v. Jaguar Land Rover North America, LLC (S287946) that "alternative-choice" section 998 offers are not categorically prohibited under California law.
For California employers, the decision expands practical tools available to structure settlement proposals, create meaningful litigation risk for opposing parties, and manage post-offer cost exposure.
Background: Multiple Choice Settlement Proposal Rejected Prior to Jury Verdict
Under CCP section 998, a party who rejects a valid statutory offer to compromise and fails to obtain a more favorable judgment at trial forfeits post-offer costs and must pay the offering party’s post-offer costs, with some exceptions. Historically, California lower courts required section 998 offers to be sufficiently certain and specific so that the offeree and trial court could accurately evaluate the offer’s monetary value at the time it was made.
In Gorobets, the defendant car manufacturer served a single section 998 offer proposing two distinct, mutually exclusive settlement options:
- Option 1: A simple lump-sum cash payment of $85,000.
- Option 2: A statutory reimbursement model where the plaintiff itemized expenses, with disputed amounts left to court determination or dispute resolution.
The plaintiff rejected both options and eventually won a jury verdict of $76,155.27. The trial court enforced cost-shifting penalties against the plaintiff. However, the Court of Appeal struck down the cost-shifting, ruling that presenting alternative choices creates two "simultaneous offers" that are inherently uncertain and categorically invalid under section 998.
Supreme Court: Alternative Offers Are Valid if Structured Clearly and Valuation Is Possible
Writing for a unanimous court, Justice Corrigan rejected the Court of Appeal's categorical ban. The Supreme Court clarified that an alternative-choice proposal is a single offer providing multiple avenues for resolution at once under general contract principles.
The Court adopted a two-part test to determine whether an alternative-choice section 998 offer is valid for cost-shifting. First, the offer must clearly delineate the specific terms attributable to each mutually exclusive choice and explain how the offeree accepts. Second, at least one of the proposed alternative sets of terms must be sufficiently certain to permit an accurate valuation at the time the offer is made.
If these criteria are met and the offeree fails to achieve a judgment at trial exceeding the highest valued valid alternative, cost-shifting penalties apply. The court noted that trial judges do not need to evaluate complex or invalid options within the offer if a single valid choice (such as the $85,000 lump sum) easily exceeds the ultimate trial verdict.
What Does This Decision Mean for California Employers?
Statutory settlement offers under section 998 remain a vital tool for employers seeking to mitigate litigation exposure, cut off fee-shifting liabilities, and resolve workplace disputes before they get to trial. The Gorobets ruling clarifies several practical takeaways for businesses defending litigation in California:
- Employers are no longer forced to choose between offering a flat lump-sum payout or negotiating a structured framework. Both options can be presented in a single section 998 offer.
- The court does not require offers to be “simple,” and ministerial entry of judgment on acceptance is distinct from any later contract‑interpretation dispute.
- To preserve validity, an alternative choice section 998 offer must be clearly structured as a single proposal with mutually exclusive choices and a simple acceptance mechanism, while featuring at least one option that is sufficiently definite for the offeree to evaluate, and the court to later measure, at the time the offer is made.
- Allowing alternative choices enables defense counsel to address varying plaintiff preferences simultaneously “potentially shortening the path to common ground.”
For questions regarding Section 998 offers or assistance with structuring litigation settlement proposals, reach out to the author or your preferred CDF attorney.
