Judgment on Section 998 Agreement Vacated Because Offer Did Not Contain Signature Line for Acceptance

Timothy Kowal, Esq.
  •  
March 8, 2021

In a hyper-formalistic holding in Mostafavi Law Group, APC v. Larry Rabineau, APC (D2d4 Mar. 3, 2021) No. B302344 (published), a judgment entered on an agreement under Code of Civil Procedure section 998 was vacated. The defendant's 998 offer did not include a signature line for the plaintiff to sign, though the plaintiff signed it anyway, and the court entered judgment on it. When a dispute arose about fees and costs associated with the 998 judgment, defendant moved to set it aside, noting he had failed to comply with section 998 in his own offer by not including a signature line. The trial court agreed, and vacated the judgment.

In a case of first impression, the Second District affirmed, holding a judgment may not be entered on a section 998 agreement in which the offer does not provide an acceptance provision.

Section 998 requires that an offer "shall include ... a provision that allows the accepting party to indicate acceptance of the offer by signing a statement that the offer is accepted." (Though section 998 goes on to allow that acceptance may be made "on a separate document," tending to undercut the necessity of the signature line in the offer.)

Appellant Mostafavi Law Group made a number of strong arguments, but the Second District rejected all of them.

First, appellant argued the omission of the signature line, even if erroneous, was harmless. The Second District did not conclude otherwise. But in its analysis (unsatisfying, in my view), the court concluded that harmless or not, the offer was invalid, and thus the agreement, and the resulting judgment, likewise were invalid.

The court noted that other 998 cases involving rejection of offers without acceptance provisions have held the offers invalid. The Mostafavi court considered it "a logical extension of their holdings" to conclude that the acceptance and resulting judgment on such invalid offers likewise should be considered invalid.

(But I would note that, in those prior cases, by not accepting the defective offers the offerees refused to acquiesce in the error. That is not the case here, thus making any error harmless, and establishing the aggrieved party had waived any such error. Parties typically cannot seek redress for their own invited errors.)

Appellant also argued that, section 998 aside, the parties struck a valid agreement to dismiss the lawsuit. And besides, any defect was the offeror's fault,

No dice. Relying on the California Supreme Court's decision in Martinez v. Brownco Construction Co. (2013) 56 Cal.4th 1014, 1020, when invoking section 998, all normal rules of contract are out the window.

Equity, too, is excluded from the picture. And besides, the court notes any equitable argument arguably "has been forfeited, as MLG did not raise it before the trial court. (See Bigler-Engler v. Breg, Inc., supra, 7 Cal.App.5th at pp. 331-332.)" Appellant also did not satisfy all the elements of equitable estoppel.

Takeaways: Section 998 offers are a minefield of technicalities. Normal presumptions in favor of the judgment may not apply. Be very wary.

Tim Kowal helps trial attorneys and clients win their cases and avoid error on appeal. He co-hosts the Cal. Appellate Law Podcast at www.CALPodcast.com, and publishes a newsletter of appellate tips for trial attorneys at www.tvalaw.com/articles. Contact Tim at tkowal@tvalaw.com or (714) 641-1232.