Posted on January 2nd, 2020
Full Transcript Below:
What’s happening fellow entrepreneurs? Today I want to talk about CCP 998. That’s a statutory offer to compromise.
It’s a tool that’s used in California by defense attorneys mostly, I’m sure some plaintiff’s attorneys use it too, but specifically for defense attorneys to try to settle a matter when it looks like it’s not going to be settled.
I might’ve talked about a CCP 998 in a previous video a long time ago but I’m always getting questions about this and I just thought it’d be good for another video, especially considering the last question I just got about it today was from another attorney, so that’s what gave me the idea to make this video.
When you’re in the middle of a litigation, and I’m going to speak specifically about employment claims but CCP 998 can be used in various types of litigation, but since what I do is employment defense that’s the context I’m going to put it in.
When you have a case and you’re trying to get out of it, a lot of times people are trying to get out of it because either they know they’re going to lose or it just doesn’t make sense to stay in the case financially.
If a case is worth 50K let’s say, and it’s going to cost you 200,000 to go all the way to trial, then what’s the point.
It doesn’t make sense to spend 200K on legal fees and still take that risk of potentially having a judgment against you when you can get out of it much sooner for a smaller number.
There’s two ways to get out of it sooner, typically. One way would be just to settle, and the other way would be to use a CCP 998.
Now let me tell you the pros and cons of both, and then it’ll make it clear what a CCP 998 is.
Let me start with a settlement. The good of a settlement is that it’s negotiated, it’s a very particular number, whatever you’re going to end up paying, you know what it is, it’s not some future number that a jury or a judge decides you’re going to pay.
And the other great thing about a settlement is that a lot of times you can negotiate payment plans or make it easier on you.
So even if the number is too big, let’s say 50,000 is just too big of a number and that’s what the settlement is going to be, well you can say, “Hey, let’s do something up front in payments,” or whatever you can get the other side to do that makes it as easy as possible for you to pay. So that’s the great thing about a settlement.
The problem with a settlement a lot of times is if the other side doesn’t want to settle, there’s no pressure. They could just say, “Sorry, we want to go to trial,” or, “We’re not settling for that amount,” or, “We’ll only settle for this” … gargantuan number that doesn’t make sense for you to settle or you wouldn’t be able to settle anyway because you can’t pay that. That’s the problem with a settlement.
The other tool is the CCP 998. Again, this is a statutory offer to compromise. So you make the offer and then the attorney on the other side, and obviously with the plaintiff’s input, gets to decide if they’ll accept it or reject it. The bad part about a CCP 998 is if they accept the offer. If you say, “Hey, I’ll give you 50 grand,” and they say, “Yes, we accept,” then it becomes a judgment. So you’re settling it but it’s really a judgment.
And so they’re not required really to negotiate with you for terms or whatever. You can’t say, “Hey, 50,000 over a year.” It’s 50,000 that’s what goes into the offer to compromise. And then it acts as a judgment and they can start collecting.
Now however, in between there, if you have a reasonable attorney on the other side, you could say, “Look, you can try to collect because now this is a judgment but we’re not going to make it easy for you to collect, or we can work this out.
You’ve accepted 50,000, let’s make the payments over the year.” That’s the bad part about a CCP 998 is that they’re not required to take any terms; it’s just a judgment once they accept.
The good thing about a CCP 998 and why people use it as a tool is that if I make a CCP 998 offer and they reject it, if they don’t win at trial more than what I’ve offered them in the CCP 998 at the time that I offered them, it cuts off all the attorneys going forward for them.
A good CCP 998 should include whatever offer you’re making to settle it, which doesn’t have to be what the liability is; it can be whatever it is, and what you think the attorney’s fees are on the other side up to that point.
That’s why it’s good to do a CCP 998 closer to the beginning of a case not towards the end because then there’s no motivation.
Think about it from the perspective of the attorney on the other side. He gets a CCP 998. It’s a good offer. He may or may not win more than what you’ve offered him if you’ve given a good CCP 998 and now he has risk.
So I’m rejecting this CCP 998; if I don’t win then I’ve done all of this work over all of this time and I potentially am not going to get my legal fees for that. The legal fees is kind of what makes these employment claims so difficult for employers, because not only do they potentially get what a jury or a judge awards if they award them anything, but if they win even $1, all of those attorney’s fees on the other side.
So now you’ve paid your attorney, let’s say 150,000, well that’s going to be at least what it is on that side. So now that’s 300,000 and then whatever the award is.
That’s why there’s so many attorneys that go into this type of law because they understand that not only are they going to get a third of whatever the award is if they win, but they’ll also get all their attorney’s fees, which they don’t have to share with anybody.
That’s all theirs. Now with the CCP 998 you’re potentially putting them at risk for that.
Let’s say they win $50,000 or less than $50,000, if you made an offer to compromise at 50 and they didn’t win more than that, so he doesn’t get his attorney’s fees, he just gets a third of that $49,000.
That’s not very much money for all the work that he’s done over a year and a half. So that’s why that puts them at risk, and that’s basically what a CCP 998 is.
All right, hopefully I put that in a way that people understand and if not, you can comment below and ask me to explain further and maybe I’ll make another video about it if it’s not a good enough explanation.
All right everybody, until next time be productive.
