October 31, 2019 Articles

California Supreme Court Rules on Timing for Requesting Arbitration

The court held that requests for costs under California Code of Civil Procedure section 998 are timely if raised within 15 days of an arbitrator’s final award.

By Carolyn G. Burnette and Casey M. Curran

California Code of Civil Procedure Section 998

Under California law, a prevailing party is generally entitled to recover litigation costs. California Code of Civil Procedure section 998 widens the scope of this general principle. It more broadly provides that a non-prevailing party may recover costs if (1) the party made a legally compliant pretrial (or pre-arbitration) settlement offer, (2) the offer was rejected by the opposing party, and (3) the opposing party failed to obtain a trial (or arbitration) award more favorable than the offer. In other words, where a party makes a timely, good-faith settlement offer that the opposing party does not beat at trial (or arbitration), section 998 allows the offering party to recover some costs even if the offering party does not ultimately prevail on the merits. In such circumstances, the prevailing party is generally denied an award of post-offer costs. The policy objective of section 998 is to avoid the time and expense of protracted litigation and to encourage parties to settle.

Until now, practitioners have had an ongoing struggle with ambiguity as to the proper timing of requests for costs under section 998 in the context of arbitration. On the one hand, raising a section 998 offer before an arbitrator reaches his or her final decision could create prejudice by influencing the arbitrator’s assessment of the merits. On the other hand, the arbitrator’s jurisdiction typically terminates when he or she issues a final decision, which could render any subsequent request for costs untimely. Fortunately, the California Supreme Court settled this question in Heimlich v. Shivji, 7 Cal. 5th 350 (2019). 

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