Avoiding the Pitfalls: What K.M. v. Grossmont Union Teaches About Drafting Enforceable Section 998 Offers

California’s Code of Civil Procedure section 998 (Section 998) is a powerful tool. Used correctly, it can shift thousands of dollars in litigation costs and drive parties toward early settlement. However, the Fourth District Court of Appeal’s recent decision in K.M. v. Grossmont Union makes clear that imprecision can cost you everything. If the offer is unclear, specifically with respect to an accompanying Civil Code section 1542 release, the Section 998 offer risks invalidation. Imprecision and ambiguity jeopardizes the intended cost-shifting benefits of this offer.

This case is a cautionary tale. It highlights how even a generous offer can fail if it leaves too much to the imagination. Here’s what happened, and what attorneys need to do differently.

Civil Procedure Code section 998 establishes a cost-shifting framework to encourage settlement. If a party refuses a reasonable pretrial offer and fails to obtain a more favorable result at trial, that party may not recover its post-offer costs and may even be required to pay the offeror’s post-offer costs, including expert witness fees. See, e.g., Ignacio v. Caracciolo, 2 Cal. App. 5th 81, 86 (2016); Elite Show Services, Inc. v. Staffpro, Inc., 119 Cal. App. 4th 263, 268 (2004). The statute rewards parties who make realistic offers to resolve litigation early. However, there is a catch: to invoke its benefits, the offer must be valid and enforceable. That burden falls squarely on the offering party. Ignacio, 2 Cal. App. 5th at 86.

A typical Section 998 offer may require the execution of a release, often waiving “known and unknown” claims under Civil Code section 1542, and sometimes a more detailed settlement agreement. If the offer refers to such documents, the courts require that the terms be included or clearly disclosed. As seen in K.M., failure to do so may result in the offer being deemed invalid—eliminating the costshifting mechanism entirely.

In K.M., several former students sued the Grossmont Union High School District for negligence, negligent supervision, negligent hiring or retention, negligent failure to warn, train, or educate students, intentional infliction of emotional distress, and sexual harassment under Civil Code section 51.9, arising from alleged sexual abuse by their high school drama teacher.

The District served Section 998 offers requiring the plaintiffs to execute a settlement and release agreement. However, the offers did not attach the agreement or describe its terms in any detail.

Plaintiffs rejected the offers and proceeded to trial. Although they prevailed, the jury awarded less than what had been offered. That should have triggered Section 998’s costshifting, but it didn’t.

Why? The trial court—and, later, the court of appeal—found the offers invalid. Without the actual agreements or a clear explanation of what the plaintiffs were expected to sign, the offers were unenforceable. The District was ultimately responsible for costs it might have otherwise avoided.

The appellate court didn’t mince words: a party needs to be able to assess a Section 998 offer as it stands. An offer that requires execution of a settlement agreement or release—without attaching the document or explaining its terms—leaves the offeree to speculate about material obligations. The court drew heavily from Sanford v. Rasnick, 246 Cal. App. 4th 1121 (2016), where a Section 998 offer was invalidated because it required execution of a settlement agreement and release without disclosing the terms. There, the court explained: “A release is not a settlement agreement, and the [defendants] have cited no case, and we have found none, holding that a valid . . . [Section] 998 offer can include a settlement agreement, let alone one undescribed and unexplained.” Id. at 1130.

The court also recognized that settlement agreements frequently contain waivers of all “known and unknown” claims under Civil Code section 1542—terms that can significantly affect a litigant’s rights. The court in K.M. emphasized that merely referring to a 1542 waiver, without detailing it, places the plaintiff in a position where they are “left to guess at what terms [the offerors] might insist upon.” Sanford, 246 Cal. App. 4th at 1131. Without specific language or the attached agreement itself, the offers were deemed fatally uncertain.

The message from K.M. is simple: clarity is king. If you’re drafting a Section 998 offer that refers to a settlement agreement or release, make sure the terms are either fully included or clearly described. An unclear or incomplete offer invites judicial scrutiny and jeopardizes the ability to shift costs—even when the offer is otherwise generous.

To ensure enforceability, practitioners should follow these best practices:

• Attach any referenced agreement: If your offer requires execution of a separate settlement agreement or release, attach the full text to the offer.

• Avoid vague phrasing: Terms like “mutually agreeable settlement agreement” or “standard release terms to follow” are legally insufficient.

• Be specific with section 1542 waivers: These waivers can be valid, but only if they are disclosed upfront. Courts view overbroad or hidden waivers with skepticism.

• Keep it self-contained: If possible, include all material terms within the body of the Section 998 offer to eliminate ambiguity.

• Record all terms clearly: Ensure that any negotiated terms prior to the offer are clearly integrated into the offer itself. Unwritten understandings will not save an ambiguous offer. If it matters, put it in writing.

This guidance is especially critical in cases involving significant expert fees or lengthy trials. A prevailing plaintiff or defendant who missteps in drafting a Section 998 offer may find that the failure to follow these rules eliminates tens or hundreds of thousands of dollars in recoverable costs. The financial risk is both real and avoidable.

K.M. v. Grossmont Union is more than a case citation – it serves as a compelling roadmap when drafting a Section 998 offer. Courts expect clarity, transparency, and completeness. Clarity is not a luxury, it is a necessity. Courts will not enforce offers that leave the offeree guessing at essential terms. The policy behind Section 998 demands certainty to promote meaningful settlement decisions and fair cost consequences.

So don’t just draft with care; draft with foresight. Because when it comes to Section 998, precision isn’t just good legal writing, it is the difference between cost-shifting and costeating.

Rachel E. Lustig is a Civil Litigation Defense Attorney at Yoka & Smith, LLP, and can be reached at rlustig@yokasmith.com.

This article first appeared in Orange County Lawyer, November 2025 (Vol. 67 No. 11), p. 46. The views expressed herein are those of the author. They do not necessarily represent the views of Orange County Lawyer magazine, the Orange County Bar Association, the Orange County Bar Association Charitable Fund, or their staffs, contributors, or advertisers. All legal and other issues must be independently researched.