Wednesday, April 13, 2016

Net Monetary Recovery II

DeSaulles v. Comty. Hosp. of the Monterrey Peninsula, No. S219236 (Cal. Mar. 10, 2016)

The Supreme Court granted review of the DeSaulles case that I posted about a little less than two years ago. As a quick recap, the parties entered a settlement where the plaintiff got some cash, but a zero-dollar judgment was entered for Defendant. (The weird setup permitted the manufacture of a judgment so Plaintiff could appeal an unfavorable in limine ruling.) The settlement agreement didn’t say anything about costs. So the question was, who was the prevailing party under Code of Civil Procedure § 1032? Given that the statute describes the prevailing party as someone who wins a “net monetary recovery,” it was unsurprising (to me at least) that it was Plaintiff. But in getting to that result, the Court of Appeal disagreed with some earlier inconsistent precedent. Hence the granted review.

The Court, with Justice Liu writing for a 5-2 majority, affirms the Court of Appeal. “Net monetary recovery” is a pretty broad concept that can include a payment of cash under a settlement. The Court further rejects the argument that § 1032(a)(4)’s alternative definition—a “defendant in whose favor . . . dismissal is granted”—applies to cases where a judgment of dismissal is entered as part of a settlement where defendant nonetheless pays plaintiff some money. Reviewing the history of that language, the court finds that it was intended to ensure that a defendant could recover costs if plaintiff unilaterally dismissed. It was not intended to apply when the dismissal was accompanied by a monetary payment.

Justice Kruger dissents, joined by Justice Werdegar. She agrees that a plaintiff who gets a settlement has won a net monetary recovery. But she’s not so comfortable ignoring what she reads as the plain meaning of the § 1032(a)(4)’s reference to a defendant who obtains a dismissal. This case was, in fact, dismissed. (Given the payment of cash, the majority responds that this is form over substance.) That, of course creates a conundrum, because it would effectively mean that both parties meet different definitions of
prevailing party.

But Justice Kruger reads the next sentence in § 1032(a)(4) to solve that problem. It says that “in situations other than as specified, the ‘prevailing party’ shall be as determined by the court, and under those circumstances, the court, in its discretion, may allow costs or not and, if allowed may apportion costs between the parties on the same or adverse sides pursuant to rules adopted under Section 1034.” So, according to the dissent, if both sides meet the definition of prevailing, the trial court has the discretion to decide who prevailed and how to allocate costs between the parties. The dissent would thus remand for such a determination in the first instance.


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