Who Pays for an Unused PowerPoint Deck?

Segal v. Asics Am. Corp., No. S263569 (Cal. Jan. 13, 2022)

The costs statute—Code of Civil Procedure § 1033.5—generally permits a prevailing party to recover as a cost trial graphics expenses, to the extent “they were reasonably helpful to aid the trier of fact.” § 1033.5(a)(13). Those costs also can arguably be recovered under § 1033.5(c)(4), which gives the trial court discretion to award costs that are reasonably necessary to the conduct of the litigation rather than merely convenient or beneficial to its preparation.” The question in this case is whether expenses incurred for presentations that were never used are recoverable. Decisions of the Court of Appeal are all over the map on that issue, so the Supreme Court granted review to resolve the question.

The § 1033.5(a)(13) question is pretty easy. Absent some kind of jural telepathy, it is not logically possible that trial graphics that have not been used were helpful to the trial of fact. The Court runs all the traps on this—statutory interpretation, legislative history, etc.—and lands on the obvious point.

The availability of a discretionary award under § 1033.5(c)(4) is a little closer. But, looking to the structure of the statute, the Court explains that subdivision (a) describes costs the court must award, and subdivision (b) describes costs the court must not award, and everything else is subject to the court’s discretion under subdivision (c). Although the non-prevailing Plaintiff argues that this creates an incentive to run up costs, the Court notes, specifically, that an award under (c) requires the trial court to find both that the expenses were both necessary and reasonable.

Affirmed.

Good Enough for Real Docs

Hooked Media Grp. v. Apple Inc., No. H044395 (D6 Sept. 30, 2020) 

The Court of Appeal here affirms a trial court’s summary judgment in a case alleging that a certain computer company poached some engineers from a company it had previously considered acquiring. For anyone who practices in this space, it’s a useful opinion delimiting the typical causes of action. (There’s also a weird concurrence that, so far as I can tell, basically agrees with the Court’s opinion in every essential respect.)

A few things of procedural note, however. First, the Court makes a point on authentication that, in the early days of this blog, I once complained was unaddressed in a published case. (Although I later discussed a case that resolved the issue.) Namely that an attorney declaration attesting that documents were received from the opposing party in discovery is adequate to authenticate those documents when they bear facial indica that they actually came from the producing party. 

Second, the Court affirms the trial court’s refusal to tax almost $100k in e-discovery costs. Although the appellant raised some cogent points as to why the costs were unnecessary, they weren’t enough to overcome the deference given to the trial court on cost issues.

Affirmed.

Statute Solving Split Is a Clarification, Not a Change

Scott v. City of San Diego, No. D074061 (D4d1 Aug. 1, 2019)

While this appeal was pending, the Legislature amended the FEHA’s costs provision to make clear that costs could not be awarded against a plaintiff who brings a non-frivolous claim, even when that plaintiff fails to beat a Code of Civil Procedure § 998 offer. The Court of Appeal here holds that the amendment was a clarification, not a change, in the law, such that the standard could be applied to pre-amendment claims. At the time the fees were awarded, there was a split of authority in the Court of Appeal interpreting the pre-amendment statute. Plus, the legislative history of the bill contained strong statements of intent to clarify, not change, the law. That was enough to get the court here comfortable with applying the “clarified” standard to the cost award in this case.

Reversed.

Never Mind

People v. Native Wholesale Supply Co., No. C084031 (D3 Jul. 12, 2019)

UCL case brought by the AG against a Company run by an Indian tribe for selling a boatload of illegal cigarettes. Bunch of Indian commerce issues that are beyond my ken. But briefly, two procedural issues to note.

Land Use Group Gets Costs and Fees for Killing B&B

Friends of Spring Street v. Nevada City, No. C086563 (D3 Apr. 4, 2019)

Plaintiffs challenged both a local zoning ordinance and a City’s decision to permit an Applicant to run a B&B in a residential area—a nonconforming use under that ordinance. Plaintiffs lost the facial challenge, but—after an intervening appeal—won the as-applied. They seek to recover their costs, see Code of Civil Procedure § 1032, and their attorneys’ fees under the private attorney general doctrine, see § 1021.5. The trial court denied both, finding that the split decision meant there was no prevailing party. 

So far as costs go, when a plaintiff obtains only non-monetary relief, § 1032(a)(4) permits the court to decide who is the prevailing party for cost award purposes. Generally, the court looks to “whether the party succeeded at a practical level by realizing its litigation objectives . . . and the action yielded the primary relief sought in the case.” Because Plaintiffs were successful in getting the decision approving the B&B reversed, they met that standard and should have been awarded costs. The fact that Applicant could potentially re-apply to the City at some point in the future does not change that fact.

Similarly, Plaintiffs should not have been denied their fees under § 1021.5. Plaintiffs conveyed an important benefit on the public. Generally, they vindicated the application of local zoning law. And in particular, they obtained a ruling that upheld the intent of a local ballot initiative that was the basis of their as-applied challenge. But the trial court made no finding on the other element of § 1021.5—whether the necessity and financial burden of private enforcement make a fee award appropriate—so it will need to decide that on remand.

Reversed and remanded. 

$1m+ Appellate Bond Cost Award Affirmed.

Rostack Inv., Inc. v. Sabella, No. B286069 (D2d8 Feb. 5, 2019)

To say enforcement of a money judgment pending appeal, the defendant needs to post an undertaking. Code Civ. Pro. § 917.1(b). (Or if he or she is flush, a cash deposit will do. § 995.710.) To account for postjudgment interest, the undertaking needs to be 150 percent of the judgment, if posted by a licensed surety insurer. Otherwise it’s double. The one mitigator is that the cost of a bond, interest on it, and the costs of financing it are recoverable as an appellate cost if the case gets reversed. Cal. R. Ct. 8.278(d)(1)(F).

Here, Plaintiff won a pretty big judgment—$52 million—in some kind of collections matter. Staying enforcement required Defendant to post a $77 million bond, assuming it was from a licensed surety. The judgment got reversed. So now Defendant is seeking the bond costs—$1.4 million—as costs on appeal. Plaintiff says that’s unreasonable, particularly since Defendant, who is apparently of some means, could have just posted cash, or financed the bond differently. The trial court disagreed and denied a motion to tax. It entered the cost award as a judgment. Plaintiff appealed.

There’s a threshold appealability issue. The underlying case is still ongoing. Plaintiff says the cost award needs to wait to be wrapped into a final judgment. But that’s not right. Unlike trial court costs, which are part of a merits judgment, costs awarded by the Court of Appeal (the amount of which are decided by the Superior Court on remand) are a collateral issue that get entered as an independent judgment. The case law seems pretty clear on that.

On the merits, the question comes down to whether the bond costs were reasonable and necessary. Cal. R. Ct. 8.278(d)(1). The record here contained substantial evidence that Defendant had explored a variety of alternatives. The Court explains that it wasn’t unreasonable for Defendant to account for the opportunity costs of locking up so much cash in deciding to opt for a more financed options. So drawing inferences in favor of the trial court’s ruling, she chose a reasonable path. The fact that there may have been other, cheaper, options—options with potentially problematic consequences for Plaintiff—didn’t make the cost unreasonable.

Affirmed. (With more costs on appeal ….)

Voluntary Mediation Fees Are Sometimes a Recoverable Cost

Berkeley Cement, Inc. v. Regents of the Univ. of Cal., No. F073455 (D5 Jan 7, 2019)

This is one of those long, grab-bag post-trial appeals that raises too many issues. As is typical when parties dilute their arguments like that, basically everything gets affirmed. In this option, all that stuff is unpublished. 

The only published part deals with whether fees paid to a mediator in connection with a mediation that is not court-ordered can be recoverable costs under Code of Civil Procedure § 1033.5. Mediation costs are neither categorically recoverable under § 1033.5(a), nor categorically unrecoverable under § 1033.5(b). They thus may be awarded when, in the discretion of the trial court, they are “reasonably necessary to the conduct of the litigation rather than merely convenient or beneficial to its preparation.” § 1033.5(c)(4). 

An earlier Court of Appeal case held that mediation expenses were recoverable under the discretionary provision when the mediation was court-ordered. Gibson v. Bobroff, 49 Cal. App. 4th 1202 (1996). While that is perhaps sufficient to being “reasonably necessary,” the Court here declines to make it necessary. 

As the Court explains, expenses for a consensual mediation could potentially meet the reasonable necessity standard. Whether they do needs to be decided based on the facts and circumstances of a particular case. Here, the only challenge here is categorical. Appellant argues that a mediation not ordered by the court is never reasonably necessary. It doesn’t challenge the trial court’s fact-finding or its exercise of discretion under § 1033.5(c)(4). Given that the purely legal issues don’t carry the day, the trial court’s decision to award mediator fees gets affirmed.

Affirmed in relevant part.

All About the Lodestar

Warren v. Kia Motors Am., Inc., No. E068348 (D4d2 Dec. 12, 2018)

Plaintiff won a jury verdict for about $17 grand on a Song-Beverly Act claim over a defective Kia Forte. That gave her a statutory right to attorneys’ fees under the Act. She submitted a fee motion for $350k in lodestar from 16 different lawyers, requesting a 1.5 multiple. The trial court ultimately awarded only $115k citing a “disconnect” between the damages and the billed time, giving an effective lodestar multiple of .33.

Nine Years’ Litigation, Nobody Prevails

Marina Pac. Partners Homeowners Assoc. v. S. Cal. Fin. Corp., No. B276719 (D2d8 Feb. 5, 2018) 

Civil Code § 1717 permits a prevailing party to a contract with an attorney fee provision to recover its fees. The trial court is authorized to determine the prevailing party, who is generally the party that receives the greater of the relief. But the code authorizes the court to decide that there isn’t any prevailing party and, under those circumstances, to decline to shift fees. The Supreme Court has instructed that in making a prevailing party determination, the court should look at the relief obtained in the context of the parties’ litigation objectives. Hsu v. Abbara, 9 Cal. 4th 863 (1995). If the case is truly a mixed bag—like where both parties seek relief and neither gets everything it wanted—then the trial court can find there’s no prevailing party.

This is a long running real estate dispute, filed in 2009. I don’t really care to get into the substance, but the dispute is over a fee. Plaintiff wanted to be entirely absolved from paying it. Defendant asserted that it should be 10 percent over the life of the contract. The judgement landed on 4 percent. Now, both sides try to say that the 4 percent was their true objective and thus that they prevailed. (Because you litigate for 9 years when you basically agree, right?) But that really wasn’t what the case was about. Under the circumstances the trial court didn’t abuse its discretion that no party prevailed to the extent that a fee award was merited. Same goes with the court’s declining to award costs under Code of Civil Procedure § 1032.

Affirmed.

Plaintiffs' Joint § 998 Offer Holds Up

Gonzalez v. Lew, No. B271312 (D2d3 Mar. 1, 2018) 
 
This is a wrongful death case arising out of a house fire where two people were killed. Plaintiffs made a joint, undifferentiated offer of judgment under Code of Civil Procedure § 998 for $1.5 million. Defendants didn’t accept it, and a jury ultimately awarded $2.6 million. So the Court awarded Plaintiff’s their expert fees and interest on the award from the date the offer expired. 

A Demand for Everything Is Apparently Not an Offer of Compromise

Arave v. Merrill Lynch, Pierce, Fenner & Smith Inc., No E061677 (D4d2, as modified, Jan. 23, 2018)

First things first. A footnote at the beginning of this 95-page opinion says “We certify this opinion for publication under California Rules of Court, rules 8.1105(b) and 8.1110, except for parts I.B., I.C., I.D., I.E., I.F., I.G., II.A.1., II.A.2., II.A.4., II.A.5., II.A.6., II.B., II.C., II.D., II.E., II.F., and II.I.” (On a publication request the court struck II.C from the footnote.) So to figure out what is actually being published, you’ll need to make a list (like literally write it down) then scroll through the opinion and figure out by process of elimination what’s not excluded.

§ 998 Shifts Costs in FEHA and POBRA Cases

Sviridov v. City of San Diego, No. D069785 (D4d3 Aug. 15, 2017)

The general rule in California is that a prevailing defendant can recover its costs. See Cal. Code Civ. Proc. § 1032(a). But there are various statutes that create an exception to that rule, permitting cost-shifting only when the claim is objectively devoid of merit. Two such statutes implicated here: The Fair Employment and Housing Act and the Public Safety Officers Procedural Bill of Rights Act. But in this case, costs weren’t awarded just because Defendant prevailed. They were awarded because Plaintiff rejected several offers of judgment under Code of Civil Procedure § 998 and failed to best the offers at trial. In a terse analysis, the Court of Appeal holds here that the FEHA and POBRA do not create exceptions to cost-shifting when it is imposed under § 998(c)(1), as opposed to § 1032.

Affirmed.

Can Kicking on a Costs Ruling

Heimlich v. Shivji, No. H062641 (D6 May 31, 2017)

About a year into an Attorney-Client fee dispute, Client made an offer of judgment under Code of Civil Procedure § 998 to settle the case for thirty grand. Attorney didn’t respond. Months after that, client sought to compel arbitration under the parties’ fee agreement. For reasons unclear, the trial court compelled the case to arbitration after summary judgment was denied, which ended in a $0 award where each party bore its own costs and fees. 

Client tried to raise the § 998 offer with the arbitrator as a basis of fee-shifting. But the arbitrator said that since her award had been rendered, she no longer had jurisdiction to address the question. As part of an effort to confirm the (lack of) award, Client asked the court to shift costs based on his beating the pre-arbitration § 998 offer. The trial court denied relief, finding that the issue should have been raised with the arbitrator before the substantive award was entered. Client appeals.

Some relevant legal points at play here. 1. § 998 was amended in 1997 to apply in arbitrations. 2. § 1293.2 permits a court upon confirmation of an arbitral award to award the same kinds of costs that are recoverable by a prevailing party in a civil litigation. 3. § 1284.2 says that, absent a contractual agreement otherwise, a party bears his own costs plus his pro rata share of the expenses of arbitration, such as the arbitrator’s fee.

Courts have generally read the interplay between 2 and 3 to mean that a court can shift court-related costs of compelling, confirming, or vacating an arbitration, but not costs incurred within the arbitral process itself. The 1997 amendments to § 998, however, change that somewhat, permitting the recovery of costs within the arbitration, even if not contractually agreed to. That’s not too controversial. But still, who decides? Generally litigants have been expected to enforce intra-arbitration cost shifting within the context of the arbitration, not afterwards.

The trouble with putting the question to the arbitrator is that with the exception of a limited authority to correct obvious or immaterial errors, the arbitrator doesn’t have much in the way of post-award jurisdiction. Cases and statues re pretty clear on that. But when it comes to a § 998 issue, that makes absolutely no sense, because an arbitrator can’t decide if a § 998 offer was bested until a decision has been rendered. Indeed, § 998 itself says that a rejected offer is inadmissible in evidence during a case on the merits.

So it’s a quintessential Catch 22. A § 998 “determination necessarily must postdate an arbitration award,” since there’s no way to adjudicate the § 998 before the award is entered, particularly when the rejection is inadmissible. But the arbitrator basically lacks jurisdiction to do that. 

Lacking many great options, and hemmed in by conflicting case law, the Court of Appeal just gets to rulin’ in the interest of common sense. It says: 1. an arbitrator can and should consider a post-award § 998 motion, and has jurisdiction to do so. 2. If the arbitrator won’t do that, he has failed to consider a submitted issue—a grounds for vacation under § 1283.4 and related case law. So the arbitrator here made that mistake.

The court thus orders the matter remanded for reconsideration by the arbitrator. But if that doesn’t work, there is some tangential dicta in a Supreme Court case that says something from which one could read—were one to squint a little and turn your head like a puppy—that a superior court can also entertain such an award if the arbitrator refuses to do so. So if the arbitrator continues to refuse, the superior court should address the issue on remand.

Reversed.

To Pay Is to Stay

Quiles v. Parent, No. G054353 (D4d3 Mar. 27, 2017)

To stay enforcement of a money judgment pending appeal, the defendant needs to post a bond. Code Civ. Proc. § 917.1(a)(1). But a defendant does not need to post a bond when the only money award is for costs awardable under § 1033.5. See § 917.1(d). 

Defendant here fully satisfied a money damages judgment, which it did not appeal. But it is appealing a post-judgment award of costs and attorneys’ fees, and hasn’t satisfied that yet. Plaintiff is trying to collect that award and the trial court is going along with it. Defendant requests a writ of supersedeas clarifying that collection is stayed pending the appeal.

Relying on a terse analysis in the only case on point, the court here finds that Defendant was entitled to stay of the judgment under § 917.1(d) because no bond is required to stay a costs-only judgment. Attorney fees count as costs when they are awardable under a statute or the law. § 1033.5(a)(10)(B), (C). Since paying of the damages left nothing but costs, Defendant was entitled to a stay.

Writ of supersedeas granted.

RFA Withdrawal Can Cost You Fees

Rhule v. Wavefront Technology Inc., No. B267359 (D2d5 Feb. 23, 2017)

The trial court let Plaintiff withdraw two admissions tendered in response to requests for admission, conditioned on an award of fees based on reliance on those admissions. Plaintiff appeals. 

But there isn’t a reporter’s transcript. The trial court’s minute ordered noted that the motion had been granted. A subsequent entry set a date for a fee motion. And then the trial court heard the fee motion, which also wasn’t transcribed. The court’s minute order, citing Code of Civil Procedure § 2033.300(c), awarded $8,125 in fees out of the $10,000 sought by Defendant.

Because of the lack of a record, the Court of Appeal finds it can’t entertain the challenge to the amount of the fee award, which was not facially beyond the pale. That’s a discretionary call where the trial court can act as a factfinder. So in the absence of a record, an abuse of discretion can’t be found.

Which still leaves Plaintiff’s purely legal challenge that § 2033.300 doesn’t permit the court to assess fees as a condition of letting a party out of an admitted RFA. Section 2033.300(c) specifically permits the court to shift the “costs of any additional discovery.” As used there “costs” isn’t limited to recoverable costs under § 1033.5, but pragmatically the marginal costs caused by permitting the withdrawal of the admission, including attorneys’ fees. Moreover, “costs” can include fees when shift-able by statute, and the RFA statutes permit an award of fees as a consequence for an unsubstantiated denial, which suggests, albeit obliquely, that “costs” in § 2033.300 should include attorneys’ fees. 

Affirmed.

Not Dead Yet ...

S. Cal. Sunbelt Developers v. Banyan Ltd. P'ship, No. G051260 (D4d3 Feb. 16, 2017)

This dispute over a joint venture has been going on for twenty years. A receiver was ultimately appointed to wind the thing down. At the bitter end, one question remained: Who pays?

Overhead

Cal. Pub. Records Research, Inc. v. County of Yolo, No. C078158 (D3 Oct. 14, 2016)

 This case is a complaint about records copying fees, akin to the County of Stanislaus case brought by the same outfit earlier this year. Here, they are challenging Yolo County’s fee schedule demanding $10 for the copying of the first page of a document and $2 for each subsequent page. Government Code § 27366 permits counties to set these fees at rates necessary for the county to recover the direct and indirect costs associates with the copying. 

Unlike in the Stanslaus case, Yolo justifies its copy rates with a fee study that values the staff time of employees in its Recorder’s Office at $129.88 per hour, and then it slices and dices the amount of time spent on responding to requests down to the minute. If you are a clerical worker considering putting in an application and moving to Woodland because of that great pay, don’t go there. The Yolo Recorder employees don’t actually make that much—their pay is about $43 per productive hour—$71k per year on average. A decent government wage, but not worth the move. Yolo’s study, however, bakes in another $85/hour in “indirect costs” in the form of overhead for stuff like the cost of computers, management costs, and office overhead. The issue here is whether that can be lumped in as an “indirect” cost.

After plaintiff filed suit challenging the legality of the fees, Yolo reduced its fees to $7.50/$2. It then moved for summary judgment, arguing that its fees didn’t violate § 27366 and in any event, given the reductions, the petition was moot. The trial court granted the motion. Plaintiff then filed a fee motion under the private attorney general doctrine, arguing that its lawsuit was the catalyst for Yolo’s fee reduction. The trial court denied the motion and plaintiff appealed.

On the merits, the Court of Appeal decides to read “direct and indirect” costs super broadly to include as “indirect” costs “overhead and operating costs not specifically associated with the production of copies.” It supports this reading by reference to dictionaries, federal regulations, and other statutes to determine that “indirect costs” unambiguously includes the kinds of garbage that Yolo is passing off on its citizens by charging $7.50 to make a photocopy of a one-page public document. In that way, it parts ways with D5’s County of Stanislaus decision, which held that the undefined term was ambiguous and thus needed to be interpreted narrowly in light of the State Constitution’s dictate (in Art. I, § 3) that statutes that restrict access to public information must be interpreted narrowly.

Plaintiff also sought fees under the private attorney general doctrine, arguing that, even if it didn’t win, it was the “catalyst” for County lowering its first page fee by $2.65. That theory requires a plaintiff to achieve, to some degree, its “primary objective.” The court here interprets Plaintiffs primary objective as stopping County from including indirect costs, not just any old fee reduction. If that was its objective, it failed and thus did not satisfy the test.

Affirmed.

In Split Verdict, Costs Award Cannot Be Formulaic

Charton v. Harkey, No. G050514 (D4d3 May 24, 2016)

Plaintiffs in an investment fraud case won against three Defendants but lost against one other. The prevailing Defendant seeks her costs under Code of Civil Procedure § 1032. No one disputes that this Defendant is the prevailing party under § 1032. But Plaintiffs contend that she is too closely aligned with the losing defendants to be permitted to recover her costs. The trial court rejected that argument, but permitted the moving Defendant to recover only 25 percent of her costs, reasoning that the costs should have been evenly apportioned across both the winning and losing Defendants.

The Court of Appeal agrees on the first point. While some old cases discuss that a prevailing defendant that is closely aligned with one found liable can be deemed a non-prevailing party, those cases were based on an old version of § 1032, which was repealed in 1986. Under the current version of the statute, a defendant against whom no relief is ordered prevails, and is entitled to costs as a matter of right. Full stop.

But as to the apportionment of costs, the court did err. It could not just mechanically say that since one of four defendants won, that Defendant gets 25 percent. Instead, the court should have asked whether: (1) the costs were actually incurred by the prevailing Defendant, (2) they were reasonably necessary to that Defendant’s conduct of the litigation; and (3) they were reasonable. If those tests are met, the costs are recoverable even if they might also have been useful to one of the non-prevailing Defendants. The trial court’s rough justice wouldn’t cut it.

Reversed.

Thank You, the Tentative Stands.

FWIW, this is 111 N. Hill's 500th post!

Stanford v. Rasnick, No. A145904 (D1d2 Apr. 25, 2016)

Two Defendants in an auto accident case (a father and son) made a joint $130,000 offer under Code of Civil Procedure § 998. Or perhaps more accurately, their insurance company did. The offer was not allocated between Defendants and was conditioned on Plaintiff to entering a “written settlement agreement” Plaintiff didn’t take it. After adjusting for comparative liability and adding pre-offer costs, plaintiff won a recovery of $122k—just under the § 998 amount. Both sides sought costs and both moved to tax. The court agreed with Defendants on basically all counts. It found the § 998 offer was valid and thus Plaintiff could not recover his post-offer costs while Defendants could recover their post-offer costs, as well as their expert witness costs. It further taxed Plaintiff’s pre-offer costs, finding that his share of the cost of a mediator and certain attorney service charges were “not allowed.”

The Court of Appeal reverses on both points. So far as the § 998 offer goes, to be valid, it needed to be unambiguous. If accepted, it needs to be clear on its face as to what it is being offered and accepted. If collateral litigation might be needed to suss out the terms of the deal, the offer is not valid. 

Payment in exchange for a release is clear. But conditioning an offer on entering a “settlement agreement,” particularly one of terms unspecified, is not. Although Defendants contend that they made a “a standard, insurance defense offer,” the Court isn’t buying it. Just because a practice is common doesn’t make it correct. Simply put, Plaintiff can’t be put to accepting or rejecting a § 998 offer that includes entering a “settlement agreement” when he doesn’t know what the terms of the settlement hearing are ex ante.

So far as plaintiffs’ costs go, neither mediation expenses or attorney service costs are “not allowed.” They are, instead, not automatic, but nonetheless awardable in the discretion of the court. The Court of Appeal makes the point of noting that in the extensive oral argument on the costs issue, plaintiff pointed this out and asked the court to explain any discretionary denial. The trial court’s response was curt “thank you.”* It then stood on the tentative. The Court of Appeal finds that was error because the trial court abdicated its discretion by treating the costs as categorically disallowed.

Reversed and remanded.

*The opinion notes that the oral argument on the motion was “quite lengthy” and seems exasperated—or at least puzzled—by the fact that Plaintiff sensibly pointed out some mistakes in the tentative and the trial judge did not so much as react. That, however, is not an uncommon occurrence so far as law and motion oral arguments in a California Superior Court goes. 

Indeed, given the low value many trial judges put on oral argument on law and motion matters, and the incredibly burdened dockets of the superior courts, I often wonder why they bother. It’s not like—other than in some specific circumstances like summary judgment—a court is required to hold a hearing.  Nevertheless, unlike federal courts, which frequently rule without a hearing, California state courts basically always take oral argument. But if the court doesn’t perceive any value in it, one would think that, in the aggregate, the quality of justice would likely improve were the court to just rule on the papers and put that time to some better use. 

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.

Affirmed.