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one found liable can be deemed a non-prevailing party, those cases were based on an old version of § 1032, which was repealed in 1986.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.

Fee Estoppel Under Civil Code § 1717

Brown Bark III LP v. Haver, No. G047198 (D4d3 Sept. 13, 2013)

Plaintiff sued defendant for failure to repay money owed on a line of credit. Defendants weren’t a party to the credit agreement; plaintiff pursued them on alter ego and successor liability theories as well as for conversion and fraud. Defendants won at trial. Because the underlying credit agreement had an attorneys’ fees provision, defendant sought a fee award, which the trial court denied. Defendants appealed.