Decision Confronts Whether Settlement Proceeds Constitute a “Net Monetary Recovery” in an Opinion Likely Be Cited Often in the Costs Area.
deSaulles v. Community Hospital of the Monterey Peninsula, Case No. H038184 (6th Dist. May 2, 2014) (published), we predict, will be an opinion often cited on routine costs issues
What happened in this one was plaintiff employee agreed to dismiss two of her seven causes of action with prejudice in exchange for defendant’s settlement payment of $23,500, although the arrangement did not indicate who would be the prevailing party as far as a costs award. (Earlier, employee had lost one claim via summary adjudication and some in limine motion rulings prompted the dismissal of the other two claims.) Other in limine rulings lead the trial judge to enter a judgment against plaintiff, specifying the parties would defer any costs proceedings until employee completed an appeal, one that was not successful. Then, both parties sought costs and filed dueling tax costs motions. The lower court determined employer was the prevailing party, awarding it $12,731.92 in routine costs.
Employee’s appeal of the costs ruling was successful, with the appellate court reversing the costs grant to employer and the costs denial to employee. In doing so, many, many issues in this area were explored, which we summarize this way:
1.Appealability. Employer argued that the costs order based on the settlement was not appealable, but the appellate court found the situation akin to that involved in Ruiz v. Calif. State Auto. Assn., 222 Cal.App.4th 596, 606 (2013), where the settlement was followed by a judgment allowing for total disposition of the case such that both the lower court’s judgment and costs order were separately appealable.
2.Employee’ Entitlement to Mandatory Costs. Because there generally can only be one mandatory costs winner, the issue focused on whether employee prevailed when the action was settled and she received positive settlement payment proceeds. The appellate court determined that, absent agreement otherwise in the settlement, a lower court retains jurisdiction after the filing of a compromise agreement to entertain a costs bill. It then decided that a “net monetary recovery” was not limited to a judgment, but could include a settlement by which a party obtained a positive recovery (the other “legal process” described in Goodman v. Lozano, 47 Cal.4th 1327, 1333-1334 (2010)). In reaching the conclusion that the settlement in the case before it qualified as net monetary recovery, the panel disagreed partially with reasoning to the contrary in Chinn v. KMR Property Mgt., 166 Cal.App.4th 175 (2008).
3.Employer’s Entitlement to Mandatory Costs. This issue centered upon whether employer was due mandatory costs based on the dismissal entered as part of the settlement arrangement. The problem with employer’s argument was that the court did not technically dismiss any cause of action but only entered a judgment to facilitate further appellate review of the merits and employee, not the court, voluntarily entered the dismissal of two causes of action. Because employer only obtained at most a partial voluntary dismissal, this without more did not trigger a mandatory costs award to it. Employer also argued that the “no relief” language in the judgment entitled it to mandatory costs. However, the appellate court determined a pragmatic approach had to be employed here because employee did recover money despite the “no relief” language in the judgment. (Friends of the Trails v. Blasius, 78 Cal.App.4th 810, 839 (2000).)
At the very end of this decision, Justice Grover—the author for a 3-0 panel—gave all practitioners a great practice tip to avoid mandatory prevailing party costs application in a settlement: “Of course, parties can avoid this mechanical approach by taking care to provide for costs in their settlements.” (Slip Opn., p. 27.) Employee won the costs battle in this one, mainly because the settlement arrangement was silent on the issue.