However, Matter Remanded Because Judicial Confirmation Proceedings Costs Were Recoverable and Erroneously Not Awarded.
Watson v. Knorr, Case No. H036430 (6th Dist. May 13, 2013) (unpublished) is a case where plaintiffs won a $1.1 million arbitration award “plus costs under the Code of Civil Procedure.” Plaintiffs never submitted costs issues to the arbitrator, and the defense successfully had stricken the costs language albeit on an erroneous ground. The trial court also refused to award judicial confirmation costs.
Split decision on appeal, but maybe a Pyrrhic victory at best.
The trial court found that plaintiffs’ failure to submit the CCP 998 costs-shifting issues to arbitrators effectively waived any ability to recoup costs, relying on reasoning from the recent case of Maaso v. Signer, 203 Cal.App.4th 362, 377-378 (2012) [reviewed in our Feb. 8, 2012 post]. However, plaintiffs argued that Maaso was unworkable by interjecting costs/998 issues before a merits award was reached. The appellate court rejected these arguments, mainly on the ground that arbitration proceedings routinely are bifurcated so that cost issues are considered after an interim merits award. In very helpful language to practitioners, here is what the panel had to say:
“Addressing Plaintiffs‘ arguments that Maaso‘s holding is unworkable, we suggest the following procedure in cases involving section 998 costs claims that have been submitted to arbitration. The parties should advise the arbitrator that a 998 offer has been made, without disclosing the amount of the offer or who made the offer, and ask the arbitrator to conduct a bifurcated hearing. After the liability and damages phase of a bifurcated arbitration is completed, the arbitrator could issue an interim award on the questions of liability and damages and reserve jurisdiction to award section 998 costs, if applicable. The parties could then agree to a briefing schedule for the second phase of the arbitration and submit evidence and argument on the question of section 998 costs. This would allow parties claiming costs time to collect any additional evidence needed, including final bills from their expert witnesses reflecting the costs of appearing at the first phase of the arbitration. In answer to the question whether both sides would be required to put on evidence of their costs in anticipation of a favorable award, in a typical case, only the party or parties claiming they obtained an award more favorable than that party‘s 998 offer would be required to put on evidence of any costs claimed. The parties could stipulate to the use of the Judicial Council memorandum of costs forms and a briefing schedule that would allow for challenges to the costs claimed similar to that applicable to motions to tax costs. There is nothing about the procedures for claiming or challenging costs that could not be handled in an arbitration hearing. We therefore reject Plaintiffs‘ suggestion that the holding in Maaso is unworkable.”
Then, in the “paper victory” section of the opinion, the appellate court did find plaintiffs were entitled to judicial confirmation costs under CCP § 1293.2, although they were not that substantial in nature–so a narrow remand was in order.