Third District Affirms Fees/Costs Award Under Code of Civil Procedure section 1038.
In our July 28, 2008 post on Clark v. Optical Coating Laboratories, Inc., we discussed a recent First District decision reversing an award of defense costs to the government under Code of Civil Procedure section 1038. We now discuss a Third District opinion affirming a section 1038 fees/cost award.
Hirschler v. Cal. Dept. of Corrections, Case No. C053955 (3d Dist. July 30, 2008) (unpublished) involved a plaintiff ex-state employee who lost a summary judgment on a complaint alleging wrongful termination, intentional infliction of emotional distress, and violations of Business and Professions Code sections 2056 and 510 against governmental parties. All of the claims arose from plaintiff’s reliance on the theory that he was given a negative performance evaluation in retaliation for a protest memorandum that he circulated. The evidence in the lower court demonstrated that plaintiff’s performance evaluation never entered into his personnel files, which meant there could be no violation under the Business and Professions Code statutory provisions. Additionally, plaintiff failed to rebut a clear immunity defense under Government Code section 821.6. The trial court assessed attorney’s fees of $148,739.69 and costs of $10,926.95 against plaintiff under section 1038.
The Third District affirmed the fees/costs award on appeal.
Under section 1038, the government can be awarded defense costs if plaintiff’s action was filed/maintained without good faith or without reasonable cause—disjunctive elements that must be rebutted by plaintiff in order to avoid fees/costs exposure. See Knight v. City of Capitola, 4 Cal.App.4th 918, 931-932 (1992). The appellate court did not have to probe beyond the “without reasonable cause” prong. Because the negative evaluation never entered plaintiff’s personnel file and an immunity defense plainly applied, no reasonable attorney would entertain a belief that the Business and Professions Code claims were tenable. The Third District cited cases holding that section 1038 defense costs were justifiable where a clear immunity governed, which happened to be the case in Hirschler.
The lesson in this opinion is that governmental employees suing their ex-public boss need to carefully evaluate the case to make sure that the facts justify commencement and continued prosecution of claims and—especially in cases against government—no immunity defenses transparently apply so that argument cannot be had as to their nonpreclusive impact.