Fourth District, Division Two Splits Sharply On Fee Award Denial By
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Mr. Leviant, of The Complex Litigator, has done a very insightful synopsis of Laabs v. City of Victorville, Case No. E040778 (4th Dist., Div. 2 June 12, 2008) (certified for publication) on the subject of when “cost of proof” sanctions can be awarded against a litigant denying requests for admissions (RFAs) improperly. We agree with his observations and also post our “spin” on this 2-1 decision because it also deals with a denial of fees under Code of Civil Procedure section 1038. Unlike our previous posts in which substantial fees were awarded under the RFA scheme, this case involved a denial of fees and highlights conflicting views among the appellate panel about the particularity with which the trial judge needs to articulate his/her reasons for fee denial.
Plaintiff minor suffered injuries in an automobile crash, suing San Bernardino County and the City of Victorville for creating a dangerous public property condition. Summary judgment was granted in favor of the City, a determination affirmed on appeal. However, the trial judge subsequently denied City its defense costs and fees under either Code of Civil Procedure section 2033.420 (the RFA “cost of proof” sanction) or Code of Civil Procedure section 1038(a) (a provision allowing fee recovery to a governmental entity showing a plaintiff brought a Tort Claim Act proceeding without a good faith belief in the action’s justifiability and without objectively reasonable cause). City appealed. The Fourth District, Division Two affirmed in a 2-1 decision with divergent opinions (Authoring Justice King and Justice Miller in the majority, and Acting Presiding Justice Hollenhorst in a dissent on the fees issues).
On the RFA issue, the majority found that the denial was reviewed under the abuse of discretion standard, a point the dissent did not contest. (Slip Opn., pp. 49 [majority], p. 24 [dissent].) The majority found that the RFA denials were on unimportant matters or were made because plaintiff believe she had a good reason to deny, hinged on the implied determinations that certain denials were not central to the case and that other denials were made because there was a belief that plaintiff would prevail at trial. In contrast, the dissent argued that review was impossible because the trial judge stated no express findings on the issue so as to preclude meaningful review. This does set up an interesting appellate review issue for further consideration–whether explicit or implied findings are required for scrutiny of RFA “cost of proof” issues. Stay tuned on this first issue.
That brings us to the section 1038(a) issue. The majority determined that it was not necessary for the trial judge to make the equivalent of an explicit “statement of decision” that the elements of the statute were met. (Slip Opn., at p. 44.) Rather, the majority found that “implied findings” sufficed. Using this standard, the majority found that an objective attorney could reasonably have thought plaintiff’s claim was tenable.
Not at all, said dissenting Justice Hollenhorst. He noted that the “reasonable cause” prong of section 1038 is reviewed de novo and the “good faith” prong is reviewed for the presence of substantial evidence. (Slip Opn., pp. 15-16, dissenting opn.). The dissent believed that the trial court was required to make a mandatory statement of decision on both prongs of the section 1038 fee-shifting test. (Slip Opn., pp. 16-23, dissenting opn.). Because no explicit findings were made by the trial court, the dissent would have reversed and remanded with directions to issue the equivalent of a “statement of decision.” Stay tuned on this second issue.
We agree with Mr. Leviant that this decision is an interesting counterpoint to other decisions awarding substantial RFA “cost of proof” sanctions. Laabs seems to queue up whether a statement of decision needs to be made, with particularity, in order to sustain fee decisions (grants or denials) under the RFA fee-shifting statute or section 1038. Given that no statement of decisions are usually required in other important contexts (e.g., normal preliminary injunctions), it will be interesting to see which side—the majority or dissent in Laabs—is vindicated in this interesting debate.