Defendant Does Not Have To Choose Best Option For Appealing Plaintiff, With Lost Opportunity Costs To Defendant Being A Factor To Consider.
In Rostack Investments, Inc. v. Sabella, Case No. B286069 (2d Dist., Div. 8 Feb. 5, 2019) (published), plaintiff obtained a substantial summary judgment which was reversed on appeal, with the appellate court awarding defendant appellate costs as the prevailing party. She sought to recover $1.4 million in costs for obtaining a surety bond, secured by a letter of credit (LOC), pending appeal. (The total amount secured was around $77 million.) Plaintiff moved to tax the claimed costs as neither reasonable or necessary based on the premise that defendant could have obtained a cash-collateralized bond without the need for the LOC. Defendant presented counter-evidence that the surety bond was the best financial alternative for her, and she did not have that much cash. The trial court denied the motion to tax costs, and plaintiff appealed.
The 2/8 DCA affirmed.
Plaintiff first argued that the judgment awarding appellate costs was not a final, enforceable judgment, but this was swept away because it was—even though the trial court had to liquidate the amount which was awarded as costs by the appellate court. (Cal. Rules of Court, rule 8.278(c)(3); Lucky United Properties Investments, Inc. v. Lee, 185 Cal.App.4th 125, 138 (2010).)
On the merits, the trial court’s determination was no abuse of discretion. The option chosen by defendant, in these circumstances, does not have to be the option which would most benefit the plaintiff. Defendant did not have the cash and chose the less painful alternative. With respect to guiding precedent going forward, the appellate court recognized that the lost opportunity costs—that defendant could invest the $77 million rather than tie it up as cash collateral for the undertaking—was a factor which could be considered in this context. Here is what the panel said: “We believe that lost opportunity costs are an appropriate factor in determining the method used to bond the judgment. If lost opportunity costs are not considered at all, an appellant must choose the bonding alternative which will result in the lowest cost being passed on to the respondent (should the appellant be successful on appeal) even if that alternative results in a greater net financial loss to the appellant if the appeal is unsuccessful and the appellant must bear the costs itself. If ‘reasonable’ is to mean anything, it
must mean reasonable to the appellant under all of the circumstances. It is reasonable for the appellant to choose the method that is cost-effective based on its own financial situation; not to be forced to choose what might be best for the respondent.” (Slip Op. at pp. 16-17.)