In deSaulles v. Community Hospital of the Monterey Peninsula (H038184, Superior Court No. M85528), the Sixth Appellate District held a plaintiff is entitled to statutory costs as the prevailing party where a voluntary dismissal made in exchange for a monetary payment dismissed only part of the case and the court entered judgment in favor of defendant on the remaining issues. The Court of Appeal found that plaintiff was the only prevailing party under California Code of Civil Procedure (“CCP”) §1032 because plaintiff recognized a net monetary recovery through settlement, and because the dismissal was not for all causes of action.
In deSaulles, plaintiff Maureen deSaulles was employed by defendant Community Hospital of the Monterey Peninsula (CHMP). Following plaintiff’s termination by CHMP, plaintiff filed suit on seven causes of action. Prior to trial, the court granted summary adjudication as to one cause of action and in limine motions excluding evidence in support of four other causes of action. Also prior to trial, CHMP agreed to pay plaintiff $23,500 in exchange for a dismissal of the only two remaining causes of action. The parties placed the settlement agreement on the record before the court, but did not include a waiver of statutory costs for either party.
Following settlement, plaintiff dismissed the agreed two causes of action, and the court entered judgment on the remaining five causes. After an unsuccessful appeal, CHMP and plaintiff filed competing cost memoranda. The trial court determined that CHMP was the prevailing party because it obtained favorable rulings on significant causes of action and entered into a settlement agreement on the remaining causes of action. The Court of Appeal reversed, and awarded plaintiff costs following a very detailed review of the operation of CCP §1032 allowing for the recovery of certain litigation costs.
Pursuant to CCP §1032(b), a prevailing party is entitled to recover costs as a matter of right—a court cannot concurrently award mandatory costs to opposing parties. “When any party recovers other than monetary relief and in situations other than as specified, the ‘prevailing party’ shall be determined by the court, and under those circumstances, the court, in its discretion, may allow costs or not…” If opposing parties both qualify under the statute as a prevailing party, the circumstances could be, “…situations other than specified…” then allowing the court to exercise discretion in the award of costs. CCP §1032(a)(4). The prevailing party is defined as including: 1) the party with a net monetary recovery; 2) a defendant in whose favor a dismissal is entered; 3) a defendant where neither plaintiff nor defendant obtains any relief;, or 4) a defendant as against those plaintiffs who do not recover any relief against that defendant. Importantly, a trial court has no discretion to deny costs where they are mandatory, but does have discretion over the award amount.
Here, the Court of Appeal sought to determine whether one or both plaintiff and CHMP qualified as a prevailing party. The Court found that CHMP’s settlement payment was a net monetary recovery to plaintiff because it was the result of the legal process and when evaluating whether a party recognized a net monetary recovery, all amounts paid in settlement are necessarily considered. Therefore, even though plaintiff received nothing by judgment, the settlement payment resulted in a net recovery in her favor thus qualifying plaintiff as the prevailing party. The Court also found that plaintiff’s dismissal of her two causes of action was not complete—CCP §1032(a)(4) only mandates the award of costs where a dismissal ends the action in its entirety against a defendant, not where the dismissal leaves plaintiff with pending causes of action.
This case serves an important reminder to settling parties to be diligent and precise in the terms of settlement. Defendants should always seek a dismissal of all causes of action and claims, regardless whether a defendant previously succeeded in adjudicating some of plaintiff’s claims. If a full dismissal is not possible, defendants should include an explicit waiver of statutory costs pursuant to CCP §1032, to ensure the amount paid to settle a case is capped and certain.
This document is intended to provide you with information about general liability law related developments. The contents of this document are not intended to provide specific legal advice. This communication may be considered advertising in some jurisdictions.