DeSaulles v. Community Hospital of the Monterey Peninsula: Supreme Court will Decide Right to Recover Costs after Settlement

In DeSaulles v. Community Hospital of the Monterey Peninsula (2014) 225 Cal.App.4th 1427 (available here), the Court of Appeal held that when an employer pays an employee in settlement, the employee obtains a "net monetary recovery" from the employer and is the prevailing party in the action. As such, where the settlement agreement is silent as to the recovery of costs, the employee is entitled to recover his or her costs as a matter of right. The employer is not entitled to recover its costs in this situation, even though it obtained a judgment denying the plaintiff any relief, which ordinarily would make the defendant the prevailing party.

The California Supreme Court granted review on July 23, 2014. The Court's web site lists the issue presented as follows:

When plaintiff dismissed her action in exchange for the defendant's payment of a monetary settlement, was she the prevailing party for purposes of an award of costs under Code of Civil Procedure section 1032, subdivision (a)(4), because she was "the party with a net monetary recovery," or was defendant the prevailing party because it was "a defendant in whose favor a dismissal is entered"?

DeSaulles is case number S219236, and the Court's web site for it is here. As always, you can sign up for automatic notices regarding the proceedings on the case web site. Or you can watch this space. I'll post the result once it comes down. 

Williams v. Chino Valley Independent Fire District: Supreme Court Rules on Cost Awards to Prevailing Defendants in FEHA Actions

Williams v. Chino Valley Independent Fire District (5/4/15) --- Cal.4th --- concerns whether a prevailing defendant in a FEHA action may recover its ordinary costs absent a finding that the plaintiff brought or continued the litigation without an objective basis for believing that it had merit.

Plaintiff Loring Winn Williams sued defendant Chino Valley Independent Fire District for disability discrimination. The trial court granted summary judgment for the defendant and awarded it $5,368.88 in costs. The Court of Appeal affirmed, but the Supreme Court reversed, holding as follows:

CCP section 1032(b) mandates that prevailing parties recover their costs as a matter of right, "except as otherwise expressly provided by statute." Government Code section 12965(b) allows courts, in their discretion, to award attorney fees and costs to prevailing parties in FEHA actions. Section 12965(b) thus constitutes an express exception to section 1032(b) and as a result, trial courts have discretion to award ordinary costs to prevailing defendants, but need not do so.

In exercising this discretion, courts must follow the rule set forth in Christiansburg Garment Co. v. EEOC (1978) 434 U.S. 412. In Christiansburg, the U.S. Supreme Court held that a prevailing plaintiff in a Title VII action ordinarily should be awarded his or her fees but should not be assessed his or her opponent's fees unless a court finds that the claim was "frivolous, unreasonable, or groundless, or that the plaintiff continued to litigate after it clearly became so."

Christiansburg applies equally to awards of attorney fees and costs in FEHA actions: a prevailing plaintiff ordinarily should recover his or her fees and costs unless special circumstances would render such an award unjust, but a prevailing defendant should not recover its fees or costs unless the court finds the action was "objectively without foundation when brought, or the plaintiff continued to litigate after it clearly became so."

The opinion is available here. 

Cal. Supreme Court Rules in FEHA Attorney Fee Case

On January 14, 2010, the California Supreme Court has issued its decision in Chavez v. City of Los Angeles (2010) 47 Cal.4th 970, and - as many predicted - the resulted was not pretty for the plaintiff and his lawyer.

In 1998, the plaintiff filed an action against the City of Los Angeles, alleging defamation and other violations. The Court dismissed that action. In May, 2000, the plaintiff filed a second action, this one for discrimination, harassment, and retaliation. In August, 2000, the plaintiff filed a third action, this one for federal civil rights violations. In November, 2004, the plaintiff filed a fourth action, this time alleging that the City retaliated against him for filing his earlier actions. Ultimately, the plaintiff won a verdict of $11,500 in this fourth action, well below the $25,000 threshold for "limited actions."

The plaintiff then asked for attorney fees of $870,000 -- 2.0 times the fees incurred on all work done from 2000 through the date of judgment, including fees incurred in the prior litigation. The trial court denied the motion for fees, but the Court of Appeal reversed, holding that the trial court had “applied the wrong statutory standard and abused its discretion.” Slip opinion at p. 5. The Supreme Court granted review.

The Court started by going through Cal. Code Civ. Proc. section 1033, which gives the court discretion to award fees and costs when the plaintiff chooses to proceed with an unlimited civil case, but recovers less than $25,000. The Court then noted that the Fair Employment and Housing Act (FEHA) also gives courts discretion to award fees: “In actions brought under this section, the court, in its discretion, may award to the prevailing party reasonable attorney's fees and costs....” Cal. Gov. Code section 12965(b). Next, the Court held that there was no conflict between these two sections, and a trial court has discretion in an appropriate FEHA case to deny a successful plaintiff his attorney fees, although the Court was clear that this should not be an exercise in Monday morning quarterbacking:

If, based on the available information, the plaintiff's attorney might reasonably have expected to be able to present substantial evidence supporting a FEHA damages award in an amount exceeding the damages limit (now $25,000) for a limited civil case, or if the plaintiff's attorney might reasonably have concluded that the action could not be fairly and effectively litigated as a limited civil case, the trial court should not deny attorney fees merely because, for example, the trier of fact ultimately rejected the testimony of the plaintiff's witnesses or failed to draw inferences that were reasonably supported, although not compelled, by the plaintiff's evidence. But if, to the contrary, the trial court is firmly persuaded that the plaintiff's attorney had no reasonable basis to anticipate a FEHA damages award in excess of the amount recoverable in a limited civil case, and also that the action could have been fairly and effectively litigated as a limited civil case, the trial court may deny, in whole or in part, the plaintiff's claim for attorney fees and other litigation costs.

Slip opinion at p. 9. Finally, the Court held that the trial court did not abuse its discretion in denying fees to Mr. Chavez.

Chavez may be a good cautionary tale for those who may be tempted to overreach, but employers should not try to rely on it too heavily in wage and hour cases. FEHA, which was at issue in Chavez, varies substantially from California wage law. FEHA makes an award of attorney fees to a successful plaintiff discretionary and allows successful defendants to recover their attorney fees and costs.

In stark contrast, a number of California Labor Code sections provide for one-way fee shifting in favor of successful plaintiffs, make such fee awards mandatory, rather than discretionary, and forbid attorney fee awards to successful defendants. See, e.g., Cal. Labor Code section 1194; Earley v. Superior Court (2000) 79 Cal. App. 4th 1420.

Ninth Circuit Affirms Decision Shifting Class Notice Costs to Defendant

Hunt v. Imperial Merchant Svcs. Inc., 560 F.3d 1137, is not a wage and hour case, but it is a class action and it makes a good point. The plaintiff in Hunt sued a debt collector for violating the Debt Collection Practices Act. The plaintiff moved for class certification and partial summary judgment. The District Court granted both motions and ordered the defendant to pay the cost of giving notice to the class members. The defendant appealed, and, on March 31, the Ninth Circuit affirmed:

District courts may order a class action defendant to pay the cost of class notification after they determine that the defendant is liable on the merits. They may in an appropriate case shift these notice costs even when the liability decision is under appeal. Here, considering the totality of circumstances, we conclude that the district court did not abuse its discretion by placing the cost of class notification on IMS.

You can read the full opinion here.

Post-Judgment Costs of Collection and Bankruptcy

I find this decision interesting, given the current economic climate and the number of employers who threaten to file bankruptcy when their employees ask to be paid lawful wages. On December 30, 2008, the California Court of Appeal held that Code of Civil Procedure Section 685.040, which allows a judgment creditor to recover reasonable and necessary attorney fees incurred in "enforcing" a judgment, applies to those attorney fees that creditor incurrs in a debtor’s post-judgment bankruptcy proceeding. Chinese Yellow Pages Company v. Chinese Overseas Marketing Service Corporation (December 30, 2008, Second District, Division Five).