Plaintiff Who Voluntarily Dismisses Action After Entering Into Monetary Settlement Is Prevailing Party Entitled to Costs.
In DeSaulles v. Community Hosp. of the Monterey Peninsula (2016) 62 C.4th 1140, ___ C.R.3d___, ___ P.3d ____, , plaintiff sued her former employer following termination of her employment. She alleged seven causes of action. The trial court granted summary adjudication of one cause of action and granted defendant's motion in limine with regard to four others, effectively precluding plaintiff from establishing those causes of action. The parties entered into a settlement of the remaining two causes of action, under which plaintiff agreed to dismiss those claims and defendant agreed to pay plaintiff $23,500. The settlement deferred resolution of costs until the completion of any appeal of the other causes of action. After plaintiff's unsuccessful appeal, the parties returned to the trial court, each claiming to be the prevailing party entitled to recovery of costs. The trial court found that defendant was the prevailing party and awarded it costs totaling almost $13,000. The Court of Appeal reversed, concluding that plaintiff had obtained a net monetary recovery and was therefore the prevailing party. Held, affirmed.
(a) Under C.C.P. 1032(b), a prevailing party is entitled as a matter of right to recover costs in any action or proceeding, except as otherwise expressly provided by statute. C.C.P. 1032(a)(4) defines "prevailing party" to include the party with a net monetary recovery and a defendant in whose favor a dismissal is entered. (2016 WL 903944, p. 4.)
(b) The definition of "prevailing party" as a defendant in whose favor a dismissal is entered was not intended to encompass defendants that enter into a money settlement in exchange for a dismissal. The definition was intended to prevent a plaintiff from evading the cost statute by dismissing an unmeritorious action after the defendant has incurred costs preparing for trial. That rationale does not apply to a plaintiff who has achieved some litigation success through settlement of the action. (2016 WL 903944, p. 8.) A defendant is not a prevailing party as a matter of right in these situations. (2016 WL 903944, p. 9.)
(c) A plaintiff who obtains a monetary settlement is a prevailing party. The statute's language suggests a broad understanding of the word "recovery" that includes situations in which a defendant settles with a plaintiff for some or all of the money that the plaintiff sought. (2016 WL 903944, pp. 9, 10.) Cases predating the current version of the statute established the principle that a plaintiff who settles an action for money or other tangible benefits may be considered a prevailing party, and nothing in the language or legislative history of the statute indicates an intention to change that principle. (2016 WL 903944, p. 10.)
(d) A plaintiff who enters into a stipulated judgment to be paid money in exchange for a dismissal has obtained a "net monetary recovery" within the meaning of C.C.P. 1032(a)(4), regardless of whether the judgment mentions the settlement. Where the parties stipulate before the court that the plaintiff has been paid a sum of money in exchange for dismissing the action, the plaintiff is as legally entitled to receive money from the defendant as a plaintiff who obtains a stipulated judgment without a dismissal. "The former plaintiff is every bit as much a prevailing party as the latter." (2016 WL 903944, p. 11.)
(e) The holdings here establish a default rule that applies only when the parties have not resolved the matter of costs in their settlement agreement or have not stipulated to alternate procedures for awarding costs. Rather than place the burden of determining the merits of a plaintiff's case on the trial court, the settling defendant should calibrate the terms of a settlement, including allocation of costs, with appropriate provisions in the settlement agreement. (2016 WL 903944, p. 12.) "Although not required by law, it is advisable that trial courts inquire into whether the parties in a given case have resolved the allocation of costs in their settlement agreement, or whether they wish to have the court resolve the issue, before placing a judicial imprimatur on the agreement." (2016 WL 903944, p. 13.)
(f) Chinn v. KMR Property Management (2008) 166 C.A.4th 175, 82 C.R.3d 586, which held that the defendant is the prevailing party where a settlement results in a dismissal, is disapproved. (2016 WL 903944, p. 13.)
On recovery of costs generally, see 7 Cal. Proc. (5th), Judgment, §83 et seq.
On costs for party who obtains net monetary recovery, see 7 Cal. Proc. (5th), Judgment, §91.
On costs for defendant who obtains dismissal, see 7 Cal. Proc. (5th), Judgment, §92.
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