deSaulles v. Cmty. Hosp. of the Monterey Peninsula

• Decision Date: 10 March 2016
• Docket Number: No. S219236.,S219236.
• Citation: 32 A.D. Cases 1069,370 P.3d 996,202 Cal.Rptr.3d 429,62 Cal.4th 1140
• Court: California Supreme Court
• Parties: Maureen DESAULLES, Plaintiff and Appellant, v. COMMUNITY HOSPITAL OF the MONTEREY PENINSULA, Defendant and Respondent.

62 Cal.4th 1140

370 P.3d 996

202 Cal.Rptr.3d 429

32 A.D. Cases 1069

Maureen DESAULLES, Plaintiff and Appellant

v.COMMUNITY HOSPITAL OF the MONTEREY PENINSULA, Defendant and Respondent.

No. S219236.

Supreme Court of California

March 10, 2016.

Henry Joachim Josefsberg, Los Alamitos, for Plaintiff and Appellant.

The David Firm, Henry S. David, Dana Joy Emmer ; Greines, Martin, Stein & Richland, Robert A. Olson and Edward L. Xanders, Los Angeles, for David S. Karton, a Law Corporation as Amicus Curiae on behalf of Plaintiff and Appellant.

Fenton & Keller and Christopher Edward Panetta, Monterey, for Defendant and Respondent.

LIU

, J.

Code of Civil Procedure section 1032, subdivision (a)(4)

defines the “prevailing party” in litigation to include “the party with a net monetary recovery” and “a defendant in whose favor a dismissal is entered.” (All undesignated statutory references are to this code.) A “ prevailing party,” so defined, “is entitled as a matter of right to recover costs in any action or proceeding.” (§ 1032, subd. (b)

.) The question in this case is whether a plaintiff who voluntarily dismisses an action after entering into a monetary settlement is a prevailing party under section 1032, subdivision (a)(4) (hereafter section 1032(a)(4) ).

The Court of Appeal below answered in the affirmative, reasoning that the statutory definition of “prevailing party” includes a party that obtains a “net monetary recovery” and that a settlement in which a defendant pays a plaintiff some amount of money is a net monetary recovery, at least under the circumstances of this case. In reaching this conclusion, the Court of Appeal disagreed with Chinn v. KMR Property Management (2008) 166 Cal.App.4th 175, 82 Cal.Rptr.3d 586

(Chinn ), which held that the defendant is the prevailing party where a settlement results in a dismissal. Chinn reasoned that the statutory definition of “prevailing party” includes “ ‘a defendant in whose favor a dismissal is entered’ ” and that a settlement is not a “ ‘net monetary recovery.’ ” (Id. at p. 188, 82 Cal.Rptr.3d 586.)

We conclude that the Court of Appeal below was correct: When a defendant pays money to a plaintiff in order to settle a case, the plaintiff obtains a “net monetary recovery,” and a dismissal pursuant to such a settlement is not a dismissal “in [the defendant's] favor.” (§ 1032(a)(4)

.) As emphasized below, this holding sets forth a default rule; settling parties are free to make their own arrangements regarding costs.

I.

Community Hospital of the Monterey Peninsula (the Hospital) hired Maureen deSaulles in February 2005 as a part-time patient business services registrar. In June 2005, she began complaining about her work shift assignments to the emergency room. The Hospital placed deSaulles on a leave of absence in January 2006 and terminated her employment in July 2006.

In July 2007, deSaulles filed a complaint alleging that the Hospital had (1) failed to accommodate her physical disability or medical condition (susceptibility to infection as a result of cancer

); (2) retaliated against her for exercising her rights under California's Fair Employment and Housing Act; (3) breached implicit conditions of an employment contract; (4) breached an implied covenant of good faith and fair dealing; (5) negligently and (6) intentionally inflicted emotional distress; and (7) wrongfully terminated her in violation of public policy.

After the Hospital's motion for summary judgment adjudication and subsequent motions in limine, the court ruled that deSaulles would be precluded from introducing evidence and argument regarding any cause of action except the third and fourth causes of action, breach of contract and breach of the implied covenant of good faith and fair dealing.

At the conclusion of those rulings and before a jury was empaneled, the parties placed the following settlement on the record to permit the court to retain jurisdiction under section 664.6

: “[I]n consideration for dismissal with prejudice of the two claims of breach of contract and breach of covenant, Defendant will pay Plaintiff within 10 days $23,500.” Defense counsel “will prepare a judgment on the remaining claims which references the dismissal with prejudice and which preserves the right of appeal of the rulings of this court on the remaining causes of action....” “[T]he parties will not file any motions or memoranda for costs or attorney fees[,] holding off until the completion of the appeal....”

On October 6, 2008, pursuant to the settlement, deSaulles filed a request for dismissal with prejudice of the breach of contract and breach of covenant claims. On January 6, 2009, the trial court entered an amended judgment that said: “Having considered the arguments, oral and written, of all the parties, the records and file herein, and the pretrial motions and oppositions thereto filed herein, and having granted defendant's Motion in Limine No. 1 to Preclude Any Argument That Defendant Failed to Accommodate Plaintiff's Disability or to Engage in the Interactive Process, or That Plaintiff Was Harassed, Discriminated or Retaliated Against in Connection Therewith, the Court finds that plaintiff will be unable to introduce any evidence that would establish plaintiff's second cause of action for retaliation, her fifth and sixth causes of action for intentional and negligent infliction of emotional distress, or her seventh cause of action for wrongful termination in violation of public policy; and, [¶] The Court having previously granted summary adjudication of Plaintiff's first cause of action for failure to accommodate; and, [¶] The parties having settled plaintiff's third cause of action for breach of implied in fact contract and Fourth cause[ ] of action for breach of the covenant of good faith and fair dealing, IT IS HEREBY ADJUDGED that, [¶] 1. Plaintiff recover nothing from defendant; and [¶] 2. The Parties shall defer seeking any recovery of costs and fees on this Judgment coming final after the time for all appeals.”

DeSaulles filed an appeal from the amended judgment, and the Court of Appeal affirmed the judgment in an unpublished opinion. After the Court of Appeal issued a remittitur, the parties returned to the trial court, and each claimed to be the prevailing party entitled to recovery of costs. After a hearing, the trial court said: “The Court believes it can exercise its discretion in determining which party did prevail, and because [the Hospital] prevailed on significant causes of action and thereafter entered into a settlement on the remaining costs, the Court finds that [the Hospital] is the prevailing party.” The trial court awarded the Hospital costs of $12,731.92 and denied deSaulles's request for costs.

The Court of Appeal reversed, concluding that deSaulles had obtained a net monetary recovery and was therefore the prevailing party. As to the Hospital's argument that it was entitled to costs because it had obtained a dismissal, the Court of Appeal observed that a final dismissal had not disposed of this case: “The summary adjudication did not end the action in Employer's favor. The sustaining of in limine motions did not end the action in Employer's favor, as two causes of action remained for trial. The case ended without a trial on the merits because Employee agreed to dismiss her remaining two causes of action, but the judgment entered did not purport to dismiss the entire action. The judgment was intended by its terms to preserve Employee's right to appeal the court's rulings on her other claims. Employee did indeed appeal in an ultimately unsuccessful attempt to resurrect those causes of action. [¶] Employee voluntarily dismissed two causes of action and a judgment was entered on the remaining causes. Employer obtained at most a partial voluntary dismissal, which we conclude did not, without more, trigger a mandatory costs award to Employer.”

The Court of Appeal further explained: “The judgment in this case provided that Employee shall recover nothing and also recited that the parties had settled two of the seven causes of action. But the judgment failed to mention that Employee was paid $23,500 in exchange for dismissing those causes of action.” The court cited Friends of the Trails v. Blasius (2000) 78 Cal.App.4th 810, 93 Cal.Rptr.2d 193

, which awarded costs to a plaintiff who had obtained a declaration that a public easement had been created in an irrigation ditch, despite the fact that the judgment stated that “no relief is granted in favor of plaintiffs against defendant.” (Id. at pp. 838–839, 93 Cal.Rptr.2d 193.) “Blasius illustrates that a costs award should be based on all aspects of a lawsuit's final disposition rather than on an isolated phrase in the judgment.” In so holding, the court expressly disagreed with Chinn, supra, 166 Cal.App.4th 175, 82 Cal.Rptr.3d 586.

We granted review.

II.

In contrast to the American rule that parties to a lawsuit ordinarily pay their own attorney fees, litigation costs have been traditionally awarded to the prevailing party. “Costs are allowances which are authorized to reimburse the successful party to an action or proceeding, and are in the nature of incidental damages to indemnify a party against the expense of successfully asserting his rights.” (Purdy v. Johnson (1929) 100 Cal.App. 416, 418, 280 P. 181

; see

§ 1033.5

[costs include filing fees, ordinary witness fees, costs related to recording and transcribing depositions, and certain costs of preparing exhibits].) “ ‘The theory upon which [costs] are allowed to a plaintiff is that the default of the defendant made it necessary to sue him, and to a defendant, that the plaintiff sued him without cause. Thus the party to blame pays costs to the party without fault.’ ” (Purdy v. Johnson, at p. 418, 280 P. 181.)

Section 1032

codifies this approach to allocating costs: “Except as otherwise expressly provided by statute, a prevailing party is entitled as a matter of right to recover costs in any action or proceeding.”...