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The Right to Recover Costs

6/24/20

By: Dhave Balatero

In California, the right to recover costs is entirely a creature of statute (Murillo v. Fleetwood Enterprises, Inc. (1998) 17 Cal.4th 985, 989) and Cal. Code. Civ. Pro. section 1032 is “the fundamental authority for awarding costs in civil actions.” (Scott Co. v. Blount, Inc. (1999) 20 Cal.4th 1103, 1108.  

The statute states: 

  1. “Complaint” includes a cross-complaint;
  2. “Defendant” includes a cross-defendant, a person against whom a complaint is filed, or a party who files an answer in intervention;
  3. “Plaintiff” includes a cross-complainant or a party who files a complaint in intervention
  4. “Prevailing party” includes a party with a net monetary recovery, a defendant in whose favor is a dismissal is entered, a defendant where neither plaintiff nor defendant obtains any relief, and a defendant as against those plaintiffs who does not recover any relief against that defendant […] Cal. Code. Civ. Proc. section 1032. 

Since the Legislature has not distinguished between types of dismissals in the statute, [the Court] will not read such a restriction into it. “[O]ne should not read into the statute allowing costs a restriction which has not been placed there. ‘In general, a court should not look beyond the plain meaning of a statute when the language is clear and unambiguous, and there is no uncertainty or doubt as to the legislative intent.’” (Crib Retaining Walls, Inc. v. NBS/Lowry, Inc. (1996) 47 Cal.App.4th 886, 890 quoting Teachers Management & Inv. Corp. v. City of Santa Cruz (1976) 64 Cal.App.3d 438, 446.

Therefore, a defendant including a cross-defendant, in whose favor a voluntary dismissal has been entered is a prevailing party for cost recovery purposes. (Cal. Code. Civ. Proc. Section 1032; Brown v. Desert Christian Center (2011) 193 Cal. App. 4th 733, 737-738.). 

Consider the following scenario: Plaintiff names two defendants in its initial complaint. Based on the facts and allegations in the complaint, Defendant A files a cross-complaint for indemnity and contribution against Defendant B. Defendant A/cross-complainant does not conduct any significant discovery in relation to its cross-complaint. Before trial, Defendant A reaches a settlement agreement with Plaintiff.  Defendant A’s settlement is deemed a good faith settlement with the Court pursuant to Cal. Code. Civ. Proc section 877.6 and Plaintiff dismisses Defendant A from the suit. Accordingly, Defendant A dismisses its cross-complaint against Defendant B.

Is Defendant B entitled to seek his/her litigation costs from Defendant A? Yes! Even if the costs are not limited to the defense of the cross-complaint? Yes! It may seem unfair, but as mentioned above, the court will not look beyond the plain meaning of the statute and create restrictions. More and more cross-defendants are seeking cost from cross-complainants and attorneys should be mindful of this growing trend in their litigation plan.

If you have questions or would like more information, please contact Dhave Balatero at dbalatero@fmglaw.com.

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