(b) 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.
But attorney's fees are not considered costs and are not recoverable unless a statute so provides.
The Fair Employment and Housing Act contains a provision in Govt Code section 12965(b) allowing prevailing parties to recover attorney's fees and costs:
In civil actions brought under this section, the court, in its discretion, may award to the prevailing party, including the department, reasonable attorney's fees and costs, including expert witness fees.
The courts have long interpreted this section to say that employees normally are entitled to attorney's fees if they win their lawsuit. But, employers do not recover attorney's fees unless the plaintiff's case was frivolous, groundless, or without foundation. I know, the statute does not make that distinction. But that's been the rule since the 1970's, at least under federal law. California courts have followed this rule for many years. The theory is that allowing employer-defendants to recover attorney's fees in all cases would dissuade people from suing for discrimination, harassment and retaliation.
But what of litigation costs? Does Govt Code section 12965(b), quoted above, "expressly provide" for an exception to the general rule set forth in Civil Proc. Code section 1032?
Yes. Yes it does. That's what the California Supreme Court unanimously held in Williams v. Chino Valley Ind. Fire Dist., opinion here. In a nutshell, the Court held:
We conclude Government Code section 12965, subdivision (b), governs cost awards in FEHA actions, allowing trial courts discretion in awards of both attorney fees and costs to prevailing FEHA parties. We further conclude that in awarding attorney fees and costs, the trial court‘s discretion is bounded by the rule of Christiansburg; an unsuccessful FEHA plaintiff should not be ordered to pay the defendant‘s fees or costs unless the plaintiff brought or continued litigating the action without an objective basis for believing it had potential merit.
Many cases do not go to trial or get resolved via motion for summary judgment. Therefore, there are only a small percentage of cases in which the defendant is entitled to recover its "costs."
But this case has wider implications. The potential for an award of costs is an incentive to plaintiffs to settle weak cases. This holding guts that incentive. Courts now must apply the same standard to costs as they do to attorney's fees. It's not easy to persuade a court to award attorney's fees. Plaintiffs and their lawyers will take into account that the employer will have a tough time obtaining an award of costs. Therefore, they may hold out for larger settlements or refuse to settle altogether.
This case also makes it less likely that a weak case will be dismissed for a waiver of costs, which is a way for a plaintiff to settle a bad case. The offer of a waiver of costs can have real consequences if costs are recoverable as a matter of right. For example, if an employer wins summary judgment, it may offer to settle for a waiver of costs if the plaintiff forgoes appeal. Now, that offer is less valuable.
Finally, this case will make it more burdensome and expensive for defendants who prevail and then seek costs. It also will cause new burdens for trial courts. Defendants no longer will be able to file a simple memorandum of costs at the end of a case. Instead, they will have to file a motion to convince the court that the plaintiff's case was frivolous, unreasonable or without foundation. Presumably, that motion will have to be based on evidence, such as deposition transcripts. Those motions cost money to prepare, creating a further disincentive to filing them. The trial court will then have to take the time to review these motions and make rulings. And then the courts of appeal may have to review the orders on appeal.
This ruling is great for plaintiffs with weak cases. But not so great for employers facing huge defense costs that wish to pay a settlement rather than risk losing at trial or incurring further legal bills.
Again, the opinion in Williams v. Chino Valley Ind. Fire Dist. is here.
Have a nice day!
