California Supreme Court: Plaintiffs Who Settle for Money are "Prevailing Parties" for Costs Purposes

Here's a quick post, mostly for litigators in employment law cases.  But clients should make sure that settlement agreements are drafted correctly when they review them.

The California Supreme Court once again interpreted California's costs statute, Civil Procedure Code section 1032.  The case happens to be an employment law lawsuit, but the facts do not really matter.

Section 1032 awards "costs" of suit, such as deposition transcripts, subpoena fees, filing fees, and the like to the "prevailing party" in litigation.

The "prevailing party" can mean "the party with a net monetary recovery, a defendant in whose favor a dismissal is entered, a defendant where neither plaintiff nor defendant obtains any relief, and a defendant as against those plaintiffs who do not recover any relief against that defendant."

Well, if the case settles before trial and the defendant pays the plaintiff money, does that mean that the plaintiff is prevailing party because the plaintiff is "the party with a net monetary recovery?"  Could be!  

But wait. Isn't defendant also the prevailing party because there's a "dismissal" in favor of defendant?  Probably so!  Can there be two prevailing parties then?   Who gets the costs?  Whatever will happen to us now?  

That's why there's a Supreme Court and here's what the Court said:

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.

So, that means that when there's a settlement, it's very important for the parties to expressly include in the settlement agreement and/or the request for dismissal "each side will bear his/her/its/their own costs."  Unless the parties address the issue, the "default rule" will apply. The plaintiff can go into court and file for costs, which can mean more money on top of the settlement that the defendant paid

Sometimes legal mumbo-jumbo in settlement agreements matters and this is one of those times.

This case is  DeSaulles v. Community Hospital of the Monterey Peninsula and the opinion is here.