Case Number: 19STCV27360    Hearing Date: March 13, 2023    Dept: 40

Superior Court of California

County of Los Angeles

Department 40

Background

Plaintiff/Cross-Defendant Afshin Moghavem, Inc. (“AMI”) sued Defendant/Cross-Complainant Dollar Shave Club, Inc. (“DSC”) pursuant to claims pleaded in its Second Amended Complaint, including: (1) Breach of Contract—i.e., a consulting agreement between the parties—against DSC for (a) failure to pay monies contractually owed to AMI for setting up and operating a shaving blade manufacturing factory in Israel on behalf of DSC and (b) failure to pay a $3,081,259.14 milestone award pursuant to a term of the consulting agreement; (2) Breach of Covenant of Good Faith and Fair Dealing against DSC for failure to pay the milestone award; (3) Intentional Misrepresentation against DSC for making fraudulent misrepresentations through its agents to induce AMI to enter the parties consulting agreement; (4) Concealment against DSC based on failure to disclose a merger with a different company and litigation against DSC, which would have affected AMI’s decision to enter the consulting agreement; and (5) Negligent Misrepresentation against DSC for making fraudulent misrepresentations through its agents to induce AMI to enter the parties consulting agreement.

DSC filed a Cross-Complaint against AMI alleging (1) Declaratory Judgment as to the monies owed to AMI for work performed, (2) Declaration Judgment as to AMI’s entitlement to the milestone award, and (3) Declaratory Judgment relating to alleged fraud by DSC to AMI.

On September 3, 2021, AMI moved for summary adjudication of its SAC’s first cause of action for breach of contract, which the Court granted in part on January 3, 2022 as to monies owed to AMI pursuant to the parties’ consulting agreement—award of $226,209.65—but denied as to AMI’s entitlement to the milestone award for failure to carry its burden of showing the conditions precedent for such an award took place.

On April 7, 2022, DSC made a motion for summary adjudication of the claims made in AMI’s SAC and DSC’s Cross-Complaint, which the Court granted in full on October 24, 2022, finding, in relevant part, that no triable issues of material facts existed as to whether the conditions precedent to payment of the milestone award to AMI were ever triggered.

The Court entered judgment on November 15, 2022 with notice of entry of judgment on November 16, 2022.

On November 30, 2022, DSC filed a memorandum of costs with the court seeking $136,997.58 in costs and expenses from AMI.

On December 1, 2022, AMI filed its own memorandum of costs, later amending it to seek $119,340.47 in costs and expenses from DSC.

On December 16, 2022, AMI filed the motion to strike or tax costs from DSC’s December 1, 2022 memorandum of costs.

On December 20, 2022, DSC filed its own motion to strike or tax costs from AMI’s December 2, 2022 memorandum of costs.

On January 23, 2023, AMI filed a notice of appeal against the Court’s October 24, 2022 ruling and judgment.

On March 1, 2023, DSC opposed AMI’s motion to strike or tax costs.

On March 7, 2023, AMI filed a reply to DSC’s opposition.

AMI’s motion to strike or tax costs is now before the Court. DSC’s motion to strike or tax costs is calendared for July 26, 2023.

Motion to Strike or Tax Costs: GRANTED, in Part.

Legal Standard

In general, the “prevailing party” is entitled as a matter of right to recover costs for suit in any action or proceeding. (Code Civ. Proc., § 1032, subd. (b); Santisas v. Goodin (1998) 17 Cal.4th 599, 606; Scott Co. Of Calif. v. Blount, Inc. (1999) 20 Cal.4th 1103, 1108.) Assuming the “prevailing party” requirements are met, the trial court has no discretion to order each party to bear his or her own costs of suit. (Michell v. Olick (1996) 49 Cal.App.4th 1194, 1198; Nelson v. Anderson (1999) 72 Cal.App.4th 111, 129.) The term “prevailing party” for costs purposes is defined by statute to include:  

(1) The party with a net monetary recovery;  

(2) A defendant who is dismissed from the action;  

(3) A defendant where neither plaintiff nor defendant recovers anything; and  

(4) A defendant as against those plaintiffs who do not recover any relief against that defendant.

(Code Civ. Proc., § 1032, subd. (a)(4).)

If the party does not fall within one of these four express categories, the court may exercise its discretion to award or deny costs. (See Lincoln v. Schurgin (1995) 39 Cal.App.4th 100, 105.)

Further, if any party recovers other than monetary relief and in situations other than as specified, the “prevailing party” shall be as determined by the court, and under those circumstances, the court, in its discretion, may allow costs or not and, if allowed, may apportion costs between the parties on the same or adverse sides pursuant to rules adopted under Section 1034. (Code Civ. Proc., § 1032, subd. (a)(4).) For example, even if a plaintiff maintains a net monetary recovery, in determining the prevailing party in the litigation, the trial court should also consider, if applicable, the defendant’s success on its declaratory relief claims and exercise its discretion to allow costs or not and, if allowed, to apportion them as appropriate. (Wolf v. Walt Disney Pictures & Television (2008) 162 Cal.App.4th 1107, 1142; see, e.g., Lincoln v. Schurgin, supra, 39 Cal.App.4th at pp. 104-05 [when plaintiff wins net monetary recovery but defendant prevails in its cross-action for declaratory relief, case presents circumstance not otherwise specified; in that case, determination of prevailing party is matter within court’s discretion].)

Allowable costs under Code of Civil Procedure section 1033.5 must be reasonably necessary to the conduct of the litigation, rather than merely convenient or beneficial to its preparation, and must be reasonable in amount. An item not specifically allowable under Section 1033.5(a) nor prohibited under subdivision (b) may nevertheless be recoverable in the discretion of the court if they meet the above requirements (i.e., reasonably necessary and reasonable in amount). If the items appearing in a cost bill appear to be proper charges, the burden is on the party seeking to tax costs to show that they were not reasonable or necessary. (Ladas v. California State Automotive Assoc. (1993) 19 Cal.App.4th 761, 773-74.)

A verified memorandum of costs is prima facie evidence that the costs, expenses, and services therein listed were necessarily incurred. (Rappenecker v. Sea-Land Serv., Inc. (1979) 93 Cal. App. 3d 256, 266.) A party seeking to tax costs must provide evidence to rebut this prima facie showing. (Jones v. Dumrichob (1998) 63 Cal. App. 4th 1258, 1266.) Mere statements unsupported by facts are insufficient to rebut the prima facie showing that costs were necessarily incurred. (Ibid.) On the other hand, if the items are properly objected to, they are put in issue and the burden of proof is on the party claiming them as costs. (Ibid.) Whether a cost item was reasonably necessary to the litigation presents a question of fact for the trial court and its decision is reviewed for abuse of discretion. (Ibid.) However, because the right to costs is governed strictly by statute, a court has no discretion to award costs not statutorily authorized. (Id.) Discretion is abused only when, in its exercise, the court “exceeds the bounds of reason, all of the circumstances being considered.” (Ibid.) 

Analysis

On December 1, 2022, DSC filed a memorandum of costs with the court seeking $136,997.58 in costs and expenses from AMI, comprised of: (1) $4,882.74 in filing and motion costs; (2) $150 in jury fees; (3) $13,924.45 in deposition costs; (4) $2,151.20 in court reporter fees; (5) $102,605.03 in costs and expenses for hosting electronic documents; and (6) $13,284.16 in other costs.

In its motion to strike or tax these costs, Plaintiff AMI argues that (1) the Court should strike DSC’s entire memo of costs because (a) DSC is not the prevailing party in this action given AMI is the prevailing party under section 1032 of the Code of Civil Procedure where it achieved a net monetary recovery, prevailed on the contract, and achieved a primary litigation objection or (b) AMI is the prevailing party under section 1717 of the Civil Code because prevailed in bringing an action to enforce its rights under the consulting agreement and (2) this Court should substantially tax the costs DSC seeks as disallowed, unnecessary, and/or unreasonable. (Mot., 3:21-6:15 [section 1032], 6:16-7:18 [section 1717], 7:19-12:15 [unreasonable costs].)

I. Prevailing Party, Section 1032 – Recovery, Contract, Litigation Objective

AMI first argues that it is the only prevailing party in this action because it was the only party to achieve a net monetary recovery, thus prevailing on the contract between the parties and achieving a litigation objective. (Mot., 3:21-6:15.)

Pursuant to the Court’s January 4, 2022 ruling on AMI’s affirmative summary adjudication motion, Plaintiff prevailed on part of the SAC’s first cause of action for breach of contract, receiving an award of $226,209.65 for fees unpaid to AMI by DSC under the consulting agreement. (1/4/22 Minutes, pp. 3-4; 11/15/22 Judgment, 1:21-23.)

In opposition, DSC argues that AMI is not a prevailing party in this action because, given DSC obtained declaratory relief in its favor in this case as to the milestone award and the fraud claims in this action (see 10/24/22 Minutes, pp. 11-12; 11/15/22 Judgment, pp. 1-2), precedent in Wolf, supra, and section 1032, subdivision (a)(4) grant the Court discretion in determining which party has prevailed for the purposes of recovery of costs and expenses. (Opp’n, 4:13-17; see Lincoln v. Schurgin, supra, 39 Cal.App.4th at pp. 104-05 [when plaintiff wins net monetary recovery but defendant prevails in its cross-action for declaratory relief, case presents circumstance not otherwise specified; in that case, determination of prevailing party is matter within court’s discretion].) DSC further argues that it should be declared the prevailing party because while AMI recovered $226,209.65 in unpaid fees arising from the consulting agreement (11/15/22 Judgment, 1:21-23), (1) DSC prevailed on all three of its declaratory relief cross-claims, (2) the amount AMI did recover in relation to the SAC’s first cause of action—$226,209.65—was conceded by DSC through its Answer and interrogatories, and was otherwise adopted directly from DSC’s opposition papers to AMI’s affirmative summary adjudication motion, (3) DSC made section 998 offers that exceeded the award amount to AMI, and (4) AMI has not explained how it achieved its litigation objective where judgment in its favor was only entered in conformity with arguments advanced by DSC as to proper amount due to AMI under the consulting agreement. (Opp’n, 4:14-5:11.)

In reply, AMI fails to argue that it is the prevailing party under section 1032 or to distinguish Wolf; instead, AMI limits its arguments to whether AMI is the prevailing party under section 1717 of the Civil Code and whether the 998 offer by DSC was invalid. (Reply, 2:2-3:18 [section 1717], 3:19-7:25 [998 offer].)

The Court finds that for the purposes of section 1032 of the Code of Civil Procedure, DSC is the prevailing party in this action. While AMI recovered $226,209.65 in connection with the ‘monies owed to AMI for work performed on behalf of DSC’ portion of its breach of contract claim (11/15/22 Judgment, 1:21-23), DSC prevailed on the lion’s share of claims. Indeed, DSC obtained summary adjudication and judgment in its favor as to (1) the milestone award portion of the SAC’s first cause of action for breach of contract, (2) the remaining four claims advanced by AMI in its SAC (breach of covenant of good faith and fair dealing and three fraud claims), and (3) the three causes of action for declaratory relief in its Cross-Complaint. (See 10/24/22 Minutes, pp. 11-12; 11/15/22 Judgment, pp. 1:24-2:1.) Further, the $226,209.65 awarded to AMI was based on DSC’s suggestion as to the proper fees owed to AMI for work performed under the consulting agreement. (Compare 12/21/21 Opp’n, 13:15-24, with 1/4/22 Minutes, p. 3.)

DSC is therefore a prevailing party pursuant to section 1032 of the Code of Civil Procedure and is entitled to costs and expenses incurred in this action.

II. Prevailing Party – Enforcement of Consulting Agreement Rights

Alternatively, AMI argues that the consulting agreement between the parties “limits a costs and fees award to the party who has prevailed on the contract” where “AMI prevailed on the contract, meaning that costs cannot be awarded to DSC” “whether or not AMI succeeded or failed (or DSC obtained relief) on alternative noncontractual claims.” (Mot., 7:10-13.)

DSC fails to address section 1717 in its opposition. (See Opp’n generally.)

AMI’s reply reiterates its argument that section 1717 limits recovery of costs and expenses to the party prevailing on the contract. (Reply, 6:16-7:18.)

The Court finds AMI’s argument unavailing. The memo of costs by DSC is premised on Code of Civil Procedure sections 1032 and 1033.5, not section 1717 of the Civil Code. (Memo of Costs, p. 1 [at bottom right of page, showing memo premised on sections 1032 and 1033.5 of the Code of Civil Procedure].) While section 1717 of the Civil Code provides that a prevailing party within the meaning of that statutory section may recover all fees and costs incurred in a contract action, relief under section 1032 is narrower and separate, providing that a prevailing party under that statutory section may recover specific costs and expenses. A review of the authority provided by AMI does not convince the Court that an agreement for attorney’s fees and costs pursuant to Civil Code section 1717 forecloses relief under section 1032 of the Code of Civil Procedure. (Mot., 6:22-7:9; Reply, 2:7-17.)

Because the Court has determined that DSC is a prevailing party under the meaning of section 1032 of the Code of Civil Procedure and because the Court does not apply a section 1717 analysis to the claimed costs and expenses, the Court finds that it need not reach the arguments as to whether AMI is the prevailing party in this action in light of DSC’s October 20, 2019 Code of Civil Procedure section 998 offer, such that only DSC is entitled to costs only following October 20, 2019. (Opp’n, 5:19-6:14 [AMI rejected DSC’s $260,000 section 998 offer and only recovered $226,209 on the contract], Beffa Decl., Ex. E [offer]; Reply 2:18-7:25 [rebuttal arguments]; see 11/15/22 Judgment, 1:21-23 [$226,209 award to AMI].)

The Court thus continues to its discussion of reasonability of costs and expenses due to DSC.

III. Unreasonable Costs

AMI next argues that specific costs and expenses in DSC’s memo should be stricken or taxed.

A. Deposition Costs

For deposition costs (line 4), AMI argues that DSC does not demonstrate how DSC’s $13,924.45 in deposition costs are reasonable where (1) DSC noticed and took a single deposition in this case as to AMI’s principal—which was a remote deposition, meaning that DSC’s counsel (and the court reporter and videographer) did not have to travel, and DSC submitted no invoices or account statements from the reporting service that transcribed the deposition—(2) AMI’s principal did not require an interpreter, (3) AMI took nearly five depositions and is only charging $15,713.55 in deposition costs, and (4) to the extent DSC’s claimed costs include its counsel’s investigation in preparation for the deposition, that is disallowed. (Mot., 9:5-22, Doniger Decl., ¶ 2.)

DSC argues that its sought deposition costs are reasonable because (1) DSC was obligated to purchase copies of those deposition transcripts, which it used—successfully—in prevailing on two summary judgment motions, (2) the fact that AMI is charging less in deposition costs is immaterial because an attending party’s deposition transcript costs are only marginally—if at all—less than the noticing party’s costs, and (3) contrary to AMI’s assertions on motion, DSC  did not include “local travel expenses unrelated to depositions” in deposition costs. (Opp’n, 8:10-9:4, Beffa Decl., ¶ 15, Ex. F [copies of invoices related to deposition costs].)

AMI argues on reply that DSC should be taxed at least $4,371 in deposition costs because (1) DSC’s claimed cost of $1,650 for “concierge technical support” is disallowed and (2) DSC fails to explain or justify its claimed cost of $2,721 for additional unspecified “video services,” and that $7,348.50 for noticing and taking a single deposition is unnecessary and unreasonable. (Reply, 8:10-17.)

A review of Exhibit F to the opposition’s Beffa Declaration shows the entirety of the receipts for the $13,924.45 in deposition costs sought by DSC. While facially excessive, the Court determines that most of the costs sought by DSC are reasonable, particularly where some of the high costs are related to certified deposition transcripts needed by DSC in this action. The Court finds no issue with the additional “video services costs.” However, the Court does tax the $1,650 for concierge technical support at the deposition of AMI’s principal (see Opp’n, Ex. F, 12/10/20 Invoice #4707228) because the precedent cited by AMI (Reply, 8:10-13) compels the conclusion that such charges are not reasonable. (Sci. Applications Internat. Corp. v. Superior Ct. (1995) 39 Cal.App.4th 1095, 1104-05 [on-site technician for jury trial setting is unreasonable cost].)

Deposition costs are thus awarded in the amount of $12,275.45.

B. Court Reporter Fees

For court reporter fees (line 11), AMI argues that DSC is not entitled to the $2,151.20 in costs DSC seeks because DSC references no statute, provides no description of why it was necessary to expend the claimed fees, and provides no declaration from the court reporter(s) as to the fees they charged or for what purpose and on what days, or whether the reporters were official superior court reporters (capped at $55/day) or private reporters; nor does DSC provide any documentation establishing that the fees were incurred by DSC alone. (Mot., 9:23-27.)

DSC argues in opposition that its fees are reasonable up to the amount of $1,960 (1) because court reporter fees related to five hearings that took place in this action and (2) where “DSC’s Memorandum of Costs erroneously included $191.20 in hearing transcript fees that are not allowable under Code of Civil Procedure Section 1033.5(b).” (Opp’n, 9:5-21., Beffa Decl. ¶ 16, Ex. G, pp. 4-5 [showing $2,070 in claimed costs].)

In reply, AMI argues that (1) court reporter fees predating DSC’s October 20, 2019 section 998 offer are not valid and (2) no costs should be awarded for June 24, 2022 hearing that did not take place. (Reply, 7:4-9, fn. 5.)

The Court finds the entirety of the $1960 in court reporter costs are reasonable. The section 998 offer arguments were dispensed by this Court’s discussion at section I.A. ante. The costs for June 24, 2022 are reasonable because even if the hearing did not take place, the charges were incurred.

C. Electronic Document Hosting

For costs related to hosting electronic documents (line 15), AMI argues that the $102,605.03 in costs sought by DSC are unreasonable and excessive because: (1) such costs are only statutorily allowable if a court orders it and are otherwise recoverable under the court’s discretion; (2) such costs are unreasonable and excessive where for a variety of reasons, including (a) lack of explanation as to why using an electronic discovery vendor to maintain an electronic document management database was not only indispensable, but also why it was the only cost-effective method of complying with discovery obligations, (b) lack of detail regarding how many and which documents were collected from which custodians, (c) why it was necessary to collect those documents from those custodians, (d) when and for how long those documents were collected and hosted, and (e) why the collected documents—especially those that were not produced, referenced in a privilege log, or used in any depositions or filings—were necessary to host for that amount of time, and (c) DSC’s production of  10,128 pages in this case pales in comparison to AMI’s production of 19,264 pages, where AMI is only seeking $16,125 for its electronic hosting. (Mot., 10:4-12:12.)

In opposition, DSC argues that its costs are reasonable because (1) DSC hired an e-discovery vendor to host DSC’s documents on a platform that allowed review and production of documents, (2) the vendor charged DSC a monthly fee for hosting based on the volume of

data hosted, (3) AMI’s discovery requests forced DSC to maintain its electronic document hosting between 2020 and 2022, (4) expenditure of $100,000 in hosting fees was reasonable and reasonably necessary in light of the more than $3 million Plaintiff was attempting to impose on DSC as damages, (5) DSC’s document discovery was narrow and targeted and far outpaced the volume of documents held by a closed corporation like AMI, (6) without an e-discovery vendor, DSC would have been unable to practicably process the data and produce documents relevant to the case, and (7) “[a]lthough such costs are not awarded as a matter of right, see Cal. Civ. Proc. Code § 1033.5(a), neither are they prohibited, see Cal. Civ. Proc. Code § 1033.5(b).” (Opp’n, 9:22-11:7, Beffa Decl., ¶¶ 17-20, Ex. H [receipts for hosting between February 2020 and July 2022, with charges of roughly $7,000 and $8,000 for the first two months and over $3,000 thereafter].)

In reply, AMI argues that the electronic hosting costs are unreasonable because (1) the fees for the first two months of electronic data hosting are not properly explained insofar as DSC does not explain what data was ingested by the vendor to justify such high costs, (2) DSC does not explain why it was necessary to host 90+ gigabytes of data between May 2020 and August 2021, (3) DSC does not explain why it required 80+ gigabytes of data storage between September 2021 and July 2022, including 41 GB in a “vault,” (4) DSC does not explain why it was necessary to create two partial archives in the electronic hosting server, (5) AMI used Disco, the same e-discovery vendor that DSC used, and exported its electronic documents from its vendor’s management database to a hard drive to not unnecessarily continue to incur hosting fees, and (6) DSC fails to address that recovery of costs associated with hosting electronic documents after January 1, 2022 is not mandated. (Reply, 8:18-9:16.)

The Court finds that the electronic hosting costs are excessive and taxes the costs down to $30,000. Most importantly, the Court finds that DSC could have, like AMI, exported its electronic documents into a local hard drive(s) to reduce the amount incurred in costs. It is not reasonable for DSC to cite its corporate structure or other reasons for why it could not streamline processing of data and production documents relevant to the case other than by incurring substantial amounts of monies in electronic hosting.

D. Other Fees

For other costs (line 16), AMI argues that the $13,284.16 in costs sought by DSC are unspecified and thus not statutorily allowable where DSC bears the burden to prove why they are allowable and, even if allowable, why they were necessarily incurred and reasonable in amount. (Mot., 12:13-15.)

In opposition, DSC argues that its “other” costs are reasonable insofar as they are comprised of: (1) $5,939.69 in online legal research fees; (2) $4,987.00 in mediation fees; (3) $998.17 in courtesy copy delivery fees; (4) $650.00 in electronic court deadline calendaring service fees; (5) $484.72 in docket document retrieval fees; (6) $97.59 in parking and other local travel costs related to court hearings; (7) $43.29 in document scanning costs; and (8) $3.75 in costs of obtaining fictitious business name information from the County Recorder. (Opp’n, 11:8-12:14, Beffa Decl., ¶¶ 13, 21-22, Ex. I.)

In reply, AMI argues that (1) pursuant to case law, DSC’s claimed $5,939.69 in “online legal research fees” are disallowed, (2) DSC’s claimed $4,987 in “mediation fees” should be disallowed because mediation was not court-ordered, (3) DSC omits that the July 2022 mediation referenced in Beffa Decl. Ex. I never happened, omits what “portions of the attached mediation invoices were refunded,” and omits what “new mediation expenses” DSC “incurred” that were purportedly “greater than the refunded amount,” (4) DSC’s claimed $998.17 in “courtesy copy delivery fees” should be disallowed, as there is nothing in DSC’s declaration stating what those costs were related, (5) DSC’s claimed $484.72 in “docket document retrieval fees” are disallowed because that is just “a method of accessing information,” and thus “not recoverable,” (6) DSC’s claimed $97.59 “in parking and other local travel costs” are disallowed under case law, and (7) DSC’s $43.29 “in document scanning costs” are disallowed by statute. (Reply, 9:17-10:12.)

The Court finds that: (1) online legal research fees are struck based on AMI’s cited precedent at Ladas v. California State Automotive Assoc., supra, 19 Cal.App.4th at p. 776 and based on Code of Civil Procedure section 1033.5, subdivision (b)(2); (2) docket document retrieval fees are struck based on AMI’s cited precedent in Sci. Applications Internat. Corp. v. Superior Ct., supra, 39 Cal.App.4th at p. 1105; (3) parking and travel costs are struck based on AMI’s cited precedent in Ladas, at pp. 774-75; and (4) document scanning costs are stricken based on AMI’s cited reference to Code of Civil Procedure section 1033.5, subdivision (b)(3).  The remaining costs are allowed.

The Court briefly notes that, under AMI’s own cited precedent (Reply, 9:20-23), while mediation costs are not mandated by statute, they are allowable. (Gibson v. Bobroff (1996) 49 Cal.App.4th 1202, 1207-08 [“… if the Legislature meant to exclude mediation expenses as costs, it would have done so explicitly in subdivision (b),” for which reasons, the “legislation does not foreclose an award of mediation expenses as costs”].)

DSC’s “other costs” are thus stricken down to $6,638.92.

E. Remaining Costs

The Court finds that the unchallenged (1) $4,882.74 in filing and motion costs and (2) $150 in jury fees are reasonable.

F. Costs Conclusion

The Court GRANTS AMI’s motion, in Part, for a total recovery of costs and expenses by DSC in the amount $55,907.11, comprised of: (1) $4,882.74 in filing and motion costs; (2) $150 in jury fees; (3) $12,275.45 in deposition costs; (4) $1,960 in court reporter fees; (5) $30,000 in costs and expenses for hosting electronic documents; and (6) $6,638.92 in other costs.

 Conclusion uPlaintiff/Cross-Defendant Afshin Moghavem, Inc.’s Motion to Strike or Tax Costs is GRANTED, in Part, through which Defendant/Cross-Complainant Dollar Shave Club, Inc.’s requested costs and expenses of $136,997.58 are struck or otherwise taxed down to $55,907.11.