Judge: Helen Zukin, Case: 19SMCV01612, Date: 2022-09-30 Tentative Ruling

Case Number: 19SMCV01612-02    Hearing Date: September 30, 2022    Dept: 207

Background

This is an insurance bad faith action brought by Plaintiff Mingsong Yao (“Plaintiff”) against Defendant State Farm General Insurance Company (“Defendant”) arising from damage to Plaintiff’s Malibu home caused by the Woolsey Fire. The matter came on regularly for trial before the Court from June 29, 2022, to July 8, 2022, resulting in a jury verdict in Defendant’s favor. Defendant now brings a motion to recover costs under Code Civ. Proc. § 2033.420. Specifically, Defendant asks the Court to award it $133,882.50 in legal fees incurred to prove Defendant did not breach its contract with Plaintiff. Alternatively, Defendant asks the Court to award it $66,911.25 in legal fees incurred to prove Defendant did not act in bad faith.

Legal Standard

Under Code Civ. Proc. § 2033.420, when a party fails to admit the truth of any matter when requested to do so in a request for admission, and if the proponent of that request for admission proves the truth of that matter, the proponent of the request for admission may request the Court to order the party failing to admit the truth of the matter to pay the reasonable expenses incurred in making that proof, including reasonable attorney's fees. Code Civ. Proc. section 2033.420(b) states that the Court shall make this order unless the Court finds any of the following:

(1)        An objection to the request was sustained or a response to it was waived under Section 2033.290.

(2)       The admission sought was of no substantial importance.

(3)       The party failing to make the admission had reasonable ground to believe that that party would prevail on the matter.

(4)       There was other good reason for the failure to admit.

(C.C.P. § 2033.420(b).)

The purpose of requests for admissions is to expedite trial by “setting at rest a triable issue so that it will not have to be tried.” (Cembrook v. Superior Court (1961) 56 Cal.2d 423, 429.) Although a defendant “cannot be forced to admit the fact prior to trial despite its obvious truth”, the failure to do so comes with consequences, exposure to a costs of proof award. (Grace v. Mansourian (2015) 240 Cal.App.4th 523, 532.) To justify denial of a request, a party must have a “reasonable ground” to believe the party would prevail on the issue and this means more than a hope or a roll of the dice. (Id.) For example, when a responding party seeks to show that the responding party had a reasonable ground for believing the responding party would prevail on an issue, the Court may properly consider whether at the time the denial was made the party making the denial held a reasonably entertained good faith belief that the party would prevail on the issue at trial. (Brooks v. Am. Broad. Co. (1986) 179 Cal.App.3d 500, 511.) It is not enough for the party making the denial to “hotly contest” the issue. (Id.) Instead, there must be some reasonable basis for contesting the issue in question before sanctions can be avoided. (Id.)

Analysis

As an initial matter, the Court notes Plaintiff filed a “Supplemental Declaration” in opposition to Defendant’s motion on September 9, 2022. At the time this supplemental declaration was filed, the briefing on Defendant’s motion was complete as Defendant had filed a timely reply in support of its motion on September 6, 2022. Plaintiff’s supplemental declaration is an unauthorized sur-reply. Plaintiff did not obtain leave of Court to file additional briefing on Defendant’s motion. Accordingly, the Court will disregard Plaintiff’s improper sur-reply in ruling on Defendant’s motion.

Plaintiff raises several arguments in response to Defendant’s motion. Plaintiff argues Defendant has not established it is the prevailing party for purpose of an award of fees and costs. Here however, Defendant is not seeking an award of fees and costs as a prevailing party, rather it is seeking them as an award under Code Civ. Proc. § 2033.420 to compensate Defendant for Plaintiff’s failure to admit certain matters contained in a request for admission propounded on him in August 2021. Such an award is not contingent on the Court finding Defendant is the prevailing party. (C.C.P. §2033.420.)

Plaintiff also claims Defendant has not shown he failed to admit any matters in discovery. The Court disagrees. Defendant submits copies of the requests for admission propounded on Plaintiff in August 2021 and Plaintiff’s verified September 2021 responses to those requests in which Plaintiff unequivocally refused to admit certain matters, including whether Defendant breached its contract with Plaintiff or acted in bad faith. The Court finds Defendant has shown Plaintiff refused to admit these issues in discovery such as to make an award of costs under Code Civ. Proc. §2033.420 as it is undisputed these issues—breach and bad faith—were of substantial importance in the context of Plaintiff’s case.

Plaintiff argues he had reasonable grounds to not admit the matters contained in Defendant’s requests. However, Plaintiff puts no evidence before the Court showing any such reasonable grounds. Plaintiff instead offers only his unsupported assertions that Defendant breached the terms of the policy and acted in bad faith in handling his claim. While the Court’s inquiry in ruling on a motion under Code Civ. Proc. § 2033.420 turns on a party’s belief that he or she would prevail on the issue in question, this belief must have a reasonable, good faith basis. Such a reasonable basis must be established by evidence, not the conclusory statements of the responding party. (Yoon v. CAM IX Trust (2021) 60 Cal.App.5th 388, 394-395 [responding party must show evidence supporting a reasonable belief to avoid costs]; Doe v. Los Angeles County Dept. of Children & Family Services (2019) 37 Cal.App.5th 675, 691 [court need not credit self-serving testimony in ruling on motion under C.C.P. § 2033.420].)

Plaintiff has not shown any of the four statutory exceptions apply here, and thus the Court finds Defendant is entitled to an award of reasonable costs it incurred in proving these issues.

However, Defendant has not set forth any basis for the Court to determine the reasonableness of the fees incurred as the billing records submitted by Defendant have been redacted to remove all of the descriptions for every time entry. Without the billing descriptions, the Court has no way to determine whether the fees sought by any individual entry are reasonable or actually related to proving the matters which Plaintiff would not admit. Defendant itself concedes it is difficult to determine whether any of its entries relate to proving any particular issue in the litigation. (Motion at 7 [“It is difficult to separate the fees billed for defense of the breach of contract cause of action from those fees billed in defense of the bad faith cause of action”].)

Defendant says its best estimate is that half of the fees were incurred to prove it did not act in bad faith and half the fees were incurred to prove it did breach the contract, but it has provided no basis for this estimate to the Court. The Court also notes Defendant seeks to recover all fees incurred after the time of Plaintiff’s response through the conclusion of trial as costs incurred to prove the issue of breach, totaling $133,882.50. But by Defendant’s own admission at least half of these fees were incurred to prove it did not act in bad faith, rather than showing it did not breach. Defendant thus provides no rationale for the Court to award the full $133,882.50 to Defendant to prove it did not breach.

The lack of billing descriptions in Defendant’s motion is particularly relevant here as Defendant seeks to recover all attorney’s fees incurred after Plaintiff’s September 2021 response to Defendant’s requests for admission. The Court is skeptical that every action taken by defense counsel from September 2021 to present was incurred to prove Defendant did not breach the contract or act in bad faith. For example, the Court notes Defendant filed motions to continue the trial date and to submit a peremptory challenge under Code Civ. Proc. §170.6. Defendant offers no explanation as to how these filings proved Defendant did not breach or act in bad faith. Under Code Civ. Proc. § 2033.420, Defendant is only permitted to recover “the reasonable expenses” it incurred in proving the matter Plaintiff did not admit. Defendant has not shown the costs it seeks to recover here were related to proving those issues.

Nonetheless, an award under Code Civ. Proc. § 2033.420 is mandatory unless one of the four exceptions set out by statute is found to apply. Where a Court finds the evidentiary record before it inadequate to determine the reasonableness of the costs claimed by the moving party, “the court has the discretion to determine the amount of reasonable expenses, to receive further evidence should it choose to do so, and to exclude any claimed expenses to the extent they relate to issues outside the scope of the requests for admission. What it cannot do is deny costs of proof that are mandated by statute.” (Association for Los Angeles Deputy Sheriffs v. Macias (2021) 63 Cal.App.5th 1007, 1031; see also Garcia v. Hyster Co. (1994) 28 Cal.App.4th 724, 737 [reversing and remanding for redetermination of an award under C.C.P. § 2033.420 based on the “conclusionary statement of counsel” and seeking costs “not properly the subject of a section 2033 sanction”].)

Defendant’s motion was originally set for hearing on September 13. At the hearing, the Court continued the hearing to September 30 and directed the parties to file supplemental briefing by September 23 to allow Defendant to submit unredacted billing records from which the Court can determine the reasonableness of the costs sought by Defendant. No such unredacted billing records were provided by Defendant, and thus the Court will exercise its discretion in setting the amount of Defendant’s award based on the record before it. As set forth above, Defendant has not shown that all attorney’s fees incurred after September 2021 were incurred to prove either the issues of breach or bad faith. Indeed, the record in this action indicates at least some of those attorney fees were incurred in connection with motions or applications completely unrelated to these issues. Accordingly, the Court in its discretion finds $40,000 to be sufficient to reimburse Defendant for the reasonable costs incurred in proving the issues of breach and bad faith.

Conclusion

Defendant’s motion is granted in part and denied in part. Defendant is awarded $30,000 in costs pursuant to Code Civ. Proc. § 2033.420, and Defendant’s motion is otherwise denied.