Judge Theresa M. Traber, Case Number: 19STCV26512, Date: 2023-08-18 Tentative Ruling

Judge: Theresa M. Traber, Case: 19STCV26512, Date: 2023-08-18 Tentative Ruling

Case Number: 19STCV26512 Hearing Date: January 23, 2024 Dept: 47

Tentative Ruling

Judge Theresa M. Traber, Department 47

HEARING DATE: January 23, 2024 JUDGMENT: December 5, 2023

CASE: Frontline Medical Associates, Inc. v. Bird, Marella, Boxer, Wolpert, Nessim, Drooks, Lincenberg & Rhow, P.C., et al.

CASE NO.: 19STCV26512

MOTION TO TAX COSTS

MOVING PARTY: Plaintiff Frontline Medical Associates, Inc.

RESPONDING PARTY(S): Defendants Bird, Marella, Boxer, Wolpert, Nessim, Drooks, Lincenberg & Rhow, P.C. and Benjamin Gluck

CASE HISTORY:

07/30/19: Complaint filed.
12/16/21: First Amended Complaint filed.
10/27/23: Terminating sanctions granted.
12/05/23: Judgment entered.

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

This was a legal malpractice action. Plaintiff alleged that the lawyer Defendants made misrepresentations to Plaintiff so that it would pay them $600,000 to provide services to another of their clients, Paul Turley. The Court granted terminating sanctions against Plaintiff on October 27, 2023.

Plaintiff moves to tax Defendants’ memorandum of costs.

TENTATIVE RULING:

Plaintiff’s Motion to Tax Costs is GRANTED IN PART.

Defendants’ claimed costs in the amount of $419,861.51 are taxed in the amount of $156,803.09 as described herein.

DISCUSSION:

Plaintiff moves to tax Defendants’ memorandum of costs.

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(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.) A defendant who is dismissed from the action is the “prevailing party.” (Code Civ. Proc. §1032(a)(4).) This is so whether the dismissal is voluntary or involuntary. (Santisas, 17 Cal.4th at 606.)

Allowable costs under 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 it meets 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, 773-774.) 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.)

Timeliness of Motion

“Any notice of motion to strike or to tax costs must be served and filed 15 days after service of the cost memorandum. If the cost memorandum was served by mail, the period is extended as provided in Code of Civil Procedure section 1013.” If the cost memorandum was served electronically, the period is extended as provided in Code of Civil Procedure section 1010.6(a)(4). (Cal. Rules of Court, rule 3.1700(b)(1).) Further, the parties disputing costs may agree to extend the time for filing and serving a cost memorandum and motion to strike, but that agreement “must be confirmed in writing, specify the extended date for service, and be filed with the clerk.” (Id. Rule 3.1700(b)(3) [emphasis added].)

Defendants’ Memorandum of Costs was served by mail on November 13, 2023 and filed with the Court that same date. (Memo. Proof of Service.) Plaintiff’s Motion to Tax Costs was filed and served by email on November 27, 2023, 14 days after the Memorandum of Costs was served. (Mot. Proof of Service.) Plaintiff’s motion is timely.

Entitlement to Recover Costs

Plaintiff does not dispute that Defendants are the prevailing party in this action, and therefore entitled to costs under Code of Civil Procedure section 1032, subdivision (b). Plaintiff objects to several of the items claimed in the Memorandum of Costs as falling outside the range of costs authorized by Code of Civil Procedure section 1033.5. Defendants contend in opposition that they are entitled to costs beyond those described in that code section because (1) the action was based on a retainer agreement between the parties which authorized the prevailing party to recover costs in any litigation between them; and (2) because Plaintiff rejected a valid offer to compromise under Code of Civil Procedure section 998 and then failed to secure greater recovery.

1. Retainer Agreement

Defendants argue that they are entitled to reasonable attorney’s fees and costs, notwithstanding the limitations of section 1033.5(b), because the parties entered into a retainer agreement for legal representation which provided for recovery of reasonable fees and costs. It is well-settled that parties are generally free to stipulate to the apportionment of fees and costs beyond what is provided for by statute. (See Code Civ. Proc. § 1021, see also Arntz Contracting Co. v. St. Paul Fire & Marine Ins. Co. (1996) 47 Cal.App.4th 464, 492.)

Defendants rely on a Retainer Agreement executed by the Defendants on the one hand and Plaintiff, Munir Uwaydah, and South Bay Surgical and Spine Institute LLC on July 22, 2010 for legal services with respect to a criminal investigation. (Declaration of Hilary Potashner ISO Opp. Exh. 1.) Section L of the retainer agreement states that “[t]he prevailing party in any litigation [relating to this agreement] between us shall be entitled to an award of reasonable attorneys’ fees and costs.” (Potashner Decl. Exh. 1, § L.) Plaintiff contends that the 2010 Retainer Agreement was no longer in place after Munir Uwaydah was criminally charged in 2015, and therefore could not serve as the basis for an award of costs in this action. As Plaintiff observes, the Agreement “encompasses representation only up to the conclusion of the investigation in the matter. It does not apply to any proceedings after a criminal charge has been filed. . .” (Potashner Decl. Exh. 1 § A.) Plaintiff’s argument is belied by its own First Amended Complaint, which alleges that Defendants violated their continuing obligation to Plaintiff as a former client, as well as their obligations to Plaintiff and Paul Turley as concurrent clients. (FAC ¶ 2c.) Thus, this action arose in part from Defendants’ obligations established by the 2010 retainer agreement, and therefore its fee provision entitling Defendants to reasonable fees and costs as the prevailing party is applicable to this case.

That said, the Court does not share Defendants’ position that they are not subject to the limitations of Code of Civil Procedure section 1033.5 because of the Retainer Agreement. Defendants contend that subdivision (b) does not restrict their entitlement to costs, applying the holding of Bussey v. Affleck that costs disbursed by counsel for expert fees, investigation expenses, and postage, telephone, and photocopying charges may be claimed as attorney’s fees. (Bussey v. Affleck (1990) 225 Cal.App.3d 1162, 1166.) That opinion was expressly disavowed by the First District in 2005, however, when it held that Bussey improperly conflated attorney’s fees and costs. (Hsu v. Semiconductor Systems, Inc. (2005) 126 Cal.App.4th 1330, 1342.) Several other cases support this position, holding that a prevailing party may not claim costs that are expressly disallowed under Code of Civil Procedure section 1033.5(b) under a contractual cost-shifting provision unless the prevailing party pleads and proves their right to recover those fees at trial. (Carwash of America-PO LLC v. Windswept Ventures No. I (2002) 97 Cal.App.4th 540, 544-45, citing Ripley v. Pappadopoulos (1994) 23 Cal.App.4th 1616, 1627-28; see also Robert L. Cloud & Associates, Inc. v. Mikesell (1999) 69 Cal.App.4th 1141, 1154; First Nationwide Bank v. Moutain Cascade Inc., (2000) 77 Cal.App.4th 871, 878.) The remainder of Defendants’ authorities are not applicable to this case, as they either do not concern subdivision (b) (Arntz Contracting Co., supra, 47 Cal.App.4th at 492), or involve cost provisions that expressly provided for expert fees, unlike the language at issue here. (Thrift Payless, Inc. v. Mariners Mile Gateway, LLC (2010) 185 Cal.App.4th 1050, 1066.) Defendants did not plead their entitlement to such costs in their Answer, nor did they attempt to prove them during the aborted bench trial. (See Answer to FAC). Defendants are therefore not entitled to claim costs barred by section 1033.5(b) solely based on the fee provision in the 2010 Retainer Agreement.

2. Offer to Compromise

Defendants also contend that they are entitled to certain costs under Code of Civil Procedure section 998. This section provides, in relevant part:

(b) Not less than 10 days prior to commencement of trial [. . .] any party may serve an offer in writing upon any other party to the action to allow judgment to be taken or an award to be entered in accordance with the terms and conditions stated at that time. The written offer shall include a statement of the offer, containing the terms and conditions of the judgment or award, and a provision that allows the accepting party to indicate acceptance of the offer by signing a statement that the offer is accepted. Any acceptance of the offer, whether made on the document containing the offer or on a separate document of acceptance, shall be in writing and shall be signed by counsel for the accepting party or, if not represented by counsel, by the accepting party.

. . .

(c)(1) If an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, the plaintiff shall not recover his or her postoffer costs and shall pay the defendant's costs from the time of the offer. In addition, in any action or proceeding other than an eminent domain action, the court or arbitrator, in its discretion, may require the plaintiff to pay a reasonable sum to cover postoffer costs of the services of expert witnesses, who are not regular employees of any party, actually incurred and reasonably necessary in either, or both, preparation for trial or arbitration, or during trial or arbitration, of the case by the defendant.

(Code Civ. Proc. § 998(b), (c)(1) [emphasis added].)

Defendants served an offer to compromise on Plaintiff pursuant to this section via email on June 30, 2023, offering $25,000 for a full and final settlement of the action. (Potashner Decl. Exh. 2 p.3.) The offer was attached to a separate email offering an alternative settlement of the action for $50,000 in exchange for dismissal of all claims with prejudice. (Id. p.1). Defendants contend that the offer for $25,000 was reasonable based on Defendants’ substantial evidence that Plaintiff was an alter ego of Munir Uwaydah and thus barred from bringing this case under the fugitive disentitlement doctrine. In opposition, Plaintiff contends that the offer to compromise is ambiguous and invalid because the attached email describes different terms from those set forth in the formal offer to compromise. Not so. As stated above, the attached email is a separate settlement offer that was extended in the alternative to the offer to compromise under Code of Civil Procedure section 998, which is plainly distinguished as such in the text of the email. (Potashner Decl. Exh. 2 p.2.) The terms of the offer to compromise are not ambiguous.

Plaintiff also argues that the offer to compromise was not valid because it was not signed by Defendants, analogizing the offer to an unsigned settlement agreement. (See Gallo v. Getz (1988) 205 Cal.App.3d 329, 333, citing Datatronic Systems Corp. v. Speron, Inc. (1986) 176 Cal.App.3d 1168, 1174–75; City of Fresno v. Maroot (1987) 189 Cal.App.3d 755, 762.) This analogy is not well taken. A stipulation is by definition an agreement between the parties, which requires both an offer and acceptance. A stipulation not signed by both parties cannot be enforced as a settlement because there is no manifestation of mutual assent. Nothing in the authorities cited by Plaintiff establish that an offer to compromise is invalid because it is not signed by Defendants’ counsel. (See Id.) The offer to compromise was not invalid on this basis.

Plaintiff next argues that the 998 offer for $25,000 was not reasonable. As the Court of Appeal states:

As a general rule, the reasonableness of a defendant's offer is measured, first, by determining whether the offer represents a reasonable prediction of the amount of money, if any, defendant would have to pay plaintiff following a trial, discounted by an appropriate factor for receipt of money by plaintiff before trial, [. . .] all premised upon information that was known or reasonably should have been known to the defendant. It goes without saying that a defendant is not expected to predict the exact amount of his exposure. If an experienced attorney or judge, standing in defendant's shoes, would place the prediction within a range of reasonably possible results, the prediction is reasonable. (Cf. Abbott Ford, Inc. v. Superior Court (1987) 43 Cal. 3d 858, 874 [239 Cal. Rptr. 626, 741 P.2d 124].)

If the offer is found reasonable by the first test, it must then satisfy a second test: whether defendant's information was known or reasonably should have been known to plaintiff. This second test is necessary because the section 998 mechanism works only where the offeree has reason to know the offer is a reasonable one. If the offeree has no reason to know the offer is reasonable, then the offeree cannot be expected to accept the offer.

(Elrod v. Oregon Cummins Diesel, Inc. (1987) 195 Cal.App.3d 692, 700.)

Plaintiff contends that Defendant’s offer was not reasonable because it was not possible for Plaintiff to suspect on June 30, 2023 that the Court would grant terminating sanctions against Plaintiff in October. The Court disagrees. Although the most explosive allegations of misconduct by Plaintiff and its former counsel concerned events that occurred during the bench trial, the Court’s order granting terminating sanctions set forth a laundry list of misconduct dating back to March 2022. (See October 27, 2023 Minute Order.) Plaintiff’s claim that it could not possibly have expected to be punished for its extensive and egregious misconduct up to that point is not well taken.

Finally, Plaintiff argues that the 998 offer was untimely. Offers to compromise under Code of Civil Procedure section 998 must be served no later than 10 days before commencement of trial. (Code Civ. Proc. § 998(b).) As Plaintiff observes, the caption page of both Defendants’ opposition to this motion and of the Judgment entered December 5, 2023 list the trial date as July 5, 2023. If that were the date the bench trial commenced, Defendants’ offer to compromise served on June 30, 2023 would be five days late. Although the bench trial on alter-ego had been set for July 5, the Court granted a continuance to July 14, 2023 based in part on what the Court has found to be gross exaggerations by Plaintiff’s former counsel, David Browne, of alleged ethical conflicts requiring his withdrawal in connection with an ex parte application by Plaintiff on June 27, 2023. (See June 27, 2023 Minute Order.) Plaintiff should be well aware of this, as Mr. Browne’s misrepresentations about a serious conflict mandating withdrawal and his later involvement in preparing key witnesses for Plaintiff constituted one basis for the Court’s order granting terminating sanctions against it. (See October 25, 2023 Minute Order.) Thus, Defendants’ offer to compromise was served not five days before the commencement of trial, but fourteen. Defendants’ offer was timely.

In sum, the Court finds that Defendants served a valid offer to compromise under Code of Civil Procedure section 998 on June 30, 2023, more than 10 days before trial commenced, and that Plaintiff did not accept that offer. Consequently, Defendants are entitled to recover post-offer costs, including expert witnesses. (Code Civ. Proc. § 998(c)(1).)

Disputed Cost Items

Plaintiffs identify 10 cost items in Defendants’ Memorandum of Costs to which they object: (1) filing and motion fees in the amount of $1,075.35 in Item 1; (2) Deposition costs in the amount of $83,214.16 under Item 4; (3) service of process fees in the amount of $9,647.02 under Item 5; (4) witness fees in the amount of $22,397.04 under Item 8; (5) court reporter fees in the amount of $2,633.39 under Item 11; (6) models, enlargements, and photocopies of exhibits in the amount of $3,571.61 under Item 12; (7) interpreter fees in the amount of $4,550 under Item 13; (8) electronic filing or service costs in the amount of $ 3,931.68 under Item 14; (9) electronic document hosting in the amount of $14,258.86 under Item 15; and (10) other costs in the amount of $274,856.15 under Item 16.

Defendants’ Memorandum of Costs did not include an attached Form MC-011 Worksheet for Memorandum of Costs setting forth Defendants’ calculations reaching the claimed costs. As Plaintiff has objected to the cost items set forth above for lack of information, the Court finds that they have been properly placed at issue. The burden thus shifts to Defendants to demonstrate that the claimed costs are allowable and reasonable.

As an initial matter, Defendants inform the Court that the Memorandum of Costs inadvertently calculated the total cost including a duplicative invoice for service of process in the amount of $263.75. Defendants state that the correct total that should be claimed is $419,861.51, less any items which should be taxed.

1. Filing and Motion Fees (Item 1)

Defendants provided invoices for the filing and motion fees incurred for the many filings in this action. (Potashner Decl. ¶ 4, Exh. 3 Item 1.) Plaintiff’s reply concedes that these figures are valid and demonstrate the reasonableness of the fees, and therefore withdraws its objection to this item. The Court therefore finds that Item 1 should not be taxed.

2. Deposition Costs (Item 4)

Defendants state that invoices for court reporting and transcription fees, data hosting, and legal research costs were miscategorized as “deposition” costs, and that the correct amount for this item is $27,191.64. (Opposition fn. 2.) Defendants state that the deposition costs arose from several depositions spanning multiple days, including the depositions of Adib Kassir, Janek Hunt, and Munir Uwaydah, and from Plaintiff cancelling depositions at the last minute, resulting in late cancellation fees. (Potashner Decl. Exh. 3 Item 4.) Plaintiff concedes that the recalculated cost item is justified and withdraws its objection to this item. The Court therefore finds that Item 4 as recalculated should not be taxed.

3. Service of Process Fees (Item 5)

Defendants state that these cost items are expressly recoverable by statute as costs incurred for registered process servers. Most of the attached invoices are for service on Plaintiff’s counsel, which is not, strictly speaking, service of process. (See generally Potashner Decl. Exh. 3. Item 5.) However, as Defendants are entitled to reasonable costs even if not enumerated under Code of Civil Procedure section 1033.5(a), such messenger costs are not invalid per se. Plaintiff’s assertion in reply that these costs are not reasonable is not persuasive. Nor is the Court persuaded by Plaintiff’s conclusory assertions that the service fees incurred for witnesses are unreasonable because a stakeout was required or because certain witnesses did not testify. The Court therefore finds that this item should not be taxed.

4. Witness Fees (Item 8)

Defendants state that this item contains improperly categorized invoices, and the proper fee amount is $21,316.25 (Opp. fn. 2.) Defendants explain that this cost item covers the post-offer expenses for Defendants’ experts, including an expert in Lebanese law, Elias Chadid, and an investigator to locate and interview percipient witnesses associated with Munir Uwaydah. (Potashner Decl. ¶ 7; Exh. 3 Item 8.) As the Court has found Defendants’ offer to compromise was valid, this cost item as recalculated should not be taxed.

5. Court Reporter Fees (Item 11)

Defendants state that the corrected amount for this cost item is $57,012.83, accounting for $55,783.44 in court reporter fees, plus $1,229.39 in transcripts from other proceedings. Court reporter fees are expressly authorized under Code of Civil Procedure section 1033.5(a)(11), and Plaintiff does not dispute that those cost items are valid. In addition, however, Defendants argue that they are entitled to recover the costs for physical transcripts under the retainer agreement, citing Warren v. Kia Motors America Inc. (2018) 30 Cal.App.5th 24, 42. Defendants are mistaken. The Court of Appeal’s holding in Warren is expressly based on the expanded definition of “costs” as used in Civil Code section 1794(d). (Id.) The Court is similarly not persuaded by Defendants’ unsupported contention that section 998(c)(1) authorizes recovery of such transcripts. Unlike expert fees, which are expressly authorized under that statute in conformity with section 1033.5(b), transcript fees are not described as authorized in section 998, and Defendants cite no authority that this statute applies an expanded definition of costs. The Court therefore finds that this item should be taxed in the amount of $1,229.39.

6. Models, Enlargements, and Photocopies, Interpreter Fees, and Electronic Filing or Service Fees (Items 12-14)

Defendants provided invoices for these cost items. (Potashner Decl. ¶ 4, Exh. 3 Items 12-14.) Plaintiff’s reply concedes that these figures are valid and demonstrate the reasonableness of the fees, and therefore withdraws its objection to this item. The Court therefore finds that Items 12 through 14 should not be taxed.

7. Electronic Hosting Fees

Defendants state that these fees were incurred from document management vendors to host, manage, and review the thousands of documents produced in this matter. (Potashner Decl. Exh. 3 Item 15.) Defendants contend that this cost item is justified under Code of Civil Procedure section 1033.5(a)(15), which sunsetted in January 2022, and under subdivision (c)(4) as costs not expressly authorized. Plaintiff, in reply, asserts that the sunset of subdivision (a)(15) suggests that these costs should not be shifted to the opposing party. The Court disagrees. This action produced a tremendous amount of documentation as its scope expanded, and use of electronic hosting and document management is a prudent measure to limit expenditures of both money and time. (See El Dorado Meat Co. v. Yosemite Meat & Locker Service, Inc. (2007) 150 Cal.App.4th 612, 620.) The Court therefore finds that this cost item should not be taxed.

8. Other Costs

Defendants state that this cost item breaks down into several subcategories: (a) courier fees in the amount of $4,768.55; (b) travel fees totaling $2,551.86; (c) legal research costs in the amount of $10,614.84; (d) postage costs totaling $70.11; (e) pre-998 expert fees in the amount of $145,573.70; (f) printing costs of $3,650.20; (g) third-party billing fees in the amount of $24,681.12; (h) trial consultant fees totaling $85,263.82; and (i) court fees amounting to $94. Defendants have produced invoices for each of these items. (Potashner Decl. Exh. 4 Item 16.)

With respect to the courier fees, travel fees, legal research costs, and printing costs, these items are within the Court’s discretion to award under Code of Civil Procedure section 1033.5(c)(4). The Court is not persuaded by Plaintiff’s assertion that these costs should be reduced because of Defendant’s “aggressive” legal strategy. These costs were on their face reasonably necessary for the litigation given the numerous motions and complex issues in this matter.

With respect to the expert fees incurred before Defendants’ offer to compromise, Defendants offer no legal justification for these fees, which are expressly barred under Code of Civil Procedure section 1033.5(b)(1). As stated above, the 2010 Retainer Agreement does not shield Defendants from the application of that code section where they have neither pled nor proven their entitlement to those fees. The Court therefore finds that expert fees in the amount of $145,573.70 must be taxed.

As to the third-party billing fees, Defendants state that they arise from accumulated costs for submission of electronic invoices for the fees of Defendants’ counsel, which were covered by Defendants’ liability insurer, ALAS. (Potashner Decl. ¶ 14, Exh 3. Item 16 [third party billing fees].) Plaintiff contends that this cost item is really an “overhead item” and not a cost. This would seem to be a distinction without a difference. Defendants have demonstrated that these costs were reasonably necessary to the litigation because they could not be compensated for their time without incurring these costs. The Court therefore finds that these costs are reasonable under Code of Civil Procedure section 1033.5(c)(4) and should not be taxed.

Defendants state that their trial consultant fees were incurred for the mock trial services of Taylor Trial Consulting because of the substantial monetary liability at stake and the threat of reputational harm to Defendants. The Court concurs that such costs are reasonably necessary to the litigation and may be awarded under subdivision (c)(4). However, as Plaintiff argues in reply, the attached invoice only accounts for $75,263.82, not the $85,263.82 claimed in the opposition. (See Potashner Decl. Exh. 3 Item 16 [trial consultant fees].) The Court therefore finds that these costs should be taxed by the $10,000 which has not been accounted for.

Finally, Defendants offer invoices for their postage costs and court fees. (Potashner Decl. Exh. 3 [postage; court fees].) Plaintiff does not contest the reasonableness nor accuracy of these items. The Court therefore finds that these costs should not be taxed.

CONCLUSION:

Accordingly, Plaintiff’s Motion to Tax Costs is GRANTED IN PART.

Defendants’ claimed costs in the amount of $419,861.51 are taxed in the amount of $156,803.09 as described herein.

Moving party to give notice, unless waived.

IT IS SO ORDERED.

Dated: January 23, 2024 ___________________________________

Theresa M. Traber

Judge of the Superior Court

Any party may submit on the tentative ruling by contacting the courtroom via email at Smcdept47@lacourt.org by no later than 4:00 p.m. the day before the hearing. All interested parties must be copied on the email. It should be noted that if you submit on a tentative ruling the court will still conduct a hearing if any party appears. By submitting on the tentative you have, in essence, waived your right to be present at the hearing, and you should be aware that the court may not adopt the tentative, and may issue an order which modifies the tentative ruling in whole or in part.