Judge: Theresa M. Traber, Case: 21STCP01557, Date: 2023-05-18 Tentative Ruling


Case Number: 21STCP01557    Hearing Date: May 18, 2023    Dept: 47

Tentative Ruling

 

Judge Theresa M. Traber, Department 47

 

 

HEARING DATE:     May 18, 2023             TRIAL DATE: NOT SET

                                                          

CASE:                         Cynthia Knoblock v. Allstate Northbrook Indemnity Co.

 

CASE NO.:                 21STCP01557           

 

MOTION TO TAX COSTS

 

MOVING PARTY:               Respondent Allstate Northbrook Indemnity Co.

 

RESPONDING PARTY(S): Petitioner Cynthia Knoblock

 

CASE HISTORY:

·         05/13/21: Petition filed.

·         09/13/22: Request for Dismissal granted.

·         03/03/23: Dismissal set aside.

 

STATEMENT OF MATERIAL FACTS AND/OR PROCEEDINGS:

           

            This was an action arising out of an underinsured motorist claim. Petitioner originally sought an order appointing an arbitrator to adjudicate the underlying dispute.

 

Respondent moves to tax Petitioner’s Memorandum of Costs.

           

TENTATIVE RULING:

 

            Respondent’s Motion to Tax Costs is DENIED.

 

DISCUSSION:

 

Respondent moves to tax Petitioner’s 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 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, 773-774.)  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 or email, the period is extended as provided in Code of Civil Procedure section 1013.”  (Cal. Rules of Court, rule 3.1700(b)(1).)

 

            Here, the Memorandum of Costs was served and filed by email on March 3, 2023. This motion was not filed and served until April 4, 2023. However, on April 11, 2023, the parties filed a written stipulation extending the time for filing of this motion to April 4, 2023. The motion is therefore timely pursuant to the stipulation of the parties.

 

Analysis

 

            Respondent challenges the memorandum of costs in its entirety on the basis that Petitioner is not entitled to recover costs from arbitration.

 

            Unless an arbitration agreement provides otherwise, each party to an arbitration must pay a pro rata share of the expenses and fees of the arbitrator, and must bear their own expenses incurred in connection with the arbitration. (Code Civ. Proc. § 1284.2.) However, when a party serves an offer to compromise pursuant to Code of Civil Procedure section 998, and the offeree fails to obtain a more favorable award or judgment, the offeror may recover costs during arbitration that would have been recoverable at trial. (See Code Civ. Proc. § 998(d).)

 

            Respondent contends that Petitioner is not the prevailing party for the purposes of any award of costs because there was no final judgment or award in Petitioner’s favor in this case. Respondent concedes that Petitioner served a section 998 offer to compromise on December 7, 2020 for $85,000, which Respondent rejected. (Declaration of Irene Kelian ISO Mot. ¶ 3.) Respondent also concedes that the parties ultimately sent Petitioner a check for $90,000 on the basis that Petitioner was entitled to the full value of her claim as requested, thereby resolving this dispute. (Id. ¶ 9.) However, Respondent contends that there was nonetheless no final judgment or award such that section 998 is applicable here.

 

            In opposition, Petitioner contends that the payment of Petitioner’s insurance claim is the equivalent of a settlement, which is the equivalent of a judgment under section 998 as a matter of law. Petitioner principally relies on the recent opinion Madrigal v. Hyundai Motor America (April 11, 2023, C090463) ___ Cal.App.5th __ [2023 WL 2883009], in which the Court of Appeal held that the term “judgment” in section 998 should be construed expansively to apply to dismissal with prejudice pursuant to a settlement, on the basis that such a dismissal is a final judgment on the merits. (Madrigal, supra, at *9.) As section 998 applies equally to arbitrations as to litigation before a court, Petitioner contends that Madrigal’s reasoning is equally applicable here.

 

            In reply, Respondent argues that Madrigal is distinguishable because there was no civil action, no settlement, and no dismissal of a civil action. Instead, Respondent contends, the purpose of an underinsured motorist arbitration is to resolve a dispute over the insurance benefits owed, and the need to arbitrate “becomes moot” when all policy benefits are paid. In the Court’s view, this argument misses the point. Under Code of Civil Procedure § 998, the parties to a dispute may employ a statutory settlement demand or offer in the context of an arbitration.  When that statute is invoke by a properly served settlement demand, as it was here, the terms of the statute and cases interpreting are fully applicable to the arbitration at issue, including the Madrigal ruling that a settlement with a dismissal with prejudice is tantamount to a final judgment on the merits.  The undisputed facts here are that Petitioner claimed that she was entitled to the full $90,000 in insurance benefits, and Respondent disputed that position before ultimately conceding that Petitioner was correct and paying her that amount, but it only did so after rejecting a section 998 offer to compromise during arbitration and after Petitioner incurred substantial costs. Put differently, Respondent conceded the merits of Petitioner’s claim and conveyed full satisfaction of that claim as a final resolution of this dispute, in exactly the manner typically contemplated in any settlement. Respondent’s conclusions that such an application of section 998 would force insurers to balance the need to pay benefits with the cost of paying litigation costs, or that a party could seek to recover costs at any point in litigation after serving a section 998 offer are not persuasive.

 

            The Court finds, based on the foregoing, that the parties settled this case for an amount greater than the amount sought in Petitioner’s section 998 offer to compromise. Applying the reasoning in Madrigal and the plain language of section 998 that the statute is equally applicable to arbitration proceedings (Code Civ. Proc. § 998(d)), the Court concludes that Petitioner is entitled to recover costs as the prevailing party under this statute.

 

CONCLUSION:

 

            Accordingly, Respondent’s Motion to Tax Costs is DENIED.

 

            Moving Party to give notice.

 

IT IS SO ORDERED.

 

Dated:  May 18, 2023                         ___________________________________

                                                                                    Theresa M. Traber

                                                                                    Judge of the Superior Court

 


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