In Desaulles v. Community Hospital of the Monterey Peninsula, a 5-2 Supreme Court today holds that a settling plaintiff who dismisses his or her case in exchange for a monetary payment is the prevailing party for purposes of obtaining litigation costs. However, the majority opinion by Justice Goodwin Liu stresses this is a “default rule” that applies “only when the parties have not resolved the matter of costs in their settlement agreement or have not stipulated ‘to alternate procedures for awarding costs.’ ” Additionally, the majority recommends that “trial courts inquire into whether the parties in a given case have resolved the allocation of costs in their settlement agreement, or whether they wish to have the court resolve the issue, before placing a judicial imprimatur on the agreement.”
Justice Leondra Kruger writes in dissent, joined by Justice Kathryn Werdegar. The dissent reads the applicable statute differently. Because the statute defines “prevailing party” to include not only “the party with a net monetary recovery,” but also “a defendant in whose favor a dismissal is entered,” the dissent says the plaintiff cannot be entitled to costs as a matter of right. Instead, the dissent concludes, the case should be governed by another part of the statute, one that gives court’s discretion over costs in “situations other than as specified.” According to the dissent, this provision “permits courts to take into account special circumstances that may render a costs award inequitable or unjust.” It’s not a bright-line rule like the majority’s, the dissent admits, but “it is the approach that is most consistent with both the text of the statute and its underlying equitable purposes.”
The court affirms the Sixth District Court of Appeal and disapproves a 2008 opinion by the Second District, Division Five, Court of Appeal, with which the Sixth District had disagreed.
