Civil Rights, Employment, Section 998: Fee And Costs Award To Successful Defendants Had To Be Reversed And Remanded Based On Failure To Make Findings On Frivolousness For Purposes Of Labor Code Section 218.5 Claim

However, 4/2 DCA Denied Expert Witness Fees To Unsuccessful FEHA Plaintiff Rejecting CCP § 998 Offer, Parting Company With Contrary Results By 1/5 And 4/1 DCAs.

            We have to say that 2018 has started out with a bang, producing a decision by the Fourth District, Division 2 acknowledging it is parting company from the approach taken by two other DCAs on whether CCP § 998 gives a right to expert fee costs-shifting even though the underlying FEHA claim was found nonfrivolous in nature.

            Arave v. Merrill Lynch, Pierce, Fenner & Smith, Inc., Case No. E061677 (4^th Dist., Div. 2 Jan. 2, 2018) (partially published; fees/costs discussion published) involved a plaintiff suing under FEHA for discrimination, harassment and retaliation based on LDS church membership as well as under Labor Code section 218.5 (wage/hour violation) and the whistleblower statute.  Either through summary judgment or trial, plaintiff lost all of his claims after a jury defensed him on claims escaping pre-trial adjudication.  The defense (both the company and some affiliated individuals) moved to recoup $1,203,225.06 in fees, apportioning $200,537.60 to the wage claim (1/7^th of total fees) and the remaining $1,002,607.96 to the FEHA claims.  The trial judge denied fee recovery under FEHA based on her feeling that the claims were not frivolous (given plaintiff survived a summary judgment motion on these claims), but did not buy into the 1/7^th apportionment on the wage claim.  After some more apportionment, the lower court awarded $97,500 in fees to the defense on the Labor Code section 218.5 wage claim, although not making any finding whether it was frivolous in nature.  With respect to “routine” costs, the defense sought $84,017.68, with the trial judge striking a small amount and awarding $83,642.68—broken down as $54,545.18 in ordinary costs and $29,097.50 in expert witness fees.  The expert witness fees were based on plaintiff’s rejection of a 998 offer as to all claims (including FEHA claims), which he did not beat.  The trial judge determined that even though the FEHA claims were not frivolous, section 998 pre-trial settlement principles effectively overrode the situation based on First District authority in the Holman decision.  She did not expressly rule on entitlement to expert fees under the unsuccessful wage claim given making no determination of whether it was or was not frivolous.

            The fee and costs award got reversed and remanded on appeal, but on interesting grounds.

            Fees Award.  This award got reversed and remanded because the lower court did not determine if the wage claim—the only basis for fee entitlement after the appellate court affirmed the nonfrivolity determination on the FEHA fee entitlement basis—was frivolous or not.  Without this finding, the fee award could not stand.

            Ordinary Costs Award.  Obviously, under Williams (a California Supreme Court case we have posted on frequently and our Leading Case No. 16), the ordinary costs award of $54,545.18 was improper because the trial judge determined that the FEHA claims were not frivolous.  However, that did leave room to argue that they might be justified based on the wage/hour claim, so a remand was in order on this issue.

            Expert Witness Fees.  $29,097.50 in expert witness fees were awarded based on the trial judge’s perception that plaintiff’s rejection of the 998 offer took precedence over the FEHA frivolity “no award” scenario.  The appellate court disagreed, finding that the FEHA frivolity precept overrode 998 in a situation where fees were not otherwise unavailable under the FEHA statute.  (The 4/2 DCA was careful to note that the rejection of a 998 offer could be considered in situations where FEHA expert fees were allowable in the absence of a “no frivolity” determination.)  In doing so, it expressly departed company from contrary determinations by the 1/5 DCA (Holman) and 4/1 DCA (Sviridov).  However, it did remand for the trial judge to determine if expert fees were allowable based on the wage claim fee-shifting statute given no ruling on whether the action was frivolous under this section (possibly requiring apportionment of fees if the trial judge decided that the wage claim was frivolous).