In The End, the Supervisor Might Get Some Litigation Reimbursement Fees Of A Somewhat Limited Nature.
Municipality practitioners should be well advised to read County of San Benito v. Scagliotti, Case No H045887 (6th Dist. Sept. 24, 2020) (unpublished) about fee shifting statutes under the Political Reform Act (PRA) and Government Claims Act (GCA), not to mention indemnification for settlement payments made by public employees.
Boiling things down, County and former supervisor Richard Scagliotti were sued for violations of the Political Reform Act of 1974. County agreed to indemnify and defend Mr. Scagliotti based on the ambiguous nature of some complaint allegations. The lower court assessed some $12,500 in penalties against Mr. Scagliotti for some unintentional reporting omissions under the PRA and $220,000 under Government Code section 81700 for use of governmental position for financial gains in the plaintiff suit. That determination provoked a firestorm by which the County withdrew its indemnification/defense decisions based on the premise that Mr. Scagliotti’s conduct might have been outside the course and scope of his employment, especially in connection with the $220,000 penalty. Mr. Scagliotti substituted in another attorney, incurring about $27,000 in fees for beating back the plaintiff’s $800,000 fee motion. He also eventually reached a settlement with plaintiff by which he paid $220,000 out of his own pocket, effectively having plaintiff waive the PRA penalties. This set off secondary litigation where County sued to recoup $470,000 in fees spent in defending Mr. Scagliotti in the underlying case based on GCA and Labor Code section 2865 fee-shifting provisions. Mr. Scagliotti cross-complained under Government Code section 825 and Government Claims Act section 995 for the $27,000 attorney’s fees he expended on the substituted attorney and for the $220,000 settlement payment he made to the plaintiff. In the end, the trial judge denied each side’s requests for fee awards and indemnification. Both sides moved for reimbursement of litigation fees expended in litigating the secondary action for fees/settlement payments under Code of Civil Procedure section 1038(a), motions which were denied.
That gets us to the Sixth District appeal decision in the matter.
The Court of Appeal had no problem finding County was not entitled to underlying fees because nothing in a contractual letter with Mr. Scagliotti overrode the more inclusive fee-shifting reimbursement provisions in Government Code section 996, with Labor Code section 2805 not displacing the general reimbursement provision which is pro-public employee. With respect to Mr. Scagliotti, he was not entitled to recovery of settlement payments because it did not fit GCA’s “injury” definition; however, he was entitled to reimbursement of his defense costs under Government Code section 996.4 for the failure to report violations, after a very detailed discussion of the interaction between GCA and PRA statutory schemes. On the section 1038 dueling motions, County was properly denied fees based on Mr. Scagliotti’s reporting result, with Mr. Scagliotti’s fee denial being correct because the County’s defenses were not totally baseless in nature. Each side had to bear their own appellate costs. So, the former supervisor gets a shot at recovering some attorney’s fees of a limited nature—otherwise, everyone went home empty-handed!
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