California Court of Appeals Allows Cross-Defendant to Recover Costs in Car Accident Lawsuit, Remands to Determine Reasonable and Necessary Costs

In a recent California Court of Appeal opinion, the court addressed the issue of cost recovery on behalf of a cross-defendant in an underlying car accident lawsuit.  The court analyzed the law providing that a prevailing party in an action may recover costs as a matter of right. In addition, the court analyzed whether the costs to defend the lawsuit were reasonable and necessary to the party’s defense.

In this lawsuit, the plaintiffs sued Mr. Pritchett, Ford, and Lithia of Fresno, Inc. to recover damages for personal injuries. Mr. Pritchett cross-complained against Ford and Lithia for equitable indemnity.

Mr. Pritchett settled with the plaintiffs, paying his insurance policy limits of $1.5 million, contingent on the settlement being made in good faith.  The plaintiffs then dismissed their case against Mr. Pritchett.  Lithia settled with the plaintiffs, and the matter went to trial between the plaintiffs and Ford.

During the trial, Ford moved for a directed verdict on Mr. Pritchett’s cross-complaint against it. The trial court dismissed Mr. Pritchett’s cross-complaint, and the trial ended with a verdict in favor of Ford. Ford then filed a memorandum seeking to recover costs from Mr. Pritchett. Mr. Pritchett moved to strike the memorandum, and Ford opposed the motion.  The trial court granted Mr. Pritchett’s motion, and Ford appealed.

On appeal, the court stated that a review of an award of costs is based on whether the trial court properly struck Ford’s entire memo of costs, determining that Ford was not entitled to recover under the costs statute. Code of Civil Procedure section 1032 states that a prevailing party in an action may recover costs as a matter of right.  A prevailing party includes a defendant in whose favor a dismissal is entered.

Here, Mr. Pritchett filed a cross-complaint against Ford. That cross-complaint was dismissed, and Ford became a cross-defendant in whose favor a dismissal was entered. Ford was therefore entitled to an award of litigation costs. The appellate court stated the statute does not hold that only certain types of dismissals allow a defendant to recover costs. Since Ford was a cross-defendant when neither the cross-complainant nor the cross-defendant obtained relief, it was entitled to recover costs from Mr. Pritchett.

The appellate court also stated that Mr. Pritchett’s settlement with the plaintiffs did not dispose of his cross-complaint against Ford. A good-faith settlement bars any claims for indemnity against a settling joint tortfeasor.  However, it does not bar claims by a settling joint tortfeasor. In other words, the statute does not affect claims by a settling defendant against a non-settling co-defendant. Here, Mr. Pritchett settled with the plaintiffs and obtained a good-faith determination of the settlement. He was then free to pursue his cross-complaint against Ford and to try to obtain indemnity from Ford for all or some of the amount paid to settle the plaintiffs’ claims.

Mr. Pritchett did not pursue his cross-complaint against Ford after the determination of the good-faith settlement with the plaintiffs.  Ford requested costs based on the dismissal of the cross-complaint, and this was not a disguised attempt to obtain indemnity.  The jury held that Ford was not liable to the plaintiffs for their injuries.  Since the judgment was in favor of Ford, Ford did not pay anything to the plaintiffs. There was nothing for Mr. Pritchett to indemnify. Ford was entitled to recover their costs in defense of Mr. Pritchett’s cross-complaint.

The appellate court analyzed whether the costs that Ford claimed were reasonably necessary to defending Mr. Pritchett’s cross-complaint.  Ford contended that any defense against the plaintiffs’ claims was equally aimed at defending against Mr. Pritchett’s cross-complaint.  Both parties, according to Ford, were trying to prove that Ford’s actions proximately caused the plaintiffs’ injuries.

The court stated that in an action for equitable indemnity, there is a joint legal obligation to another for damages. The right to indemnity comes from the payment of a joint legal obligation. Here, Ford mistakenly concluded that all the costs of defending against the plaintiffs’ complaint were also reasonably incurred defending the cross-complaint. Mr. Pritchett did not pursue his claims against Ford throughout the litigation, and the costs incurred by Ford of defending against the cross-complaint did not mirror those of defending against the complaint.

To determine when Ford should have known Mr. Pritchett was not pursuing his cross-complaint, and when it was not reasonable to incur further costs, the appellate court remanded the case to the trial court. The court reversed the lower court’s order granting Mr. Pritchett’s motion to strike Ford’s memo of costs.

The car accident attorneys at Sharifi Firm provide guidance and representation to victims throughout Southern California in personal injury claims for compensation. Contact our office today for a free consultation at 866-422-7222 or complete our online form.

More Blog Posts:

California Court of Appeal Holds Evidence of Industry Custom Relevant in Lawsuit for Compensation Following Car Accident, Southern California Injury Lawyer Blog, January 21, 2016

California Appeals Court Holds Substantial Evidence to Support Contrary Finding Does not Compel Conclusion of Insufficient Evidence Supporting the Judgment, Southern California Injury Lawyer Blog, December 11, 2015

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