CCP 1038: Municipal Considerations

If you are a public entity and find yourself on the victorious end of a summary judgment motion, motion for directed verdict, motion for judgment (under Section 631.8), or non-suit, then consider whether the plaintiff’s lawsuit, or co-defendant’s cross complaint, against the entity was brought “with reasonable cause,” and “in the good faith belief that there was a justifiable controversy.”  Civ. Proc. Code, sec. 1038. If it was not, then the victorious public entity may be entitled to recovery of “defense costs reasonably and necessarily incurred” under section 1038.  Id.

This is both an important tool, and strategic consideration, for public entities. Specifically, “defense costs,” as defined under section 1038, encompasses “reasonable attorneys’ fees, expert witness fees, the expense of services of experts, advisers, and consultants in the defense of the proceeding, and where reasonably and necessarily incurred in defending the proceeding.”  Id.

In the recent case of Ponte v. County of Calaveras (2017) 14 Cal.App.5th 551, the Third Appellate District found in favor of a public entity on a motion for summary judgment relative to a promissory estoppel claim, and then imposed the recovery of fees and costs under section 1038.  The court specified that “[s]ection 1038 applies not only to tort actions initiated in bad faith, but also to actions initiated in good faith but maintained in bad faith and without reasonable cause.” (Hall v. Regents of University of California (1996) 43 Cal.App.4th 1580, 1585-1586.)  Analyzing the claims presented, the Court agreed with the trial court that “no reasonable attorney would have thought the claims were legally tenable.”  Ponte, 14 Cal.App.5th at p. 560. Furthermore, the Court of Appeal found that the plaintiff was also responsible for paying the County’s costs on appeal.  (Id.; see Cal. Rules Ct., Rule 8.278(a).)

Ultimately, the Ponte case serves as a sobering reminder to plaintiffs that their claims against a public entity must be meritorious.  Furthermore, it serves as an important tool for public entities to consider when seeking an award of fees and costs in the trial court pursuant to Code of Civil Procedure section 1038 and, then, costs on appeal pursuant to California Rules of Court, Rule 8.278(a).

Justin Sarno is an appellate practitioner at CR&D and has been defending public agencies and public employees for his entire career.