In deSaulles v. Community Hospital of the Monterey Peninsula, 2014 DJDAR 5571 (2014), the California Court of Appeal for the Sixth Appellate District decided that a prevailing party was entitled to costs, despite the fact that the controlling settlement agreement was silent on that point.

The plaintiff sued her employer, asserting numerous causes of action. The first cause of action included a claim that the employer did not accommodate the employee’s disability. The employer moved for summary adjudication of that claim and prevailed. The victory effectively precluded the employee from presenting evidence related to additional causes of action for retaliation, wrongful termination and emotional distress.

The parties then agreed to settle the remaining claims in exchange for a payment of approximately $23,000. The settlement agreement was silent on the issue of recoverable costs. Both sides then requested mandatory costs as the “prevailing party” under Code of Civil Procedure Section 1032. The trial court granted the employer’s request, awarding over $11,000 in costs.

The employee appealed and the Sixth District reversed the trial court. The court of appeal noted that Section 1032 entitles a “prevailing party,” as a matter of right, to recover costs. For purposes of the statute, a “prevailing party” includes the party with a net monetary recovery. 

The court of appeal reasoned that although the employer obtained a judgment denying the employee relief, the judgment was reached following a settlement payment to the employee. The court considered that payment a “net monetary recovery” and concluded that the trial court should have awarded the employee her costs.