California Appeals Court Reverses $180,000 Cost Award in FEHA Case

Takeaway: In a case brought under California’s Fair Employment and Housing Act (FEHA), the trial court erred in awarding court costs to the defendant without making a finding that the FEHA claims were objectively frivolous.

The prevailing defendant in an ordinary civil case is entitled to an award of court costs, but a different rule applies to a defendant in a case brought under California’s Fair Employment and Housing Act (FEHA). In a FEHA case, the court cannot award costs to a defendant unless it makes a finding that the FEHA claims were objectively frivolous.

Therefore, a trial court erred in awarding costs in excess of $180,000 to a prevailing employer in a FEHA action in the absence of such a finding, a California appeals court ruled.

The trial court entered a judgment in favor of the employer after a jury found that the plaintiff was an independent contractor, rather than an employee. The trial court refused to award attorney fees to the employer, explaining that a prevailing defendant in a case seeking recovery under FEHA is entitled to attorney fees only if the plaintiff’s FEHA claims were objectively frivolous, and the employer had made no such showing.

In its ruling, the court noted that the same rule applied to both attorney fees and cost awards in a FEHA case, stating that a prevailing defendant should not be awarded fees and costs unless the court finds the action was objectively without foundation when brought or the plaintiff continued to litigate after it clearly became so.

However, the plaintiff’s motion to strike an award of costs from the judgment was untimely filed, and the trial court awarded $180,370 in court costs to the employer. The plaintiff appealed.

The California Supreme Court has ruled that in FEHA actions, trial courts have discretion in awards of both attorney fees and costs to prevailing parties (Williams v. China Valley Indep’t Fire Dist., 61 Cal. 4th 97 [2015]), the appeals court first noted.

The high court in that case explained that the rule for FEHA cases is an express exception to the rule in most civil cases, which automatically calls for the award of costs to the prevailing party.

An unsuccessful FEHA plaintiff should not be ordered to pay the defendant’s fees or costs unless the plaintiff brought or continued litigating the action without an objective basis for believing it had potential merit, the court said.

Thus, when the defense prevails in a FEHA action, it has no automatic right to recover costs. Instead, it must move the court to make a discretionary award of such costs, based in part on a specific finding that the action was frivolous.  

In this case, the employer filed a motion seeking an award of attorney fees. In denying that motion, the trial court explained that the plaintiff had correctly pointed out the different rule for FEHA cases and noted that the defendant had failed to make the showing required for the award of attorney fees under that statute.

Instead of making a motion for an award of discretionary costs, the defendant filed a cost memorandum that amounted to a request for the clerk to award the costs that a prevailing party would be entitled to as a matter of right under other civil litigation actions.  

The clerk has no authority to exercise discretion in awarding costs, let alone to make the frivolousness finding required by FEHA, the appeals court said. The cost memorandum was therefore an ineffective means of seeking costs in this FEHA case.  

The court noted that a different California appellate court had reached the same conclusion, ruling that the plaintiff was not required to file a timely cost memorandum to preserve its right to seek expert witness costs that were not recoverable as a matter of right under California’s civil procedure rules (Anthony v. City of Los Angeles, 166 Cal.App.4th 1011 [2008]). That court found that the cost memorandum applies only to cost items to which a party is entitled as a matter of right. By contrast, costs such as expert witness fees not ordered by the court or attorney fees that require a court determination may not be immediately entered by the clerk and instead necessitate a decision by the trial court, exercising its discretion.

Because the employer here failed to file the necessary motion for costs, it forfeited any such claim and the plaintiff had no obligation to respond to its ineffective cost memorandum, the court said. It therefore concluded that the trial court erred by signing a judgment that included an award of $180,369 in costs to the employer.

Neeble-Diamond v. Hotel California By the Sea LLC, Calif. Ct. App., No. G061425 (Feb. 5, 2024).

Joanne Deschenaux, J.D., is a freelance writer in Annapolis, Md.