Any one who has been associated with the construction, has probably been involved in a lawsuit or two. Hopefully the case settled and did not have to go to trial. Typically when a case settles, an agreement is reached on the amount due, each side bears the cost of his own attorney and the case gets dismissed by the Plaintiff.
A recent decision of the Appellate Court gives Defendants one more thing to worry about- the payment of attorneys even though the defendant reached an agreement with the Plaintiff to settle, the settlement was paid and the case voluntarily dismissed by the Plaintiff.!
In DeSaulles v. Community Hosp. of the Monterey Peninsula (SC S219236 3/10/16) , that was the exact situation except the defendant was forced to pay the Plaintiff 's attorney's fees despite the settlement and voluntary dismissal of the complaint.
Code of Civil Procedure section 1032, subdivision (a)(4) defines the “prevailing party” in litigation to include “the party with a net monetary recovery” and “a defendant in whose favor a dismissal is entered.” A “prevailing party,” so defined, “is entitled as a matter of right to recover costs in any action or proceeding.” (§ 1032, subd. (b).) The question in this case is whether a plaintiff who voluntarily dismisses an action after entering into a monetary settlement is a prevailing party under section 1032, subdivision (a)(4) (hereafter section 1032(a)(4))?.
The Court of Appeal below answered in the affirmative, reasoning that the statutory definition of “prevailing party” includes a party that obtains a “net monetary recovery” and that a settlement in which a defendant pays a plaintiff some amount of money is a net monetary recovery, at least under the circumstances of this case. In reaching this conclusion, the Court of Appeal disagreed with Chinn v. KMR Property Management (2008) 166 Cal.App.4th 175 (Chinn), which held that the defendant is the prevailing party where a settlement results in a dismissal. Chinn reasoned that the statutory definition of “prevailing party” includes “ ‘a defendant in whose favor a dismissal is entered’ ” and that a settlement is not a “ ‘net monetary recovery.’ ” (Id. at p. 188.)
The Court stated "We conclude that the Court of Appeal below was correct: When a defendant pays money to a plaintiff in order to settle a case, the plaintiff obtains a “net monetary recovery,” and a dismissal pursuant to such a settlement is not a dismissal “in [the defendant’s] favor.” (§ 1032(a)(4).) As emphasized below, this holding sets forth a default rule; settling parties are free to make their own arrangements regarding costs."
If the Courts continue to interpret the statute in this manner, it is empairative that in any litigation that gets settled, there be a written settlement agreement which provides either that each party is to bear its own costs and fees or if some other arrangement was agreed to (Defendant agreed to pay a portion of the fees), the specific manner of how attorney fees and costs are going to be handled must be set forth in writing as part of the settlement agreement. An oral settlement likewise would subject you to the potential of having to pay the settlement and the Plaintiff's attorneys fee and costs.
Attorneys are not always bad and in this situation can make sure you do not get sucked into the trap suffered by the defendant in the DeSaulles case.