Case Number: KC065667 Hearing Date: July 20, 2016 Dept: J

Re: Hai Huang, et al. v. State Farm General Insurance Company, etc., et al. (KC065667)

MOTION TO STRIKE AND/OR TAX COSTS

Moving Parties: Plaintiffs Hai Huang and Jen Huang

Respondent: Defendant, State Farm General Insurance Company

POS: Moving OK; Opposing OK

This lawsuit involves a claim for homeowner insurance policy benefits based upon damage to Plaintiffs’ home allegedly caused by vibrations resulting from construction activities on a neighbor’s property. Defendant State Farm General Insurance Company (hereinafter, “defendant”) issued the homeowners insurance policy to Plaintiffs, and denied the claim based on “earth movement” exclusion in its policy. Plaintiff commenced this action on 2/19/13. The Second Amended Complaint, filed on 5/21/14, asserted causes of action for:

1. Breach of Contract
2. Breach of the Implied Covenant of Good Faith and Fair Dealing
3. Declaratory Relief
4. Negligence
5. Trespass

On 3/15/16, the Judgment on Jury Verdict in favor of Defendant State Farm was filed. On 3/29/16, the Notice of Entry of Judgment was filed.

Plaintiffs Hai Huang and Jen Huang now move this court, per CCP §§ 1032, 1033.5 and 1034, for an order taxing the following portions of defendant’s “Memorandum of Costs:”

1. Item No. 2 (Jury Fees): The $626.70 paid by defendant on 2/26/16 was half of the fee split with plaintiff;
2. Item No. 4 (Deposition costs): These costs are not recoverable absent supporting documentation;
3. Item No. 8 (Witness Fees): Defendant is not entitled to recoup its expert witness fees, inasmuch as its CCP § 998 offer was made in bad faith. Defendant seeks $20,330.00 for Ninyo & Moore expert services, even though Michael Rodgers (hereinafter, “Rodgers”) did not testify as an expert but merely as a percipient witness. None of the experts testifying at trial relied on A.S. Gillespie and Associates’ (hereinafter, “Gillespie”) work product or opinion, nor did any Gillespie representative testify, yet defendant seeks $2,891.76 for their services; and
4. Item No. 11 (Models, blowups and photocopies of exhibits): Defendant’s counsel relied primarily on digitally displayed images projected at trial. Plaintiffs’ counsel was provided with an electronic link to an online drop-box containing trial exhibits, not their hard copies.

The “prevailing party” is entitled as a matter of right to recover costs of suit in any action or proceeding. (CCP § 1032(b).) The losing party may dispute any or all of the items in the prevailing party’s memorandum of costs by a motion to strike or tax costs. (CRC 3.1700(b).)

“If items on their face appear to be proper charges, the verified memorandum of costs is prima facie evidence of their propriety, and the burden is on the party seeking to tax costs to show they were not reasonable or necessary. ‘On the other hand, if items are properly objected to, they are put in issue and the burden of proof is on the party claiming them as costs.’ (Ladas v. California State Auto. Assn. (1993) 19 Cal.App.4th 764, 774). However, whether a cost item was reasonably necessary is still a question of fact to be decided by the trial court. (Ibid.)” Jones v. Dumrichob (1998) 63 Cal.App.4th 1258, 1266. “Initial verification will suffice to establish the reasonable necessity of the costs claimed. There is no requirement that copies of bills, invoices, statements, or any other such documents be attached to the memorandum. Only if the costs have been put in issue via a motion to tax costs must supporting documentation be submitted.” Id. at 1267.

ITEM NO. 2 (JURY FEES):

Plaintiffs seek to tax defendant’s request for $626.70 paid on 2/23/16. Jury fees, however, are expressly recoverable under CCP § 1033.5(a)(1). Thus, the motion is denied.

ITEM NO. 4 (DEPOSITION COSTS):

“Transcripts and video recordings of “necessary” depositions, plus travel expenses to attend depositions, are allowable costs. [CCP § 1033.5(a)(3)…].” Wegner, Fairbank, Epstein & Chernow, CAL. PRAC. GUIDE: CIV. TRIALS & EVIDENCE (The Rutter Group 2015) ¶ 17:113.

Plaintiffs complain that deposition costs are not recoverable without an invoice. Defendant has attached these invoices as Exhibit “19” to the Declaration of Matthew Batezel (hereinafter, “Batezel”). Batezel advises that the deposition fees incurred by State Farm were for witnesses that were all called as witnesses at trial with the exception of Avram Ninyo and Stravos Chrysovergis. (Batezel Declaration, ¶ 27). The aforesaid individuals were deposed by plaintiff; defendant’s requested costs associated with these persons are for copies of their deposition transcripts only. (Id.). He explains that Chrysovergis was a co-defendant’s retained expert and was not called as a witness at trial because plaintiff settled with that defendant during trial and because his testimony would have been duplicative of Jon Wren’s testimony. (Id.). Batezel further explains that Ninyo was not called because at that time it appeared sufficient to have Wren testify on the geotechnical engineer issues. (Id.).

The fees incurred are reasonable in amount and reasonably necessary to the conduct of the litigation. Thus, the motion should be DENIED.

ITEM NO. 8 (WITNESS FEES):

On 12/4/15, defendant made a CCP § 998 offer for $5,000.00 and a mutual waiver of costs. (Declaration of Monica Szkopek [hereinafter, “Szkopek”], ¶ 7, Exhibit “C”). Plaintiffs did not accept the offer. After a jury trial, the jury reached a verdict that plaintiffs failed to establish that they suffered a direct physical loss to property that was not otherwise already in need of repair and, on this basis, found in defendant’s favor.

Typically, if an offer to allow judgment is made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, the plaintiff shall not recover his or her postoffer costs and shall pay the defendant’s costs from the time of the offer. (CCP § 998(c)). “’It is the general rule that where a party shows a prima facie entitlement to costs, the burden is on an objector to prove the costs should be disallowed. [Citations]. Where…the offeror obtains a judgment more favorable than its offer, the judgment constitutes prima facie evidence showing the offer was reasonable and the offeror is eligible for costs as specified in section 998. The burden is therefore properly on plaintiff, as offeree, to prove otherwise.’” Santantonio v. Westinghouse Broadcasting Co. (1994) 25 Cal.App.4th 102, 116-117 (citation omitted).

“Whether a section 998 offer is reasonable must be determined by looking at circumstances when the offer was made. (Cf. Tech-Bilt, Inc. v. Woodward-Clyde & Associates (1985) 38 Cal. 3d 488, 499, 502). However, the reasonableness of an offer depends on the information used to evaluate it. In many cases, a plaintiff and a defendant will not have the same information when an offer is made. For this reason the reasonableness of an offer may lie in the eye of its beholder.” Elrod v. Oregon Cummins Diesel, Inc. (1987) 195 Cal.App.3d 692, 699. As a general rule, the reasonableness of a defendant’s offer is measured, first, by determining whether the offer represents a reasonable prediction of the amount of money, if any, defendant would have to pay plaintiff following a trial, discounted by an appropriate factor for receipt of money by plaintiff before trial, all premised upon information that was known or reasonably should have been known to the defendant.” Id. (emphasis theirs). “If the offer is found reasonable by the first test, it must then satisfy a second test: whether defendant’s information was known or reasonably should have been known to plaintiff. This second test is necessary because the section 998 mechanism works only where the offeree has reason to know the offer is a reasonable one. If the offeree has no reason to know the offer is reasonable, then the offeree cannot be expected to accept the offer.” Id.

“Thus, suppose defendant’s files contain ‘dynamite’ information likely to insulate it from liability. However, the information is subject to a privilege and is not discoverable by plaintiff. Defendant intends to waive the privilege and use the information at trial. Defendant makes a low offer premised on its exclusive knowledge; an objective appraisal of other circumstances, including defendant’s likely liability for damages, would indicate the offer is patently unreasonable. Unless defendant communicates its exclusive knowledge to plaintiff with its offer, the offer is not reasonable and does not qualify as a valid section 998 offer. Since defendant knew or reasonably should have known plaintiff lacked information necessary to evaluate the offer, defendant did not make the offer in good faith for purposes of section 998.” Id. at 699-700.

“[T]he reasonableness of defendant’s offer does not depend on information actually known to plaintiff but rather on information that was known or reasonably should have been known. The latter standard of an objective one: would a reasonable person have discovered the information? A contrary conclusion would make defendant’s good faith incongruously depend on plaintiff’s subjective knowledge and would reward plaintiffs who are dilatory in pursuing discovery. Thus, if a defendant makes a low offer shortly before trial based upon potent evidence likely to insulate defendant from liability, and if the evidence was reasonably available to plaintiff, defendant’s offer may qualify as a valid section 998 offer even though plaintiff did not in fact know of the information because he failed to investigate or pursue discovery.” Id. at 700 (emphasis theirs).

Plaintiffs contend that defendant’s settlement offer was not made in good faith because at the time of the offer, they only had access through discovery to materials prepared by Ninyo & Moore, who did not take soil samples and concluded that plaintiffs’ home was built on cut-and-fill. They claim that they did not have access to privileged expert data, analysis and opinions of Exponent who performed soil sample analysis and concluded that plaintiffs’ property was built on bedrock until this “dynamite” information was disclosed at Wren’s 1/22/16 deposition. They further claim that neither experts John Callanan’s and Seb Ficcadenti’s data findings, photographs and reports were made available to them until these individuals were deposed on 2/5/16.

Again, however, the jury determined that the plaintiffs failed to establish that they suffered a direct physical loss to property that was not otherwise already in need of repair. The jury never determined whether plaintiffs’ property was damaged by long-term settlement. Throughout the litigation, moreover, defendant argued that the property was already damaged as of 1/12, as evidenced by two prior State Farm claims. Defendant’s Motion for Summary Judgment served 1/20/15 (Batezel Declaration, Exhibit “1”) included as evidence the 2008 claim file, a declaration from Dr. Medji Sama (the engineer who inspected the property in 2008) and Sama’s report. On 2/11/16, defendant provided the 2008 and 2010 claims files for claims made by plaintiffs for damage to their property, in response to a Request for Production of Documents served by Defendant Larry Jacinto Construction. (Id., ¶ 7, Exhibit “3”). On 3/26/15, defendant’s counsel sent another copy of the 2008 and 2010 claim files to plaintiff’s counsel. (Id., ¶ 8, Exhibit “4”). Plaintiffs’ representation that they “did not deny the existence of damage” prior to the construction activities is belied by portions of their deposition testimony. (Id., ¶ 9, Exhibits “5” and “6”).

Even if plaintiffs “dynamite” information argument relative to Webb is considered, it is apparent that the information possessed by defendant was not exclusive. In 2/12, plaintiffs were told that defendant believed the damage to the home was caused by long-term settlement. (Szkopek Declaration, ¶ 9(c), Exhibit “E”). Plaintiffs, in fact, were told this information in 9/08 as set forth in the Exponent report. (Batezel Declaration, ¶ 10, Exhibit “8”). Plaintiffs, moreover, owned the property at all times during the litigation, and were never precluded from conducting their own soil samples. Even if it is assumed that the soil under plaintiffs’ home was somehow exclusive to defendant through the work conducted by Wren, plaintiffs should have known this information but chose not to conduct any discovery or seek any information regarding Wren’s findings until the eve of trial.

Defendant’s counsel advised plaintiffs’ counsel on 4/6/15 and again on 4/7/15 that soil samples would be taken. (Id., ¶¶ 11-12, Exhibits “9” & “10”). Despite this knowledge, plaintiffs never requested any of the data obtained, never requested a sample of the borings and never requested that they be permitted to conduct an analysis of the borings/soil samples.

Defendant’s CCP § 998 offer was not a “token,” inasmuch as it not only included a $5,000.00 payment but also a mutual waiver of costs (which would include attorney’s fees). Plaintiffs’ $178,058.87 damages figure was calculated by their expert, Michael Nedobity, who conceded that causation was outside the scope of his retention. (Id., ¶ 17, Exhibit “13”). Callanan, by way of contrast, opined that the cost to repair plaintiffs’ home was only approximately $31,000.00. (Id., ¶ 18, Exhibit “14”). Plaintiffs, then, have failed to meet their burden of proving that defendant’s CCP § 998 offer was not made in good faith.

Plaintiffs also seek to bar defendant’s recoupment of expert fees incurred by Ninyo & Moore on the basis of Government Code § 68092.5, which limits experts to charging “the reasonable and customary hourly or daily fee for the actual time consumed in the examination of that witness by any party.” However, CCP § 998 expressly allows for the recovery of fees of expert witnesses “reasonably necessary in either, or both, preparation for trial or arbitration, or during trial or arbitration.” “The reference to Government Code section 68092.5 in section 998, subdivision (h) is interpreted to mean that any fees charged for trial time must not exceed the expert’s normal rate.” Sanantonio, supra, 25 Cal.App.4th at 123.

After the CCP ¶ 998 offer, defendant incurred and paid $16,227.50 in fees for Ninyo & Moore’s work. (Id., ¶ 22). Both Mike Rodgers (hereinafter, “Rodgers”) and Avram Ninyo were deposed by plaintiffs in their capacities as expert witnesses. (Id.). Rodgers was, in fact, ultimately called as a percipient witness; as such, defendant agrees that the $1,600.00 Rodgers charged defendant for four hours of trial testimony should be deducted from Item No. 8 in its Memorandum of Costs.

Defendant has likewise voluntarily withdrawn its request for $27,184.06 in expert fees on the basis that they were incurred prior to the 998 offer.

Accordingly, defendant is entitled to recover its post-offer expert fees, in the amount of $50,664.44. The invoices for all expert witness bills have been attached as Exhibit “16” to Batezel’s declaration.

ITEM NO. 11 (MODELS, BLOWUPS, AND PHOTOCOPIES OF EXHIBITS):

Expenses for models, blowups, photocopies, etc. that are “reasonably helpful to aid the trier of fact” are recoverable costs. [CCP § 1033.5(a)(13). Batezel advises that the exhibits were all admitted into evidence with the exception of a few pages. (Batezel Declaration, ¶ 25). He has attached invoices for same as Exhibit “17” to his declaration.

The fees incurred are reasonable in amount and reasonably necessary to the conduct of the litigation. Thus, the motion is denied.