Charton v. Harkey

Filed 5/24/16

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION THREE

LLOYD CHARTON, as Trustee, etc.,
et al.,
G050514
Plaintiffs and Appellants,
(Super. Ct. No. 30-2008-00114401)
v.
OPINION
DIANE HARKEY,

Defendant and Respondent.

Appeal from a postjudgment order of the Superior Court of Orange County,
Steven L. Perk and Kim Garlin Dunning, Judges. Affirmed in part, reversed in part, and
remanded.
Grant, Genovese & Baratta, David C. Grant, Chad J. Brandel; Straggas &
Associates and George D. Straggas for Plaintiffs and Appellants.
Law Offices of Jeffrey S. Benice and Jeffrey S. Benice for Defendant and
Respondent.
* * *
 Code of Civil Procedure section 1032 gives a “prevailing party” the right to
recover its litigation costs.1 It is undisputed defendant and respondent Diane L. Harkey
meets section 1032’s definition of a prevailing party. Plaintiffs and appellants
(Plaintiffs),2 however, contend the trial court erred in awarding Harkey her costs because
she was united in interest and shared costs with other defendants who did not satisfy the
statutory definition. In support, Plaintiffs rely on cases applying the so-called unity of
interest exception, which provides a trial court with discretion to deny prevailing party
status to a defendant who otherwise would be entitled to recover costs as a matter of right
when that defendant is united in interest with, and asserted the same defenses in the same
answer as, other defendants who did not prevail and are not entitled to recover their costs.
We conclude these cases are no longer controlling, and therefore affirm the
trial court’s determination Harkey was a prevailing party entitled to recover costs as a
matter of right. Courts developed the unity of interest exception based on the language of
former section 1032. In 1986, the Legislature repealed that version of the statute in its
entirety and enacted the current version to substantially change how trial courts identify
the parties entitled to recover costs as a matter of right. The current version includes
none of the language on which the unity of interest exception was based, and provides
trial courts with no discretion to deny prevailing party status to a party who meets the
statutory definition of a prevailing party. We therefore conclude the Legislature intended
to eliminate the unity of interest exception as a basis for denying a prevailing party the
right to recover costs. Although most of the appellate cases on which Plaintiffs rely
postdate the repeal and reenactment of section 1032, we do not find these cases
persuasive because none of them explain how the unity of interest exception survived the
Legislature’s actions.

1
All statutory references are to the Code of Civil Procedure.
2
Plaintiffs are 84 investors who claim they were defrauded by defendants.

2
 In 1986, the Legislature also enacted section 1033.5 to identify the specific
cost items a prevailing party may recover, and to limit the recoverable costs to those that
are incurred by the prevailing party, reasonably necessary to that party’s conduct of the
litigation, and reasonable in amount. When less than all of a group of jointly represented
parties prevail, these limitations require the trial court to apportion the costs among the
jointly represented parties based on the reason for incurring each cost and whether the
cost was reasonably necessary to the conduct of the litigation on behalf of the prevailing
parties. The court may not make an across-the-board reduction based on the number of
jointly represented parties because doing so fails to consider the reason for incurring the
costs and whether they were reasonably necessary for the prevailing party.
Here, the trial court made an improper across-the-board reduction,
awarding Harkey 25 percent of the defense costs because she was one of four jointly
represented defendants. We therefore reverse and remand for the trial court to determine
the proper cost allocation among the jointly represented defendants.

I

FACTS AND PROCEDURAL HISTORY

Defendant National Financial Lending, LLC (National Financial) was a
limited liability company in the mortgage lending business. Defendant Point Center
Financial, Inc. (Point Center) was National Financial’s sole manager and Harkey’s
husband, Dan Harkey, was Point Center’s principal shareholder, president, chief
executive officer, and director. Plaintiffs invested in National Financial by purchasing
membership interests in a public offering.
In November 2008, Plaintiffs filed this action to recover damages they
suffered based on their investments. Plaintiffs named National Financial, Point Center,
Harkey, and her husband as defendants. The claims Plaintiffs alleged include breach of
fiduciary duty, breach of operating agreement, breach of promissory note, negligent

3
misrepresentation, intentional misrepresentation, rescission, failure to produce records,
unfair business practices, securities law violations, elder abuse, and declaratory relief. As
against Harkey, Plaintiffs only alleged claims for aiding and abetting, fraudulent
conveyance, and declaratory relief.
The trial court conducted a jury trial on Plaintiffs’ claims seeking monetary
damages and a bench trial on their fraudulent conveyance and declaratory relief claims.
During trial, Plaintiffs dismissed their aiding and abetting claim against Harkey. The jury
returned a special verdict against Harkey’s husband and Point Center, awarding Plaintiffs
more than $12.5 million in compensatory and punitive damages on the breach of
fiduciary duty and elder abuse claims.3 In the bench trial, the court found Harkey’s
husband was the alter ego of Point Center, and Point Center was the alter ego of National
Financial. The court also ruled in Harkey’s and her husband’s favor on the fraudulent
conveyance and declaratory relief claims. Based on the jury’s verdict and these rulings,
the court entered judgment in Plaintiffs’ favor and against Harkey’s husband and Point
Center for more than $12.5 million, but the court entered judgment in Harkey’s favor and
against Plaintiffs on all claims they alleged against her.
Harkey then joined with her husband and Point Center to file a
memorandum of costs seeking nearly $329,000 from Plaintiffs.4 Plaintiffs moved to tax
these costs, arguing Harkey’s husband and Point Center were not prevailing parties
entitled to recover costs because Plaintiffs prevailed on their claims against these
defendants and obtained a net monetary recovery. As to Harkey, Plaintiffs argued the
3
The case did not proceed to trial on Plaintiffs’ claims against National
Financial, and the parties do not explain how those claims were resolved.
4
The memorandum of costs sought $5,909.80 in filing and motion fees;
$18,155.93 in jury fees; $133,534.39 in deposition costs; $7,235.40 for service of
process; $95,987.38 in witness fees; $13,473.63 for models, blowups, and photocopies of
exhibits; $8,004.75 for court reporter fees; and $46,007.21 in other costs for a total of
$328,908.49. The memorandum also reserved the right to seek attorney fees.

4
court had discretion to deny her costs even though she prevailed on Plaintiffs’ claims
against her because Harkey was represented by the same lawyer who represented her
husband and Point Center, she filed a joint answer with those nonprevailing defendants,
and she otherwise joined with them in incurring the costs they specified in the cost
memorandum. According to Plaintiffs, awarding costs to Harkey would allow her
husband and Point Center to shift the costs they incurred to Plaintiffs even though
Plaintiffs prevailed against Harkey’s husband and Point Center. Plaintiffs also argued
various cost items Harkey and the other defendants sought were not recoverable costs.
The trial court granted the motion in part, taxing 75 percent of the
recoverable costs and awarding the remaining 25 percent to Harkey only. The court
concluded Harkey’s husband and Point Center were not entitled to recover their costs
because they were not prevailing parties, but Harkey was a prevailing party entitled to
recover her costs because Plaintiffs dismissed their aiding and abetting claim against her
and she prevailed at trial on the other claims they alleged against her. The court also
rejected Plaintiffs’ contention the court should deny Harkey her costs even though she
met section 1032’s definition of a prevailing party because Harkey shared a unity of
interest with the nonprevailing defendants. According to the court, “[Harkey’s] interest
in the case was not the same as [her husband], Point Center or [National Financial].
[She] was not an officer, director or shareholder of the business entities. She did not
make representations to [Plaintiffs]. She did not participate in any loan servicing activity.
She did not solicit investments from any of [Plaintiffs]. She did not have a unity of
interest that was specifically the same as that of the other named defendants. Therefore
the court awards [Harkey] her costs in proportion to her participation in the litigation with
. . . [her husband], Point Center Financial and [National Financial], which amounts to
25 [percent].”
The court also set an evidentiary hearing on which specific cost items
identified in the cost memorandum were recoverable under the governing statutes, and

5
invited the parties to meet and confer to identify which items they agreed were
recoverable and which were not. Before that hearing, the parties submitted a stipulation
stating the total amount of recoverable costs was $150,504.99, and Plaintiffs reserved the
right to dispute Harkey’s entitlement to any costs. Based on the parties’ stipulation, the
court awarded Harkey $37,626.25, representing 25 percent of the total recoverable costs.
This appeal followed.

II

DISCUSSION

A. Basic Legal Principles Regarding Recovery of Costs
“The right to recover any of the costs of a civil action ‘is determined
entirely by statute.’” (Anthony v. City of Los Angeles (2008) 166 Cal.App.4th 1011, 1014
(Anthony).) “‘[I]n the absence of an authorizing statute, no costs can be recovered by
either party.’” (Davis v. KGO-TV, Inc. (1998) 17 Cal.4th 436, 439, disapproved and
superseded by statute on other grounds as stated in Williams v. Chino Valley Independent
Fire Dist. (2015) 61 Cal.4th 97, 105-107 & fn. 1.) “Section 1032 governs the award of
costs of trial court litigation.” (Acosta v. SI Corp. (2005) 129 Cal.App.4th 1370, 1375
(Acosta).)
Under section 1032, subdivision (b), a “prevailing party” is entitled to
recover costs “as a matter of right” unless otherwise provided by statute. Section 1032,
subdivision (a)(4), defines who is a prevailing party entitled to costs. The first sentence
of that subdivision “describes four categories of litigants who automatically qualify as
prevailing parties. It reads: ‘“Prevailing party” includes [1] the party with a net
monetary recovery, [2] a defendant in whose favor a dismissal is entered, [3] a defendant
where neither plaintiff nor defendant obtains any relief, and [4] a defendant as against

6
those plaintiffs who do not recover any relief against that defendant.’”5 (Wakefield v.
Bohlin (2006) 145 Cal.App.4th 963, 975 (Wakefield), disapproved on other grounds in
Goodman v. Lozano (2010) 47 Cal.4th 1327, 1338 (Goodman).)
“[T]he trial court has no discretion to deny prevailing party status to a
litigant who falls within one of the four statutory categories in the first [sentence] of the
provision. ‘As rewritten [in 1986], section 1032 now declares that costs are available as
“a matter of right” when the prevailing party is within one of the four categories
designated by statute.’” (Wakefield, supra, 145 Cal.App.4th at p. 975; see Nelson v.
Anderson (1999) 72 Cal.App.4th 111, 129 (Nelson).)

5
In its entirety, section 1032 provides as follows: “(a) As used in this
section, unless the context clearly requires otherwise:

“(1) ‘Complaint’ includes a cross-complaint.

“(2) ‘Defendant’ includes a cross-defendant or a person against whom a
complaint is filed.

“(3) ‘Plaintiff’ includes a cross-complainant or a party who files a
complaint in intervention.

“(4) ‘Prevailing party’ includes the party with a net monetary recovery, a
defendant in whose favor a dismissal is entered, a defendant where neither plaintiff nor
defendant obtains any relief, and a defendant as against those plaintiffs who do not
recover any relief against that defendant. When any party recovers other than monetary
relief and in situations other than as specified, the ‘prevailing party’ shall be as
determined by the court, and under those circumstances, the court, in its discretion, may
allow costs or not and, if allowed may apportion costs between the parties on the same or
adverse sides pursuant to rules adopted under Section 1034.

“(b) Except as otherwise expressly provided by statute, a prevailing party
is entitled as a matter of right to recover costs in any action or proceeding.

“(c) Nothing in this section shall prohibit parties from stipulating to
alternative procedures for awarding costs in the litigation pursuant to rules adopted under
Section 1034.”

7
 “‘Where the prevailing party is one not specified [in these four categories,
the second sentence of] section 1032, subdivision (a)(4) permits the trial court to
determine the prevailing party and then allow costs or not, or to apportion costs, in its
discretion. The statute requires the trial court to determine which party is prevailing and
then exercise its discretion in awarding costs.’ . . . [¶] This prong of the statute thus
calls for the trial court to exercise its discretion both in determining the prevailing party
and in allowing, denying, or apportioning costs. It operates as an express statutory
exception to the general rule that a prevailing party is entitled to costs as a matter of
right.” (Wakefield, supra, 145 Cal.App.4th at p. 977.)
Section 1033.5, subdivision (a), identifies the specific cost items a
prevailing party may recover as a matter of right, such as filing, motion, and jury fees;
costs of necessary depositions; service of process costs; and court reporter fees.
Section 1033.5, subdivision (b), identifies specific cost items that a prevailing party may
not recover, including the fees of experts not ordered by the court; investigation
expenses; and postage, telephone, and certain copying charges. Section 1033.5,
subdivision (c)(4), grants the trial court discretion to award a cost item that is neither
allowed under subdivision (a) nor prohibited under subdivision (b).
All costs awarded to a prevailing party must be (1) incurred by that party,
whether or not paid; (2) “reasonably necessary to the conduct of the litigation rather than
merely convenient or beneficial to its preparation”; and (3) reasonable in amount.
(§ 1033.5, subd. (c)(1)-(3); see El Dorado Meat Co. v. Yosemite Meat & Locker Service,
Inc. (2007) 150 Cal.App.4th 612, 616 (El Dorado Meat).)
Whether a party falls within one of the four categories authorizing the
recovery of costs as a matter of right is a question of law we review de novo. (Wakefield,
supra, 145 Cal.App.4th at p. 978; Acosta, supra, 129 Cal.App.4th at p. 1374.) We
otherwise review a trial court’s cost award for abuse of discretion. (Wakefield, at p. 978;
El Dorado Meat, supra, 150 Cal.App.4th at p. 617.) For example, we review a trial

8
court’s determination on which costs are reasonably necessary and reasonable in amount
under the abuse of discretion standard. (Seever v. Copley Press, Inc. (2006)
141 Cal.App.4th 1550, 1556-1557.)

B. A Prevailing Party Is Entitled to Recover Costs as a Matter of Right Even If that
Party Joined With Nonprevailing Defendants in Resisting the Plaintiffs’ Claims
Plaintiffs do not dispute Harkey satisfied the statutory definition of a
prevailing party entitled to recover costs as a matter of right because she was a defendant
in whose favor a dismissal was entered and a defendant against whom Plaintiffs did not
recover any relief. (§ 1032, subd. (a)(4).) Plaintiffs nonetheless contend the trial court
abused its discretion in awarding Harkey costs because the unity of interest exception
allowed the court to deny Harkey the prevailing party status to which she otherwise was
entitled. According to Plaintiffs, the trial court applied the wrong factors to determine
Harkey did not share a unity of interest with the nonprevailing defendants. We affirm the
trial court’s decision Harkey was a prevailing party entitled to recover costs as a matter of
right without deciding whether she shared a unity of interest with the nonprevailing
defendants.
The unity of interest exception arose from the prior version of section 1032.
(Zintel Holdings, LLC v. McLean (2012) 209 Cal.App.4th 431, 441 (Zintel); Wakefield,
supra, 145 Cal.App.4th at p. 984.) Subdivision (b) of that statute provided costs were
“allowed of course” to a defendant “upon a judgment in his [or her] favor” in certain
types of actions, including actions to recover money or damages, actions to recover real
or personal property, and special proceedings. (Stats 1957, ch. 1172, § 1, p. 2464.) That
subdivision also stated, “When there are several defendants . . . not united in interest, and
making separate defenses by separate answers, and plaintiff fails to recover judgment
against all, the court must award costs to such of the defendants as have judgment in their
favor.” (Ibid., italics added.) Former section 1032, subdivision (c), granted the trial court

9
discretion to allow or deny costs “[i]n other actions than those mentioned in this
section.”6 (Stats 1957, ch. 1172, § 1, pp. 2464-2465.)
Former section 1032, subdivision (b), expressly required a trial court to
award costs to a prevailing defendant who did not unite in interest with other defendants
and made separate defenses by a separate answer, but the statute did not expressly
address a cost award for a prevailing defendant asserting the same defenses in the same
answer as other defendants. The decision whether to award costs to a prevailing
defendant united in interest with other defendants therefore was vested in the trial court’s
discretion. (Zintel, supra, 209 Cal.App.4th at p. 441; Smith v. Circle P Ranch Co. (1978)

6
In its entirety, former section 1032 provided as follows: “In the superior
court, except as otherwise expressly provided, costs are allowed of course:

“(a) To plaintiff upon a judgment in his favor: in an action for the
recovery of real property; in an action to recover the possession of personal property; in
an action for the recovery of money or damages; in a special proceeding; in an action
which involves the title or possession of real estate or the legality of a tax, impost,
assessment, toll, or municipal fine.

“(b) To the defendant upon a judgment in his favor in special proceedings
and in the actions mentioned in subdivision (a) of this section, or as to whom the action is
dismissed. When there are several defendants in any action mentioned in subdivision (a)
of this section, not united in interest, and making separate defenses by separate answers,
and plaintiff fails to recover judgment against all, the court must award costs to such of
the defendants as have judgment in their favor.

“(c) In other actions than those mentioned in this section costs may be
allowed or not, and, if allowed, may be apportioned between the parties, on the same or
adverse sides, in the discretion of the court.

“(d) In all actions, whether mentioned in this section or not, if the
prevailing party recovers a judgment that could have been rendered in a court inferior in
jurisdiction in the county or city and count, such prevailing party shall not recover costs
unless the judgment, who presided at the trial, or, in the event of his inability for any
reason to act, some other judge of the court, in his discretion, makes an order, allowing
costs or such party thereof as he deems proper.” (Stats 1957, ch. 1172, § 1,
pp. 2464-2465.)

10
87 Cal.App.3d 267, 272 [“In those instances in which several defendants are united in
interest and/or join in making the same defenses in the same answer, the allowance or
disallowance of an award to prevailing defendants lies within the sound discretion of the
trial court”].)
In 1986, the Legislature repealed section 1032 in its entirety and replaced it
with the current version of the statute as part of a major overhaul of the statutes
governing recovery of costs. (Goodman, supra, 47 Cal.4th at p. 1335.) As explained
above, the current version of section 1032 provides for recovery of costs as a matter of
right if the party fits one of the four prevailing party definitions listed in section 1032,
subdivision (a)(4). The current statute no longer focuses on the nature of the lawsuit to
distinguish between parties who are entitled to costs as a matter of right and those who
may recover costs in the court’s discretion. Instead, section 1032 now focuses on the
nature of the prevailing party’s victory—the party with a net recovery, a defendant in
whose favor a dismissal is entered, a defendant when neither party obtains any relief, and
a defendant against those plaintiffs who did not recover any relief against that defendant.
If a party satisfies one of these four definitions of a prevailing party, the trial court lacks
discretion to deny prevailing party status to that party. (Wakefield, supra,
145 Cal.App.4th at p. 975; Nelson, supra, 72 Cal.App.4th at p. 129.) Most significantly,
the current version of section 1032 eliminated the language regarding several defendants
who are not united in interest and asserted separate defenses by separate answers.
“As a general rule, in construing statutes, ‘[w]e presume the Legislature
intends to change the meaning of a law when it alters the statutory language [citation], as
for example when it deletes express provisions of the prior version [citation].’” (People
v. Mendoza (2000) 23 Cal.4th 896, 916; see DeCastro West Chodorow & Burns, Inc. v.
Superior Court (1996) 47 Cal.App.4th 410, 418 [“a substantial change in the language of
a statute by an amendment indicates an intention to change its meaning”].) The
“Legislature’s repeal of [a] prior statute ‘together with its enactment of a new statute on

11
the same subject . . . with significant differences in language, strongly suggests the
Legislature intended to change the law.’” (Goodman, supra, 47 Cal.4th at p. 1337.) In
construing a statute, we are “not authorized to create an exception not contained in the
statutory language.” (University of Southern California v. Superior Court (1996)
45 Cal.App.4th 1283, 1290; see Conde v. City of San Diego (2005) 134 Cal.App.4th 346,
351; Crib Retaining Walls, Inc. v. NBS/Lowry, Inc. (1996) 47 Cal.App.4th 886, 890
[“‘one should not read into the statute allowing costs a restriction which has not been
placed there’”].)
As explained above, the 1986 repeal and reenactment of section 1032
substantially changed the statutory framework for determining which parties are entitled
to recover costs as a matter of right. The new statute provides no exception to a party’s
right to recover costs when the party satisfies any of the four statutory definitions of a
prevailing party. In doing so, the new statute eliminated any basis to apply the unity of
interest exception found in the repealed version. Consequently, we conclude the
Legislature intended to eliminate the unity of interest exception as a basis for denying
costs to a prevailing defendant who otherwise is entitled to recover costs as a matter of
right. (See Zintel, supra, 209 Cal.App.4th at p. 442 [explaining in dicta, “Whether the
Legislature intended the continued use of [the unity of interest exception] seems doubtful
. . . since it created four categories of litigants that automatically qualify as prevailing
parties [citation], provided an award of costs must be made to those litigants ‘[e]xcept as
otherwise expressly provided by statute’ [citation], and eliminated the language in the
prior version of section 1032 upon which the unity of interest [exception] was based”].)
Although the right to recover costs is entirely statutory (Anthony, supra,
166 Cal.App.4th at p. 1014), Plaintiffs identify no statutory basis for the continued
viability of the unity of interest exception after the 1986 repeal and reenactment of
section 1032. Instead, Plaintiffs rely on a small handful of cases that have applied the
exception despite the Legislature’s action. (See Benson v. Kwikset Corp. (2007)

12
152 Cal.App.4th 1254, 1278 (Benson); Wakefield, supra, 145 Cal.App.4th at
pp. 984-985; Textron Financial Corp. v. National Union Fire Ins. Co. (2004)
118 Cal.App.4th 1061, 1075-1076 (Textron), disapproved on other grounds in Zhang v.
Superior Court (2013) 57 Cal.4th 364, 382; Webber v. Inland Empire Investments, Inc.
(1999) 74 Cal.App.4th 884, 920 (Webber); Slavin v. Fink (1994) 25 Cal.App.4th 722,
725-726 (Slavin).) We decline to follow these cases because they fail to explain how the
unity of interest exception remained viable after the Legislature’s reenactment of
section 1032 omitted the language from the former statute that supported the exception.
Three of the cases Plaintiffs rely on applied the unity of interest exception
without even acknowledging the repeal of the statutory basis for the exception. (Benson,
supra, 152 Cal.App.4th at p. 1278; Textron, supra, 118 Cal.App.4th at p. 1075; Webber,
supra, 74 Cal.App.4th at p. 920.) The fourth case acknowledged “the statutory language
has changed,” but concluded “the underlying precept . . . continues to apply” without
providing any analysis or explanation to support that conclusion. (Wakefield, supra,
145 Cal.App.4th at p. 985.) The final case similarly acknowledged the statutory language
had changed, but nonetheless applied the unity of interest exception to deny a prevailing
defendant costs without explaining how the exception survived the 1986 repeal and
reenactment of section 1032. (Slavin, supra, 25 Cal.App.4th at p. 726 & fn. 2.)
We also note Slavin is internally inconsistent and misapplies section 1032.
In one paragraph the court stated “[t]here is no doubt but that appellant has a right to
recover costs incurred for his benefit because he was the prevailing party,” but in the next
paragraph the court denied the recovery. (Slavin, supra, 25 Cal.App.4th at pp. 725-726,
italics added.) Slavin summarily concluded “the circumstances of this case do not fall
within the specific situations specified in . . . section 1032, subdivision (a)(4),” because
the underlying action was consolidated with another action and “appellant and [a
nonprevailing defendant] were united in interest and shared the same counsel.” (Slavin,
at p. 726.) Slavin provided no explanation how the appellant can be both a prevailing

13
party entitled to recover costs as a matter of right, but not fall within any of the four
definitions of a prevailing party entitled to recover costs as a matter of right. The fourth
category of section 1032, subdivision (a)(4), states a prevailing party includes “a
defendant as against those plaintiffs who do not recover any relief against that
defendant.” The appellant in Slavin was a defendant against whom the plaintiff did not
recover any relief and nothing in section 1032’s plain language removed the Slavin
appellant from that category merely because the underlying actions were consolidated
and the appellant shared counsel and was united in interest with another defendant who
did not prevail.
We therefore conclude the trial court did not error in refusing to apply the
unity of interest exception and properly determined Harkey was a prevailing party
entitled to recover costs as a matter of right. We next consider whether any interest
Harkey shared with the nonprevailing defendants allowed the trial court to deny Harkey
specific cost items.

C. The Trial Court Erred by Allocating Costs Based Solely on the Number of Jointly
Represented Parties
Plaintiffs also contend the unity of interest Harkey shared with the
nonprevailing defendants allowed the trial court to deny some or all of the costs she
sought because the costs were not incurred by Harkey for her own benefit and were not
reasonably necessary to the conduct of her defense. We agree in part and remand for the
trial court to determine which specific costs Harkey incurred that were reasonably
necessary to her defense.
As explained above, all costs awarded to a prevailing party must be
incurred by that party, must be “reasonably necessary to the conduct of the litigation
rather than merely convenient or beneficial to its preparation,” and must be reasonable in
amount. (§ 1033.5, subd. (c)(1)-(3).) These limitations apply whether the costs are
awarded as a matter of right or in the court’s discretion. (Perko’s Enterprises, Inc. v.

14
RRNS Enterprises (1992) 4 Cal.App.4th 238, 244-245 (Perko’s).) The Legislature added
section 1033.5’s limitations on recoverable costs to the Code of Civil Procedure at the
same time the Legislature repealed and reenacted section 1032. (Perko’s, at p. 244.)
“‘When a prevailing party has incurred costs jointly with one or more other
parties who are not prevailing parties for purposes of an award of costs, the judge must
apportion the costs between the parties [based on the reason the costs were incurred and
whether they were reasonably necessary to the conduct of the litigation by the jointly
represented party who prevailed].” (Wakefield, supra, 145 Cal.App.4th at p. 986; see
Ducoing Management, Inc. v. Superior Court (2015) 234 Cal.App.4th 306, 315
(Ducoing); Fennessy v. Deleuw-Cather Corp. (1990) 218 Cal.App.3d 1192, 1196-1197
(Fennessy).)
For example, in Fennessy, six jointly represented defendants moved for
summary judgment, but only one prevailed and obtained a judgment in his favor. That
defendant then sought to recover all costs incurred by the jointly represented defendants,
including the nonprevailing defendants. The trial court denied the plaintiff’s motion to
tax costs. (Fennessy, supra, 218 Cal.App.3d at p. 1194.) The Court of Appeal reversed,
explaining the prevailing defendant may recover only those costs actually incurred by
that defendant or on his behalf in defending the case. All other costs could not be
recovered at that point because it could not be shown those costs were incurred by and
were reasonably necessary to the prevailing party’s conduct of the litigation. The court
noted it could not determine which additional costs could be recovered until the entire
action was resolved as to the other jointly represented defendants. (Id. at pp. 1196-1197.)
Fennessy is factually distinguishable because the action remained pending
against a majority of the jointly represented defendants, but here the case has concluded.
This distinction, however, affects only how the court applies the underlying principle to
particular cost items; it does not change the underlying principle. A prevailing party who
is represented by the same counsel as a nonprevailing party may only recover those costs

15
the prevailing party incurred and were reasonably necessary to the prevailing party’s
conduct of the litigation, not the other jointly represented parties’ conduct of the
litigation. (Ducoing, supra, 234 Cal.App.4th at p. 315; Fennessy, supra, 218 Cal.App.3d
at pp. 1196-1197; Wakefield, supra, 145 Cal.App.4th at p. 986.) Whether to award costs
that were incurred by both the prevailing party and the nonprevailing party, and were
reasonably necessary to the conduct of the litigation for both the prevailing and
nonprevailing party, is left to the trial court’s sound discretion based on the totality of the
circumstances. (Wakefield, at p. 986; Slavin, supra, 25 Cal.App.4th at p. 726 [trial court
did not abuse discretion by allocating nearly all costs incurred by jointly represented
defendants to nonprevailing defendant because that defendant’s conduct was basis for
claims against jointly represented defendants].)
In allocating costs between jointly represented parties, however, the trial
court may not make an across-the-board reduction based on the number of jointly
represented parties because such an allocation fails to consider the necessity or
reasonableness of the costs as required by section 1033.5, subdivision (c). (Nelson,
supra, 72 Cal.App.4th at p. 130.) Instead, when allocating costs between jointly
represented parties, the court must examine the reason each cost was incurred, whether
the cost was reasonably necessary to the conduct of the litigation on behalf of the
prevailing party, and the reasonableness of the cost. (Ibid. [court must “distinguish
between costs incurred as a result of the actions or tactics of [the prevailing jointly
represented party] as opposed to [the nonprevailing jointly represented party]”].)
Here, the trial court made an across-the-board allocation based on the
number of jointly represented defendants, awarding Harkey 25 percent of all costs
defendants incurred because she was one of four jointly represented defendants. The
court erred because it failed to apply the proper legal standards in making the allocation.
(Perko’s, supra, 4 Cal.App.4th at p. 245 [“When a trial court is mistaken about the scope
of its discretion, even if the mistake is reasonable, an action taken in accord with that

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mistaken view is error”].) We therefore reverse and remand for the trial court to allocate
costs based on the foregoing principles.

III
DISPOSITION

The order is affirmed as to the trial court’s determination Harkey is a
prevailing party entitled to recover costs as a matter of right. The order is reversed as to
the trial court’s across-the-board reduction in the amount of costs based on the number of
jointly represented defendants. The matter is remanded to the trial court to allocate costs
among the jointly represented defendants based on the principles discussed in this
opinion. In the interest of justice, the parties shall bear their own costs on appeal.

ARONSON, J.

WE CONCUR:

MOORE, ACTING P. J.

FYBEL, J.

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