Mesisca Riley & Kreitenberg, Dennis P. Riley and Rena E. Kreitenberg for Plaintiffs and Appellants. Wood, Smith, Henning & Berman, Tracy M. Lewis and Peter J. Burfening, Jr., for Defendant and Respondent. Horvitz & Levy, Jason R. Litt, Emily V. Cuatto; Clark Hill, Micah M. Hoffman; Lynberg & Watkins, Lane E. Webb; Citron & Citron and Thomas H. Citron for Defendants and Appellants.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Los Angeles County Super. Ct. No. SC111139) APPEAL from a judgment and orders of the Superior Court of Los Angeles County, Victor E. Chavez, Judge. Judgment affirmed; postjudgment order on motion to strike or tax costs reversed in part and remanded; appeal from postjudgment order denying motion to compel satisfaction of judgment dismissed. Mesisca Riley & Kreitenberg, Dennis P. Riley and Rena E. Kreitenberg for Plaintiffs and Appellants. Wood, Smith, Henning & Berman, Tracy M. Lewis and Peter J. Burfening, Jr., for Defendant and Respondent. Horvitz & Levy, Jason R. Litt, Emily V. Cuatto; Clark Hill, Micah M. Hoffman; Lynberg & Watkins, Lane E. Webb; Citron & Citron and Thomas H. Citron for Defendants and Appellants.
The tenants of a 23-unit apartment building (Tenants) appeal from a judgment entered following a jury trial in their negligence action against the owners and property manager of the building following a seven-year history of sewage spills into Tenants' apartments, the ensuing mold, and the alleged negligent remediation of mold in Tenants' units. The jury awarded Tenants a total of $729,780 in compensatory damages against the owners of the building, Michael Mikyska, individually and as trustee of the Michael Mikyska Trust, and Irwin Thaler, individually and as trustee of the Thaler Family 1987 Trust (Owners), and $850,000 in punitive damages against Mikyska, but the jury found in favor of the property manager, RDM Management, Inc.
On appeal, Tenants contend the trial court improperly instructed the jury as to RDM with a jury instruction for professional negligence. Tenants also argue the court abused its discretion in denying their motion to strike or tax $137,559 in costs claimed by RDM. Specifically, they contend RDM was not entitled to recover costs under Code of Civil Procedure section 998 because it made only a "token" settlement offer, and they challenge specific costs items awarded by the trial court under section 1032.
Tenants appealed both the judgment and the trial court's postjudgment order denying their motion to strike or tax costs. Tenants also appealed from the jury's denial of punitive damages against Thaler. However, Thaler died after the filing of Tenants' appeal, and Tenants no longer challenge this portion of the judgment. On December 18, 2017 Owners filed a motion to dismiss Tenants' appeal as moot on the basis Tenants accepted partial satisfaction of the judgment. Because Tenants have limited their appeal to RDM, we deny as moot the motion to dismiss.
Further undesignated statutory references are to the Code of Civil Procedure.
Owners separately appeal from the judgment, arguing the trial court erred in denying their request to offset the judgment with the amount of the good faith settlements made by the contractors who remediated the mold and the settlement with the subsequent owners of the building. Owners also appeal the trial court's postjudgment order denying Owners' motion to compel satisfaction of judgment, in which Owners again asserted their right to an offset. In that appeal, Owners also contend they overpaid the amount of interest owed on the judgment and orders awarding attorneys' fees and costs.
Owners' appeal of the trial court's order denying their motion to compel satisfaction of judgment was filed on January 5, 2018 as case No. B287407. On March 14, 2018 we granted Owners' motion to consolidate the appeals, which have proceeded as part of case No. B280728.
We affirm the judgment but reverse in part the order denying Tenants' motion to strike or tax costs. We dismiss Owners' appeal from the order denying their motion to compel satisfaction of judgment as moot.
BACKGROUND AND PROCEDURAL HISTORY
The factual background is taken from testimony in the September 2016 trial.
From 1981 to November 2011 Owners owned a 23-unit rent-controlled apartment building in Los Angeles built around 1965. Mikyska managed the building in return for a share of the gross rental revenue.
The Tenants resided in six 2-story units in the apartment building. Dominic Quant, Georgina Saez, and their two children lived in unit 23 since June 1, 1997; Cynthia Roark lived in unit 20 since August 1, 2002; David Park, Katherine Eads, and their three children lived in unit 19 since November 11, 2002; Ann Lewis lived in unit 22 since May 1, 2004; Matthew Goodman and his daughter lived in unit 18 from March 1, 2008 to November 2011; and Geraldine Vergara and her two daughters lived in unit 6 since August 2009.
From January 1, 1997 until September 27, 2010, Kelsey Hernandez, who lived in unit 13, was the on-site resident manager. Hernandez "was responsible for collecting rent, leasing units, keeping the property maintained, handling tenant complaints, [and] maintenance requests." Hernandez created vendor sheets, which she faxed to Mikyska to apprise him of the tenants' maintenance requests and the vendors' work. In 2004 she became Mikyska's office manager, but she continued to manage the apartment building. B. Sewage and Water Leaks in the Units
Starting in 2002 the apartment building's sewage system and galvanized pipes caused raw sewage spills and water leakage into the Tenants' units. On September 16, 2002 Hernandez reported to Mikyska that the bathtubs in units 22 and 23 did not drain and the toilets overflowed. On October 10, 2003 raw sewage flooded units 22 and 23. Hernandez reported to Mikyska on her vendor sheet: "[P]lumbers called out on Friday night for emergency in units 22 & 23[.] [B]oth units backing up and flooding units with sewage. Unit 22 came out of toilet and flooded upstairs and of course sewage leaked down to lower level[.] Plumbers came [and] snaked toilet[']s main drain. Unclogged both sides, removed nothing abnormal, only hair and toilet paper. Plumbers left. Two hours late[r] tubs in both unit[s] started backing up. Plumbers came out again on Sat. Snaked tubs & drain, pulled out only hair. Th[is] problem is continuous[,] happens every 3-4 month[s]."
On November 4, 2003 the City of Los Angeles Housing and Community Investment Department issued an order to comply with respect to unit 22, requiring Owners to "[m]aintain all plumbing and waste drain lines clear of blockages which would cause any fixture to overflow under the condition of normal water supply to that fixture." The housing inspector noted, "Frequent sewer backups indicates possible damaged/blocked pipes[.] — NOTE: Repair or replace any/all damaged waste water drain pipes to maintain clear of blockages under normal use." The order also required, as to unit 22, Owners to "[e]liminate causes of dampness in habitable rooms, and maintain the areas in a dry and sanitary condition." The housing inspector explained, "Recent sewer backups require adequate sanitation remedies to prevent growth of mildew, mold, etc."
In 2009 Saez and her family were eating dinner in unit 23 when water started leaking into her unit from the kitchen ceiling. According to Saez, that year there were frequent sewage backups that came out of the toilet and spilled into the bedrooms, hallway, stairs, kitchen, and laundry room. In August 2010 sewage flowed from Saez's downstairs toilet and covered the downstairs with sewage. Saez testified the sewage flowed out of the toilet all night, and she stayed up to clean the mess. Saez complained, but Hernandez did not provide a plumber until the next morning. Even then the plumbers worked on the main sewage line, but no one came to Saez's unit to help clean up the sewage. Raw sewage also flowed from the toilets in Lewis's unit (No. 22), which was next door.
In September 2010 Lewis and Saez again experienced sewage flowing from the downstairs toilets of their units. Saez testified the September sewage overflow was worse than the one in August and continued throughout the evening. The plumbers came the next day to address the spill, but again, no one helped to clean up the sewage. Saez and her family had diarrhea for a week after one of the sewage spills. At the recommendation of the health department, Saez and her family were tested for Hepatitis C, but the results were negative.
In August 2009 Eads reported to Hernandez a sewage overflow in unit 19. Hernandez testified, "I saw raw sewage through [Eads'] bathroom[,] kitchen and into her living room area at a level of two inches, covered with human feces, food, and other unidentified substances." Two or three days later, Hernandez called a restoration company to clean up the sewage, but she did not get Mikyska's approval because he was on vacation. When Hernandez later informed Miskyska, he threatened to fire her "immediately on the spot" if she "ever did anything like that again."
In November 2009 Park saw sewage come out of a pipe outside unit 19 into his driveway. In October 2010 Park saw mold behind the downstairs bathroom toilet when Paul Taylor, a mold inspector retained by Tenants, inspected unit 19.
Roark, who lived in unit 20, also experienced issues with her unit in 2009. The water heater leaked, and the downstairs toilet kept "running all the time." When it rained, water came under the back sliding glass door, the front door, and holes in the kitchen flooring. Water from the roof leaked into the bedroom closet and upstairs bedroom. In October or November 2010, the water heater failed and water flooded the downstairs of her unit.
Goodman and his daughter experienced problems in unit 18 starting in March 2008. Water came through the sliding glass patio door when it rained. In August 2009 Goodman saw rat droppings in his kitchen and downstairs closet. In late October 2010 Goodman had another rodent problem. On October 26, 2010 Goodman sent a letter to building management stating there were leaks in the garage and a health department inspector had "found black mold in [his] bathroom and kitchen."
On May 9, 2011 Vergara, who lived in unit 6 with her two daughters, came home from work and saw water on the floor flowing towards the front door. The water damaged the unit's drywall and carpeting. C. RDM's Management of the Building
On September 23, 2010 Owners and RDM entered into an agreement for RDM to serve as the property manager for the apartment building. Mikyska testified he hired RDM because he "was tired of managing after 30-some years, and [he] was looking for a professional manager."
RDM took over as the property manager on October 1, 2010. Ryan Morehead, RDM's president, testified that Mikyska initially handled the remediation in units 19, 22, and 23. But RDM assumed responsibility for remediation of mold and asbestos in the three units in the middle of October 2010. According to Morehead, Mikyska was frustrated because "there was a lot of back and forth" among Mikyska, the insurance adjustor, and Accurate Construction, the company that had been retained to perform the remediation work.
Mikyska testified that asbestos was used as a building material when the building was constructed in 1965 and needed to be addressed as part of the remediation.
Morehead had experience preparing tenant habitability plans, having previously prepared 20 to 30 plans. Based on his experience, a tenant habitability plan is used "for other major upgrades or renovations when you're dealing with entire building systems, electrical, the plumbing, sewage and clean water." Morehead determined a tenant habitability plan was not applicable to the remediation of units 19, 22, and 23 because the work was not a "primary renovation" and did not affect a majority of the tenants. Morehead explained, "[W]hen I stepped in, the tenants were already relocated, and . . . one of the purposes of the plan, is to determine whether or not a tenant needs to be relocated. But in this instance, it was a non-issue. They had already been relocated. And I kind of dealt with this situation as more of an emergency when I stepped in, you know, the urgency was high. We needed to get things moving and get going with work."
The Tenants in units 19, 22, and 23 relocated to temporary housing in early October 2010. When RDM took over management of the remediation, RDM and the Owners agreed to pay for the Tenants to stay at another apartment building.
Accurate Construction was scheduled to work on units 19, 22, and 23 starting on October 12, 2010, but it would not perform the work until the tenants' personal belongings were removed. The insurance adjuster indicated the company would not pay to move the tenants' personal belongings. RDM initially informed Tenants they had to remove their belongings, but later RDM decided to hire Puroclean, which was willing to remove the units' contents and perform the remediation work.
At the end of October 2010, Morehead, Phil Luken from Puroclean, and Oscar Gonzalez, the insurance adjustor, had a meeting at the building to inspect units 19, 22, and 23 to determine what work needed to be done. Morehead testified, "Puroclean and Oscar Gonzalez were walking the unit, figuring out the scope of work, figuring out what Puroclean was going to do. I was simply there as a representative of management. I'm not the professional." Puroclean performed the remediation, which was still continuing as of RDM's November 22, 2010 update to Mikyska.
Puroclean also responded in October 2010 to a flood throughout units 19 and 20 that resulted from a rusted-out water heater. In the course of Puroclean's response, it discovered mold in the shared wall between unit 19's and 20's downstairs bathrooms and laundry rooms. Morehead did not relocate Roark from unit 20 because she did not request relocation, and Puroclean did not recommend it. RDM hired One Source Group to "clear" the units by conducting mold inspections to verify Puroclean's remediation was successful. Morehead testified he vetted all vendors that RDM used to make sure they were qualified and licensed to perform the work. One Source cleared units 19, 20, 22, and 23 prior to restoration work on the units.
On November 22, 2010 Morehead informed Owners that Goodman refused to pay his rent because the city's environmental health department had visited his unit and issued a compliance order. Morehead advised Owners not to pursue legal action "as it is possible that we could find out that there are in fact pending violations that were not fulfilled." However, RDM staff could not confirm with the health department whether an inspection had occurred, and the inspector was on vacation until November 29. On December 1, 2010 RDM authorized its attorney to bring an unlawful detainer action against Goodman. RDM dismissed the unlawful detainer action after Goodman filed the health department compliance order with his answer.
Mikyska testified RDM made the decision to file the unlawful detainer action. Mikyska stated, "By December, I had suffered so much emotional distress over this property, that the management company was handling everything, and I, for the most part, didn't have any independent recollection of what transpired at the property."
A health department inspector conducted an inspection of the building on September 15, 2010 and found Health Code violations for units 18, 19, 20, 22 and 23. The inspection report stated the violations must be corrected by October 7, 2010. According to Mikyska, he did not receive the inspection report until December 2010 when RDM dismissed the unlawful detainer action against Goodman.
On December 8, 2010 Tenants' attorney sent Morehead a letter informing RDM that a mold testing company hired by Tenants had found visible mold contamination in a bathroom in unit 23. The attorney also objected to Morehead's notice that the tenants in units 22 and 23 had two days in which to relocate back into their units. RDM did not have another mold testing company retest the units. Morehead testified, "We already inspected the units. I did have someone go out and inspect the units before receiving this letter. I felt that this letter was just another way to try to document that we were doing something wrong, when we weren't. And I felt that it wasn't warranted. And we felt that we shouldn't delay the tenants moving back in any further. There had been multiple delays throughout this process, and it just seemed unreasonable to wait further after we already inspected and had clearance test results."
RDM did not manage the property after December 23, 2010. Morehead explained he terminated the property management agreement with Owners because coordinating the remediation "took a lot of [his] time." In addition, Morehead was concerned Owners had not informed him of the health department inspection and correction notice. D. Property Management Expert Testimony at Trial
1. Tenants' expert
Allan E. Klein, a retired certified property manager, testified as Tenants' expert. Klein opined the conduct of Owners and property manager Hernandez fell below the standard of care because they failed to provide Tenants with habitable units, including working plumbing facilities and clean and sanitary units. As to RDM, Klein opined its failure to initiate a tenant habitability plan fell below the standard of care. Klein opined a tenant habitability plan should have been created to relocate the tenants and advise them of the work to be done in their units. He stated a plan is needed if the condition of one or more units jeopardizes the health and safety of the residents. Klein opined a tenant habitability plan would have helped in this case because "[t]he constant delays exposed the tenants, some of which were children, to Hepatitis C infection." In addition, he stated, "I felt it was wrong for management to have remediation work done without the supervision of a professional hygienist directing what should have, and should not have, been done." Further, Klein testified the manner in which repairs were conducted was not within the standard of care in the industry because "[t]here were excuses and explanations for delay," and the delay posed a danger to the health and safety of Tenants.
On cross-examination, Klein conceded he had no experience preparing a tenant habitability plan because he retired from active property management of large properties in 2002, before tenant habitability plans became mandatory. He acknowledged that when a tenant habitability plan is filed with the Los Angeles Housing and Community Investment Department, tenants must be given 60-day advance notice before they can be relocated, and by the time RDM started managing the building in October 2010, the tenants had already been relocated. Although Klein testified RDM hired unqualified contractors, he acknowledged he did not investigate the training or background of Puroclean and One Source. When Klein was asked on cross-examination whether "Puroclean was qualified to perform the remediation work at the property," Klein responded, "I believe so, yes." Further, Klein acknowledged it was within the standard of care for Owners and RDM to rely on Puroclean and One Source to perform appropriate work.
2. Defense expert
Richard A. Snyder, a certified property manager and counselor of real estate, testified as an expert for Owners and RDM. Snyder stated a property manager must have a real estate license if it provides management services on behalf of an owner. However, neither an owner nor a resident manager is required to have a real estate license or certification to manage property. Snyder opined Owners and the building property managers met the standard of care in the operation and maintenance of the apartment building. According to Snyder, the standard of care "is the level of performance that should be expected of either an owner or a property management company in the administration of that property."
On cross-examination, Snyder testified the standard of care includes ensuring repairs are done pursuant to applicable building codes. But Snyder did not determine whether the work done on the units met the building codes. Snyder explained Owners and the property managers met the standard of care "[b]ecause the individuals retained by the owners and managers held themselves out as having the necessary expertise, were licensed to be able to conduct and undertake that work, and based on the testimony, it was my evaluation that that work was done consistent with the standard of care."
In response to Klein's expert opinion, Snyder testified there was "no need to have an industrial hygienist review and monitor the scope of work that is done in the context of remediation." According to Snyder, "an industrial hygienist would be called upon to conduct air quality tests with a control sample from the outside" after remediation and before restoration work. Snyder also opined there was no requirement to replace the entire drain system or water supply system simply because the building was built in the 1960's.
In addition, Snyder testified a tenant habitability plan was not required for the scale and scope of the work performed on the affected units. He opined a tenant habitability plan applies when there is a complete replacement of a building's water supply system, electrical system, or heating and air conditioning system "that would impact the entire building." Similar to Morehead, Snyder testified that once the City of Los Angeles approved the tenant habitability plan, a 60-day notice must be given to implement the plan, including relocation of the residents. Further, the residents must be given seven days' advance notice before relocating them back in their units. On cross-examination, Snyder acknowledged the remediation work included replacement of water lines for 15 to 16 units, including units 19, 20, 22, and 23. RDM was the property manager when units 22 and 23 were repiped. E. Jury Verdict and Judgment
After a three-week trial, on October 3, 2016 the jury returned a verdict finding RDM was not negligent with respect to units 18, 19, 20, 22, and 23. The jury found Mikyska and Thaler negligent with respect to the Vergara family (unit 6); the Goodman family (unit 18); the Eads and Park family (unit 19); Roark (unit 20); Lewis (unit 22); and the Saez and Quant family (unit 23). The jury verdict instructed the jury, upon a finding of negligence, to determine as to each Tenant the "net damages, if any (after deducting each [Tenant's] own negligence, if any, as well as the negligence of others, if any) as against [Mikyska and Thaler]."
The jury did not make a finding as to RDM's negligence with respect to the Vergara family in unit 6 because RDM was no longer the property manager when that unit flooded in May 2011.
The jury awarded a total of $729,780 in damages to Tenants against Owners: $40,500 to Vegara and her two daughters; $18,000 to Goodman and his daughter; $257,000 to Eads, Park, and their three children; $75,000 to Roark; $118,280 to Lewis; and $221,000 to Saez, Quant, and their two children. The jury also awarded a total of $850,000 in punitive damages against Mikyska.
Owners filed an objection to Tenants' proposed judgment on the jury verdict, in which they argued, "Defendants are entitled to approximately $615,000 in offsets from pre-trial settlements which, after deduction from the jury verdict, will bring amounts owed within or below additional Code of Civil Procedure § 998 offers made to other [Tenants]." On November 16, 2016 Owners filed an ex parte application for a stay of execution of the judgment, again arguing for an offset. Owners argued at the hearing on their ex parte application, "We served statutory offers, some of which we beat. We also are claiming a right to offset, so I think the prevailing parties issue should come out of the judgment."
On November 21, 2016 the trial court entered judgment setting forth the full amount of damages owed to each Tenant under the jury verdict. The judgment provided as to costs, "The [c]ourt is deferring any ruling on 'prevailing party' status as well as any party's right to recover their reasonable attorney's fees, costs and interest until conclusion of all post-trial motions. These issues will be addressed by way of an [a]mended [j]udgment." The court stayed "execution of [j]udgment until all posttrial motions have been ruled upon and 10 days after [n]otice of [a]ppeal could or should be filed." F. Owners' Ex Parte Application and Motion To Compel Offset
We note the judgment has a typographical error as to damages awarded to Lewis. The jury awarded $118,280 in damages, but the judgment provides for recovery of $118,000. We use the $118,280 amount awarded by the jury.
On February 8, 2017 Owners filed an ex parte application to amend the judgment. They sought an offset from the compensatory damages portion of the judgment in the amount of Tenants' pretrial settlements with Puroclean for $285,000, One Source for $30,000, and Alan V. Ruzicka and Allen Sarlo (the subsequent owners) for $315,000. Owners contended they were entitled to an offset of the entire amount of the pretrial settlements under section 877, because the settlements and verdict forms did not allocate damages between economic and noneconomic damages. On February 8 the trial court denied the ex parte application without prejudice.
On February 9, 2017 Owners filed their notice of appeal from the judgment. The next day Owners filed a motion to compel an offset from the judgment in the amount of Tenants' settlements with the codefendants. At the March 15, 2017 hearing, Owners argued their motion for offset was timely because the ex parte application was filed prior to filing the notice of appeal, and the trial court's denial of Owners' motion for new trial extended the court's jurisdiction by 30 days. On March 30 the trial court denied Owners' motion for an offset. The court reasoned it lost jurisdiction 60 days after entry of the judgment, or at the latest when Owners filed their notice of appeal. G. The Trial Court's Award of Costs to RDM
On May 17, 2017, after denying Tenants' motion to strike or tax costs, the trial court amended the judgment to award RDM $137,559.43 in costs against all Tenants except for the Vergara family, who did not assert claims against RDM. The court awarded Tenants $2 million in attorneys' fees and $91,495.54 in costs against Owners "for a total judgment in the amount of $3,671,275.54 with interest thereon at the rate of ten percent (10%) per annum until paid." H. Owners' Motion To Compel Satisfaction of the Judgment
On September 8, 2017 Owners moved to compel satisfaction of judgment, seeking an order to compel Tenants to file a full satisfaction of the judgment, or in the alternative, for the court to determine there had been partial satisfaction. Owners asserted they had fully paid the judgment by tendering checks totaling $3,416,006.37 to Tenants on July 10, 2017, which Tenants cashed. The payment amount reflected an offset for $472,289.10 based on the pretrial settlements and $137,559.43 in costs awarded to RDM (which RDM assigned to Owners). Owners acknowledged the pendency of the appeal but contended the trial court retained jurisdiction to order Tenants to file a satisfaction of judgment.
For Roark, Owners deducted $157,500 (offset from the Ruzicka and Sarlo settlement) and $47,301.15 (offset from the Puroclean and One Source settlements), which reduced Roark's judgment ($75,000) to zero. As to the Eads and Park family, Lewis, and the Saez and Quant family, Owners applied an offset based on the allocations in the Puroclean and One Source settlements. Owners did not deduct any offset as to the Vergara and Goodman families because those families were not parties to the pretrial settlements.
Owners also argued they were entitled to restitution of $157,495.93 for overpayment of interest on the judgment and attorneys' fees and costs, asserting interest stopped accruing when Owners first tendered payment in March 2017 (which Tenants rejected as only partial payment). Owners argued even if the March 2017 tenders were invalid, Owners overpaid interest by $94,914.85 by calculating interest on the attorneys' fees and costs from the date of the judgment. In calculating the purported overpayment of interest, Owners assumed they owed Tenants the amount of the judgment less offsets.
At the October 25, 2017 hearing, Owners argued as to jurisdiction, "[T]his is a procedurally proper motion which this [c]ourt can enter the offset to make the appeal unnecessary." Owners further argued Tenants had waived their right to oppose an offset based on the absence of an allocation of economic and noneconomic damages in the verdict form because Tenants explicitly waived any objection to an offset so they could obtain the verdict form they wanted.
On November 13, 2017 the trial court denied Owners' motion to compel satisfaction of the judgment. The court determined the motion was in effect a motion for reconsideration of the court's March 30, 2017 denial of Owners' motion for an offset, over which the court lacked jurisdiction because of the appeal from the judgment. The court observed that even if it reached the merits, "[b]ecause the jury did not apportion fault among the various defendants, it is also not clear that it would even be possible for the court to compel the offset sought in this motion." The court found the request for a partial satisfaction was moot because Tenants "filed a partial acknowledgment of satisfaction of judgment in the amount of $3,416,006.37, on September 8, 2017."
A. The Trial Court Properly Instructed the Jury as to RDM on Professional Negligence
1. The jury instructions
Over Tenants' objections, the trial court instructed the jury with CACI No. 600, the standard of care for professional negligence, as modified: "A property manager is negligent if he fails to use the skill and care that a reasonably careful property manager would have used in similar circumstances. This level of skill, knowledge and care is sometimes referred to as 'the standard of care.' [¶] You must determine the level of skill and care that a reasonably careful property manager would use in similar circumstances, based only on the testimony of the expert witnesses, including Ryan Morehead who testified in this case."
The trial court instructed the jury as to Owners with CACI No. 1001 for ordinary duty of care, and CACI No. 1006 for a landlord's duty of care.
In addition, the court instructed the jury with CACI No. 602, as modified: "A property manager is not necessarily negligent just because his efforts are unsuccessful or he makes an error that was reasonable under the circumstances. A property manager is negligent only if he was not as skilled, knowledgeable or careful as another property manager would have been in similar circumstances."
The court instructed the jury with a special jury instruction on the elements of professional negligence: "The elements of a cause of action for professional negligence are: first, the duty of the professional to use such skill, prudence and diligence as other members in his profession commonly profess and exercise; secondly, a breach of that duty; [third], a proximate causal connection between the negligent conduct and the resulting injury; and [fourth], actual loss or damage resulting from the professional's negligence."
Further, the court instructed the jury with Tenants' special instruction on the tenant habitability plan: "If you find that a tenant habitability plan is required, the following are the requirements of a tenant habitability plan: [¶] When a landlord engages in primary renovation work, which includes replacement of existing water or gas supply line, electrical wiring, waste lines, the abatement of hazardous material, including, but not limited to, lead-based paint and asbestos that will affect the tenant or rental unit, the landlord must follow these guidelines: [¶] . . . [¶] A landlord must temporarily relocate a tenant to a habitable temporary housing and pay for any cost related to relocate the tenant to the temporary housing and returning the tenant to the dwelling unit upon completion of the work. [¶] Any person who fails to provide relocation assistance shall be liable to the tenant for damages in the amount of the unpaid relocation assistance and all actual damages and special damages not to exceed the greater of twice the amount of actual damages, or $5000. Damages of three times the amount of the actual damages may be awarded in civil action for failure to comply with the payment of relocation."
2. Standard of review
"A party is entitled upon request to correct, nonargumentative instructions on every theory of the case advanced by him which is supported by substantial evidence." (Soule v. General Motors Corp. (1994) 8 Cal.4th 548, 572; accord, Amelco Electric v. City of Thousand Oaks (2002) 27 Cal.4th 228, 243.) "The trial court may not force the litigant to rely on abstract generalities, but must instruct in specific terms that relate the party's theory to the particular case." (Soule, at p. 572; accord, LAOSD Asbestos Cases (2019) 35 Cal.App.5th 1088, 1094.) "We review the legal adequacy of jury instructions de novo." (Petitpas v. Ford Motor Co. (2017) 13 Cal.App.5th 261, 292; accord, Ghezavat v. Harris (2019) 40 Cal.App.5th 555, 558.)
3. The trial court appropriately instructed the jury on professional negligence
Generally "negligence" is the failure "'to exercise the care a person of ordinary prudence would exercise under the circumstances.'" (Flowers v. Torrance Memorial Hospital Medical Center (1994) 8 Cal.4th 992, 997.) "'Professional negligence' is one type of negligence, to which general negligence principles apply. 'With respect to professionals, their specialized education and training do not serve to impose an increased duty of care but rather are considered additional "circumstances" relevant to an overall assessment of what constitutes "ordinary prudence" in a particular situation. Thus, the standard for professionals is articulated in terms of exercising "the knowledge, skill and care ordinarily possessed and employed by members of the profession in good standing . . . ."'" (Delaney v. Baker (1999) 20 Cal.4th 23, 31; accord, Massey v. Mercy Medical Center Redding (2009) 180 Cal.App.4th 690, 694 (Massey).) "Since the standard of care remains constant in terms of 'ordinary prudence,' it is clear that denominating a cause of action as one for 'professional negligence' does not transmute its underlying character. For substantive purposes, it merely serves to establish the basis by which 'ordinary prudence' will be calculated and the defendant's conduct evaluated." (Flowers, at p. 998; accord, Evans v. Hood Corp. (2016) 5 Cal.App.5th 1022, 1050 (Evans).)
As the Evans court explained in finding the trial court properly instructed the jury on the standard for professional negligence for a claim arising from the laying and repairing of gas pipelines, "[T]he scope of those held to a 'professional' standard of care—a standard of care similar to others in their profession, as opposed to that of a 'reasonable person'—is broad enough to encompass a wide range of specialized skills. As a general matter, '[t]hose undertaking to render expert services in the practice of a profession or trade are required to have and apply the skill, knowledge and competence ordinarily possessed by their fellow practitioners under similar circumstances, and failure to do so subjects them to liability for negligence.'" (Evans, supra, 5 Cal.App.5th at pp. 1050, 1052 [trial court correctly instructed jury with CACI No. 600 regarding professional standard of care for negligence claim given extensive evidence "about the very specialized profession of building and repairing gas pipelines"]; see Miller v. Los Angeles County Flood Control Dist. (1973) 8 Cal.3d 689, 702-703 (Miller) [expert testimony required to establish standard of care for builder that constructed home that was later flooded because "average layman has neither training nor experience in the construction industry and ordinarily cannot determine whether a particular building has been built with the requisite skill and in accordance with the standards prescribed by law or prevailing in the industry" (fn. omitted)]; cf. Ryan v. Real Estate of the Pacific, Inc. (2019) 32 Cal.App.5th 637, 646 [expert testimony was not necessary for negligence claim against real estate broker who failed to disclose planned remodel of neighbor's home that would obstruct views and home's value because anyone "who hired a real estate broker to sell her home, would expect that broker to share information that would adversely impact the value of the home"]; Massey, supra, 180 Cal.App.4th at p. 696 [expert testimony was not necessary to determine negligence of nurse who left "fall-risk" patient, who needed assistance following surgery to walk a short distance, waiting alone with his walker for 15 minutes, because "alleged negligence . . . is within the sphere of common knowledge and obvious to laymen"].)
RDM contends the trial court properly instructed on professional negligence because RDM holds a real estate broker's license through a designated officer and a real estate broker is subject to the professional negligence standard, citing Wilson v. Hisey (1957) 147 Cal.App.2d 433, 438. As an outside property manager, RDM is required to have a real estate license in order to offer to lease, lease, and collect rents on the apartment units under the property management agreement. (MKB Management, Inc. v. Melikian (2010) 184 Cal.App.4th 796, 802; see Bus. & Prof. Code, §§ 10131, subd. (b), 10131.2.) But a broker's license is "not required for other management duties such as causing repairs to [be] made, decorating, and general maintenance." (MKB Management, Inc., at p. 802.) Thus, RDM's real estate license is not dispositive as to whether the standard of care for professional or ordinary negligence applies because the alleged negligence involves repair and maintenance of the apartment units and preparation of a tenant habitability plan, not lease agreements or the collection of rent.
As the Supreme Court has held in the context of expert testimony on the standard of care, the "'decisive consideration in determining the admissibility of expert opinion evidence is whether the subject of inquiry is one of such common knowledge that men [or women] of ordinary education could reach a conclusion as intelligently as the [expert] witness or whether, on the other hand, the matter is sufficiently beyond common experience that the opinion of an expert would assist the trier of fact.'" (Miller, supra, 8 Cal.3d at p. 702; accord, Flowers v. Torrance Memorial Hospital Medical Center, supra, 8 Cal.4th at p. 1001.)
Tenants contend a property management company does not act as a professional, and therefore the trial court erred by instructing the jury on professional negligence. Tenants rely on Curties v. Hill Top Developers, Inc. (1993) 14 Cal.App.4th 1651 (Curties) and Hjelm v. Prometheus Real Estate Group, Inc. (2016) 3 Cal.App.5th 1155 (Hjelm) to support their argument. Both are distinguishable.
Tenants also argue CACI No. 600 as read to the jury required the jury to consider only the testimony of RDM's principal, Morehead, in determining whether RDM breached its duty of care. But the instruction properly directed the jury to consider "the testimony of the expert witnesses, including Ryan Morehead."
In Curties, the Court of Appeal addressed whether the trial court erred by instructing the jury on the defense of implied assumption of risk with respect to a tenant's negligence claim against the owner of the apartment building based on the tenant's fall on a sloping lawn on the grounds of the apartment complex. (Curties, supra, 14 Cal.App.4th at p. 1653.) The court rejected the assumption of risk defense and held comparative negligence principles applied, observing that defendant, "as a property owner or manager, was required to use due care to eliminate dangerous conditions on its property in order to avoid exposing tenants such as [plaintiff] to unreasonable risks of harm." (Ibid.) The Curties court did not reach whether the standard of care for a property manager is based on a standard of care for professional or ordinary negligence. Further, unlike the defendant in Curties who was both the owner and property manager, RDM is an outside property manager retained by Owners.
In Hjelm, two tenants sued the lessor of their apartment for negligence and other claims relating to bedbug infestation and raw sewage on the property. (Hjelm, supra, 3 Cal.App.5th at p. 1160.) After a jury returned a verdict for the tenants, the lessor appealed, arguing it had not breached "'the standard of care applicable to property managers.'" (Id. at p. 1164.) The Court of Appeal rejected this argument, concluding there was no support for "the proposition that one needs expert testimony to support a claim that bedbug infestation and/or raw sewage on the property may violate the warranty of habitability or the covenant of quiet enjoyment." (Id. at p. 1165.)
Unlike Hjelm, Tenants did not claim RDM was negligent in failing to prevent the sewage spills or mold from occurring. Rather, Tenants' attorney asserted in his closing argument RDM was negligent because it failed to have the contractors fully remediate the mold. He argued, "We're not claiming that Puroclean did anything wrong. It's because somebody determined—RDM and the Owners—what the scope was going to be. The scope was never going to cover everything." Tenants' attorney also argued RDM breached its duty of care by not implementing a tenant habitability plan and failing to relocate Roark while repairs were made to her unit. At Tenants' request, the jury was instructed to make a finding on whether a tenant habitability plan was required for the work performed in the apartment units.
Similar to the standard of care for building a home in Miller, supra, 8 Cal.3d at pages 702-703 and for a contractor laying gas pipelines in Evans, supra, 5 Cal.App.5th at page 1052, evaluation of whether RDM breached the standard of care in its management and supervision of Puroclean and One Source in remediating mold in the units required expertise in building management. Likewise, a lay person would not have knowledge on the specialized subject of when a tenant habitability plan is required and the circumstances under which a tenant should be relocated during remediation. B. The Trial Court Abused Its Discretion in Awarding to RDM One-third of the Expert Fees, Attorney Lodging Costs, and Photocopies and Enlargement of Exhibits
1. RDM's memorandum of costs and Tenants' motion to strike or tax costs
On December 5, 2016 RDM filed a memorandum of costs requesting $137,559.43 in total costs. RDM sought $85,736.75 in expert witness fees; $9,600.40 for photocopies and enlargements of trial exhibits; $11,220.42 for courtroom assistance during trial from Trialspeak; $11,194.64 for lodging for RDM's attorney during the 2016 trial; $3,103.61 in jury fees; and $11,582.05 in court reporter fees.
Tenants moved to strike or tax the costs. Tenants argued the trial court should exercise its discretion to strike all costs in light of the "unity of interest" between RDM, which was successful, and Owners, who were not. In addition, Tenants challenged all costs as excessive. As to expert fees, Tenants argued it was unreasonable for RDM to seek one-third of the expert fees incurred by defendants (splitting the costs among Mikyska, Thaler, and RDM) because there was no joint defense agreement and the experts were initially hired only by Owners. Tenants also argued RDM's section 998 offers made in January 2012 were "token" offers that were not reasonable in light of the state of discovery and potential for recovery. RDM had offered a total of $20,500 to Tenants: $1,000 to Goodman and $500 to his daughter; $2,000 each to Saez, Quant, and their two children; $2,500 to Eads, $2,000 to Park, and $500 to each of their three children; $3,500 to Lewis; and $1,500 to Roark.
Tenants also challenged the one-third allocation of other costs among defendants, but on appeal focuses only on the allocation of expert witness fees.
In opposition, RDM argued the settlement offers it made to Tenants were reasonable because the jury's verdict in RDM's favor was prima facie evidence of the reasonableness of the offers. RDM contended there was an agreement among Owners, RDM, and their insurance carriers to apportion defense costs. Peter Burfening (then RDM's attorney) stated in his declaration, "Between March 2011 and July 2016, each of the three [d]efendants jointly incurred expenses for consultants and expert witnesses that were necessary to the defense of all [d]efendants, of which RDM Management has claimed 1/3 of the total cost, as claimed in RDM Management's [m]emorandum of [c]osts." Burfening attached invoices from 2015 and 2016 for defense experts Charles Beven, Snyder Andrew Saxon, M.D., Alan Szeftel, M.D., and Jeffrey Hicks. Burfening stated the three defendants "jointly incurred expenses for Trial[s]peak," for which RDM claimed one-third of the costs ($11,220.42). Burfening attached other supporting documents, including the invoice from Trialspeak for courtroom graphics support during the 2015 and 2016 trials.
The first trial commenced in November 2015 and ended in a hung jury in December. In the first trial, RDM designated only Beven as its expert on the standard of care for property managers. Owners were represented by attorneys Burfening and Lane Webb, who retained Dr. Saxon, Dr. Szeftel, and Hicks as experts in the first trial. After the first trial Burfening substituted out as counsel for Owners, then substituted in as counsel for RDM on July 14, 2016. RDM first designated the three experts as its expert trial witnesses on July 18. RDM also designated Snyder as its trial expert on property management in place of Beven. Drs. Saxon and Szeftel offered expert medical opinions on causation; Tenants' preexisting conditions, if any; Tenants' diagnosis and prognosis; the reasonableness and necessity of Tenants' care and treatment; and the necessity of medical costs and future care. Dr. Szeftel's testimony was "principally related to the claims of the minor plaintiffs." Hicks, a certified industrial hygienist, offered opinions on environmental health investigations, mold testing, remediation efforts, and environmental conditions at the property.
RDM also addressed Tenants' challenges to the specific items of its costs bill. As to the $11,194.64 in 2016 lodging costs for its attorneys, RDM argued the costs were necessary because daily roundtrip travel from San Diego to Los Angeles would have prevented RDM's attorneys from being fully prepared for trial each day, and travel costs would likely exceed lodging costs. Finally, RDM argued jury fees were allowable under section 1033.5, subdivision (a)(1), and court reporter fees were recoverable as taxable costs under section 1033.5, subdivision (a)(11) (allowing recovery of "[c]ourt reporter fees as established by statute"), and Government Code section 68086 (allocating certain court fees for court reporters to encourage use of reporters in civil proceedings).
At the hearing, Tenants' attorney argued the one-third allocation was not supported by the Burfening declaration, which only stated there was a joint defense without detail as to any joint defense agreement. Further, he argued Burfening did not have knowledge of an agreement because he did not come into the case until 2014 and substituted in as RDM's attorney in July 2016. On January 18 the trial court denied Tenants' motion.
2. Governing law
"'"[C]osts" of a civil action consists of the expenses of litigation . . . . The right to recover any such costs is determined entirely by statute.'" (Olson v. Automobile Club of Southern California (2008) 42 Cal.4th 1142, 1148; accord, Charton v. Harkey (2016) 247 Cal.App.4th 730, 738 (Charton).) "Section 1032 is the fundamental authority for awarding costs in civil actions." (Scott Co. v. Blount, Inc. (1999) 20 Cal.4th 1103, 1108; accord, Charton, at p. 737 ["'Section 1032 governs the award of costs of trial court litigation.'"].) Section 1032, subdivision (b), provides, "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." Under section 1032, subdivision (a)(4), a "prevailing party" is defined to include "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." (See Friends of Spring Street v. Nevada City (2019) 33 Cal.App.5th 1092, 1103.)
"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)." (Charton, supra, 247 Cal.App.4th at pp. 738-739.)
"[A]ll 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." (Charton, supra, 247 Cal.App.4th at p. 743, quoting § 1033.5, subd. (c)(1)-(3); accord, Quiles v. Parent (2018) 28 Cal.App.5th 1000, 1014.) "'"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]."'" (Charton, at pp. 743-744; accord, Quiles, at p. 1014.)
Expert witness fees are not recoverable as a cost under section 1032, but may be recoverable under section 998. Under section 998, subdivision (c)(1), "If an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, the plaintiff . . . shall pay the defendant's costs from the time of the offer. In addition, . . . the court . . . , in its discretion, may require the plaintiff to pay a reasonable sum to cover postoffer costs of the services of expert witnesses, who are not regular employees of any party, actually incurred and reasonably necessary in either, or both, preparation for trial . . . , or during trial . . . , of the case by the defendant."
A prevailing party can only recover costs under section 998 if the offer was made in good faith. (Licudine v. Cedars-Sinai Medical Center (2019) 30 Cal.App.5th 918, 924 (Licudine); Adams v. Ford Motor Co. (2011) 199 Cal.App.4th 1475, 1483 (Adams); Elrod v. Oregon Cummins Diesel, Inc. (1987) 195 Cal.App.3d 692, 698 (Elrod) ["We therefore conclude the Legislature intends that only good faith settlement offers qualify as valid offers under section 998."].) A section 998 offer is made in good faith if the offer "'"carr[ies] with it some reasonable prospect of acceptance."'" (Licudine, at p. 924; accord, Adams, at p. 1483.) "Whether a section 998 offer has a reasonable prospect of acceptance is a function of two considerations, both to be evaluated in light of the circumstances '"at the time of the offer"' and '"not by virtue of hindsight."' [Citations.] First, was the 998 offer within the 'range of reasonably possible results' at trial, considering all of the information the offeror knew or reasonably should have known? [Citation.] Second, did the offeror know that the offeree had sufficient information, based on what the offeree knew or reasonably should have known, to assess whether the 'offer [was] a reasonable one,' such that the offeree had a 'fair opportunity to intelligently evaluate the offer'?" (Licudine, at pp. 924-925; accord, Adams, at p. 1485; Elrod, at p. 699.)
On a motion to strike or tax costs, the party making the section 998 offer has the burden to show its offer was valid. (Licudine, supra, 30 Cal.App.5th at p. 926; Timed Out LLC v. 13359 Corp. (2018) 21 Cal.App.5th 933, 942.) 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." (Elrod, supra, 195 Cal.App.3d at p. 700; accord, Licudine, at p. 926; Adams, supra, 199 Cal.App.4th at p. 1484.) Once the offeror shows the section 998 offer is valid, the burden shifts to the offeree to show the offer was not made in good faith. (Licudine, at p. 926; Elrod, at p. 700.)
3. Standard of review
We review a trial court's award of fees and costs under section 1032 for an abuse of discretion. (Goodman v. Lozano (2010) 47 Cal.4th 1327, 1332 ["Generally, a trial court's determination that a litigant is a prevailing party, along with its award of fees and costs, is reviewed for abuse of discretion."]; LAOSD Asbestos Cases (2018) 25 Cal.App.5th 1116, 1123 ["Generally, we review a trial court's order taxing costs for an abuse of discretion."]; Charton, supra, 247 Cal.App.4th at p. 739 ["[W]e review a trial court's determination on which costs are reasonably necessary and reasonable in amount under the abuse of discretion standard."].) We similarly review the trial court's ruling on an award of expert fees under section 998 for an abuse of discretion. (Licudine, supra, 30 Cal.App.5th at p. 923; Adams, supra, 199 Cal.App.4th at p. 1482.) "To meet its burden, a complaining party must therefore show that the trial court exercised its discretion in an 'arbitrary, capricious or patently absurd manner.'" (Adams, at p. 1482.)
4. The trial court did not abuse its discretion in denying Tenants' motion to strike RDM's costs in their entirety under the unity of interest theory
Tenants contend the trial court abused its discretion by not applying the unity of interest exception to disallow RDM's costs. "The unity of interest principle, which vests the trial court with discretion to deny or apportion costs otherwise recoverable by a prevailing party defendant, is rooted in the language of . . . former section 1032, subdivision (b), as it read before the statutes governing recovery of costs were substantially revised in 1986 . . . ." (Zintel Holdings, LLC v. McLean (2012) 209 Cal.App.4th 431, 441; accord, Charton, supra, 247 Cal.App.4th at p. 739 ["The unity of interest exception arose from the prior version of section 1032."].) Some courts have continued to recognize the unity of interest exception after the 1986 amendment. (Benson v. Kwikset Corp. (2007) 152 Cal.App.4th 1254, 1278 [recognizing unity of interest exception but finding it inapplicable]; Wakefield v. Bohlin (2006) 145 Cal.App.4th 963, 985 [unity of interest applied to husband and wife sued on joint sale of home], disapproved on another ground in Goodman v. Lozano, supra, 47 Cal.4th at p. 1330; Textron Financial Corp. v. National Union Fire Ins. Co. (2004) 118 Cal.App.4th 1061, 1075 [rejecting plaintiff's unity of interest argument], disapproved on another ground in Zhang v. Superior Court (2013) 57 Cal.4th 364, 382; Webber v. Inland Empire Investments, Inc. (1999) 74 Cal.App.4th 884, 920 [citing unity of interest exception in finding trial court did not abuse discretion by refusing to apply alter ego doctrine in awarding attorneys' fees to prevailing defendants]; Slavin v. Fink (1994) 25 Cal.App.4th 722, 725-726 [affirming trial court's allocation of prevailing defendant's costs under the unity of interest exception].)
But as explained by the Charton court, none of these cases explains "how the exception survived the 1986 repeal and reenactment of section 1032." (Charton, supra, 247 Cal.App.4th at p. 742.) We agree with Charton the unity of interest exception is no longer viable under the current version of section 1032, subdivision (b), which now provides that unless a statute provides otherwise, "a prevailing party is entitled as a matter of right to recover costs in any action or proceeding."
5. RDM's offers to compromise under section 998 were not token offers
Tenants contend the section 998 offers ranging from $500 to $3,500 per person were "token offers" that were unreasonable given the state of discovery and potential for recovery at the time the offers were made. The trial court did not abuse its discretion in finding otherwise.
Tenants argue that at the time of the section 998 offers in January 2012 the deposition of RDM's person most qualified (Morehead) and the documents produced in discovery "established a strong basis for liability against RDM and exposure to a potentially substantial damage award." In support of this assertion, Tenants point to Morehead's testimony he delayed remediating the units until the insurance company determined what would be covered. But Tenants do not explain the extent of the delay or RDM's role in the delay. Tenants also point to the fact Morehead initially demanded Tenants remove their belongings from the units based on his conversation with the insurance carrier, also delaying the remediation. At that time Accurate Construction had demanded Tenants' belongings be removed before it would start the remediation, and in response Morehead sent a letter to the Tenants requesting they store their belongings. However, instead of making Tenants remove their belongings, after consulting with Mikyska, Morehead selected Puroclean to perform the remediation because the company agreed to help remove Tenants' belongings in the areas affected by remediation. Although Tenants point to this as the cause for delay, Morehead testified in his deposition that one to two weeks after talking with the insurance adjuster, Morehead met with Puroclean at the property. According to Morehead, Puroclean "pretty much started working right away."
Tenants also cite to a letter from RDM to Mikyska in July 2011 stating RDM was terminating its agreement to serve as property manager because of Owners' breach of the agreement by violating the law. But, as RDM highlights, this does not show RDM's culpability in Owners' conduct, only that as a result of Owners' conduct, RDM stopped managing the building.
Tenants also point to the significant settlements they reached with Puroclean and One Source. But those settlements were reached in January 2014 and have limited relevance to Tenants' knowledge at the time they rejected RDM's section 998 offers. Further, the settlements resolved claims that reflected on the liability of Owners and RDM. The fact Owners filed a cross-complaint for indemnity against RDM is likewise not information that Tenants would have reasonably relied on in rejecting the section 998 offers as unreasonable.
Although Morehead's deposition testimony shows RDM was managing the building during the period there were delays in the remediation due to constraints imposed by the insurance company, his testimony also reflects his efforts to avoid delays by retaining Puroclean to perform the mold remediation. Even if Tenants believed they could hold RDM liable for its conduct during the 84 days in which it managed the building, the testimony showed RDM had limited liability for the injuries sustained by Tenants over the seven-year period of Owners ignoring their complaints about sewage spills, resulting in the mold contamination. Under these circumstances, the trial court did not abuse its discretion in determining the minimal offers by RDM to settle were within the "'range of reasonably possible results' at trial, considering all of the information [RDM] knew or reasonably should have known" and RDM's knowledge of the information available to Tenants "to assess whether the 'offer [was] a reasonable one,' such that the offeree had a 'fair opportunity to intelligently evaluate the offer.'" (Licudine, supra, 30 Cal.App.5th at pp. 924-925; accord, Elrod, supra, 195 Cal.App.3d at p. 699.)
Tenants' reliance on Elrod, supra, 195 Cal.App.3d at page 698 is misplaced. In Elrod, the Court of Appeal held the trial court did not abuse its discretion in finding the section 998 offer was unreasonable. (Elrod, at p. 700.) The Elrod court explained the jury found defendant was liable for damages almost eight times greater than the section 998 offer, and the pretrial settlements with other defendants—which reduced the net judgment to zero—played no part in the section 998 offer because they occurred after the offer. (Elrod, at p. 701.) In contrast to Elrod, the jury returned a verdict in favor of RDM. Likewise, Licudine is distinguishable because there the court concluded there had been insufficient discovery on which the offeree (the defendants) could evaluate the reasonableness of the offer. Here, the section 998 offers were made a year after the case was filed and after the deposition of RDM's person most qualified had been taken.
6. The trial court abused its discretion in awarding RDM one-third of the expert witness fees
Tenants contend the trial court abused its discretion in allowing RDM to recover expert witness fees for Dr. Saxon, Dr. Szeftel, and Hicks relating to the first trial because RDM did not call these witnesses in the first trial, and therefore it did not incur these costs. As noted, RDM designated Beven as its sole expert witness in the first trial. Dr. Saxon, Dr. Szeftel, and Hicks testified for Owners in the first trial, then RDM retained them as experts for the second trial. We agree the trial court abused its discretion in awarding expert witness fees for the time spent by the three experts preparing for the first trial and testifying, but the remaining fees awarded were proper.
Tenants do not challenge the award of expert witness fees for Beven. However, Tenants assert RDM did not incur expert costs for Snyder because Snyder testified he was retained by Webb, Owners' attorney. But it is undisputed RDM designated Snyder as an expert witness for the second trial, and Burfening, RDM's counsel, called Snyder as a defense expert witness at trial.
The parties dispute whether RDM had an agreement with Owners (or the insurers) requiring RDM to pay a one-third share of the expert fees incurred for Dr. Saxon, Dr. Szeftel, and Hicks since March 2011. Regardless of whether RDM reached an agreement at the time of the first trial to share the expert costs, the trial court appropriately allowed RDM to recover some portion of the expert witness fees for the three experts. Tenants do not dispute that the opinions offered by Dr. Saxon, Dr. Szeftel, and Hick in the second trial were based upon the same testing and review of materials considered in developing their opinions in the first trial. Thus, it was within the trial court's discretion to allow RDM to recover one-third of the expert witness fees relating to this expert work, even if RDM had not retained these experts for the first trial. Moreover, it was appropriate to allow RDM to recover one-third of the expert witness fees incurred for the three experts' 2016 trial preparation and testimony because RDM called the experts in the second trial.
We deny Tenants' July 5, 2018 request to take judicial notice of a 2016 declaration filed by Webb, Owners' attorney, and a summary adjudication ruling in the lawsuit between Owners' insurers over insurance coverage because the documents are not necessary to our resolution of whether RDM may recover a share of expert witness fees. (See Jordache Enterprises, Inc. v. Brobeck, Phleger & Harrison (1998) 18 Cal.4th 739, 748, fn. 6 [judicial notice denied where "the requests present no issue for which judicial notice of these items is necessary, helpful, or relevant"]; Appel v. Superior Court (2013) 214 Cal.App.4th 329, 342, fn. 6 [judicial notice denied where materials are not "relevant or necessary" to the court's analysis].)
We deny RDM's August 24, 2018 motion to augment the record with the expert testimony of Dr. Saxon, Dr. Szeftel, and Hick in the first trial because it not necessary to our analysis.
But the trial court abused its discretion in awarding RDM expert costs related to the trial preparation and testimony of Dr. Saxon, Dr. Szeftel, and Hicks in the first trial. RDM did not call these experts in the first trial; thus, it did not incur expert fees in November and December 2015 relating specifically to the first trial. For example, Dr. Saxon billed $10,230 for trial preparation in November 2015, and another $13,800 for trial preparation and trial testimony in December 2015. The invoices for Dr. Szeftel and Hicks similarly reflect time spent preparing for the 2015 trial and testifying. Dr. Szeftel's bill for December 2015 shows time he spent reviewing court testimony, preparing for trial, and testifying in the first trial. Similarly, Hicks billed $18,348 and $1,102.77 (for travel, lodging, and meals) in November and December 2015 for trial preparation and testimony in the first trial. We remand for the trial court to determine the amount of expert witness fees incurred in November and December 2015 in connection with the first trial, and to deduct the fees from the cost award for RDM.
7. The trial court abused its discretion in awarding costs for exhibits not used at trial
Tenants contest the award of $9,600.40 for photocopies and enlargements of trial exhibits, arguing only the costs of copies and enlargements of documents and trial exhibits used at trial are recoverable. We agree. Under section 1033.5, subdivision (a)(13), a prevailing party may recover costs for photocopies and enlargements of exhibits "if they were reasonably helpful to aid the trier of fact." There is a split in authority as to whether section 1033.5 allows for recovery of exhibits not used at trial. (Compare Seever v. Copley Press, Inc. (2006) 141 Cal.App.4th 1550, 1557 (Seever) ["statutory language excludes as a permissible item of costs exhibits not used at trial, which obviously could not have assisted the trier of fact"] & Ladas v. California State Auto Assn. (1993) 19 Cal.App.4th 761, 775 ["fees are not authorized for exhibits not used at trial"] with Benach v. County of Los Angeles (2007) 149 Cal.App.4th 836, 856 [§ 1033.5, subd. (c)(4), allows recovery of costs for exhibits not used at trial] & Applegate v. St. Francis Lutheran Church (1994) 23 Cal.App.4th 361, 363-364 [trial court had discretion under § 1033.5, subd. (c)(4), to allow defendants to recover exhibit costs where plaintiff settled on day of trial].)
In Seever, supra, 141 Cal.App.4th at pages 1558-1559, we disagreed with Applegate's "assertion that only those cost items expressly prohibited by section 1033.5, subdivision (b), are outside the scope" of the discretionary authority granted under subdivision (c)(4). As we explained, "Because the Legislature has expressly stated in [former] subdivision (a)(12) what is allowable (exhibits used at trial that are reasonably helpful) and implicitly what is not, the discretion granted in section 1033.5, subdivision (c)(4), to award costs for items not mentioned in section 1033.5 is simply inapplicable." (Seever, at pp. 1559-1560.)
Here, RDM was awarded $8,548.95 for photocopies and enlargement of exhibits for the 2015 trial and $1,051.45 for photocopies and exhibits relating to the 2016 trial. In his declaration in support of Tenants' motion to tax RDM's costs, Tenants' counsel, Dennis Riley, asserted, "RDM did not prepare any exhibits for use at the first trial." RDM's counsel, Burfening, stated in his declaration in opposition, "Between the first and second trial, each of the three [d]efendants jointly incurred expenses for trial exhibits, copies, and enlargements thereof, of which RDM Management has claimed 1/3 of the total cost, $8,548.95, as claimed in RDM Management's [m]emorandum of [c]osts." Burfening does not refute Riley's assertion that "RDM did not prepare any exhibits for use at the first trial." But it is unclear from the Riley and Burfening declarations whether any exhibits were used in the first trial (only that RDM did not prepare any), and likewise, whether the claimed costs included the costs of photocopies and exhibits not used at trial. The trial court's cursory order denying Tenants' motion does not shed any light on this question. We remand for the trial court to determine whether RDM incurred costs for photocopies and exhibits for the first trial, and to determine the portion of the claimed costs that are recoverable for photocopies and exhibits because they were used at trial. (Seever, supra, 141 Cal.App.4th at p. 1557; Ladas v. California State Auto Assn., supra, 19 Cal.App.4th at p. 775.)
8. The trial court abused its discretion in awarding attorney lodging costs
The trial court awarded $11,194.64 to RDM for Burfening's lodging costs during the 2016 trial. Attorney lodging costs are not specified under section 1033.5 as either an allowable or excluded item. (§ 1033.5, subds. (a) & (b).) Thus, the trial court has discretion to allow or deny attorney lodging costs under section 1033.5, subdivision (c)(4). However, under section 1033.5, subdivision (c)(2), "[a]llowable costs shall be reasonably necessary to the conduct of the litigation rather than merely convenient or beneficial to its preparation." In opposition to Tenants' motion to tax lodging costs, RDM argued the costs were necessary because Burfening's daily roundtrip travel from San Diego to Los Angeles would have prevented him from being fully prepared for trial each day, and travel costs would likely exceed lodging costs. But reducing the travel costs for the attorney selected by RDM is not a proper basis for recovery of the costs as "reasonably necessary to the conduct of the litigation" under section 1033.5, subdivision (c)(2). Rather, the costs were "merely convenient or beneficial" for RDM's trial preparation. (§ 1033.5, subd. (c)(2).)
9. The trial court did not abuse its discretion in awarding the other costs
Tenants challenge the award of $11,220.42 for RDM's share of trial technology assistance from Trialspeak (a total of $76,829.17). Tenants contend the trial technology costs are not recoverable, relying on Science Applications Internat. Corp. v. Superior Court (1995) 39 Cal.App.4th 1095, 1104-1105, in which the court approved only a portion of the technology costs. There, the Court of Appeal explained, "We are troubled by review of a case in which a party incurred over $2 million in expenses to engage in high-tech litigation resulting in recovery of only $1 million in damages." (Id. at p. 1105.) But as the court in Bender v. County of Los Angeles (2013) 217 Cal.App.4th 968, 991 observed, "[T]he use of technology in the courtroom has become commonplace (including a technician to monitor the equipment and quickly resolve any glitches), and technology costs have dramatically declined" since 1995 when Science Applications was decided.
Under section 1033.5, subdivision (a)(13), "the electronic presentation of exhibits, including costs of rental equipment and electronic formatting, may be allowed if they were reasonably helpful to aid the trier of fact." The trial court was in the best position to evaluate whether the Trialspeak costs incurred at trial were "helpful to aid the trier of fact" (§ 1033.5, subd. (a)(13)), and whether "trial technology enhanced counsel's advocacy and was reasonably necessary to the conduct of the litigation" (Bender, supra, 217 Cal.App.4th at p. 991 [trial court did not abuse its discretion in allowing recovery of approximately $24,000 in trial technology costs]; accord, Green v. County of Riverside (2015) 238 Cal.App.4th 1363, 1374 [trial court did not abuse its discretion in allowing trial technology costs "as reasonably helpful to aid the jury"]). We find no abuse of discretion.
Tenants also challenge the award of $3,103.61 for RDM's share of jury fees on the basis RDM did not present invoices showing it was billed for or paid the jury fees and the award of $11,582.05 in court reporter fees for the 2016 trial on the same basis. Tenants do not dispute that jury fees are recoverable under section 1033.5, subdivision (a)(1), and "court reporter fees as established by statute" are recoverable pursuant to section 1033.5, subdivision (a)(11). RDM attached a list of jury fees totaling $3,103.51 to its memorandum of costs, and Burfening stated in his declaration in opposition to Tenants' motion to strike or tax costs that this was RDM's share of the expenses for jury fees. As to court reporter fees, RDM included the $11,582.05 in its memorandum of costs worksheet, and Burfening stated in his declaration the amount was RDM's share of the fees, attaching as an exhibit the court reporters' bills for the trial.
"'"[I]f the items appear to be proper charges, the verified memorandum is prima facie evidence that the costs, expenses and services therein listed were necessarily incurred by the defendant [citations], and the burden of showing that an item is not properly chargeable or is unreasonable is upon the [objecting party]."'" (Whatley-Miller v. Cooper (2013) 212 Cal.App.4th 1103, 1115; accord, Litt v. Eisenhower Medical Center (2015) 237 Cal.App.4th 1217, 1224.) Tenants have not met their burden to show the jury and court reporter fees were not necessarily incurred by RDM. C. The Trial Court Did Not Abuse Its Discretion in Denying Owners an Offset for the Pretrial Settlements
Chaaban v. Wet Seal, Inc. (2012) 203 Cal.App.4th 49, 58, relied on by Tenants, is not to the contrary. The court there rejected the argument the defendant had not incurred the billed jury fees and reporter costs, relying on invoices from the superior court showing the defendant was billed for the fees and costs. Although the invoices attached to RDM's memorandum show billing to attorneys other than RDM, as discussed, RDM presented evidence it shared the costs with the other defendants.
1. Owners can appeal the denial of an offset
Tenants contend we lack jurisdiction to consider Owners' appeal of the trial court's November 13, 2017 order denying their motion to compel satisfaction of judgment because Owners failed to appeal the February 8, 2017 denial of their ex parte application for offsets and the March 30, 2017 denial of their motion to compel offsets, thereby forfeiting their ability to appeal the later denial of the same motion (albeit in a different procedural context). Tenants argue in the alternative Owners' motion to compel satisfaction of judgment was a motion for reconsideration that is not an appealable order. We need not resolve whether the postjudgment orders are appealable because we have jurisdiction to consider Owners' offset argument as part of their timely appeal from the November 21, 2016 judgment.
On November 1, 2016 Owners filed an objection to Tenants' proposed judgment, in which they argued they were entitled to approximately $615,000 in offsets from the pretrial settlements. On November 16 Owners again argued they were entitled to an offset during the hearing on their ex parte application for a stay of execution of the judgment. Although Owners' offset argument was made in connection with whether Tenants or Owners were the prevailing parties, the offset question is properly before us on appeal because the trial court rejected Owners' offset argument and entered the judgment without accounting for the settlements. Because we conclude Owners were not entitled to an offset, we dismiss Owners' appeal from the November 13, 2017 order as moot.
Owners also argue the trial court erred in denying their request for reimbursement of an asserted overpayment of interest to Tenants, arguing they calculated interest on attorneys' fees and costs based on the judgment date instead of the date of the orders and did not owe interest after they tendered payment of the judgment less offsets to Tenants. However, this issue is not properly before us because the trial court never reached Owners' interest argument, instead finding Owners were not entitled to an offset and denying the motion to compel satisfaction of judgment in part on that basis.
2. Governing law and standard of review
Under section 877, subdivision (a), a settlement "given in good faith before verdict or judgment to one or more of a number of tortfeasors claimed to be liable for the same tort" reduces plaintiff's claims against the nonsettling defendants "in the amount stipulated by the release, the dismissal or the covenant, or in the amount of the consideration paid for it, whichever is the greater." However, under Civil Code section 1431.2, subdivision (a), a settling defendant is only entitled to an offset for economic damages. (Rashidi v. Moser (2014) 60 Cal.4th 718, 722 (Rashidi).) As the Rashidi court explained, "[S]ection 877 allows a nonsettling tortfeasor to set off the amount of a jointly liable tortfeasor's settlement against damages awarded at trial. However, tortfeasors are jointly liable for only economic damages. Civil Code section 1431.2 imposes 'a rule of strict proportionate liability' on noneconomic damages. [Citation.] '[E]ach defendant is liable for only that portion of the plaintiff's noneconomic damages which is commensurate with that defendant's degree of fault for the injury.' [Citation.] Accordingly, . . . when a pretrial settlement does not differentiate between economic and noneconomic losses, a postverdict allocation is required because 'only the amount attributable to the joint responsibility for economic damages may be used as an offset.'" (Rashidi, at p. 722, fn. omitted.)
Civil Code section 1431.2, subdivision (a), provides, "In any action for personal injury, property damage, or wrongful death, based upon principles of comparative fault, the liability of each defendant for non-economic damages shall be several only and shall not be joint. Each defendant shall be liable only for the amount of non-economic damages allocated to that defendant in direct proportion to that defendant's percentage of fault, and a separate judgment shall be rendered against that defendant for that amount."
The Rashidi court described the "widely accepted method for making such a postverdict allocation" established in Espinoza v. Machonga (1992) 9 Cal.App.4th 268, 276-277 (Espinoza), under which "[t]he percentage of the jury's award attributable to economic damages is calculated and applied to the settlement, yielding the amount that the nonsettling defendant is entitled to offset." (Rashidi, supra, 60 Cal.4th at p. 722; accord, Hellam v. Crane Co. (2015) 239 Cal.App.4th 851, 863 ["Under Espinoza, a court calculates the percentage of the overall damages award that consists of economic damages, multiplies the settlement proceeds by that percentage, and reduces the economic-damages award by the resulting amount."].)
A defendant seeking an offset under Civil Code section 1431.2 has the burden to prove each fact essential to the offset. (Rashidi, supra, 60 Cal.4th at p. 723, fn. 4; LAOSD Asbestos Cases (2018) 28 Cal.App.5th 862, 882 [defendant seeking settlement offset has "'"the burden of proof as to each fact the existence or nonexistence of which is essential to the claim for relief or defense that he is asserting"'"]; Conrad v. Ball Corp. (1994) 24 Cal.App.4th 439, 444 (Conrad) ["A defendant seeking an offset against a money judgment has the burden of proving the offset."].)
"'We generally review a ruling granting or denying a section 877 settlement credit under the deferential abuse of discretion standard. [Citation.] To the extent that we must decide whether the trial court's ruling was consistent with statutory requirements, we apply the independent standard of review.'" (LAOSD Asbestos Cases, supra, 28 Cal.App.5th at p. 880; accord, Garcia v. Myllyla (2019) 40 Cal.App.5th 990, 1004.)
3. Owners failed to prove their entitlement to an offset from the pretrial settlements
Owners contend they are entitled to $314,998.10 in offsets from the damages awarded at trial because of Tenants' pretrial good faith settlements with Puroclean and One Source. Owners also claim a common law offset for the pretrial settlement for $315,000 reached by Roark and another tenant, Cynthia Miller, with the subsequent owners, Ruzicka and Sarlo. Owners concede they do not know how the settlement was allocated between Roark and Miller, but they attribute half of the settlement ($157,500) to Roark.
Owners do not seek an offset to the compensatory damages awarded to the Vergara and Goodman families because there were no pretrial settlements as to those families.
Owners acknowledge the jury verdict does not separate out economic and noneconomic damages. Thus, the method outlined in Rashidi, supra, 60 Cal.4th at page 722 and Espinoza, supra, 9 Cal.App.4th at pages 276-277, for determining the apportionment of economic and noneconomic damages in a settlement—by applying the percentage of a jury verdict allocated to economic damages—cannot be utilized here. Further, Owners concede a nonsettling defendant's failure to propose a jury verdict that allocates economic and noneconomic damages forfeits the defendant's right to an offset. (Conrad, supra, 24 Cal.App.4th at p. 444 [nonsettling defendant "waived any right to an offset by failing to propose a special verdict which differentiated between economic and noneconomic damages"].)
Owners claim Tenants waived their right to challenge Owners' entitlement to an offset because Tenants' counsel insisted on a general verdict and expressly gave up their right to argue against an offset. The record does not support Owners' argument. Owners rely on statements made by Tenants' counsel, Riley, at the October 3, 2016 hearing on the jury verdict form. Owners' counsel, Thomas Citron, stated, "We're also going to be entitled to an offset, regardless of an allocation between economic and noneconomic damages, for the amounts of the settlement." Citron's cocounsel, Webb, added, "So question 2 just says 'damages.' It's not broken out 'economic' or 'noneconomic.' Mr. Riley agrees not to oppose our offset post-trial." Riley responded, "Not exactly. . . . [¶] . . . [¶] [W]e're not breaking out economic and noneconomic damages. And the reason they wanted that originally was so they could argue offset. My agreement is that failure to not have it broken out, they're not waiving their offset argument."
It is not clear which party proposed the verdict form, which lacked an allocation between economic and noneconomic damages. In a declaration filed in opposition to Owners' motion to compel offset, Tenants' counsel, Riley, stated, "Defendants' proposed judgment and proposed jury verdict language was used by the trial court over [p]laintiffs' objection."
Contrary to Owners' assertion, Tenants' counsel did not waive Tenants' right to challenge Owners' entitlement to offsets. Indeed, had the settlements apportioned economic and noneconomic damages, Owners could have argued an offset for the economic portion of damages was appropriate. The agreement by Tenants' counsel was simply that the failure to allocate economic and noneconomic damages in the verdict form did not constitute a waiver by Owners of their right to seek an offset. But Owners still bore the burden to prove the facts necessary to their claim for an offset, including an allocation of economic and noneconomic damages.
Conrad is instructive. In Conrad, the plaintiff, who suffered injuries from a defective glass bottle, settled with the store and the bottler before trial for $50,000. (Conrad, supra, 24 Cal.App.4th at p. 442.) The settlement did not differentiate between economic and noneconomic damages. (Id. at p. 443.) Plaintiff proceeded to trial against the manufacturer, and the jury returned a verdict in favor of plaintiff for $275,000. (Id. at p. 442.) The Court of Appeal reversed the trial court's award of an offset for the settlement amount, explaining, "[U]nlike in Espinoza, the special verdict did not specify economic and noneconomic damages, but merely awarded an undifferentiated lump sum of $275,000." (Id. at pp. 443-444.) The court concluded the manufacturer "waived any right to an offset by failing to propose a special verdict which differentiated between economic and noneconomic damages." (Id. at p. 444.) This failure "precluded any offset, for want of supporting facts." (Id. at p. 445.)
Here, Owners presented no evidence the Puroclean and One Source settlement agreements differentiated between economic and noneconomic damages. The Ruzicka and Sarlo settlement with Roark and Miller—which is in the record— does not apportion the settlement amount between the economic and noneconomic damages. Similar to Conrad, because the jury verdict does not differentiate between economic and noneconomic damages, Owners did not meet their burden of proof, and the trial court did not abuse its discretion in denying an offset. (Conrad, supra, 24 Cal.App.4th at pp. 444-445.)
We are doubtful Owners are entitled to an offset from Ruzicka and Sarlo's settlement with Roark because Ruzicka and Sarlo owned the building after Owners, and therefore had liability for different conduct. (Garcia v. Myllyla, supra, 40 Cal.App.5th at p. 1005 [no abuse of discretion in rejecting offset under § 877 where nonsettling defendant and settling defendants owned building at different times].)
Tenants also argue an offset is not supported because the jury verdict does not apportion fault among the defendants. Rather, the jury verdict form asked the jury to determine "each [p]laintiff's net damages, if any (after deducting each [p]laintiff's own negligence, if any as well, as the negligence of others) as against" the Owners. Because we conclude the failure to allocate economic and noneconomic damages bars recovery of an offset, we do not reach Tenants' additional argument against an offset. --------
The judgment is affirmed. The order denying Tenants' motion to strike or tax costs is reversed and remanded for a redetermination of costs consistent with this opinion. The appeal from the order denying Owners' motion to compel satisfaction of judgment is dismissed as moot. The parties are to bear their own costs on appeal.
FEUER, J. We concur:
ZELON, Acting P. J.