Settlement Agreements: Forgetting Costs May Cost You in California

by Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

DeSaulles v. Community Hospital of the Monterey Peninsula, No. H038184 (May 2, 2014): A California Court of Appeal recently considered the issue of whether one of the parties in a litigation can be considered to be “prevailing”—and thereby may collect costs—if an action is dismissed or settled. The court decided that a settlement payment that an employer made to an employee to resolve two of her causes of action qualified as a “net monetary recovery” thereby entitling her to recover litigation costs. According to the court, section 1032 of the California Code of Civil Procedure—which gives prevailing parties the right to recover litigation costs—entitled the employee to mandatory costs where, as here, the parties had not decided who would pay costs in their settlement agreement. In arriving at this conclusion, the court determined that section 1032 does not indicate that a party is not prevailing if the action is “dismissed or a judgment entered based on full or partial settlement.”

After the termination of her employment, Maureen DeSaulles sued Community Hospital of the Monterey Peninsula for disability discrimination (among other claims). The hospital asked the court for, and was granted, summary adjudication as to DeSaulles’s claim for failure to accommodate her disability. As a result, DeSaulles was precluded from moving forward with her claims for retaliation, wrongful termination, and intentional infliction of emotional distress. DeSaulles and her employer agreed to settle the remaining claims in exchange for payment of $23,500 and the claims were dismissed with prejudice.

Both DeSaulles and the hospital filed memoranda with the court asking for an award of litigation costs as  the “prevailing party.” Section 1032’s definition of “prevailing party” includes the party with a “net monetary recovery.” The trial court found the hospital to be the prevailing party since it “prevailed on significant causes of action” and awarded over $13,000 in costs to the hospital. DeSaulles appealed the decision.

The Court of Appeal reversed the trial court’s decision, holding that the settlement money received by DeSaulles is considered a “net monetary recovery,” making her the prevailing party and entitled to costs.

According to Rafael G. Nendel-Flores, a shareholder in the Orange County office of Ogletree Deakins: “The key takeaway from DeSaulles is that employers should specifically address costs in settlements that are entered into before trial courts. Otherwise, like the defendant in DeSaulles, employers must face the California courts’ often byzantine and conflicting interpretations of the terms ‘prevailing party’ and ‘net monetary recovery’ contained in section 1032. Since the parties did not expressly address costs, the DeSaulles court held that the employee was the ‘prevailing party’ because she received a ‘net monetary recovery’ even though she had to dismiss her claims in exchange for receipt of the $23,500 settlement payment. In turn, the DeSaulles court held that the employee was entitled to mandatory costs under Section 1032.” 

Nendel-Flores continued, “Interestingly, in reaching this result, the DeSaulles court rejected a prior California appellate opinion (Chinn v. KMR Property Management (2008) 166 Cal.App.4th 175) which held that settlement payments should be disregarded in determining whether a party received a ‘net monetary recovery.’”

Note: This article was published in the May 2014 issue of the California eAuthority.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ogletree, Deakins, Nash, Smoak & Stewart, P.C. | Attorney Advertising

Written by:

Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

Ogletree, Deakins, Nash, Smoak & Stewart, P.C. on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.