Clients often ask about the recoverability of fees and costs if they are successful in litigating or arbitrating a claim against a third party. As for attorney’s fees, California follows the “American Rule,” which provides that each side bears its own attorney’s fees, even if you win at trial. The general exceptions to this are where a contract provides for the award of attorney’s fees to the prevailing party and where fees are authorized by a statute or law. Even if attorney’s fees are not recoverable, however, a successful result may entitle a party to recover other significant expenses, including a number of different costs when shown to be reasonable.
With respect to costs, California specifically identifies a number of categories that are available for recovery to a successful litigant. Some of these include jury fees, filing fees, deposition transcripts, service costs, copying costs, court reporter fees, and ordinary witness fees, among others. The statute authorizing recovery of these costs specifically excludes expert witness fee recovery unless the expert was ordered by the court. Finally, as long as the category of cost is not something that is specifically prohibited by the statute, the court retains discretion to award recovery of a cost item if it is determined that the cost was reasonably necessary to the litigation, not merely convenient or beneficial, and reasonable in amount.
Mediation costs are not listed among the categories of cost that are explicitly recoverable or explicitly not recoverable, so it is up to the court whether or not recovery will be allowed. Many jurisdictions these days have court-ordered mediation programs, and the court is able to compel parties with disputes under $50,000 to attend mediation. The courts have already determined that the costs of a court-ordered mediation can be recoverable, but can the costs of a mediation that is completely voluntary be recovered?
A recent Court of Appeal case answered that question with a firm “yes.” In Berkeley Cement, Inc. v. Regents of University of California, the court determined that the prevailing party in a construction contract dispute could recover $15,950 paid to mediators the parties hired to try and resolve their case before trial. The court determined that the voluntary mediation costs fell under the catch-all of costs “reasonably necessary” to the litigation, rejecting the losing party’s argument that because the mediation was voluntary, the costs were incurred for an event that was merely “convenient or beneficial.” In so ruling, the Court of Appeal emphasized that mediation is fundamental to the conduct of litigation because it encourages parties to resolve their disputes without the time, expense, and risk of trial or arbitration. The court noted, however, that the recoverability of these costs in each case must be determined based on its own facts and circumstances.
Although the Berkeley case stopped short of providing a hard-and-fast rule for recovery of voluntary mediation costs by every prevailing party, the potential for recovery of these costs is significant, particularly considering the costs of mediator services can be quite significant for claims that proceed to final judgment via jury or arbitration.