Wage Law

This opinion is over three months old, and isn't a wage case, but it could ruin the policy favoring and encouraging settlements, and it's up for review with the Supreme Court, so we thought we'd give it a mention. In Goodman v. Lozano (2008) 159 Cal.App.4th 1313, the court held that if a plaintiff settles with some, but not all, defendants, and then proceeds to trial against the non-settling defendant(s) and wins on liability, but recovers no net proceeds because the amounts collected in settlement exceed the amount of the liability of the nonsettling defendant, then it is the defendant who is the prevailing party, and it is the defendant who recovers costs. The holding is in conflict with Wakefield v. Bohlin (2006) 145 Cal.App.4th 963. An April-filed petition for review is pending. The conflict makes the case a strong candidate for review.

The second issue involves the interplay of both section 877 and section 1032: Where a plaintiff obtains a net zero judgment as a result of the operation of section 877, is that plaintiff nevertheless entitled to prevailing party status because that party was “the party with a net monetary recovery”? The answer is no. Again, the analysis is straightforward. A litigant cannot actually recover or “gain” anything without an order or a judgment. An award or verdict without a judgment is merely symbolic. The fact that the litigant may have had an award or verdict prior to a zero judgment is meaningless for purposes of whether that litigant qualifies as “the party with a net monetary recovery” if the award or verdict produces nothing tangible. “Recovery,” not “award,” is the word chosen by the Legislature.

This straightforward analysis, based on the plain meaning of the words actually used in the statute, vindicates Justice Mihara’s dissent in Wakefield v. Bohlin (2006) 145 Cal.App.4th 963 (Wakefield).  Alas, it also forces us to disagree with the majority opinion in Wakefield, and explain why several other cases followed by the Wakefield majority also erred.  The essential problem is that the Wakefield majority substituted its own words for the actual words in the statute.  The statute says “recovery.”  It does not say “award” or “verdict.”

If this one holds up, it will change the way the average reasonable lawyer negotiates settlements. Cases will not settle as often or as easily. We always have preferred a "global" settlement over a piecemeal patchwork of settlements. If Goodman remains good law, that will no longer be merely a preference; it will become the rule, to which few exceptions could be risked.

The most recent modification to the original opinion in Goodman v. Lozano can be seen here in pdf or word format.