Opinion
B311927
09-27-2023
MICHAEL J. KURGAN, Plaintiff and Appellant, v. A. RAYMOND HAMRICK, III, et al, Defendants and Respondents.
Michael J. Kurgan, in pro. per., for Plaintiff and Appellant. Cooksey, Toolen, Gage, Duffy & Woog and Matthew R. Pahl for Defendants and Respondents.
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of Los Angeles County No. BC672375 Michael L. Stern, Judge. As modified, affirmed.
Michael J. Kurgan, in pro. per., for Plaintiff and Appellant.
Cooksey, Toolen, Gage, Duffy & Woog and Matthew R. Pahl for Defendants and Respondents.
RUBIN, P. J.
Plaintiff and appellant Michael Kurgan was the unsuccessful party in an arbitration against defendants and respondents Hamrick & Evans, LLP; A. Raymond Hamrick, III; Kenneth A. Hearn; Kenneth Charles Greene; Rebecca Worden and Judith E. Felz (collectively, Hamrick &Evans). After Hamrick &Evans successfully petitioned the trial court to confirm the award in its favor, Hamrick &Evans obtained an award of costs, consisting of (1) superior court filing fees and (2) costs related to depositions taken during the arbitration. The judgment was amended accordingly. On Kurgan's appeal of the costs order, we modify the judgment to strike the costs arising from the arbitration depositions and otherwise affirm.
FACTUAL AND PROCEDURAL BACKGROUND
As the appeal relates only to the post-judgment order for costs, we need not discuss the underlying factual dispute in any detail. Kurgan had previously retained Hamrick &Evans as his counsel. The individual defendants were lawyers at the firm. Kurgan terminated the relationship and sued Hamrick &Evans for professional negligence. Hamrick &Evans moved to compel arbitration based on an arbitration clause in its retainer agreement. That clause provided, in pertinent part, as follows:
"Any dispute arising out of or in connection with the interpretation, performance, or breach of this Agreement, including claims for fees and costs as well as claims for professional negligence, shall be resolved through final and binding arbitration and a judgment upon an arbitration award may be entered in any court of competent jurisdiction. Arbitration proceedings shall be conducted in Los Angeles County, California, and be governed by California law. Unless the parties subsequently agree in writing to resolve a dispute through a different arbitration forum or service, the following shall apply: [¶] . . . [¶] The arbitration of all [non-fee disputes], including disputes over professional negligence, shall be conducted in accordance with the rules and procedures of the American Arbitration Association. Pending resolution of the arbitration and award of costs by the arbitrator, CLIENT and ATTORNEY shall each advance one-half of the amounts, if any, which may be requested by the arbitration and/or the sponsoring organization."
On March 5, 2018, the trial court granted the motion, on condition Hamrick &Evans pay all arbitration costs. When signing the proposed order staying the case pending arbitration, the court interlineated the following, "The defendants are ordered to pay all arbitration costs, including, but not limited to, initial filing fees for both parties, arbitrator fees and costs, and court reporter costs, if any."
The case proceeded to arbitration before an American Arbitration Association (AAA) arbitrator. The arbitrator issued his final award on May 21, 2020. The order explained the course of events that had taken place in the arbitration: Preliminarily, the parties had disputed which set of AAA rules governed the dispute; the arbitrator determined that AAA's Commercial Arbitration Rules applied. Next, Hamrick &Evans sought leave to file a dispositive motion. The arbitrator granted leave, on condition Hamrick &Evans grant Kurgan a reasonable opportunity to depose three of the named defendants (Hamrick, Hearn and Greene). The depositions were ultimately conducted. Thereafter, Hamrick &Evans filed its summary judgment motion, which the arbitrator granted. On that basis, the arbitrator entered its final award in favor of Hamrick &Evans.
The record indicates that five depositions were taken by Kurgan - the timing of the depositions reflects that all five depositions were taken after the matter had been sent to arbitration.
The final award addressed costs in its final paragraphs. First, the arbitrator noted that it had previously ordered Hamrick &Evans to reimburse Kurgan $3,500 for his travel expenses to attend the depositions. The arbitrator reaffirmed this order to the extent it had not already been paid. Kurgan later agreed that it had been paid; it is therefore not at issue in this appeal. Second, the arbitrator quoted from the trial court's order compelling arbitration and directing Hamrick &Evans to pay all arbitration costs. The arbitrator's award stated, "Accordingly, the administrative fees of AAA and compensation of the arbitrator shall be borne by [Hamrick & Evans]. The parties' other costs of the arbitration (e.g., attorneys' fees, expert fees, postage, etc.) shall be borne by the parties as incurred." Third, the arbitrator included a paragraph stating, "This Final Award is intended to determine all claims, defenses and contentions asserted by the parties herein. Any claims not specifically mentioned in this Final Award or in the Order [granting summary judgment] are hereby denied."
On June 19, 2020, Hamrick & Evans returned to the trial court and petitioned to confirm the award. In its motion, it included a sentence, with no further argument, stating that it sought "attorneys fees and costs pursuant to the written agreement to arbitrate." Kurgan did not oppose entering judgment to confirm the award, but argued that the request for costs and attorney fees was improper.
The court confirmed the award, entering judgment in favor of Hamrick &Evans; the judgment was silent on the issue of costs and fees.
Hamrick and Evans then served a memorandum of costs seeking over $50,000 in costs, in three categories: (1) $3,963.55 in filing and motion fees; (2) $6,267.71 in deposition costs; and (3) $40,300. Hamrick &Evans did not fully explain the $40,300 in its memorandum of costs, simply citing to an inapplicable statute, Code Civil Procedure section 1141.21. It would later appear that the $40,300 Hamrick &Evans sought constituted the arbitrator's fees, which it believed it could seek at this point in the litigation, despite both the trial court's order and the arbitrator's award directing it to pay the arbitrator's fees. The trial court rejected this third item of costs and Hamrick &Evans no longer pursues it. We do not discuss it further.
That provision provides for the prevailing party to obtain costs and fees when it is successful on a trial de novo following an arbitration in certain circumstances. (See Code Civ. Proc., § 1141.11.) It is clearly inapplicable to this dispute, which did not involve a trial de novo. All further statutory references are to the Code of Civil Procedure.
Kurgan moved to tax the entirety of the costs, based on the prior court order and the arbitration award allocating costs. Hamrick &Evans opposed on the basis that it was the prevailing party and entitled to both filing fees and deposition costs as standard costs allowed a prevailing party under sections 1032 and 1033.5.
The trial court held that, as prevailing party, Hamrick &Evans was entitled to both categories of costs. However, the court was concerned that Hamrick &Evans's memorandum of costs may have included additional amounts that were not recoverable, such as messenger fees it had paid when it paid filing fees. The court therefore directed Hamrick &Evans to file a supplement, with receipts attached, identifying only costs it was statutorily entitled to recover.
Hamrick &Evans complied. The filing and motion fees it sought, originally amounting to $3,963.35, were now reduced to $3,496.75. The deposition costs it had initially sought at $6,267.71 were now reduced to $5,273.99.
Kurgan filed an opposition, again arguing that the arbitrator had already resolved the issue of costs and it could not be reopened at this stage. In addition, he addressed specific costs he believed were excessive or incurred in bad faith. For example, he argued that Hamrick &Evans should not recover fees for filing demurrers as the demurrers "were filed in bad faith when [Hamrick &Evans] knew they were going to move the claim to arbitration."
The trial court accepted Hamrick &Evans's submission and rejected Kurgan's arguments - taxing costs only in the amount by which Hamrick &Evans had already reduced its claimed filing fees and deposition costs. The court entered an amended judgment including the award of costs in favor of Hamrick &Evans in the amount of $8,770.74. Kurgan filed a timely notice of appeal.
DISCUSSION
1. Standard of Review
"Generally, the standard of review of an award of costs is whether the trial court abused its discretion in making the award. [Citation.] However, when the issue to be determined is whether the criteria for an award of costs have been satisfied, and that issue requires statutory construction, it presents a question of law requiring de novo review. [Citation.] [¶] 'In ruling upon a motion to tax costs, the trial court's first determination is whether the statute expressly allows the particular item and whether it appears proper on its face. "If so, the burden is on the objecting party to show [the costs] to be unnecessary or unreasonable." [Citation.] Where costs are not expressly allowed by the statute, the burden is on the party claiming the costs to show that the charges were reasonable and necessary. [Citation.] "Whether a cost item was reasonably necessary to the litigation presents a question of fact for the trial court and its decision is reviewed for abuse of discretion." '" (Berkeley Cement, Inc. v. Regents of University of California (2019) 30 Cal.App.5th 1133, 1139.)
We will first address Kurgan's argument that the costs were not legally awardable - a question of law, then briefly address Kurgan's argument that particular cost items were not reasonably necessary - a question of fact.
2. While Court Costs Were Properly Awarded, Arbitration Costs Were Within The Exclusive Jurisdiction of the Arbitrator
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." There are, however, specific statutes "otherwise expressly" governing costs arising from contractual arbitration. Section 1284.2 provides, "Unless the arbitration agreement otherwise provides or the parties to the arbitration otherwise agree, each party to the arbitration shall pay his pro rata share of the expenses and fees of the neutral arbitrator, together with other expenses of the arbitration incurred or approved by the neutral arbitrator, not including counsel fees or witness fees or other expenses incurred by a party for his own benefit." This provision "sets forth the legislative policy of this state that arbitration costs are to be borne by the party incurring them, unless the arbitration agreement provides otherwise." (Austin v. Allstate Ins. Co. (1993) 16 Cal.App.4th 1812, 1815 (Austin).) In contrast, section 1293.2 provides, "The court shall award costs upon any judicial proceeding under" the title of the Code of Civil Procedure governing arbitration. (Emphasis added.) In other words, "[i]t is apparent that the Legislature has distinguished between costs incurred in an arbitration proceeding and costs incurred in superior court to enforce an arbitration award, allowing costs to the prevailing party only in the latter." (Austin, at pp. 18151816; Dickinson v. Kaiser Foundation Hospitals (1980) 112 Cal.App.3d 952, 954.) If the parties do not want to allow the arbitrator to allocate the costs of arbitration, section 1284.2 allows the parties to contract around its terms in their arbitration agreement.
Hamrick & Evans suggests the appellate record is insufficient for us to determine whether the arbitration agreement in this case placed the issue of arbitration costs within the exclusive jurisdiction of the arbitrator. We reject this argument for three reasons. First, arbitrators have broad discretion to fashion remedies, and costs can be presumed to be within that discretion absent agreement otherwise. (Britz, Inc. v. Alfa-Laval Food &Dairy Co. (1995) 34 Cal.App.4th 1085, 1105, fn. 9.) Second, the arbitration agreement here expressly provided for an arbitrator's cost award, stating that the parties would advance the arbitrator's expense, "[p]ending resolution of the arbitration and award of costs by the arbitrator, . . ." (Emphasis added.) Third, the arbitration agreement provided that the arbitration would be conducted in accordance with the rules and procedures of the AAA. Here, the arbitrator decided that the AAA Commercial Rules applied. We have taken judicial notice of the applicable Commercial Rules. (AAA Commercial Arbitration Rules and Mediation Procedures, amended and effective Oct. 1, 2013<https://www.adr.org/sites/default/files/CommercialRules_W eb-Final.pdf.>, archived at <https://perma.cc/JME6-68E4>.) R-47 of those rules specifically gives the arbitrator discretion to apportion fees among the parties in its final award.
The AAA's standard commercial rules do not expressly provide for the taking of depositions. However, the rules for large commercial cases provide that the arbitrator may, in exceptional cases, order depositions to be taken. Rule L-3, subdivision (f) provides, "The arbitrator may allocate the cost of taking such a deposition."
Hamrick &Evans next suggests the record is inadequate to determine whether the parties submitted the issue of arbitration costs to the arbitrator. Again, we disagree. Hamrick &Evans admitted in a declaration of its counsel that it "did not seek costs in the arbitration." This does not mean the issue of arbitration costs was taken from the arbitrator and preserved for the trial court; it instead means Hamrick &Evans waived the right to those costs. "Allowing a party to request that the trial court make an award that was within the scope of the arbitration but not pursued in that forum is inconsistent with the policies underlying the statutory private arbitration scheme." (Corona v. Amherst Partners (2003) 107 Cal.App.4th 701, 706; see also Heimlich v. Shivji (2019) 7 Cal.5th 350, 358 [party was required to seek costs under section 998 from the arbitrator in the first instance; failure to do so precludes relief].) As cautioned in the Rutter Guide, "A party requesting costs and attorney fees incurred in the arbitration must make the request to the arbitrator during the arbitration proceeding. A court lacks power to correct the award to include arbitration costs that should have been awarded." (Knight et al., Cal. Practice Guide: Alternative Dispute Resolution (The Rutter Group 2008) ¶ 5:402 (rev. 2022).)
In sum, the court had jurisdiction to award actual court costs (here, the filing fees), but not arbitration costs (here, the deposition costs). We therefore modify the judgment to strike the deposition costs.
3. The Record Is Inadequate To Establish Error As To Any Individual Filing Fee
In his appeal, Kurgan reasserts his challenges to particular line items of costs. Specifically, as to the filing fees, he challenges, as not reasonably necessary to the litigation: the fees for two demurrers, ex parte fees associated with the motion to compel arbitration, and jury fees. As to the demurrers and the ex parte, neither those documents, nor the court's rulings on them, are part of the record on appeal. It is therefore impossible to determine whether the court abused its discretion in determining the fees were reasonably necessary. The appellant has the burden of providing an adequate record on appeal. Failure to provide a record sufficient for meaningful appellate review requires resolution of the issue against appellant. (Jameson v. Desta (2018) 5 Cal.5th 594, 609.)
As to the jury fees, the record includes the trial court's January 31, 2018 order to post jury fees "forthwith," and Hamrick &Evans's receipt shows the fees were posted on February 6, 2018. On this limited record, we cannot say the court abused its discretion in determining the fees were reasonably necessary, when the trial court had ordered Hamrick &Evans to post them.
DISPOSITION
The judgment is modified to strike the award of costs for depositions taken in the arbitration. The cost award of $8,770.74 is therefore modified to $3,496.75. As modified, the judgment is affirmed. Hamrick &Evans shall pay Kurgan's costs on appeal.
WE CONCUR: MOOR, J.
BAKER, J, Concurring in Part and Dissenting in Part
I would affirm the trial court's order outright. The opinion for the court correctly acknowledges the record provided by plaintiff and appellant is inadequate to establish the trial court erred in awarding filing and jury fees as costs. I believe the record provided is similarly inadequate to establish the trial court erred in allowing deposition costs.