Cnty. of San Benito v. Scagliotti

Full title: COUNTY OF SAN BENITO, Plaintiff, Cross-defendant, and Appellant, v…

Court: COURT OF APPEAL OF THE STATE OF CALIFORNIA SIXTH APPELLATE DISTRICT

Date published: Sep 24, 2020

No. H045887 (Cal. Ct. App. Sep. 24, 2020)

Opinion

H045887

09-24-2020

COUNTY OF SAN BENITO, Plaintiff, Cross-defendant, and Appellant, v. RICHARD SCAGLIOTTI, Defendant, Cross-complainant, and Appellant.

Danner, J.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (San Benito County Super. Ct. No. CU-16-00007)

The County of San Benito (County) and Richard Scagliotti, a former county supervisor, each appeal a judgment denying their claims for reimbursement of sums they incurred during a civil lawsuit filed by a county resident involving violations of the Political Reform Act of 1974 (Gov. Code, § 81000 et seq.)¹ (hereafter PRA).

1 Unspecified statutory references are to the Government Code.

In its appeal, the County challenges the trial court's denial of its claims for reimbursement of attorney fees it believes Scagliotti owed it under a contract or, alternatively, under Labor Code section 2865. For his part, Scagliotti contends the trial court erred in denying his claims under the Government Claims Act (§ 810 et seq.) (hereafter GCA) for reimbursement by the County of defense costs he incurred after the County withdrew from his defense and for indemnification of the settlement he paid to resolve the civil lawsuit. Both the County and Scagliotti also argue the trial court erred in denying their respective motions for attorney fees under Code of Civil Procedure section 1038.

As explained further below, we reject the County's appeal of the judgment. With respect to Scagliotti's appeal, we conclude the trial court erred under section 996.4 when it found that he was not entitled to reimbursement by the County of some of his defense costs. We therefore vacate the judgment against Scagliotti and remand the matter to the trial court to determine the amount of defense costs for which the County must reimburse Scagliotti. In all other respects, we affirm the trial court's rulings.

I. FACTS AND PROCEDURAL BACKGROUND

For 16 years, Scagliotti served as an elected supervisor of the county.² For a period of time, Scagliotti also served as a member of the San Benito County Local Agency Formation Commission ("LAFCO"). LAFCO was involved in decisions of whether to annex certain county land into the incorporated cities within the territory of the county, including the City of Hollister. (See § 56301[describing purposes of a LAFCO].) In addition to these official duties, Scagliotti was a private real estate developer who held interests in real property.

2 We take judicial notice of this court's opinion in a previous appeal related to this matter (Pekin v. Scagliotti (June 14, 2013, No. H035867) [nonpub. opn.].) That appeal involved the Pekin litigation, described further below, and concerned the trial court's order denying that plaintiff's motion to disqualify joint defense counsel. In that appeal, this court affirmed the trial court's order. (Id. at p. 1.) For the facts underlying the current appeals, the parties rely principally upon letters sent to Scagliotti in April 2006 and April 2015, the February 2015 statement of decision issued in the Pekin litigation, and the Compromise and Release agreement related to the Pekin litigation. We requested supplemental briefing from the parties on whether these documents had been admitted into evidence by the trial court in the litigation underlying the current appeals. In a joint letter to this court, the parties stated these documents were admitted into evidence by stipulation. We accept the parties' representation and discuss this evidence further below.

In 2003, while still serving as a county supervisor, a lawsuit was brought against Scagliotti and other parties. We refer to this matter, which generated the settlement payment and most of the attorney fees in dispute in this appeal, as "the Pekin litigation." (See Super. Ct. San Benito County, Case No. CU-03-00150.)

A. Pekin Litigation

The Pekin litigation began in December 2003, when a county resident filed a civil lawsuit against Scagliotti, both in his individual and official capacity, as well as against the San Benito County Board of Supervisors (Board) and the San Benito County Financing Corporation (the Corporation), a "wholly owned subsidiary" of the County.³ The original complaint in the Pekin litigation alleged multiple violations of the PRA⁴ and sought to hold Scagliotti civilly liable for making or influencing governmental decisions while having a prohibited financial interest and for failing to comply with disclosure requirements.

3 Prior to filing the lawsuit, the plaintiff had requested that the district attorney file an action against Scagliotti, but the district attorney declined. (See § 91007.) The named plaintiff in the Pekin litigation changed over time and eventually was Patrick Pekin, who was the son of the attorney who filed the original action in 2003.

4 The complaint also alleged a violation of section 1090, a conflict of interest statute that is not part of the PRA that prohibits public officials from having a personal, financial interest in the contracts they form in their official capacities. (See Lexin v. Superior Court (2010) 47 Cal.4th 1050, 1074.) The contract at issue was for vehicle maintenance. The trial court ultimately found no violation of section 1090 and decided that Scagliotti was not prohibited from voting on the contract.

The County agreed to defend Scagliotti and engaged private counsel to conduct the defense. That attorney jointly represented the County and Scagliotti for several years. The record on appeal does not contain any writings from the inception of the litigation that set out the terms of that joint representation or any reservation of rights made by the County. In a prior, related appeal,⁵ we noted that the County provided legal representation to Scagliotti pursuant to section 995 of the GCA, a provision we examine further below. (See Pekin v. Scagliotti (June 14, 2013, No. H035867) [nonpub. opn.].)

5 See footnote 2, ante.

In 2006, over two years after the inception of the Pekin litigation, a substitution of joint counsel occurred. In connection with this change, Scagliotti received two letters relevant to the current appeals. First, on April 17, 2006, new joint counsel (Michael Serverian of the law firm of Rankin, Landsness, Lahde, Serverian & Stock, P.C.) sent a letter to Scagliotti, County Counsel Irma Valencia, and Deputy County Counsel Terra Chaffee regarding the joint representation (April 17 letter).

The April 17 letter explained that Serverian and his firm would represent Scagliotti, the Corporation, and the County jointly, and it outlined the parameters of the joint representation, including that "[t]he fees for the joint representation will be paid by the County alone, even though the three of you will be clients." We discuss the text of the April 17 letter further below in examining the County's claim in its appeal that Scagliotti thereby incurred a contractual obligation to reimburse it for his defense costs.

Two days later, on April 19, 2006, County Counsel Valencia sent Scagliotti a letter confirming the County would provide him with a defense through Attorney Serverian (April 19 letter). The letter addressed the topics of defense and indemnification. The April 19 letter included the following language:

"a. The County's Duty to Provide You with a Defense
From the face of the Complaint, it is difficult to determine, at this time, whether any of the claims being made against you are within your employment as an employee of the County. For this reason, the County intends to, and will, initially provide you with a defense to the claims being made against you. If, however, at anytime during the course of the litigation, it appears, in the judgment of the County, that the claims against you arise out of actions which were outside the scope of your employment, the County reserves the right to withdraw its defense.

"b. The County's Duty to Indemnify You
In the same way, in compliance with Government Code Section 825, the County will indemnify you for any damages arising out of the performance of your official duties; provided, however, that such damages do not arise out of actions that were either actual fraud, actual corruption, or actual malice, or willfully failed or refused to conduct the defense or the claim or action in good faith."

The April 19 letter contained an acknowledgment, which Scagliotti signed, stating Scagliotti "[u]nderstood and agreed" to it.

The Pekin litigation continued over the course of several years and culminated in 2014 in a bench trial at which the County defended Scagliotti. By that date, the complaint had been amended eight times. The claims at issue included violations of section 87100 (use of government position for financial gain) and section 91004 (failure to report assets on Form 700s) of the PRA. "Form 700" is a standard form California public officials and employees must file to disclose their financial holdings. (§§ 87202, 87302; Gananian v. Wagstaffe (2011) 199 Cal.App.4th 1532, 1537, fn. 5 (Gananian).) We discuss Form 700 further below in our examination of Scagliotti's appeal.

In February 2015, the trial court issued a written statement of decision (February 2015 statement of decision). The trial court denied most of the claims alleged against Scagliotti but found that Scagliotti had violated certain provisions of the PRA. In particular, the trial court found Scagliotti committed five violations of section 91004 by failing to list on his Form 700s properties he either still owned or had received income from following their sale. The trial court determined that "[a]lthough the court finds that his repeated omissions showed a decidedly careless approach to his reporting obligations, the evidence is not sufficiently persuasive that the omissions in these counts were intentional" and concluded that Scagliotti's omissions were merely negligent. For each of these five "non reporting violations," the trial court assessed a penalty of $2,500, for a total penalty of $12,500 for them.

The trial court also found Scagliotti had violated section 87100 (use of governmental position for financial gain)⁶ when, as a member of LAFCO, he participated in a vote related to an annexation request for a large development. We refer to this vote, as did the trial court in the Pekin litigation, as "the LAFCO vote." At the time of the LAFCO vote, which appears to have occurred in 2002, Scagliotti and his business partner were seeking permits to build their own housing project. Scagliotti's own project might have been affected by the annexation request, and the trial court found that Scagliotti "intentionally failed to disclose his financial interest" in that property (referred to in the record as "the Powell Street property") before participating in the vote. For this violation of section 87100, the trial court assessed a penalty of $225,000. Combined with the penalty for the violations associated with the Form 700s, the trial court imposed a total penalty of $237,500.

6 Section 87100 states, "No public official at any level of state or local government shall make, participate in making or in any way attempt to use his official position to influence a governmental decision in which he knows or has reason to know he has a financial interest."

The February 2015 statement of decision does not specify whether Scagliotti or the County was to pay the penalty or whether Scagliotti was acting within the scope of his employment when he committed the violations found by the trial court.

Following the February 2015 statement of decision, joint counsel (now Sujata Reuter of the Rankin law firm, who appears to have succeeded Serverian as joint counsel) advised Scagliotti that she could no longer jointly represent him and the County because of an actual conflict of interest between them. In a letter dated April 1, 2015, Reuter wrote to Scagliotti. She transmitted her letter by both e-mail and US mail, and the e-mailed version of the letter differed from the mailed version in material respects. Unless otherwise indicated, the language set out below appears in both versions of the letter.

The April 1, 2015 letter addressed the February 2015 statement of decision, the proposed judgment for the decision, payment of the judgment once it was entered, and other issues. In a section of the letter titled "Conflict of Interest," Reuter stated, "[d]ue to the fact that the Court has found an intentional violation of the PRA, which falls outside the course and scope of your employment, and triggers the County's reservation of rights, there is now an actual conflict of interest as between you and the County. As such, this firm can no longer continue to represent you in this matter. Accordingly, please find enclosed a Substitution of Attorney naming Paul Balbas as your attorney going forward." In one version of the letter, Reuter also stated that "[b]ased upon the Court's Decision, it appears that the $12,500.00 damage assessment for negligent failure to properly complete your Form 700s would fall within the course and scope of your employment, and would, therefore, be paid on your behalf by the County. On the other hand, the $225,000.00 damage assessment for intentional violation of the conflict of interest provisions of the PRA would not fall within the course and scope of your employment and, therefore, would not be paid by the County."

Following the receipt of the April 1, 2015 letter, Scagliotti substituted Balbas as his counsel. Balbas charged Scagliotti approximately $27,000 for work from approximately April 2015 through early June 2015, which appears largely related to Scagliotti's successful opposition of Pekin's posttrial request for $800,000 in attorney fees.

In June 2015, shortly following the denial of Pekin's motion for attorney fees, Scagliotti executed a settlement with plaintiff Pekin for $220,000. The County did not participate in the settlement negotiations, did not authorize the settlement, and did not sign the written agreement memorializing it, which was titled "Compromise and Release Agreement" (settlement agreement). Scagliotti did not admit any liability in the settlement agreement. Scagliotti personally paid the $220,000 settlement amount.

B. Reimbursement Litigation Between County and Scagliotti

In early 2016, the County filed the lawsuit against Scagliotti that is directly at issue in the County's appeal. The County sought reimbursement of $470,000 in attorney fees it had incurred in defending Scagliotti in the Pekin litigation. The County's original complaint against Scagliotti was based on the GCA but was later amended to add a cause of action based on Labor Code section 2865 (second cause of action).⁷

7 The County's first amended complaint continued to allege a claim based on the GCA (first cause of action) and also alleged a cause of action for equitable indemnity (third cause of action). At some point thereafter, the County withdrew the first and third causes of action.

Scagliotti in turn filed a cross-complaint against the County pursuant to sections 825 and 995 of the GCA that sought reimbursement of both the $27,000 he alleged he had incurred in defense costs in the Pekin litigation for his private counsel and his $220,000 settlement payment.⁸ To distinguish these actions from the Pekin litigation that preceded them, we collectively refer to the litigation conducted pursuant to the County's complaint against Scagliotti and to Scagliotti's cross-complaint against the County as the "reimbursement litigation."

8 The cross-complaint also contained a cause of action for equitable indemnity (second cause of action), contribution (third cause of action), and common counts (fourth cause of action). Prior to trial, Scagliotti withdrew his common counts cause of action. Scagliotti withdrew the causes of action for equitable indemnity and contribution during a bench trial in October 2017.

The trial court conducted a bench trial in the reimbursement litigation on October 16, 2017.⁹ At the beginning of the bench trial, each party argued that the trial court should make its decision based on the facts set out in the February 2015 statement of decision. Neither party sought to relitigate the factual findings made by the court in the Pekin litigation or supplement the factual record with respect to the activities underlying the earlier suit. At the bench trial in the reimbursement litigation, both the County and Scagliotti offered into evidence testimony and documents pertaining to the amounts each had expended in legal costs in the Pekin litigation for which they sought reimbursement.¹⁰

9 The judge who conducted the trial in the reimbursement litigation was not the same judicial officer who presided over the Pekin litigation.

10 Although neither the transcript nor the minute order reflect admission by stipulation of a number of written documents, the parties have jointly represented to this court that the exhibits were admitted by the trial court in the reimbursement litigation by stipulation, and we have accepted that representation for purposes of deciding these appeals. (See fn. 2, ante.)

In support of its claim for reimbursement, the County presented the testimony of a single witness (former joint counsel Reuter), but the trial court struck her testimony. The trial court took this action as a sanction for the County's failure to provide discovery on how it had apportioned attorney fees, including failure to respond to Scagliotti's request that it provide discovery on how defense costs were apportioned between the causes of action in the Pekin litigation. Scagliotti moved for judgment on the County's complaint pursuant to Code of Civil Procedure section 631.8, and the trial court granted his motion.

The trial court then turned to Scagliotti's cross-complaint. Scagliotti testified about the costs he incurred in the Pekin litigation, including the $220,000 settlement he had personally paid. Scagliotti stated his own counsel had negotiated the settlement, and the County did not participate in the negotiations. According to Scagliotti, the sum of $220,000 represented a "discount" of $17,500 from the total penalty of $237,500 imposed by the trial court. Scagliotti testified that plaintiff Pekin had agreed to that discount on the condition that Scagliotti pay the amount right away, which Scagliotti did.

At the conclusion of Scagliotti's testimony, the County in turn moved for judgment on Scagliotti's cross-complaint pursuant to Code of Civil Procedure section 631.8. The County argued that the Pekin lawsuit brought under the PRA did not involve an "injury" that a public entity had a statutory duty to defend and indemnify under the GCA. The County noted that "injury in that part of the Claims Act is very specifically defined, and that appears at Government Code [section] 810.8. And it says that 'an injury involves death, injury to a person, damage to, or loss of property, or any other injury that a person may suffer to his person, reputation, character, feelings, or estate, of such nature that it would be actionable if inflicted by a private person.' [¶] And so the definition of injury requires, essentially, something to—would have required someone to have claimed the plaintiff [sic], that Mr. Scagliotti, injured their person, their reputation, their character, their feelings." Instead of asserting a claim for personal injury, plaintiff Pekin had made a claim "on behalf of the body politic, the citizens of the County of San Benito," which did not fall within the terms of the GCA.

In its ruling, the trial court agreed with the County and ruled in its favor on Scagliotti's cross-complaint. The court concluded that "Government Code Section 810 deals with cases where there's actual injury, a tort-type action. It might encompass other things, but it doesn't encompass the activity involved in this case." In its written judgment, the trial court stated, "The Court finds that the County had no duty under the Claims Act to indemnify Scagliotti, as the underlying Pekin lawsuit did not involve a harm encompassed in the definition of 'injury' under Government Code section 810[.8]." The trial court also found that the County had reserved its right to withdraw its representation of Scagliotti in the Pekin litigation in its April 19, 2006 letter and therefore was not obligated to reimburse Scagliotti for defense costs he had incurred.

Pursuant to the trial court's rulings in the reimbursement litigation, neither the County nor Scagliotti successfully recouped from the other any of the fees or costs each had incurred in the Pekin litigation.

Following the October 2017 bench trial in the reimbursement litigation, the County and Scagliotti each filed motions under Code of Civil Procedure section 1038, subdivision (a), for payment by the other of the attorney fees they had incurred in the reimbursement litigation. Following a hearing, the trial court denied both the County's and Scagliotti's posttrial request for attorney fees incurred in the reimbursement litigation.

On April 9, 2018, the trial court entered judgment in the reimbursement litigation on the County's complaint and on Scagliotti's cross-complaint. The County moved for a new trial and to vacate the judgment. The trial court heard these motions on June 5, 2018. The trial court denied the County's motions for a new trial and to vacate the judgment.

Both the County and Scagliotti have appealed the trial court's judgment in the reimbursement litigation.

II. DISCUSSION

In its appeal, the County argues the trial court committed two errors in denying its claim for reimbursement of $470,000 in defense costs in the Pekin litigation. First, relying on language in the April 17 and April 19 letters sent by joint counsel and county counsel in 2006, the County contends it had a contractual right to recoup the defense costs, and the trial court erred in failing to uphold the contract. Second, the County argues it is entitled to recover its costs under Labor Code section 2865 and asserts the trial court erred when it concluded the County's Labor Code claim was preempted by the GCA.

In his appeal, Scagliotti primarily argues the trial court erred under sections 825, 825.2, and 996.4 in concluding he was not entitled either to reimbursement of the $27,000 in defense costs he incurred in the Pekin litigation or indemnification of the $220,000 settlement he personally paid. In the alternative, Scagliotti asserts he is "at least" entitled to indemnification of $12,500 of the settlement based on a concession by former joint counsel.

Neither party in its initial briefing in this court analyzed the applicability of the GCA's definition of "injury," although the trial court relied on this definition in part in its ruling against Scagliotti on his cross-complaint. We requested supplemental briefing on whether this definition affects the claims on appeal asserted by each party. In its supplemental briefing, the County argues the definition of injury in the GCA precludes recovery by Scagliotti of both the settlement payment and his defense costs and therefore supports the trial court's judgment against Scagliotti on his cross-complaint. Scagliotti, by contrast, contends that the definition of injury is irrelevant to his right to reimbursement by the County. We address the parties' arguments on this issue in our consideration of Scagliotti's appeal.

In addition, the County and Scagliotti each challenge the trial court's refusal pursuant to Code of Civil Procedure section 1038, subdivision (a), to award either side its respective attorney fees incurred in the reimbursement litigation. We will discuss these claims together after considering the County's and Scagliotti's other arguments related to the reimbursement litigation.

A. Statutory Background

These appeals require us to consider the legal relationship between two statutory schemes—the GCA and the PRA.

1. Government Claims Act (GCA)

The GCA (§ 810 et seq.),¹¹ enacted in 1963, "is a comprehensive statutory scheme governing the liabilities and immunities of public entities and public employees for torts." (Quigley v. Garden Valley Fire Protection Dist. (2019) 7 Cal.5th 798, 803.) Pursuant to the terms of the GCA, "there is no such thing as common law tort liability for public entities; a public entity is not liable for an injury '[e]xcept as otherwise provided by statute.' " (Ibid.)

11 For several decades, courts commonly referred to the Act as the "Tort Claims Act." In 2007, the California Supreme Court adopted the practice of referring to it as the Government Claims Act, as several of its provisions are not limited to tort claims. (City of Stockton v. Superior Court (2007) 42 Cal.4th 730, 742 (Stockton).)

While tort liability and governmental immunity are its primary focus, the GCA addresses a range of subjects. Both the County's and Scagliotti's appeals involve the GCA's indemnification and defense provisions, addressed in parts 2 and 7 of the Act, respectively. The GCA generally provides that "in the usual civil case brought against a public employee, a public entity is required to defend the action against its employee (Gov. Code, § 995 et seq.) and to pay any claim or judgment against the employee in favor of the third party plaintiff (§ 825 et seq.). A principal purpose of these statutes is to assure 'the zealous execution of official duties by public employees.' " (Farmers Ins. Group v. County of Santa Clara (1995) 11 Cal.4th 992, 997, fn. omitted (Farmers).) We examine provisions of the GCA related to defending public employees and indemnifying them in our discussion of the specific contentions raised by the County and Scagliotti.

2. Political Reform Act (PRA)

The voters enacted the PRA, now codified in section 81000 et seq., as an initiative measure in 1974. (Fair Political Practices Com. v. Superior Court (1979) 25 Cal.3d 33, 37.) The PRA includes financial disclosure requirements for public officials and provides that "in appropriate circumstances the officials should be disqualified from acting in order that conflicts of interest may be avoided." (§ 81002, subd. (c).) The "manifest purpose" of these provisions is to ensure "a better informed electorate and to prevent corruption of the political process." (Thirteen Committee v. Weinreb (1985) 168 Cal.App.3d 528, 532.) To facilitate enforcement of its provisions, the PRA creates a private cause of action. (§§ 91004, 91005; McCauley v. BFC Direct Marketing (1993) 16 Cal.App.4th 1262, 1266-1267.)

The Pekin litigation involves such a private enforcement action. In addition, the Pekin litigation constitutes a "civil action" pursuant to the terms of the PRA. (§§ 91004; 91005, subd. (b).) The PRA, enacted more than 10 years after the GCA, contains no provisions specifically relating to indemnification of or defense for public employees who are subject to such an action. Further, it does not explicitly reference the GCA or indicate that its provisions are exempt from it. Rather, section 91014 of the PRA states that "[n]othing in this chapter shall exempt any person from applicable provisions of any other laws of this state."

Having set out this basic groundwork, we turn first to the County's claims that the trial court erred in concluding that Scagliotti was not required to reimburse it for defense costs it incurred in defending Scagliotti in the Pekin litigation.

B. County's Appeal of the Trial Court's Judgment Denying Reimbursement of Defense Costs

The County asserts Scagliotti must reimburse it for the defense costs it incurred on his behalf in the Pekin litigation pursuant to a contract it allegedly entered into with him in the form of the April 17 and April 19 letters. In the alternative, the County argues it is entitled to reimbursement under section 2865 of the Labor Code. Before examining the merits of these contentions, we set out the provisions of the GCA related to a public entity's duty to defend its employees in civil litigation.

1. Legal Principles

Part 7 of the GCA addresses a public entity's duty to defend a public employee; the relevant provisions appear at sections 995 through 996.6. (See Farmers, supra, 11 Cal.4th at p. 1001.) Pursuant to section 995, "a public entity is generally required to provide for the defense of a civil action brought against an employee or former employee on account of an act or omission in the scope of the employee's employment." (City of Bell v. Superior Court (2013) 220 Cal.App.4th 236, 243 (City of Bell).) Section 995 states in relevant part, "[e]xcept as otherwise provided in Sections 995.2 and 995.4, upon request of an employee or former employee, a public entity shall provide for the defense of any civil action or proceeding brought against him, in his official or individual capacity or both, on account of an act or omission in the scope of his employment as an employee of the public entity." (§ 995.) Although it must provide a defense to the employee, the public entity has no obligation to provide the employee with separate counsel. (City of Huntington Beach v. Petersen Law Firm (2002) 95 Cal.App.4th 562, 567 (City of Huntington Beach).)

The mandatory obligation to defend an employee under section 995 is, in turn, limited by the public entity's right to refuse to provide a defense. A public entity may refuse to defend the employee if it determines the challenged action or omission did not fall within the scope of his or her employment; the employee acted with actual fraud, corruption, or actual malice; or that defense of the action would create a conflict of interest between the public entity and the employee. (§ 995.2, subd. (a); Stewart v. City of Pismo Beach (1995) 35 Cal.App.4th 1600, 1605 (Stewart).)

"[W]hen the conflict of interest is only potential rather than actual, the public entity remains obligated to provide a defense." (City of Huntington Beach, supra, 95 Cal.App.4th at p. 567.) By contrast, with respect to an "actual and specific conflict of interest" the statute provides, "nothing herein shall prevent the public entity from refusing to provide further defense to the employee," and "[t]he public entity shall inform the employee of the reason for the refusal to provide further defense." (§ 995.2, subd. (c).) Even in the case of an actual conflict of interest, the language of the statutory exception to the duty to provide a defense "is permissive." (City of Bell, supra, 220 Cal.App.4th at p. 254.) In other words, a public entity may continue to provide a defense to an employee posing an actual conflict of interest, but it may also refuse to provide any further defense under these circumstances. (Ibid.)

Once the public entity provides for the defense of an employee, section 996 generally prohibits the public entity from recovering defense expenses from the employee. Section 996 states "[a]ll of the expenses of providing a defense pursuant to this part are proper charges against a public entity. A public entity has no right to recover such expenses from the employee or former employee defended."

With these principles in mind, we first turn to the County's contract-based claim that Scagliotti must reimburse it for his defense costs.

2. Contract Claim

The County contends the judgment denying it reimbursement of Scagliotti's defense costs should be reversed because there was a contract between it and Scagliotti that he would repay these defense costs if he were proven to have acted "wrongfully." The County anchors its contractual theory on the April 17 letter from joint counsel and the April 19 letter from county counsel.

Scagliotti asserts that the County's contract theory fails for several reasons. Scagliotti argues the County forfeited this argument by failing to raise it at or before trial. Further, Scagliotti maintains that, as a matter of law, a public entity may not contract around its obligation to pay defense costs once it has undertaken that employee's defense. In Scagliotti's view, the public entity has the options only of providing a defense or refusing to provide a defense. If it chooses to provide a defense, it may never recover those costs from its employee. Finally, Scagliotti disputes that either letter indicates the parties intended for him to waive his statutory right to a defense paid for by the County.

The County challenges Scagliotti's contention of forfeiture, asserting it properly raised its contractual right to reimbursement in its posttrial motion to the trial court and arguing we may decide this issue because the contract's terms are undisputed and thus solely implicate questions of law. On the merits, the County maintains that nothing in the GCA prevents a public entity from contracting for what it describes as a "reservation of rights" to its defense costs, and it contends it did so in the April 17 and 19 letters.

We assume without deciding that the County adequately preserved this issue for appeal by raising it in the trial court. However, as we explain below, we reject the County's contract-based claim.

The County and Scagliotti disagree whether the GCA allows parties to enter into a contract after the public entity has undertaken a defense for an employee that provides for reimbursement of defense costs, effectively overriding sections 995 and 996.¹² To resolve this question, we begin with the familiar principles of statutory interpretation. (Weiss v. People ex rel. Dept. of Transportation (2018) 20 Cal.App.5th 1156, 1168, review granted on other grounds June 13, 2018, S248141 (Weiss).) " 'The primary purpose of statutory construction is to ascertain the Legislature's intent.' . . . [W]e ascertain the Legislature's intent ' "with a view to effectuating the purpose of the statute, and construe the words of the statute in the context of the statutory framework as a whole" ' [citation]. ' "If the language of the statute is not ambiguous, the plain meaning controls and resort to extrinsic sources to determine the Legislature's intent is unnecessary." [Citation.]' [Citation.] But if the statutory language ' "leaves doubt about meaning, we may consult other evidence of the Legislature's intent, such as the history and background of the [provision]." ' " (Ibid.) Moreover, "we may not 'insert what has been omitted' from a statute." (Ibid.)

12 In its supplemental briefing, the County for the first time contends the entire GCA is inapplicable to civil enforcement actions, such as the Pekin litigation, brought under the PRA. For the reasons explained below in our discussion of Scagliotti's appeal, we decline to address this new argument.

As described above, section 996 unambiguously provides that "[a]ll of the expenses of providing a defense pursuant to this part are proper charges against a public entity. A public entity has no right to recover such expenses from the employee or former employee defended." (§ 996.) We need not here resolve the general question whether parties may contract around the limitations of section 996 because we determine, even if the GCA does not foreclose such a contract, neither the April 17 nor April 19 letter evidences an agreement that Scagliotti would reimburse the County for his defense costs.

"The interpretation of a contract is a judicial function." (Wolf v. Walt Disney Pictures & Television (2008) 162 Cal.App.4th 1107, 1125.) "[T]he trial court 'give[s] effect to the mutual intention of the parties as it existed' at the time the contract was executed. (Civ. Code, § 1636.)" (Id. at p. 1126.) Where—as here—the parties do not offer conflicting extrinsic evidence regarding the document's meaning, the objective intent of the contracting parties is a legal question determined solely by reference to the contract's terms. (Civ. Code, §§ 1638, 1639; see also Founding Members of the Newport Beach Country Club v. Newport Beach Country Club, Inc. (2003) 109 Cal.App.4th 944, 956.)

The only mention of legal fees appears in the April 17 letter from then-joint counsel Serverian to Scagliotti, County Counsel Valencia, and Deputy County Counsel Chaffee. It provided, in relevant part, that "the County is reserving its right to obtain recovery from you . . . of . . . legal fees incurred in defending the Action."

The Government Code does not give public entities like the County any statutory right to obtain recovery of legal fees expended defending their employees and former employees. Instead, section 996 provides just the opposite. The letter does not explain the source of the claimed preexisting right to reimbursement of its defense costs from an employee. Accordingly, the letter is ambiguous.

" ' "When a dispute arises over the meaning of contract language, the first question to be decided is whether the language is 'reasonably susceptible' to the interpretation urged by the party. If it is not, the case is over." ' " (Brown v. Pacifica Foundation, Inc. (2019) 34 Cal.App.5th 915, 931.) The County claims the language authorizes it to recoup its defense costs from Scagliotti if the claims against him were proven. Scagliotti disagrees, as do we.

The April 17 letter's vague and undefined statement that "the County is reserving its right to obtain recovery from you . . . of . . . legal fees incurred in defending the Action" does not identify the source of the claimed right, make any reference to section 996, or suggest that the County and Scagliotti were agreeing that Scagliotti was thereby giving up his own right to have the County pay his defense costs. As the April 17 letter is not reasonably susceptible to the County's interpretation that the parties impliedly agreed in it to circumvent section 996, we reject the County's contention that it provides a contractual right to reimbursement of defense costs from Scagliotti.

The April 19 letter provides even less support for a contractual basis for the County to recoup defense costs from Scagliotti. The letter states that "the County intends to, and will, initially provide you with a defense to the claims being made against you. If, however, at anytime during the course of the litigation, it appears, in the judgment of the County, that the claims against you arise out of actions which were outside the scope of your employment, the County reserves the right to withdraw its defense." While the language anticipates the withdrawal of the defense (as the County eventually did), it is silent as to any future recoupment of defense costs already paid by the County.

For these reasons, the two letters relied upon by the County do not provide a basis grounded in contract for reversing the judgment as to the County's complaint for recoupment from Scagliotti of the defense costs it incurred on his behalf in the Pekin litigation.

3. Labor Code Claim

Alternatively, the County contends it has a right to recoup its defense costs based on Labor Code section 2865. Labor Code section 2865 provides that "[a]n employee who is guilty of a culpable degree of negligence is liable to his employer for the damage thereby caused to the employer. The employer is liable to the employee if the service is not gratuitous, for the value of the services only as are properly rendered." (Lab. Code, § 2865.)

"The proper interpretation of a statute and the application of the statute to undisputed facts are questions of law." (Lozada v. City and County of San Francisco (2006) 145 Cal.App.4th 1139, 1149.) As a general principle of statutory construction, "a particular or specific provision will prevail over one which is more general." (Los Angeles Police Protective League v. City of Los Angeles (1994) 27 Cal.App.4th 168, 178-179 (Los Angeles Police Protective League).)

Based on this principle, we conclude the general language of Labor Code section 2865 does not displace section 996 in cases involving the payment of defense costs for public employees such as Scagliotti. Section 996 clearly states that public entities may not recover defense costs from employees. (§ 996.) Courts have consistently determined that the specific defense provisions of the GCA prevail over other sections of the Labor Code in cases involving the reimbursement of defense costs incurred by public employees. (See Thornton v. California Unemployment Ins. Appeals Bd. (2012) 204 Cal.App.4th 1403, 1420-1421 (Thornton) [concluding public entity had no obligation to reimburse public employee under Labor Code section 2802 as that provision must yield to section 996.4]; Los Angeles Police Protective League, supra, 27 Cal.App.4th at p. 180 [specific provisions of section 995.8 pertaining to public employer's defense of criminal action or proceeding against public employee control over general provisions of Labor Code section 2802].)

Although the County distinguishes these cases on the ground that they involved public employees' claims to payment by a public employer and not a public entity's claim for reimbursement from an employee, the County cites no legal authority in support of its contention that this factual difference carries any legal significance. As a matter of statutory construction and in light of the explicit language in section 996, we conclude Labor Code section 2865 cannot be construed as permitting a public entity employer to recover legal fees expended to defend an employee.¹³

13 The County also cites principles of collateral estoppel in support of its argument under the Labor Code. Relying on Scagliotti's 2015 settlement payment in the Pekin litigation, the County argues that this settlement "operates as a retraxit collaterally estopping him to deny liability under the Labor Code." As we do not agree that the Labor Code entitles the County to reimbursement of defense costs, we need not analyze the applicability of collateral estoppel here.

4. Public Policy Considerations

Finally, the County argues it is fundamentally unfair as a matter of public policy for taxpayers to have funded a defense amounting to $470,000 for a "rapacious" former public official where there has been a judicial determination that the employee intentionally committed a wrongful act. The County acknowledges that the GCA does not provide it a right to reimbursement, and "Courts of Appeal have found [the GCA] to preempt employees' claims against public agencies." The County, however, argues that "no case applies it to public employer's claims against faithless employees." We are not persuaded that this distinction dictates our analysis here.

As noted above, section 995 mandates the provision of a defense in a civil proceeding (subject to certain exceptions not applicable to the $470,000 in costs incurred by the County), and section 996 prohibits the public entity from recovering such expenses from an employee or former employee. "Our duty as a court is to apply the governing statutes as written to the facts of the case before us, not to rewrite the statutes to make them more just or fair in particular circumstances." (Thornton, supra, 204 Cal.App.4th at p. 1419.) As another court has noted, "changes in the manner in which defenses in civil actions are provided for public employees have the potential for enormous fiscal impact on state and local governments. The relationships of public employee groups and their respective employers are also matters of considerable importance to the functioning of government in this state. These are not problems well suited to ad hoc judicial solution. We therefore decline to attempt modification of the existing legislative scheme." (Laws v. County of San Diego (1990) 219 Cal.App.3d 189, 201.) We agree and similarly decline to override the statutory text applicable here.

For these reasons, we conclude the trial did not err in denying the County's cause of action for defense costs and affirm its judgment against the County.¹⁴

14 The County also challenges the trial court's denial of its motions for a new trial and to vacate the judgment. In support of this argument, the County advances the same arguments we have rejected above. Therefore, we also affirm the trial court's posttrial motions. In addition, based on our conclusion that the County's Labor Code claim in the County's complaint fails, we do not reach Scagliotti's other arguments in support of affirmance.

We next to turn to Scagliotti's appeal of the trial court's ruling that he was not entitled to reimbursement by the County of costs he incurred in connection with the Pekin litigation.

C. Scagliotti's Appeal of the Trial Court's Judgment Denying Reimbursement of Defense Costs and Indemnification

As described above, Scagliotti's cross-complaint sought $247,000 from the County, comprised of the (1) $220,000 settlement he paid to resolve the Pekin litigation and (2) $27,000 in attorney fees he asserts he incurred after the County withdrew from his defense. In this court, Scagliotti appeals the trial court's rejection of his claims to reimbursement of these sums.

1. Legal Principles

We have set out above the GCA's provisions related to a public entity's obligation to defend a public employee, which appear in part 7 of the Act. The sections related to indemnification appear in part 2.

Sections 825 and 825.2 address indemnification—in this context, compensation for judgments and settlements—in civil suits against public employees. (Rivas v. City of Kerman (1992) 10 Cal.App.4th 1110, 1117 (Rivas).) Section 825, subdivision (a) (hereafter section 825(a) ¹⁵), contains two paragraphs, both of which include the term "injury." Section 810.8 of the GCA, in turn, defines "injury" as "death, injury to a person, damage to or loss of property, or any other injury that a person may suffer to his person, reputation, character, feelings or estate, of such nature that it would be actionable if inflicted by a private person."

15 The other subdivisions of section 825 are irrelevant to the issues here.

Section 825(a) reads in full:

"Except as otherwise provided in this section, if an employee or former employee of a public entity requests the public entity to defend him or her against any claim or action against him or her for an injury arising out of an act or omission occurring within the scope of his or her employment as an employee of the public entity and the request is made in writing not less than 10 days before the day of trial, and the employee or former employee reasonably cooperates in good faith in the defense of the claim or action, the public entity shall pay any judgment based thereon or any compromise or settlement of the claim or action to which the public entity has agreed.

"If the public entity conducts the defense of an employee or former employee against any claim or action with his or her reasonable good-faith cooperation, the public entity shall pay any judgment based thereon or any compromise or settlement of the claim or action to which the public entity has agreed. However, where the public entity conducted the defense pursuant to an agreement with the employee or former employee reserving the rights of the public entity not to pay the judgment, compromise, or settlement until it is established that the injury arose out of an act or omission occurring within the scope of his or her employment as an employee of the public entity, the public entity is required to pay the judgment, compromise, or settlement only if it is established that the injury arose out of an act or omission occurring in the scope of his or her employment as an employee of the public entity.

"Nothing in this section authorizes a public entity to pay that part of a claim or judgment that is for punitive or exemplary damages." (§ 825(a), italics added.)

Section 825.2 sets out the circumstances under which an employee who has paid a claim or judgment against him or her is entitled to "recover the amount of such payment from the public entity." (§ 825.2, subd. (a) (hereafter section 825.2(a)).) Section 825.2(a) provides, "Subject to subdivision (b), if an employee or former employee of a public entity pays any claim or judgment against him, or any portion thereof, that the public entity is required to pay under Section 825, he is entitled to recover the amount of such payment from the public entity."

Section 825.2, subdivision (b) (hereafter section 825.2(b)) addresses the situation where the public entity did not conduct the defense or conducted the defense pursuant to a reservation of rights. Section 825(b) states, "If the public entity did not conduct his defense against the action or claim or if the public entity conducted such defense pursuant to an agreement with him reserving the rights of the public entity against him, an employee or former employee of a public entity may recover from the public entity under subdivision (a) only if he establishes that the act or omission upon which the claim or judgment is based occurred within the scope of his employment as an employee of the public entity and the public entity fails to establish that he acted or failed to act because of actual fraud, corruption or actual malice."

Against this statutory backdrop, we first examine Scagliotti's claim that the County must indemnify him for the payment he made to settle the Pekin litigation. We then turn to his contention that the County must reimburse him for the defense costs he incurred after the County withdrew from his defense.

2. Indemnification by the County of the Pekin Settlement Payment

Scagliotti advances two independent arguments in support of his contention that the County must reimburse him for the Pekin settlement payment—one based on the statutory provisions related to indemnification in the GCA and one based on a promise the County allegedly made to him. We turn first to Scagliotti's statutory argument, grounded in sections 825 and 825.2 of the GCA.

a. Sections 825 and 825.2

Regarding the settlement payment, Scagliotti argues he is entitled under sections 825 and 825.2 to indemnification from the County. The trial court rejected Scagliotti's contention, reasoning that the right to indemnification under the GCA applies only to claims or actions involving "an injury," as that term is defined in section 810.8 of the GCA. In its supplemental briefing, the County adopts this position. Scagliotti, by contrast, argues the definition of injury has no bearing on his right to indemnification. In particular, he contends that, while the first paragraph of section 825(a) contains the term "injury," the second paragraph does not and therefore is not limited to suits involving an injury. In Scagliotti's view, the second paragraph of section 825(a) requires the public entity to indemnify an employee whenever it "provides an unconditional defense and the public employee cooperates in the defense."

As described above, the GCA defines "injury" as "death, injury to a person, damage to or loss of property, or any other injury that a person may suffer to his person, reputation, character, feelings or estate, of such nature that it would be actionable if inflicted by a private person." (§810.8, italics added; see also § 810 [providing "[u]nless the provision or context otherwise requires, the definitions contained in this part govern the construction of [the GCA]."].

The parties have not cited and our own research has not revealed any reported decision analyzing the term injury as defined in section 810.8 either in the context of the indemnification of a public employee under sections 825.2 and 825 or in a suit involving violations of the PRA.

In the absence of direct precedent, we look to other decisions examining the relevance of the definition of injury in the GCA. In City of Dinuba v. County of Tulare (2007) 41 Cal.4th 859, the California Supreme Court addressed the application of the definition of injury in section 810.8 to an alleged claim that a county had misallocated property tax revenue. (Id. at p. 863.) The court concluded that the county was not immune from suit under the GCA, because the statutory immunity applied only to suits alleging an injury, as defined in the Act. (Ibid.) The court highlighted the "narrow meaning" of injury under the GCA and stated "[t]he wrong plaintiffs complain of 'is one which by its very nature could not exist in an action between private persons . . . . As a result, the injury alleged in this case is not included within the Tort Claims Act's definition of injury.' " (Id. at p. 867.)

The California Supreme Court in Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962 similarly concluded the GCA did not provide a cause of action against a public entity that failed to comply with wage obligations set out in the Labor Code because the relevant statute limited liability to causes of action involving an injury, as defined by section 810.8. (Id. at pp. 967-968.) The court reasoned that the injury alleged "is one which by its very nature could not exist in an action between private persons; if the defendant awarding body were not a public entity, there would be no injury. As a result, the injury alleged in this case is not included within the Tort Claims Act's definition of injury." (Id. at p. 968.) The court noted, "The recovery of statutory penalties by a state agency for failure to pay the prevailing wage on a public work does not fall within the ambit of the types of interests that are protected in actions between private persons, and therefore is not an injury for purposes of the Tort Claims Act. (See Gov. Code, § 810.8, and Cal. Law Revision Com. com., Deering's Ann. Gov. Code, § 810.8, supra, p. 125.)" (Id. at p. 970.)

As was the case with the alleged violations in Dinuba and Aubry, the Pekin litigation involved violations of the PRA which, by definition, could not exist in an action between private persons. The obligations Scagliotti violated flowed solely from his role as a public official. (§§ 87200, 87203.) Instead of involving an injury to plaintiff Pekin, the actionable wrong in in the litigation was "the adulteration of the political process, [in which] the damage to the citizenry is significant but the injury to any one citizen is not only nebulous but also indirect." (See People v. Roger Hedgecock for Mayor Com. (1986) 183 Cal.App.3d 810, 817.)

Scagliotti asserts section 825(a) requires the County to reimburse him for his payment to settle the Pekin litigation. However, the text of section 825(a) limits its application to "any claim or action against him or her for an injury . . . " (§ 825(a), italics added.) Under the terms of the GCA—in particular the definition of injury in section 810.8—the claim or action must be one that could exist between private persons, which the Pekin litigation could not. Based on this clear statutory language, we conclude that the indemnification obligation flowing from section 825(a) does not apply to the PRA claims in this case, and the County was not required under this provision to indemnify Scagliotti for the civil settlement he paid in the Pekin litigation.

We reject Scagliotti's arguments to the contrary. Scagliotti contends that the definition of injury set out in section 810.8 of the GCA applies to the provisions of the GCA addressing governmental liability and immunities but not to those relating to indemnification. However, he cites no authority for that contention, and nothing in the text of the GCA itself supports this conclusion. To the contrary, the definitions applicable to the GCA set out in sections 810.2 et seq. apply generally to the entire GCA. (§ 810.) In light of the clarity both of section 825(a)'s reference to injury and the definition of that term in the GCA, we do not deem it necessary to refer to the GCA's legislative history.

We recognize that at least two cases have assumed—contrary to our conclusion here—that the indemnification provisions of the GCA apply where the alleged violations relate to duties that apply solely to public officials. (See, e.g., Williams v. Horvath (1976) 16 Cal.3d 834, 836 [suit alleging violation of the federal Civil Rights Act (42 U.S.C. § 1983)]; Tenwolde v. County of San Diego (1993) 14 Cal.App.4th 1083, 1093 (Tenwolde) [suit alleging violation of statute prohibiting public employee from on-duty participation in political activities].) However, neither of these opinions considered the relevance of the GCA's definition of injury to sections 825 or 825.2, and cases are not authority for propositions not considered. (People v. Ault (2004) 33 Cal.4th 1250, 1268, fn. 10.) In the absence of any discussion or apparent consideration in these cases of the GCA's definition of injury, we respectfully disagree with the premise of these decisions that the indemnity provisions of the GCA apply to suits alleging injuries which by their nature could not exist in an action between private persons.

We also reject Scagliotti's contention that the absence of the term injury in the first sentence of the second paragraph of section 825(a) means that the second paragraph contains a broader right to indemnity than does the first paragraph, which does reference the term. The second sentence in the second paragraph does reference injury. In addition, the second paragraph of section 825(a) is dependent upon the meaning of the first paragraph and inferentially shares its limitations. As another court has noted, "the introductory phrase of paragraph two of subdivision (a) of section 825 reads as a restatement of paragraph one." (Rivas, supra, 10 Cal.App.4th at p. 1117.)

Turning to section 825.2, Scagliotti correctly observes that this provision does not reference injury. However, section 825.2(a) states "Subject to subdivision (b), if an employee or former employee of a public entity pays any claim or judgment against him, or any portion thereof, that the public entity is required to pay under Section 825 , he is entitled to recover the amount of such payment from the public entity." (§825.2(a), italics added.) Because it incorporates the criteria of section 825, section 825.2 is "inextricably interwoven" with it. (Rivas, supra, 10 Cal.App.4th at p. 1117.) By this cross-reference, section 825.2 is limited to situations where the employee could recover under section 825. As section 825 does not provide Scagliotti a right to indemnification, he is also not entitled to indemnification under section 825.2(a).

Section 825.2(b) addresses the situations where the public entity did not conduct the defense or did conduct the defense but entered into a reservation of rights. Section 825.2(b) provides that, in either of these circumstances, "an employee or former employee of a public entity may recover from the public entity under subdivision (a) only if he establishes that the act or omission upon which the claim or judgment is based occurred within the scope of his employment." (§ 825.2(b), italics added.) Therefore, section 825.2(b) is subject to the constraints of section 825.2(a), which in turn is limited to the circumstances where a public employee could recover under section 825.

The comment to section 825.2 in the Law Revision Commission's report confirms this linkage between sections 825.2 and 825. It states "This section permits a public employee to enforce his right of indemnity against the public entity where he has been required to pay a judgment that the entity is required to pay under Section 825 ." (Recommendation Relating to Sovereign Immunity, Tort Liability of Public Entities and Public Employees, 1 Cal. Law Revision Com. Rep. (Jan. 1963) p. 847.) The Law Revision Commission's report is " 'entitled to substantial weight in construing' " the Government Claims Act. (Farmers, supra, 11 Cal.4th at p. 1003, fn. 6.) Accordingly, given that section 825 is limited to claims involving an "injury" as defined by section 810.8, and given the inseparable connection between section 825 and section 825.2, the GCA's definition of injury also applies to section 825.2. As we have previously concluded that the Pekin litigation did not involve a claim for an injury as defined by the GCA, we decide the County did not have a statutory duty to indemnify Scagliotti under section 825 or section 825.2 for the settlement he paid in the Pekin litigation.¹⁶

16 In light of this conclusion, we do not address the County's other arguments related to Scagliotti's claim for indemnification, including that it was not obligated as an equitable matter to indemnify Scagliotti, that section 815.3 precludes indemnification, and that it never agreed to the settlement, a prerequisite to the application of sections 825 and 825.2.

b. Letter from Joint Counsel

In the alternative, Scagliotti argues that the County owes him $12,500 of the Pekin settlement payment based on statements made by former joint counsel in one version of her April 2015 letter. The County does not deny the existence of this language but responds that statements made by outside counsel who had a duty of loyalty to both Scagliotti and the County "are not 'admissions' binding the County." The County also argues that the statement was "not an unqualified admission" but rather a legal conclusion in the context of providing legal advice.

The particular language at issue in joint counsel's letter states: "Based upon the Court's [2015] Decision, it appears that the $12,5000.00 damage assessment for negligent failure to properly complete your Form 700s would fall within the course and scope of your employment and would, therefore, be paid on your behalf by the County. On the other hand, the $225,000.00 damage assessment for intentional violation of the conflict of interest provisions of the Political Reform Act would not fall within the course and scope of your employment and, therefore, would not be paid by the County."

We do not read this language as conceding any binding obligation by the County. Rather, joint counsel states that it "appears" the County would pay the $12,500 based on her legal conclusion that such a negligent act was within the scope of his employment, but she did not make any promises to that effect. Moreover, Scagliotti does not cite any authority for his argument that this statement by itself entitles him to payment by the County. Based on the letter's ambiguous language and the absence of authority cited by Scagliotti, we are not persuaded that he was entitled as a matter of law to reimbursement by the County of $12,500.

For these reasons, Scagliotti has not persuaded us the trial court erred in its conclusion that Scagliotti was not entitled to indemnification for any amount of the payment he made to settle the Pekin litigation. We next consider Scagliotti's contention that the trial court erred in deciding that the County had no obligation to reimburse him for the defense costs he personally incurred in the Pekin litigation.

3. County's Obligation to Pay Scagliotti's Defense Costs

a. Procedural Background

In its April 19, 2006 letter to Scagliotti, the County stated with respect to its duty to defend Scagliotti, "From the face of the Complaint, it is difficult to determine, at this time, whether any of the claims being made against you are within your employment as an employee of the County. For this reason, the County intends to, and will, initially provide you with a defense to the claims being made against you. If, however, at anytime during the course of the litigation, it appears, in the judgment of the County, that the claims against you arise out of actions which were outside the scope of your employment, the County reserves the right to withdraw its defense." The County subsequently withdrew its defense of Scagliotti in the Pekin litigation after the trial court issued its February 2015 statement of decision. The April 2015 letter from joint counsel to Scagliotti stated, "Due to the fact that the Court has found an intentional violation of the Political Reform Act, which falls outside the course and scope of your employment, and triggers the County's reservation of rights, there is now an actual conflict of interest as between you and the County."

After the County withdrew from Scagliotti's defense, plaintiff Pekin filed a posttrial motion for attorney fees, which apparently resulted in Scagliotti incurring approximately $27,000 in attorney fees in successfully defending against the motion.¹⁷

17 Pekin's attorney fee motion and the trial court briefing related to it do not appear in the record on appeal.

In his cross-complaint, Scagliotti sought reimbursement under sections 995 et seq. of the attorney fees he personally incurred in the Pekin litigation. The trial court in the reimbursement litigation denied Scagliotti's request for the $27,000 in attorney fees, finding that "the County had reserved its right to withdraw its representation of Scagliotti in the underlying action, in its April 19, 2006 letter, as well as the clear reading of the Government Code." The trial court did not explain which provision of the Government Code it was referencing in this statement and did not make any express findings related to the scope of Scagliotti's employment. The trial court did not further analyze the legal issues involved in Scagliotti's request for defense costs.

In this court, Scagliotti argues the trial court erred under section 996.4 when it denied his claim for reimbursement of his defense costs. Before we consider the merits of this argument, we first address the County's contention (raised for the first time in supplemental briefing on appeal) that it had no obligation to defend Scagliotti at any time in the Pekin litigation—and thus no obligation to pay for his defense costs—under section 995.

b. Section 995

Section 995 requires, subject to exceptions described in section 995.2 and 995.4, that "upon request of an employee or former employee, a public entity shall provide for the defense of any civil action or proceeding brought against him, in his official or individual capacity or both, on account of an act or omission in the scope of his employment as an employee of the public entity." (§ 995.) Under a plain reading of section 995 and the exceptions described in section 995.2,¹⁸ the County had a mandatory duty to defend Scagliotti in the Pekin litigation unless it found any of the following: " '(1) The act or omission was not within the scope of his or her employment. [¶] (2) He or she acted or failed to act because of actual fraud, corruption, or actual malice. [¶] The defense of the action . . . by the public entity would create a specific conflict of interest between the public entity and the employee or former employee.' " (Torres v. City of San Diego (2007) 154 Cal.App.4th 214, 219-220; §§ 995, 995.2.)

18 The exceptions described in section 995.4 apply only to actions or proceedings brought by the public entity itself and are therefore not relevant to the Pekin litigation. (§ 995.4.)

The County did not, at the outset of the Pekin litigation, determine that defending Scagliotti would give rise to a specific conflict of interest. To the contrary, for many years it defended Scagliotti in the suit. Indeed, the County stated in its opening brief in this court that it was "obliged" to defend Scagliotti pursuant to section 995 and "[a]ccordingly, the County defended Scagliotti" in the Pekin litigation "subject to a reservation of rights." This statement accords with this court's prior opinion, in which we noted that the County provided legal representation to Scagliotti pursuant to section 995, and "the County's provision for Scagliotti's defense is authorized by statute (§§ 995, 996) and cannot be deemed an 'illegal expenditure' of the County's funds." (See Pekin v. Scagliotti, supra, H035867.)

Nevertheless, following our request for supplemental briefing on the applicability of the GCA's definition of injury in section 810.8, the County has changed its position. It now contends that sections 995 and 995.2 are wholly inapplicable to the Pekin litigation, because the public employer's duty to defend is "limited to claims of 'injury.' " Because it is manifestly untimely, we decline to reach the County's new legal theory that sections 995, 995.2, 996, and 996.4 are inapplicable to the Pekin litigation. (See Greenwich S.F., LLC v. Wong (2010) 190 Cal.App.4th 739, 767.)

We therefore turn to the merits of Scagliotti's claim that the trial court erred under section 996.4 in concluding he was not entitled to reimbursement by the County of his defense costs.

c. Section 996.4

Section 996.4 provides, "If after request a public entity fails or refuses to provide an employee or former employee with a defense against a civil action or proceeding brought against him and the employee retains his own counsel to defend the action or proceeding, he is entitled to recover from the public entity such reasonable attorney's fees, costs and expenses as are necessarily incurred by him in defending the action or proceeding if the action or proceeding arose out of an act or omission in the scope of his employment as an employee of the public entity, but he is not entitled to such reimbursement if the public entity establishes [] that he acted or failed to act because of actual fraud, corruption or actual malice."

As made clear by the County's initial reservation of rights in 2006 and joint counsel's 2015 letter to Scagliotti, the County reserved the right to refuse to defend Scagliotti for acts falling outside the scope of his employment. Similarly, the Government Code does not obligate a public employer to defend its employee for acts falling outside the scope of employment. (See §§ 995, 996.4.) In the reimbursement litigation, the trial court implicitly found that Scagliotti's wrongdoing (as determined by the trial court in the Pekin litigation) fell outside the scope of Scagliotti's employment.

Scagliotti bore the burden in the reimbursement litigation of proving that the violations found by the trial court in the Pekin litigation fell within the scope of employment. (Stone v. Regents of University of California (1999) 77 Cal.App.4th 736, 746 (Stone).) With respect to our standard of review of the trial court's decision, "Whether an employee was acting within the course and scope of his employment is generally a question of fact, but if the facts are undisputed and no conflicting inferences are possible, the question is one of law." (Morales-Simental v. Genentech, Inc. (2017) 16 Cal.App.5th 445, 453 (Morales-Simental).) Neither party argues in this court either that there are any facts in dispute or that we should remand the matter to the trial court for further factfinding to resolve conflicting inferences. We therefore review the trial court's finding that Scagliotti's acts fell outside the scope of his employment de novo, recognizing that Scagliotti bore the burden of proof on that question in the trial court and bears the burden of proof on appeal of demonstrating error.

We first set out the legal principles relevant to determining the scope of employment and then apply them to the specific acts of wrongdoing found by the trial court in the 2015 statement of decision in the Pekin litigation.

i. Scope of Employment: General Principles

"The scope of employment has been interpreted broadly under the respondeat superior doctrine in California." (Morales-Simental, supra, 16 Cal.App.5th at p. 452.) Courts reviewing the parameters of scope of employment "accord an extremely broad interpretation to the phrase." (Tenwolde, supra, 14 Cal.App.4th at p. 1091.)

Because of the breadth accorded by California courts to the scope of employment, an employer's liability can extend to significant acts of employee wrongdoing. As the California Supreme Court has observed, it is "well established, if somewhat surprising on first encounter . . . that an employee's willful, malicious and even criminal torts may fall within the scope of his or her employment for purposes of respondeat superior, even though the employer has not authorized the employee to commit crimes or intentional torts." (Lisa M. v. Henry Mayo Newhall Memorial Hospital (1995) 12 Cal.4th 291, 296-297 (Lisa M.).)

For example, the California Supreme Court held that a truck driver was acting within the scope of his employment when, while driving a truck to make a delivery on behalf of his employer, he got into a dispute with another motorist following a vehicle accident and struck the other driver on the head with a large metal object. (Fields v. Sanders (1947) 29 Cal.2d 834, 836-837.) The court concluded that the doctrine of respondeat superior applied because "[t]he culmination of the quarrel upon [the truck driver's] perpetration of the assault and the infliction of injuries upon plaintiff indicates not a departure from the line and scope of his employment but rather an additional act committed 'in and as a part of' his employer's business." (Id. at p. 841.)

As the California Supreme Court has stated more recently, respondeat superior incorporates not only ideas of "minor character flaws, but also the human tendency toward malice and viciousness." (Lisa M., supra, 12 Cal.4th at p. 300.) The court declined to adopt a rule that "sexual misconduct is per se unforeseeable in the workplace" because it was "not persuaded that the roots of sexual violence and exploitation are in all cases so fundamentally different from those other abhorrent human traits as to allow [such] a conclusion." (Ibid.)

Nevertheless, an employer is not liable for all actions taken by its employees related to their employment. As the California Supreme Court has underscored, "an employer will not be held vicariously liable for an employee's malicious or tortious conduct if the employee substantially deviates from the employment duties for personal purposes." (Farmers, supra, 11 Cal.4th at pp. 1004-1005.) "Stated another way, '[i]f an employee's tort is personal in nature, mere presence at the place of employment and attendance to occupational duties prior or subsequent to the offense will not give rise to a cause of action against the employer under the doctrine of respondeat superior.' [Citation.] In such cases, the losses do not foreseeably result from the conduct of the employer's enterprise and so are not fairly attributable to the employer as a cost of doing business." (Id. at p. 1005.) Ultimately, the California Supreme Court in Farmers held that a deputy sheriff's undisputed sexual harassment of other deputy sheriffs working at the county jail did not fall within the scope of his employment and ruled the county did not have to indemnify him or pay for his costs for defending against a sexual harassment lawsuit. (Id. at pp. 997, 1019.)

The respondent superior doctrine applies where the injury bears "a causal nexus to the employee's work." (Lisa M., supra, 12 Cal.4th at p. 297.) This causal nexus has been described in terms of "foreseeability," which means " 'in the context of the particular enterprise an employee's conduct is not so unusual or startling that it would seem unfair to include the loss resulting from it among other costs of the employer's business.' " (Id. at p. 299.) The test of foreseeability aligns with "the central justification for respondeat superior [liability]: that losses fairly attributable to an enterprise—those which foreseeably result from the conduct of the enterprise—should be allocated to the enterprise as a cost of doing business." (Ibid.) Articulated in a different manner, courts have stated the test for scope of employment as a "two-prong disjunctive test:" "The conduct of an employee falls within the scope of his or her employment if the conduct either (1) is required by or incidental to the employee's duties, or (2) it is reasonably foreseeable in light of the employer's business." (Montague v. AMN Healthcare, Inc. (2014) 223 Cal.App.4th 1515, 1521; see also Bailey v. Filco, Inc. (1996) 48 Cal.App.4th 1552, 1561.)

As described above, in the February 2015 statement of decision the trial court in the Pekin litigation decided that Scagliotti had violated the PRA in two ways. First, it found Scagliotti had acted negligently in failing to disclose assets in his Form 700s. Second, it determined Scagliotti had intentionally and wrongfully failed to disclose his potential conflict of interest when participating in the LAFCO vote. We turn first to the negligent omissions in the Form 700s.

ii. Negligent Form 700 Omissions

"Form 700, titled 'Statement of Economic Interests,' is a standard form California public officials and employees must file to disclose their financial holdings." (Gananian, supra, 199 Cal.App.4th at p. 1537, fn. 5.) It is undisputed that Scagliotti was required under the PRA to file, each year, a Form 700. (See §§ 87203, 87200.) As noted in one treatise, "[t]he economic interest disclosure forms of state and local officials (Form 700) may be reviewed for evidence of disqualifying economic or financial interests. These are public records and may be obtained from the agency where the official or employee works." (Asimow, Cal. Practice Guide: Administrative Law (The Rutter Group 2019) ¶ 5:422, p. 5-78.) Further, "Section 91004 of the [Political Reform Act] authorizes . . . a local resident to bring a civil action for damages against one who intentionally or negligently violates its provisions." (Community Cause v. Boatwright (1987) 195 Cal.App.3d 562, 568.)

As described above, in its statement of decision in the Pekin litigation, the trial court determined that Scagliotti's misstatements were done negligently rather than intentionally.¹⁹ It stated, "[a]lthough the court finds that his repeated omissions showed a decidedly careless approach to his reporting obligations, the evidence is not sufficiently persuasive that the omissions in these counts were intentional" and concluded that his conduct was "negligent." For these five "non reporting violations," the trial court assessed a total penalty of $12,500.

19 The trial court found that Scagliotti did make an intentional misstatement on one of the Form 700s related to the Powell Street property implicated by the LAFCO vote, but this misstatement was not one of the five negligent violations found by the trial court and for which the trial court assessed a penalty of $12,500.

The County does not contend that Scagliotti's negligent omissions in his Form 700s fell outside the scope of his employment—instead, the County emphasizes Scagliotti's "intentional" violation related to the LAFCO vote and does not mention Form 700 at all in its legal argument related to the scope of employment. Nor does the County advance a compelling public policy argument for why it should not bear the costs for such negligent omissions. Although the County cites generally to Tenwolde, supra, 14 Cal.App.4th 1083, we conclude that case is distinguishable. In Tenwolde, a Court of Appeal concluded that, as a matter of public policy, a county should not be required to indemnify a public employee for a wrong involving an "illegal expenditure of County funds- a tort by the [employee] against his own employer." (Id. at p. 1092.) No such illegal expenditures of county funds occurred here.

We conclude that Scagliotti's negligent failure to properly report certain assets in his Form 700s fell within the scope of his public employment. Scagliotti was statutorily required to file these forms on an annual basis solely because of his status as a public employee. Although the trial court concluded that Scagliotti's failure to report these assets resulted from carelessness rather than confusion, filling out the Form 700 can be a complex undertaking. (See People v. Thrasher (2009) 176 Cal.App.4th 1302, 1310 [examining whether a promissory note qualifies as a "loan" for purposes of Form 700].) Given the routine and detailed nature of these filing requirements,²⁰ it is reasonably foreseeable that a public employee may make a mistake when filling out the form. Accordingly, we conclude the PRA violations related to the negligent Form 700 omissions fell within the scope of Scagliotti's public employment.

20 For example, section 87207, contains a lengthy list of required disclosures related to income including gifts of $50 or more in value.

Although we do not give it significant weight, we also note that in one version of joint counsel's April 1, 2015 letter, she stated "[b]ased upon the Court's Decision, it appears that the $12,500.00 damage assessment for negligent failure to properly complete your Form 700s would fall within the course and scope of your employment and would, therefore, be paid on your behalf by the County." While we reject Scagliotti's argument that this letter necessarily obligates the County to pay this amount, we agree with the letter's general premise that a negligent failure to "properly complete" a Form 700 can fall within the scope of public employment and does under the facts here. This conclusion, however, does not end our inquiry, as the County would not need to reimburse Scagliotti for defense costs associated with those violations if it can establish "that he acted or failed to act because of actual fraud, corruption or actual malice." (§996.4.)

We decide that the County has not carried its burden on this point. Generally, the County argues that the settlement in the Pekin litigation, which it refers to as a "retraxit," conclusively demonstrated that Scagliotti violated the PRA and therefore his acts were "wrongful, corrupt, fraudulent, illegal" as well as outside the scope of his employment. However, this conclusory assertion falls short of the County's burden of proof. The settlement agreement did not include an admission of wrongdoing, let alone of actual fraud, corruption, or actual malice.

We also reject the County's implicit argument that any violation of an anti-corruption law (such as the PRA) is corruption per se for purposes of section 996.4. The County provides no legal authority for its contention. The trial court in the Pekin litigation found that Scagliotti's failure to report certain assets in his Form 700s were the result of negligence, and the County plainly cannot show that these violations were the result of actual fraud, corruption, or actual malice.

For these reasons, we conclude the County has not established that Scagliotti acted or failed to act because of actual fraud, corruption or actual malice. (§996.4.) Therefore, Scagliotti is entitled under section 996.4 to reimbursement by the County of the defense costs he incurred in the Pekin litigation with respect to the negligent omissions in the Form 700.

iii. The LAFCO Vote

We reach a different conclusion with respect to the LAFCO vote. Scagliotti bears the burden of proving that the violations the trial court found he had committed fell within the scope of his employment. (Stone, supra, 77 Cal.App.4th at p. 746.) As stated above, he has carried this burden with respect to his negligent omissions in the Form 700s. Scagliotti was required to annually file these documents under state law, and the trial court in the Pekin litigation found his failure to properly fill out the forms was merely careless. We have decided, under these circumstances, that these actions were reasonably foreseeable as a consequence of his public employment.

By contrast, the circumstances surrounding Scagliotti's intentional failure to disclose his potential conflict of interest in the LAFCO vote are much less clear from the record. The key question with respect to the determination of whether Scagliotti's actions fall within the scope of his County employment is whether the wrongdoing is "engendered by or arise[s] from the [employee's] work." (Lisa M., supra, 12 Cal.4th at p. 298.) On the limited record before us, we are unable to conclude that the trial court in the reimbursement litigation erred in its implicit finding that Scagliotti's intentional wrongdoing with respect to the LAFCO vote fell outside the scope of his employment. For example, the trial court in the Pekin litigation did not explicitly address whether Scagliotti's actions in the LAFCO vote amounted to self-dealing or whether Scagliotti abused his job-created authority for "purely personal reasons." (See Farmers, supra, 11 Cal.4th at p. 1013 [holding that "for purposes of respondeat superior, employees do not act within the scope of employment when they abuse job-created authority over others for purely personal reasons"].) The trial court in the Pekin litigation made no findings with respect to foreseeability and the LAFCO vote, and we cannot conclude as a matter of law that intentional wrongdoing in this context is foreseeable. Because Scagliotti bore the burden in the reimbursement litigation of demonstrating that this intentional wrongdoing fell within the scope of his employment, his failure to offer any additional evidence as to the LAFCO vote dooms his attempt on appeal to show trial court error. We therefore decline to disturb on appeal the trial court's implicit finding that Scagliotti's intentional wrongdoing with respect to the LAFCO vote fell outside the scope of his public employment.²¹

21 In light of this conclusion, we do not reach the County's alternative argument that Scagliotti has no right to defense costs based on section 815.3,which applies only to intentional torts. (See § 815.3.) As section 815.3 is irrelevant to our analysis, we deny the County's request for judicial notice of its legislative history. (See Stockton Citizens for Sensible Planning v. City of Stockton (2012) 210 Cal.App.4th 1484, 1488, fn. 3.)

d. Amount of Defense Costs

For the reasons explained above, we conclude that the trial court erred under section 996.4 in deciding that the County need not reimburse Scagliotti for his defense costs associated with litigation over his negligent omissions in the Form 700s.

As the record before us does not contain the motion papers for Pekin's request for attorney fees, we do not know whether and to what extent this litigation involved the trial court's finding with respect to the negligent omissions in the Form 700s. We therefore reverse the trial court's judgment and remand the matter in order for the trial court to determine the "reasonable attorney's fees, costs and expenses . . . necessarily incurred by [Scagliotti] in defending the action or proceeding" (§ 996.4) attributable to his defense of the charges involving his negligent omissions in the Form 700s. Scagliotti is entitled to recover this amount from the County.

D. Attorney Fees Under Code of Civil Procedure Section 1038 , Subdivision (a)

The County and Scagliotti each challenge the trial court's refusal to award either side its respective requests for attorney fees incurred in the reimbursement litigation pursuant to Code of Civil Procedure section 1038, subdivision (a) (hereafter Code of Civil Procedure section 1038(a)).

1. Legal Principles

Code of Civil Procedure section 1038(a) states: "In any civil proceeding under the Government Claims Act . . . , the court, upon motion of the defendant or cross-defendant, shall, at the time of the granting of any . . . motion for judgment under Section 631.8 . . ., determine whether or not the plaintiff, petitioner, cross-complainant, or intervenor brought the proceeding with reasonable cause and in the good faith belief that there was a justifiable controversy under the facts and law which warranted the filing of the complaint, petition, cross-complaint, or complaint or answer in intervention. If the court should determine that the proceeding was not brought in good faith and with reasonable cause, an additional issue shall be decided as to the defense costs reasonably and necessarily incurred by the party or parties opposing the proceeding, and the court shall render judgment in favor of that party in the amount of all reasonable and necessary defense costs, in addition to those costs normally awarded to the prevailing party."

"The standard of review of an award of attorney fees under Code of Civil Procedure section 1038 is both de novo and substantial evidence. The 'reasonable cause' prong is reviewed de novo, and the 'good faith' prong is reviewed for substantial evidence." (Austin B. v. Escondido Union School Dist. (2007) 149 Cal.App.4th 860, 888.)

According to its text, Code of Civil Procedure section 1038(a) provides two independent bases for imposing attorney fees following the granting of a motion under Code of Civil Procedure section 631.8—where the party bringing the action did so without reasonable cause or in bad faith. (Kobzoff v. Los Angeles County Harbor/UCLA Medical Center (1998) 19 Cal.4th 851, 860-861 (Kobzoff).) The term " 'reasonable cause' " is generally considered synonymous with " 'probable cause,' " "with 'reasonable cause' defined under an objective standard as ' "whether any reasonable attorney would have thought the claim tenable." ' " (Id. at p. 857.)

2. County's Request for Attorney Fees

In support of its request under Code of Civil Procedure section 1038(a) for fees related to Scagliotti's cross-complaint in the reimbursement litigation, the County relies only on that part of the statute providing for a grant of attorney fees where the action was brought without reasonable cause. While not challenging Scagliotti's underlying motives, the County contends Scagliotti's cross-complaint was "baseless."

As we have found merit to Scagliotti's contention that he is entitled to reimbursement of some defense costs incurred after the County's withdrawal in the Pekin litigation, we disagree that Scagliotti's cross-complaint lacked merit. We therefore affirm the trial court's denial of the County's motion for attorney fees under Code of Civil Procedure section 1038(a).

3. Scagliotti's Request for Attorney Fees

In support of his request under Code of Civil Procedure section 1038(a) for fees incurred in litigating the County's complaint in the reimbursement litigation, Scagliotti relies on both prongs of Code of Civil Procedure section 1038(a). He contends the County acted in bad faith throughout the reimbursement litigation and initiated and maintained meritless claims to recoup the defense costs for what Scagliotti characterizes as political reasons.

We are not persuaded. While certain evidence could have been construed by the trial court as bad faith, such as the County's inclusion of the GCA in both the original and amended complaint notwithstanding the clear language of section 996, there is other evidence supporting the trial court's implicit finding of good faith by the County. For example, the County sought to recover significant defense fees under a particular Labor Code section, and there is no published authority directly addressing the relationship of this provision to the GCA.

Moreover, having independently reviewed the County's theories of liability, we do not agree its claims lacked merit. The County sought reimbursement of significant fees as a matter of public policy and to avoid imposing this cost indirectly on taxpayers. While we have rejected that public policy claim under the circumstances of this case, its lack of success does not mean Scagliotti should receive the statutory fees here. "Under section 1038, a reasonable and good faith attempt to change or modify existing law should not result in a section 1038 award to the defendant." (Kobzoff, supra, 19 Cal.4th at p. 863.) The County's complaint in the reimbursement litigation meets this standard.

In conclusion, we affirm the trial court's denial of both the County's and Scagliotti's motions for fees under Code of Civil Procedure section 1038(a).

III. DISPOSITION

The judgment is reversed and the matter is remanded to the trial court. The trial court is directed to vacate its judgment of April 9, 2018, and to determine, including by conducting a new hearing if appropriate, the reasonable attorney fees, costs and expenses incurred by Scagliotti in defending the Pekin litigation with respect to his negligent Form 700 omissions and to order the County to pay them to him. (Gov. Code, § 996.4.) In all other respects, the trial court should reenter its judgment. In the interests of justice, the parties shall bear their own costs on appeal.

/s/_________

Danner, J.

WE CONCUR:

/s/_________

Elia, Acting P.J.

/s/_________

Bamattre-Manoukian, J.