California Court of Appeals, First District, Second Division
Filed Date 9/25/13
San Mateo County Super. Ct. No. CIV 463671, Trial Judge Honorable Gerald J. Buchwald.
Attorney for Plaintiff and Appellant Hanson Bridgett, Joseph M. Quinn, Adam W. Hofmann; David Jay Morgan.
Attorneys for Defendants and Respondents Hayes Scott Bonino Ellingson & McLay, Mark G. Bonino, Stephen P. Ellingson, Jamie A. Radack; CMD Associates, C. Matthew Didaleusky
For the second time in recent years we are called upon to construe the scope of rule 8.278 of the California Rules of Court (rule 8.278), which governs recovery of costs allowed following a successful appeal. Last year the Supreme Court affirmed a decision by this court, and held that “rule 8.278(d)(1)(F) does not authorize an award of costs for interest expenses and fees incurred to borrow funds to deposit as security for a letter of credit that was procured to secure an appeal bond.” (Rossa v. D.L. Falk Construction, Inc. (2012) 53 Cal.4th 387, 399 (Rossa).) Here, the respondent borrowed money to deposit with the trial court in lieu of securing an appeal bond. After its appeal was successful, it was allowed to recover the more than $200, 000 interest paid on the borrowed funds as a cost of appeal. The costs were included in an amended judgment from which this timely appeal was perfected.
We first consider whether rule 8.278 and the reasoning of Rossa preclude the appellant recovering the interest paid on the borrowed funds as a cost of appeal. We conclude this type of interest is likewise precluded. Next, we consider whether a recent amendment of rule 8.278, which expressly allows recovery of interest in this situation, and which became effective during the pendency of this appeal, should be given retroactive application. We conclude that it should not. In light of these conclusions, we modify the amended judgment by deleting the interest, and affirm the modified, amended judgment.
This dispute arose out of the decision of insurance broker Frederic Holbrook to change his employment from Andreini & Company (Andreini) to MacCorkle Insurance Service, Inc. (MacCorkle), taking a list of clients with him. At the conclusion of a bench trial, the trial court concluded that Holbrook did not breach his contract with Andreini or otherwise misappropriate Andreini’s trade secrets. However, the court further concluded that MacCorkle and its chief executive officer Bernard Lauper were guilty of misappropriating Andreini's trade secrets. Damages were awarded against MacCorkle and Lauper in the amount of $1, 275, 000. Andreini, MacCorkle, and Lauper all appealed. Division Four of this District affirmed the judgment in favor of Holbrook, and reversed that part of the judgment against MacCorkle and Lauper. (Andreini & Co. v. MacCorkle Ins. Service, Inc. (Jan. 14, 2011, A124784) [non pub. opn.].) In short, it was a complete win for MacCorkle and Lauper (who will hereafter be collectively referred to as MacCorkle).
MacCorkle did not post an appeal bond, electing instead to deposit $2, 057, 668.97 with the clerk of the trial court, an amount he borrowed. In April 2011, following receipt of the remittitur, and after the Supreme Court had granted review of our decision in Rossa, MacCorkle filed a memorandum of costs for the expenses incurred on the appeal, seeking $214, 771.40 representing the net interest on the amount borrowed, identifying this item as “other expenses reasonably necessary to secure surety bond.” No longer able to rely on our opinion in Rossa, but clearly hoping that its reasoning would be vindicated, Andreini moved to tax this item of MacCorkle and Lauper’s claimed costs. Relying on Cooper v. Westbrook Torrey Hills, LLP (2000) 81 Cal.App.4th 1294 (Cooper), which we had declined to follow in our Rossa opinion, MacCorkle argued that the interest was allowable under rule 8.278. The matter was extensively argued to the trial court in July 2011. Believing “the equities in this case probably weigh against the award of the interest, ” the court nevertheless felt bound to follow Cooper. The court then entered an amended judgment awarding MacCorkle “$221, 324.52 in costs on appeal... pursuant to Rule 8.278, ” from which Andreini perfected this timely appeal.
In Rossa, our Supreme Court considered that part of rule 8.278 which at the time authorized recovery as appeal costs “The cost to procure a surety bond, including the premium, the cost to obtain a letter of credit as collateral, and the fees and net interest expenses incurred to borrow funds to provide security for the bond or to obtain a letter of credit, unless the trial court determines the bond was unnecessary.” (Rule 8.278(d)(1)(F).) The appellant in Rossa had secured a standby letter of credit for $954, 070 that a surety required before posting an appeal bond. The bank issuing the letter of credit in turn required the appellant to deposit the face value of the letter of credit with the bank. The appellant had to borrow the money to satisfy the bank’s requirement, thereby incurring almost $100, 000 in interest, plus a fee of more than $1, 700 to extend the line of credit. Having won on appeal, the appellant sought to recover these sums, and was rejected by the trial court, then by this court, and finally by the Supreme Court. (Rossa, supra, at p. 391.) Two points of the Supreme Court’s decision are central.
First, after an extensive examination of the principles governing recovery of costs of appeal and the evolution of what is now rule 8.278, the court noted that “provisions allowing the recovery of costs historically have been strictly construed, ” and that this approach “was retained after the Legislature empowered the Judicial Council to prescribe rules for appellate practice.” (Rossa, supra, at p. 395.) The court then explained why ...