North Carolina Business Litigation Report
Does A Trial Judge Have The Discretion To Deny Costs To A Prevailing Party?
If you've ever made a Motion for Costs following a win at summary judgment or a win at trial you know that the law on such motions is a quagmire. Does the trial court have discretion in determining whether to award costs to a prevailing party? Section 6-20 of the General Statutes implies that the Court always has discretion (it's titled "Costs allowed or not, in discretion of Court"), but the answer is muddy.
Judge Gale ruled in a post-judgment ruling last Friday in Dunn v. Dart that the costs listed in and allowed by G.S. N.C. Gen Stat.§7A-305(d) must be awarded to a prevailing party, and that a trial judge lacks any discretion in determining to deny them. He interpreted a less than year old Court of Appeals decision, Khomyak v. Meek, 720 S.E.2d 392 (2011), "[t]o eliminate that discretion and to compel awarding the prevailing party those costs allowed by N.C. Gen Stat.§7A-305(d)"
The Khomyak case represented an admirable effort by Judge McCullough of the Court of Appeals to harmonize the cases laying in the "troublingly divergent path" taken by the COA in ruling on motions for costs that have come to it on appeal.
That "troubling path" includes Smith v. Cregan, 178 N.C. App. 519, 632 S.E.2d 2006 (2006), which held that a trial court does have discretion whether to award costs:
this Court's decision explicitly holds that, for actions governed under section 6-20, such as negligence actions like the present case, the trial court has the discretion to determine whether or not to award costs to the prevailing party, and if the trial court chooses to exercise that discretion, then the trial court is confined to those costs expressly enumerated under section 7A-305(d) or any other statute." Id. at 222 (emphasis added).
Id. at 734, 596 S.E.2d 895.
Since one panel of the Court of Appeals can't overrule another, and since the North Carolina Supreme Court hasn't ruled on the discretion issue, the Smith case is still out there as good (but now questionable) law.
It doesn't take much reading between the lines of the one page Order in Dunn v. Dart to take away that Judge Gale did not look kindly on this Motion for Costs. In fact, he stated that "[i]f the court did have discretion to do so, it would exercise its discretion here to deny all costs."
And he certainly exercised some discretion, in awarding only about five thousand dollars in costs against Defendants' request for more than $130,000 in fees and costs.
Don't forget that this case is a fight between lawyers to carve up a big fat fee about which I wrote last year. There's obviously no love lost between those lawyers, and maybe the Court of Appeals will get another chance to consider the law on Motions for Costs if there is an appeal of this ruling.
Brooks Pierce, LLP
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