Don’t Ignore the Impact of Judicial Discretion on the Outcome and Cost of Trial

Discretion is the better part of valor, a phrase that can be traced to a 15th Century English writer named Caxton, became part of the English vernacular after the publication of William Shakespeare’s ‘King Henry the Fourth’ in the 16th Century. The phrase came into the American lexicon in the 18th Century courtesy of Benjamin Franklin’s ‘Poor Richard’s Almanac’. But what does the phrase mean and, since this is a blog about resolving disputes, does it have any application to alternative dispute resolution principles in the 21stCentury?

To me the phrase “discretion is the better part of valor” means proper judgment is better than unwarranted bravery. Trial lawyers are people of valor because they display courage, spirit, nerve, dedication, and boldness when advocating for their clients. However, there are times during the course of litigation when proper judgment is more important than valor, times when fierce trial advocacy skills are unwarranted, like when lawyers are preparing for, and participating in, mediation.

Mediation advocacy skills come from another toolbox. They are characterized by insight, knowledge, objectivity, patience, prudence, judgment, and, returning to the phrase of the day, discretion, including the wisdom to recognize that trial judges are granted broad discretion in deciding critical issues affecting the outcome and costs of trials. This is an important acknowledgment given the fact that appellate courts do not overturn decisions that are within the discretion of the trial judge unless there has been an abuse of discretion.

Since litigation is so expensive, a lawyer evaluating the risks of going to trial verses the settlement value of a case should take into consideration the discretionary power of the trial court in determining which side is the “prevailing party” for purposes of awarding litigation costs, including, in some cases, attorney fees and expert fees. This task becomes more challenging when there is a possibility of a “mixed result” because neither side can claim a complete victory. For example, when the outcome of a contract claim falls short of a complete victory for one party, then the trial court has discretion to determine which party prevailed on the contract, and it may conclude that neither party sufficiently prevailed to justify an award of attorney fees.

A recent 56 page opinion of the California Court of Appeal illustrates the discretionary power of trial judges in deciding the “prevailing party” issue and which side must bear the costs of litigation. In this breach of contract case, the plaintiff alleged various causes of action in its complaint and the defendant also asserted numerous claims in a cross-complaint. Both sides “won some” and “lost some” through pre-trial motions and trial. Due to the ‘mixed result”, the trial court determined that even though the plaintiff had been awarded substantial damages on its contract claim, plaintiff was not the prevailing party and was not entitled to an award of attorney fees under California Civil Code section 1717. The court of appeal affirmed, concluding the trial court acted within its discretion in denying the motion for attorney fees.

The court of appeal, however, concluded the trial court was in error when it denied plaintiff’s alternative theory for requesting attorney fees pursuant to California Code of Civil Procedure section 998, a statute that encourages parties to make reasonable pre-trial settlement offers and punishes those who reject them. In explaining how it was possible for the plaintiff to lose its motion for attorney fees pursuant to an attorney fee clause in the contract while being granted attorneys fees under Section 998, the court of appeal noted that entitlement to costs under section 998 derives not from which party is the prevailing party under section 1717 but rather from the defendant’s failure to accept a reasonable settlement offer under section 998.

Taking into account the broad discretion of the trial court on a wide range of issues affecting the outcome and costs of trial is always the better part of valor for litigators. It is an essential element in the thorough analysis of the pre-trial settlement value of a case and the prudent practice of many of the outstanding lawyers I have learned from over the years.