Filed 5/12/22 SwiftAir v. Row 44 CA2/7

NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION SEVEN

SWIFTAIR, LLC,

Plaintiff and Appellant

,

v.

ROW 44, INC. et al.,

Defendant s and Respondent s

. B 30 6166

(Los Angeles County Super. Ct. No. SC122964 )

APPEAL from order s of the Superior Court of Los Angeles County. Elaine W. M a ndel , Judge. Affirmed

. Holmgren Johnson: Mitchell Madden and Dennis M. Holmgren; Shamoun & Norman and Stephen R. Tittle, Jr.

, for
Plaintiff and Appellant

. Sheppard, Mullin, Richter & Hampton, Martin D. Katz, and Dylan J. Price for Defendant and Respondent Row 44, Inc.
H awxhurst Harris, Gerald E. Hawxhurst, David S. Harris
and Patrick B. Nichols ; Hawxhurst, Gerald E. Hawxhurst and2

Patrick B. Nichols; Davis S. Harris and David S. Harris for
Defendant and Respondent Southwest Airlines Co

.

INTRODUCTION

SwiftAir, LLC appeals from the trial court’s orders granting
motions by Southwest Airlines Co. and Row 44, Inc

. for attorneys’
fees and costs. SwiftAir argues the court erred in ruling
Southwest and Row 44 were entitled to attorneys’ fees as prevailing pa rties under the relevant contracts . SwiftAir also argues that, because Southwest’s offer to compromise under Code of Civil Procedure section 998 was unreasonable, 1 the trial court erred in awarding Southwest $209,886.89 in fees for experts not ordered by the court

. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

A. SwiftAir Develops a Software Platform Tha t Southwest Decides Not To License
As we described in SwiftAir, LLC v. Southwest Airlines Co. (2022) 77 Cal.App.5th 46 ( SwiftAir I ), i n 2010 SwiftAir was developing a software platform that would allow passengers to make inflight purchase s of coupons and vouchers the passengers
could use at restaurants and other businesses in the ir destination
cities. Later that year Southwest expressed an interest in evaluating the software p latform for use on its flights. In August 2011 SwiftAir and Southwest entered into a
contract titled “Beta Test Agreement

, ” w ith Southwest agreeing

1 Undesignated s tatutory references are to the Code of Civil Procedure.3

to evaluate SwiftAir’s software p latform by testing it for eight

w eeks on some of Southwest’s WiFi

- enabled aircraft

, to report to SwiftAir during the testing period on the software’s performance,
and to notify SwiftAir within 30 days after the testing period
ended whether Southwest intended to use the software “on an
extended basis

. ” The a greement also stated that, in the event
Southwest decided to continue using the software platform,
Sout h west and SwiftAir would “enter into good faith discussions prior to the termination of the Initial Term [of testing] to negotiate a full license agreement.” The parties subsequently amended the Beta Test Agreement to extend the testing period to 24 weeks

. Installing the software platform on Southwest’s planes also required SwiftAir to enter into agreement s with Row 44, the

company that operated Sout hwest’s inflight WiFi service. ( SwiftAir I

, supra , 77 Cal.App.5th at p. 50 .)
At the end of the testing period, Southwest had not decided
whether to license SwiftAir’s software platform , but Southwest
continued “ ‘ to work toward some arrangement whereby the SwiftAir product would be refined and deployed ultimately to Southwest planes

. ’ ” Ultimately, Southwest decided not to license SwiftAir’s software platform. ( SwiftAir I

, supra , 77 Cal.App.5th
at p. 50 .)

B. SwiftAir Sues Southwest and Row 44 , Loses, and Appeals In August 2014 SwiftAir filed this action against Southwest
and Row 44

. 2 In the operative first amended complaint SwiftAir

2 Row 44 reports that, as a result of bankruptcy proceedings discussed below, “substantially all” of it s assets have been sold to4

asserted 12 causes of action against both defendants , including
for breach of contract and the covenant of good faith and fair dealing, quantum meruit , and interference with contractual relations and prospective economic advantage. ( SwiftAir I

, supra , 77 Cal.App.5th at p. 51 .) T he trial court sustained a demurrer by Row 44 to four of the causes of action against i t without leave to amend. Southwest and Row 44 then each filed a motion for summary judgment or

, in the alternative, summary adjudication

, arguing , among other things, the federal Airline Deregulation Act (49 U.S.C. § 41713(b)(1)) (ADA) p reempted most of SwiftAir’s remaining causes of action

. Row 44 also moved for summary adjudication o n SwiftAir’s claims that Row 44
committed various distinct breache s of agreement s between
Row 44 and SwiftAir

, as alleged in SwiftAir’s first cause of action.
The trial court ruled the ADA preempted all of SwiftAir’s remaining causes of action except for the first ( against both
defendants ) for breach of contract (which included a claim for breach of the covenant of g ood faith and fair dealing). T he court
therefore granted motions by Southwest and Row 44 for

“ GEE Acquisition Holdings Corp. and its designees, which included Row 44’s rights of recovery against SwiftAir in connection with the t rial court’s post

- judgment award of attorneys’ fees and costs.” Because there has been no motion to substitute another entity in the action , however, t his appeal may continue in the name of Row 44. (See § 368.5 [“ An action or proceeding does not abate by the transfer of an interest in the action or proceeding or by any other transfer of an interest. The action or proceeding may be continued in the name of the original party, or the court may allow the person to whom the transfer is made to be substituted in the action or proceeding. ”].)5

summary adjudication on all other remaining causes of action. In addition, on the breach of contract cause of action against Row 44, the court summarily adjudica ted i n favor of Row 44 some, but not all, of the alleged “separate and distinct breach es

. ” Finally,

o n a motion by Southwest for reconsideration, the court also granted summary adjudication on th at portion of the first cause of action against Southwest that alleged breach of the covenant of good faith and fair dealing. At this point , what remained of SwiftAir’s lone breach of

contract cause of action against Southwest were claims based on two allege d breaches. F irs t, SwiftAir alleged Southwest breached the Beta Test Agreement by not entering into good

- faith discussions to negotiate a full licensing agreement and by not timely removing SwiftAir’s software platform from Southwest’s planes after the te sting period

. S econd

, SwiftAir alleged
Southwest breached an implied

- in

- fact agreement requiring i t to install SwiftAir’s software platform on “WiFi

- enabled aircraft flying into 11 of Southwest’s top destinations, with more cities added throughout the ter m” of the Beta Test Agreement.
Southwest now served SwiftAir with a n offer to compromise under section 998. In exchange for SwiftAir ’s voluntary dismiss al with prejudice of all claims against Southwest, Southwest offered to pay SwiftAir $50,000 and to agree that SwiftAir and Southwest would each bear its attorneys’ and expert fees

, costs, and expenses. In an accompanying letter,
Southwest wrote that it believed “this offer is more than reasonable in light of the Court’s recent summary judgment rulings

. . . . As you have previously acknowledged, SwiftAir does not have damages related to

. . . the Beta Test Agreement

. . . . Further, SwiftAir’s expert report

. . . fails to identify any damages6

related to” agreements between Southwest and SwiftAir. SwiftAir did not respond to the offer to compromise

. The parties tried SwiftAir’s remaining cause s of action to a jury. Finding that Southwest breach ed the Beta Test A greemen t
, but that the breach did not harm SwiftAir

, the jury award ed
SwiftAir n o damages for the breach. Finding SwiftAir did not substantially perform its obligations under the implied

- in

- fact agreement with Southwest and was not excused from doing so, the jury f

ound Southwest was not liable for any breach of that
agreement. The jury found Row 44 was not liable on the cause of action against it.
SwiftAir fil ed motions for judgment notwithstanding the
verdict and for a new trial , contending that, because the jury
found Southwest breached the Beta Test Agreement, the jury
should have award ed SwiftAir $878,000 in damages “for the monies SwiftAir [spent] developing” its software platform

. T he trial court denied these motions, and SwiftAir appealed from the judgment.

C. T he Trial Court Grants Motions by Southwest and
Row 44 for Attorneys’ Fees, and SwiftAir Files This Appeal
Meanwhile

, citing attorneys ’ fees provi sions in their agreements with SwiftAir, Southwest and Row 44 each filed a postjudgment motion for attorneys’ fees and costs as a prevailing
part y in the action

. Southwest also contended it was entitled to attorneys’ fees and costs because SwiftAir failed to achieve a more favorable result than the one Southwest proposed in its
section 998 offer to compromise.7 Concluding Southwest and Row 44 were prevailing parties,
the trial cou rt granted their motions. The court awarded Southwest $1,501,988.80 in attorneys’ fees and $30 9
, 362.40 in

costs. The court denied a motion by SwiftAir to strike fro m Southwest’s memorandum of costs $209,886.89 in expert fees

,

r uling Southwest was entitle d to recover those fe es under
section 998. The court awarded Row 44 $2,216,117.50 in attorneys’ fees and $57,830.44 in costs. SwiftAir timely appealed the orders granting the motions

. That ’s this appeal.

D

. In the Appeal from the Judgment, W e Dismiss Row 44
and Affirm the Judgment in Favor of Southwest And again meanwhile, w ith SwiftAir’s two appeal s pending,
Row 44 and various affiliates fil ed for bankruptcy under Chapter 11 of the United States Bankruptcy Code

, which resulted in stays of bot h appeals

. A fter the bankruptcy court
confirmed a plan, Row 44 asked this court to dismiss it from SwiftAir’s appeal from the judgment (but not from this appeal )

. Pointing out that SwiftAir had not filed a proof of claim in the bankruptcy proceeding , Row 44 argued the bankruptcy plan and
confirmation order barred SwiftAir from pursuing any claims against Row 44, including the claims asserted in this action. After receiving opposition from SwiftAir , we granted Row 44’s request and dismissed Row 44 from th e appeal from the judgment

. The Supreme Court denied SwiftAir’s petitio n for
review. SwiftAir’s appeal from the judgment in favor of Southwest, however, proceeded. SwiftAir contended t he trial court erred in granting Southwest’s motion for summary adjudicatio n because the ADA did not preempt any of SwiftAir’s causes of actio n and in8

denying SwiftAir’s motions for judgment notwithstanding the verdict and for a new trial because the jury should have awarded $878,000 in damages on SwiftAir’s br each of contract cause of
action against Southwest

. We rejected those contentions and
affirmed the judgment. ( SwiftAir I

, supra , 77 Cal.App.5th at

p. 59.)

DISCUSSION

A. The Trial Court Did Not Err in Granting Southwest’s Motion for Attorneys’ Fees
SwiftAi r argues that in granting Southwest’s motion for attorneys’ fees the trial court erred in two respects. First,
SwiftAir argues the court erred in ruling Southwest was a prevailing party because that ruling rested on the orders SwiftAir challenged in its appeal from the judgment: the orders granting Southwest’s motion for summary adjudication and denying
SwiftA ir’ s motions for judgment notwithstanding the verdic t and
for a new trial

. I n that appea l , however, we conclud ed th e trial
court did not err . Therefore, the court did not err in ruling Southwest was a prevailing party

. Second, SwiftAir argues the trial court erred by awarding Southwest $209,886.89 in expert witness fees. SwiftAir argues
Southwest was not entitled to re cover those costs under
section 998 because the experts were not ordered by the court
and because Southwest’s offer to compromise was not reasonable. 3 This argument is meritless.

3 “Fees of experts not ordered by the court are not ordinarily recoverable as costs to a prevailing party, unless expressly9 “Section 998 allows for any party in a civil suit to serve a settlement offer to any other party before the commencement of trial. Section 998, subdivision (c)(1) provides that ‘[i]f an offer made by a defendant is not accepted and the plaintiff fails to obtain a more favorable judgment or award, the plaintiff shal l not recover his or her postoffer costs and shall pay the defendant’s costs from the time of the offer. In addition,

. . . the court

. . . , in its discretion, may require the plaintiff to pay a reasonable sum to cover costs of the services of expert wit nesses

. . . actually incurred and reasonably necessary in

. . . preparation for trial or
arbitration

. . . of the case by the defendant. ’ ” 4 ( Adams v. Ford
Motor Co. (2011) 199 Cal.App.4th 1475, 1482

- 1483 ( Adams ) ; see id. at p. 1483 [section 998, subdivision (c), “ gives the trial court discretion to award a prevailing defendant the costs of expert
witnesses whether incurred before or after the settlement offer ”] .) The “purpose of section 998 is to encourage the settlement of litigation without tri al

, ” and to effectuate that purpose, courts have read a “good faith requirement” into the statute . ( Adams

, supra , 199 Cal.App.4th at p. 1483.) Thus, “ [o] nly settlement offers made in good faith are effective under section 998.” ( Covert v. FCA USA, LLC ( 2022) 73 Cal.App.5th 821, 833 ( Covert ).) Good faith “ requires that the settlement offer be

authorized by law.” ( Holman v. Altana Pharma US, Inc. (2010) 186 Cal.App.4th 262, 278; see §§ 1032, subd. (b), 1033.5, subd. (b)(1).)

4 Section 998, subdivision (c)(1), thus provides an exception to the general rule that fees of experts not ordered by the court are not allowable as costs. (See Covert v. FCA USA, LLC (2022) 73 Cal.App.5th 821, 83 2; Holman v. Altana Pharma US, Inc. (2010) 186 Cal.App.4th 262, 278 .)10

‘ realistically reasonable under the circumstances of the particular

case. ’ [Citation.] The offer must therefore ‘ carry with it some reasonable prospect of accepta nce. ’” ( Adams , at p. 1483 .) “‘Whether a section 998 offer has a reasonable prospect of acceptance is a function of two considerations, both to be evaluated in light of the circumstances “‘at the time of the offer’” and “‘not by virtue of hindsight.’” [C itations.] First, was the 998 offer within the “range of reasonably possible results” at trial, considering all of the information the offeror knew or reasonably should have known? [Citation.] Second, did the offeror know
that the offeree had sufficient information, based on what the offeree knew or reasonably should have known, to assess whether the “offer [was] a reasonable one,” such that the offeree had a “fair opportunity to intelligently evaluate the offer”?’” ( Covert

, supra , 73 Cal.App.5th at p. 834.) “‘Although the party making a 998 offer generally has the burden of showing that [the] offer is valid [citations], [ 5 ] it is the 998 offeree who bears the burden of showing that an otherwise valid 998 offer was not made in goo d faith. ’ ” ( Covert

, supra , 73 Cal.App.5th at p. 834; see id. at p. 833 [ “Once the offeror shows the section 998 offer is valid, the burden shifts to the offeree to show the offer was not made in good faith.”].)

“‘“ ‘ Where

. . . the offeror obtains a judgm ent more favorable than its offer, the judgment constitutes prima facie evidence showing the offer was reasonable and the offeror is eligible for costs as

5 To be valid, an offer to compromise under section 998 must, for example, “‘“be sufficiently specific to allow the recipient to evaluate the worth of the offer and make a reasoned decision whether to accept the offer.”’” ( Covert

, supra , 73 Cal.App.5th at

p. 833.)11

specified in section 998. ’ ”’” ( Id. at pp. 833

- 834; see Adams

, supra , 199 Cal.App.4th at p. 1484.) “ ‘ “ Whether a section 998 offer was reasonable and made in good faith is a matter left to the sound discretion of the trial court, and will not be reversed on appeal except for a clear abuse of discretion. ” ’ ” ( Covert

, at p. 834 ; see Adams , at p. 1484 [“ An appellate court may reverse the trial

court ’ s determination only if the court finds that in light of all the evidence viewed most favorably in support of the trial court, no judge could have reasonably reached a similar result. ”]. )
The trial court did not abuse its discretion in finding (implicitly) Southwest made a reasonable, good faith offer to compromise. That the judgment Southwest obt ained

— of zero liability and the entitlement to recover , as a prevailing party, its attorneys’ fees and costs

— was more favorable than its offer

— of $50,000 and a waiver of fees and costs

— is prima facie evidence
the offer was reasonable . ( See Bates v. Presbyterian Intercommunity Hospital, Inc. (2012) 204 Cal.App.4th 210, 22 1 [dismissal resulting in zero liability for the re spondent

“ established the prima facie reasonableness of the section 998
offer ”].)
SwiftAir did not rebut that evidence. Citing Wear v.
Calderon (1981) 121 Cal.App.3d 818 for the proposition that a

“ plaintiff may not reasonably be expected to accept a token or nominal offer from any defendant exposed to [substantial] liability unless it is absolutely clear that no reasonable possibility
exists that the defendant will be held liable ” ( id. at p. 821),
S wiftAir argues it could not reasonably be expected to accept Southwest’s offer because it was merely a token offer and there was a reasonable possibility Southwest would be held liable, as12

demonstrated by the jury’s finding Southwest breached the Beta
Test A greement. But Southwest’s offer was not token. $50,000 was not a nominal offer , e ven relative to the $878,000 SwiftAir insists
Southwest owed (but the jury found it did not owe) for breaching the Beta Test Agreement

. ( Compare Najah v. Scottsdale Ins. C o. (2014) 230 Cal.App.4th 125, 14 5 [ where the evidence at the time
of the section 998 offer supported the plaintiff’s claim for damages in excess of $500,000, the trial court did not abuse its
discretion in concluding the defendant’s offer of $30,000 was

r easonable

, “ given the reasonable possibility that liability did not
exist ” ] with Wear v. Calderon

, supra , 121 Cal.App.3d at p p

. 819

- 820 [ section 998 offer to settle for $1 was a token offer ] and Pineda v. Los Angeles Turf Club, Inc. (1980) 112 Cal.App.3d 53

, 62

- 63 [ where the plaintiff sought $10 million in damages , the
trial court did not abuse its discretion in finding a section 998
offer of $2,500 was not reasonable].) And Southwest’s proposal to bear its fees and costs added significant value to the offer. (See
Adams

, supra , 199 Cal.App.4th at p. 148 5 [“ a section 998 offer has value beyond the monetary award provided if it also includes
a waiver of costs ”]; Jones v. Dumrichob (1998) 63 Cal.App.4th 1258, 1264 [ section 998 offer that included a waiver of costs but no monetary award was reasonable because it “carried a significant value to ” the offerees

- appellants : “ if accepted, it would have eliminated appellants ’ exposure to the very cost s which are the subject of this appeal” ].)13 B. The Trial Court Did Not Err in Granting Row 44’s Motion for Attorneys’ Fees
SwiftAir contends the trial cour t erred in granting Row 44’s motion for attorneys’ fees because that order “was based upon

erroneous judgments [ sic ] in Row 44’s favor.” More specifically, SwiftAir argues the trial court’s ruling Row 44 was a prevailing party rested on the court’s supposedly erroneous order granting Row 44’s motion for summary adjudication. SwiftAir argues the
latter order was erro neous because the ADA did not preempt any of its causes of action against Row 44 and because , in ruling on
issues relating to but not disposing of the entire cause of action for breach of contract, the court violated section 437c
, subdivision (f)(1)

. A s discussed, however, over SwiftAir’s objection we dismissed Row 44 from SwiftAir’s appeal from the judgment

, which “ amounts to an affirmance of the judgment .” 6 ( Estate of

6 SwiftAir did not file a proof of claim in Row 44’s bankruptcy proceeding or seek relief from the resulting automatic stay , and it has n ot persuasively address ed Row 44’s a ssertion these were SwiftAir’s “only proper avenue[s] to attack the Underlying Judgment.” (See 11 U.S.C. § § 101(1 0 ) [ defining “creditor” as an “entity that has a claim against the debtor that arose at the time of or before” the filing of the bankruptcy petition], 101(5) [defining “claim” as “right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed,

c ontingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured”]; In re Maxus Energy Corporation (Bankr. D.Del., 2022) 706 __B.R. ___,

___ [ 2022 WL 840996
, p. 9 ] [“if a creditor has a claim, whether that claim be disputed, con tingent, or unliquidated, it must file a proof of claim”].) Without c iting any legal authority, SwiftAir suggests it14

Basso (1947) 79 Cal.App.2d 758, 760 ; see In re Jasmon O. (199 4) 8 Cal.4th 398, 413 [“ Normally the involuntary dismissal of an appeal leaves the judgment intact. ”]; County of Sacramento v.
Rawat (2021) 65 Cal.App.5th 858, 869 [“ In general, the unqualified dismissal of an appeal leaves the trial court ’ s judgment or or der standing, as if no appeal had been taken from
it. ”]; City of Santa Paula v. Narula (2003) 114 Cal.App.4th 485,

492 [“ An ‘ involuntary dismissal of an appeal operates as an affirmance of the judgment below. ’”].) Therefore, SwiftAir can no longer challen ge the merits of the judgmen t in favor of Row 44

. (See Conservatorship of Ribal (2019) 31 Cal.App.5th 519, 526 [on appeal from a postjudgment order awarding attorneys’ fees after
the previous appeal resulted in affirmance of the judgment, the appellant could not challenge the merits of the judgment] ; Narula , at p. 488 [on appeal from a postjudgment order awarding attorneys’ fees, the appellants were “ barred

. . . from challenging
the v alidity of prior judgments”]. ) B ecause that is SwiftAir’s only

could not file a proof of claim because “it had already been judicially determine d [ i.e., by the trial court in this case] that SwiftAir h ad no claim

. ” But this suggestion ignores both the Bankruptcy Code’s definition of “claim” and the fact that, because SwiftAir had appealed from the judgment, its causes of action against Row 44 in this case were not yet final . (See Archdale v. American Internat. Specialty Lines Ins. Co. (2007) 154 Cal.App.4th 449, 479 [ “ ‘[A] judgment does not become final so long as the action in which it was rendered is pending and an action is deemed pending until it is finally determined on appeal or until the time for appeal has passed. The determination of the issue in the case is held in abeyance until the appeal is finally decided by an appellate court and the appeal operates to “ ‘ keep alive the case

. . . as it existed before the judgment was rendered.’” ’”].)15

ground for challenging the trial court’s order granting Row 44’s motion for attorneys’ fees, SwiftAir has failed to demonstrate

error.

DISPOSITION

The motion by Row 44 to dismiss the appeal is denied. The trial court’s orders granting the motions by Southwest and
Row 44 for attorneys’ fees and costs are affirmed. Southwest and
Row 44 are to recover their costs in this appeal.

SEGAL

, J.
We concur:

PERLUSS

, P. J.

FEUER , J.