Opinion ID: 706879
Heading Depth: 1
Heading Rank: 4

Heading: Federal law should have determined Allstate's costs

Text: 44 Before trial, Allstate offered the Aceveses $50,100 to settle their action. The district court's judgment awarded the Aceveses $9,000. Because Allstate's pretrial settlement offer exceeded the Aceveses' judgment, the district court granted Allstate's motion to recover costs from the Aceveses and awarded Allstate $9,625 in costs. 45 The district court awarded Allstate costs under section 998(c) of the California Code of Civil Procedure. The Aceveses argue it was error for the district court to use state procedure instead of federal procedure to determine the amount of costs. We review the district court's choice of law de novo. Waggoner v. Snow, Becker, Kroll, Klaris & Krauss, 991 F.2d 1501, 1505 (9th Cir.1993). We agree with the Aceveses that the district court should have applied federal law. 46 Federal and California law regarding offers of judgment are similar in that they both allow a defendant to recover costs if he makes a settlement offer before trial, the plaintiff refuses to settle, and the plaintiff obtains a trial judgment that is worth less than the settlement offer. Compare Fed.R.Civ.P. 68 with Cal.Code Civ.Proc. Sec. 998(c). Thus, the choice of law does not affect Allstate's entitlement to costs. The Aceveses do not dispute that they owe costs. 47 Federal and California offer of judgment rules differ in the level of reimbursement for expert witness costs they allow. California law allows the defendant to recover expert witness fees in full. Cal.Code. Civ.Proc. Sec. 998(c). Federal law allows the defendant to recover forty dollars per day per witness. 28 U.S.C. Sec. 1821(b). A federal court may not exceed this limit without explicit statutory or contractual authorization. Crawford Fitting Co. v. J.T. Gibbons, Inc., 482 U.S. 437, 445, 107 S.Ct. 2494, 2499, 96 L.Ed.2d 385 (1987). The court may not use other cost provisions like 28 U.S.C. Sec. 1920 or Federal Rule of Civil Procedure 54(d) to circumvent section 1821(b). Id. at 442, 107 S.Ct. at 2497. 48 California law controls the substance of this lawsuit, but federal law controls the procedure by which the district court oversaw the litigation. See Hanna v. Plumer, 380 U.S. 460, 473, 85 S.Ct. 1136, 1145, 14 L.Ed.2d 8 (1965). Because reimbursement of expert witnesses fees is an issue of trial procedure, federal law should have controlled this costs issue, unless one of two factors indicated otherwise. State procedure would only have applied if the pedigree of the federal rule could not be traced back to a federal statute or a Federal Rule of Civil Procedure, duly enacted pursuant to the Rules Enabling Act, see id. at 470-71, 85 S.Ct. at 1143, or if the federal rule created an incentive to shop for the federal forum, see id. at 467-68, 85 S.Ct. at 1141-42. See also Olympic Sports Prods., Inc. v. Universal Athletic Sales Co., 760 F.2d 910, 914-15 (9th Cir.1985). 49 Neither factor indicates that section 998(c) should control. We can find no indication that section 1821(b) of Title 28 has a suspect pedigree. More important, we think it exceedingly unlikely that section 1821(b) provides litigants an incentive to sue in or remove to federal courts. There may be unusual cases, some mass tort cases, for instance, in which litigation costs are so large and expert witness fees constitute so great a portion of litigation costs that section 1821(b)'s cost maximum is a significant incentive to litigate in federal court. However, in ordinary cases other factors, like impartiality and speed of the court system, determine the choice of forum, and we design the choice of law rule for the ordinary case, not a hypothetical one. Our conclusion, that federal law should control the reimbursement of expert witnesses in federal courts sitting in diversity jurisdiction, is in accord with the holdings of several other circuits. Chaparral Resources, Inc. v. Monsanto Co., 849 F.2d 1286, 1291-92 (10th Cir.1988); Kivi v. Nationwide Mut. Ins. Co., 695 F.2d 1285, 1289 (11th Cir.1983); Bosse v. Litton Unit Handling Sys., 646 F.2d 689, 695 (1st Cir.1981). 50 Allstate offers two arguments in opposition to our conclusion, neither of which we find persuasive. First, Allstate argues that other federal courts have applied state offer of judgment statutes to award costs that the defendant could not have recovered under Rule 68. This argument presents a choice of law issue different from the one before us. The choice of law issue here is between state and federal expert witness cost provisions, not offer of judgment rules. Tanker Management, Inc. v. Brunson, 918 F.2d 1524 (11th Cir.1990), the one appellate case Allstate cites in support of its argument, proves our point. The state and federal offer of judgment rules in that case were in direct collision because the state rule made attorneys fees compensable. Id. at 1528. In this case, the offer of judgment rules in question are not in direct collision, but the expert witness fee compensation rules are. 51 Second, Allstate argues that we are bound by our holding in Meadows v. Bicrodyne Corp., 785 F.2d 670 (9th Cir.1986), in which we held that a district court did not abuse its discretion in awarding a party expert witness fees under section 998(c) of the California Code of Civil Procedure. Id. at 673. We did not inquire whether federal or state law governed the recovery of expert witness fees on the facts of that case. See id. Because Meadows did not address or decide the choice of law issue before us here, it does not control our resolution of this question. 52 We conclude that the district court should have applied 28 U.S.C. Sec. 1821(b), not California Code of Civil Procedure Sec. 998(c), when it determined the amount of Allstate's expert witness costs, we vacate the district court's order awarding $9,625 in costs to Allstate, and we remand for the district court to determine Allstate's costs consistent with section 1821(b).