Court Opinion

ID: 6340363
Source: CourtListenerOpinion
Date Created: 2022-05-12 23:05:36.930743+00
Date Added: 2024-06-11T15:49:14.792751
License: Public Domain

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   NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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has not been certified for publication or ordered published for purposes of rule 8.1115.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,                                                     B306166

           Plaintiff and Appellant,                                 (Los Angeles County
                                                                    Super. Ct. No. SC122964)
           v.

 ROW 44, INC. et al.,

           Defendants and Respondents.

      APPEAL from orders of the Superior Court of Los Angeles
County. Elaine W. Mandel, 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.
      Hawxhurst Harris, Gerald E. Hawxhurst, David S. Harris
and Patrick B. Nichols; Hawxhurst, Gerald E. Hawxhurst and
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 parties 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 That
             Southwest Decides Not To License
       As we described in SwiftAir, LLC v. Southwest Airlines Co.
(2022) 77 Cal.App.5th 46 (SwiftAir I), in 2010 SwiftAir was
developing a software platform that would allow passengers to
make inflight purchases of coupons and vouchers the passengers
could use at restaurants and other businesses in their destination
cities. Later that year Southwest expressed an interest in
evaluating the software platform for use on its flights.
       In August 2011 SwiftAir and Southwest entered into a
contract titled “Beta Test Agreement,” with Southwest agreeing

1    Undesignated statutory references are to the Code of Civil
Procedure.

                                2
to evaluate SwiftAir’s software platform by testing it for eight
weeks 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 agreement also stated that, in the event
Southwest decided to continue using the software platform,
Southwest 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 agreements with Row 44, the
company that operated Southwest’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 its assets have been sold to

                                 3
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.) The trial court sustained a
demurrer by Row 44 to four of the causes of action against it
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) preempted most
of SwiftAir’s remaining causes of action. Row 44 also moved for
summary adjudication on SwiftAir’s claims that Row 44
committed various distinct breaches of agreements 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 good faith and fair dealing). The 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 trial court’s post-judgment award of
attorneys’ fees and costs.” Because there has been no motion to
substitute another entity in the action, however, this 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.”].)

                                 4
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 adjudicated in favor of Row 44 some, but
not all, of the alleged “separate and distinct breaches.” Finally,
on a motion by Southwest for reconsideration, the court also
granted summary adjudication on that 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 alleged breaches. First, 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 testing period. Second, SwiftAir alleged
Southwest breached an implied-in-fact agreement requiring it to
install SwiftAir’s software platform on “WiFi-enabled aircraft
flying into 11 of Southwest’s top destinations, with more cities
added throughout the term” of the Beta Test Agreement.
       Southwest now served SwiftAir with an offer to
compromise under section 998. In exchange for SwiftAir’s
voluntary dismissal 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 damages

                                 5
related to” agreements between Southwest and SwiftAir.
SwiftAir did not respond to the offer to compromise.
       The parties tried SwiftAir’s remaining causes of action to a
jury. Finding that Southwest breached the Beta Test Agreement,
but that the breach did not harm SwiftAir, the jury awarded
SwiftAir no 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 found 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 filed 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 awarded SwiftAir $878,000 in damages “for the
monies SwiftAir [spent] developing” its software platform. The
trial court denied these motions, and SwiftAir appealed from the
judgment.

      C.     The Trial Court Grants Motions by Southwest and
             Row 44 for Attorneys’ Fees, and SwiftAir Files This
             Appeal
      Meanwhile, citing attorneys’ fees provisions in their
agreements with SwiftAir, Southwest and Row 44 each filed a
postjudgment motion for attorneys’ fees and costs as a prevailing
party 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.

                                 6
       Concluding Southwest and Row 44 were prevailing parties,
the trial court granted their motions. The court awarded
Southwest $1,501,988.80 in attorneys’ fees and $309,362.40 in
costs. The court denied a motion by SwiftAir to strike from
Southwest’s memorandum of costs $209,886.89 in expert fees,
ruling Southwest was entitled to recover those fees 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, We Dismiss Row 44
             and Affirm the Judgment in Favor of Southwest
      And again meanwhile, with SwiftAir’s two appeals pending,
Row 44 and various affiliates filed for bankruptcy under
Chapter 11 of the United States Bankruptcy Code, which
resulted in stays of both appeals. After 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 the appeal from the
judgment. The Supreme Court denied SwiftAir’s petition for
review.
      SwiftAir’s appeal from the judgment in favor of Southwest,
however, proceeded. SwiftAir contended the trial court erred in
granting Southwest’s motion for summary adjudication because
the ADA did not preempt any of SwiftAir’s causes of action and in

                                7
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 breach 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
       SwiftAir 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
SwiftAir’s motions for judgment notwithstanding the verdict and
for a new trial. In that appeal, however, we concluded the 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 recover 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 expressly

                                8
        “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 shall 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 witnesses . . . 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 trial,” 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, 832; Holman v. Altana Pharma US, Inc.
(2010) 186 Cal.App.4th 262, 278.)

                                   9
‘realistically reasonable under the circumstances of the particular
case.’ [Citation.] The offer must therefore ‘carry with it some
reasonable prospect of acceptance.’” (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.’” [Citations.] 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 good 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 judgment 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.)

                                 10
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 obtained—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, 221
[dismissal resulting in zero liability for the respondent
“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),
SwiftAir 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, as

                                 11
demonstrated by the jury’s finding Southwest breached the Beta
Test Agreement.
       But Southwest’s offer was not token. $50,000 was not a
nominal offer, even 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. Co.
(2014) 230 Cal.App.4th 125, 145 [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
reasonable, “given the reasonable possibility that liability did not
exist”] with Wear v. Calderon, supra, 121 Cal.App.3d at pp. 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. 1485 [“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 costs which are
the subject of this appeal”].)

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      B.     The Trial Court Did Not Err in Granting Row 44’s
             Motion for Attorneys’ Fees
       SwiftAir contends the trial court 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 erroneous 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).
       As 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 not persuasively addressed Row 44’s assertion these were
SwiftAir’s “only proper avenue[s] to attack the Underlying
Judgment.” (See 11 U.S.C. §§ 101(10) [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,
contingent, 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, contingent, or unliquidated, it must file a proof of
claim”].) Without citing any legal authority, SwiftAir suggests it

                                13
Basso (1947) 79 Cal.App.2d 758, 760; see In re Jasmon O. (1994)
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 order 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 challenge the merits of the judgment 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 validity of prior judgments”].) Because that is SwiftAir’s only

could not file a proof of claim because “it had already been
judicially determined [i.e., by the trial court in this case] that
SwiftAir had 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.’”’”].)

                                14
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.

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