Interpretation of California Code of Civil Procedure Section 1038
In Kobzoff v. Los Angeles County Harbor/UCLA Medical Center (1998) 19 Cal.4th 851, the California Supreme Court summarized--indeed, unanimously--the effect and proper interpretation of Code of Civil Procedure section 1038 in these words:
"Section 1038 authorizes the defendants or cross-defendants to recover reasonable costs after prevailing on a dispositive motion (i.e., summary judgment, directed verdict, nonsuit, judgment before presentation of defense evidence, or other motion in an action for indemnity or contribution). ( 1038, subds. (a), (c).) A defendant may not recover section 1038 costs simply because it won a summary judgment or other dispositive motion; victory does not per se indicate lack of reasonable cause. That victory is simply the first step. Following the court's determination of the dispositive motion, and before the court discharges the jury or enters the requisite judgment, the defendant must also make a motion for defense costs, as the statute directs, alleging that the plaintiff did not bring or maintain the proceeding in 'good faith' and with 'reasonable cause.' ( 1038, subds. (a), (c).) An award of defense costs may be made only on notice and an opportunity to be heard, and the court determines section 1038 liability as a matter of law. ( 1038, subd. (a).) In seeking section 1038 costs, the defendant waives its right to malicious prosecution damages, to the extent the right exists, although the failure to make the motion will not be deemed a waiver of the right to pursue a malicious prosecution action. ( 1038, subd. (c).)' . . . Construed literally, the statute quite clearly indicates plaintiffs must not only bring (or maintain) their action 'with reasonable cause,' but must also bring (or maintain) it 'in the good faith belief that there is a justifiable controversy under the facts and law.'
"The statute then states that if the court determines 'the proceeding was not brought in good faith and with reasonable cause,' it shall render judgment (i.e., reasonable defense costs) in favor of the party opposing the original proceeding (the County here), 'in addition to those costs normally awarded to the prevailing party,' once it determines 'the defense costs reasonably and necessarily incurred by the party or parties opposing the proceeding.' ( 1038, subd. (a).) In selecting the construction that comports most closely with the apparent legislative intent, the use of 'and' in this section, when considered in light of the first conjunctive phrase, indicates that the Legislature intended that plaintiffs bring or maintain lawsuits both with reasonable cause and in good faith. Neither the context nor the language used in section 1038 justifies giving to the word 'and' a disjunctive construction.
"Thus, before denying a section 1038 motion, a court must find the plaintiff brought or maintained an action in the good faith belief in the action's justifiability and with objective reasonable cause." (Kobzoff, supra, 19 Cal.4th at pp. 856-857, 861-862.)