When winning is risky

Sometimes, an appeal doesn’t make sense to me. This can be true even if there are better-than-average odds of winning. When an appeal doesn’t make sense to me, I ask why the party wants to appeal. I’m sure that most of the time, the reaction is to think, “Isn’t it obvious? Because I lost!” But to my mind, that’s not always a good enough reason. As a matter of effective client relations, I get curious about motives when it seems to me, as an outsider, that a win on appeal would yield a negligible benefit or even risk making the appellant worse off.

An example of the latter situation is Department of Fair Employment and Housing v. Ottovich, case no. A136607 (1st Dist.  June 30, 2014), where I think the appellant potentially had a whole lot to lose by winning the appeal.

The appellant was the defendant below, where the trial court struck his answer and entered his default as sanctions for discovery misconduct. Judgment for more than $240,000 was entered after the prove-up hearing. The defendant successfully moved to set aside the default judgment (and underlying default) based on the plaintiff’s failure to serve a statement of damages, but the court left the answer stricken, granted summary judgment on liability based on the allegations of the complaint, and held a jury trial on damages, which resulted in a judgment for the plaintiff of only $8,500. If I were the defendant, I think I would have been thankful for avoiding that judgment of nearly a quarter million dollars, counted my blessings that my liability was only $8,500, and called it a day.

Not so for the appellant here, who contended that when the default judgment was vacated, his answer was revived as a matter of law. Clearly, the appellant wanted the issue of liability tried, and wanted to pay zero.

The appellant lost his appeal, but suppose he had won. What’s the up side? Sure, the case gets to proceed on the merits. But appellant, if found liable, would be facing a new damages determination. Who’s to say that a less-friendly jury or better lawyering for the plaintiff the next time around wouldn’t result in a judgment against the appellant far in excess of $8,500?

I have to think there was something besides money driving the decision to appeal in this case. . . or maybe I’m wrong about the process after reversal and there would be some way to avoid having damages tried again (if you think so, shoot me an email, and I will happily correct the post, if warranted). But going solely by what I can glean from the decision, I would have advised against the appeal.

Any litigation, including an appeal, involves risk. Consider that reversal rates hover around 20% and that you may be throwing good money after bad. There is enough risk in the possibility of losing. Why pursue an appeal where winning could make you worse off?

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