Arizona Court of Appeals Division One Holds That Taxable Costs Include Travel Expenses for In-State Depositions; Travel Expenses for Out-of-State Depositions of Independent Fact Witnesses; Expenses for Video Recording of Depositions; Deposition Expenses of Independent Fact Witnesses When the Witness Fails to Appear or Is Late; and Private Mediation Costs.

Antonio Silva, while driving a tractor/trailer rig for Frank’s Service and Trucking, L.L.C. “FST”), collided with Hugo Reyes, who was also driving a tractor/trailer.  Reyes sued FST.  FST made a pretrial offer of judgment to Reyes for $200,001.  Reyes did not accept the offer and ultimately prevailed in his lawsuit, getting an award of $188,700 in damages.  The damages award to Reyes was less than the amount offered by FST before trial.  Rule 68 imposes sanctions on a party that declines an offer of judgment when the party ultimately recovers at trial an amount less than the offer of judgment.  Following the verdict, however, Reyes moved to recover litigation expenses that he claimed were taxable costs under A.R.S. § 12-332(A), and for which FST was therefore liable.  At least half of these costs were incurred before FST had made its offer of judgment.  The trial court ruled that Reyes was entitled to $32,052.12 in taxable costs. Because the total amount of taxable costs claimed by Reyes combined with his damages award totaled more than the $200,001 offered by FST, the trial court ruled that Rule 68 sanctions were not available.  FST appealed.

The Court of Appeals affirmed in part and remanded in part.  In its appeal, FST argued that the trial court had improperly classified the following expenses as taxable costs:  the expenses Reyes’s attorneys incurred for in-state depositions, expenses that Reyes’s attorneys incurred for out-of-state independent fact witnesses; fees charged by interpreters at two depositions as witness fees; costs for video recording depositions; costs incurred when independent fact witnesses failed to appear at a deposition or were late; and Reyes’s share of mediation expenses.  The Court of Appeals held that travel expenses for in-state depositions are valid taxable costs.  Travel expenses for out-of-state independent fact witnesses are also valid taxable costs.  A party is “presumptively entitled to recover taxable costs associated with either a deposition transcript/court reporter or a deposition video/videographer,” but based on a trial court’s evaluation of reasonableness and necessity, it has discretion to award costs for both.  The costs associated with absent or late deposition witnesses who were independent fact witnesses were “costs of taking depositions that were recoverable.” 

The statute authorizes cost awards for “[o]ther disbursements that are made or incurred pursuant to an order or agreement of the parties.”  The costs of the parties’ private mediation qualified as such a cost because the parties had agreed to incur the costs.  This was so even though the parties had agreed to split the costs of mediation because “the relevant inquiry under the statute is whether the parties agreed to incur the costs, not whether they reached a specific agreement about how the costs would ultimately be classified.  The Court of Appeals remanded to the trial court the issue of whether deposition costs for both a court reporter and video recording were reasonable, but because the other costs were enough to put Reyes’s damages award above the amount offered in FST’s offer of judgment, the Court of Appeals affirmed the trial court’s denial of FST’s request for Rule 68(g) sanctions against Reyes.

Judge Downie authored the opinion.  Judges Cattani and Brown concurred.