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Attorney’s Fees Under CEQA Limited to Exceptional Costs: Heron Bay HOA v. City of San Leandro (2018)

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On January 12, 2018 the California Appellate Court issued the ruling for Heron Bay HOA v. City of San Leandro which stated that, under the “private attorney general” for CEQA, the HOA was only entitled to attorney’s fees for those costs that went above and beyond what it would have been expected to pay had it only litigated out of self-interest. (Heron Bay Homeowners Association v. City of San Leandro, 19 Cal.App. 5th 376 (2018))

The project at issue in the case was the construction of a 100-foot tall wind turbine located within the San Francisco Bay Estuary. The turbine was approximately 500 feet from the Heron Bay residential development which opposed the project. The HOA submitted comments on the Project’s MND expressing concerns about the project’s potential impact on the environment. After the City approved a revised MND, the HOA filed a petition to set aside the approval and require an EIR.

The Trial Court ruled in favor of the HOA, finding substantial evidence supported a fair argument that the project, as mitigated, might have a significant impact on the environment. (Id, 382). Having prevailed, the HOA moved for attorney’s fees under Section 1021.5. The fee motion sought fees for both the administrative proceedings and the CEQA litigation.

The City and the Project Owner filed oppositions to the Motion stating that the HOA could not claim compensation under the Private Attorney General theory as it was exclusively motivated to protect its own property values.

The Trial Court agreed that the value of the HOA’s interest in preserving its property values should be deducted from the attorney’s fee award. Based upon its own, subjective valuation and fee awards in similar cases, the Court estimated fees which the HOA could have reasonably expected to pay on its own. (Id, 383).

The Trial Court stated that the intent of the Private Attorney General theory was to aid litigants in public interest cases who are unable to afford an attorney, such as environmental non-profits. Prevailing parties in CEQA cases are not typically awarded monetary damages and cannot, therefore, pay their attorneys with a portion of the award. Similarly, as with the HOA, a plaintiff whose goal is to avoid economic loss simply retains his assets rather than gains any monetary damages. Therefore, the Court concluded, it could award fees to alleviate the financial burden of bringing a lawsuit while deducting an amount reflecting the fee that plaintiffs would reasonably have been expected to bear themselves. (Id, 384). The Court ultimately ruled that the HOA was not entitled to any fees for the administrative proceedings. The additional fees for the litigation however, were evenly apportioned between the City and the Project Owner.

The City and Project Owner appealed. The Appellate Court analyzed the fee award under Section 1021.5 stating that eligibility for fees under that Section is established where: 1) the plaintiffs’ actions resulted in the enforcement of an important right affecting the public interest, 2) a significant benefit has been conferred on the general public or a large group of persons, and 3) the necessity and financial burden of private enforcement are such as to make the award appropriate. The Court’s review was limited to the issue of “whether the financial burden of private enforcement was such as to make the award appropriate.” (Id, 386). An award would be appropriate when the cost of the claimant’s legal victory is out of proportion to his individual stake in the matter. (id, 387). Section 1021.5, said the Court, is intended to incentivize plaintiffs to bring a case in the public interest when their personal stake in the outcome is insufficient to warrant incurring the costs of litigation. (Id).

The Appellate Court found that the HOA had sufficient financial incentive to bear some, but not all, of the costs of litigation. The Court agreed with the Court below that it had the ability to deduct from the total reasonable attorney fee an amount reflecting the fee that plaintiffs could reasonably be expected to bear themselves. (Id, 389). The fact that the HOA had a pecuniary interest in the case was not disqualifying under Section 1021.5 but, so long as the two other requirements are met, the issue is whether the financial burden placed on the party is out of proportion with that pecuniary interest. (Id). The Court remanded to the Trial Court to determine fees under an objective, rather than subjective standard.

The implications of this case should be of interest to attorneys representing Cities, Counties, or other agencies with approval authority under CEQA, as well as developers whose projects are subject to opposition. With the rise in CEQA-related cases from private plaintiffs, such as labor unions and neighborhood resident associations, who rely upon Section 1021.5 to pay large, expensive law firms, Cities face the prospect of paying hundreds of thousands in attorney’s fees. This case provides a potential avenue to reduce exorbitant awards to something more reasonable. For example, while the final fee award has not yet been decided by the Trial Court, if the original determination by the trial court is an accurate indication, it appears the Court would deem the fees incurred at the administrative level to be excepted from the award.

The Heron Bay HOA, had included in their motion the fees for the administrative opposition and the Trial Court originally denied that entire fee stating that the HOA was sufficiently motivated to oppose at an administrative level based solely on its interest in preserving its home values. It was only those fees incurred in the litigation which the Court deemed above and beyond those the HOA would reasonably expect. The implication here, is that those plaintiffs with a pecuniary or personal interest in opposing a project under CEQA would likely be expected to incur those fees inherent in the low level, administrative opposition, such as drafting comments or speaking at public hearings. If a plaintiff seeks to include those costs in a motion for fees, the defendant City or developer may have an argument under Heron Bay to have those fees deducted from the award.

catherine ferguson

Catherine Ferguson advises private and public clients on matters regarding Land Use, Environmental, Real Property, Municipal Law, and Civil Litigation. Her transactional practice includes project entitlement, development agreements, zoning regulation, and real property purchase and sale agreements. Her Environmental Law practice includes environmental review and certification under CEQA, California and Federal water quality law, and stormwater regulation and compliance. Her Municipal Law practice includes stormwater laws, development regulation, and municipal code provisions. Her litigation practice includes property, land use and contract disputes.

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