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

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 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.

In Defense of Millennials: What Young Lawyers Have to Offer Beyond Experience

Originally Published in San Diego County Bar Association: For the Record

By Catherine Ferguson

If you are a young attorney, then, more likely than not, you have found yourself searching through a job board or employment website scrolling past entry-level job after entry-level job looking for someone with five-to-seven years of experience, and thinking, “How will I ever get experience if no one will hire me?” If you are a partner at your firm or the head of HR, you may be thinking, “Well, why would I want someone with no experience?” The answer is that young attorneys, while lacking the typical experience those job posts are referencing, bring so much more to the table. The current generation of new attorneys grew up in the age of computers and social media and know, almost intuitively, how these things work. This knowledge can be a vital asset, both to a young job-seeker looking to promote their value, and to their potential employer whose Microsoft Word won’t %&$#*@^ stop autonumbering their contract clauses.

This isn’t to say that hiring a millennial attorney means a firm can fire their IT guy, but most young attorneys have been using the basic computer software utilized by law firms their entire adult lives. Microsoft Word — used for taking notes or writing papers in college and law school. PowerPoint — used for every classroom presentation. Lexis and Westlaw — basically fancy Google, which is how all millennials get answers. Young attorneys can solve computer issues, conduct online research, and learn new software incredibly quickly because the very nature of computer software has become an integral part of their daily lives.

As a real-life example, in the last week, I (a young attorney) helped a partner at my firm create a PowerPoint presentation which would have taken her hours, fixed another colleague’s laptop when it wouldn’t connect with her printer, and helped a secretary format the place-cards for an upcoming event. The benefit of my ability to solve a problem more intuitively than my less tech-savvy colleagues benefits my firm almost daily by preventing a small computer SNAFU from ballooning into a missed deadline due to a faulty printer or a pleading being filed with the wrong date because of an auto-filled field. Young lawyers like me add value to a firm by providing smart, motivated attorneys with IT skills (or at least the ability to find a solution fast) that could save time and money where it counts.

So, whether you are a new lawyer wondering how you can promote yourself in an interview over someone with more experience, or you are a partner looking to hire someone that will truly benefit your firm, remember that there are advantages that lie beyond the resume. Young attorneys come with skills that they likely take for granted but, could save their boss a headache when the sentences in their complaint won’t line up with the %&*$^&#! margin numbers.

Catherine Ferguson advises public and private clients on matters regarding Environmental, Real Property, Land Use, and Municipal Law. Her transactional practice includes real property purchase and sale agreements, development agreements, zoning regulations, and project entitlements. Her Environmental Law practice includes California and Federal water quality law, stormwater regulation and compliance, and environmental impact reports under CEQA. Her Municipal Law practice includes stormwater laws, development regulation, and municipal code provisions.

A Victory for Voters … And Cities

For the past five years, LFAP lawyers have guided a citizen’s initiative process in San Diego known as Proposition B. It is a pension reform measure which the voters approved by a 65% majority vote in 2012. The firm drafted the measure, oversaw the election, and defended the measure against several assaults in court by a huge State agency – the Public Employee Relations Board – and several employee unions.

On April 11, 2017, the vote of the people was upheld by the Fourth District Court of Appeal. In a landmark ruling, the Court held that neither the State agency, nor the unions, could interfere with the initiative process or the outcome of the valid election.

The ruling marked a victory for the many cities that must adjust their unfunded pension obligations if they are to survive. If faced with a citizen’s initiative measure that mandates such adjustments, the Court ruled that a city is not required to go the bargaining table with the unions before either scheduling the election or abiding by the outcome.

Importantly, the Court’s ruling upheld the right of the electorate to directly enact a law through the initiative process – a Constitutional right that has been vested in California voters since 1909. PERB and the unions argued that the voter’s rights were subordinate to the requirement that cities must bargain with the unions before enacting changes in pension obligations. They argued that a vote of the people was subject to the jurisdiction of a State bureaucracy. The Court disagreed, ruling that a State agency could not interfere with the right of citizens to directly pass laws through the initiative election process.

While the ruling of the Court of Appeal is a huge step, the fight is not over. PERB and the unions have appealed to the California Supreme Court. The high Court is now deciding whether to hear the appeal.

Stay tuned. LFAP will report further as news emerges.

Initiative Rights Upheld

In a landmark ruling, the Fourth District Court of Appeal has upheld the right of citizens to reform pension plans using the initiative petition process.

The result – Proposition B, the pension reform measure passed by the San Diego voters in 2012, has been validated and restored. This is good news for taxpayers, but it is even better for California voters where numerous cities are facing budget deficits, even bankruptcy, due to spiraling pension obligations.

Proposition B was originally drafted by Lounsbery, Ferguson, Altona and Peak (LFA&P), which then administered the signature gathering process, and guided the subsequent election. Opponents of pension reform have spent the last five years challenging the measure, and the election process, both of which LFA&P vigorously defended. Proposition B has now been upheld. It is now the law of the land in California that neither bureaucrats nor labor negotiations can interrupt or interfere with the right of citizens to circulate an initiative petition for the purpose of enacting a local law.

For four decades LFAP attorneys have guided clients in all aspects of the election, including, but not limited to, drafting ballot measure arguments and advising on and defending the election process, and its election specialists have handled a score of campaigns resulting in successful outcomes. The Proposition B case is now the most recent example of the right of citizens to exercise their Constitutional right to enact a local law.

Decision Alert: Supreme Court Rules on Scope of PRA Requests

The Supreme Court has held that communications on private/personal devices and accounts of its employees and officials are subject to the California Public Records Act (CPRA) and that documents on such devices may be subject to disclosure.  The Court explained that the CPRA should not permit government agencies from avoiding requests for public documents simply by switching to a different email address or device.

The Court described a public record as “a writing [which] must relate in some substantive way to the conduct of the public’s business,” modifying the prior standard which provided that “[o]nly purely personal” communications “totally void of reference to governmental activities” may be excluded from being defined as public records.   “Communications that are primarily personal, containing no more than incidental mentions of agency business, generally will not constitute public records.” The mere mention of the public agency or another public employee in an email will not necessarily make the email a public record.  This is intended to address privacy concerns associated with purely non-governmental communications.

The Court also offered suggestions on how to ensure records on personal devices or channeled through personal accounts can be searched.  The suggestions range from permitting public employees to search their own records and providing affidavits attesting to the materials found/not found within the scope of a request, or requiring that all communications/records be prepared on governmental devices and/or accounts.  The Court did not prescribe a particular procedure.

The Court did not address a public agency’s liability for its employees’ and/or officials’ failure to comply.  Nor did it unambiguously contend with such individuals’ responsibilities to retain records on their personal devices and accounts.  The Court found that “[a] writing prepared by a public employee conducting agency business has been ‘prepared by’ the agency within the meaning of section 6252, subdivision (e), even if the writing is prepared using the employee’s personal account.” The existence of smart phone communications apps, like Signal and Confide, which delete messages within a pre-ordained period (in some cases, as soon as the message is read by the recipient) will test the Public Records Act and this ruling.  If you have any questions about how this decision may affect your agency or your personal records and/or devices, please contact the attorneys at Lounsbery, Ferguson, Altona & Peak.

AN UNREASONABLE FINAL OFFER

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On May 26, 2015 a California Court of Appeal sent a clear message to public entities that any final offer of settlement be free from conditions of approval, making preparation and planning for presentation of a final offer key in the final stages of settlement negotiation in eminent domain litigation.

In a decision issued by the First District in City and County of San Francisco v. PCF Acquisitionco, LLC (2015) 237 Cal.App.4th 90, the Court determined that a final offer of settlement by a condemnor pursuant to Code Civ. Proc. Section 1250.410 that is conditioned upon approvals of governing bodies is not reasonable, thus exposing the condemnor to liability for litigation expenses.

The City and County of San Francisco filed an action in eminent domain to acquire a site for a future subway station. Valuation data was exchanged ranging from a low of $3,800,000 to a high of $10,875,000. Twenty days before trial the parties exchanged their final offers/demands in an attempt to settle the matter pursuant to Code Civ. Proc. Section 1250.410. The City’s offer for $5,000,000 was expressly made contingent upon approval by the Federal Transportation Authority, the Board of Directors of the San Francisco Municipal Transportation Agency, and the San Francisco Board of Supervisors. The parties did not reach a settlement and the case went to trial where the jury awarded PCF Acquisitionco $7,319,000. PCF Acquisitionco then moved to recover its litigation expenses under CCP 1250.410 arguing that the City’s offer was unreasonable because it was conditioned on obtaining approvals from other governing bodies. The underlying court denied the motion and did not address the question of whether the conditions on the offer of settlement made the offer unreasonable.

The Court of Appeal addressed the narrow issue of whether a final offer of settlement is reasonable if made contingent upon approvals by other governing bodies. The Court found that the choice of entering into an uncertain and contingent bargain or risk losing its litigation expenses was unreasonable under the meaning set forth by the statute, thus triggering the condemnor’s liability for litigation expenses. The Court stated “In these circumstances, the City’s final offer was not really an offer at all.” The underlying court’s order was reversed and the case was remanded for further proceedings.

The holding provides minimal practical guidance to public agencies. It remains to be seen how agencies will obtain approvals for final offers given the timing requirements for convening their governing bodies. Also a concern is obtaining all essential approvals prior to actual possession and control of the property at issue. Further, agencies will have to deal with the potential prejudicial effects of disclosure of litigation strategy and settlement posture to the public in open meetings prior to presenting the offer to the opposing party.

This decision will result in even more concentrated efforts to secure agreements with property owners. Consideration in closed session to discuss and approve litigation strategy and settlement posture is ideal. Government agencies should plan ahead and get all approvals prior to the deadline for the exchange of final offers before trial. Planning ahead is particularly important where approvals from several government agencies (federal, state and local) are necessary. Otherwise, a final offer may be considered unreasonable and expose agencies to potential litigation expenses and costly attorneys’ fees awards.

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Kristen S. Steinke has an established practice focused on eminent domain, inverse condemnation, land use and real property-related litigation.  She represents public entities, land owners, developers, small businesses, contractors, and subcontractors. Native to San Diego, Ms. Steinke is the Chair of the Eminent Domain Section of the San Diego County Bar and is also a member of the San Diego chapter of Lawyers Club.

 

LFAP Announcement

LFAP is pleased to announce the addition of two associates to the firm:

Kristen S. Steinke

&

Matthew C. Starr

Kristen S. Steinke has an established practice focused on eminent domain, inverse condemnation, land use and real property-related litigation.  She represents public entities, land owners, developers, small businesses, contractors, and subcontractors. Native to San Diego, Ms. Steinke is currently the Chair of the Eminent Domain Section of the San Diego County Bar and is also an active member of the San Diego chapter of Lawyer’s Club.

Matthew C. Starr practices in the areas of real estate, business, municipal, unlawful detainer, and insurance litigation. He interned at the United States House of Representatives as a legislative aide, and is a member of the State Bars of California and Idaho. Mr. Starr is a native of Escondido, an avid football official, and active member of the San Diego Football Officials Association.

The attorneys of Lounsbery Ferguson Altona & Peak LLP have served the specialized legal needs of businesses, individuals, and public agencies for more than three decades. LFAP is committed to providing client satisfaction through efficient personal service and finding creative, cost-effective solutions. For more information, please visit our websitewww.lfap.com.