3 Cal. App. 5th 568
Cal. Ct. App.2016Background
- In 2012 the City of San Diego filed a validation action to authorize a special tax for expansion of the Convention Center; interested parties had to answer by July 10, 2012.
- San Diegans for Open Government (SDOG), a nonprofit corporation, filed a verified answer on July 9, 2012; SDOG later prevailed on appeal and the trial court entered judgment for SDOG and reserved attorney fees.
- At the time SDOG filed its answer it was administratively suspended for failure to file/pay taxes; SDOG was not revived until November 20, 2012 (more than four months after the statutory deadline to appear).
- SDOG’s counsel, Briggs Law Corporation (BLC), knew of the suspension before filing the verified answer but did not inform the court or opposing counsel; BLC filed other suits on behalf of SDOG while it was suspended.
- The trial court awarded SDOG attorney fees under Code of Civil Procedure § 1021.5 but reduced/denied fees for work done while SDOG was suspended; the City appealed the denial of its motion to strike and the fee award.
Issues
| Issue | City’s Argument | SDOG’s Argument | Held |
|---|---|---|---|
| Whether a suspended corporation that appeared in a validation action while suspended (with attorney’s knowledge) can recover fees under CCP § 1021.5 | SDOG lacked capacity to appear when it filed its answer; its subsequent revival does not cure substantive defects (like the effective deadline to appear); therefore no fees under § 1021.5 | SDOG argued revival cured defects and pointed to public awareness of its status; contended it is an eligible prevailing private-attorney-general | Reversed fee award: § 1021.5 fees are not available where the corporation and counsel knowingly appeared while suspended and revival occurred after the statutory appearance deadline. |
| Whether the City waived lack-of-capacity defense by not raising it earlier | City maintained it timely raised suspension defense in opposing fee motion and by motion to strike | SDOG argued City waived the defense | Court held City did not waive the defense; it was raised at the earliest opportunity. |
| Whether the trial court erred in denying City’s motion to strike SDOG’s answer | City argued the answer should be struck because SDOG lacked capacity (would remove SDOG from judgment and preclude fees) | SDOG relied on procedural timing and asserted public knowledge of its suspension | Court affirmed denial of motion to strike as moot given reversal of fee award; struck-answer issue not reached on merits. |
| Whether unethical/illegal conduct by counsel bars fee recovery under § 1021.5 | City argued counsel’s knowing appearance for a suspended corp. was bad faith/unethical and should deny fees | SDOG/BLC offered explanations about revival and public notice but did not justify filing while suspended | Court emphasized counsel’s bad faith/unethical conduct as dispositive in precluding § 1021.5 fees. |
Key Cases Cited
- City of San Diego v. Shapiro, 228 Cal.App.4th 756 (2014) (appellate reversal directing judgment for SDOG and remand regarding fees)
- Sade Shoe Co. v. Oschin & Snyder, 217 Cal.App.3d 1509 (1990) (suspended corporation lacks capacity to prosecute or defend civil actions)
- Center for Self-Improvement & Community Dev. v. Lennar Corp., 173 Cal.App.4th 1543 (2009) (revival may validate procedural acts but not cure substantive defenses like statutes of limitations)
- Abouab v. City & County of San Francisco, 141 Cal.App.4th 643 (2006) (three-element test for § 1021.5 fees: public right, public benefit, necessity/financial burden)
- Punsly v. Ho, 105 Cal.App.4th 102 (2003) (private attorney general doctrine codified in § 1021.5)
- Benton v. County of Napa, 226 Cal.App.3d 1485 (1991) (effect of revival on prior proceedings)