CHILDREN AND FAMILIES COMMISSION OF FRESNO COUNTY et al., Plaintiffs and Appellants, v. EDMUND G. BROWN, JR., as Governor, etc., et al., Defendants and Respondents.
No. F066233
Fifth Dist.
July 22, 2014
228 Cal. App. 4th 45
COUNSEL
Kamala D. Harris, Attorney General, Douglas J. Woods, Assistant Attorney General, Mark R. Beckington and Seth E. Goldstein, Deputy Attorneys General, for Defendants and Respondents.
OPINION
GOMES, Acting P. J.—Plaintiffs Children and Families Commission of Fresno County (Fresno Commission), Madera County Children and Families Commission (Madera Commission), First 5 Merced County (Merced Commission), First 5 Solano Children and Families Commission (Solano Commission) and Kendra Rogers (collectively the Commissions) appeal from a postjudgment order denying their motion for attorney fees sought under the private attorney general doctrine. (
In November 1998, California voters adopted Proposition 10, the California Children and Families First Act of 1998. (Prop. 10, § 5, adopted Nov. 3, 1998; see
To pay for these programs, the Act imposes a surtax on cigarettes and tobacco products, which is deposited into the California Children and Families Trust Fund (the Trust Fund) in the state treasury. (
The Trust Fund moneys are allocated and appropriated as follows: (1) 20 percent to separate accounts of the state commission and (2) 80 percent to county commissions, which are deposited into local trust funds administered by each county commission. (
The Act provides that moneys raised pursuant to the cigarette and tobacco taxes “shall be appropriated and expended only for the purposes expressed in [the Act], and shall be used only to supplement existing levels of service and not to fund existing levels of service. No moneys in the . . . Trust Fund shall be used to supplant state or local General Fund money for any purpose.” (
To solve this problem, Assembly Bill 99 authorized the transfer of a specified amount of funding from the state and county trust funds. Assembly Bill 99 added three Health and Safety Code sections: (1) section 130156, which established the Children and Families Health and Human Services Fund (Human Services Fund) in the State Treasury, which was to be used “upon appropriation by the Legislature, to provide health and human services, including, but not limited to, direct health care services, to children from birth through five years of age“; (2) section 130157, which directed that $50 million be transferred from the state commission‘s accounts to the Human Services Fund; and (3) section 130158, which directed that $950 million from the combined balances of all the county commissions’ trust funds be transferred to the Human Services Fund. The Legislature asserted this transfer did not supplant existing levels of service because the services were no longer being funded and that requiring Proposition 10 funds to be used in this manner would help counties achieve the Act‘s “overall objective of promoting, supporting, and optimizing early childhood development.” (Stats. 2011, ch. 4, § 1(g).)
Each nonexempt county commission was supposed to remit 50 percent of its county commission funding for deposit into the Human Services Fund by June 30, 2012. (
On April 5, 2011, the Fresno, Madera and Merced Commissions, as well as taxpayer Kendra Rogers, filed a petition for writ of mandate in Fresno County Superior Court, naming Governor Edmund G. Brown, Jr., California State Controller John Chiang, and California Director of Finance Ana J. Matosantos as defendants (collectively the state officials). The Commissions alleged the Legislature exceeded its authority in enacting Assembly Bill 99, asserting the measure interfered with local control of commission funds, violated Proposition 10‘s prohibition on using those funds to supplant existing services, and threatened to allow expenditures for services to all age groups, rather than children to age five and their families. The Commissions sought a writ of mandate prohibiting the state officials from implementing or complying with Assembly Bill 99; they also asked for declaratory and injunctive relief, as well as attorney fees pursuant to section 1021.5.
Pursuant to a stipulation, the Solano Commission joined the initial three commissions in prosecuting the action. Six other county commissions filed similar suits throughout the state. All of these cases eventually were consolidated in Fresno County.
Governor Brown‘s initial budget proposal in January 2011 called for using $1 billion of the more than $2 billion held in the state and county commissions trust funds to fund Medi-Cal services for children through age five to allow continued funding of core programs providing early childhood health services, subject to voter approval. This approach changed in the May revision to the 2011-2012 budget which increased funding to the Health and Human Services Agency by $1 billion in light of the legal challenges brought against the state‘s use of Proposition 10 funding for the Medi-Cal program. While the May revision noted the state would continue to defend the legal challenges, the administration elected to take a conservative approach and restore the General Fund costs. The 2011-2012 budget the Governor signed on June 30, 2011, did not include the transfer of the Proposition 10 funds for use by the Health and Human Services Agency.
On November 21, 2011, after briefing by the parties and argument, the trial court issued its order on the petition. The issue before the court was whether Assembly Bill 99 was a valid amendment to Proposition 10, which turned on whether Assembly Bill 99 furthered Proposition 10‘s purposes. The court rejected the state officials’ assertion that the undisputed purpose of Proposition 10 was funding programs for preschool children, finding instead that Proposition 10 was intended to “‘emphasize local decision-making’ and ‘provide for greater local flexibility in designing delivery systems.‘” The
The court also found that Assembly Bill 99 violated Proposition 10‘s prohibition against using Trust Fund money to supplant or replace funding for existing levels of services for young children, noting that Assembly Bill 99 “essentially states that its intent is to transfer the funds out of the local commissions to get around that prohibition by allowing the state legislature to do what Prop 10 prevents the commissions from doing.” As the court explained, “by claiming that the [L]egislature has prioritized ensuring that the target population ‘continue to receive basic health care services,’ they are essentially acknowledging that the legislative intent is to use these funds to ‘fund existing levels of service.‘”
The court concluded that, based on the evidence before it, neither Health and Safety Code section 130157 nor Health and Safety Code section 130158 furthered Proposition 10 or was consistent with its purposes, and therefore the amendments could be validly enacted only by a vote of the electorate. The court also found that Health and Safety Code section 130156 could not be severed from the rest of Assembly Bill 99. Therefore, the court held that the entire bill was invalid and the Commissions were entitled to judgment on the peremptory writ.
Following the ruling, the Commissions dismissed their remaining causes of action, with the exception of their attorney fees claim. The court entered final judgment on January 11, 2012. The state officials elected not to appeal the judgment.
The Commissions subsequently filed a motion for attorney fees under section 1021.5, which provides, in relevant part, “Upon motion, a court may award attorneys’ fees to a successful party against one or more opposing parties in any action which has resulted in the enforcement of an important right affecting the public interest if: (a) a significant benefit, whether pecuniary or nonpecuniary, has been conferred on the general public or a large class of persons, (b) the necessity and financial burden of private enforcement, or of enforcement by one public entity against another public entity, are such as
The motion sought $382,382.50 in attorney fees incurred during the litigation.4 The Commissions argued their lawsuit enforced important rights affecting the public interest and conferred a significant benefit on two classes of persons: (1) children from the prenatal stage to age five and their families, and (2) California voters. They asserted the lawsuit benefitted more than just their own constituents, as it enforced the rights of all California voters and young children and families throughout the state. The Commissions claimed their interest in the litigation was not financial, as they sought to protect the funds entrusted to them and ensure the Trust Fund would be allocated to programs through local decisionmaking and not used to supplant funding for existing services for young children. While the Commissions acknowledged they would retain a substantial amount of money by virtue of the lawsuit, they argued this was not an economic benefit to them but instead constituted money held in trust for the benefit of their constituents.
In their opposition to the motion, the state officials argued that the Commissions had not shown that the lawsuit conferred a substantial benefit on the general public or a large class of persons, as neither young children nor the California electorate received any meaningful benefit from the trial court‘s determination that Assembly Bill 99 exceeded the Legislature‘s power to amend Proposition 10. The state officials further argued the Commissions had not established that the financial burden of enforcement made an attorney fee award appropriate, as they had a sufficient financial interest to bring the lawsuit without the prospect of an attorney fee award and their litigation costs of $382,382.50 were not disproportionate to their expected financial gain, i.e., the retention of more than $30 million in trust money that would have been subject to transfer had Assembly Bill 99 been enforced.
The trial court denied the motion for attorney fees. In its written order, it explained its decision as follows: “Here . . . the petitioner commissions are public entities with identified constituencies, appointed to hold and distribute the funds they receive in trust for their constituents. In this case, the Commissions obtained a significant pecuniary benefit for their constituencies from this litigation, and as argued in the opposition, it was in no way ‘disproportionate’ to the $700,000 in fees they claim to have incurred, since the funds they preserved for their constituents were in the hundreds of millions.
“While respondents concede that important rights were protected (including the right of the electorate to control the scope of legislative authority to amend statutes passed by initiative and the right of young children to the benefits of locally determined programs funded with taxpayer dollars), there is a question as to the extent of the ‘substantial benefit’ obtained in that the inability of the state to use the one billion of tobacco tax revenue to fund existing health related programs necessarily meant that there were less funds available to fund those programs.
“With regard to benefit to the electorate, it does seem, as respondents have argued, that the issue here wasn‘t whether the people have the right to set limits on the power of the [L]egislature to make amendments, but whether in this case AB 99 furthered the Act and was ‘consistent with its purpose,’ since the voters specifically authorized amendment on a 2/3 vote of the [L]egisla-ture where those conditions were met.
“Additionally, to qualify for an award under
Only the Fresno, Madera, Merced and Solano Commissions, along with Kendra Rogers, appealed the fee denial.
DISCUSSION
Section 1021.5
Section 1021.5 codifies the private attorney general doctrine enunciated in Serrano v. Priest (1977) 20 Cal.3d 25,
As pertinent here, an award under section 1021.5 requires a showing that (1) the litigation enforced an important right affecting the public interest; (2) it conferred a significant benefit on the general public or a large class of persons; and (3) the necessity and financial burden of private enforcement (or enforcement by one public entity against another) were such as to make the award appropriate. (Conservatorship of Whitley (2010) 50 Cal.4th 1206, 1214 (Whitley).) Since the statute states the criteria in the conjunctive, each element must be satisfied to justify a fee award. (City of Maywood v. Los Angeles Unified School Dist. (2012) 208 Cal.App.4th 362, 429 (Maywood).) Accordingly, we may uphold the trial court‘s order denying the attorney fees motion if we determine any one of these elements is missing.
The third element, the necessity and financial burden requirement, involves two issues: “‘“whether private enforcement was necessary and whether the financial burden of private enforcement warrants subsidizing the successful party‘s attorneys.“‘” (Whitley, supra, 50 Cal.4th at p. 1214.) It is the second prong that is at issue here. Our Supreme Court has explained this prong as follows: “In determining the financial burden on litigants, courts have quite logically focused not only on the costs of the litigation but also any offsetting financial benefits that the litigation yields or reasonably could have been expected to yield. ‘“An award on the ‘private attorney general’ theory is appropriate when the cost of the claimant‘s legal victory transcends his personal interest, that is, when the necessity for pursuing the lawsuit placed a burden on the plaintiff ‘out of proportion to his individual stake in the matter.’ [Citation.]“’ [Citation.] ‘This requirement focuses on the financial burdens and incentives involved in bringing the lawsuit.‘” (Id. at p. 1215.) A party seeking fees under section 1021.5 has the burden of establishing its litigation costs transcend its personal interests, (Save Open Space Santa Monica Mountains v. Superior Court (2000) 84
Cal.App.4th 235, 246-247; Beach Colony II v. California Coastal Com. (1985) 166 Cal.App.3d 106, 113.)
In Whitley, our Supreme Court clarified the proper method of evaluating the “financial burden” element of section 1021.5, i.e., when the cost of the legal victory transcends the successful party‘s personal interest. (See Maywood, supra, 208 Cal.App.4th at pp. 429-430.) As explained in Maywood, before Whitley, “appellate courts were divided as to whether it was proper to consider a claimant‘s nonpecuniary ‘personal interests’ when applying the financial burden element. [Citations.] Whitley resolved the dispute, holding that ‘a litigant‘s personal nonpecuniary motives may not be used to disqualify [that] litigant from obtaining fees under . . . section 1021.5.‘” (Id. at p. 430.)
The plaintiff in Whitley, the conservator of her developmentally disabled brother, brought litigation resulting in a published appellate opinion that extended certain procedural protections to disabled persons challenging a community placement. (Whitley, supra, 50 Cal.4th at pp. 1211-1212.) The trial court denied her subsequent request for attorney fees under section 1021.5, in part, on the ground the financial burden imposed by the case was not out of proportion to her personal interest in her brother‘s well-being. (Id. at p. 1213.) The Court of Appeal affirmed the fee denial, holding that a strong nonpecuniary personal interest in the litigation could disqualify a litigant from obtaining attorney fees under section 1021.5. (Ibid.)
Our Supreme Court reversed, holding that “a litigant‘s personal nonpecuniary motives may not be used to disqualify that litigant from obtaining fees” under section 1021.5. (Whitley, supra, 50 Cal.4th at p. 1211.) The court explained that the appellate court‘s contrary interpretation had no basis in the language, legislative history, or evident purpose of section 1021.5, which is “not to compensate with attorney fees only those litigants who have altruistic or lofty motives, but rather all litigants and attorneys who step forward to engage in public interest litigation when there are insufficient financial incentives to justify the litigation in economic terms.” (Ibid.)
In so