I. BACKGROUND
A. Facts
San Leandro is located in the San Francisco Bay. Halus Power owned an approximately five-acre parcel in an industrial zone in San Leandro, where it designed, manufactured, and remanufactured wind turbines used to generate electricity. It proposed to install a single 100-foot-tall wind turbine on its property to generate renewable energy for its business and conduct on-site research and development. To
The California Environmental Quality Act ( Pub. Resources Code, § 21000 et seq. ) (CEQA) "requires that a public agency determine whether a project may have significant environmental impacts before it approves the project. [Citations.]" ( Preserve Poway v. City of Poway (2016)
"Under CEQA, an agency must require an [environmental impact report (EIR) ] for any project that 'may have a significant effect on the environment,' unless a categorical exemption applies. [Citations.]" ( Preserve Poway , supra ,
San Leandro did not change course, but, instead, released a revised MND adding eight mitigation or monitoring levels, essentially those recommended by the Department of Fish and Game. Heron Bay HOA and its members submitted further comments in response, again insisting an EIR was required and again expressing concern, among other things, regarding an anticipated resulting decline in property values if the project were completed. San Leandro's Board of Zoning Adjustments ultimately approved the MND, after adding one further mitigation measure, and granted the variance. Heron Bay HOA appealed the board's decision, but the city council affirmed it, approving the project.
B. Procedural History
1. The Merits
Heron Bay HOA filed a petition for a writ of mandate in the trial court seeking
2. Attorneys' Fees
Following entry of judgment, Heron Bay HOA moved the trial court for an award of attorneys' fees under section 1021.5. The fees motion advised that the Law Offices of A. Alan Berger (the Berger law firm) represented Heron Bay HOA in the administrative proceedings, while the law firm of Rogers Joseph O'Donnell (the RJO law firm) represented it in the CEQA litigation before the trial court. According to the moving papers, Heron Bay HOA members, through their membership dues, paid the Berger law firm $84,720.00. Additionally, under a partial contingency agreement, they paid the RJO law firm $64,638.00, and the firm agreed to seek reimbursement for the remainder of its fees ($166,981.50) as part of an eventual attorney fee award.
Following a hearing, the trial court issued an order granting the fees motion in part. The court concluded "[t]he lawsuit conferred a significant benefit on the public." But it also found the Heron Bay HOA "had a significant financial incentive to initiate the litigation" because it feared installation of the proposed turbine would reduce members' property values. After discounting the suggestion of Heron Bay HOA's president, based on unspecified "studies," that the total reduction could be between $30 million and $150 million, the trial court acknowledged that any valuation of real estate involved uncertainty, and that the project's impact here would be distributed unevenly among Heron Bay HOA members, "with properties closer to the turbine and with a better view of the turbine suffering larger declines in value."
Nonetheless, the court determined it was possible to value the projected loss that Heron Bay HOA and its members feared. Attempting to do so, the court "[a ]ssum i[ied d] a rational fear of an average 2.5% drop in value" for all of the 629 residences. (Italics added.) Crediting evidence that each residence on average was worth $500,000, the court concluded this "suggest [ed ]" Heron Bay HOA and its members "sought to avoid a property loss in the neighborhood of $[7.8 million]." (Italics added.) Finding that "experienced CEQA counsel would have thought there was a 75% probability of success when the litigation commenced," the trial court then discounted its $7.8 million estimate by the corresponding 25 percent risk of a loss, and concluded the "probable monetary value of the benefit of the litigation was in the neighborhood of $[5.8 million]" (italics added) (or $9,000.00 per residence). In comparison, the trial court judge found, based on knowledge of the case, including the "procedural, factual, and legal complexity," and based on fee awards entered in other CEQA cases the same judge had handled, Heron Bay HOA could have reasonably estimated, "[w]hen deciding to initiate the lawsuit," that its fees would total about $240,000.00.
Weighing these anticipated benefits and costs, the trial court concluded it was "a very close call" whether Heron Bay HOA was entitled to a fee award. If "required to make an all or nothing decision on fees," the trial court observed, it would deny the motion. But, the court interpreted the relevant case law as allowing it the discretion instead to apportion (or adjust) the amount of the award to account for Heron Bay HOA's "significant financial incentive" to initiate litigation. "[W]here a party pursues litigation for both its private pecuniary interest and in the public interest," it concluded, a court could award fees to alleviate "the financial burden of bringing the lawsuit," while deducting " 'an amount reflecting the fee that plaintiffs could reasonably have been expected to bear themselves.' " (Quoting Woodland Hills Residents Assn., Inc. v. City Council (1979)
Applying these conclusions, the trial court granted Heron Bay HOA's fees motion in part. Concluding Heron Bay HOA and its members were sufficiently motivated to retain counsel in the administrative proceedings by their concern completion of the project would reduce their property values collectively by $7.8 million, the trial court apportioned responsibility for the Berger law firm's fees ($84,720.00) entirely to Heron Bay HOA, denying the latter's motion insofar as it applied to those fees. The same concerns motivated Heron Bay HOA to retain the RJO law firm to initiate the CEQA litigation,
Halus Power and San Leandro filed a timely appeal of this ruling.
II. DISCUSSION
A. General Legal Principles
" '[T]he Legislature adopted section 1021.5 as a codification of the "private attorney general" attorney fee doctrine that had been developed in numerous prior judicial decisions. ... [T]he fundamental objective of the private attorney general doctrine of attorney fees is " 'to encourage suits effectuating a strong [public] policy by awarding substantial attorney's fees ... to those who successfully bring such suits and thereby bring about benefits to a broad class of citizens.' " [Citations.] The doctrine rests upon the recognition that privately initiated lawsuits are often essential to the effectuation of the fundamental public policies embodied in constitutional or statutory provisions, and that, without some mechanism authorizing the award of attorney fees, private actions to enforce such important public policies will as a practical matter frequently be infeasible .' [Citation.]" ( Whitley , supra , 50 Cal.4th at pp. 1217-1218,
B. Analysis
On appeal, and before the trial court, Halus Power and San Leandro do not and did not dispute that Heron Bay HOA's action resulted in the enforcement of an important right affecting the public interest, a significant benefit was conferred on the general public or a large class of persons, and there was a necessity for private enforcement. Our focus is limited, therefore, to the final element of section 1021.5's eligibility test, and particularly, to the question of whether the "financial burden of private enforcement ... [is] such
Here, the trial court concluded Heron Bay HOA and its members had "a significant financial incentive to initiate the litigation" because they feared installation of the proposed turbine would reduce their property values. This made Heron Bay HOA's entitlement to attorneys' fees a "very close call," the court observed. Reasoning that the financial incentive was "mitigated by the uncertain value of the benefit sought," however, the court exercised its discretion by granting the fees motion in part, denying it in part, and then apportioning responsibility for payment of
Appellants assert the trial court erred in applying apportionment principles to grant a partial fee award. They contend the trial court could only consider apportionment when determining the amount of the fee award, after concluding a party's financial interest in the litigation was insufficient to disqualify it from receiving any fee award. Here, as the trial court estimated Heron Bay HOA's potential loss at about $5.8 million and the reasonable fees expenditure at $250,000, appellants submit, the court must have skipped a step, moving on to consider apportionment, without properly evaluating whether Heron Bay HOA's costs transcended its members' personal interests. We disagree, because the trial court ultimately concluded the "value of the benefit sought" was uncertain and that conclusion was supported by substantial evidence.
Additionally, as the court noted, it was relevant that the benefit Heron Bay HOA
Although the trial court did not expressly state a finding on the financial burden element before discussing apportionment, the record supports an implied finding that Heron Bay HOA had a sufficient financial incentive to incur some, but not all, of the costs of the litigation. (See, e.g., Ketchum v. Moses (2001)
Appellants suggest, in the alternative, that Heron Bay HOA was ineligible to seek attorneys' fees because it acted purely out of self-interest or, if it acted for altruistic purposes, that it lacked authority
Notably, the trial court did not find, and the record does not support the conclusion, that Heron Bay HOA and its members were motivated in initiating this litigation solely by a desire to avoid a loss in property values. Although the public comments that Heron Bay HOA and its individual members submitted during the administrative process raised concerns about the project's potential impact on property values, they also expressed worries about the potential impact on wildlife, aesthetics, health, and noise levels. Heron Bay HOA additionally submitted a consultant's report suggesting the project would "have a potentially significant impact on aesthetics, biological resources, and noise." The fact that a party had a pecuniary interest in initiating litigation does not automatically signify more altruistic concerns played no role in the decision.
Appellants additionally contend the trial court's conclusion that Heron Bay HOA's "financial incentive" here was "mitigated by the uncertain value of the benefit sought" contradicted its earlier estimate assigning a value to Heron Bay HOA's avoided property value loss. We do not discern a contradiction, however, but, rather view the court's statement as confirmation that it did not ultimately value the projected property loss at $5.8 million. The court arrived at that figure by assuming Heron Bay HOA and its members subjectively feared "an average 2.5% drop in [the] value" of all 629 residences,
It is questionable whether a trial court may rely on an arbitrary estimate in evaluating the extent of a party's personal stake in litigation under section 1021.5. (See Keep Our Mountains Quiet v. County of Santa Clara (2015)
The error is not fatal to the trial court's decision, however, because, as noted, it did not actually rely on its own arbitrary assessment in deciding the fees motion.
Appellants assert "abundant evidence" confirmed the answer was yes. Aside from the court's arbitrary valuation of Heron Bay HOA's feared loss,
Appellants contend it is well established that "preservation of property values can be a disqualifying pecuniary interest" under section 1021.5 (italics added), and "need not be quantified with absolute mathematical precision." As support for this proposition, appellants rely particularly on Beach Colony II v. California Coastal Com. (1985)
The decision is easily distinguishable as none of those key facts existed here. To the contrary, the record here contains evidence that Heron Bay HOA and its members were motivated to initiate the CEQA litigation in part by non-pecuniary interests, including concerns about the proposed turbine's potential impact on wildlife, aesthetics, health and noise levels. The trial court agreed that the monetary value of the benefit they sought was uncertain. And Heron Bay HOA submitted detailed evidence demonstrating the financial costs of its litigation, including attorneys' fees.
Although appellants devote considerable effort to distinguishing the facts, discrediting
Appellants also attempt to differentiate this case by observing that, while Keep Our Mountains Quiet concluded any financial benefit was indirect and speculative-because the trial court's ruling granting a writ of mandate did not guarantee changes to the proposed project ( Keep Our Mountains Quiet , supra ,
Appellants suggest it would "write the 'financial burden' element entirely out of Section 1021.5" if the value of the asserted financial benefit in the form of loss of property value, must be quantified with objective evidence before it is considered, particularly in CEQA cases. Appellants point to three cases in which courts applied the financial burden element to conclude plaintiffs were ineligible for fee awards without requiring " 'empirically-derived' economic data." But, in two of those cases, the courts had a basis for assigning a value, while in the third case the court affirmed denial of an award relying primarily on other grounds. (See, Norberg , supra ,
To the extent appellants contend Heron Bay HOA failed to meet its burden of proof, for example, by failing to adequately and objectively quantify the potential reduction in property values that it avoided through this litigation, we disagree. As an initial matter, we note the contention appears to contradict appellants' assertions, in support of other arguments, that it was not necessary to precisely quantify the value of the benefit that Heron Bay HOA sought. Leaving this point aside, however, we conclude that Heron Bay HOA did meet its burden of proving the financial burden of the litigation transcended the value of its private pecuniary interests, making a partial award appropriate. Heron Bay HOA's fees' motion provided detailed information regarding its litigation costs, and correctly pointed out that Heron Bay HOA and its members received no "reasonably certain financial benefit" by securing
We affirm the judgment. Heron Bay HOA is entitled to its costs on appeal, including its attorneys' fees for successfully defending this appeal, with the amount to be determined by the trial court. (See Beasley v. Wells Fargo Bank (1991)
We concur:
Ruvolo, P.J.
Streeter, J.
Notes
All undesignated statutory references below are to the Code of Civil Procedure.
The trial court also found that San Leandro failed to comply with its own zoning code in granting the variance.
Altogether, Heron Bay HOA advised, it paid more than $149,000 out-of-pocket in attorneys' fees.
Although the trial court's order gave the amount as $232,500.00, the accompanying calculations indicate the court intended the number to read "$242,000.00," which it rounded down to the nearest thousand. This is evident because, after stating the total estimated fees, the order estimated costs would likely total $10,000, and it concluded fees and costs together would total $252,500, which it "rounded to $250,000."
The RJO law firm had sought $77,769.50 for its work on the fee motion, which represented 180.3 attorney hours multiplied by each attorney's respective hourly rate. The attorneys' hourly rates ranged between $185 and $695 per hour, with most hours billed at $425 per hour.
Section 1021.5 provides in pertinent 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 to make the award appropriate, and (c) such fees should not in the interest of justice be paid out of the recovery, if any."
Although in their briefs opposing the fees motion and on appeal, Halus Power and San Leandro (collectively, appellants) included a few remarks suggesting the value of the public benefit the action conferred was minimal, they offered no legal arguments on this point, and agreed in their appellate reply brief the financial burden element was "the only issue presented on this appeal."
This is particularly true as San Leandro produced a study during the administrative proceedings finding "no evidence ... that home prices surrounding wind facilities [were] consistently, measurably, or significantly affected by either the view of wind facilities or the distance of the home to those facilities." Heron Bay HOA cited this study as support for its argument, in its fees motion, that it did not seek "any reasonably certain financial benefit" through this litigation.
Appellants, in their reply brief, attempt to refute this suggestion and the idea that the trial court relied on it by noting the trial court's observation that Heron Bay HOA could pay litigation costs from its reserves or by borrowing money. Neither the trial court nor appellants cite any portion of the record confirming the existence of such reserves. Regardless, the availability of funds is irrelevant to the question of whether a majority of the members of Heron Bay HOA had a financial incentive to expend such funds on litigation when, according to the trial court, only a few members would have had views of the proposed turbine. We do not agree with appellants that the existence of a partial contingency agreement here was entirely irrelevant, or that we must disregard the nature of the agreement because Heron Bay HOA declined to produce the actual agreement, citing attorney-client privilege; there is no indication appellants attempted to compel production.
Although the trial court used the terms "reasonable" and "rational" in describing Heron Bay HOA's expectation and fear, it confirmed in a footnote it was applying a subjective standard.
Courts of Appeal have interpreted Whitley differently as to whether this test is required in every instance, an issue that we do not decide. (See, e.g., Millview County Water Dist. v. State Water Resources Control Bd. (2016)
We note the trial court did not even state an express finding that Heron Bay HOA and its members subjectively feared a $5.8 million reduction in their property values. Instead, the court couched its "estimate" in qualifying language, stating that it "[a ]ssum i[ied ] a rational fear of an average 2.5% drop"; this "suggest [ed ]" a motive to avoid a property loss "in the neighborhood " of $7.8 million; and "[t ]o the extent " Heron Bay HOA's litigation prevented a reduction in property value, it "derived a financial benefit for its members." (Italics added.)
Heron Bay HOA incorporated and adopted by reference Lee's entire multipage public comment in its own public comments, and its board of directors included the "$50,000 to $150,000" estimate in an e-mail urging members to attend a city hearing regarding the proposed project.
Appellants rely to a lesser degree on Schwartz v. City of Rosemead (1984)
Although the trial court stated that the evidence suggested Heron Bay HOA wanted to prevent installation of the turbine entirely, and not just to delay or require changes to the project, the decision about whether and how the project would proceed did not rest with Heron Bay HOA, and the end result, therefore, remained uncertain after the trial court entered judgment in its favor.
It is worth noting that in Edna Valley Watch v. County of San Luis Obispo , supra , the Court of Appeal actually reversed the trial court's order denying fees based on the Supreme Court's decision in Whitley , supra ,
It is not actually clear whether the Court of Appeal in Christward Ministry v. County of San Diego , supra , relied on the existence of a pecuniary or a nonpecuniary private interest as an additional basis for affirming denial of the plaintiff's fees motion. The court mentioned the plaintiff's eligibility under the financial burden element in a single sentence after a lengthier analysis of the significant benefit element, stating only that it found the trial court's "assessment of Christward's private interest in the litigation" to be reasonable. (Christward Ministry , supra ,
As neither Halus Power nor San Leandro directly responded to Heron Bay HOA's request for attorneys' fees on appeal, the appropriateness of this award is not in dispute.