Opinion
It is well settled that a trial court is vested with wide discretion in fixing the amount to be awarded to a prevailing party for attorneys’ fees, and that a court’s award will not be disturbed on appeal unless the record discloses an abuse of discretion. (See Serrano v. Priest (1977)
The Statutory Setting for the Litigation
The community redevelopment law (CRL; Health & Saf. Code, § 33000 et seq.)
In recent years, the Legislature has enacted a number of statutes out of a concern that implementation of the CRL may adversely impact housing, particularly low-income housing. For example, section 33334.2 requires redevelopment agencies to set aside “not less than 20 percent” of its tax increment proceeds in a low- and moderate-income housing (LMIH) fund. Other statutes require agencies to provide relocation benefits to persons displaced by a redevelopment (§§ 33411, 33411.1), to include prescribed percentages of units for low- and moderate-income housing in redevelopment-assisted housing projects, with covenants to keep those units affordable for prescribed periods, and to replace affordable units lost because of redevelopment activities (§§ 33413, 33418).
The Litigation
In December 2006, Esperanza Rogel and other residents of a mobilehome park (Plaintiffs) in the City of Lynwood (City) filed a complaint and verified petition for writ of mandate against the City, the City Council of the City of Lynwood, and the Lynwood Redevelopment Agency (LRDA). Plaintiffs’ complaint alleged that a proposed plan to change the mobilehome park into townhomes would result in the loss of low-income rental housing units and would force Plaintiffs out of the City because it otherwise lacked housing they could afford. Plaintiffs alleged that the LRDA had violated (and had a history of violating) statutes requiring relocation assistance, setting aside money to assist affordable housing goals, and building affordable units with covenants to keep them affordable. Plaintiffs prayed for declaratory and
In August 2007, the trial court (Hon. Dzintra Janavs) denied Plaintiffs’ petition for writ of mandate against the City and city council. In October 2007, the court lifted a stay of Plaintiffs’ claims against the LRDA and transferred the case for reassignment to a trial department.
Plaintiffs’ initial lawyers were affiliated with Public Counsel and the California Affordable Housing Law Project. In October 2007, Plaintiffs filed notice that the law firm of O’Melveny & Myers LLP (O’Melveny) had become associated as Plaintiffs’ cocounsel.
In January 2008, the LRDA moved to stay discovery until Plaintiffs’ appeal of the deniаl of their writ petition had been completed. The parties later stipulated to take the motion off calendar. In April 2008, the LRDA filed a motion to strike almost 200 allegations from Plaintiffs’ first amended complaint, including single words such as “unlawful,” references to the City (on the ground the City was no longer a party), and dozens of other passages which, in the eyes of the LRDA, constituted objectionable legal conclusions. In June 2008, the trial court denied the LRDA’s motion upon finding the agency was attacking “unimportant” parts of the pleading. At the same time, the court set a trial date for December 2008.
During the ensuing course of the litigation, the LRDA repeatedly failed to respond to discovery, and Plаintiffs filed multiple discovery-related motions. The record suggests that the LRDA’s repeated failures to comply with discovery were the result of its internal failures to maintain ordinary records. At various times, the LRDA claimed it could not locate documents concerning budgets, general ledgers, bank accounts, and audit reports. In this vein, the LRDA’s housing manager and the person it designated as “most qualified” to testify on affordable housing issues both testified the LRDA’s records were so disorganized that it would be difficult for the agency even to determine the number of redevelopment projects in which it had been
Plaintiffs’ discovery efforts included the following: In May 2008, Plaintiffs filed a motion to compel responses to their request for production of documents. In September 2008, Plaintiffs filed a motion to compel further response to their request for production of documents, and a motion to compel further responses to their requests for admissions and their form interrogatories. In December 2008, Plaintiffs filed a motion for issue and evidencе sanctions based on the LRDA’s discovery failures, a motion for an order deeming Plaintiffs’ requests for admissions admitted (and to compel responses to special interrogatories), and a motion to produce documents responsive to Plaintiffs’ second request for production of documents. For all practical purposes, Plaintiffs won all of their discovery-related motions.
On December 23, 2008, the trial court granted in part Plaintiffs’ motion for issue and evidence sanctions against the LRDA. The court ordered that matters included in three sets of Plaintiffs’ requests for admissions were to be deemed admitted, and that the LRDA could not introduce evidence of any document responsivе to Plaintiffs’ first request for production of documents unless the documents were produced by December 31, 2008. The court also imposed monetary sanctions against the LRDA.
Meanwhile, O’Melveny’s ability or agreeability to continue with its role as Plaintiffs’ cocounsel “became more limited.” In August 2008, Plaintiffs’ public interest lawyers persuaded Gibson, Dunn & Crutcher LLP to assume the role of lead cocounsel in preparation for trial.
On January 2, 2009, the LRDA served its response to requests for admissions, admitting each matter covered by the discovery request. Together, the matters deemed admitted by the trial court’s December 23, 2008 order and the LRDA’s January 2, 2009 admissions essentially established the following elements of Plaintiffs’ аction:
—The LRDA never provided relocation assistance to persons displaced from dwelling units within its jurisdiction.
—The LRDA never determined how many housing units it should have produced to fulfill its housing obligations, or how many housing units it had actually produced.
—The LRDA had no evidence that, since January 1994, it had satisfied any of its housing obligations related to any of its redevelopment projects.
*1325 —Since January 1994, the LRDA had failed to assure that dwelling units developed or substantially rehabilitated within its jurisdiction were made available at an affordable housing cost to, and occupied by, persons of low or moderate income.
—Since January 1994, the LRDA had failed to produce the number of replacemеnt dwelling units it was obligated to produce.
—The LRDA had no evidence that it satisfied any of its replacement housing obligations from January 1994 to September 2006, and, since 2006, the LRDA had produced no replacement dwelling units.
—Since January 1994, the LRDA had failed to deposit the prescribed percentage of its tax increment (not less than 20 percent) into a LMIH fund.
—The LRDA failed to record any affordability covenants for housing units in any redevelopments.
—Since January 1994, the LRDA’s redevelopment activities had discriminatory, adverse, and disproportionate impact on racial and ethnic minorities, persons with disabilities, and families with children, and further discriminated against the development of housing reserved for occupancy by lower income households.
On February 17, 2009 (at which time trial was set to begin on Feb. 23, 2009), the LRDA approved a settlement. On March 23, 2009, the trial court signed and entered a stipulation and order incorporating the settlement agreement. The court’s March 23 order included the following provisions, among others: (1) the LRDA shall develop a minimum of 42 “inclusionary dwelling units” within four years, and develop and make available for occupancy by March 2015 another 49 “replacement dwelling units”; (2) the LRDA shall record affordability covenants on all newly developed inclusionary and replacement dwelling units; (3) the LRDA shall establish, fund, administer, and use in accordance with applicable law a separate and segregated LMIH fund; (4) the LRDA must deposit $250,000 into the LMIH fund to replace improperly expended funds; (5) the LRDA shall provide full payment of all relocation assistance owed to persons displaced by LRDA activities, including the named Plaintiffs; and (6) the LRDA shall submit specified issues to a redevelopment “specialist” who will make final and binding determinations of inappropriate LRDA expenditures from the LMIH fund, as well as any related penalties for which the LRDA may be liable.
The settlement agreement included this provision addressing attorneys’ fees: “Plaintiffs shall not be precluded from seeking to recover reasonable
In April 2009, Plaintiffs filed a motion for an award of attorneys’ fees and costs pursuant to Code of Civil Procedure section 1021.5, supported by a series of attorneys’ declarations and accompanying billing documentation. The aggregate sum rеquested or “lodestar based on the hours worked and applicable hourly rates” totaled approximately $2.7 million. Plaintiffs asked the trial court to apply a multiplier of 1.2 to the lodestar in light of the complexity of the issues, the skill displayed in litigating the case, the results obtained, the importance of the case, and the risk taken by Plaintiffs’ lawyers in pursuing the litigation.
The LRDA opposed Plaintiffs’ motion for attorneys’ fees on three principle grounds: (1) the most it could pay in attorneys’ fees without harming its affordable housing mission (including its obligations under the settlement agreement) was roughly $160,000; (2) Plaintiffs’ lawyers had inflated the lodestar; and (3) the LRDA had incurred far less in attorneys’ fees. The LRDA further argued the casе involved “straightforward statutory issues,” and the Plaintiffs had obtained only “limited success.” Based on all of these factors, the LRDA asserted that a “negative” multiplier was appropriate.
At a hearing on May 20, 2009, the trial court noted Plaintiffs “clearly” were entitled to an award of attorneys’ fees. It made repeated statements over the course of the hearing to the effect that the case had resulted in a substantial public benefit, and that the LRDA may never have developed affordable housing units without being motivated by the litigation. The court specifically described the result as “a benefit to the citizens of Lynwood and to the county as a whole.” At the same time, however, the court requested additional briefing to help determine the amount of the fees award. It specifically indicated it was interested in the attorneys’ fees language in the settlement agreement dealing with the LRDA’s “financial condition.”
Plaintiffs’ supplemental briefing argued the settlement agreement did not require the court to consider the LRDA’s alleged financial condition in determining the amount of the attorneys’ fees award, only that the LRDA
In its supplemental opposition, the LRDA argued that the language in the settlement agreement about the agency’s “financial condition” showed that the parties intended to “go beyond” the factors addressed in Serrano III, supra,
On July 10, 2009, the court issued a tentative ruling. The court ruled Plaintiffs were the prevailing parties, having “obtained the relief sought in the Complaint through the stipulated judgment.” The court also found Plaintiffs’ litigation had “conferred a significant public benefit” in that the settlement agreement would result in “the development of almost 100 new affordable housing units and the reimbursement of amounts owed by LRDA to various public funds.” In its oral pronouncements, the court expressly noted that, without Plaintiffs’ counsel, “we would not have the result we have. We would not get anything.” The court expressly stated Plaintiffs’ counsel did “a fantastic job” with regard to affordable housing in the City.
Despite its written and oral statements, the court ruled it would measure the amount of attorneys’ fees by applying a negative multiplier of 0.2 to the lodestar requested by Plaintiffs. The trial court based its ruling on two predominant grounds: first, the settlement agreement authorized the court to “factor in” the LRDA’s financial condition in deciding the amount of fees; second, “the requested attorneys’ fees would significantly reduce the amount
The court’s second reason for applying a negative multiplier was its finding that portions of the attorney time reflected in the billing statements submitted by Plaintiffs’ lawyers was “duplicative” and, therefore, “noncompensable.” The court did not calculate and deduct specific amounts from the lodestar based on these conclusions, but cited this as a factor for applying a negative multiplier. In addition, the court found that the time billed also reflected work completed by law students who received school credit, and that this time billed “should not be passed through to the [LRDA].” The court also suggested Plaintiffs were seeking “attorney fees for actions taken against the City,” which were not related to Plaintiffs’ claims against the LRDA. Again, however, the court did not deduct specific amounts from the lodestar based on these conclusions. Basically, the trial court adopted the LRDA’s claims regarding unreasonable billing but did not specifically calculate and deduct the excessive fees. Instead, it cited the overbilling element as a basis for applying a blanket negative multiplier.
Finally, the court noted the pro bono nature of the lawyers’ work as a factor for applying a negative multiplier: “[T]he Court considers an award of millions of dollars of in attorneys’ fees unreasonable and excessive when most of the work ... by Plaintiffs’ counsel was pro bono.”
As a result of the 0.2 negative multiplier, the attorneys’ fees award in favor of Plaintiffs was reduced from the $2.7 million (rounded) lodestar to $540,000 (rounded). On July 14, 2009, the court adopted its tentative ruling, and on August 14, 2009, the court signed and entered an order on the attorneys’ fees motion.
Plaintiffs filed a timely notice of appeal.
DISCUSSION
Plaintiffs contend the trial court abused its discretion by diverging from the “lodestar” approach normally applied when calculating an attorneys’ fees award. We agree.
A court assessing attorneys’ fees must begin with a lodestar figurе based on the time spent and the reasonable hourly rate of each attorney involved in the presentation of the case. (Ketchum v. Moses (2001)
In Serrano III, supra,
II. The Lodestar Approach Should Have Been Followed
We agree with Plaintiffs the trial court erred by diverging from the lodestar in the current case. The cases on this subject do indeed support the
For example, in San Diego Police Officers Assn. v. San Diego Police Department (1999)
The facts in the current case are directly opposite to those in the San Diego Police Officers case. In the current case, Plaintiffs achieved a significant success. Plaintiffs prevailed in an action made complex by the LRDA’s internal incompetence of keeping documents in a disorganized, unaccessible fashion and/or its deliberate obstructionism of its discovery obligations. The case required large and largely avoidable amounts of lawyers’ time to overcomе the LRDA’s lack of basic record keeping, thereby precluding work on other matters. At best, Plaintiffs’ current case and the San Diego Police Officers case are similar only to the extent that the award of attorneys’ fees “would ultimately be borne by the taxpayers.” Further, since the LRDA does not actually have the power to tax, this is not as much of a similarity as it might initially appear.
In Thayer v. Wells Fargo Bank (2001)
Turning to that principal issue in the current case, we agree with Plaintiffs that the trial court erred by applying a negative multiplier based on the factor that payment of lodestar attorneys’ fees would not be the “better” use of the LRDA’s money. As noted above, the Supreme Court in Serrano III implicitly approved consideration of a “taxpayer burden” factor in fixing an appropriate figure for an attorneys’ fees award. (Serrano III, supra,
We acknowledge that, following Serrano III, our state’s courts have regularly affirmed attorneys’ fees awards against governmental entities basеd on positive and negative multipliers. However, no case cited in the parties’ briefs has affirmed a negative multiplier attorneys’ fees award against a governmental agency based on the express factor that it would be “better” for a governmental entity not to pay the lodestar so that the entity’s ability to fund its ongoing operations would not be affected. In our view, the absence of history on this subject is not surprising given that the funding of a governmental entity’s ongoing operations has little, if any, bearing on the “fair market value” of attorneys’ fees for the legal work performed by lawyers who represented a prevailing party in an action against that governmental entity.
To guide us, we find most applicable Horsford v. Board of Trustees of California State University (2005)
Finally, we agree with Plaintiffs that the “pro bono” status of their attorneys cannot justify the negative multiplier applied to Plaintiffs’ request for attorneys’ fees. It appears that the trial court, in applying a pro bono discounter factor, was giving special treatment to lawyers who represent a party in public interest litigation. We find that treatment to be unfair to Plaintiffs. Our Supreme Court has held that attorneys’ fees may not be reduced because the prevailing plaintiffs are represented by public interest law firms, which do not charge their clients for their services. (Serrano v. Unruh, supra, 32 Cal.3d at pp. 640-644.) The reason for such a rule is straightforward: рublic interest litigation “ ‘should not have to rely on the charity of counsel . . . .’ [Citation.]” (Id. at p. 644, fn. 40.) The controlling factor, again, is the fair market value of the legal work which was performed.
In Serrano III, supra, 20 Cal.3d at pages 48-49, the Supreme Court indicated that the public or charitable funding of a party’s counsel may be considered in fixing an award for attorneys’ fees. However, as with its reference to taxpayer burden, the court did not have occasion to explain when or how to apply and weigh this factor. We do not understand Serrano III to have approved of negating properly documented attorneys’ fees simply because a lawyer took a case pro bono. It is one thing to recognize that hourly rates for legal work on behalf of multinational corporate clients is compensated more handsomely in the marketplace than legal work in other fields, but it is not proper to cut properly documented, field-appropriate fees because a lawyer provided pro bono work. Assuming that representation by nonprofit organizations might impact a decision not to apply a positive multiplier, this does not justify a negative multiplier. Lawyers are, and should be, encouraged to provide pro bono services to the community. We reject the proposition that a law firm’s willingness to provide its services on a prо bono basis to low-income clients justifies a diminishment in the fee award when that pro bono representation proves successful. (Cruz v. Ayromloo (2007)
III. The Reasonableness of the Attorneys’ Fees
At this point, we decline to address Plaintiffs’ contention that the record does not otherwise support the trial court’s decision to reduce their lodestar request for attorneys’ fees. For the reasons explained above, we agree with Plaintiffs that the record supports a conclusion that the trial court applied a negative multiplier based on the LRDA’s status as a governmental entity. On examination оf the attorneys’ fees issue in the absence of this factor, the trial court may determine that portions of Plaintiffs’ claim for attorneys’ fees are excessive. For this reason, we find it premature to evaluate any trial court assessment of reasonableness of fees until the court has made specific findings on that issue.
IV. The Settlement Agreement
The LRDA contends the trial court properly reduced Plaintiffs’ lodestar under the attorneys’ fees provision included in the settlement agreement. We disagree.
According to the LRDA, Plaintiffs’ appeal “is controlled by the express provisions of the settlement agreement.” LRDA argues that the law allows parties to agree, in accord with basic contrаct principles, to resolve the issue of attorneys’ fees in a manner other than under Code of Civil Procedure section 1021.5. We have no quarrel with the LRDA’s abstract statement of law allowing for the contractual resolution of the issue of attorneys’ fees. However, that does not support the LRDA’s argument that the award in the current case must be sustained.
The express language of the settlement agreement provided that “nothing in [the] Settlement Agreement. . . shall preclude the [LRDA] from raising its financial condition.” (Italics added.) The LRDA tells us that this language “permitted the trial court to consider the [LRDA]’s financial condition.” (Italics added.) We have reviewed the record before us, including statements made by Plaintiffs’ сounsel at the final hearing on the attorneys’ fees issue on July 10, 2009, and we find the record supports the interpretation of the settlement agreement proffered by the LRDA.
Accepting the LRDA’s interpretation of the settlement agreement, however, does not mean we accept its argument that the settlement agreement
DISPOSITION
The trial court’s order awarding attorneys’ fees of August 14, 2009, is reversed, and the сause is remanded to the court with directions to reconsider the proper amount of attorneys’ fees to be awarded to Plaintiffs based on their lodestar, and any proper factor in the published cases. Plaintiffs are awarded costs on appeal.
Rubin, 1, and Flier, 1, concurred.
Notes
All further section references are to the Health and Safety Code, unless otherwise stated.
Plaintiffs filed an appeal from the judgment in the writ proceeding against the City. (Rogel v. City of Lynwood (May 22, 2008, B203280).) The appeal was dismissed in May 2008. The issues in Plaintiffs’ writ proceeding are not involved in the current appeal. The writ proceeding is relevant to the current appeal only to the extent that some portion of Plaintiffs’ aggregate attorneys’ fees were incurred for legal services discretely attributable to the writ proceeding.
Plaintiffs’ request for $60,000 (rounded) in costs is not a material part of this appeal.
We have rounded this number for simplicity.
We acknowledge that the LRDA, as a governmental entity reliant on tax increment financing, has some measure of connection to taxpayers. It is not altogether clear to us, however, that the LRDA’s burden to pay attorneys’ fees to the Plaintiffs will necessarily mean that an additional tax burden will be imposed on taxpayers. What truly appears to be involved in the present case is that the LRDA may have less money in its coffers to spend when it comes time to make discretionary decisions whether to look at particular redevelopment projects.