In an opinion filed June 8, and ordered published on July 6, 2015, the Fourth Appellate District Court of Appeal affirmed the trial court’s judgment denying a CEQA plaintiff’s motion for attorneys’ fees under CCP § 1021.5, California’s private attorney general statute. Coalition for a Sustainable Future In Yucaipa v. City of Yucaipa (Target Stores, Inc., Real Party In Interest) (4th Dist., Div. 2, 2015) 238 Cal.App.4th 513. The Court’s opinion explicates in detail and applies the rules governing such motions when brought on a catalyst theory, and does so in a rather unique procedural context – one in which the moving party was an unsuccessful CEQA plaintiff whose appeal of an adverse judgment became moot as a result of the developer’s abandonment of the challenged project for reasons wholly unrelated to plaintiff’s action.
The case’s straightforward facts are these: A developer (Target) sought to develop a shopping center project on 60 acres of land in the City of Yucaipa (City) owned by Palmer. Target entered into a purchase agreement with Palmer, and applied for and obtained the necessary land use entitlements from the City – a Preliminary Development Plan (PDP) and General Plan Amendment (GPA) – following City’s certification of an EIR under CEQA. Shortly thereafter, Target sued Palmer for specific performance and breaches of the purchase agreement which prevented it from completing the land purchase; shortly after that, the CEQA plaintiff (Coalition) filed its writ action challenging City’s approval of the entitlements.
Pursuant to an indemnity provision in the project’s conditions of approval Target defended the CEQA action and did so successfully – the trial court denied the writ and upheld the EIR. The Coalition appealed that adverse judgment. Meanwhile, in the purchase agreement litigation, Target dismissed its specific performance action and proceeded with its damages claims against Palmer; it accordingly notified the City that it no longer had any legal or equitable interest in the property or the entitlements, and sought to obtain its dismissal as a party to the appeal.
Given that development entitlements “run with the land,” the City asked if Palmer would assume the defense of the litigation on appeal; Palmer refused, and the City (having no interest of its own in continuing to litigate over a project abandoned by both the developer and owner as a result of the purchase agreement litigation) took action to repeal the project entitlements and EIR certification. The City and Target then moved, prior to the filing of a Respondent’s Brief, to dismiss the Coalition’s CEQA appeal as moot; the Court of Appeal granted the motion, reversing the judgment as moot and directing the trial court to dismiss the underlying CEQA action with prejudice.
The trial court denied the Coalition’s subsequent CCP § 1021.5 fee motion, which was based on the argument that its writ action was a catalyst to City’s revocation of the entitlements. In rejecting this argument, the trial court found instead that the evidence showed the Palmer litigation and Target’s failure to secure the property were the reasons the project did not proceed. In affirming the trial court’s order, the Court of Appeal made the following key points:
- “Generally, whether a party has met the statutory requirements for an award of attorney fees is best decided by the trial court, whose decision we review for abuse of discretion. [citation and footnote omitted] Although this standard is deferential, a court abuses its discretion where no reasonable basis for the action is shown. [citations]”
- “The pertinent question is whether the reasons for the trial court’s denial of an award are consistent with the substantive law of the Code of Civil Procedure, section 1021.5, and, if so, whether their application to the facts of the case is within the range of discretion conferred upon the trial courts [by the statute] …. read in light of the purposes and policy of the statute. [citations]”
- “Among other elements, “a party seeking an award of [CCP §] 1021.5 attorney fees must first be determined to be ‘a successful party.’ [citation] A necessary prerequisite to recovery under the statute is the status of prevailing party. [citation] …. It is not necessary for plaintiff to achieve a favorable final judgment to qualify for attorneys’ fees so long as the plaintiff’s actions were the catalyst for the defendant’s actions, but there must be some relief to which the plaintiff’s actions are causally connected. [citations]”
- “The “catalyst theory” permits an award of fees even when the litigation does not result in a judicial resolution if the defendant changes its behavior substantially because of, and in the manner sought by, the litigation. [citation]”
- “To obtain attorney fees under [the catalyst] theory, a plaintiff must establish that (1) the lawsuit was a catalyst motivating the defendants to provide the primary relief sought; (2) the lawsuit had merit and achieved its catalytic effect by threat of victory, not by dint of nuisance and threat of expense; and (3) the plaintiffs reasonably attempted to settle the litigation prior to filing the lawsuit. [citations]”
- “To satisfy the causation prong of the catalyst theory, the plaintiff need not show that litigation was the only cause of the defendant’s acquiescence, only that it was a substantial factor contributing to defendant’s action. [citations] In other words, it is enough that “but for” the party’s legal action, the right would not have been vindicated. [citation]”
- “The causation issue may be resolved by relatively economical, straightforward inquiries by trial judges close to and familiar with the litigation and its [sic] determination of causation is entitled to deference by the appellate court if there is any reasonable basis in the record to support the determination. [citation]”
- Applying the above principles, the Court of Appeal found record “evidence to support the trial court’s finding that the Coalition action was not a substantial factor contributing to the defendant’s action.” Among other things, plaintiff Coalition lost on the merits of its writ of action in the trial court and thereafter appealed the adverse judgment; as reflected by City Council meeting minutes and agenda reports, the City’s motivation for revoking the entitlements was Target’s dismissal of its specific performance claim in the litigation with Palmer, its withdrawal of a defense to the writ action under the indemnification agreement, and Palmer’s refusal to take up the defense; and the City had no interest in defending on its own a project that, for various business and economic reasons, Target and Palmer had abandoned. Thus, plaintiff’s CEQA action not the “but-for” cause of the City’s revocation of entitlements. Nor did the City change its behavior substantially because of and in the manner sought by the Coalition’s litigation; the Coalition failed to show its CEQA action was a catalyst or a substantial factor contributing to the City’s action.
- The plaintiff did not achieve “success by threat of victory” – in fact, its petition was first denied by the trial court, and later dismissed with prejudice. Per the Court of Appeal: “None of the cases applying the catalyst theory involved situations in which as adverse judgment had already been rendered against the party seeking attorneys’ fees …. [¶] Further, filing an appeal from the adverse judgment does not convert an unsuccessful action into a meritorious one. A direction to dismiss the action with prejudice on remand was not a favorable outcome. Having lost twice, Coalition cannot show “threat of victory.””
- Finally, in the course of rejecting the Coalition’s remaining arguments, the court held that in any event the likelihood of reversal on the merits in the appeal was low; this was both because of the deferential “substantial evidence” standard of review that would apply to the EIR challenge, and because appellant Coalition failed to present an adequate record on appeal since it did not secure the transmittal of the Administrative Record to the Court of Appeal, as was its duty.
Questions? Please contact Arthur F. Coon of Miller Starr Regalia. Miller Starr Regalia has had a well-established reputation as a leading real estate law firm for more than fifty years. For nearly all that time, the firm also has written Miller & Starr, California Real Estate 3d, a 12-volume treatise on California real estate law. “The Book” is the most widely used and judicially recognized real estate treatise in California and is cited by practicing attorneys and courts throughout the state. The firm has expertise in all real property matters, including full-service litigation and dispute resolution services, transactions, acquisitions, dispositions, leasing, financing, common interest development, construction, management, title insurance, environmental law and land use. For more information, visit www.msrlegal.com.