CEQA Case Report: Understanding the Judicial Landscape for Development[1]

In a published opinion issued January 12, 2018, Heron Bay Homeowners Assn. v. City of San Leandro, the California Court of Appeal affirmed the trial court’s partial grant of Heron Bay Homeowners Association’s request for attorneys’ fees following its successful CEQA suit against the City of San Leandro (the City). In summary, the court determined:

  • The financial burden of enforcement the homeowners association faced made an award appropriate under California Code of Civil Procedure (CCP) section 1021.5.
  • A successful CEQA litigant is not disqualified from an award of attorneys’ fees if the financial benefit at stake in the litigation was uncertain compared to a substantial financial burden.

The petitioner, the homeowners association, had filed a petition for writ of mandate seeking to invalidate the City’s approval of Halus Power Systems’ (Halus’) proposed project to install a single 100-foot-tall wind turbine on Halus’ property for renewable power generation and on-site research and development (the Project). The petitioner also sought to compel the City to prepare an environmental impact report (EIR) instead of the mitigated negative declaration (MND) the City had initially prepared. The petitioner argued the Project as mitigated would have significant environmental impacts on views, birds and their habitats, aircraft navigational radar, noise and vibration levels, and property values. The trial court found substantial evidence supported a fair argument that the Project as mitigated would have significant environmental impacts and directed the City to set aside its approvals until the City prepared and approved an EIR. Halus ultimately decided not to proceed with the Project.

Background for Appeal

Following the entry of judgment, the petitioner moved for an award of attorneys’ fees in the amount of US$483,321 under CCP section 1021.5. The trial court determined that the value of the suit to the petitioner was approximately US$5.8 million, and reasonably anticipated legal costs should have totaled approximately US$240,000. The trial court also noted that CCP section 1021.5 was intended to address the problem of affordability in public interest litigation, and pointed out that a lawsuit aimed at avoiding financial loss (such as an anticipated harm to property values) may be especially hard to finance. Balancing these findings, the trial court awarded the petitioner US$181,471.70 in attorneys’ fees. The City and Halus appealed the award of attorneys’ fees.

Financial Burden of CEQA Enforcement Rendered Fees Appropriate

The City disputed that the petitioner was eligible for attorney’s fees under CCP section 1021.5, which requires a plaintiff to establish (1) the suit resulted in enforcement of an important right affecting the public interest, (2) a significant benefit was conferred on the public or a large class of persons, and (3) the financial burden of enforcement justifies the award. The City did not dispute the first two requirements, arguing only that the petitioner did not satisfy the third requirement for several reasons.

First, the City argued the trial court erred in applying apportionment principles to grant the partial fee award and claimed that the trial court could consider apportionment when determining the amount of the fee award only after concluding a party’s financial interest was insufficient to disqualify it from receiving any fee award. The City further contended that the petitioner did not face a sufficiently substantial financial burden compared to the potential benefit at stake in the litigation. The Court of Appeal explained that, if litigants stand to gain a substantial financial benefit as compared to the cost of a lawsuit, CCP section 1021.5 may not apply. Here, membership in the homeowners association was mandatory, each member had a vote, and only a few properties in the development were likely to be within view of the Project. As such, many members likely did not have sufficient individual financial motivation to retain counsel for CEQA litigation absent the possibility of CCP section 1021.5 fees. In addition, because the petitioner retained counsel partially on a contingent fee basis, the benefit the petitioner sought was not “immediately bankable” and, thus, could not be used to pay counsel. The court agreed with the petitioner, concluding that a majority of members did indeed face a substantial financial burden compared to the potential benefits of litigation. Thus, the court found that, 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 the petitioner had sufficient incentive to incur some, but not all, of the costs of litigation.

Second, the City argued that the petitioner was ineligible for attorneys’ fees because the petitioner acted purely out of self-interest. A pecuniary interest in the outcome of the litigation is not disqualifying. Rather the relevant inquiry is whether the financial burden placed on the party is disproportionate to its personal stake in the lawsuit. Here, the members of the petitioner who submitted comments during the public comment period addressed not only property values, but also impacts on wildlife, aesthetics, health, and noise levels. Therefore, the court rejected the City’s argument, finding that the petitioner had demonstrated public interest motivations and was not acting solely out of a desire to avoid a loss in property values.

Third, the City argued that the trial court contradicted itself by concluding that the petitioner’s “financial incentive” was “mitigated by the uncertain value of the benefit sought,” because the trial court assigned a value of US$5.8 million to the petitioner’s avoided property value loss. The Court of Appeal acknowledged that a court’s reliance on an arbitrary estimate in evaluating the extent of a party’s personal stake in litigation is questionable, and that the trial court here “undoubtedly erred” in concluding that a subjective standard applied. However, the Court of Appeal found the trial court’s error did not affect the question of whether the petitioner’s financial incentive was so large and so certain that it precluded any award. Because the City cited no credible valuation of the projected loss, the Court of Appeal could not agree that the petitioner’s financial stake made an award of attorneys’ fees inappropriate.

Disposition

Accordingly, the Court of Appeal affirmed the trial court’s ruling and awarded the petitioner its costs on appeal, including attorneys’ fees, in an amount to be determined by the trial court.

  • Opinion by Justice Maria P. Rivera with Presiding Justice Ignazio J. Ruvolo and Justice Jon B. Streeter concurring.
  • Trial Court: Superior Court of Alameda County, No. RG13677840, Judge Evelio M. Grillo.