In a partially-published opinion filed September 29, 2014, the Fourth District Court of Appeal affirmed an order and judgment permitting the County of San Diego to recover actual labor costs incurred for an attorney and paralegals to take over and complete preparation of an administrative record in a CEQA case where the petitioner had elected, but failed, to do so. The Otay Ranch, L.P. v. County of San Diego (2014) __ Cal.App.4th __, Case No. D064809.

The underlying mandate action was brought against the County by the former owners of a skeet and trap shooting range. Those Petitioners challenged County’s clean-up/remediation project (for which County adopted a Mitigated Negative Declaration) under CEQA and the Health and Safety Code. Petitioners elected to prepare the administrative record, subject to County’s certification for accuracy. After the trial court denied Petitioners’ TRO application to halt County’s remediation work, the parties stipulated and agreed to several extensions of time for Petitioners to prepare the record. Following a meeting to discuss the record, at which County Counsel determined Petitioners’ draft index was both grossly under-and over-inclusive, Petitioners voluntarily dismissed the CEQA cause of action; however, two months later they filed an amended Petition under the Health and Safety Code with no record and no indication of when a record would be filed.

At an ex parte hearing, at which the trial court denied Petitioners’ request to shorten time on a motion to stay the briefing and hearing schedule pending the outcome of another action involving the range clean-up, the Court inquired about the status of the record. County Counsel advised the Court that since Petitioners had not prepared it, County would do so and file it with its answer, which was due within 10 days. Petitioners did not object to County’s announced election, nor did they challenge its assertion that they would be obligated to pay record preparation costs.

Because the County department maintaining the files lacked manpower and resources to prepare the record, it tasked the outside counsel representing it in the litigation with the job, working together with County’s most knowledgeable staff member. Outside counsel initially delegated the record preparation to experienced paralegals, document clerks, and an electronic record vendor, but “as the work unfolded, it became necessary for the attorney to become actively involved in reviewing and organizing the record” as “[g]iven the technical complexity of the documents, the scope of the record and the manner in which the documents were maintained, the attorney hired by the County was the only person who understood the interplay of the various versions of the documents as well as which documents should be included in the administrative record and which should not.” According to County’s most knowledgeable staffer, “the work required someone with specific knowledge and a comprehensive understanding of the project over the previous decade to reassemble various documents and technical reports with supporting documentation to prepare an adequate administrative record, but the County did not have adequate staffing to undertake this effort.”

Given the short time to complete the task, “[t]he attorney and the paralegals worked extended hours and through the weekend to prepare the record” which when filed consisted of 326 documents totalling over 18,000 pages. The day after the record was filed Petitioners dismissed the entire action. County thereafter submitted a cost bill seeking $66,638.14 for record preparation costs, including $59,545 for attorney and paralegal time.

Petitioners moved to tax the amounts claimed by County for attorney and paralegal time, arguing it was not authorized by law. The trial court disagreed, noting that (1) Petitioners had “failed to prepare the administrative record in the six months since the action was filed, … [and] were responsible for the costs of preparing the record”; (2) “labor costs incurred for preparing an administrative record are allowable if ‘necessarily incurred and reasonable,’ including labor for ‘persons with specialized knowledge’” (citing River Valley Preservation Project v. Metropolitan Transit Development Bd. (1995) 37 Cal.App.4th 154, 181); and (3) the labor costs here were reasonably necessary. The trial court accordingly awarded County’s requested attorney and paralegal time expended after the date of the ex parte Court hearing at which County decided to prepare to record, which came to $30,435 in labor costs for County’s attorney (who billed 74.1 hours at a reduced rate of $350 per hour) and paralegals (who billed 67.1 hours at $100 per hour.)

In affirming, the Court of Appeal observed that actual costs to prepare the record in an administrative mandamus action are recoverable (citing Code Civ. Proc., §§ 1094.5(a), 1094.6(c)), and that the prevailing party is entitled to costs the trial court finds “reasonably necessary” and “reasonable in amount” (citing Code Civ. Proc., § 1033.5, inter alia). It held the determination of whether particular record preparation costs are necessary and reasonable is entrusted to the trial court’s sound discretion, which is abused only when the appellant shows the trial court’s decision “‘exceeds the bounds of reason, all of the circumstances being considered.’” (Citing River Valleysupra, 37 Cal.App.4th at 181.) After discussing the relevant precedents allowing recovery of labor costs incurred to prepare an administrative record as an item of costs, the Court of Appeal reasoned:

The County undertook preparation of the administrative record after months of inaction on the part of the [Petitioners], who initially elected to prepare the Administrative Record for their CEQA claim. Given the history and complexity of the project and how the documents were maintained, we cannot conclude the trial court exceeded the bounds of reason in determining it was “reasonably necessary” for the County’s retained counsel and paralegals to prepare the administrative record since the County “did not have the resources or experienced personnel to prepare the [r]ecord.

Further, because the trial court found it reasonably necessary for County to incur outside attorney and paralegal costs to prepare the record within a short time frame, the Court of Appeal saw “no reason to differentiate between those actual labor costs and actual labor costs for agency staff and document clerks to prepare an administrative record.” According to the Court: “To hold otherwise would undermine the statutory policy of shifting the costs and expenses of preparing an administrative record away from the public and to the private individual or entity bringing the lawsuit.” Further, the trial court did not abuse its discretion in determining the rates charged were reasonable, or in awarding only record preparation costs reflecting labor after the date County affirmatively elected to prepare the record.

The key “takeaway” from this decision is the Court’s recognition that the expeditious preparation of complex administrative records – i.e., the “norm” in CEQA cases – can require specialized attorney and paralegal knowledge, and that the law allows recovery of reasonable “labor costs” for such professional time by the prevailing party agency. In an unpublished part of its opinion, the Court dodged a potentially important issue – Petitioner’s argument against the cost award based on an indemnity agreement between the County and Real Party in Interest – on the basis that the trial court did not abuse its discretion in disregarding the argument since Petitioners failed to raise it or the “new evidence” supporting it in their reply brief. As a practical matter, public agencies require an indemnity from real parties in all land use matters as a condition of approval, so if Petitioners’ unaddressed argument were ultimately to succeed, Real Parties would always bear record preparation costs and neither they nor the agency would ever be able to recover them. Perhaps laying the groundwork for a future decision on the same argument in another case, the Court of Appeal did reference in the published portion of its opinion “the statutory policy of shifting the costs and expense, of preparing an administrative record away from the public and to the private individual or entity bringing the lawsuit.” (Emph. added, citing Code Civ. Proc., §§ 1094.5(a), 1094.6(c), River Valley, supra, 37 Cal.App.4th at 182.) While a fuller explication and application of this public policy will have to await another published decision, the Court of Appeal here “moved the line” on record preparation cost recovery issues in a way that is generally helpful to public agencies and project proponents sued in mandate cases brought under CEQA or other land use laws.