Plaintiffs/Intervenors Obtain Reversal Of Lower Court’s Fee Denial As A Matter Of Law.
The 1/4 DCA, in Epstein v. Schwarzenegger, Case Nos. A147092/A147366 (1st Dist., Div. 4 May 10, 2018) (unpublished), recently issued an opinion in an interesting case on a publicized event which constitutes must reading for practitioners prosecuting or defending fee requests under the private attorney general statute’s catalyst theory.
The case involved California’s proposed sale of 11 state-owned buildings to a buyer, dubbed the Golden State Portfolio transaction, which was ultimately abandoned when Jerry Brown became Governor. Certain plaintiffs/intervenors were denied recovery of CCP § 1021 attorney’s fees based on their claimed theory that they were the catalyst for bringing about the “no sale” of the Portfolio. The trial judge, however, accepted the State’s argument on causation: the buyer lacked the funds to close the deal, so the fee claimants were not catalysts because the sale was never going to happen.
The appellate court reversed as a matter of law, remanding to have the trial judge adjudge the claimants’ fee requests. Claimants also were awarded fees/costs on appeal.
On the “successful parties” element, the reviewing court found that claimants did achieve their objective of no sale under a catalyst theory, although finding that simply obtaining an appellate stay for earlier proceedings was not success (because it just preserved appellate jurisdiction).
A big reason for the reversal was procedural. Claimants had the burden to demonstrate an inference of causation (which they did), with the State needing to rebut the inference. However, the State did not provide any apt “convincing contemporaneous evidence” of why it abandoned such that the trial judge improperly placed the burden on claimants to rebut the causation claim beyond their burden to only show an inference of same. In fact, the appellate court found that case law rejected inevitability as sufficient for showing lack of causation under the catalyst theory, which meant the buyer lack of funds was inconsequential and claimants’ claims were not frivolous in nature (although some were rather thin), with the preliminary injunction denial not showing frivolity given that other factors than the merits are weighted in injunctive battles.
Claimants’ failure to engage in settlement negotiations can sometimes submarine a 1021.5 request, but the record here showed these efforts would have been futile given the State’s pre-litigation and litigation stances in favor of the sale, finding Cates v. Chiang, 213 Cal.App.4th 791’s futility rationale was on all fours.
Important public rights were at stake, including claims that there was improper delegation of decision-making to a state agency and there was a failure to obtain Judicial Council approval of the sale of some of the buildings.
The case did benefit the public in light of the importance to guard the public fisc when sales of State property were involved.