Second District, Division Eight Affirms Award in a Sharply Divided 2-1 Panel on the Fee Award Issues.
This next profiled case can only be described as … a doozy!
In 1998-1999, brother and sister (the eventual plaintiffs) bought two adjoining units in a Westwood 13-story condominium building that was constructed in the 1960-1962 time frame. Slab penetrations in concrete throughout the building made for piping configurations were neither filled nor fire proofed, but existing building codes allowed for the unfilled floor penetrations to remain as an existing, non-conforming condition. Brother/sister and some of their tenants complained about smoke odors in the units; investigations began, and the slab penetrations were identified as the likely culprits. The condominium association’s expert also blamed the slab penetrations, further indicating that they posed a significant fire safety risk. After lots of investigations and side wranglings, the condominium board held a hearing on brother/sister’s requests to repair the slab penetrations adjacent to their own unit and all penetrations throughout the building. Board denied their requests and imposed fines for brother/sister’s failure to fill the holes adjacent to their units. Board also obtained a contractor bid indicating that the brother/sister penetration work could be completed for $2,700 per unit, a bid declined by brother/sister.
Predictably, litigation ensued. Brother/sister sought damages of at least $200,000 for diminution in value of their units as a result of the unfilled penetrations and an injunction requiring condominium association to fill slab penetrations throughout the building at its expense, suing the association and all of its individual directors. Association cross-complained against brother/sister for the daily fines in not repairing the penetrations, which added up to $77,000 at the time of trial.
After a combined jury trial on legal issues and court trial on equitable issues, brother/sister won $4,620 in damages against association, won nothing against the individual directors, won a mandatory injunction requiring the association and board to fill brother/sister’s slab penetrations (but not the whole building), and won an order requiring the association and board to give notice to all homeowners for a meeting to explain the slab penetration risks and obtain homeowner feedback on the issue. Association won nothing on its cross-complaint to obtain fines. The Board complied with the injunctive order, with homeowners voting 78-3 against incurring the costs to correct penetrations on a building-wide basis.
The association’s CC&Rs had a fees clause allowing attorney’s fees to the prevailing party in any legal action brought by the association, board, or any owner against any owner to enforce the CC&Rs. This clause was broad enough to allow recovery to a homeowner successfully suing the association for breach of failure to maintain common areas, an analogous situation to brother/sister’s action. (See Arias v. Katella Townhouse Homeowners Assn. Inc., 127 Cal.App.4th 847 (2005).) The trial court determined brother/sister were the prevailing parties, awarding them $531,159—essentially 100% of all their fees and costs in the litigation—under the fees clause of the CC&Rs. The lower court also denied association’s and directors’ request for their approximately $775,000 in defense fees and costs. Association and directors appealed.
After affirming the liability and injunctive relief issues, the Second District, Division Eight, by a 2-1 majority, affirmed the fee determinations in Ritter & Ritter, Inc. v. The Churchill Condominium Assn., Case No. B187840 (2d Dist., Div. 8 July 22, 2008) (unpublished).
Presiding Justice Cooper, along with concurring Justice Flier, basically determined that brother/sister determined did win monetary damages (although not substantial in amount), avoided the $77,000 in fines that the association sought under its cross-complaint, and won significant equitable relief to put the penetration risk for consideration by the entire homeowner body. With respect to the individual directors, the majority characterized it as a “push” for these defendants—they did not win, but simply avoided liability based on the business judgment rule and Corporations Code section 7231 decision making shield. Association/directors raised an apportionment argument, but raised it too late—it was introduced in an appellants’ reply brief, waiving the contention because the argument was not made in appellants’ opening brief.
Justice Rubin dissented from both of the fee determinations. He believed that the directors did prevail (not simply “avoiding liability”), because they were found to have not acted wrongfully. This made them prevailing parties; “[a] plaintiff who sues individual members of a governing board when its claim is legally against only the board itself should not be rewarded by denying the successful members the attorney’s fees to which they are otherwise entitled.” (This refers to statutory provisions that establish a relaxed standard of care for unpaid HOA directors.) The dissent did not believe brother/sisters prevailed against the association—they “asked for much at trial, but obtained little.” Even though they got a few thousand dollars, repair of the penetrations near their units, and an association vote, brothers/sisters did not get close to the $200,000 sought-after damages and did not get an order requiring repair of the entire building, mixed results at best in the dissent’s perspective. Alternatively, the dissent found the full fee award unreasonable when compared to the nature of the winners’ “limited” victory below.
No matter how anyone reading this post falls on either side of the fee determinations in this case, Justice Rubin’s parting sentences are poignant and reinforce the overarching theme we have developed in our Mission Statement—attorney’s fees are frequently the tail that wags the dog in litigation. Here is what he had to say: “The amount of attorney’s fees spent on this matter was appalling. Awarding the full amount of attorney’s fees rewards the recklessness of the attorneys’ unbridled advocacy. What should have been a manageable dispute to be resolved, perhaps, by a one or two day arbitration without significant discovery turned into a brakeless locomotive that crashed and destroyed most, if not all, the benefits achieved in this unfortunate litigation.”