Homeowners Associations: 4/1 DCA Reverses As A Matter Of Law Adverse Fee Awards Against Homeowners Not Prevailing On Common Interest Development Open Meeting Act (OMA) Violations

Fees Are Not Awardable To Prevailing HOAs Under OMA Violations; Costs Were Not Proper Because Homeowners’ Action Was Not Frivolous, Unreasonable, Or Without Foundation.

            In LNSU #1, LLC v. Alta Del Mar Coastal Collection Community Assn., Case Nos. D080208/D081204 (4^th Dist., Div. 1 Aug. 25, 2023) (published), the 4/1 DCA had to decide, for an ordinary costs award, what “frivolous, unreasonable, and without foundation” meant with respect to a costs-shifting provision under the Common Interest Development Open Meeting Act (OMA), Civil Code § 4955(b), which allows costs shifting to a prevailing HOA if these prerequisites are met.

            Two homeowners sued HOA for violations of the OMA, with the merits resolved against homeowners in the lower court and with the appellate court affirming the merits determination.  However, the lower court granted HOA $8,874.61 in routine costs, denying homeowners’ motion to strike/tax costs.  The lower court also granted HOA $348,306 in attorney’s fees (out of a requested $405,282.50) under the Davis-Stirling Act, Civil Code § 5975(c)) rather than the OMA costs shifting provision.

            The appellate court reversed the costs and fees awards against homeowners. 

The problem with the fee award is that homeowners did not bring a Davis-Stirling Act claim based on governing HOA documents, but rather the OMA.  Under the OMA, only ordinary costs—not attorney’s fees—are awardable in favor of a prevailing HOA.

Then, attention shifted to the ordinary costs award.  The appellate court construed the “frivolous, unreasonable, and without foundation” requirements to award costs to a prevailing HOA to incorporate the “any reasonable attorney” standard adopted in such cases as Smith v. Selma Community Hospital, 188 Cal.App.4^th 1, 33 (2010).  With that in mind, the homeowners’ positions were debatable and never decided before, such that there was legal uncertainty which did not justify imposition of routine costs under the circumstances.  Even though homeowners rejected HOA’s CCP § 998 offer, the specific OMA costs-shifting provision prevailed over the 998 costs-shifting mechanism.