Costs, Private Attorney General: In Case Involving Extension Of 241 Toll Road Near San Clemente, 4/2 DCA Affirms Denial Of 1021.5 Fees To HOA, Reverses And Remands Denial Of Fees To Environmental Parties, And Affirms Award Of Costs Against HOA

Lots Of Moving Parts Here, But The Remand For Environmental Parties Is Not An Automatic Endorsement Of Receiving 1021.5 Fees.

            City of San Clemente v. Department of Transportation et al., Case No. E077153 (4^th Dist., Div. 2 June 29, 2023) (published) arose out of the Corridor Agency’s approved extension of State Route 241 (known as the “toll road” to Orange County residents) near San Clemente, which resulted in lawsuits by Environmental Parties and an HOA, respectively, to protect environmental interests and homeowners’ interest in not having the extension too close.  Environmental Parties were able to get the Corridor Agency to agree to a settlement agreement by which an environmental “avoidance area” was created.  HOA’s suit challenged the settlement agreement as being ultra vires, but it dismissed its case after suffering some key losses. Eventually, Corridor Agency proceeded with an option which steered clear of the “avoidance area” and HOA.

            This is where the attorney’s fees/costs motion frenzy began, with fee requests brought under the private attorney general statute (CCP § 1021.5) and costs presented under the routine cost statute.  HOA moved for about $1.85 million in fees on a catalyst theory against Corridor Agency; Environmental Parties moved for about $1.139 million in fees against HOA; and Corridor Agency and Environmental Parties moved for costs totaling about $190,000 against HOA.

            The lower court denied the fee requests, but it awarded reduced costs of about $102,000 against the HOA.  Environmental Parties appealed the fee denial, and HOA cross appealed in relation to the fee denial and cost awards.  The 4/2 DCA, in a lengthy opinion, affirmed the HOA fees denial and costs awards, but reversed and remanded with respect to the fee denial involving the Environmental Parties.

            Denial of HOA’s fee request focused on whether it was successful for 1021.5 catalyst purposes.  The problem for HOA was that the Corridor Agency’s decision to “steer clear” was motivated by factors other than HOA’s litigation.  Beyond that, HOA’s primary litigation objective was to invalidate the settlement agreement, and they were not successful given the dismissal of its suit.

            Costs against the HOA were proper because its dismissal made costs recovery a “matter of right” as to Corridor Agency and the Environmental Parties.

            That left the Environmental Parties’ appeal of the denial of their fee request.  The 4/2 DCA decided that a narrow 1021.5 exception articulated in its Joshua S. case did not apply because Environmental Parties did vindicate public interests through the “avoidance area” settlement such that HOA’s challenge to that settlement would have been detrimental to broader public environmental interests—finding persuasive the reasoning in Wal-Mart Real Estate Business Trust v. City Council of San Marcos, 132 Cal.App.4^th 614 (2005) to the contrary.  However, the reversal and remand were not all good news for Environmental Parties.   The appellate court expressly instructed the lower court to explore if those parties’ prior enforcement actions were necessary (another 1021.5 element).  I guess we shall see if there are follow-up decisions on this remaining fee issue.