Opinion
B290699
02-04-2020
LANCE JAY ROBBINS PALOMA PARTNERSHIP, Plaintiff and Appellant, v. CITY OF LOS ANGELES, Defendant and Respondent.
Law Offices of Thomas A. Nitti, Thomas A. Nitti and Andrew B. Kavros for Plaintiff and Appellant. Michael N. Feuer, City Attorney, Kathleen A. Kenealy, Chief Assistant City Attorney, Scott Marcus, Chief, Civil Litigation Branch, Blithe S. Bock, Managing Assistant City Attorney, and Shaun Dabby Jacobs, Deputy City Attorney, for Defendant and Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Los Angeles County Super. Ct. No. BS154262) APPEAL from an order of the Superior Court of Los Angeles County, James C. Chalfant, Judge. Affirmed. Law Offices of Thomas A. Nitti, Thomas A. Nitti and Andrew B. Kavros for Plaintiff and Appellant. Michael N. Feuer, City Attorney, Kathleen A. Kenealy, Chief Assistant City Attorney, Scott Marcus, Chief, Civil Litigation Branch, Blithe S. Bock, Managing Assistant City Attorney, and Shaun Dabby Jacobs, Deputy City Attorney, for Defendant and Respondent.
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This action arises from plaintiff and appellant Lance Jay Robbins Paloma Partnership's (Paloma) successful challenge to the administrative appeal policies of defendant and respondent the City of Los Angeles (the City). The Los Angeles Housing Department (the Housing Department) cited Paloma for offering apartments for rent on a short-term basis, a practice which the Housing Department alleged was in violation of zoning laws pertaining to the apartment building Paloma owns. Paloma filed a petition for a writ of administrative mandate, contending that the City violated state law by failing to provide an avenue of appeal to someone other than to an employee of the Housing Department.
The trial court agreed and granted the writ, but denied Paloma's request for private attorney general fees under Code of Civil Procedure section 1021.5 (section 1021.5). The court found that Paloma was not entitled to attorney fees because the financial burden to Paloma in bringing the action did not outweigh Paloma's individual stake in the outcome. Paloma now challenges the denial of attorney fees, contending that the trial court erred by taking into account potential benefits to Paloma beyond the scope of what it obtained directly in the litigation. We affirm.
PROCEDURAL AND FACTUAL SUMMARY
Paloma owned and operated an apartment building near Venice Beach known as The Ellison. On February 20, 2015, an inspector with the Housing Department served Paloma with a notice and order to comply, alleging that Paloma was illegally offering several apartments in The Ellison as short-term rentals. According to the inspector, The Ellison's zoning and certificate of occupancy allowed Paloma to rent apartments only on a long-term basis. Paloma filed an appeal to the Housing Department, contending that it was operating legally because its practice of offering short-term rentals was "grandparented in." The Housing Department, following its ordinary policy, referred the case to a senior inspector within the department, who denied the appeal.
On March 10, 2015, Paloma filed a petition in the trial court for a writ of mandate and a complaint for declaratory relief. Paloma alleged that the City had failed to provide an adequate and meaningful appeals process as required by California Building Standards Code (the Building Code). Section 1.8.8.1 of the Building Code requires that cities establish an appeals process for violations of building and occupancy laws, and that "[m]embers of the appeals board(s) shall not be employees of the enforcing agency." (Cal. Code Regs., tit. 24, § 1.8.8.1.) Paloma argued that the City violated that requirement by failing to provide an avenue for appeals of decisions of the Housing Department inspectors to anyone other than an employee of the Housing Department.
In addition to its claims regarding the inadequacy of the appeals process, Paloma also argued that the City violated the California Environmental Quality Act (Pub. Resources Code, § 21000 et. seq.) (CEQA) by failing to prepare a draft environmental impact report before issuing the notice to comply. Paloma later dismissed its CEQA claim without prejudice.
Paloma requested private attorney general fees under section 1021.5 for enforcing the public's right to a legally sufficient appeal of Housing Department decisions. Paloma provided no documentation of the amount of money it was currently earning from short-term rentals compared with the amount it could expect to earn if required to rent the same apartments on a long-term basis. The trial court granted Paloma's petition for a writ of mandate. The court determined that the City indeed violated state law by failing to provide Paloma with an opportunity for appeal either to an independent appeals board or to the city council. The trial court denied Paloma's claim for attorney finding that Paloma had not shown that the $97,240 in attorney fees it spent to enforce the public's right to an adequate appeals process outweighed the individual benefit it obtained from the litigation.
DISCUSSION
Paloma contends that the trial court erred by denying its motion for private attorney general fees. It argues that the only benefit it obtained from the action was the right to a proper administrative appeal, and that the trial court should not have taken into account as an individual benefit its ability to continue offering short-term rentals at The Ellison. We disagree.
A successful plaintiff may obtain an award of private attorney general fees under section 1021.5 if it can demonstrate " '(1) plaintiff['s] action "has resulted in the enforcement of an important right affecting the public interest," (2) "a significant benefit, whether pecuniary or nonpecuniary has been conferred on the general public or a large class of persons" and (3) "the necessity and financial burden of private enforcement are such as to make the award appropriate." ' " (Conservatorship of Whitley (2010) 50 Cal.4th 1206, 1214 (Whitley), quoting Woodland Hills Residents Assn., Inc. v. City Council (1979) 23 Cal.3d 917, 935 (Woodland Hills).) " ' " 'Whether the statutory requirements have been satisfied so as to justify a fee award is a question committed to the [sound] discretion of the trial court.' " ' " (Boatworks, LLC v. City of Alameda (2019) 35 Cal.App.5th 290, 307.) When, as in this case, however, " ' " 'the question turns on statutory construction, . . . we review de novo.' " ' " (Ibid.)
In this case, Paloma met the first two of these requirements, as the trial court found and the City does not dispute. Paloma enforced an important right affecting the public interest by vindicating the public's statutory right to an appeal to a decisionmaker outside the Housing Department. Paloma's action "effectuat[ed] . . . a fundamental constitutional or statutory policy" (Woodland Hills, supra, 23 Cal.3d at p. 939) and therefore conferred a significant benefit on a large class of persons, namely all those who wish to appeal decisions of the Housing Department.
The third requirement for private attorney general fees in turn breaks down into " ' "two issues: whether private enforcement was necessary and whether the financial burden of private enforcement warrants subsidizing the successful party's attorneys." ' " (Whitley, supra, 50 Cal.4th at p. 1214.) The trial court found that Paloma met the first prong because private enforcement was necessary to vindicate the public right to an adequate appeal process. Once again, the City does not take issue with the trial court's finding, nor do we. The Housing Department was responsible for establishing an appeals process in compliance with the Building Code and had failed to do so. The City has not proposed, and we are not aware, how the department's policy could have been challenged if not through private action. (See Woodland Hills, supra, 23 Cal.3d at p. 941.)
The only issue in dispute, then, is whether the financial burden of Paloma's suit was sufficient to justify an award of private attorney general fees. " ' "An award on the 'private attorney general' theory is appropriate when the cost of the claimant's legal victory transcends his personal interest, that is, when the necessity for pursuing the lawsuit placed a burden on the plaintiff 'out of proportion to his individual stake in the matter.' " ' " (Whitley, supra, 50 Cal.4th at p. 1215, quoting Woodland Hills, supra, 23 Cal.3d at p. 941.) To determine if a plaintiff has met this requirement, the court measures the expense of bringing the lawsuit against the financial benefit the plaintiff has achieved for itself. An award is appropriate unless the individual benefit " 'exceeds by a substantial margin the actual litigation costs.' " (Whitley, supra, at p. 1216.)
The trial court interpreted Paloma's personal interest in the litigation broadly, noting that Paloma challenged the City's appeal process for the purpose of being able to continue to offer short-term rentals at The Ellison. The amount of money Paloma stood to gain from these short-term rentals was thus relevant to measuring Paloma's financial stake in the litigation. Because Paloma was the party requesting private attorney general fees, it bore the burden "to demonstrate all elements of the statute, including that the litigation costs transcend his or her personal interest." (Millview County Water Dist. v. State Water Resources Control Bd. (2016) 4 Cal.App.5th 759, 769 (Millview County Water Dist.).) Paloma provided no documentation of the amount of money it was currently earning or was likely to earn in the future from short-term rentals, and the court found that Paloma had thus failed to meet its burden.
Paloma contends that the trial court erred in applying the financial burden test, and that its individual interest in the litigation consisted only of what it achieved directly through this litigation. In Paloma's view, its victory has allowed it to avoid a citation of $1,000 from the City, and has gained it the right to a legally valid appeal of the City's decision. But because Paloma did not seek or obtain a remedy on the merits regarding its ability to offer short-term rentals, Paloma contends that the trial court could not properly take into account what it might ultimately gain if it wins its appeal.
Paloma is correct that in evaluating a plaintiff's individual stake in litigation, a court must distinguish between potential future gains and those already achieved. In particular, vindicating the right to an appeal is not equivalent to actually winning what is sought on appeal. Thus, in Baggett v. Gates (1982) 32 Cal.3d 128 (Baggett), our Supreme Court held that a group of police officers were entitled to private attorney general fees in their suit challenging the Los Angeles Police Department's procedure for handling appeals of reductions in officer pay. The Court reasoned that the financial burden the plaintiffs undertook outweighed their personal stake in the case because although the officers had won the right to an administrative appeal, their appeal might be denied. (Id. at p. 143.) Similarly, in Otto v. Los Angeles Unified School Dist. (2003) 106 Cal.App.4th 328, a school police officer won private attorney general fees in his suit against the school district to allow him an administrative appeal before the district could place a disciplinary memorandum in his employment file. The court noted that the plaintiff had incurred attorney fees but had yet to obtain any financial benefit. He had not yet won his appeal, and even if he did, there would be no immediate economic benefit from the removal of the memorandum from his file. (Id. at p. 333.)
But this case includes factors the courts in Baggett and Otto did not consider, in that Paloma has already gained from this litigation regardless of whether it ultimately wins or loses its appeal of the City's decision. If it wins, it may continue offering short-term rentals at The Ellison indefinitely. If it loses, the City will presumably order it to stop its short-term rental business. (See, e.g., City of Los Angeles v. Silver (1979) 98 Cal.App.3d 745, 750 [affirming an injunction to prevent a business from continuing to operate a business in violation of zoning laws].) But in that case, Paloma will have been able to continue offering short-term rentals for the duration of this litigation, a span that has already reached nearly five years. Either way, Paloma will have obtained some financial benefit from this litigation.
A dissenting opinion in Baggett noted that the officers in that case had gained from the litigation because they were allowed to collect a higher salary while the case was pending and argued that this should be taken into account as part of the plaintiffs' financial benefit from the case. (Baggett, supra, 32 Cal.3d at p. 145 (conc. & dis. opn. of Kaus, J.).) The majority opinion did not take this factor into consideration, however. " 'It is axiomatic, of course, that a decision does not stand for a proposition not considered by the court.' " (Agnew v. State Bd. of Equalization (1999) 21 Cal.4th 310, 332.)
Paloma does not deny that it has continued its short-term rental business throughout the litigation, and indeed its website still advertises rentals at The Ellison for as little as one night. <http://theellisonsuites.com> (as of January 24, 2019).
The case law instructs us to consider a plaintiff's stake in a case based on its "reasonable expectation of financial benefits from the litigation" (Davis v. Farmers Ins. Exchange (2016) 245 Cal.App.4th 1302, 1329) at the time it decided to sue, not simply based on what it actually achieved. "The relevant issue is ' " 'the estimated value of the case at the time the vital litigation decisions were being made.' " ' " (Id. at p. 1330.) The purpose of section 1021.5 is to reward "litigants and attorneys who step forward to engage in public interest litigation when there are insufficient financial incentives to justify the litigation in economic terms." (Whitley, supra, 50 Cal.4th at p. 1211.) Private attorney general fees are appropriate only where the plaintiff's " ' "own financial stake in the outcome would not by itself constitute an adequate incentive to litigate." ' " (Millview County Water Dist., supra, 4 Cal.App.5th at p. 769.)
For this reason, courts have defined plaintiff's individual stake in litigation broadly and realistically. For example, in Norberg v. California Coastal Com. (2013) 221 Cal.App.4th 535, the plaintiff obtained a writ of mandate striking down restrictions on the potential development of his property. Although he won no damages, the court held that the potential enhancement in the value of his property gave him sufficient incentive to pursue litigation without an award of attorney fees. (Id. at pp. 544-545.) Similarly, in United Systems of Arkansas, Inc. v. Stamison (1998) 63 Cal.App.4th 1001, the plaintiff successfully challenged the Department of Motor Vehicles procedures for awarding a contract on the grounds that the Department failed to follow the statutory procedure for handling a protest to its contract bidding procedure. (See id. at p. 1012.) Nevertheless, the court denied the plaintiff private attorney general fees. The plaintiff brought the suit "in order to have a chance at obtaining a contract worth almost half a million dollars." (Id. at p. 1013.) Although the plaintiff won no damages, its financial incentive was strong enough that an award of attorney fees was not appropriate. (Ibid.)
We agree with Paloma that the trial court could not assume that it would ultimately prevail in its appeal against the City and thus could not reasonably attribute to Paloma the benefits of victory. But even if Paloma ultimately loses, it will have obtained valuable benefits from that litigation. The ability to continue offering short-term rentals while the case is pending was a direct and foreseeable benefit to Paloma of the litigation regardless of whether Paloma ultimately prevails on the merits of its appeal. It was thus a very real part of Paloma's "financial incentives to justify the litigation in economic terms." (Whitley, supra, 50 Cal.4th at p. 1211.) We see no reason under existing case law that a court should not take into account the value of that interim business as part of its " 'realistic and practical comparison of the litigant's personal interest with the cost of suit.' " (Arnold v. California Exposition and State Fair (2004) 125 Cal.App.4th 498, 511.) In addition, the trial court might even have been justified in taking into account the potential fruits of ultimate victory, on the merits discounted according to its expected probability of winning on appeal.
Because Paloma was the party seeking attorney fees, it bore the burden of proving that its expenses outweighed its gains in litigation. (Millview County Water Dist., supra, 4 Cal.App.5th at p. 769.) Paloma presented no evidence of how much money it earned from short-term rentals, nor how much more or less it could have expected to earn from long-term rentals of the same apartments, and the trial court had no choice but to conclude that Paloma failed to prove that it was entitled to private attorney general fees.
DISPOSITION
The trial court's order is affirmed. Respondent is awarded its costs on appeal.
NOT TO BE PUBLISHED.
ROTHSCHILD, P. J. We concur:
CHANEY, J.
Judge of the Los Angeles Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.