By Cori Badgley and Emilio Camacho
In Monterey/Santa Cruz County Bldg. & Constr. Trades Council v. Cypress Marina Heights LP (2011) 191 Cal.App.4th 1500, the California Court of Appeal, Sixth District, held that deeds acquiring property from a redevelopment agency required the purchaser/developer to pay prevailing wages to the construction workers. In addition, the appellate court also held that plaintiffs were entitled to $73,167.50 in attorney’s fees pursuant to Code of Civil Procedure section 1021.5.
Cypress Marina Heights LP (“CMH”) acquired Fort Ord land from the City of Marina’s Redevelopment Agency (“MRDA”) at fair market value for the development of 1,050 residential units on 248 acres of land within Fort Ord (the "Marina Heights project"). MRDA had acquired the land from the Fort Ord Reuse Authority (“FORA”). Covenants in the FORA/MRDA deeds required payment of the prevailing wage to workers on all construction projects relating to development of the land, regardless of whether the projects were considered “public works” projects under the Labor Code. CMH refused to commit to pay the prevailing wage to workers on the Marina Heights project claiming that its purchase agreement with MRDA did not require payment of the prevailing wages. Plaintiff, representing non-unionized construction workers, filed suit against CMH and other entities that had purchased property from MRDA. The trial court found that CMH was required to pay the prevailing wage on the project, entered judgment for plaintiffs, and awarded plaintiffs their attorney’s fees under Code of Civil Procedure section 1021.5, CMH appealed.
The heart of the case revolves around a series of transactions and documents adopted by and/or entered into between FORA, the City of Marina, and CMH. The first key document at issue was Master Resolution adopted by FORA in 1997. Chapter 3, Sections 8 and 9 of the Procurement Code, governed prevailing wages and dictated that prevailing wages be paid to “all workers employed on construction.” Notably, the definition of “construction” was limited to work on property owned, leased, or maintained by FORA. However, the Master Resolution also required that any developer or owner of property who entered into an Agreement with FORA to purchase, sale or development of property at Ford Ord must pay or cause to be paid to all workers employed in connection with the development of such property an amount not less than the general prevailing wage rate set by the Master Resolution. The second key document at issue was the Implementation Agreement between FORA and the City, which specifically provided that any development of the land would be subject to the Master Resolution (e.g., prevailing wage requirements). The City quitclaimed the land at issue to its MRDA in March 2006, and in April 2006, the MRDA sold the Marina Heights property to CMH. CMH paid fair market value for the land and received no public subsidies for its purchase. Further, CMH was not proposing to accept any public subsidies for the construction of any of the improvements in the Marina Heights project.
The court of appeal affirmed the judgment by reasoning that the Master Resolution included in the transfer of land obligated MRDA to require CMH to pay the prevailing wage. Furthermore, the Implementation Agreement mandated that any transfer of property acquired from FORA by MRDA must be done in compliance with the Master Resolution and must incorporate specific deed covenants. Besides explicitly stating that the covenants would be deemed to run with the land in perpetuity, the deeds also stated that the “Grantee covenants for itself, its successors, and assigns and every successor in interest to the Property, or any part thereof, that Grantee and such successors and assigns shall comply with all provisions of the Implementation Agreement as if the Grantee were the referenced Jurisdiction under the Implementation Agreement and specifically agrees to comply with the Deed Restrictions and Covenants set forth in Exhibit F of the Implementation Agreement as if such Deed Restrictions and Covenants were separately recorded prior to the recordation of this Deed.” (Id. at 1506-1507.)
Thus, the court ruled that this language indisputably bound MRDA’s successors in interest, and CMH was required to pay prevailing wages.
After affirming the trial court’s ruling, the appellate court addressed whether the trial court properly awarded attorney’s fees under Code of Civil Procedure section 1021.5. In the end, the trial court had granted two summary adjudication motions: one against CMH and one against Garrison, another developer. Finding that CMH was less culpable than Garrison, the trial court required CMH to pay 35 percent of the total attorney’s fees amount and Garrison 65 percent.
On appeal, CMH argued that the award of attorney’s fees was improper pursuant to Section 1021.5 of the Code of Civil Procedure, and that even if an award of attorney’s fees was proper, the amount awarded was improper. On the first issue, the appellate court expressed that, in determining the importance of the particular vindicated right, courts should realistically assess the significance of that right in terms of its relationship to the achievement of fundamental legislative goals. In this case, Plaintiffs’ vindication of prevailing wage requirements did vindicate a public interest and revitalized a local economy, resulting in benefits to 900 construction workers. After determining that attorney’s fees were appropriate, the court reasoned that the amount of the fee award was reasonable, given that only 35 percent of the requested amount was awarded as against CMH.
The moral of this case is as follows: when drafting agreements between parties – whether for purchase or sale or otherwise – the intent of the parties should be made clear in the actual language and terms of the agreements. Here CMH argued that the deed covenants required by the Implementation Agreement were not intended to make the Master Resolution’s prevailing wage requirements a covenant running with the land. CMH produced a declaration from the attorney for the City and the MRDA, which stated that the City and MRDA were not obligated to require CMH to pay prevailing wages, as well as other documents evidencing the fact that FORA was lacking the legal authority to require subsequent owners/developers to pay the prevailing wage. But the court found that the declaration and documents were inadmissible since the text of the Implementation Agreement read otherwise.
Cori Badgley is an associate and Emilio Camacho is a law clerk at Abbott & Kindermann, LLP. For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, LLP at (916) 456-9595.