By Glen C. Hansen

In Conservatorship of Whitley (2010) 50 Cal. 4th 1206, the California Supreme Court examined the three requirements that litigants must prove in order to recover attorneys’ fees under California’s ‘private attorney general’ fee statute in Code of Civil Procedure section 1021.5. Those factors are “(1) plaintiffs’ 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.’” (Id. at p. 1214 (citation omitted).)

The Whitley court examined the third requirement of “necessity and financial burden.” That requirement is comprised on two prongs: “[W]hether private enforcement was necessary and whether the financial burden of private enforcement warrants subsidizing the successful party’s attorneys.” (50 Cal.4th at p. 1214.) In determining the second prong of that third requirement — i.e., the “financial burden on litigants” — courts have focused “not only on the costs of the litigation but also any offsetting financial benefits that the litigation yields or reasonably could have been expected to yield.” (Id. at p. 1215.) A fee award 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.’” (Ibid. (citation omitted).) That second prong focuses on “the financial burdens and incentives involved in bringing the lawsuit.” (Ibid.) The method for weighing the financial costs and benefits consists of the following:

The trial court must first fix—or at least estimate—the monetary value of the benefits obtained by the successful litigants themselves. … Once the court is able to put some kind of number on the gains actually attained it must discount these total benefits by some estimate of the probability of success at the time the vital litigation decisions were made which eventually produced the successful outcome. [¶] After approximating the estimated value of the case at the time the vital litigation decisions were being made, the court must then turn to the costs of the litigation—the legal fees, deposition costs, expert witness fees, etc., which may have been required to bring the case to fruition. … [¶] The final step is to place the estimated value of the case beside the actual cost and make the value judgment whether it is desirable to offer the bounty of a court-awarded fee in order to encourage litigation of the sort involved in this case. … [A] bounty will be appropriate except where the expected value of the litigant’s own monetary award exceeds by a substantial margin the actual litigation costs. [Id. at pp. 1215-1216.]

Thus, the focus is “not on plaintiffs’ abstract personal stake, but on the financial incentives and burdens related to bringing suit.” (Id. at p. 1216.) The Whitley court disapproved several lower appellate decisions that had considered claimants’ aesthetic or other nonpecuniary interests in evaluating the “necessity and financial burden” requirement. (Id. at pp. 1221-1226 & fn. 4.)

In City of Maywood v. Los Angeles Unified School District (2012) 207 Cal.App.4th 1075, 2012 Cal.App.LEXIS 819, the Court of Appeal for the Second Appellate District addressed an issue not decided in Whitley: Whether the Supreme Court’s holding is intended to apply to public enforcement cases where a public entity has pursued attorneys’ fees against another public entity. In City of Maywood, a city filed a petition for writ of mandate seeking to overturn a decision by a school district that certified a final environmental impact report (“FEIR”) that analyzed the environmental consequences of constructing a high school. Finding the FEIR deficient under CEQA, the trial court issued a peremptory writ of mandate that prohibited the school district from taking any further actions to approve the school construction project until it had prepared and certified a revised FEIR. The trial court then granted attorneys’ fees to the city pursuant to section 1021.5. The school district appealed both the writ and the award of attorneys’ fees. The Court of Appeal affirmed a portion of the writ, and reversed on the remainder of the writ. The Court of Appeal also reversed the trial court’s order awarding attorneys’ fees and remanded that issue for further proceedings.

On appeal, the school district challenged the fee award on the ground that the city had not satisfied the “necessity and financial burden” requirement of section 1021.5 because “the city had a personal interest in the litigation—preservation of its tax base—that transcended the burdens of enforcement,” and because the primary purpose of the lawsuit was to benefit the city and its constituents, “whether for financial or other reasons.” Addressing that issue in its partially certified decision, the Court of Appeal noted that, prior to Whitley, appellate courts were divided as to whether it was proper to consider a claimant’s nonpecuniary “personal interests” when applying the financial burden element; however, Whitley clarified that, “in a private enforcement action, a court may not consider nonpecuniary interests when evaluating the financial burden criterion in section 1021.5.” (Id. at p. ___, 2012 Cal.App.LEXIS at *14.) The Court of Appeal found that “the holding of Whitley applies equally to both private and public litigants who seek attorneys’ fees pursuant to section 1021.5.” (Id. at pp. ___, ___, 2012 Cal.App.LEXIS at *14, *18.) The court explained that all of the factors that Whitley discussed in concluding that nonpecuniary interests may not preclude a private litigant from obtaining fees under section 1021.5 apply equally to public entity litigants. (Id. at p. ___, 2012 Cal.App.LEXIS at *15.) Therefore, when assessing the financial burden element in the context of a public entity’s legal victory, “the trial court may only consider the public entity’s pecuniary interests and the pecuniary interests of its constituents.” (Id. at p. ___, 2012 Cal.App.LEXIS at *23.) City of Maywood v. Los Angeles Unified School District (2012) 207 Cal.App.4th 1075.

Glen C. Hansen is Senior Counsel 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.

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, or the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.