SB 1306: Consumer remedies: attorney’s fees and litigation costs.

Existing law, the Consumer Legal Remedies Act, authorizes a consumer who suffers damage from the use of unfair methods of competition and unfair or deceptive acts, as defined, to bring an action to recover damages or other relief. Existing law requires a court to award court costs and attorneys fees to the prevailing plaintiff in an action brought litigation filed pursuant to those provisions. Existing law also permits a court to award reasonable attorneys fees to a prevailing defendant only if the court finds that the plaintiffs prosecution of the action was not in good faith.

Existing law, the Consumer Legal Remedies Act, authorizes a consumer who suffers damage from the use of unfair methods of competition and unfair or deceptive acts, as defined, to bring an action to recover damages or other relief. Existing law requires a court to award court costs and attorneys fees to the prevailing plaintiff in an action brought pursuant to those provisions. Existing law also permits a court to award reasonable attorneys fees to a prevailing defendant only if the court finds that the plaintiffs prosecution of the action was not in good faith.

This bill would revise those provisions to instead require a court to award court costs and attorneys fees to the prevailing party in the action.

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2015-2016 Regular Session

Bill No: SB 1306 (Author:Stone)

Version: March 28, 2016

Hearing Date: April 26, 2016

Fiscal: No

Urgency: No

Consultant: TH

SUBJECT

Consumer Remedies: Attorney’s Fees and Litigation Costs

DESCRIPTION

Existing law, the California Environmental Quality Act (CEQA), requires a public agency to prepare, or cause to be prepared, and to certify the completion of, an environmental impact report (EIR) on a project that it proposes to carry out or approve that may have a significant effect on the environment. Existing law authorizes parties to bring an action or proceeding to attack, review, set aside, void, or annul the acts or decisions of a public agency on the grounds of noncompliance with CEQA, and authorizes a court to award attorneys’ fees to a successful party in any action which has resulted in the enforcement of an important right affecting the public interest.

This bill provides that in litigation pertaining to CEQA that is filed pursuant to the Consumer Legal Remedies Act (Civ. Code Sec 1750 et seq.), the court shall award court costs and attorney fees to a prevailing party in the action.

BACKGROUND

Enacted in 1970, the California Environmental Quality Act (CEQA) requires state and local agencies (public agencies) to follow a set protocol to disclose and evaluate the significant environmental impacts of proposed projects and to adopt feasible measures to mitigate those impacts. CEQA itself applies to “projects” undertaken or requiring approval by public agencies, and, if more than one agency is involved, CEQA requires one of the agencies to be designated as the “lead agency.” The environmental review process required by CEQA consists of: (1) determining if the activity is a project; (2) determining if the project is exempt from CEQA; and (3) performing an initial study to identify the environmental impacts and, depending on the findings, preparing either a Negative Declaration (for projects with no significant impacts), a Mitigated Negative Declaration (for projects with significant impacts, but that are revised in some form to avoid or mitigate those impacts), or an Environmental Impact Report (for projects with significant impacts).

An Environmental Impact Report (EIR) must accurately describe the proposed project, identify and analyze each significant environmental impact expected to result from the proposed project, identify mitigation measures to reduce those impacts to the extent feasible, and evaluate a range of reasonable alternatives to the proposed project. Prior to approving any project that has received environmental review, an agency must make certain findings pertaining to the project’s environmental impact and any associated mitigation measures. If mitigation measures are required or incorporated into a project, the public agency must adopt a reporting or monitoring program to ensure compliance with those measures.

To enforce the requirements of CEQA, a civil action may be brought to attack, review, set aside, void or annul the acts or decisions of a public agency for noncompliance with the act. Like many other environmental laws, CEQA is enforced primarily through private litigation, not through oversight by a governmental agency. Before a petitioner can file a lawsuit alleging noncompliance with CEQA, he or she must first exhaust administrative remedies, which generally requires the petitioner to submit the alleged grounds of noncompliance to the public agency before it makes a final decision on a project. Typically, a CEQA petitioner must finance his or her own costs during litigation, but existing law does authorize a reviewing court to award attorney fees to a prevailing plaintiff.

This bill seeks to alter CEQA’s existing fee-shifting provisions to a “loser pays” arrangement, requiring a court to award costs and attorney fees to the prevailing party in an action.

CHANGES TO EXISTING LAW

Existing law, the California Environmental Quality Act (CEQA), requires a public agency to prepare, or cause to be prepared, and to certify the completion of, an environmental impact report (EIR) on a project that it proposes to carry out or approve that may have a significant effect on the environment, or to adopt a negative declaration if it finds that the project will not have that effect. (Pub. Resources Code Sec. 21100 et seq.)

Existing law provides that an action or proceeding to attack, review, set aside, void, or annul the acts or decisions of a public agency on the grounds of noncompliance with CEQA may be commenced when, among other things, it is alleged that:

• a public agency is carrying out or has approved a project that may have a significant effect on the environment without having determined whether the project may have a significant effect on the environment;
• a public agency has improperly determined whether a project may have a significant effect on the environment;
• an environmental impact report prepared by, or caused to be prepared by, a public agency does not comply with CEQA;
• a public agency has improperly determined that a project is not subject to CEQA; or
• another act or omission of a public agency does not comply with CEQA. (Pub. Resources Code Sec. 21167.)

Existing law states that an action or proceeding to attack, review, set aside, void, or annul the acts or decisions of a public agency on the grounds of noncompliance with CEQA shall not be brought unless the alleged grounds for noncompliance were presented to the public agency orally or in writing by any person during the public comment period provided by CEQA or prior to the close of the public hearing on the project before the issuance of the notice of determination. (Pub. Resources Code Sec. 21177(a).)

Existing law provides that upon motion, a court may award attorney fees to a successful party against one or more opposing parties in any action which has resulted in the enforcement of an important right affecting the public interest if: (a) a significant benefit, whether pecuniary or nonpecuniary, has been conferred on the general public or a large class of persons, (b) the necessity and financial burden of private enforcement, or of enforcement by one public entity against another public entity, are such as to make the award appropriate, and (c) such fees should not in the interest of justice be paid out of the recovery, if any. (Code Civ. Proc. Sec. 1021.5.)

Existing law states that, with respect to actions involving public entities, the provision above applies to allowances against, but not in favor of, public entities. (Code Civ. Proc. Sec. 1021.5.)

Existing law provides that, except as otherwise expressly provided by statute, a prevailing party is entitled as a matter of right to recover costs in any action or proceeding. (Code Civ. Proc. Sec. 1032.)

This bill states that in litigation pertaining to the California Environmental Quality Act (CEQA) that is filed pursuant to the Consumer Legal Remedies Act (Civ. Code Sec 1750 et seq.), the court shall award court costs and attorney’s fees to a prevailing party in the action.

COMMENT

1. Stated need for the bill

The author writes:

Currently CEQA is abused by enabling frivolous lawsuits against all kinds of companies and groups for a litany of reasons. A comprehensive report by the law firm Holland and Knight found that, “Sixty-four percent of the petitioners filing CEQA lawsuits are either individuals or local associations that often have no prior track record of environmental advocacy.” This is compounded by the fact that existing law only allows for plaintiffs to recoup their legal fees and expenses, meaning that even if defendants prevail on the merits of their cases they have no way to seek restitution other than a counter-suit. There is also an extreme implication with regard to the housing market.

As the Legislative Analyst Office notes in a March 2015 report, “CEQA’s complicated procedural requirements give development opponents significant opportunities to continue challenging housing projects after local governments have approved them.”

SB 1306 will empower courts to award court costs and attorney’s fees to a prevailing party as opposed to just a plaintiff in CEQA litigation.

1. Public policy behind CEQA

When it passed CEQA in 1970, the Legislature declared that the “maintenance of a quality environment for the people of this state now and in the future is a matter of statewide concern.” (Pub. Resources Code Sec. 21000(a).) CEQA’s findings and declarations expressly direct “all agencies of the state government which regulate activities of private individuals, corporations, and public agencies which are found to affect the quality of the environment, [to] regulate such activities so that major consideration is given to preventing environmental damage.” (Pub. Resources Code Sec. 21000(g).) CEQA’s environmental review process gives effect to the policy of giving major consideration to preventing environmental damage by forcing public agencies to critically examine the environmental impacts of proposed projects before approving them. The California Supreme Court has recognized that CEQA’s “purpose is to inform the public and its responsible officials of the environmental consequences of their decisions before they are made,” and in so doing “protects not only the environment but also informed self-government.” (Citizens of Goleta Valley v. Board of Supervisors (1990) 52 Cal.3d 553, 564 [citations omitted].) CEQA exists “not to generate paper, but to compel government at all levels to make decisions with environmental consequences in mind.” (Id. [citations omitted].)

CEQA, like many other statutes in environmental law, is primarily enforced through litigation brought by private parties. While the ultimate “duty of identifying and evaluating potentially feasible project alternatives” and assessing the environmental impact of a project “lies with the proponent and the lead agency, not the public,” (Citizens of Goleta Valley v. Bd. of Supervisors, 52 Cal.3d at 568.) it is the public’s power to hold agencies accountable that gives CEQA’s mandates their true force. By authorizing prevailing parties to shift the costs of litigation to non-prevailing parties, this bill could chill public participation in CEQA enforcement. Parties with meritorious claims may be reluctant to challenge agency actions out of a concern that they could be ordered to pay a sizeable sum should they lose in court. Raising this concern, Sierra Club California, in opposition, states:

We oppose SB 1306, which requires attorney’s fees and court costs to be paid to prevailing parties in a suit litigated under the California Environmental Quality Act (CEQA). This will prevent citizens from being able to effectively enforce the law, leading to potentially faulty Environmental Impact Reports and insufficient mitigation. Effective enforcement of CEQA is contingent on the public’s ability to enforce the law, often through litigation. These suits are done to protect the public and the environment from any problems that may arise during the process. Enforcing environmental laws already costs the public through their own attorneys and court fees. Adding the risk of covering prevailing party costs would be prohibitive and restrict access to the courts.

1. “American Rule” on attorney fees

Generally in the United States, the “American rule” is that parties are to bear their own costs in civil litigation. In Alyeska Pipeline Co. v. Wilderness Society (1975) 421 U.S. 240, the United States Supreme Court held that it was the province of the legislative branch to craft exceptions to the “American rule,” and that courts were not free to shift such costs absent express legislative authorization. (Id. at 269-270.) In 1977, the Legislature enacted Code of Civil Procedure Section 1021.5, which appeared to be “in significant measure … an explicit reaction to the United States Supreme Court’s Alyeska decision.” (Woodland Hills Residents Assn., Inc. v. City Council (1979) 23 Cal.3d 917, 934.)

Section 1021.5 provides courts with authority to award attorney’s fees in actions to enforce important rights in the public interest that confer a significant benefit on a large class of persons. Specifically, Section 1021.5 was intended to encourage litigation deemed to be in the public interest by persons acting as a private attorney general. This doctrine rests on the recognition that privately initiated lawsuits are often essential to the effectuation of public policies embodied in constitutional or statutory provisions, and that without some mechanism authorizing the award of attorney fees, private actions to enforce such public policies would be financially impracticable. As explained recently by the California Supreme Court:

[s]ection 1021.5 [addresses] the problem of affordability of such lawsuits. Because public interest litigation often yields nonpecuniary and intangible or widely diffused benefits, and because such litigation is often complex and therefore expensive, litigants will be unable either to afford to pay an attorney hourly fee or to entice an attorney to accept the case with the prospect of contingency fees, thereby often making public interest litigation as a practical matter . . . infeasible.” (Conservatorship of Whitley (2010) 50 Cal.4th 1206, 1219 [internal citations and quotation marks omitted].)

The standard set by Section 1021.5 is rigorous and is conditioned upon three requirements being met: (1) a significant benefit is provided to the general public; (2) the necessity and financial burden of private enforcement, or of enforcement by one public entity against another public entity, are such as to make the award appropriate; and (3) such fees should not in the interest of justice be paid out of the recovery, if any. Additionally, the statute specifically provides for an important exception to this rule when the matter involves a public agency, stating that “with respect to actions involving public entities, this section applies to allowances against, but not in favor of, public entities.” (Code Civ. Proc. Sec. 1021.5.)

The types of suits that would be subject to fee shifting under this bill would largely involve a private person or entity who brings an unsuccessful suit against a public entity, which is not one of the fee-shifting scenarios currently authorized by Section 1021.5. Allowing fee shifting by a public entity against private individuals could undermine an individual’s ability to pursue judicial redress to enforce CEQA. Fears of having to pay a substantial sum in attorney fees may disincentivize individuals from bringing meritorious claims against public entities under CEQA, thereby undermining an important check on the powers exercised by these entities. Writing in opposition, the Center for Biological Diversity states:

[This] bill would threaten plaintiffs in certain California Environmental Quality Act cases with liability for defendants’ attorneys’ fees even when their actions are brought in good faith. The bill’s adoption thus could set a precedent that improperly chills enforcement of California’s premier environmental protection statute. . . . Existing law protects defendants by allowing them to recover fees in bad-faith actions. This properly discourages frivolous lawsuits, while allowing good-faith actions enforcing important public rights to proceed. Courts also have well-established authority to ensure that plaintiffs can recover attorneys’ fees only if their successful litigation truly confers a public benefit. . . . This attempt to single out and chill CEQA litigation is ill-advised and unnecessary.

1. Payment of costs

Costs of litigation, in contrast to attorney fees, are generally recoverable by the prevailing party in civil litigation as a matter of right. Code of Civil Procedure Section 1032 states that, “except as otherwise expressly provided by statute, a prevailing party is entitled as a matter of right to recover costs in any action or proceeding.” Other provisions in the Code of Civil Procedure, such as Section 1033.5, enumerate specific items that may be recovered as costs as well as those which cannot be claimed. CEQA contains no provision expressly barring a prevailing party from recovering their costs in an action brought under the statute. Consequently, existing law already authorizes a prevailing party to recover his or her costs under CEQA, rendering the cost shifting provision of this bill unnecessary.

1. Codification in the Consumer Legal Remedies Act

This bill provides that in litigation pertaining to CEQA that is filed pursuant to the Consumer Legal Remedies Act (Civ. Code Sec 1750 et seq.), the court shall award court costs and attorney fees to a prevailing party in the action. The Consumer Legal Remedies Act (CLRA) is a consumer protection statute intended “to protect consumers against unfair and deceptive business practices and to provide efficient and economical procedures to secure such protection.” (Civ. Code Sec. 1760.) Among other things, it prohibits merchants from representing that goods have “characteristics, ingredients, uses, benefits, or quantities which they do not have,” or representing that goods “are of a particular standard, quality, or grade” when they are of another. (Civ. Code Sec. 1770.) Consumers who are harmed by unlawful practices specified in the CLRA have a right of action to recover damages and other remedies.

Passed by the Legislature in 1970, the CLRA is intended to be “liberally construed” by the courts and “applied to promote its underlying purposes.” (Civ. Code Sec. 1760.) However, even a broad construction of the CLRA is unlikely to encompass CEQA claims. A litigant who wishes to challenge an agency’s compliance with CEQA may do so by bringing suit under that act, which generally allows legal challenges alleging that:

• a public agency is carrying out or has approved a project that may have a significant effect on the environment without having determined whether the project may have a significant effect on the environment;
• a public agency has improperly determined whether a project may have a significant effect on the environment;
• an environmental impact report prepared by, or caused to be prepared by, a public agency does not comply with CEQA;
• a public agency has improperly determined that a project is not subject to CEQA; or
• another act or omission of a public agency does not comply with CEQA. (Pub. Resources Code Sec. 21167.)

It is unclear how a CEQA lawsuit alleging agency noncompliance as described above could be pled under the CLRA’s unfair competition and unfair or deceptive acts or practices provisions concerning the sale or lease of goods or services to a consumer. Should the Committee approve this bill, it may wish to consider re-codifying its provisions within CEQA to give them proper legal effect.

1. Bill should be sent back to Senate Rules Committee for consideration of request from Senate Environmental Quality Committee

The Senate Environmental Quality Committee has indicated that this bill may have an impact to policy areas within their jurisdiction. As a result, should the Committee approve the bill, the motion should be to send the bill back to the Senate Rules Committee for consideration of the re-referral request from the Environmental Quality Committee.

Support: California Chamber of Commerce

Opposition: California League of Conservation Voters; Center for Biological Diversity; Consumer Attorneys of California; Disability Rights California; Sierra Club California; State Building and Construction Trades Council of California

HISTORY

Source: Author

Related Pending Legislation:

SB 122 (Jackson and Hill, 2015) would authorize lead agencies, upon request of a project applicant, to concurrently prepare the administrative record while going through the CEQA environmental review process, rather than after the process has concluded, as specified. This bill would also improve the accessibility of CEQA related documents by expanding the use of California’s online CEQA State Clearinghouse. This bill is pending in the Assembly Appropriations Committee.

SB 1248 (Moorlach, 2016) would require plaintiffs or petitioners in CEQA actions to disclose certain information about named plaintiffs, including their names and cities and counties of legal residence, as well as the identity of individuals or entities that contribute in excess of $100 dollars toward a plaintiff’s costs in an action. This bill would also require plaintiffs to identify any pecuniary or business interest related to the project or issues involved in the CEQA action of any named plaintiff or person that contributes in excess of $100 to the costs of the action, as specified. This bill is pending in the Senate Environmental Quality Committee.

Prior Legislation:

SB 1451 (Hill and Roth, 2014) would have expanded CEQA’s exhaustion requirements by, among other things, precluding an individual from challenging a public agency’s compliance with the act if the alleged grounds of noncompliance were known or could have been known with the exercise of reasonable diligence during a public comment period, but the alleged grounds of noncompliance were presented to the public agency at a time other than during the public comment period. This bill failed passage in the Senate Judiciary Committee.

SB 1456 (Simitian, Ch. 496, Stats. 2010) added the requirement that an organization formed after the approval of a project may bring an action or proceeding to attack, review, set aside, void, or annul the acts or decisions of a public agency on the grounds of noncompliance with CEQA if a member of that organization presented to the public agency orally or in writing the alleged grounds for noncompliance during the public comment period or prior to the close of the public hearing on the project before the issuance of the notice of determination.

SB 919 (Dills, Ch. 1131, Stats. 1993) enacted CEQA’s exhaustion requirement by prohibiting the bringing of an action or proceeding under the act unless the alleged grounds for noncompliance with the act were presented to the public agency, and unless the person bringing the action or proceeding objected during the public comment period, or prior to the close of the public hearing on the project.

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