Opinion
D071611
02-22-2018
WEST COAST AIR CONDITIONING COMPANY, INC., Plaintiff and Appellant, v. CALIFORNIA DEPARTMENT OF CORRECTIONS AND REHABILITATION, Defendant and Respondent.
Finch, Thornton & Baird, P. Randolph Finch Jr. and Shawn E. Fields, for Plaintiff and Appellant. Xavier Becerra, Attorney General, Thomas S. Patterson, Assistant Attorney General, Stepan A. Haytayan and Jeffrey A. Rich, Deputy Attorneys General, for Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 37-2015-00017334-CU-WM-CTL) APPEAL from an order of the Superior Court of San Diego County, Joan M. Lewis, Judge. Affirmed. Finch, Thornton & Baird, P. Randolph Finch Jr. and Shawn E. Fields, for Plaintiff and Appellant. Xavier Becerra, Attorney General, Thomas S. Patterson, Assistant Attorney General, Stepan A. Haytayan and Jeffrey A. Rich, Deputy Attorneys General, for Defendant and Respondent.
Plaintiff West Coast Air Conditioning Company, Inc. (West Coast) appeals the court's October 26, 2016 postjudgment order denying West Coast's request for attorney fees under the "private attorney general" theory codified in Code of Civil Procedure section 1021.5. West Coast contends the court erred in refusing to award it reasonable attorney fees after West Coast (1) successfully challenged by ordinary writ of mandate (§ 1085, subd. (a)) the award of a public works contract by defendant California Department of Corrections and Rehabilitation (CDCR) to real party in interest Hensel Phelps Construction Co. (HP), and (2) obtained a permanent injunction preventing HP from performing any additional work under that misawarded contract.
Unless otherwise noted, all further statutory references are to the Code of Civil Procedure.
Specifically, West Coast contends the court erred when it found attorney fees were inappropriate under section 1021.5 because West Coast could not satisfy the requirement that a financial burden was placed on it that was out of proportion to its individual stake in the litigation. Affirmed.
This is the third appeal involving the parties and their instant dispute. In West Coast Air Conditioning Company, Inc. v. California Department of Corrections and Rehabilitation (Jan. 9, 2017, D069033 [nonpub. opn.]), CDCR both appealed the trial court order granting West Coast's request for a temporary injunction preventing HP from performing any additional work on the misawarded contract and sought a writ of supersedeas to avoid enforcement of the injunction. This court denied the request for a writ of supersedeas and in January 2017, dismissed that appeal as moot. In West Coast Air Conditioning Company, Inc. v. California Department of Corrections and Rehabilitation, case number D071106 (hereinafter D071106), currently pending before this court, CDCR appealed an award of $250,000 to West Coast for its bid preparation costs after West Coast obtained a permanent injunction preventing HP from continuing to work under the misawarded contract.
OVERVIEW
A detailed factual and procedural overview of the parties' dispute is set forth in D071106.
Briefly, West Coast and HP among others bid on a public works project to update the Ironwood State Prison Heating, Ventilation and Air Condition System (subject project). CDCR initially awarded HP the contract for the subject project, as HP's bid was about $88 million. West Coast, the next lowest bidder, bid about $98 million for the subject project. West Coast in May 2015 challenged the contract award to HP by filing a verified petition for writ of ordinary mandate and a complaint seeking injunctive relief and alleging a promissory estoppel cause of action against CDCR only.
On September 11, 2015, the court set aside the contract award to HP after finding HP's bid contained arithmetic errors that were material to the HP bid price and that could not be waived by CDCR. At that time, it appeared the court was at least considering an order requiring CDCR to award the contract for the subject project to West Coast, the next lowest responsible bidder. (See Pub. Contract Code, § 10108 [noting in relevant part that "[i]f the estimated total cost of any construction project or work carried out under this section exceeds twenty-five thousand dollars ($25,000), the district or agency shall solicit bids in writing and shall award the work to the lowest responsible bidder or reject all bids"].) Indeed, the court's September 11 order stated that the contract for the subject project "should have been awarded to West Coast."
However, on December 9, 2015, the court in its statement of decision granting the petition for writ of mandate accepted the argument of CDCR that the court (allegedly) lacked the authority to command CDCR to award the contract for the subject project to West Coast. Two days later in granting West Coast's request for a permanent injunction, the court reiterated it would not order CDCR to award West Coast the contract for the subject project.
The court in May 2016 awarded West Coast its bid preparation costs in the stipulated amount of $250,000. As noted (see fn. 2, ante), CDCR appealed this award in D071106, contending that West Coast's bid was nonresponsive and that West Coast already had obtained "effective" relief when the court granted its request for a permanent injunction but no additional relief. (See D071106.)
As we explain in D071106 filed concurrently with the instant case, we reject CDCR's contentions that West Coast bid was nonresponsive and that the court as a matter of law was prevented from exercising its broad equitable power in awarding West Coast its bid preparation fees. We conclude that West Coast's remedy would be inadequate if it was merely entitled to a permanent injunction, as CDCR contends, when only about 8 percent of the subject project was completed when HP stopped work and when CDCR refused to award West Coast the contract despite West Coast being the "lowest responsible bidder." (See Pub. Contract Code, § 10108.)
All of which leads up to the appeal in the instant case. After it succeeded under its promissory estoppel cause of action and obtained the $250,000 award, West Coast filed a memorandum of costs seeking $6,603.40 in costs and a motion for an award of attorney fees under section 1021.5 seeking about $140,000 in fees. The court awarded West Coast its costs in full, but refused to award West Coast any attorney fees.
In rejecting West Coast's request for an award of attorney fees, the court ruled in part as follows:
"In Arnold v. California Exposition and State Fair (2004) 125 Cal.App.4th 498[,] the court explained that 'section 1021.5 codifies the "private attorney general" doctrine under which attorney fees may be awarded to successful private litigants who further the public interest. To obtain fees under section 1021.5 requires a showing that the litigation: (1) served to vindicate an important public right; (2) conferred a significant benefit on the general public or a large class of persons; and (3) was necessary and imposed a financial burden on the fee requester which was out of proportion to his or her individual stake in the matter. (Citations omitted.)'
"The Court believe[s] it is this last element that is dispositive of this motion.
"With the exception of the trial of the promissory estoppel claim, this Court has presided over all matters concerning this case, including the hearing on the writ petition and motion for permanent injunction and is quite familiar with the arguments advanced by the parties, including West Coast.
"In its reply papers, West Coast attempts to offer an after-the-fact (i.e., after this litigation was commenced) unsupported reason (CDCR won't allow West Coast to bid on the subject project and maybe will not be able to compete for CDCR's work for a long time) why 'there is no pecuniary benefit to West Coast that results from West Coast pursuing the writ and injunction to stop CDCR's illegal contract with HP.'
"It was always the Court's understanding that West Coast, as a disappointed bidder, hoped to one day be able to obtain the contract for this very expensive project— either by default (CDCR awarding the contract to West Coast outright if the writ w[as] granted) or by re-bid. For example, see the June 15, 2015 ex parte application for a TRO where West Coast argued that '[i]f CDCR is required to follow the law, then HP's bid will be deemed non-responsive and the contract for the Project will be awarded to West Coast or re-bid. Without the issuance of a writ of mandate, West Coast would forever be deprived of its right to perform work on the Project in exchange for payment.' This is exactly what the Court believes drove this litigation—West Coast's hope to either be awarded the contract or to at least re-bid the project. That there were perhaps later-occurring events (the claim that CDCR will not work with West Coast) does not change the motivation behind pursuing this litigation.
"[¶] . . . [¶]
"The Court concludes that in this case, there was not a financial burden placed on West Coast that was out of proportion to its individual stake in the matter. The Court finds the requirements for fees under [section] 1021.5 are not present.
"The Motion for attorneys' fees is therefore denied."
DISCUSSION
A. Guiding Principles
Section 1021.5 provides in part that "[u]pon motion, a court may award attorneys' 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 . . . 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."
" '[T]he Legislature adopted section 1021.5 as a codification of the "private attorney general" attorney fee doctrine that had been developed in numerous prior judicial decisions. . . . [T]he fundamental objective of the private attorney general doctrine of attorney fees is " 'to encourage suits effectuating a strong [public] policy by awarding substantial attorney's fees . . . to those who successfully bring such suits and thereby bring about benefits to a broad class of citizens.' " [Citations.] The doctrine rests upon the recognition that privately initiated lawsuits are often essential to the effectuation of the fundamental public policies embodied in constitutional or statutory provisions, and that, without some mechanism authorizing the award of attorney fees, private actions to enforce such important public policies will as a practical matter frequently be infeasible.' [Citation.]" (See Conservatorship of Whitley (2010) 50 Cal.4th 1206, 1217-1218 (Whitley).)
"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 fees 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.' [Citation.] . . . Section 1021.5 addresses this affordability problem with the inducement of attorney fees for public interest litigation when certain conditions in the statute are met." (Whitley, supra, 50 Cal.4th at pp. 1219-1220.)
At issue in the instant case is the "necessity and financial burden requirement" in section 1021.5. This requirement " ' "really examines two issues: whether private enforcement was necessary and whether the financial burden of private enforcement warrants subsidizing the successful party's attorneys." ' [Citations.] The 'necessity' of private enforcement ' " ' "looks to the adequacy of public enforcement and seeks economic equalization of representation in cases where private enforcement is necessary." ' " ' " (Whitley, supra, 50 Cal.4th at pp. 1214-1215.)
In determining the financial burden on litigants for purposes of the second prong of this inquiry, "courts have quite logically 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. ' "An award on the 'private attorney general' theory is appropriate when the cost of the claimant's legal victory transcends [the claimant's] personal interest, that is, when the necessity for pursuing the lawsuit placed a burden on the plaintiff 'out of proportion to [the claimant's] individual stake in the matter.' " ' " (Whitley, supra, 50 Cal.4th at p. 1215.) Where, however, the party "had a 'personal financial stake' in the litigation 'sufficient to warrant [the] decision to incur significant attorney fees and costs in the vigorous prosecution [or defense]' of the lawsuit, an award under section 1021.5 is inappropriate." (Millview County Water Dist. v. State Water Resources Control Bd. (2016) 4 Cal.App.5th 759, 768-769.)
The requirement that the litigation impose a financial burden on a plaintiff reflects an important public policy of section 1021.5 to incentivize the pursuit of important cases that would otherwise not be filed. Section 1021.5 awards fees to "one whose personal stake is insufficient to otherwise encourage the action," not to litigants whose own personal financial incentives were adequate to motivate them to bring the lawsuit. (Beach Colony II v. California Coastal Com. (1985) 166 Cal.App.3d 106, 114 (Beach Colony II).)
A party such as West Coast that is seeking fees under section 1021.5 therefore bears the burden of establishing that the " 'cost of [its] legal victory transcends [its] personal interest, that is, when the necessity for pursuing the lawsuit placed a burden on the plaintiff "out of proportion to [its] individual stake in the matter." ' " (Woodland Hills Residents Assn., Inc. v. City Council (1979) 23 Cal.3d 917, 941; see Beach Colony II, supra, 166 Cal.App.3d at p. 113.) In comparing the cost of litigation to the plaintiffs' stake, " 'we do not look at the plaintiffs' actual recovery after trial, but instead we consider 'the estimated value of the case at the time the vital litigation decisions were being made.' " (Lyons v. Chinese Hospital Assn. (2006) 136 Cal.App.4th 1331, 1352 (Lyons).)
We review the court's order denying an award under section 1021.5 for an abuse of discretion. (Lyons, supra, 34 Cal.4th at p. 1344.) Because the trial court is usually in the best position to evaluate the burdens and benefits of the litigation, "its determinations will not be disturbed ' "unless the appellate court is convinced that it is clearly wrong." ' " (County of Orange v. Barratt American, Inc. (2007) 150 Cal.App.4th 420, 441.)
Relying on Whitley, supra, 50 Cal.4th at pp. 1213-1214, West Coast contends a de novo standard of review should apply because the court allegedly was construing section 1021.5 when it found "there was not a financial burden placed on West Coast that was out of proportion to its individual stake in the matter." Whitley recognized that typically an award of attorney fees is reviewed under an abuse of discretion standard. (Id. at p. 1213.) However, Whitley applied a de novo standard of review because the issue in that case involved the construction of the " 'necessity and financial burden of private enforcement' " requirement in section 1021.5 when a litigant had a "nonfinancial, nonpecuniary personal interest[] in the litigation, such as vindicating the best interest of a child or sibling," which the Whitley court found presented a pure question of law. (Id. at pp. 1211, 1214.) Unlike the novel issue in Whitley, we conclude the issue presented in the instant case does not turn on the statutory construction of one or more requirements of section 1021.5, but instead merely involves the application of the facts to well settled law. We thus apply an abuse of discretion standard of review to the order denying West Coast recovery of attorney fees.
B. Analysis
Here, as noted the court in its September 11 order granting West Coast's petition for ordinary mandate found that HP's bid was "nonresponsive" as a matter of law and that the contract "for the [subject] project should have been awarded to West Coast." As further noted, when the court on December 9 issued its statement of decision granting West Coast's mandamus petition, the court stated it could not compel CDCR to award the contract for the subject project to West Coast. The court reiterated this finding two days later, when it granted West Coast's request for a permanent injunction.
The record is not clear when West Coast came to the realization that CDCR was never going to award West Coast the contract for the subject project, as West Coast's Chairman of the Board David Dudley testified during the May 2016 trial in connection with West Coast's recovery of its bid preparation costs. However, the record is clear that after December 9, 2015, West Coast no longer could expect the court to compel CDCR to award West Coast the contract for the subject project.
This "timeline" is somewhat useful in analyzing " 'the estimated value of the case at the time the vital litigation decisions were being made' " by West Coast (see Lyons, supra, 136 Cal.App.4th at p. 1352), and thus, in aiding in part our determination of whether the court properly found the necessity for pursuing the litigation against CDCR (and HP) did not place a burden on West Coast " 'out of proportion to [its] individual stake in the matter.' " (See Whitley, supra, 50 Cal.4th at p. 1215.)
Between May 1, 2015 and December 4, 2015, West Coast incurred and sought recovery from CDCR of about $119,000 in fees, or about 85 percent of the total fees West Coast was seeking under section 1021.5. Doing the "math" so to speak, after December 9 West Coast thus only incurred about 15 percent of its requested fee award. These numbers lend some support to the court's finding that West Coast had a significant personal stake in the litigation (at least) until December 9, 2015, when the court expressly stated it would not compel CDCR to award West Coast the contract for the subject project.
West Coast's notice of lodgment in support of its motion for attorney fees shows West Coast sought recovery of attorney fees (but not costs) in the following amounts between May 1, 2015 and December 4, 2015: May 1-29 ($23,589); June 1-30 ($35,000 [including a $2,315.22 "courtesy discount"]); July 1-31 ($13,842); August 1-30 ($2,835.50); September 1-30 ($11,773.50); October 1-27 ($12,047.50) November 1-30 ($17,111.50); and December 1-4 ($2,917)
The record shows for December 2015 that West Coast incurred no attorney fees between December 5 and 9, the day the court issued its statement of decision. --------
What's more, Dudley testified that West Coast incurred $250,000 in costs in preparing its bid for the subject project; that unlike other companies bidding on the subject project, West Coast put a great deal of time and money into preparing its bid; that he personally attempted to resolve the dispute with CDCR by suggesting more than once that CDCR award West Coast the contract for the subject project, which would moot some if not all of West Coast's petition; that West Coast remained ready, willing, and able to perform the contract, including after the court nullified the award of the contract to HP; that West Coast had secured commitments from its key subs to work on the subject project if West Coast was awarded the contract; and that West Coast also had reached out to one or more subs who had been working under the HP contract (i.e., the electronics subcontractor) when the injunction issued.
We conclude the foregoing amply supports the court's finding that West Coast had a significant personal stake in the litigation—namely, to obtain the award of the nearly $100 million contract for the subject project, as demonstrated by its sustained efforts over the course of many months to nullify the award of the contract to HP; to obtain a permanent injunction preventing HP from continuing to work on the subject project; and to have the contract instead awarded to it as the lowest responsible bidder. (See Pacific Mutual Life Ins. Co. v. State Bd. of Equalization (1996) 41 Cal.App.4th 1153, 1165 [noting an award of attorney fees under section 1021.5 is inappropriate "if the public benefit gained from the law suit . . . and the important public right enforced by the suit . . . are coincidental to the plaintiff's personal monetary gain"].)
DISPOSITION
The court's postjudgment order denying West Coast an award of attorney fees under section 1021.5 is affirmed. Each party to bear its own costs of appeal.
BENKE, J. WE CONCUR: McCONNELL, P. J. IRION, J.