Epsteinv.Schwarzenegger

COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION FOURMay 10, 2018
A147092 (Cal. Ct. App. May. 10, 2018)

A147092 A147366

05-10-2018

JERRY B. EPSTEIN et al., Plaintiffs and Appellants, v. ARNOLD SCHWARZENEGGER et al., Defendants and Respondents; JOHNNY MANZON-SANTOS, Intervenor and Appellant.


ORDER MODIFYING OPINION AND DENYING REHEARING
[NO CHANGE IN JUDGMENT] THE COURT: It is ordered that the opinion filed herein on May 10, 2018, be modified as follows:

1. On page 14, in the second full paragraph, add footnote 10 (which will require renumbering of all subsequent footnotes) at the end of the sentence reading "including the sale to California First." Footnote 10 shall read:

10 In a petition for rehearing, the State argues this court committed an error of law in treating the inference of causation that may be drawn from the chronology of a public-interest suit as a mandatory presumption. We agree that the chronology of events "may" give rise to such an inference. The word "may," however, does not confer upon the trial court unfettered discretion to accept or reject an inference. It merely signals that the propriety of drawing an inference of causation depends upon the nature of the evidence itself, which is reviewed under the substantial evidence rule. Here, the chronological sequence of events is undisputed, as the evidence uniformly shows the State changed its mind after appellants' lawsuit was filed. Thus, assuming (as we
must) that the trial court refused to draw an inference of causation, on this record that decision constituted an abuse of discretion.

2. On page 15, in the first full paragraph, insert footnote 11 at the end of the sentence reading "motivations for abandoning the sale." Footnote 11 shall read:

11 Below, the only evidence the State offered to explain its decision was Governor Brown's press release announcing the cancellation of the State's plans to sell the Golden State Portfolio. That press release specifically referred to, and adopted, the LAO's conclusion that the sale of the Golden State Portfolio was poor fiscal policy and should not proceed—a conclusion that appellants also featured prominently as the core factual basis for some of their claims. The press release, however, did not explain why the State had changed its mind, in the months since the litigation was filed, concerning the persuasive force of the LAO's analysis. Under the circumstances, we fail to see how one could reasonably infer from the press release that the State abandoned the transaction for reasons entirely independent of this litigation.

3. On page 15, after the first full paragraph, insert footnote 12, which shall read:

12 In its petition for rehearing, the State contends that our opinion effectively shifts the burden to the party opposing a catalyst fee application to disprove causation. It provides no support for this contention. In some catalyst cases, the movant may have acquired other evidence, beyond the bare sequence of procedural events, which bear upon a litigant's motivations for changing its position. Thus, our decision does not set an unfairly low bar for all fee applicants.

Nor does our ruling, as the State argues, force the Governor and other executive branch officials to waive privileges. It only requires the State to meet an evidentiary burden, applicable to all litigants, by making an appropriate factual showing. Indeed, in the very case cited by the State, which concerned whether the Governor's appointment calendars and schedules are subject to disclosure under the Public Records Act, the State filed declarations from the Governor's scheduling secretary, director of security, and the Governor himself explaining the basis for the State's position. (Times Mirror Co. v. Superior Court (1991) 53 Cal.3d 1325, 1329-1332.) Similarly, in this case, at least one state official (Robert McKinnon, Assistant Branch Chief of the Asset Enhancement/ Surplus Sales Unit of the Asset Management Branch of the State of California) submitted a declaration, which the State relied upon
as evidence for its motives in abandoning the sale. In any event, we observe that in applying the deliberative process privilege, " 'the . . . courts have uniformly drawn a distinction between predecisional communications, which are privileged [citations]; and communications made after the decision and designed to explain it, which are not.' [Citation.]" (Times Mirror Co. v. Superior Court, supra, 53 Cal.3d at 1341.)

There is no change in the judgment.

The State's petition for rehearing is denied.

(Streeter, Acting P.J., Reardon, J., and Schulman, J. participated in the decision.) Dated: __________

Judge of the Superior Court of California, City and County of San Francisco, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.

/s/_________, Acting P.J.

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. (City & County of San Francisco Super. Ct. No. CGC10505436)

In 2010, on the heels of the great recession, the State faced an enormous budget gap. To close that gap, in November 2010, the Department of General Services (DGS) entered into an agreement to sell eleven state-owned buildings, referred to as the Golden State Portfolio, to California First, L.P. (California First). The transaction was set to close in mid-December. The next day, Jerry B. Epstein and A. Redmond Doms sued Governor Schwarzenegger, DGS, and Ron Diedrich, the Acting Director of DGS (together, the State) to stop the sale of the Golden State Portfolio to California First or anyone else. Two months of intense litigation ensued, including a request for preliminary injunction and proceedings before the Sixth District Court of Appeal and our Supreme Court.

In the interim, Governor Jerry Brown assumed office. On February 9, 2011, he announced that the State would not sell the Golden State Portfolio and would close the budget shortfall through other means. Appellants' writ petition was dismissed and this case was remanded for further proceedings.

Meanwhile, California First sued the State to enforce the sale/leaseback agreement. The parties stipulated to stay litigation of this case until California First's claims were resolved. In the middle of trial, the California First action settled. Following a noticed motion, the stay in Epstein was lifted to permit plaintiffs and intervenor ("appellants") to submit a motion for attorneys' fees. That motion was denied. The trial court adopted numerous arguments by the State, including most prominently that Epstein was not in fact a catalyst for relief because there was an independent intervening cause. Specifically, evidence presented during the California First trial suggested that California First lacked the necessary financing to close the deal. The court concluded that if the deal was never going to happen, this lawsuit could not have caused the State to abandon the sale of the Golden State Portfolio.

Appellants contend that the order constituted an abuse of discretion. We agree, principally because the trial court applied the wrong legal standards, and reverse.

I. FACTUAL AND PROCEDURAL BACKGROUND

In 2009, at the tail end of the great recession, the State of California faced "an immense budget gap." To generate revenue, the Legislature enacted Assembly Bill No. 22, now codified as Government Code section 14670.13, which authorized DGS to sell and/or lease eleven State-owned properties, referred to as the "Golden State Portfolio." (Gov. Code, § 14670.13.) DGS marketed the Golden State Portfolio, reviewed scores of bids and ultimately selected California First's sale-and-leaseback proposal.

After transaction costs and retirement of debt, the proposed sale to California First promised to yield one-time revenue of approximately $1.3 billion. According to the Legislative Analyst's Office (LAO) in a letter dated November 5, 2010, however, the State would spend an estimated $24.3 billion over the next 50 years to lease back the buildings, which was $6 billion more than the cost of ownership (or $1.4 billion adjusted for present value). LAO concluded the proposal constituted "poor fiscal policy"; notwithstanding, DGS executed the purchase agreement on November 15, 2010 with California First and scheduled escrow to close 30 days later, on December 15, 2010.

On November 16, 2010, plaintiffs Epstein and Doms sued, challenging the constitutionality and enforceability of Government Code section 14670.13, which authorized DGS to sell the Golden State Portfolio, and the proposed sale to California First. Alleging that the costs of the transaction would exceed the costs of ownership by $6 billion over the next 35 years, plaintiffs asserted it constituted an illegal expenditure, a waste of public funds, and an unconstitutional gift of public goods. They also asserted that the sale could not proceed without the approval of the Judicial Council.

On December 3, 2010, Donald Casper was granted leave to intervene. He asserted the same claims, plus the additional theories that the sale constituted an unconstitutional delegation of authority from the legislature to DGS, and that the sale was not, as required by section 14670.13, "in the best interest of the state." After Mr. Casper's untimely passing, the court gave leave to file an amended complaint in intervention substituting in Johnny Manzon-Santos as Intervenor. We refer herein to plaintiffs and intervenors collectively as "appellants."

The court issued a Temporary Restraining Order and an Order to Show Cause re Preliminary Injunction. Shortly thereafter, on November 18, California First failed to deposit the required earnest monies with the escrow agent. This default was not promptly disclosed. On December 3, the State's written opposition to preliminary injunction did not mention the default or suggest that the transaction might be in jeopardy. To the contrary, it touted the rigorous bid-solicitation process and the superior terms offered by California First and argued that California First had "identified sources of debt and equity with the financial capacity to perform," had the "highest certainty of closure," and was "prepared to close quickly."

The State's next submission, on December 8, likewise failed to disclose any default and argued that the injunction against the transaction, sought by plaintiffs and intervenor, would subject the State to "overwhelming" and immediate harm.

On December 10, the Honorable Charlotte Walter Woolard heard and denied appellants' request for preliminary injunction. Three days later, appellants petitioned for a writ of mandamus and requested an emergency stay of the sale. On the same day, the Sixth District Court of Appeal issued an order staying the sale of the Golden State Portfolio until further notice "[t]o permit further consideration of the issues raised by the petition for writ of mandate" (the Stay Order).

On December 15, the State submitted a preliminary opposition, requested relief from the stay and sought the imposition of a bond. For the first time, it disclosed that California First had delayed depositing their funds into escrow; however, the State attributed this delay to the pending litigation and stay. In a related filing, the State reiterated that time was "truly of the essence" and argued that the Stay Order jeopardized the entire transaction. Similarly, in the State's demand that appellants be required to post a bond, it argued that "the Stay Order ... threaten[ed] to prevent the State and California First from consummating the transaction at all."

The State's declarant expressly attributed the delay to the litigation, averring that California First's investors were concerned about possible negative consequences of the Epstein matter and had therefore refused to timely deposit the purchase funds in escrow.

The State repeated these contentions the next day, in support of an emergency request to lift the stay.

The Court of Appeal denied each of the State's requests. The State then filed a petition for extraordinary relief with the Supreme Court, seeking to vacate the Stay Order. It continued to blame the Epstein litigation and the Stay Order for California First's default, arguing these may "have the effect of causing California First to walk away from the transaction."

On December 27, the Court of Appeal issued an order to show cause why a peremptory writ should not issue, setting a January 3, 2011 deadline for filing a return and January 26 as the date for oral argument. The next day, the Supreme Court denied the State's petition for extraordinary relief.

Governor Brown assumed office on January 3, 2011. On February 9, with appellants' writ petition and the underlying litigation still pending, Governor Brown announced that the State had abandoned the proposal to sell the Golden State Portfolio. The announcement called the proposed sale " 'short-sighted,' " conceded it " 'would have cost [California] taxpayers billions of dollars in the long-run,' " and stated Governor Brown's intention to close the budget gap through other, less-costly means (specifically, by borrowing from special reserves).

On February 10, the State filed its return to appellants' writ petition, arguing that the State's abandonment of the sale mooted appellants' writ petition challenging the denial of preliminary injunctive relief. According to the State, not only was the transaction with California First cancelled, it was "highly unlikely" that a different transaction (with another purchaser) would be proposed.

In its related motion to dismiss the petition, the State confirmed that the entire concept of a sale/leaseback had been abandoned. It stated: "DGS presently has no plans to sell any of the eleven State-owned buildings that were the subject of the November 15, 2010 Purchase and Sale Agreement." The motion to dismiss also disclosed that California First had responded to the State's cancellation of the sale by suing the State for specific performance.

The Court of Appeal dismissed appellants' petition for an extraordinary writ without prejudice and discharged the order to show cause. (Epstein v. Superior Court (2011) 193 Cal.App.4th 1405, 1408, 1412.) It agreed that "the correctness of the trial court's denial of a preliminary injunction" was "a moot question in view of the state's voluntary abandonment of the challenged transaction." (Id. at p. 1410.) It acknowledged, however, that the Epstein actions could still proceed on their merits in the trial court. (Id. at pp. 1410, 1412.)

Soon thereafter, California First's specific performance action and related cross claims were transferred to San Francisco Superior Court, coordinated with this action, and litigated under the same case number. Appellants moved to stay adjudication of Epstein until the claims in California First were fully resolved. The State initially opposed, but ultimately stipulated to this approach. The trial court's order provided that if judgment was entered against California First in the specific performance action, appellants would dismiss their claims without prejudice to their right, if any, to seek fees or costs in this action.

In the middle of the California First trial, the parties reached a settlement. All claims and cross-claims were dismissed.

The trial court then lifted the stay in Epstein to permit appellants to move for attorneys' fees and costs. Appellants filed a joint motion for attorneys' fees and costs, pursuant to Code of Civil Procedure section 1021.5, invoking the "catalyst theory" as it had been affirmed and clarified in Graham v. DaimlerChrysler Corp. (2004) 34 Cal.4th 553 (Graham).

The State opposed any award of fees. First, it challenged causation. That is, it argued appellants had neither received the "judicial imprimatur" required to obtain attorneys' fees under section 1021.5, nor was the lawsuit the "catalyst" for appellants' sought after relief - rather, California First's lack of financing prevented the deal from being consummated. The State also argued that the catalyst theory was unavailing in light of Judge Woolard's denial of appellants' preliminary injunction motion, which demonstrated that their claims lacked merit

The State also contended that Epstein did not enforce any important public right, but merely tried to stop a transaction expressing public policy, and that the proposed transaction did not threaten to adversely affect the public interest. Finally, the State argued that the suit had failed to confer any "significant benefit" for the general public.

After hearing the parties' arguments, the trial court orally denied the fee motion "for the reasons set forth by defendant State." The trial court characterized as "very important" the evidence it had considered in the specific performance action, explaining: "I sat for probably four or five weeks on [the California First] case, listening to the testimony and the evidence, and reviewing all the pleadings. And I can comfortably say that this deal would never have happened." "[California First] simply did not have the money when money was due."

At the hearing, both the State and the court acknowledged that, at the time the State abandoned the sale-leaseback deal, the State had not yet learned about California First's financing difficulties, which only came to light much later, during discovery in the specific performance action filed by California First.

After the hearing, the trial court issued a written order (the Fee Order) denying the motion "for the reasons set forth by the State Defendants . . . in their opposition brief and at oral argument" as well as "the Court's reasoning" as it "was further explained at hearing [sic]," as set forth in the attached hearing transcript.

This appeal followed.

II. APPEALABILITY OF FEE ORDER

In their opening brief, appellants asserted that the Fee Order was appealable as an order after judgment, citing Code of Civil Procedure section 904.1, subdivision (a)(2). However, before issuing the Fee Order, the trial court had not entered a judgment in this case, and none was cited. (Muller v. Fresno Community Hospital & Medical Center (2009) 172 Cal.App.4th 887, 898 (Muller) ["Because there is no judgment in this case, . . . the denial order cannot be appealable under Code of Civil Procedure section 904.1, subdivision (a)(2)"].)

Alternatively, appellants cite the collateral order doctrine and Apex LLC v. Korusfood.com (2013) 222 Cal.App.4th 1010, 1015-1016. To be appealable, however, an interlocutory order must be "collateral to the main issue, dispositive of the rights of the parties in relation to the collateral matter, and direct[] [the] payment of money or performance of an act." (In re Marriage of Skelley (1976) 18 Cal.3d 365, 368.) Appellants rely upon Apex, in which the court granted the fee request, and do not explain whether the Fee Order in this case directed any party to do or pay anything. (Conservatorship of Rich (1996) 46 Cal.App.4th 1233, 1234 [doctrine does not apply to a trial court order that does not order the payment of money or performance of an act]; but see Muller, supra, 172 Cal.App.4th at pp. 898-899.) Hence our request for supplemental briefing.

In response, appellants contend the Fee Order was, in substance if not form, a final judgment, as once it was entered, nothing remained for consideration. There is some merit to the contention. (See Caminetti v. Imperial Mut. Life Ins. Co. (1942) 54 Cal.App.2d 514, 516 [stating general rule that character of the judgment is not to be determined by the label attached to it by the court, but by the substance and effect of the adjudication it makes]; Los Angeles Times v. Alameda Corridor Transportation Authority (2001) 88 Cal.App.4th 1381, 1388-1389 [while underlying order granting petition for writ of mandate was not appealable, subsequent order denying attorney fee application was appealable as a final judgment because the order "had all the earmarks of a final judgment," nothing remained for the trial court's future consideration, and there was no other opportunity for appellate review].)

The principle stated in Caminetti may apply with more force, however, to the trial court's August 11, 2015 order. That order, which approved the parties' stipulation to lift the stay so that appellants could make their motion for attorney fees, acknowledged "that the only issue remaining in this case is whether Plaintiffs Epstein/Doms and Intervenor Manzon-Santos are entitled to a fee and cost recovery under Code of Civil Procedure section 1021.5" and included appellants' promise to "dismiss their respective Complaints after the attorney fee and cost issue is finally resolved." Notwithstanding its form, this order "effectively and decisively disposed of every issue tendered between the parties" other than the traditionally collateral issue of attorneys' fees. (Caminetti v. Imperial Mut. Life Ins. Co., supra, 54 Cal.App.2d at pp. 516-518.) Accordingly, we find the Fee Order is appealable as an order made after an appealable judgment or order. (Code Civ. Proc., § 904.1, subd. (a)(2).)

While we could have ordered the trial court to amend the August 11 order to state that appellants will take nothing by their complaints and to enter judgment, nunc pro tunc, in favor of the State, we do not believe these steps to be necessary. (See ABF Capital Corp. v. Grove Properties Co. (2005) 126 Cal.App.4th 204, 213-214; Swain v. California Casualty Ins. Co. (2002) 99 Cal.App.4th 1, 6.)

In light of the foregoing, we need not address the unresolved question of whether the fee order was appealable under the collateral order doctrine.

III. DISCUSSION

Code of Civil Procedure section 1021.5 codifies an important exception to the American rule requiring litigants to bear their own attorneys' fees. (Graham, supra, 34 Cal.4th at p. 565.) The statute permits an award of attorney fees to "(1) a successful party in any action (2) that has resulted in the enforcement of an important right affecting the public interest if (3) a significant benefit has been conferred on the general public or a large class of persons, (4) private enforcement is necessary because no public entity or official pursued enforcement or litigation, (5) the financial burden of private enforcement is such as to make a fee award appropriate, and (6) in the interests of justice the fees should not be paid out of the recovery." (Robinson v. City of Chowchilla (2011) 202 Cal.App.4th 382, 390, fn. omitted (Robinson).) "[T]he fundamental objective of the doctrine is to encourage suits enforcing important public policies by providing substantial attorney fees to successful litigants in such cases." (Graham, supra, 34 Cal.4th at p. 565.)

The statute provides, in pertinent part, that "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, 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., § 1021.5) For brevity, we refer to the statute herein as "section 1021.5."

In Graham, our Supreme Court affirmed and clarified the related "catalyst theory," which permits the award of attorneys' fees to a party who does not obtain formal judicial relief but can demonstrate pragmatic success, i.e., that the defendant "change[d] its behavior substantially because of, and in the manner sought by, the litigation." (Graham, supra, 34 Cal.4th at p. 560.) The catalyst theory preserves important policies underlying section 1021.5 by ensuring that a defendant may not litigate vigorously against a meritorious public interest case and then avoid paying attorneys' fees by voluntarily providing relief before a court order is entered. (Id. at p. 574.) It also preserves judicial resources, by encouraging a plaintiff to discontinue litigation once the defendant acquiesces to the remedy initially sought. (Id. at p. 573.) To guard against potential abuses, however, the Graham court imposed two additional burdens on parties seeking "catalyst" fees: (1) the lawsuit must have "some merit," and (2) the plaintiff must have engaged in reasonable pre-litigation settlement efforts. (Id. at p. 561.)

The parties dispute the applicable standard of review. Simply stated, to the extent the trial court's order presents issues of statutory construction or questions of law, it is reviewed de novo; in all other respects, the decision is reviewed for abuse of discretion. (Conservatorship of Whitley (2010) 50 Cal.4th 1206, 1213-1214; Graham, supra, 34 Cal.4th at p. 578.) Accordingly, we must "review the entire record, paying particular attention to the trial court's stated reasons in denying or awarding attorney fees and whether it applied the proper standards of law in reaching its decision." (Coalition for a Sustainable Future in Yucaipa v. City of Yucaipa (2015) 238 Cal.App.4th 513, 519-520 (City of Yucaipa).) "If the superior court's order is not consistent with the applicable principles of law, the order necessarily falls outside the scope of the superior court's discretion. [Citation.]" (Robinson, supra, 202 Cal.App.4th at p. 391.) "[I]f the superior court applied the proper legal standards, the appellate court determines whether the result was within the range of the superior court's discretion—that is, whether there was a reasonable basis for the decision. [Citation.]" (Ibid.) "This standard of review affords considerable deference to the trial court provided that the court acted in accordance with the governing rules of law. We presume that the court properly applied the law and acted within its discretion unless the appellant affirmatively shows otherwise." (Mejia v. City of Los Angeles (2007) 156 Cal.App.4th 151, 158.)

As noted, the Fee Order did not construe or discuss the applicable criteria, instead incorporating by reference "the reasons set forth by the State Defendants" and provided by the court at the hearing. In other words, the trial court ruled against appellants only for the reasons provided by the State below. As to those elements the State declined to challenge below, the trial court inferentially ruled in appellants' favor. Those issues are not the subject of this appeal.

As noted above, the latter concerned evidence reviewed by the court in the related specific performance trial from which the court inferred that the transaction was doomed due to California First's lack of financing.

These are the fourth (necessity of private enforcement), fifth (financial burden of private enforcement), and sixth (payment of fees from monetary recovery) elements. As the State has implicitly conceded, these elements favor appellants.

A. Appellants Were Not "Successful Parties" Under the Statute

Appellants first contend it was an abuse of discretion to find that they were not "successful parties" under section 1021.5. To show "success" under the statute (rather than the related "catalyst theory"), the moving party must demonstrate it obtained "judicially sanctioned relief", i.e., a " 'judicially recognized change in the legal relationship between the parties.' " (Marine Forests Society v. California Coastal Com. (2008) 160 Cal.App.4th 867, 877.) The necessary "judicial imprimatur" may include interim relief, such as a favorable ruling on a preliminary injunction, provided the ruling is not later vacated or reversed on the merits. (Ibid.)

Appellants insist that while they did not obtain a preliminary injunction, they did obtain a stay from the Court of Appeal, "which stopped the sale from occurring on December 15, 2010, and provided time for the new Governor to stop the sale." We disagree that mere delay, by itself, can constitute "success" within the meaning of section 1021.5. While delay may be an incidental effect of litigation challenging an objectionable project or policy (and, indeed, desired by the litigants or their counsel), it does not constitute a "judicial imprimatur" as to the merits of the litigation.

Appellants also contend they obtained relief akin to a preliminary injunction, in the form of the emergency stay issued by the Sixth District Court of Appeal. Like a preliminary injunction, the stay prohibited the sale of the Golden State Portfolio pending resolution of further proceedings, specifically, appellants' writ petition concerning the trial court's denial of preliminary injunctive relief.

However, the similarities end there. Unlike an order granting a preliminary injunction, an emergency stay does not require the court to determine the likelihood that the applicant will prevail on the merits. (Compare O'Connell v. Superior Court (2006) 141 Cal.App.4th 1452, 1463 [setting forth standard for evaluation of request for preliminary injunction] with Smith v. Smith (1941) 18 Cal.2d 462, 464-465 [emergency stay requires no findings on the merits of appeal].) The decision to issue an emergency stay falls within the broad discretion of the court of appeal and has the sole purpose of preserving appellate jurisdiction. (People ex rel. San Francisco Bay Conservation & Development Com. v. Town of Emeryville (1968) 69 Cal.2d 533, 538-539.) Further, appellants have not demonstrated that the stay order provided a substantial amount of the relief they sought nor that it was "reasonably probable" that the stay order would constitute a final decision on the matter. (Coalition for Economic Survival v. Deukmejian (1985) 171 Cal.App.3d 954, 965.) Appellants never obtained a preliminary injunction or other judicial relief that amounted to a judicially sanctioned change in the legal relationship of the parties. (See Godinez v. Schwarzenegger (2005) 132 Cal.App.4th 73, 90 [trial court's order to show cause was merely an interim ruling].) Thus, if appellants are to obtain fees, it must be under the "catalyst theory" or not at all.

B. The Trial Court Abused its Discretion in Finding that Appellants Did Not "Succeed" Under the "Catalyst" Theory

1. The Trial Court Applied the Wrong Legal Standards

Appellants also contend it was an abuse of discretion to find they were not successful under the catalyst theory, which permits the award of fees "even when the litigation does not result in a judicial resolution if the defendant changes its behavior substantially because of, and in the manner sought by, the litigation." (City of Yucaipa, supra, 238 Cal.App.4th at p. 521.) To show "success" under this theory, appellants must establish that "(1) the lawsuit was a catalyst motivating the defendants to provide the primary relief sought; (2) that the lawsuit had merit and achieved its catalytic effect by threat of victory, not by dint of nuisance and threat of expense . . .; and (3) that the plaintiffs reasonably attempted to settle the litigation prior to filing the lawsuit." (Tipton-Whittingham v. City of Los Angeles (2004) 34 Cal.4th 604, 608.)

To show that Epstein was a "catalyst" for relief, appellants must show that the lawsuit motivated the State to provide the "primary relief sought," i.e., to abandon the sale of the Golden State Portfolio. (Graham, supra, 34 Cal.4th at p. 567.) Importantly, the lawsuit need not be the exclusive motivator, only a substantial factor in the State's decision. (Hogar Dulce Hogar v. Community Development Com. of City of Escondido (2007) 157 Cal.App.4th 1358, 1365 (Hogar); City of Yucaipa, supra, 238 Cal.App.4th at p. 522.)

A moving party need not provide direct evidence of the defendants' motivations for voluntarily providing the primary relief sought. Rather, the movant may establish an inference of catalyst causation by showing that the defendant's decision to voluntarily provide the relief sought occurred after the filing of plaintiff's suit. (Hogar, supra, 157 Cal.App.4th at p. 1366; City of Yucaipa, supra, 238 Cal.App.4th at p. 522.) "When action is taken by the defendant after plaintiff's lawsuit is filed the chronology of events may permit the inference that the two events are causally related." (Californians for Responsible Toxics Management v. Kizer (1989) 211 Cal.App.3d 961, 968 (Kizer).)

The burden then shifts to the responding party to rebut the inference. (Kizer, supra, 211 Cal.App.3d at p. 968; see also City of Yucaipa, supra, 238 Cal.App.4th at pp. 522-523.) In Graham, the Supreme Court observed "the defendant in such cases knows better than anyone why it made the decision that granted the plaintiff the relief sought, and the defendant is in the best position to either concede that the plaintiff was a catalyst or to document why the plaintiff was not." (Graham, supra, 34 Cal.4th at p. 573.) Accordingly, to overcome the inference of causation, the defendant must present "convincing contemporaneous evidence" to show that the lawsuit was not a substantial factor in its decision to provide the relief sought. (MacDonald v. Ford Motor Co. (N.D. Cal. 2015) 142 F.Supp.3d 884, 894.) Such evidence, "if credible," may suffice to rebut the presumption of causation raised solely by the chronology of events. (Kizer, supra, 211 Cal.App.3d at p. 969; see Cates v. Chiang (2013) 213 Cal.App.4th 791, 809-810 (Cates) [trial court had reasonable basis to reject declarant's assertions that lawsuit had nothing to do with commission's changes in policies and substantial monetary recovery].)

In support of their motion below, appellants submitted undisputed evidence that the Epstein actions sought to stop the sale of the Golden State Portfolio, generally, and specifically to enjoin the pending sale to California First. After the complaints were filed and with appellants' writ petition still pending, the State cancelled its plans to sell the Golden State Portfolio. Shortly thereafter, DGS's declarant confirmed that the State had no plans to negotiate a sale with any other purchaser. This straightforward chronology establishes an inference the Epstein matters were at least a "substantial factor" in the state's decision to abandon the sale-leaseback concept, including the sale to California First. As such, the burden shifted to the State to produce evidence of its motivations for abandoning the sale-leaseback concept, including the transaction with California First. (City of Yucaipa, supra, 238 Cal.App.4th at pp. 522-523; Graham, supra, 34 Cal.4th at pp. 567, 573.)

In opposition to the motion, however, the State provided no evidence of its motivations for abandoning the sale. Rather, it argued that appellants had provided no evidence of causation, an argument reiterated on appeal and echoed in the related contention that appellants "erroneously attempt[] to reverse the burden of proof on the fee motion." The State's sole authority, Ketchum v. Moses (2001) 24 Cal.4th 1122, 1138, concerns the amount of fees, not entitlement to fees, in a non-catalyst case under the anti-SLAPP statute. Thus, if any party has erroneously attempted to reverse the burden of proof, it is the State.

In addition to arguing that appellants did not satisfy their moving burden, the State argued, below and on appeal, that the transaction never would have occurred because California First lacked the necessary financing. The trial court agreed, characterizing as "very important" its view that "California First would never have been able to accomplish this deal."

In ruling that California First's financing issues inevitably would have led to the same result, the court applied the wrong legal standard. (City of Sacramento v. Drew (1989) 207 Cal.App.3d 1287, 1300-1302 & fn. 4 (Drew).) In Drew, the court of appeal considered and rejected the contention that the legal result was "inevitable" and thus, could not have been caused by the movant's legal action, calling the argument "not legally cognizable." (Ibid.) The court also observed that an "inevitability" test would undermine fundamental policy reasons for the catalyst theory, particularly where, in the interim, the defendant has vigorously defended against the movant's claims. (Ibid. [where defendant tenaciously defends lawsuit, "inevitability" rule contravenes the very policies supporting private attorney general fees]; see also City of Santa Monica v. Stewart (2005) 126 Cal.App.4th 43, 87-89 [legal error to deny private attorney general fees to intervenor based upon after-the-fact assessment that plaintiff would have achieved same result without intervenor's assistance; application of such a rule undermined incentive to bring meritorious public interest litigation].)

Like the defendant in Drew, supra, 207 Cal.App.3d 1287, the State vigorously defended the lawsuit and, for several critical weeks, failed to disclose that California First had failed to deposit earnest monies. Likewise, as in City of Santa Monica, supra, 126 Cal.App.4th 43, recognizing "inevitability" as an independent intervening cause to vitiate appellants' inference of causation would undermine an important policy objective of section 1021.5 to file meritorious public interest litigation. As such, we conclude the trial court applied the wrong legal rule and in so doing, abused its discretion. (Robinson, supra, 202 Cal.App.4th at p. 391.)

In light of our finding that an independent intervening cause is not a cognizable theory for rebutting an inference of catalyst causation, we need not reach appellants' related contentions, including that the trial court based its ruling upon inadmissible evidence from the coordinated action and/or evidence that was not in the record. Nor need we address the question of whether the evidence that was in the record (the declarations of DGS employees, the purchase and sale agreement, and the deposition testimony of California First's lead investment banker) would have been sufficient to establish an independent intervening cause for the cancellation of the sale.

2. Under the Correct Legal Standard, the State Bore the Burden of Rebutting Appellants' Inference and Failed to Do So

As we have explained, an inference of causation may be rebutted by contemporaneous evidence of the defendant's actual motivations, independent of the lawsuit, for voluntarily providing relief. (See, e.g., City of Yucaipa, supra, 238 Cal.App.4th at p. 522.) In response to the fee motion, the State failed to provide any direct evidence documenting the State's reasons for abandoning the sale. The only record evidence of the State's motivations was Governor Brown's announcement, which echoed the LAO's analysis and appellants' arguments that the proposed transaction would constitute a waste of public funds.

While the Governor's press release did not mention the litigation, that silence alone was insufficient to rebut the inference of causation raised by the chronology of events. We recognize that the State's argument that Governor Brown independently decided to abandon the sale of the Golden State Portfolio, based solely upon the new governor's belief that he had a better solution to the State's budget crisis than his predecessor, may have merit. However, the State bore the burden of presenting credible evidence on that point, which it failed to do. (Hogar, supra, 157 Cal.App.4th at p. 1364 [agency's contention that plaintiff's complaint did not cause it to alter its allocation of payment to housing fund not supported by record evidence]; cf. City of Yucaipa, supra, 238 Cal.App.4th at pp. 522-523 [city council minutes and agenda report reflected that motivation for revoking land use entitlements for project was abandonment of project due to contract dispute between shopping center developer and property owner, not CEQA litigation]; Kizer, supra, 211 Cal.App.3d at pp. 968-969 [Department of Health Services submitted declarations as to reasons it entered into consent decrees, which were unrelated to institution of suit].)

As a practical matter, the State relied primarily upon (and the trial court accepted) evidence of California First's financing difficulties - which the State concedes it did not discover until many months after Governor Brown had already announced the State's decision to cancel the transaction, through discovery in the specific performance action. We fail to see how information that was admittedly unknown to the State when it cancelled the transaction could possibly have motivated that decision.

The trial court may also have relied upon declarations by DGS employees that they were aware, in November and December 2010, that California First had missed escrow payments. However, these officials merely averred that the State was aware that California First failed to make timely escrow deposits. They said nothing about whether the tardy payments motivated the State to cancel the transaction with California First. In addition, in opposing the fee motion below, the State never argued that the missed escrow payments motivated it to abandon the sale; rather, it only contended that the defaults were a necessary predicate to cancellation. Perhaps most importantly, after learning of the missed payments, the State acted as if they were no impediment, vigorously defending appellants' claims and imploring the courts to allow the deal to go forward.

Because the State presented no evidence of its motivations to cancel the transaction, appellants' inference went unrebutted and the trial court's finding that catalyst causation was lacking constituted an abuse of discretion. (Robinson, supra, 202 Cal.App.4th at p. 391 [decision constitutes an abuse of discretion if it has no reasonable basis]; Western Digital Corp. v. Superior Court (1998) 60 Cal.App.4th 1471, 1488 (Western Digital) [under abuse of discretion standard, court of appeal does not weigh evidence, but where there is no evidence to support a finding, it may intervene]; Lyons v. Chinese Hospital Assn. (2006) 136 Cal.App.4th 1331, 1349 (Lyons) [where evidentiary record permitted only one conclusion, contrary finding warranted reversal under abuse of discretion standard].)

Contrary to the State's argument, City of Yucaipa, supra, 238 Cal.App.4th 513, is not "almost precisely on point." There, the defendant presented specific, direct, and contemporaneous evidence establishing that it decided to abandon a project, which had been challenged in CEQA litigation, for reasons that were entirely independent of the litigation. (City of Yucaipa, at pp. 522-523.) After considering city staff's recommendation not to proceed with a development project due to the lack of any backing by a developer and/or purchaser, the City Council voted to revoke certain land use entitlements for a project. (Ibid.) The record here reflects no comparable, contemporaneous evidence documenting the State's motivations for dropping the sale, let alone evidence that something other than Epstein was the sole and independent motivation. (See Cates, supra, 213 Cal.App.4th at p. 808 [requiring deference to trial court's causation decision "if there is any reasonable basis in the record to support" it].)

C. On this Record, Appellants' Claims Were Not Frivolous as a Matter of Law

Under the catalyst theory, fees may only be awarded for results that are achieved " 'by threat of victory, not by dint of nuisance and threat of expense.' " (Graham, supra, 34 Cal.4th at p. 575.) Thus, a fee applicant must show that their claims were not " 'frivolous, unreasonable or groundless.' " (Ibid.) "The determination the trial court must make is not unlike the determination it makes when asked to issue a preliminary injunction, i.e., not a final decision on the merits but a determination at a minimum that ' "the questions of law or fact are grave and difficult." ' [Citing authorities.]" (Id. at pp. 575-576.)

Seizing on Graham's comment that the merit determination is "not unlike" the merits inquiry facing an application for preliminary injunction, the State argued below that the trial court need only look to Judge Woolard's order denying preliminary injunctive relief to determine this lawsuit lacked "merit" for catalyst purposes. (Graham, supra, 34 Cal.4th at pp. 575-576.) This contention overlooks the important principle that, in the preliminary injunction setting, the required showing on the merits varies, depending upon the party's showing of interim harm. (See, e.g., O'Connell v. Superior Court (2006) 141 Cal.App.4th 1452, 1463 ["[t]he trial court's determination must be guided by a 'mix' of the potential-merit and interim-harm factors; the greater the plaintiff's showing on one, the less must be shown on the other to support an injunction"].) The Graham court adopted only the minimum showing required of a movant who has demonstrated a strong likelihood of interim harm, i.e., that the fee applicant's claims at least present "grave and difficult" questions of law or fact, and are not "nuisance" claims. (Graham, supra, 34 Cal.4th at pp. 575-576.)

As noted earlier, the trial court adopted all of the State's arguments as a basis for its ruling.

However, Judge Woolard's order denying preliminary injunctive relief did not utilize the minimum standard enunciated in Graham, supra, 34 Cal.4th 553. That order deemed appellants' showing of "interim harm" to be very weak and appropriately applied a more stringent standard, finding appellants were "unlikely to prevail on the merits." Therefore, in relying on Judge Woolard's merits findings as a basis for denying the fee motion, the trial court utilized the wrong merits standard, one that was too demanding. This was an abuse of discretion. (Robinson, supra, 202 Cal.App.4th at p. 391.)

Here, the court was obligated to independently determine whether appellants' claims were "frivolous, unreasonable, or groundless." (Graham, supra, 34 Cal.4th at p. 575.) On this record, we have no trouble finding that at least some of appellants' claims exceeded this lenient standard as a matter of law. (Id. at p. 576 [discussing factual record needed to conduct merits evaluation]; Peake v. Underwood (2014) 227 Cal.App.4th 428, 440 [a legal argument " 'not warranted by existing law or a good faith argument for the extension, modification, or reversal of existing law' " is frivolous].)

First, the trial court impliedly adopted Judge Woolard's conclusion that appellants lacked standing to obtain a preliminary injunction on their taxpayer claims. However, the catalyst theory does not turn on the merits of a request for (or standing to seek) preliminary injunctive relief. Further, the authority cited in Judge Woolard's order expressly holds that while a plaintiff alleging only harm to his pocketbook as a taxpayer may not be able to show the irreparable harm needed to obtain interim relief, such a plaintiff has standing to pursue permanent injunctive relief after a trial on the merits. (White v. Davis (2003) 30 Cal.4th 528, 555-557.) Appellants sought preliminary and permanent injunctive relief.

Further, we cannot say that appellants' construction of Government Code section 69204 (which confers at least some authority on the Judicial Council over state appellate court facilities) and Government Code section 14670.13, subdivision (a) (the enabling statute), was frivolous. Certainly, this claim presented "grave and difficult" legal questions. And appellants' argument that the two statutes should be construed in harmony (to authorize DGS to sell certain buildings, subject to Judicial Council approval) is premised upon accepted legal principles. (See, e.g., Western Oil & Gas Assn. v. Monterey Bay Unified Air Pollution Control Dist. (1989) 49 Cal.3d 408, 419 [reciting applicable standard for repeal by implication]; Peake v. Underwood, supra, 227 Cal.App.4th at p. 440 [legal claim based upon existing law or good faith argument for extension thereof not frivolous]; Guillemin v. Stein (2002) 104 Cal.App.4th 156, 168 [abuse of discretion to find legal argument frivolous when it was at least "arguable"].)

Similarly, appellants' "gift of public property" claim is predicated on the unexplained rush to close the transaction long before the close of the fiscal year, using a bid evaluation process that was (according to the LAO) unusually opaque and subjective. This constitutes a cognizable attack on the reasonableness or legitimacy of the stated "public purpose" for the transaction, and is distinct from the "adequacy of consideration" issue raised by the State. (County of Alameda v. Janssen (1940) 16 Cal.2d 276, 281 [public purpose will be upheld so long as it has a "reasonable basis"]; Irwin v. City of Manhattan Beach (1966) 65 Cal.2d 13, 24 [construing former gift clause, public entity's finding of "public interest" is reviewable by a court where it is alleged that fraud, oppression, or manifest abuse of discretion accompanied the determination].) Thus, it was an abuse of discretion to find that appellants' claims were frivolous, unreasonable or groundless.

D. Although Appellants Failed to Engage in Pre-filing Settlement Negotiations, All of the Evidence Demonstrates Such Efforts Would have been Futile

In order to recover attorney fees under a catalyst theory, a plaintiff "must first reasonably attempt to settle the matter short of litigation." (Graham, supra, 34 Cal.4th at p. 577.) As our Supreme Court explained in Graham, "Awarding attorney fees for litigation when those rights could have been vindicated by reasonable efforts short of litigation does not advance that objective and encourages lawsuits that are more opportunistic than authentically for the public good. Lengthy prelitigation negotiations are not required, nor is it necessary that the settlement demand be made by counsel, but a plaintiff must at least notify the defendant of its grievances and proposed remedies and give the defendant the opportunity to meet its demands within a reasonable time." (Ibid.)

There can be no dispute that appellants did not demand, or attempt to negotiate, settlement before filing their actions. However, as we explain, the record evidence conclusively demonstrates that such efforts would have been futile, and were thus excused under Cates, supra, 213 Cal.App.4th 791.

Appellants contend that they tried to settle the dispute before filing this action by requesting information about the financial impact of the sale. A mere request for information, however, does not constitute a prelitigation demand. (Cf. Graham, supra, 34 Cal.4th at p. 577 ["a plaintiff must at least notify the defendant of its grievances and proposed remedies and give the defendant the opportunity to meet its demands within a reasonable time"].)

In Cates, the trial court ruled that the plaintiff's pre-litigation complaints were not sufficiently specific and timely; however, because defendants had consistently and strongly denied any obligation to change their conduct after plaintiff filed her lawsuit, the trial court inferred that pre-litigation settlement efforts would have been futile. (Cates, supra, 213 Cal.App.4th at p. 815.) The court of appeal affirmed, in part because, after the filing of the case, the defendant "continued to strongly assert that its practices were appropriate..." and there was no evidence "that the [defendant] would have agreed to change its procedures in response to a prelitigation settlement offer or that negotiating with the [defendant] was a reasonable alternative to the lawsuit." (Id. at p. 816.) It also relied upon the trial court's finding (unchallenged below) that the suit was not brought for "improper motivation, such as to obtain attorney fees." (Ibid.) Finally, it observed that, "before filing its answer, the [defendant] had the full opportunity to negotiate an end to the lawsuit by providing the relief sought" but made it clear it would not do so. (Ibid.) Under such circumstances, the Court of Appeal held "it would be contrary to the language of section 1021.5 . . . to bar Cates from recovery based solely on her failure to provide a timely prelitigation demand letter." (Ibid.)

This case is on all fours. The record contains no evidence to support a conclusion that settlement negotiations would have borne any fruit whatsoever, and ample evidence that such efforts would have wasted precious time and potentially deprived appellants of their right to challenge the sale. Before the complaint was filed, in response to requests for information and public expressions of dissent by members of the San Francisco and Los Angeles Building Authorities (including appellants), the State did not provide the requested information or engage in any discussion about the issues; instead, Governor Schwarzenegger summarily dismissed the dissenting/inquiring members from their posts.

More importantly, once Epstein was filed, the State's defense of the action was relentless and vigorous: It opposed the issuance of a temporary restraining order and the request for a preliminary injunction, sought expedited relief from orders issued by the Court of Appeal, sought the imposition of a bond, requested expedited briefing, and filed a petition for extraordinary relief from our Supreme Court. The State's written filings did not just argue that appellants' contentions lacked merit; they conveyed its unwavering desire to close the transaction as soon as possible.

We also note a complete absence of any evidence that the State would have been willing to compromise on any issue or modify the transaction in any fashion.

As in Cates, there was no allegation that the State was "sandbagged" by trivial or insufficient notice. (Cates, supra, 213 Cal.App.4th at p. 814.) The State was well aware of likely opposition and proactively sought to neutralize it, necessitating swift legal action. This case also involves an aggravating factor not present in Cates: extreme exigency caused by the impending closing date. (Cates, supra, 213 Cal.App.4th at p. 796 [action to collect past due gambling revenues from various Indian tribes].)

As the Supreme Court observed in Graham, what constitutes reasonable pre-litigation settlement efforts "will depend upon the context." (Graham, supra, 34 Cal.4th at p. 577.) "[T]he rule should not be applied blindly without any consideration of whether the demand would have made any difference in the need for the lawsuit . . . ." (Cates, supra, 213 Cal.App.4th at p. 817.) Here, all of the evidence affirmatively demonstrates that settlement negotiations would have been futile, and there is none from which one could reasonably conclude that such negotiations would have been fruitful. Accordingly, the implied finding that pre-filing settlement efforts were required, not futile, constitutes an abuse of discretion. (Western Digital, supra, 60 Cal.App.4th at p. 1488 [abuse of discretion where there is no evidence to support factual finding]; Lyons, supra, 136 Cal.App.4th at p. 1349 [evidence reasonably led to only one conclusion; contrary finding is abuse of discretion].)

E. The Lawsuits Enforced an Important Right Affecting the Public Interest

The trial court impliedly adopted the State's argument that this action did not enforce an important right affecting the public interest because this element is not satisfied unless defendant's " 'conduct adversely affected the public interest.' " (Adoption of Joshua S. (2008) 42 Cal.4th 945, 958 (Joshua S.).)

At the outset, we note that Joshua S. "recognized an exception to be applied in cases where all three [section 1021.5] factors are satisfied, but the party from whom fees are sought 'is not the type of party on whom private attorney general fees were intended to be imposed.' " (Serrano v. Stefan Merli Plastering Co., Inc. (2011) 52 Cal.4th 1018, 1027, citing Joshua S., supra, 42 Cal.4th at p. 953.) As we recently observed, the "important public right" question does not require a showing on the merits, nor is it the substantial equivalent of the Joshua S. exception. (In re Butler (2015) 236 Cal.App.4th 1222, 1232 [characterizing as "misguided" the argument that a fee applicant must demonstrate that the defendant's practice " 'was unlawful or violated a public right' " or had an adverse impact on a public right under Joshua S., as Joshua S. did not address "important public right" element], reversed on other grounds, In re Butler (2018) 4 Cal.5th 728.)

In any event, Joshua S.'s exception does not bar an award of fees in this case, as appellants alleged that DGS's sale/leaseback proposal would directly and adversely affect the public fisc. (Serrano v. Stefan Merli Plastering Co., Inc., supra, 52 Cal.4th at p. 1021 [Joshua S. exception not applicable where plaintiffs challenged unlawful fees charged by a court reporting service as harmful to the public interest].)

The pertinent question is "whether there was an important public interest at stake." (Beasley v. Wells Fargo Bank (1991) 235 Cal.App.3d 1407, 1417, overturned on other grounds in Olson v. Automobile Club of Southern California (2008) 42 Cal.4th 1142.) This "merely calls for an examination of the subject matter of the action - i.e., whether the right involved was of sufficient societal importance." (Ibid.) It does not require a showing of the merits of appellants' claims. (In re Butler, supra, 236 Cal.App.4th at 1232.)

Rights of sufficient "societal importance" include those enshrined in the constitution or "important" statutes. (Woodland Hills Residents Assn., Inc. v. City Council (1979) 23 Cal.3d 917, 935 (Woodland Hills).) By filing this action, appellants sought to vindicate constitutional claims, including their allegations that the sale/leaseback transaction constituted an unconstitutional gift of public goods and the legislature's delegation of authority to DGS was unconstitutionally broad. (See, e.g., Harbor v. Deukmejian (1987) 43 Cal.3d 1078, 1103 ["enforcement of an important right affecting the public interest," for purposes of private attorney general fees, includes clarification of constitutional principles].) They also alleged that the failure to obtain Judicial Council approval for the sale was inconsistent with the Council's statutory authority over state appellate court facilities under the Trial Court Funding Act. As one of the stated goals of the Act is to "enhance[] economical, efficient, and effective court operations" (Sen. Bill No. 1732 (2001-2002 Reg. Sess.) § 1(c)(2)), clarification or enforcement of the Judicial Council's authority under the statute serves to promote important public rights. (See Baggett v. Gates (1982) 32 Cal.3d 128, 143 [lawsuit enforcing officers' rights under Public Safety Officers Procedural Bill of Rights Act (Gov. Code, § 3300 et seq.) promoted effective law enforcement and therefore vindicated important rights affecting the public interest]; Los Angeles Police Protective League v. City of Los Angeles (1986) 188 Cal.App.3d 1, 12 [abuse of discretion to conclude that lawsuit did not vindicate important public rights where it effectively ensured the enforceability of decisions made by a wide variety of municipal agencies, commissions and boards].)

As a result of the State's decision to abandon the concept of a sale-leaseback, all of the foregoing public rights were effectively vindicated. (Woodland Hills, supra, 23 Cal.3d at p. 938 [in this inquiry, the court "must realistically assess the litigation and determine, from a practical perspective, whether or not the action served to vindicate an important right"].) We do not see how a trial court could reasonably conclude otherwise. (Robinson, supra, 202 Cal.App.4th at p. 391.)

F. Appellants Conferred a Significant Benefit on the General Public

Finally, appellants contend the trial court abused its discretion by accepting the State's contention that Epstein did not confer a significant benefit on the public. This inquiry turns on "whether the litigation has had a beneficial impact on the public as a whole or on a group of private parties which is sufficiently large to justify a fee award." (Beasley, supra, 235 Cal.App.3d at p. 1417.) Accordingly, it requires that "the benefit provided by the litigation inures primarily to the public." (Ibid., italics added; see also Marini v. Municipal Court (1979) 99 Cal.App.3d 829, 836.)

The trial court implicitly adopted the State's arguments that there was no significant benefit to the public because the enabling statute, Government Code section 14670.13, "remains on the books," so that a future administration could proceed with a similar sale. However, this argument conflates the question of who stands to benefit (primarily the public, or private parties) with the distinct question of whether sufficiently important rights are at stake. Similarly, the court implicitly adopted the State's argument against considering the cancellation's substantial monetary benefits to State taxpayers because "Plaintiffs are not responsible for conferring this benefit." Again, this argument confuses the "public benefit" question with the catalyst question. Both of these arguments invited the trial court to apply the wrong legal standard, which constitutes an abuse of discretion. (Robinson, supra, 202 Cal.App.4th at p. 391.)

We also observe that the Executive Branch (to whom the enabling statute delegated the power to sell) affirmatively abandoned any plans to utilize its authority (in 2011 or in the future) to sell the Golden State Portfolio, and admitted that abandoning the sale-leaseback promised to save the public billions of dollars over the next 35 years. In any event, the fact that the future fate of the Golden State Portfolio is unknown is immaterial. (Center for Biological Diversity v. County of San Bernardino (2010) 185 Cal.App.4th 866, 893-895 [litigation successfully halting development of an open-air human waste composting facility because of failure to comply with CEQA resulted in public benefit, even though the ultimate fate of the project was unknown].)

Here, the pertinent question was whether the lawsuit primarily benefitted private litigants, on one hand, or a large group of people or the public, on the other. (Beasley, supra, 235 Cal.App.3d at p. 1418.) All of the evidence points to the latter. Appellants sued as taxpayers, to prevent harm to all California taxpayers by preserving the public fisc and ensuring that various state agencies complied with their constitutional and statutory obligations. The injunctive and declaratory relief they demanded would ostensibly inure in similar fashion to all Californians. And none of the allegations suggest that appellants had any significant, unique personal interest in this litigation.

Mr. Casper's complaint in intervention cited his interest as a taxpayer and harm to his reputational interest as a result of having his appointment with the San Francisco State Building Authority terminated. If anything, Casper's interest was incidental to the benefits this lawsuit conferred on California taxpayers. (Compare Flannery v. California Highway Patrol (1998) 61 Cal.App.4th 629, 637 [criteria not met where the "primary effect" of plaintiff's lawsuit alleging harassment and wrongful termination in violation of FEHA "was the vindication of her own personal right and economic interest," not the interests of others] with Robinson, supra, 202 Cal.App.4th at p. 400 [suggesting "the fact the primary effect of the action was to vindicate a plaintiff's personal economic interests does not foreclose an award of attorney fees" so long as a significant benefit is conferred on the public or large class of persons].) In any event, in August 2011, Mr. Casper passed away and was replaced by Mr. Manzon Santos, who alleges no unique personal interest in the litigation.

In sum, there is nothing in the record to suggest that the State's decision to cancel the sale resulted in any rights unique to any appellant. Nor has the State identified, or pointed to evidence of, any such interest. (Drew, supra, 207 Cal.App.3d at p. 1305 [preventing the unlawful levy of almost $7.5 million in assessments on residential properties constituted a "significant benefit" to a large class of persons where individual stake of $920 was proportionate]; Northwest Energetic Services, LLC v. California Franchise Tax Bd. (2008) 159 Cal.App.4th 841, 876-877 [public benefit sufficient where judgment declaring statute unconstitutional benefitted plaintiff LLC, but would also permit LLCs to seek at least $150 million in refunds].) Accordingly, to the extent the trial court may have concluded that the benefits conferred by this litigation inured primarily to appellants, not the public, this was an abuse of discretion. (Western Digital, supra, 60 Cal.App.4th at p. 1488 [lack of any evidence to support factual finding]; Lyons, supra, 136 Cal.App.4th at p. 1349 [reversal appropriate under abuse of discretion standard where evidence led to only one conclusion].)

IV. DISPOSITION

We conclude that in the circumstances presented, the trial court abused its discretion in denying appellants' request for attorneys' fees under the "catalyst theory," as affirmed and explained in Graham v. DaimlerChrysler Corp. (2004) 34 Cal.4th 553. We therefore remand to the trial court to determine the amount of fees to which appellants are entitled. We express no opinion on the reasonableness of the fees requested.

Appellants are entitled to their attorneys' fees and costs on appeal. (Conservatorship of Whitley, supra, 50 Cal.4th at p. 1226, fn. 5 [entitlement to attorneys' fees for work necessary to recover those fees, including on appeal]; Lyons, supra, 136 Cal.App.4th at p. 1356 [same]; Cal. Rules of Court, rule 8.278(a)(1) [costs].)

/s/_________

Schulman, J. We concur: /s/_________
Reardon, J. /s/_________
Streeter, Acting P.J.

Judge of the Superior Court of California, City and County of San Francisco, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution. --------