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In Habitat and Watershed Caretakers v. City of Santa Cruz (H040762, Oct. 6, 2015), the petitioner successfully challenged the trial court’s application of a negative multiplier to its fees on the merits and a “downward adjustment” to its fees for the fee litigation. The Sixth District Court of Appeal held that the trial court abused its discretion and consequently reversed and remanded the case for further proceedings.

After a partial success in litigation regarding the City of Santa Cruz’s EIR to amend the City’s sphere of influence to include an undeveloped portion of UC Santa Cruz, petitioner had sought $486,800 in merit fees for 837.3 hours of attorney time, with hourly rates ranging from $300 per hour for its associates to $750 per hour for its lead attorney. Petitioner also sought compensation for an additional 131.8 hours of attorney time for the fees litigation. The trial court did not take issue with the hourly fees or the number of hours billed, finding both to be reasonable. However, because the result achieved was only “a 50 percent success,” the trial court had adjusted the merit fee downward by half to reflect petitioner’s “partial success in litigation.” The trial court also reduced the fee for the fees litigation by 60 percent because the City and UC Regents “did not create any extraordinary difficulties in this case.”

On appeal, the City and UC Regents challenged the trial court’s calculation of the lodestar and petitioner challenged the negative downward adjustment.

The Court of Appeal upheld the trial court’s determination that the lodestar was reasonable because local counsel was unavailable; the hourly rates were within the range of market rates for attorneys of comparable experience in the San Francisco Bay Area; and the case was taken on a contingency fee basis. The Court was unpersuaded by the City and UC Regent’s argument that the Bay Area rates were not limited to environmental attorneys and that the lead attorney had submitted no evidence that he had ever charged or been awarded fees at a rate of $750 per hour. The Court held that the purpose of the private attorney general statute is to provide adequate financial incentive to encourage attorneys to take on the litigation, and thus “no valid comparison can be made between public interest attorneys who work on a contingent fee basis and land use defense attorneys who can expect timely recompense for all of their work regardless of the outcome of the litigation.”

The Court then held that the trial court had abused its discretion by applying negative downward adjustments to petitioner’s merit fees. A negative adjustment based on a “partial success” theory is only appropriate if the petitioner did not achieve their requested relief. In other words, it is the result that matters, not the outcome on individual theories. Here, petitioner had achieved both of its objectives because the City was required to vacate its certification of the EIR and its approval of the project. In regard to the fee for the fee litigation, the Court held that the trial court abused its discretion by reducing the amount by 60 percent due to defendant’s compliance, finding that fees for fee litigation may be enhanced due to the defendant creating difficulties but not reduced due to compliance.

Key Point:

When calculating the lodestar, the court looks at the attorney’s legal market (not the market where the case originates) and does not limit its review to the attorney’s specialty or what that particular attorney has charged in the past. Higher attorney’s fees can be requested when the work was done on a contingency basis.

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