Filed 11/22/19 Hobbs Construction, Inc. v. Dept. of Industrial Relations CA4/1

NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.

COURT OF APPEAL, FOURTH APPELLATE DISTRICT

DIVISION ONE

STATE OF CALIFORNIA

HOBBS CONSTRUCTION, INC.,

Plaintiff and Respondent,

v.

DEPARTMENT OF INDUSTRIAL RELATIONS, DIVISION OF LABOR STANDARDS ENFORCEMENT et al.,

Defendants and Appellants.

D074385

(Super. Ct. No. 37-2017-00036419-CU-MC-CTL)

APPEAL from an order of the Superior Court of San Diego County, Kenneth J. Medel, Judge. Reversed.

David D. Cross and Lance A. Grucela for Defendants and Appellants.

Finch, Thornton & Baird and Chad T. Wishchuk for Plaintiff and Respondent.

I
II
INTRODUCTION

Hobbs Construction, Inc. (Hobbs) obtained a writ of mandate against the Division of Labor Standards Enforcement (Division), the Department of Industrial Relations (DIR), and former DIR director Christine Baker (collectively, appellants) compelling them to set aside a $149,200 civil wage and penalty assessment imposed against Hobbs for alleged violations of the Prevailing Wage Law (Lab. Code, § 1720 et seq.). Thereafter, the trial court awarded Hobbs $53,165.95 in attorney fees under Code of Civil Procedure section 1021.5, the private attorney general attorney fee statute.

Appellants challenge the attorney fee order on grounds that Hobbs did not satisfy its burden of establishing that the writ proceeding conferred a significant benefit on the general public or a large class of persons. Alternatively, they claim the order was improper because the cost of Hobbs’s legal victory did not transcend its personal interest in the litigation. We conclude there is merit to both arguments. Therefore, we reverse.

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IV
BACKGROUND

A
B
In 2014, Hobbs entered into a contract with the City of Tracy to provide construction services for park renovations. While construction was ongoing, the Division received a complaint indicating Hobbs may have underpaid at least one of its employees who worked on the project. Therefore, it issued requests for payroll records to Hobbs demanding, among other documents, original time cards for all work performed on the project. The Division issued its requests under Labor Code section 1776, subdivision (b), which requires public works contractors to furnish or make available certified copies of payroll records upon request, and Code of Regulations, title 8, section 16000, which defines payroll records to include time cards. Hobbs produced several categories of documents in response to the Division’s requests, but not original time cards.

The Division issued a $149,200 civil wage and penalty assessment against Hobbs under Labor Code section 1776, subdivision (h), based on Hobbs’s failure to produce original time cards. Hobbs sought administrative review of the assessment and, following an administrative hearing, the Director of the DIR affirmed the assessment. The Director found the assessment was warranted after concluding the Division was statutorily authorized to request original time cards from covered contractors, the Division “had a valid need for … time cards to check the accuracy” of Hobbs’s payments to its workers, and Hobbs failed to produce the original time cards as requested.

C
D
In 2017, Hobbs filed a petition for writ of mandate against appellants, requesting vacatur of the administrative decision and an injunction prohibiting imposition of the challenged assessment. Hobbs contended Labor Code section 1776 did not authorize the Division to request original time cards from public works contractors and the Division thus acted without or in excess of its jurisdiction by requesting original time cards from Hobbs and levying an assessment against Hobbs for not producing original time cards.

The trial court granted the petition for writ of mandate. It reasoned that appellants did not proceed in a manner required by law because, under Labor Code section 1776, the Division may assess penalties only when a public works contractor fails to produce or make available certified copies of payroll records and, in the present case, Hobbs provided all certified payroll records requested by the Division. The court opined that “[t]o the extent the [administrative] regulations expand[ed] the definition of payroll records” for which a penalty may be assessed to include uncertified payroll records, the regulations “would be inconsistent with Labor Code Section 1776.” Therefore, the court declared the assessment “unwarranted” and vacated the administrative decision.

E
F
Based on its litigation success, Hobbs filed a motion seeking an award of attorney fees against the Division and the DIR pursuant to section 1021.5. Hobbs asserted its challenge to the assessment and the administrative decision conferred a significant benefit on the public because the Division had purportedly levied similar improper assessments “against other public works contractors and sub-contractors throughout the state.” According to Hobbs, the writ of mandate issued in the present case stood “in the way” of the Division’s alleged efforts to impose these invalid assessments. Further, Hobbs contended the necessity and financial burden of private enforcement were such as to make an award appropriate because Hobbs “carried a heavy financial burden” in seeking a writ of mandate and “received no personal benefit in the form of affirmative damages.” Hobbs requested $53,165.95 in fees, which it incurred in connection with its response to the assessment, the administrative appeal, and the petition for a writ of mandate.

As the basis for its claim the Division levied improper assessments “in other cases and against other contractors,” Hobbs cited an administrative decision, In re Ornelas Enterprises, Inc. dba Ornelas Electric Construction, Pub. Works Case No. 2015-0240, October 31, 2016 (Ornelas), in which the Division requested payroll records from a public works subcontractor, including worker time cards, and the Director of the DIR affirmed an assessment against the subcontractor for failing to produce the requested records. Hobbs also filed a request for judicial notice of a spreadsheet it received from the Division in response to a Public Records Act request, which reflected all civil wage and penalty assessments imposed by the Division since January 1, 2013. The spreadsheet stated the case number, contractor and subcontractor name(s) and address(es), project name, and assessment amount for 360 cases. It did not indicate which payroll records were requested, which documents were produced, or the bases for the assessments in any of the listed cases.

The Division and the DIR opposed Hobbs’s motion for attorney fees on grounds that Hobbs filed the action to protect its own pecuniary interests and, furthermore, the action did not confer a significant benefit on the general public or a large class of persons. As to the latter argument, they claimed Hobbs did not establish the Division had a pattern or practice of levying assessments against public works contractors for failing to produce uncertified “backup” documents. In particular, they argued the spreadsheet for which Hobbs sought judicial notice included “no proof or analysis showing that any of the[] other cases involved a request for anything other than certified payroll records.” Further, they claimed the writ issued in the present case had no precedential value and thus did not benefit any public works contractor other than Hobbs.

The trial court granted the motion, without making any express factual findings, and issued Hobbs an attorney fee award in the requested amount. Appellants appeal the order granting the motion for attorney fees.

V
VI
DISCUSSION

A
B
” ‘[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.’ ” (Conservatorship of Whitley (2010) 50 Cal.4th 1206, 1217 (Whitley).) Section 1021.5 “is an exception to the general rule in California, commonly referred to as the American rule and codified in section 1021, that each party to a lawsuit must ordinarily pay his or her own attorney fees.” (Adoption of Joshua S. (2008) 42 Cal.4th 945, 954.) Its objective 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.’ ” [Citation.] The [private attorney general attorney fee] 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.’ ” (Whitley, at pp. 1217–1218.)

“A court may award attorney fees under section 1021.5 only if the statute’s requirements are satisfied. Thus, a court may award fees only to ‘a successful party’ and only if the action has ‘resulted in the enforcement of an important right affecting the public interest ….’ [Citation.] Three additional conditions must also exist: ‘(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.’ ” (Vasquez v. State of California (2008) 45 Cal.4th 243, 250–251.) “The burden is on the claimant to establish each prerequisite to an award of attorney fees under section 1021.5.” (Ebbetts Pass Forest Watch v. Department of Forestry & Fire Protection (2010) 187 Cal.App.4th 376, 381.)

“Whether [the claimant] established its eligibility for fees under section 1021.5 implicates ‘a mixed standard of review: To the extent we construe and define the statutory requirements for an award of attorney’s fees, our review is de novo; to the extent we assess whether those requirements were properly applied, our review is for an abuse of discretion.’ ” (Friends of Spring Street v. Nevada City (2019) 33 Cal.App.5th 1092, 1107.) ” ‘ “The abuse of discretion standard is ‘deferential,’ but it ‘is not empty.’ [Citation.] ‘[I]t asks in substance whether the ruling in question “falls outside the bounds of reason” under the applicable law and the relevant facts [citations].’ ” ‘ ” (Center for Biological Diversity v. County of San Bernardino (2010) 188 Cal.App.4th 603, 616.) “Where, as here, the court was not asked to, and did not make findings on substantial factual issues, we must infer all findings necessary to support the [order] and proceed to examine the record to determine if they are based on substantial evidence.” (Beach Colony II v. California Coastal Com. (1985) 166 Cal.App.3d 106, 110 (Beach Colony II).)

C
D
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2
A party seeking attorney fees under section 1021.5 bears the burden of establishing that “a significant benefit, whether pecuniary or nonpecuniary, has been conferred on the general public or a large class of persons.” Under the express language of the statute, “the ‘significant benefit’ conferred by the litigation may be either ‘pecuniary or nonpecuniary’ in nature; thus, the fact that the chief benefits afforded by an action have no readily ascertainable economic or monetary value in no way forecloses an attorney fee award under the statute.” (Woodland Hills Residents Assn., Inc. v. City Council (1979) 23 Cal.3d 917, 939 (Woodland Hills).) Further, “the ‘significant benefit’ that will justify an attorney fee award need not represent a ‘tangible’ asset or a ‘concrete’ gain but, in some cases, may be recognized simply from the effectuation of a fundamental constitutional or statutory policy.” (Ibid.)

“Of course, the public always has a significant interest in seeing that legal strictures are properly enforced and thus, in a real sense, the public always derives a ‘benefit’ when illegal private or public conduct is rectified.” (Woodland Hills, supra, 23 Cal.3d at p. 939.) But attorney fees under section 1021.5 are not authorized “in every case involving a statutory violation.” (Ibid.) Rather, it is the responsibility of the trial court to “determine the significance of the benefit, as well as the size of the class receiving benefit, from a realistic assessment, in light of all the pertinent circumstances, of the gains which have resulted in a particular case.” (Id. at pp. 939–940.)

In its minute order granting Hobbs’s motion for attorney fees, the trial court impliedly found the litigation conferred a significant benefit on the general public or a large class of persons, a determination we review for substantial evidence. (Beach Colony II, supra, 166 Cal.App.3d at p. 110.) Notwithstanding the deferential nature of our review, we cannot affirm the trial court’s implied finding in this case. In short, the record does not include any evidence tending to show the Division has levied improper assessments on public works contractors other than Hobbs. Thus, there is no evidence—let alone substantial evidence—demonstrating Hobbs’s writ proceeding conferred a significant benefit on any person or entity except Hobbs itself. (See Ryan v. California Interscholastic Federation (2001) 94 Cal.App.4th 1033, 1045 [reversing attorney fee award under section 1021.5 because movant did “not me[et] his burden of showing that a significant benefit ha[d] been conferred on a large class of persons”].)

Hobbs argues the spreadsheet it filed in the trial court disclosed that the Division has a “pattern and practice [of] assess[ing] unwarranted penalties” against public works contractors across the state. However, as appellants note, the pertinent spreadsheet identified only the case number, contractor and subcontractor name(s) and address(es), project name, and assessment amount for cases in which the Division has imposed assessments under Labor Code section 1776, not any information from which the validity of the Division’s assessments could be determined. Therefore, the spreadsheet did not include information by which we or any other court could conclude the Division improperly penalized all—or any—of the listed contractors. We would engage in sheer speculation were we to conclude otherwise, “and ‘speculation is not evidence, less still substantial evidence.’ ” (Wise v. DLA Piper LLP (US) (2013) 220 Cal.App.4th 1180, 1188.)

Next, Hobbs argues the Ornelas decision demonstrates the Division has imposed improper assessments against other public works contractors. In Ornelas, the Division issued document requests to a public works subcontractor seeking numerous categories of documents, including “daily time cards.” The subcontractor did not comply with certain of the requests and the Division imposed an assessment against the subcontractor. However, the Ornelas decision does not clearly indicate whether the Division levied the assessment based on the subcontractor’s failure to produce certified payroll records, which would be permissible, or uncertified time cards, which would not be permitted. Thus, the decision—like the spreadsheet discussed above—does not contain sufficient information by which a court could reasonably conclude the Division has imposed improper assessments against other contractors. And, even if it could be construed as one such example, it would not reflect a widespread pattern or practice affecting contractors statewide. Rather, it would demonstrate, at most, the Division has committed two Labor Code violations against two victims (Hobbs and Ornelas). In our view this is not a reasonable basis upon which to conclude Hobbs’s writ proceeding affected the general public or a large class of persons.

Additionally, there is no basis in the record for us to conclude the writ of mandate issued below would confer a substantial benefit on any other public works contractors, even if Hobbs had shown they were subject to invalid assessments. The writ has no precedential value and affects only the parties to the present proceeding. (Norberg v. California Coastal Com. (2013) 221 Cal.App.4th 535, 542 [attorney fees unwarranted where decision “ha[d] no precedential value and, consequently, [did] not confer a substantial benefit, or any benefit, on a large class of persons.”].) Hobbs also did not file evidence suggesting appellants altered their conduct in response to the writ proceeding. The mere “possibility that [the] lawsuit may have conveyed a cautionary message to [appellants] about their conduct … is insufficient to satisfy the significant public benefit requirement.” (LaGrone v. City of Oakland (2011) 202 Cal.App.4th 932, 946; see also Flannery v. California Highway Patrol (1998) 61 Cal.App.4th 629, 636.)

For the foregoing reasons, we believe the only reasonable conclusion to be drawn from the record is that the grant of mandamus under the isolated circumstances of this case did not confer a significant benefit on the general public or a large class of persons. This determination is an adequate basis for us to reverse the attorney fee order. However, our dissenting colleague would affirm the trial court’s determination that Hobbs carried its burden as to both the significant benefit and financial burden requirements under section 1021.5, and, on that basis, he would affirm the order awarding attorney fees to Hobbs. In view of the dissent’s position, we will now address the trial court’s implied findings regarding financial burden and explain why, in our view, these findings constituted an abuse of discretion as well.

3
4
As noted, a party seeking attorney fees under section 1021.5 must establish, among other requirements, “the necessity and financial burden of private enforcement … are such as to make the award appropriate.” “[T]he necessity and financial burden 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.” ‘ ” (Whitley, supra, 50 Cal.4th at p. 1214, italics added.) Appellants contest only the trial court’s implied findings pertaining to the financial burden of private enforcement, claiming the financial cost Hobbs faced in filing suit did not outweigh its personal incentive in obtaining writ relief.

In assessing whether the burden of private enforcement is such as to make an award appropriate, the trial court must focus on litigation costs and “offsetting financial benefits that the litigation yields or reasonably could have been expected to yield.” (Whitley, supra, 50 Cal.4th at p. 1215.) ” ‘ “An award on the ‘private attorney general’ theory is appropriate when the cost of the claimant’s legal victory transcends his personal interest, that is, when the necessity for pursuing the lawsuit placed a burden on the plaintiff ‘out of proportion to his individual stake in the matter.’ ” ‘ ” (Ibid.) But, when a party “ha[s] a ‘personal financial stake’ in the litigation ‘sufficient to warrant [the] decision to incur significant attorney fees and costs in the vigorous prosecution’ 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 (Millview).)

To determine whether the burden of private enforcement is sufficiently out of proportion to the movant’s personal stake in the litigation, the court must ” ‘fix—or at least estimate—the monetary value of the benefits obtained by the successful litigants.’ ” (Whitley, supra, 50 Cal.4th at p. 1215.) Then, “it ‘must discount these total benefits by some estimate of the probability of success at the time the vital litigation decisions were made which eventually produced the successful outcome.’ ” (Ibid.) Next, it must ” ‘turn to the costs of the litigation—the legal fees, deposition costs, expert witness fees, etc., which may have been required to bring the case to fruition.’ ” (Id. at pp. 1215–1216.) And finally, the court must ” ‘place the estimated value of the case beside the actual cost and make the value judgment whether it is desirable to offer the bounty of a court-awarded fee in order to encourage litigation of the sort involved in this case.’ ” (Id. at p. 1216.) In general, an award under section 1021.5 is proper unless the movant’s reasonably expected financial benefits exceed by a substantial margin its actual litigation costs. (Ibid.)

Because the trial court granted the motion for attorney fees in an order with no factual findings, we must assume it impliedly found the cost of Hobbs’s legal victory transcended its personal interest in the litigation. On the record before us, however, we conclude substantial evidence did not support such a finding. Indeed, it is quite clear to us Hobbs had a direct and substantial financial stake in the present action far exceeding the financial burden of bringing the case. Had Hobbs not petitioned for writ relief, it would have been liable for an assessment—levied in the normal course of events by the Division and affirmed on administrative appeal—in the amount of $149,200. Because Hobbs filed the petition for writ of mandate and obtained the relief requested, it is no longer required to pay the assessment. Thus, Hobbs had both an expected financial stake and an actual financial stake in this litigation equal to $149,200.

Hobbs’s court filings highlight the considerable interest it had in the case. In its petition for writ of mandate, Hobbs decried the assessment as a “massive” penalty that threatened to cause it “grave and irreparable harm.” In trial court briefing, Hobbs described the assessment as so “excessive” that, in the absence of relief, it would “likely bankrupt Hobbs.” And in its appellate briefing, Hobbs claimed the assessment was so “inordinate” it would have sent Hobbs “out of business.” These admissions are clear indications that Hobbs had a substantial financial incentive in the writ proceeding.

On appeal, Hobbs claims the burden of private enforcement warranted an attorney fee award because Hobbs did not seek a writ of mandate to gain an “affirmative benefit,” but rather to avoid an invalid penalty. Stated differently, Hobbs apparently takes the position that a party does not have a financial interest in a case for purposes of section 1021.5 if it merely seeks to avoid an unwarranted loss of money or property, rather than seeking damages. Hobbs’s argument has been asserted, and rejected, by numerous courts—and we do so here as well. (Boatworks, LLC v. City of Alameda (2019) 35 Cal.App.5th 290, 309 [“Financial incentives may exist even where … the plaintiff seeks no monetary award in the litigation.”]; People v. Investco Management & Development LLC (2018) 22 Cal.App.5th 443, 470 [Parties have a financial interest where “the failure to litigate would … result[] in losses of money or value to their assets or investments.”]; Summit Media, LLC v. City of Los Angeles (2015) 240 Cal.App.4th 171, 193 [“The trial court … may not[] take financial incentives out of the calculation, or conclude there are none, simply because the plaintiff sought no monetary award in the litigation.”].)

In Schwartz v. City of Rosemead (1984) 155 Cal.App.3d 547 (Schwartz), for instance, a property owner sought and obtained a writ of mandate compelling the City of Rosemead to assess the environmental impacts of a city-approved construction project adjacent to his property. He filed a request for attorney fees under section 1021.5, but the trial court denied his request on grounds that the litigation “prevent[ed] what he perceived to be the threat of significant damage and depreciation to his own property.” (Id. at p. 553.) The Court of Appeal found no abuse of discretion and affirmed. As it explained, the owner’s burden ($22,000 in attorney fees) did not transcend his financial interest in the case because he would have suffered an estimated loss of $100,000 in the form of diminished property value if he had not filed suit. (Id. at pp. 558–560.)

To take another example, in Beach Colony II, the California Coastal Commission imposed a special condition on a development permit requiring a property developer to transfer a portion of its land to the public. (Beach Colony II, supra, 166 Cal.App.3d at p. 109.) After litigation, the developer prevailed in its quest to have the condition stricken and obtained a trial court order granting it attorney fees under section 1021.5. (Id. at pp. 109–110.) However, the Court of Appeal concluded the trial court abused its discretion in impliedly finding the developer’s burden ($50,550 in attorney fees) transcended its interests, and reversed the attorney fees order. (Id. at pp. 113–115.) According to the Court, the developer had an “immediate,” “substantial,” and “direct[]” interest in filing the lawsuit, which sought to (and did) remove the condition—a condition that would have reduced the market value of the developer’s property by $300,000 if left intact. (Id. at p. 113.)

One more example is Millview, in which owners of property adjacent to the Russian River sold their water rights to a water district. The purchase price was $2.1 million, subject to downward modification in the event an administrative board issued a cease and desist order (CDO) limiting the water district’s ability to divert water from the river. (Millview, supra, 4 Cal.App.5th at pp. 764–765.) The board later issued the CDO contemplated in the purchase agreement and the buyer and sellers of the water rights filed a petition for writ of mandate requesting a set-aside of the CDO. (Id. at p. 765.) The trial court granted the writ, which was affirmed on appeal, and awarded attorney fees to the successful buyer and sellers under section 1021.5. (Id. at pp. 765–767.)

In an appeal challenging the attorney fee award, the buyer and seller defended the award and, in particular, the trial court’s financial burden finding, on grounds that they “did not receive a monetary award” and “merely ‘protected what they already had ….’ ” (Millview, supra, 4 Cal.App.5th at pp. 766, 767, 770.) The Court rejected this argument, concluding as follows: “Had plaintiffs taken no action, the [b]oard, in the ordinary course, would have entered the CDO …. From [the water district’s] point of view, the [b]oard’s entry of the CDO would have rendered the newly purchased asset, for which it claims to have paid a minimum of $500,000, essentially worthless. As to [the sellers], entry of the proposed CDO would have reduced their return under the purchase agreement from $2.1 million to $500,000. For both, the prevention of this result would have provided ample financial incentive to become involved in the lawsuit, even if that involvement is characterized merely as protecting the value of the claim.” (Id. at p. 770.)

The Schwartz, Beach Colony II, and Millview decisions, among others, confirm a party can have a substantial and personal financial interest in litigation, irrespective of whether the action may be framed as a mere defense or protection of one’s existing financial interests. In each case, a government decision or order threatened the pre-existing financial interests of certain parties. In each case, the parties adversely affected by those decisions or orders instituted litigation, succeeded in vacating or striking them, and circumvented the adverse effects that otherwise would have befallen them. And in each case, the successful litigants were denied attorney fees because they had sufficient financial interests for instituting the lawsuits in which they prevailed.

The same is true here. A governmental determination—in the form of a $149,200 assessment levied by the Division and affirmed after administrative review—threatened the existing financial interests of Hobbs. Hobbs challenged the determination in court, obtained relief setting aside the determination, and avoided the deleterious financial effects it otherwise would have experienced had the determination remained in effect. Therefore, like the litigants in the Schwartz, Beach Colony II, and Millview decisions, Hobbs had a direct financial stake in the litigation in which it prevailed—in this case, a personal incentive to avoid a $149,200 assessment.

Under the multistep framework governing a financial necessity determination, this financial incentive must be considered with the costs of litigation and Hobbs’s probability of success. (Whitley, supra, 50 Cal.4th at pp. 1215–1216.) Hobbs requested and received $53,165.95 in attorney fees, which at first blush appears to reflect its litigation costs. However, this figure includes attorney fees incurred to respond to the initial assessment and during the administrative appeal—before the writ proceeding began. While recovery of prelitigation costs is not categorically foreclosed under section 1021.5, a litigant seeking prelitigation costs bears a “heav[y] burden” of establishing such costs “contributed to the success of the litigation.” (Hogar Dulce Hogar v. Community Development Com. of City of Escondido (2007) 157 Cal.App.4th 1358, 1370.) We do not have a sufficient basis on the record before us to determine whether Hobbs carried this heavy burden. However, it seems apparent to us the prelitigation fees for which Hobbs sought recovery may well be an inaccurate and inflated representation of Hobbs’s financial burden in filing the writ proceeding.

Although it is not necessary for us to pinpoint Hobbs’s precise likelihood of success, we note for the record there were many factors suggesting Hobbs had, at minimum, a fairly high likelihood of success in the writ proceeding. Among other factors, the writ proceeding primarily concerned a question of statutory interpretation to which the trial court applied de novo review. (County of Los Angeles v. City of Los Angeles (2013) 214 Cal.App.4th 643, 653.) Thus, on the key disputed issue, the trial court was not obliged to defer to the conclusions rendered by the Director of the DIR during the administrative appeal. Additionally, as a factual matter, Hobbs did not simply flout all the Division’s requests for certified payroll records. Instead, it made substantial document productions to the Division, which bolstered the likelihood it would prevail if the trial court were to agree with its interpretation of the statute at issue.

In sum, Hobbs had a personal financial stake of $149,200 in the writ proceeding, faced financial burdens no higher than (and possibly far less than) $53,165.95, and possessed at least a moderately high likelihood of success in the case. On this record, we conclude substantial evidence did not support the trial court’s implied finding that the financial burden of private enforcement was ” ‘ “out of proportion to [Hobbs’s] individual stake in the matter.” ‘ ” (Woodland Hills, supra, 23 Cal.3d at p. 941.) Rather, all credible evidence in the record suggests Hobbs possessed a direct and substantial interest in the writ proceeding, which significantly overshadowed the legal costs and litigation risks Hobbs faced in bringing suit.

VII
VIII
DISPOSITION

The order is reversed. Appellants are entitled to their costs on appeal.

McCONNELL, P.J.

I CONCUR:

DATO, J.
J. O’ROURKE, dissenting.

I respectfully dissent. Plaintiff and respondent Hobbs Construction, Inc. (Hobbs)—a contractor working on a public work of improvement—brought a successful writ petition that prevented defendants and appellants the California Division of Labor Standards Enforcement (the Division), the Department of Industrial Relations, and Department’s then-director Christine Baker from enforcing an invalid $149,200 civil wage and penalty assessment under the prevailing wage laws. Defendants levied the penalty for Hobbs’s failure to produce back-up wage and hour documentation consisting of individual time cards. Hobbs took the position that the penalty was unlawful under California’s Prevailing Wage Law (Lab. Code, § 1720 et seq.) and thus defendants were without authority to impose it and that Hobbs had met all legal requirements under the Labor Code by submitting certified payroll records. The trial court agreed, then awarded Hobbs $53,165.95 in private attorney general fees under Code of Civil Procedure section 1021.5, implicitly finding Hobbs met the statute’s requirements. The majority—engaging in what I think is an overly narrow view of the evidence—holds the court erred because Hobbs did not meet its burden of establishing it was entitled to section 1021.5 attorney fees. I cannot agree. On this record, the court properly concluded Hobbs’s action both conferred a significant benefit to the public or at least to the large class of public works contractors in California, and also correctly found the award appropriate in light of the “necessity and financial burden of private enforcement . . . .” (§ 1021.5; Press v. Lucky Stores, Inc. (1983) 34 Cal.3d 311, 317-318.)

As the majority acknowledges, the abuse of discretion review standard applies to this court’s assessment of whether the trial court properly applied section 1021.5. This case solely involves the application of section 1021.5’s eligibility requirements, not any need to construe or define them. Under this standard, this court may only reverse where the trial court is clearly wrong or its ruling has “no reasonable basis,” resulting in a manifest miscarriage of justice. (Baggett v. Gates (1982) 32 Cal.3d 128, 143; Sweetwater Union High School Dist. v. Julian Union Elementary School Dist. (2019) 36 Cal.App.5th 970, 980, 981 (Sweetwater Union).) An abuse of discretion will occur where the court’s ruling is predicated on factual findings that are not supported by substantial evidence. (Indio Police Command Unit Association. v. City of Indio (2014) 230 Cal.App.4th 521, 541.) This court “owe[s] ‘the trial court a full measure of deference’ ” in deciding whether it abused its discretion. (Sweetwater Union, at p. 980.) Because the trial court made no findings and provided no grounds for its conclusions, this court must presume it made all factual findings to support its order and that it was aware of and followed the applicable law. (Id. at p. 981.) The reviewing court is required to presume the order is correct and indulge all presumptions to support it on matters as to which the record is silent. (Ibid.) The appellants—here, defendants, not Hobbs—bear the burden of affirmatively showing error. (Ibid.; Denham v. Superior Court (1979) 2 Cal.3d 557, 564.)

Reviewing the court’s attorney fee ruling under this standard, I would affirm.

I. The Record Permitted the Trial Court to Conclude Hobbs’s Writ Conferred a Significant Benefit to Public Works Contractors and the Public in General

An award of private attorney general fees to the prevailing party is warranted if its action has conferred a significant nonpecuniary benefit on the general public or a large class of persons. (§ 1021.5, subd. (a).) As this court has acknowledged, the benefit justifying such an award ” ‘may be conceptual or doctrinal [citation], and . . . “the litigation underlying the section 1021.5 award can involve rights or benefits that are somewhat intangible.” ‘ [Citation.] . . . ‘The “extent of the public benefit need not be great to justify an attorney fee award” ‘ under section 1021.5. [Citation.] Nor is it required that the class of persons benefitted be ‘ “readily ascertainable.” ‘ ” (Sweetwater Union, supra, 36 Cal.App.5th at p. 991; RiverWatch v. County of San Diego Dept. of Environmental Health (2009) 175 Cal.App.4th 768, 781 [extent of the public benefit from the lawsuit must be “substantial” but “need not be great”]; see Indio Police Command Unit Assn. v. City of Indio, supra, 230 Cal.App.4th at p. 543 [evidence of the size of the population benefited by a private suit is not always required].) As to this prong, the trial court “should ‘determine the significance of the benefit, as well as the size of the class receiving benefit, from a realistic assessment, in light of all the pertinent circumstances, of the gains which have resulted in a particular case.’ ” (People v. Investco Management & Development LLC (2018) 22 Cal.App.5th 443, 465, quoting Woodland Hills Residents Assn., Inc. v. City Council (1979) 23 Cal.3d 917, 939-940.)

The nature of Hobbs’s action alone, in my view, supports the trial court’s implied finding that Hobbs’s success resulted in significant benefits to the general public or at least a large class of persons, namely contractors working on the various public works contracts in this state. Public works projects, which are paid for in whole or part out of public funds (see Lusardi Construction Co. v. Aubry (1992) 1 Cal.4th 976, 985) by definition implicate matters of public interest. (Id. at pp. 985-986 [overall purpose of the prevailing wage law is to protect and benefit employees on public works projects, and is supported by state public policy ” ‘to vigorously enforce minimum labor standards in order to ensure employees are not required or permitted to work under substandard unlawful conditions, and to protect employers who comply with the law from those who attempt to gain competitive advantage at the expense of their workers by failing to comply with minimum labor standards’ “]; accord, Coldwell v. Board of Public Works (1921) 187 Cal. 510, 519-521 [public has a right of access to plans and estimates related to a large public works project; “they are matters which affect the public, and in which the public has an interest”], cited with approval in Sander v. State Bar of California (2013) 58 Cal.4th 300, 315.) Likewise, prevailing wage policies ” ‘ “benefit[] the public through the superior efficiency of well-paid employees.” . . . “[P]ayment of the prevailing rate of per diem wages to workers employed on public works projects is necessary to attract the most skilled workers for those projects and to ensure that work of the highest quality is performed on those projects.” ‘ ” (Plumbers & Steamfitters, Local 290 v. Duncan (2007) 157 Cal.App.4th 1083, 1089, 1097-1098, quoting Northern Cal. Carpenters Regional Council v. Warmington Hercules Associates (2004) 124 Cal.App.4th 296, 300-301 [involving anti-SLAPP motion; union’s action to enforce city’s prevailing wage policy enforced “an important right affecting the public interest” and conferred a significant benefit on the general public or a large class of persons].)

Hobbs’s action clarified the proper scope of the record-keeping aspect of the Prevailing Wage Law for purposes of enforcement, inuring to the benefit of contractors working on public works projects in California, akin to other cases in which a litigant’s action advanced lawful activity in the public interest. This court, for example, upheld a private attorney general fee award in Sweetwater Union, supra, 36 Cal.App.5th 970, where the Sweetwater Union High School District’s action sought to enforce geographic limitations of the Charter School Act against another school district and two charter schools. (Id. at pp. 977-978.) The action resulted in an order declaring the charter schools’ operation violated the Education Code and an injunction against their operation. (Id. at p. 979.) Pointing out generally that charter schools’ compliance with the law, regulations, and the conditions imposed on their charter can be matters of serious concern to the public and public school system (id. at p. 990), this court rejected an argument that only the Sweetwater District benefitted from its action. (Id. at p. 991.) We held the trial court assessing the significant public benefit “could have reasonably concluded that [plaintiff’s] action advanced the public’s interest in the lawful operation of charter schools and the Legislature’s oversight objectives reflected in the [Charter School Act’s] location requirements. Even more broadly, the trial court could have found that through this action Sweetwater has helped preserve the constitutionality of charter schools within the public education system.” (Id. at p. 991.) We stated the court “could have reasonably concluded that advancement of these objectives conferred a significant benefit on the general public.” (Ibid.; see also Baggett v. Gates, supra, 32 Cal.3d at p. 143 [plaintiffs’ lawsuit securing protections of the police offer Bill of Rights Act directly inured to the benefit of California’s citizens because “enforcement of the Bill of Rights Act should help to maintain stable relations between peace officers and their employers and thus to assure effective law enforcement”]; Beach Colony II v. California Coastal Com. (1985) 166 Cal.App.3d 106, 112 (Beach Colony II) [action that “improve[d] the [administrative agency’s] sensitivity to [the] due process rights of” similarly situated landowners conferred a significant benefit, but reversing fee award for no evidence of disproportionate financial burden].) These kinds of conceptual future benefits can support an award of private attorney general fees. (Sweetwater Union, supra, 36 Cal.App.5th at p. 991; accord, Adoption of Joshua S. (2008) 42 Cal.4th 945, 958 [litigation underlying the section 1021.5 award can involve rights or benefits that are somewhat intangible].)

Like these cases, the trial court here could reasonably conclude Hobbs’s efforts in holding the Division to a proper construction of a “certified payroll record” provided for in Labor Code section 1776 advanced the public interest in ensuring contractors working on public projects would not be subjected to unwarranted penalties that would dissuade them from working on these projects, benefitting the public in general. Additionally, Hobbs’s evidence showed hundreds of public works contractors were subjected to Labor Code section 1776 penalties in a five-year period, allowing an inference that a large class of public works contractor employers could potentially face such penalties, and that the decision here, involving an interpretation of Labor Code section 1776, would likely affect other projects and public works contractors. This conceptual future benefit for a defined class of contractors warranted private attorney general fees. (Sweetwater Union, supra, 36 Cal.App.5th at p. 991; accord, Plumbers & Steamfitters, Local 290 v. Duncan, supra, 157 Cal.App.4th at pp. 1089, 1096-1097 [upholding trial court’s finding that its determination that a renovation project qualified as a public work based on an interpretation of the prevailing wage law contrary to the position of the Department of Industrial Relations benefitted “a large number of employers in the State . . . . , dozens of local unions representing their workforce, and many thousands of workers in the construction industry”; even though there were only seven plumbers who brought the action, substantial evidence supported court’s finding the decision was ” ‘likely to affect other projects and other trades in the future’ “]; e.g., City of Oakland v. Oakland Police & Fire Retirement System (2018) 29 Cal.App.5th 688, 711 [action protecting pensions of 590 living pensioners and their families could be a sufficiently large class of benefitted persons]; Monterey/Santa Cruz etc. Trades Council v. Cypress Marina Heights LP (2011) 191 Cal.App.4th 1500, 1523 [900 construction workers who benefitted from action to enforce prevailing wage law held to be a large class of persons].) The very nature of the controversy compels this conclusion, even absent evidence that defendants had a practice or policy of imposing unlawful penalties. Because the trial court had a reasonable basis to conclude Hobbs significantly benefitted a large class of contractors or the public generally, the trial court did not err in its section 1021.5 attorney fee award.

The majority would require Hobbs to present direct evidence of “widespread” and “statewide” conduct by the Division to levy improper assessments on public works contractors other than Hobbs. My colleagues say it is purely speculative to conclude the Division improperly penalized any contractor other than Hobbs because the spreadsheet Hobbs produced does not contain information about the records the Division sought justifying the penalty. Requiring Hobbs to establish that each assessment in fact involved an invalid penalty for failure to maintain or produce back-up time card data is the sort of tangible or “concrete” evidence of benefit eschewed by this court and others interpreting section 1021.5. (Sweetwater Union, supra, 36 Cal.App.5th at p. 991; Robles v. Employment Development Dept. (2019) 38 Cal.App.5th 191, 203; Weiss v. City of Los Angeles (2016) 2 Cal.App.5th 194, 221.) Even if Hobbs was required to meet such a standard, Hobbs did so by presenting evidence suggesting the Division had an actual policy or practice of wrongfully imposing penalties for failing to produce time cards. Its spreadsheet showed the Division’s issuance between January 1, 2013, and early 2018 of approximately 360 wage and penalty assessments that included Labor Code section 1776 penalties for the alleged failure to submit payroll records “defined as in California Code of Regulations, title 8, section 16000.” Hobbs’s attorney’s supporting declaration averred that “[s]ince at least 2015, the [Division] has improperly demanded back-up documents from Hobbs in other [Division] administrative prevailing wage cases on other Hobbs projects, and thereby has threatened Hobbs with improper Labor Code section 1776 penalties.” Hobbs cited to exhibits accompanying its request for judicial notice for the proposition that “the [Division] admitted it had used the same abusive tactic” in another case (In re Ornelas Enterprises, Inc. dba Ornelas Electric Construction, Pub. Works Case No. 2015-0240, October 31, 2016 (Ornelas)). As Hobbs points out, defendants vigorously defended their position through the administrative review and in court; indeed, the record shows defendants argued in the trial court that the term “payroll records” in Labor Code section 1776 had been defined for 37 years as including unsigned or uncertified time cards. Defendants argued the Code of Regulation defining “payroll records” as such was valid and effective, not in conflict with the statute. This evidence, considered cumulatively, permits a reasonable, nonspeculative inference that Department’s conduct was not isolated to just Hobbs and Ornelas, and that defendants advanced their improper interpretation in other Labor Code section 1776 penalty assessments as a matter of policy. The majority says the Ornelas decision is silent on the question; that it “does not clearly indicate whether the Division levied the assessment based on the subcontractor’s failure to produce certified payroll records . . . or uncertified time cards . . . . ” But on a silent record, this court must presume Hobbs’s evidence supports the conclusion—impliedly made by the trial court—that the Department in fact conceded its violation. And on substantial evidence review, this court must accept the evidence supporting the court’s decision, and disregard evidence to the contrary. (Harley-Davidson, Inc. v. Franchise Tax Bd. (2015) 237 Cal.App.4th 193, 213.)

The majority also suggests Hobbs was required to produce evidence suggesting defendants had somehow altered their conduct in response to its writ proceeding. They state the writ has no precedential value. They cite LaGrone v. City of Oakland (2011) 202 Cal.App.4th 932 to suggest Hobbs only showed a “mere ‘possibility [that its petition] may have conveyed a cautionary message . . . about their conduct,’ ” which is insufficient to satisfy the significant public benefit requirement. LaGrone involved an appellant who brought an administrative action to reinstate his employment with backpay and benefits (id. at p. 935), a highly personal stake. The trial court held the plaintiff had not shown his lawsuit conferred “an adequate public, rather than personal, benefit to support a [private attorney general fee] award . . . .” (Id. at p. 946.) LaGrone presents a situation very different from this petition involving the Prevailing Wage Law’s enforcement against public works contractors, as to which the trial court in this case found a fee award appropriate. I think the trial court’s ruling, which rejected the defendants’ interpretation and application of a long-standing Code of Regulation and found defendants acted unlawfully, was much more than a mere cautionary message to defendants about their conduct.

II. Substantial Evidence Supports the Financial Burden Element

A litigant who has a financial interest in the litigation may be disqualified from obtaining private attorney general fees when expected or realized financial gains offset litigation costs. (Conservatorship of Whitley (2010) 50 Cal.4th 1206, 1211 (Whitley); see Davis v. Farmers Insurance Exchange (2016) 245 Cal.App.4th 1302, 1329-1330 [trial court did not abuse its discretion by rejecting plaintiff’s claim for section 1021.5 attorney fees in part because plaintiff expected “a substantial financial recovery” from his wrongful discharge litigation, including hundreds of thousands of dollars for improper wage deductions].) In Whitley, supra, 50 Cal.4th 1206, the California Supreme Court explained that the necessity and financial burden prong ” ‘ “really examines two issues: whether private enforcement was necessary and whether the financial burden of private enforcement warrants subsidizing the successful party’s attorneys.” ‘ ” (Id. at p. 1214.) Defendants do not challenge the private necessity aspect in this appeal, and indeed, in this action against the public entity responsible for assessing these penalties, there was a need for private enforcement. (Accord, Boatworks, LLC v. City of Alameda (2019) 35 Cal.App.5th 290, 309 (Boatworks) [where action challenging validity of development impact fee was against the public entity that was responsible for setting the fees, the need for private enforcement was “clear”].) Only a litigant’s “objective financial incentives,” not its subjective motives, are the proper subject of the court’s inquiry when assessing the financial burden of litigation under section 1021.5. (Whitley, at p. 1221.)
I disagree with the majority’s conclusion that Hobbs had a direct and substantial financial stake in its petition far exceeding the financial burden of bringing the case. Rather, realistically and practically assessing the financial incentives and burdens at the time Hobbs commenced its action (Whitley, supra, 50 Cal.4th at p. 1215; Adoption of Joshua S., supra, 42 Cal.4th at p. 952), I would hold Hobbs’s reasonably expected financial benefits did not exceed “by a substantial margin” its actual litigation costs, thus entitling it to a private attorney general fee award. (Whitley, 50 Cal.4th at p. 1216.)

The majority notes the trial court impliedly found Hobbs’s personal financial stake did not by itself give it adequate incentive to litigate; that the cost of its legal victory transcended its personal interest in the litigation. Viewing Hobbs’s expectations of the monetary value of its case at the outset of this litigation, substantial evidence supports the court’s implied finding on this prong. Hobbs sought writ relief so as to not pay what it believed was a penalty that should never have been assessed in the first place. Thus, the litigation’s expected successful outcome cannot be viewed as providing Hobbs a direct financial benefit to add into the equation. As a practical matter Hobbs was faced with expending attorney fees in an action that, if successful, would result in no financial recovery to it. Defendants maintain that Hobbs paid $53,165.95 to save $149,200, “realizing a gain of $96,034.05.” Even accepting the defendants’ $96,000 valuation, the trial court could reasonably have placed a 50 percent chance of success on the litigation as Hobbs was asking the court in part to declare void and disregard the long-standing California regulation (Cal. Code Regs., tit. 8, § 16000) that defined payroll records as including time cards. That would discount the value by half, making it less than the attorney fees expended. I cannot say the trial court manifestly abused its discretion by concluding Hobbs’s reasonably expected financial benefit from the lawsuit exceeded its actual litigation costs of about $53,000.

I agree a party may nevertheless have a financial incentive to avoid an unwarranted loss of money. (People v. Investco Management & Development LLC, supra, 22 Cal.App.5th at p. 468 [absence of monetary award is not by itself dispositive of whether there is a sufficient financial incentive to justify litigation in economic terms]; Summit Media, LLC v. City of Los Angeles (2015) 240 Cal.App.4th 171, 193.) But a private attorney general fee award may also be appropriate in situations where the litigant’s own expected benefits exceed its actual costs by a substantial margin, where the “value judgment” warrants such an outcome. (See City of Oakland v. Oakland Police & Fire Retirement System, supra, 29 Cal.App.5th at p. 703; Whitley, supra, 50 Cal.4th at p. 1216.) “[A] pecuniary interest in the outcome of the litigation is not disqualifying.” (Heron Bay Homeowners Assn. v. City of San Leandro (2018) 19 Cal.App.5th 376, 389.) The question is whether the “financial burden placed on the party is out of proportion to its personal stake in the lawsuit.” (Id. at pp. 389-390.) Here, the court impliedly answered that question in the affirmative, and I believe it made the proper value judgment warranting a fee award to Hobbs.

I see a fundamental and practical difference between this case, in which Hobbs sued to invalidate an unlawful penalty so as to return to status quo, and situations where a plaintiff has a significant financial motivation—such as preventing damage or depreciation to an investment or property, continued operation of business, or protection of its livelihood—precluding a 1021.5 attorney fee award despite a nonmonetary recovery. The cases discussed by the majority either involve a plaintiff avoiding a loss of market value of existing real property that it owns, or a lawsuit seeking to challenge an order resulting in reduction of the price to be paid on a contract for the sale of water rights. (Millview County Water Dist. v. State Water Resources Control Bd. (2016) 4 Cal.App.5th 759, 769-770 [plaintiffs had a substantial financial incentive to challenge issuance of state board cease and desist order, which would render worthless an asset for which it paid $500,000 under a purchase agreement and defeating the order had the potential to earn them as much as an additional $1.6 million]; Schwartz v. City of Rosemead (1984) 155 Cal.App.3d 547, 559 [appellate court upheld denial of fees on finding that plaintiff initiated private nuisance action costing $22,000 to prevent the threat of $100,000 damage or depreciation to his property by a cogeneration plant, a “purely private purpose”]; Beach Colony II, supra, 166 Cal.App.3d 106, 111-115 [partnership’s motive in initiating litigation was economic self-interest; “the benefits it obtained [were] immediately and directly translated into monetary terms” in that its victory allowed the partnership to save $300,000 in improvement expenses, and partnership presented no evidence to support an implied finding its legal costs transcended its personal interests in the litigation]; People v. Investco Management & Development LLC, supra, 22 Cal.App.5th at pp. 468-470 [citing cases]; California Licensed Foresters Assn. v. State Bd. of Forestry (1994) 30 Cal.App.4th 562, 570-573 [fees properly disallowed to foresters association in their action challenging state board’s emergency regulations as unsupported by any emergency; the regulations would have effectively stopped approval of timber harvest plans, and the livelihood of the association’s members was dependent upon the continued harvesting of timber, thus they had a significant pecuniary interest that was a sufficient motivation for bringing the action]; see Heron Bay Homeowners Assn. v. City of San Leandro, supra, 19 Cal.App.5th at pp. 392-393 [distinguishing Beach Colony II].)

Even if Hobbs’s petition was characterized as one seeking to avoid a monetary loss, as one court has observed, it is relevant that the “benefit [Hobbs] sought through the litigation could not be used to pay counsel and was not ‘immediately bankable.’ Unlike a ‘plaintiff who expects a lawsuit to result in an immediate financial gain [and] can finance the lawsuit through a contingent fee agreement,’ . . . a ‘plaintiff who expects a lawsuit to result in avoiding a financial loss may have more difficulty financing the lawsuit because the plaintiff would still need to pay the lawyer out of his or her now [un]diminished assets.’ ” (Heron Bay Homeowners Assn. v. City of San Leandro, supra, 19 Cal.App.5th at pp. 388-389; see also City of Oakland v. Oakland Police & Fire Retirement System, supra, 29 Cal.App.5th at pp. 703-704 [citing Heron Bay].) That is the case here.

The majority highlights Hobbs’s assertions about the detrimental effect of the penalty on its business. Though it could be said that Hobbs’s business might have been adversely affected by imposition of $149,200 in penalties, that consequence is “a step removed” from the results of the litigation. “Where personal benefits are a step removed from the results of the litigation, the potential financial benefit is indirect and speculative, and thus, a trial court does not abuse its discretion in concluding that the financial burden criterion is satisfied for purposes of section 1021.5.” (People v. Investco Management & Development, supra, 22 Cal.App.5th at pp. 443, 448, 468-470 [plaintiffs who opposed a motion to stay individual investor claims in an already settled securities fraud action entitled to private attorney general fees because they “did not avoid any loss of money or value to their assets or investments by specially appearing in the . . . action, and there were no benefits that ‘immediately and directly translated into’ economic terms for [them] as a result of their success”]; see also Boatworks, supra, 35 Cal.App.5th at pp. 309-310 [developer entitled to 1021.5 fees for action challenging city’s basis for calculating development impact fees; the financial benefit the plaintiff might receive was ” ‘at least once removed from the results of the litigation,’ because the ruling did not ensure [plaintiff] would receive the financial benefit of any reduction in the fees” and the trial court could reasonably approximate the estimated value of the case as lower than the amount incurred in attorney fees].)

Based on the foregoing, I would hold the trial court reasonably concluded Hobbs obtained no benefits ” ‘that immediately and directly translated into’ economic terms . . . as a result of [its] success.” (People v. Investco Management & Development LLC, supra, 22 Cal.App.5th at p. 470.) I perceive no abuse of discretion in the trial court’s ruling and would uphold the attorney fee award.

O’ROURKE, Acting P. J.