SUPERIOR COURT OF CALIFORNIA
COUNTY OF SANTA CLARA

RAYMOND AND MICHELLE PLATA, individually and on behalf of other members of a class of similarly situated residents and taxpayers,

Plaintiff,

vs.

CITY OF SAN JOSE, a California municipal corporation, and DOES 1 THROUGH 100,

Defendants.
Case No. 2014-1-CV-258879
Consolidated with Case No. 2016-1-CV-294032

TENTATIVE RULING RE: PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES; PLAINTIFFS’ MOTION TO STRIKE OR TO TAX COSTS; CITY OF SAN JOSE’S MOTION TO STRIKE COSTS OR, IN THE ALTERNATIVE, TO TAX COSTS

The above-entitled action comes on for hearing before the Honorable Thomas E. Kuhnle on November 2, 2018, at 9:00 a.m. in Department 5. The Court now issues its tentative ruling as follows:

I. INTRODUCTION

Plaintiffs Raymond and Michelle Plata (together, “Plaintiffs”) have brought this class action against defendant City of San Jose (“Defendant” or “the City”), which owns and operates the San Jose Municipal Water System (“Muni Water”). (Amended and Supplemental Complaint for Refund, Declaratory Relief, and Injunctive Relief (“FAC”), ¶ 1.) Muni Water is the exclusive water utility for approximately 10 percent of the population of San Jose. (FAC, ¶ 7.) Plaintiffs allege that, since 1997, the City has used and transferred Muni Water funds for purposes other than those for which the funds were collected, in violation of Proposition 218. (FAC, ¶¶ 10, 13.)

The FAC, filed on February 3, 2015, sets forth the following causes of action: (1) Violation of Article XIII D of the California Constitution, and (2) Declaratory Relief. Following trial, the Court issued a Statement of Decision and Judgment on June 19, 2018. There are now three motions before the Court: (1) Plaintiffs’ motion for attorneys’ fees; (2) Plaintiffs’ motion to strike or tax costs; and (3) Defendant’s motion to strike or tax costs.

To summarize, Plaintiffs move for attorneys’ fees pursuant to Code of Civil Procedure section 1021.5. Plaintiffs argue they are the successful parties under a catalyst theory – i.e. their actions were a “catalyst” for important public relief. Plaintiffs contend their lawsuit caused Defendant to eliminate its illegal tiered rate system and change the municipal code. Defendant argues Plaintiffs are not entitled to any attorneys’ fees because they were not prevailing parties, were not successful, and were not awarded any relief. Defendant contends the lawsuit did not result in any benefit to Plaintiffs, much less to a large class of persons. Defendant asserts it amended its Municipal Code for reasons unrelated to the lawsuit. In turn, the parties’ arguments regarding attorneys’ fees spill into their respective motions to tax or strike costs.

II. OBJECTIONS TO EVIDENCE

The Court does not rule on Defendant’s objections to the declarations of Allen Ruby and Robert Goodin, or to the reply declarations of Tyler Atkinson and Emily Fitzgerald, because they are not relevant to the Court’s ruling. Defendant’s objections to the Declaration of Tyler Atkinson in Support of Plaintiffs’ Motion for Attorneys’ Fees and to the Declaration of Abimael Bastida in Support of Plaintiffs’ Motion for Attorneys’ Fees are OVERRULED.

III. PLAINTIFFS’ MOTION FOR ATTORNEYS’ FEES

Code of Civil Procedure section 1021.5 states, in relevant part:

Upon motion, a court may award attorneys’ fees to a successful party against one or more opposing parties in any action which has resulted in the enforcement of an important right affecting the public interest if: (a) a significant benefit, whether pecuniary or nonpecuniary, has been conferred on the general public or a large class of persons, (b) the necessity and financial burden of private enforcement, 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.

As explained by one case:

Section 1021.5 is a codification of the private attorney general doctrine adopted by the California Supreme Court in Serrano v. Priest (1977) 20 Cal.3d 25 [141 Cal.Rptr. 315, 569 P.2d 1303] (Serrano III). This section allows an award of attorney fees to “a successful party” in an action which has resulted in the enforcement of an important right affecting the public interest if: a significant benefit, whether pecuniary or nonpecuniary, has been conferred on the general public or a large class of persons, the necessity and financial burden of private enforcement make the award appropriate, and such fees should not in the interest of justice be paid out of any recovery. (§ 1021.5; Press v. Lucky Stores, Inc. (1983) 34 Cal.3d 311, 317-318 [193 Cal.Rptr. 900, 667 P.2d 704].)

The fundamental objective of the private attorney general theory is to encourage suits effecting a strong public policy by awarding substantial attorney fees to those whose successful efforts obtain benefits for a broad class of citizens. (Woodland Hills Residents Assn., Inc. v. City Council (1979) 23 Cal.3d 917, 933 [154 Cal.Rptr. 503, 593 P.2d 200].) Without a vehicle for award of attorney fees, private actions to enforce important public policies will frequently be infeasible. (Baggett v. Gates (1982) 32 Cal.3d 128, 142 [185 Cal.Rptr. 232, 649 P.2d 874].)

The decision to award attorney fees rests initially with the trial court: utilizing its traditional equitable discretion, the trial court must “‘realistically assess the litigation and determine, from a practical perspective,’” whether the statutory criteria have been met. (Baggett v. Gates, supra, 32 Cal.3d 128, 142; Mandicino v. Maggard (1989) 210 Cal.App.3d 1413, 1416 [258 Cal.Rptr. 917].)

(Hull v. Rossi (1993) 13 Cal.App.4th 1763, 1766-1767.)

Pursuant to the catalyst theory, courts look to the practical impact of public interest litigation in order to determine whether the party was successful, and therefore potentially eligible for attorney fees. (Graham v. DaimlerChrysler Corp. (2004) 34 Cal.4th 553, 566.)

The “catalyst theory” permits an award of attorney 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. [Citation.] To obtain attorney fees under this theory, a plaintiff must establish that (1) the lawsuit was a catalyst motivating the defendants to provide the primary relief sought; (2) the lawsuit had merit and achieved its catalytic effect by threat of victory, not by dint of nuisance and threat of expense; and (3) the plaintiffs reasonably attempted to settle the litigation prior to filing the lawsuit.

(Coalition for a Sustainable Future in Yucaipa v. City of Yucaipa (2015) 238 Cal.App.4th 513, 521.)

Plaintiffs argue their lawsuit caused the city to eliminate its illegal tiered rate system and change its municipal code. As stated in a case cited by Plaintiffs: “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.) Plaintiffs contend the chronology of events in this case shows the litigation caused these changes.

Plaintiffs state the evidence establishing a causal link includes the following:

(1) Until trial, the challenged practices had been in place for several decades. The tiered rates were instituted in 1994. Section 4.80.630 was enacted in 2003.

(2) The tiered rates were eliminated on the eve of trial.

(3) The Municipal Code was modified on the eve of trial, removing the challenged language and adding additional safeguards sought by this lawsuit.

(4) The City used these changed circumstances to avoid trial on whether the Court should order prospective relief, a central component of Plaintiffs’ lawsuit.

(5) Plaintiffs’ grievances were more than a mere nuisance – the Court found the City’s tiered rate system violated Proposition 218, and acknowledged that the former Municipal Code had “shortcomings.”

(6) The City’s public records show no other reason for the City’s changed conduct.

Plaintiffs contend this chronology, and the absence of any other explanation for the City’s conduct, is more than sufficient to qualify Plaintiffs as catalysts. Plaintiffs cite to Cates v. Chiang (2013) 213 Cal.App.4th 791, 807, for the proposition that they need not show the litigation was the only cause of Defendant’s changes. Rather, the lawsuit need only be a substantial factor contributing to defendant’s action. (Ibid.)

As an initial matter, the Court notes that Plaintiffs have produced little actual evidence supporting the chronology; most of the evidence relates to the amount of Plaintiffs’ fees. However, Plaintiffs do provide some evidence demonstrating that Plaintiffs’ counsel contacted Defendant several times prior to filing the lawsuits that became this consolidated action and that Defendant made certain changes in 2017 – eliminating the tiered pricing structure and modifying the relevant ordinance. (Declaration of Tyler Atkinson in Support of Plaintiffs’ Motion for Attorneys’ Fees, ¶¶ 2-11.) This evidence provides some basis for Plaintiffs’ catalyst theory.

In opposition, Defendant argues Plaintiffs were not the cause of the elimination of tiered rates and the amendments to the Municipal Code. Defendant contends it revised its rate structure because of Capistrano Taxpayers Assn., Inc. v. City of San Juan Capistrano (2015) 235 Cal.App.4th 1493. In Capistrano, the court held that, to comply with Proposition 218, a city must “correlate its tiered prices with the actual cost of providing water at those tiered levels.” (Id. at p. 1506.)

Defendant provides evidence that on May 18, 2015, following Capistrano, which was filed on April 20, 2015, Defendant’s Director of Environmental Services, Kerrie Romanow, wrote a memo to the City Council that, in part, referred to Capistrano. (Declaration of Kathryn J. Zoglin in Support of City of San Jose’s Opposition to Motion for Attorneys’ Fees (“Zoglin Decl.”), ¶ 3 and Ex. A.) The memo stated there had not yet been an adequate opportunity to assess water rate tiers in light of Capistrano, but made suggestions for changes to the rate schedule for the tiers and stated additional recommendations were anticipated during 2015-2016. (Ibid.) Defendant immediately eliminated certain water rate tiers for fiscal year 2015 2016.

On September 3, 2015, Defendant issued a Request for Proposal, to conduct a cost of service study for potable water, which would establish the costs of service for each customer class and evaluate whether and how to adjust the rates and charges to match the costs of service. (Zoglin Decl., ¶ 4 and Ex. B, pp.1-3.) Defendant contracted with Raftelis Financial Consultants in 2016 for the Cost of Service Study. (Id. at ¶ 5 and Ex. C.) In an April 17, 2017 memo to the City Council, Kerrie Romanow stated Section 4.80.630 of the Municipal Code had to be amended to implement the recommendations of Raftelis. (Ibid.)

In May 2017, the City Council accepted the staff report on the updated study of costs of services to provide potable water to San Jose Municipal Water System customers and approved an ordinance amending Section 4.80.620 “to align provisions related to expenditure of funds in the Municipal Water System Operating Fund with the updated cost of service study. . . .” (Zoglin Decl., ¶¶ 6-7 and Exs. D and E.) The evidence provided by Defendant demonstrates the City acted to amend the Municipal Code not because of the lawsuit, but instead after a series of methodical steps triggered by Capistrano which included the cost of service study and a resulting staff report.

Plaintiffs argue, citing to Hogar Dulce Hogar v. Community Development Com. of City of Escondido (2007) 157 Cal.App.4th 1358, 1365, that the catalyst theory does not require the litigation to be the only cause of a defendant’s acquiescence. This is true, but the litigation must still be “a substantial factor contributing to the defendant’s action.” (Ibid., emphasis added.) While the timing of the lawsuit and the changes made indicate the lawsuit may have been a factor, Defendant’s evidence rebuts any inference that the lawsuit was a “substantial” factor in motivating Defendant’s conduct.

Further, to obtain fees pursuant to Code of Civil Procedure section 1021.5, a plaintiff must show the lawsuit was a catalyst in motivating the defendant to provide the “primary relief sought.” (Tipton-Whittingham v. City of Los Angeles (2004) 34 Cal.4th 604, 608.) Plaintiffs sought relief in the form of damages, refunds, and injunctive and declaratory relief. (Amended and Supplemental Complaint for Refund, Declaratory Relief, and Injunctive Relief, Prayer for Relief.) Plaintiffs received none of that relief. The only portion of Plaintiffs’ claims on which they achieved any measure of success concerned Defendant’s tiered rates, which the Court found were in violation of Proposition 218. (Statement of Decision and Judgment (“SOD”), p. 51:19-22.) Even with regard to the tiered rates, however, the Court did not award any relief and, in fact, decertified the class. (SOD, pp. 54:18-59:13.)

In sum, the Court finds Plaintiffs are not entitled to attorneys’ fees pursuant to the catalyst theory because Plaintiffs’ lawsuit was not the cause of Defendant’s amendment of the Municipal Code and because Plaintiffs did not obtain their primary relief sought. Accordingly, Plaintiffs’ motion for attorneys’ fees is DENIED.

IV. DEFENDANT’S MOTION TO STRIKE OR TAX COSTS

Defendant moves to strike or, in the alternative, to tax Plaintiffs’ costs. Defendant argues Plaintiffs are not prevailing parties as defined by statute, so are not entitled to any costs. Plaintiffs respond that they are prevailing parties as catalysts.

For the reasons discussed in connection with Plaintiffs’ motion for attorneys’ fees, the Court finds Plaintiffs are not catalysts. Plaintiffs are also not prevailing parties under the Code of Civil Procedure, which defines “prevailing parties” as follows:

“Prevailing party” includes the party with a net monetary recovery, a defendant in whose favor a dismissal is entered, a defendant where neither plaintiff nor defendant obtains any relief, and a defendant as against those plaintiffs who do not recover any relief against that defendant. If any party recovers other than monetary relief and in situations other than as specified, the “prevailing party” shall be as determined by the court, and under those circumstances, the court, in its discretion, may allow costs or not and, if allowed, may apportion costs between the parties on the same or adverse sides pursuant to rules adopted under Section 1034.

(Code Civ. Proc., § 1032, subd. (a)(4).)

Plaintiffs obtained no net monetary recovery or any relief at all. Therefore, Plaintiffs are not prevailing parties. Accordingly, Defendant’s motion to strike costs is GRANTED.

V. PLAINTIFFS’ MOTION TO STRIKE OR TAX COSTS

Plaintiffs move to strike or, in the alternative, to tax Plaintiffs’ costs. Plaintiffs argue first that Defendant is not a prevailing party, but rather that Plaintiffs are prevailing parties because they prevailed on the issue of liability for violations of Proposition 218 and caused the City to change its conduct.

As discussed previously, Plaintiffs are not prevailing parties. Rather, Defendant qualifies as a prevailing party because it is “a defendant as against those plaintiffs who do not recover any relief against that defendant.” (Code Civ. Proc., § 1032, subd. (a)(4).) Therefore, Defendant is entitled to costs. (Code Civ. Proc., § 1032, subd. (b) [“[A] prevailing party is entitled as a matter of right to recover costs in any action or proceeding.”].)

Plaintiffs contend the Court should tax costs that were not “reasonably necessary.” “Allowable costs shall be reasonably necessary to the conduct of the litigation rather than merely convenient or beneficial to its preparation.” (Code Civ. Proc., § 1033.5, subd. (c)(2).) Plaintiffs challenge the amount of costs claimed for depositions, transcripts, graphics, and copies and “staff time.”

A. Depositions

Costs are generally recoverable for taking, video recording, and transcribing necessary depositions. (Code Civ. Proc., § 1033.5, subd. (a)(3)(A).) Plaintiffs state Defendant’s costs memorandum lists 19 entries for deposition transcripts, but 15 of the deponents were past or current employees of Defendant or Defendant-retained experts and, with one exception, Defendant did not use the deposition testimony at trial. Plaintiffs contend, therefore, that “a portion of this cost ($9,316.70) is not allowable.”

Plaintiffs have not identified a specific amount they believe should not be allowed, nor have they identified which specific depositions are suspect. Further, Plaintiffs do not explain why costs for depositions should not be recoverable just because the deponents were employees of Defendant or Defendant-retained experts or because the deposition testimony ultimately was not used at trial.

The Court will allow the recovery of these costs.

B. Transcripts

Transcripts of court proceedings are recoverable when ordered by the court and not allowable when not ordered by the court. (Code. Civ. Proc., § 1033.5, subds. (a)(9) and (b)(5).) Plaintiffs argue the Court did not order the transcripts for which Defendant seeks to recover costs. Defendant argues Plaintiffs have also requested costs for transcripts in their memorandum of costs. Defendant requests the Court exercise its discretion and award these costs.

The Court did not order the transcripts for which Defendant requests costs. Therefore, the costs are not recoverable. The Court will strike these costs ($15,698.10).

C. Graphics

Plaintiffs assert Attachment 12 of Defendant’s cost memorandum includes $7,327 for “Fulcrum Legal Graphics – trial graphics development and production services provided in September 2017 (Opening Statement)”. Plaintiffs argue this exhibit was not entered into evidence and was not necessary for trial, so this cost should not be allowed.

Defendant responds that there is no requirement that an exhibit be entered in evidence to recover costs. Defendant states these graphics were used in its opening statement and were reasonably necessary to orient the trier of fact and provide a summary and roadmap of the anticipated evidence.

The Court finds this cost is reasonable and it is allowed.

D. Copies and “Staff Time”

Plaintiffs argue Defendant should not be able to recover the requested $8,305.08 for exhibit copies, $1,059.30 for binders, and $2,942.05 for “Staff Time to Insert Tabs and Trial Exhibit Pages into two sets of Defendant’s Trial Exhibit Binders.”

Photocopies of exhibits are recoverable as costs if reasonably helpful to the trier of fact. (Code Civ. Proc., § 1033.5, subd. (a)(13).) The Court notes Plaintiffs seek recovery for the same cost amount in their memorandum of costs. The Court finds these costs are recoverable. The Court will also allow recovery of the costs for the binders to hold the trial exhibits.

There is no basis, however, to recover costs for the “staff time.” The Court will strike this amount of costs ($2,942.05).

In sum, Plaintiffs’ motion to strike or, in the alternative, to tax costs is GRANTED IN PART AND DENIED IN PART. The Court will strike from the amended memorandum of costs the costs for transcripts and “staff time,” which together total $18,640.15. The remaining amount sought ($73,848.92) is recoverable.

The Court will prepare the final order if this tentative ruling is not contested.

NOTICE: The Court does not provide court reporters for proceedings in the complex civil litigation departments. Parties may arrange for a private court reporter to provide services, but those arrangements must be consistent with the local rules and policies posted on the Court’s website.