Appellate court rules Santa Rosa must pay $240,000 in legal fees

An appellate court has ruled that Santa Rosa must pay more than $240,000 in legal fees to the attorneys who successfully challenged the constitutionality of a city law imposing a special tax on new developments.

The state Court of Appeal in San Francisco last week rejected the city's appeal of the fees awarded to the Pacific Legal Foundation by Sonoma County Superior Court Judge Mark Tansil in 2011.

The Sacramento-based public interest law firm represented the Home Builders Association of Northern California Inc. The group claimed the special tax unfairly forced property owners to give up their voting rights in exchange for the right to develop their properties.

The idea for the tax arose as a way to assure new developments paid their fair share of the cost of city services, particularly police and fire protection. The annual tax was to be $430 for new homes and $310 for units in multifamily buildings.

But Tansil agreed with the law's critics, finding that it "unfairly tampers with the elective process." He concluded that the attorneys were entitled to recoup their expenses because their lawsuit had "vindicated important constitutional rights that affect the public interest."

The California private Attorney General statute allows attorneys to recoup their expenses if the lawsuits they bring result in a "significant benefit" to the "general public or a large class of persons." The statute is meant to encourage the types of cases that might otherwise be cost-prohibitive.

The city argued the case did not benefit the general public, but just those with developable land in the city. It also claimed the attorneys fees were excessive and failed to consider the "extreme dire financial condition" of the city and the fact that "the ultimate costs of the fee award will be paid by . . . taxpayers."

The court rejected nearly all the city's arguments. It did, however, reduce the award by $1,800, the amount a foundation attorney claimed for hand-delivering a complaint to the court in Santa Rosa.

City Attorney Caroline Fowler said city officials were "obviously disappointed with the outcome" and would "review the decision in detail and evaluate options going forward."

Meriem Hubbard, principal attorney with the foundation, said she was pleased but not surprised by the decision. The trial judge had issued an "unusually forceful" ruling that praised the foundation's work and its right to collect the fees.

"This case resolved an important constitutional issue, which the private attorney general statute was adopted to handle," Hubbard said.

The city claimed it didn't expect the foundation to seek attorney fees in the case, and was surprised when it did so just one day before the appeal period closed. The city might have reconsidered its decision not to appeal the case if it had known the amount of attorney fees being sought, Fowler said.

But Paul Beard, the foundation attorney who tried the case, called the city's claim "bogus."

"Anyone who has practiced law for more than a year recognizes that the prevailing party will potentially seek fees and costs upon the completion of the case," Beard said.

The foundation filed its request for fees close to the deadline because such requests take time to document and support, he said.

Hubbard called it "laughable" that the city would be surprised by such a request because it has previously used the same statute to recoup its own legal fees.

In 2008, the city won a judgment against the former owners of the Llano Motel on Santa Rosa Avenue. The alleged den of prostitution was shut down by the city and later razed.

The eventual $1.1 million judgment against the motel owners included $541,611 to compensate the city attorney's office for the public good it claimed it accomplished in the case.

Hubbard said the city could theoretically appeal to the state Supreme Court, but she doubts it will.

"I'm not sure this decision really raises an issue for that court," Hubbard said.

With the $1,800 reduction, the award now stands at $241,617, plus 7 percent interest that has been accruing since June of 2011.

You can reach Staff Writer Kevin McCallum at 521-5207 or kevin.mccallum@pressdemocrat.com. OnTwitter @citybeater.