Updated on August 30, 2022
In the recent case of Artus v. Gramercy Towers Condominium Association, the First District Court of Appeal considered whether a plaintiff condominium owner or whether a defendant condominium association were entitled to attorneys’ fees under the Davis-Sterling Act (Civ. Code § 4000 et seq.). The Court denied attorney fees to both sides and determined that neither were prevailing parties under the statute. Both sides appealed.
In Artus, the residential condominium owner of the Gramercy Towers in the San Francisco area sued the Gramercy Towers Condominium Association, alleging (1) Injunctive Relief and Appointment of Monitor; (2) Injunctive Relief Against Enforcement of the ‘Restated election and voting Rules’; (3) Injunctive Relief Against Enforcement of the ‘Sale and Leasing Guidelines’; (4) Declaratory Relief Against Enforcement of the“Restated Election and Voting Rules’ Adopted November 22, 2016; and (5) Breach of Contract and Covenant of Good Faith and Fair Dealing.”
Following the filing of the Complaint, Dr. Artus sought a preliminary injunction, which was granted by the Court. The GTCA was enjoined from enforcing the alternative election rules during the pendency of the lawsuit. In response to the Complaint, however, the GTCA filed a demurrer and a special motion to strike (anti-SLAPP). The Judge sustained the demurrer without leave to amend as to the first cause of action and the fifth cause of action. With only three causes of action remaining, the case was limited to the election rules and the rules for listing condominium units for sale, narrowing significantly the focus of the litigation.
Ultimately, the GTCA revoked the 2016 election rules and in their place adopted Restated and Amended Election Rules in 2018. At the same time, the GTCA board rescinded the Sale and Leasing Guidelines that had been in place and adopted a new set of Sale and Leasing Guidelines. Accordingly, the GTCA brought a motion for summary judgment/adjudication on the grounds that, the earlier election rules and guidelines having been rescinded, there was no longer a controversy upon which effective relief could be granted to Dr. Artus, that the case was moot. On August 6, 2019, Dr. Artus and the GTCA stipulated that the remaining causes of action were moot.
Both sides filed motions for attorneys fees in HOA litigation based on Civil Code § 5975(c), which provides as follows: “In an action to enforce governing documents, the prevailing party shall be awarded reasonable attorney’s fees and costs.” Dr. Artus also sought attorney fees based on Civil Code § 5145 (b) and Code of Civil Procedure 1021.5, the private attorney general doctrine.
Both sides sought over $300,000 in attorney fees, in pleadings and documents that totaled over 2,000 pages. Both motions were denied.
The Trial Court concluded that Dr. Artus had four main litigation objectives and that she achieved only one of her four main litigation objectives. The Trial Court also denied Dr. Artus’ request for fees under §1021.5, concluding that she did not meet the“successful party” standard under that section. The Trial Court further found that Dr. Artus failed to show that her lawsuit resulted in significant benefit to the general public or large classes of persons.
As to the GTCA’s claim for fees, the Trial Court determined that their main litigation objective was to “reduce, and hopefully end, the wasteful use of its resources in fighting Dr. Artus, particularly litigation expenses and the time of it’s volunteers and employees.” However, given the possibility of another lawsuit over the 2018 amended rules, the GTCA did not reduce the governance disputes between GTCA and Dr. Artus. Perhaps most importantly, the Trial Court noted, “it would be strange indeed for a defendant, as a result of his own unilateral conduct taken without a court order or other indicia of court approval, to be considered a litigation winner. If this were the case, surely defendants would frequently take such unilateral actions, declare victory, and ask for fees.”
The standard of review for an award of attorney fees under a statutory provision is reviewed for abuse of discretion. Thus, a court’s ruling on who is the prevailing party “should be affirmed on appeal absent an abuse of discretion.” This seemingly includes a Trial Court’s determination if there is no prevailing party. Stated succinctly, “A ruling that constitutes an abuse of discretion has been described as one that is ‘so irrational or arbitrary that no reasonable person could agree with it.” [citations omitted].
Principles that come into play in a court’s discretion can include:
(1) The analysis of who is a prevailing party under the fee-shifting provisions of the Davis-Sterling Act focuses on who prevailed “on a practical level” by achievingits main litigation objections. [citations omitted].
(2)The test for prevailing party is a pragmatic one, namely whether a partyprevailed on a practical level by achieving its main litigation objections.[citations omitted].
(3)In determining litigation success, courts should respect substance rather thanform, and to this extent should be guided by equitable considerations. [citationsomitted].
In Artus, neither party could demonstrate that the Trial Court had abused itsdiscretion nor that either party had achieved most of their litigation objectives.
A party seeking an award of attorneys’ fees under the Davis-Sterling Act should be prepared to
(1) demonstrate its’ litigation objectives and
(2) provide a compelling argument on why itwas successful on achieving its objectives.
The Court looked to motions that had beenwon, depositions that had been conducted, and the pleadings to come to a conclusion. Ofcourse, a party should always be mindful that the abuse of discretion standard is a highburden to overcome when initiating an appeal.
Schorr Law, APC has experience real estate attorneys in California, representing both homeowners and homeowner’sassociations in disputes related to the enforcement of governing documents in commoninterest developments. We also have extensive experience with issues unique to shortterm rentals and transient occupancy.
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