Kracke v. City of Santa Barbara CA2/6 ( 2023 )

Filed 1/12/23 Kracke v. City of Santa Barbara CA2/6
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS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has not been certified for publication or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SIX
THEODORE P. KRACKE, 2d Civ. No. B316993
Plaintiff and Appellant, (Super. Ct. No. 56-2016-
00490376-CU-MC-VTA)
v. (Ventura County)
CITY OF SANTA BARBARA,
Defendant and Respondent.
Theodore P. Kracke sued the City of Santa Barbara (City),
claiming it had unlawfully banned short-term vacation rentals
(STVRs) within the California coastal zone. Kracke prevailed in
that action, and we affirmed the trial court’s order granting his
petition for writ of mandate and enjoining the City’s enforcement
of the STVR ban in the coastal zone unless it satisfies certain
conditions. (Kracke v. City of Santa Barbara (2021) 63
Cal.App.5th 1089, 1098 (Kracke).)
Kracke appeals the trial court’s denial of his second motion
for attorney fees under the private attorney general statute, Code
of Civil Procedure section 1021.5.1 (See Conservatorship of
Whitley (2010) 50 Cal.4th 1206, 1217 (Whitley).) Kracke contends
the trial court abused its discretion by denying his motion, but he
failed to meet his burden of producing substantial evidence of his
personal financial stake in the litigation. In the absence of such
evidence, we affirm.
I. FACTUAL AND PROCEDURAL BACKGROUND
Since 2007, Kracke has been “the proprietor of Paradise
Retreats World Class Vacation Rentals (‘Paradise Retreats’), a
local business engaged in operating, managing and servicing
vacation rentals in and around the [City].” Kracke markets his
business as “the leader in luxury vacation rental management.”
The rental rates for the properties he manages range from $400
to $5,984 per night, plus taxes and fees.
“Prior to 2015, the City . . . encouraged the operation of
[STVRs] along its coast by treating them as permissible
residential uses. In June 2015, the City began regulating STVRs
as ‘hotels’ under its municipal code, which effectively banned
STVRs in the coastal zone. The City did not seek a coastal
development permit (CDP) or an amendment to its certified local
coastal program (LCP) prior to instituting the ban.” (Kracke,
supra, 63 Cal.App.5th at p. 1092.)
In November 2016, Kracke petitioned for a writ of mandate
enjoining the City’s enforcement of the STVR ban in the coastal
zone unless it obtains a CDP or LCP amendment. During
discovery, Kracke declined to produce evidence of the rental rates
and fees his business charged to overnight guests prior to 2015.
Kracke stipulated he would not introduce during trial any
evidence referencing his business.
1All statutory references are to the Code of Civil Procedure
unless otherwise stated.
2
Kracke also did not provide this evidence in support of his
first motion for attorney fees. The trial court denied that motion,
finding he had failed to establish his personal financial stake in
the action. Kracke presented evidence that only 9.7 percent of
his income is from STVRs in the coastal zone, but the court found
“this bare percentage . . . unhelpful . . . .”
Kracke renewed his request for attorney fees in a second
motion filed after we affirmed, in a published decision, the trial
court’s order granting his petition for writ of mandate. (Kracke,
supra, 63 Cal.App.5th at p. 1098.) “[A]rmed with a published
opinion establishing the broad public impact of this case,” Kracke
claimed he had incurred over $600,000 in attorney fees, and that
his business netted just $41,693 from his coastal zone properties
during the period critical litigation decisions were being made in
the case. Kracke maintained he had more than satisfied his
entitlement to section 1021.5 fees.
The trial court rejected the City’s argument that Kracke
was equitably estopped from renewing his motion for attorney
fees, but again denied his motion. It stated: “Kracke once again
has not presented substantial evidence – at least some of which
he presumably has available to him and could have easily
submitted (e.g., regarding his historical earnings from STVRs in
the Coastal Zone both before and after the STVR ban) -- in
support of his claim that his costs of litigating this lawsuit
outweigh his personal stake in the action. In the absence of
substantial evidence of Kracke’s expected financial benefit from
this action, it would constitute an abuse of discretion for the court
to grant Kracke’s request for [section] 1021.5 fees.”
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II. DISCUSSION
A. Standard of Review and Applicable Law
“The burden is on the party requesting section 1021.5 fees
to demonstrate all elements of the statute, including that the
litigation costs transcend his or her personal interest. . . . ‘The
trial court’s judgment on whether a plaintiff has proved each of
the prerequisites for an award of attorney fees under section
1021.5 “will not be disturbed unless the appellate court is
convinced that it is clearly wrong and constitutes an abuse of
discretion.”’ [Citation.] With respect to the issues of necessity
and financial burden, the trial court abuses its discretion in
making an award under section 1021.5 when there is no
substantial evidence to support the required findings.” (Millview
County Water Dist. v. State Water Resources Control Bd. (2016) 4
Cal.App.5th 759, 769 (Millview).)
“‘[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.’” (Whitley,
supra, 50 Cal.4th at p. 1217.) 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.) “‘The
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 p. 1218, italics omitted.)
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“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: ‘[1] a significant benefit, whether pecuniary or
nonpecuniary, has been conferred on the general public or a large
class of persons, [2] the necessity and financial burden of private
enforcement . . . are such as to make the award appropriate, and
[3] 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; Whitley, supra, 50 Cal.4th at p. 1214.)
In evaluating the element of financial burden, “the inquiry
before the trial court [is] whether there were ‘insufficient
financial incentives to justify the litigation in economic terms.’”
(Summit Media, LLC v. City of Los Angeles (2015) 240
Cal.App.4th 171, 193 (Summit Media), quoting Whitley, supra, 50
Cal.4th at p. 1211.) If the plaintiff had 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. (Summit Media, at pp. 193-194; Millview, supra,
4 Cal.App.5th at pp. 768-769; Whitley, at p. 1211 [“[A] litigant
who has a financial interest in the litigation may be disqualified
from obtaining such fees when expected or realized financial
gains offset litigation costs”].)
“‘Section 1021.5 was not designed as a method for
rewarding litigants motivated by their own pecuniary interests
who only coincidentally protect the public interest.’” (Davis v.
Farmers Ins. Exchange (2016) 245 Cal.App.4th 1302, 1329
(Davis).) “‘Instead, its purpose is to provide some incentive for
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the plaintiff who acts as a true private attorney general,
prosecuting a lawsuit that enforces an important public right and
confers a significant benefit, despite the fact that his or her own
financial stake in the outcome would not by itself constitute an
adequate incentive to litigate.’” (Flannery v. California Highway
Patrol (1998) 61 Cal.App.4th 629, 635.)
In sum, “‘“[a]n 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.’ [Citation.]”’
‘This requirement focuses on the financial burdens and incentives
involved in bringing the lawsuit.’” (Whitley, supra, 50 Cal.4th at
p. 1215.)
B. The Trial Court Did Not Abuse Its Discretion by
Denying Kracke’s Second Motion for Fees Under Section 1021.5
Kracke contends the trial court abused its discretion by
considering only the financial burden requirement in denying his
motion for attorney fees. He claims the court was required to
make findings as to all the statutory criteria and engage in a
balancing test. We disagree. “[W]here the court finds that one of
the statutory criteria is not met, it is unnecessary to make
findings concerning the remaining criteria.” (Satrap v. Pacific
Gas & Electric Co. (1996) 42 Cal.App.4th 72, 81, fn. omitted
(Satrap); Millview, supra, 4 Cal.App.5th at p. 773.)
Kracke further asserts the trial court abused its discretion
by denying his motion for attorney fees because he failed to meet
his burden of establishing his personal financial stake in the
case. Once again, we disagree.
In Millview, the Court of Appeal determined the plaintiffs
had failed to provide substantial evidence to support a finding
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that pursuing the lawsuit placed a burden on them out of
proportion to their individual stake. (Millview, supra, 4
Cal.App.5th at p. 770-771.) The plaintiffs in that case prevailed
in an action challenging a proposed cease and desist order (CDO).
“With respect to the ‘financial burden’ element, [the] plaintiffs
argued the litigation would result in no financial benefit to them
because they did not receive a monetary award. At most, they
argued, the litigation protected ‘an interest that they previously
had.’” (Id. at p. 766.)
The court observed, however, that “Millview had a
similarly ample financial incentive for challenging issuance of the
proposed CDO. Most obviously, Millview had paid $500,000 for
an asset that would be rendered worthless if a CDO was entered
severely curtailing diversion under the [applicable] claim.
Preserving the value of its investment was a substantial
incentive.” (Millview, supra, 4 Cal.App.5th at p. 770; see Summit
Media, supra, 240 Cal.App.4th at pp. 192-194 [given the threat
to its profitable business, “[t]he record supports the trial court’s
conclusion that plaintiff had a personal stake in this litigation
that was sufficient to warrant its decision to incur significant
attorney fees and costs in the vigorous prosecution of this
lawsuit”]; Children & Families Com. of Fresno County v. Brown
(2014) 228 Cal.App.4th 45, 60-63 [fee award inappropriate
because the plaintiff stood to lose millions in funding if its
lawsuit was unsuccessful].)
Kracke had a similar financial incentive to challenge the
STVR ban. It is undisputed he has financial interests in rental
properties in the coastal zone. For example, Kracke alleged in
his first amended petition for writ of mandate that “[a]t all times
relevant hereto since October of 2012, [he] has been the owner of
the real property commonly known as 16 East Arrellaga Street in
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Santa Barbara . . . , which he operates as a short term vacation
rental . . . .” He further alleged that “[a]t all times relevant
hereto since 2007, [he] has been the proprietor of [Paradise
Retreats], a local business engaged in operating, managing and
servicing vacation rentals in and around the [City]. Paradise
Retreats currently operates twenty-five (25) rental properties
within the [City’s] limits, eight (8) of which are located within the
[City’s] Coastal Zone . . . .” Kracke noted he had “577 total guest
reservations” between January 1, 2015 and November 3, 2016.
Given Kracke’s financial interest in these properties, he
had ample financial incentive to challenge the STVR ban in the
coastal zone. (See Millview, supra, 4 Cal.App.5th at p. 770.) It is
true that we do not look to the plaintiff’s actual recovery after
trial; instead, we consider “‘“the estimated value of the case at
the time the vital litigation decisions were being made.”’
[Citation.] The reason for the focus on the plaintiff's expected
recovery at the time litigation decisions are being made, is that
[section] 1021.5 is intended to provide an incentive for private
plaintiffs to bring public interest suits when their personal stake
in the outcome is insufficient to warrant incurring the costs of
litigation.” (Satrap, supra, 42 Cal.App.4th at p. 79.)
Kracke contends the evidence he produced of his actual
STVR rental income between 2016 and 2018, the period in which
he claims vital litigation decisions were being made, established
his personal financial stake. He is incorrect. The City began
enforcing the STVR ban in June 2015. Evidence of Kracke’s
relatively minimal STVR income after that date cannot qualify as
substantial evidence of his personal financial stake. (See
Millview, supra, 4 Cal.App.5th at p. 769.) Rather, that stake is
what he would have expected to earn during that period in the
absence of the STVR ban. (See ibid.)
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The trial court suggested, by way of example, that evidence
of Kracke’s historical earnings from his STVRs in the coastal
zone could satisfy his burden of proving his expected financial
gain. Kracke declined to produce that evidence and,
notwithstanding his burden to prove the issue, offered no other
means of estimating his expected financial gain. The court
properly ruled that “[i]n the absence of substantial evidence of
Kracke’s expected financial benefit from this action, it would
constitute an abuse of discretion for the court to grant Kracke’s
request for [section] 1021.5 fees.”2
III. DISPOSITION
The order denying Kracke’s motion for fees is affirmed.
The City shall recover its costs on appeal.
NOT TO BE PUBLISHED.
CODY, J.*
We concur:
GILBERT, P.J.
BALTODANO, J.
2Given our decision, we need not reach the City’s collateral
estoppel argument.
*Judge of the Ventura Superior Court assigned by the Chief
Justice pursuant to article VI, section 6 of the California
constitution.
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Mark S. Borrell, Judge
Superior Court County of Ventura
______________________________
Rogers, Sheffield & Campbell, Travis C. Logue and Nathan
C. Rogers, on behalf of Plaintiff and Appellant.
Ariel Pierre Calonne, City Attorney, and Robin L. Lewis,
Assistant City Attorney, on behalf of Defendant and Respondent.
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