Tuesday, July 23, 2002
C.A. Strikes Down $88 Million Attorney Fee Award in Smog Fee Case
By ROBERT GREENE, Staff Writer
An attorney fee award of more than $88 million for the successful challenge to California’s smog fee on out-of-state cars was an unconstitutional gift of public funds, the Third District Court of Appeal ruled yesterday.
No attorney fee award in the suit against the 1990 smog impact fee could exceed $18 million, the amount the Legislature apparently had in mind when it later rescinded the fee and authorized reimbursement, the court said.
Justice Fred Morrison wrote the opinion for the three-judge panel. A separate concurring opinion was submitted by Justice Richard M. Sims III, who called a fee award that amounted to more than $8,000 an hour “completely in outer space, totally over-the-top.”
“The fact that attorneys even requested a fee award of that absurd magnitude from the taxpayers is a testament to the unreal world of greed in which some attorneys practice law in this day and age,” Sims said.
But Sims also said the state breached a fee arbitration agreement that stated it was not subject to appeal, collateral attack or other review.
“What happened in this case is that when the gigantic magnitude of the fee award became known in Sacramento, the political stuff hit the fan, the State retained private counsel, and the State began to appeal, collaterally attack, and obtain review of the award like crazy,” Sims said.
The justice said he would leave it to California lawyers to advise their clients whether to agree to binding arbitration with the state.
“But I know what I would say,” he added.
The decision upheld a Sacramento Superior Court order vacating an arbitration panel’s award that worked out to about $8,000 per hour for the bevy of lawyers on the case. The matter now goes back to a new panel to refigure the fees.
The $300-per-car fee was meant to pay for pollution caused by cars brought into the state and re-registered here. Four people who moved from out of state sued for refunds and won a court order striking down the fees as a violation of the Commerce Clause of the U.S. Constitution.
The same trial court ordered the state to pay refunds to everyone who had paid the fee, then found the ruling created a “common fund” in the amount of $363.9 million. The court awarded the plaintiffs’ lawyers five percent of that, or about $18 million.
The Third District upheld the ruling of unconstitutionality, but rejected the repayment order to car owners who were not part of the lawsuit. Gov. Gray Davis then stepped in, saying the court’s ruling was sound, that he would not appeal, and that he was asking the Department of Motor Vehicles to work out a refund plan for every driver who paid the fees and would have been covered by that portion of the court’s ruling had the Third District upheld it.
Meanwhile, the state appealed the attorney fee award, but the Legislature passed, and Davis signed, bills ordering the refund of the money and payment of “the appropriate level of court costs, fees and expenses in the settlement of the case.” The state and the plaintiffs’ attorneys then entered into an agreement to arbitrate the fee amount, and the matter went to a three-member panel that included retired state Supreme Court Justice Malcolm Lucas.
It was that panel that came up with the $88 million award. The panel rejected a state request for reconsideration, with Lucas dissenting. Back in the trial court, the arbitration award was vacated and the theory of a “common fund” was rejected.
Morrison agreed. He said the said the arbitration was only meant to implement the Legislature’s fundamental policy decision to refund the smog impact fee and to settle the fee dispute.
The Legislature enacted Revenue and Taxation Code Sec. 6909(b) and appropriated money to pay the refund and the fees based on the $18 million limit, he said. No portion of the recovery by those who paid the improper smog fee is used to pay attorney fees, which are paid by the state, not by the beneficiaries of the attorneys’ actions.
The case is Jordan v. California Department of Motor Vehicles, C038339.
Copyright 2002, Metropolitan News Company