Schulman: The rule created by the state Supreme Court was that if someone won a lawsuit for the public good at a disproportionate cost to his or her own interest, the loser would pay their fees. The Legislature eventually formalized it, but the state's judges have shaped the rule in court to favor people whose politics they like—for instance, the historic preservation group mentioned earlier. In practice, judges now even award fees to people who lost lawsuits if they were a “catalyst” for action. Also, fee awards can greatly exceed what the opposition's lawyers had actually charged their own clients.

GlobeSt.com: What does this mean for the development community?

Schulman: It is another risky and potentially large cost of doing business in this state. This affects all businesses and many private parties in California, not just developers; worse, it is only one of many ways in which the state's judges have tilted the playing field. For instance, judges in another case “interpreted” a law saying the loser of a lawsuit “shall” (i.e., must) pay the winner's fees to mean that losing individuals need not pay winning businesses.

GlobeSt.com: How can developers protect themselves?

Schulman: Again, this affects all businesses and many private parties in the state—not just developers. One way is to have a carefully drafted “prevailing party” clause if a written contract is involved. A developer can have a right to fees if a city rejects a density bonus project on spurious grounds, but that requires providing price-restricted housing. The private attorney general fee doctrine frequently comes up in connection with challenges to permits, so businesses must make sure to dot their i's and cross their t's in administrative processes.

***Richard Schulman's views and opinions are not official views or opinions of the firm Hecht Solberg Robinson Goldberg & Bagley LLP.