A Court Had To Evaluate The Financial Burden Of Bringing A Lawsuit Before Ordering School Districts To Pay Attorney Fees To Charter School Corporate Entities

CATEGORY: Public Education Matters
CLIENT TYPE: Public Education
DATE: Apr 01, 2024

In 2015, Grossmont Union High School District and San Diego Unified School District brought lawsuits asking the court to shut down several charter schools located in their districts but chartered in other districts. The Districts argued that the charter schools were violating the Charter Schools Act. The Charter Schools Act requires charter schools to be located within the geographical boundaries of the district that authorized the charter. However, there are several exceptions.

The trial court agreed with the Districts and ordered the charters be revoked. However, before the trial court entered its judgment, the State Board of Education granted temporary waivers to the charter schools to allow them to continue operating until June 30, 2018. The trial court stayed its order, so it would only go into effect after the waivers expired.

The corporations that ran the charter schools (Charter School Corporate Entities) closed the schools. They then opened new schools in the same locations but with new names and under new charters. In December 2018, the Districts asked the court to lift the stay on its order and shut down the schools. The trial court agreed, finding that the new charter schools were alter egos of the previous charter schools.

The Charter School Corporate Entities appealed the decision. The court of appeal held that the new charter schools were different than the previous ones, had new charters, and now qualified for exceptions to the Charter Schools Act’s geographic restrictions. The court of appeal remanded the decision back to the trial court and ordered it to reverse its decision.

The trial court initially agreed with the District and issued orders barring the charter schools from operating within the District’s geographic boundaries.  The court of appeal reversed and remanded, ordering the trial court to reverse the orders.

On remand, the trial court ordered the Districts to pay $582,927 in attorney fees to the Charter School Corporate Entities pursuant to Code of Civil Procedure section 1021.5. Section 1021.5 aims to encourage people to pursue public interest litigation that affects the rights of a large group of people, by awarding attorney fees to successful litigants.

The Districts appealed the trial court’s award of attorney fees. The Districts argued that (1) the case did not meet the requirements for a few award under section 1021.5, and (2) the fee amount was unreasonably high.

The court of appeal explained that section 1021.5 allow a court to award attorney fees to a successful party if (1) the litigation resulted in the enforcement of an important right affecting the public interest, (2) the litigation conferred a significant benefit on the general public or a large class of individuals, and (3) the necessity and financial burden of private enforcement renders the award appropriate. If those criteria are met, a court should award attorney fees unless special circumstances would make it unjust.

The court of appeal held that the Charter School Corporate Entities were successful parties because the outcome of the litigation enabled them to continue operating in Districts. Next, the court of appeal evaluated the three factors for section 1021.5 attorney fees. First, it held the litigation enforced an important public right affecting the public interest. The Charter Schools Act guarantees a free public education through a system of common schools, and charter schools are part of that system. Second, the court of appeal held that the litigation conferred a significant benefit on the general public because it promoted lawful operation of charter schools as part of the public school system.

Finally, the court of appeal held that the trial court failed to properly evaluate the financial burden of private enforcement, which is the third criteria under section 1021.5. The court of appeal explained that the trial court needed to separately address two issues to perform the analysis: (1) whether private enforcement was necessary, and (2) the financial burdens and incentives involved in the Charter School Corporate Entities’ participation in the lawsuit. The court of appeal pointed out that the trial court only devoted two sentences to this prong of the analysis. The trial court adequately evaluated the first issue, but not the second issue.

The court of appeal reversed and remanded the case to the trial court to further analyze the third prong of the section 1021.5 test and determine whether the necessity and financial burden of private enforcement rendered the award of attorney fees appropriate. The court of appeal held that if the trial court still found the fee award appropriate, the $582,927 amount would not be unreasonable.

Grossmont Union High School Dist. v. Diego Plus Education Corp. (2023) 98 Cal.App.5th 552 [316 Cal.Rptr.3d 721].

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