Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-00599/USCOURTS-caed-2_05-cv-00599-5/pdf.json

Nature of Suit Code: 950
Nature of Suit: Contitutionality of State Statutes
Cause of Action: 28:1983 Civil Rights

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1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

CALIFORNIA STATE OUTDOOR

ADVERTISING ASSOCIATION, INC.,

a California corporation, et

al., 

NO. CIV. S-05-0599 FCD/DAD

Plaintiffs,

CORRECTED

v. MEMORANDUM AND ORDER

(* indicates correction)

STATE OF CALIFORNIA,

DEPARTMENT OF TRANSPORTATION,

WILL KEMPTON, in his official

capacity as Director,

CALIFORNIA DEPARTMENT OF

TRANSPORTATION, and DOES 1-50

inclusive,

Defendants.

_____________________________/

----oo0oo----

This matter is before the court on a motion for summary

judgment and a motion for attorney fees filed by plaintiffs,

California Outdoor Advertising Association, Inc., and its

members, Arcturus Outdoor Advertising, Bulletin Displays, LLC,

Clear Channel Outdoor, Inc., Fairway Outdoor Advertising, Inc.,

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2

Edwards Outdoor Signs, General Outdoor Advertising, Inc., James

N. Hoff doing business as Hoff Outdoor Advertising, Hunter Media,

Lamar Central Outdoor, Inc., J. R. Zukin Corporation doing

business as Meadow Outdoor Advertising, Sun Outdoor Advertising,

Stott Outdoor Advertising, Titan Advertising, United Outdoor

Advertising, Van Wagner Communications, LLC, Van Wagner/Goodman,

LLC, and Viacom Outdoor, Inc. (collectively “CSOAA”). Defendants

State of California Department of Transportation and Will

Kempton, Director of the California Department of Transportation

(collectively “Caltrans”) oppose the motions. The court held a

hearing on the motions February 10, 2006. 

After considering the memoranda filed by the parties and

arguments made by counsel at the hearing, and for the reasons

stated herein, plaintiffs’ motion for summary judgment is

GRANTED, and plaintiffs’ motion for attorneys’ fees is GRANTED.

BACKGROUND

Caltrans, a department of the State of California, regulates

outdoor advertising pursuant to the Outdoor Advertising Act,

California Business & Professions Code § 5200 et seq. (“OAA”) and

regulations promulgated by Caltrans pursuant to the OAA. (Defs.’

Response to Pls.’ Statement of Undisp. Facts (“RUF”) ¶ 1). The

OAA requires that any person operating an outdoor advertising

display in California referred to herein as “sign” or

“billboard”) obtain a permit (“Billboard permit”) issued by the

director of Caltrans or his authorized agent, which must be

renewed every five years. Cal Bus. & Prof. Code §§ 5350,

5360(a); RUF ¶ 3. Prior to January 1, 2003, the fee for

obtaining a Billboard permit was set by statute, California

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1 According to Caltrans, it extended the thirty-day

period to sixty days on July 17, 2003. (RUF ¶ 6). 

2 California Business and Professions Code § 5463

provides in relevant part: “The director may revoke any license

or permit for the failure to comply with this chapter and may

remove and destroy any advertising display placed or maintained

in violation of this chapter after 30 days written notice is

forwarded by mail to the permitholder at his or her last known

address. If no permit has been issued, a copy of the notice shall

be forwarded by mail to the display owner, property owner, or

3

Business and Professions Code section 5485(a), at $20.00 per year

for each billboard. (RUF ¶ 4).

Effective January 1, 2003, the Legislature amended section

5485(a), which now provides that the Director of Caltrans shall

set the Billboard permit fee:

(a)(1) The annual permit fee for each advertising

display shall be set by the director.

(2) The fee shall not exceed the amount reasonably

necessary to recover the cost of providing the service

or enforcing the regulations for which the fee is

charged, but in no event shall the fee exceed one

hundred dollars ($100). This maximum fee shall be

increased in the 2007-08 fiscal year and in the 2012-13

fiscal year by an amount equal to the increase in the

California Consumer Price Index.

(3) The fee may reflect the department's average cost,

including the indirect costs, of providing the service

or enforcing the regulations.

Cal. Bus. & Prof. Code § 5485(a).

On or about June 2, 2003, Caltrans announced a new annual

permit renewal fee of $92.00, which Caltrans indicated it

promulgated pursuant to newly-amended section 5485(a). (RUF ¶

6). At or around the same time, Caltrans notified permit holders

that they were required to pay within thirty days1 an additional

$72.00 per billboard for their 2003 permits or the permits would

be revoked pursuant to California Business and Professions Code §

5463.2 (RUF ¶ 6). In setting the new Billboard permit fee,

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advertiser at his or her last known address.”

3 The court cannot locate in the file the date plaintiffs

filed the original complaint. 

4

Caltrans did not follow the rulemaking provisions of the

Administrative Procedures Act, California Government Code section

11340, et seq. (“APA”). 

Plaintiffs filed their original complaint with the Los

Angeles County Superior Court.3 On November 29, 2004, plaintiffs

filed a First Amended Complaint asserting four claims: (1)

violation of the APA; (2) violation of California Business and

Professions code section 5485(a); (3) violation of Article I,

§2(a) of the California Constitution protecting liberty of

speech; and (4) against defendant Kempton only, a claim under 42

U.S.C. § 1983 for violation of plaintiff’s First Amendment

rights. 

On January 5, 2005, defendants removed the action to the

United States District Court for the Central District of

California on the basis of the First Amendment claim against

defendant Kempton. Defendants subsequently filed a motion for

change of venue which was granted by order dated March 14, 2005. 

The case was transferred to this court on March 24, 2005. 

On June 7, 2005 defendants filed a motion for partial

summary judgment. On July 12, 2005 plaintiffs filed a cross

motion for partial summary judgment as to the validity of the

permit fee. On August 29, 2005, the court granted plaintiff’s

motion on the grounds that the APA applied to defendants’ setting

of the permit fee and Caltrans failed to comply with the APA

procedure. 

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5

On November 14, 2005, plaintiffs filed a motion for summary

judgment, seeking (1) declaratory relief that the permit fee is

void; (2) an injunction prohibiting Caltrans from taking any

action to enforce the fee and from withholding any permit renewal

or other regulatory action on the grounds of non-payment of the

fee; and (3) refunds to plaintiffs for permit fees paid. On

November 30, 2005, the parties submitted a stipulation to the

court. The parties agreed to continue the hearing on plaintiff’s

motion for summary judgment. The parties also agreed that

defendant Caltrans would not collect 2006 permit renewal fees

until the fee was set through the APA procedure and the

defendants would be permanently enjoined from imposing any

penalties upon plaintiffs for failure to pay the 2006 permit

renewal fees before December 31, 2005. On December 1, 2005, the

court entered an order based upon these stipulations. On January

3, 2006, plaintiffs filed a motion for award of attorneys’ fees. 

Defendants subsequently filed oppositions to both of plaintiffs’

motions. 

STANDARD

Pursuant to Rule 56 of the Federal Rules of Civil Procedure,

summary judgment is appropriate when “there is no genuine issue

as to any material fact and . . . the moving party is entitled to

judgment as a matter of law.” Fed. R. Civ. P. 56(c). Under this

standard, an issue is “genuine” if there is sufficient evidence

for a reasonable jury to find for the nonmoving party and a fact

is “material” when it may affect the outcome of the case under

the substantive law that provides the claim or defense. Anderson

v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986). The

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determination is made based solely upon admissible evidence. Orr

v. Bank of America, 285 F.3d 764, 773 (9th Cir. 2002). 

Furthermore, the court must view inferences made from the

underlying facts in the light most favorable to the nonmoving

party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59 (1970). 

The moving party has the initial burden to demonstrate the

absence of a genuine issue of material fact. Celotex Corp. v.

Catrett, 477 U.S. 317, 323 (1986). If the moving party is

without the ultimate burden of persuasion at trial, it may either

produce evidence negating an essential element of the opposing

party’s claim, or demonstrate that the nonmoving party does not

have enough evidence to carry its ultimate burden of persuasion

at trial. Nissan Fire & Marine Insurance Co. v. Fritz Companies,

Inc., 210 F.3d 1099, 1106 (9th Cir. 2000). If the moving party

meets this initial requirement, the burden then shifts to the

opposing party to go beyond the pleadings and set forth specific

facts that establish a genuine issue of material fact remains for

trial. Matsushita Elec. Indust. Co. v. Zenith Radio Corp., 475

U.S. 574, 585-87 (1986). Summary judgment should not be granted

where “there are any genuine factual issues that properly can be

resolved only by a finder of fact because they may reasonably be

resolved in favor of either party.” Anderson, 477 U.S. at 250.

ANALYSIS

A. Declaratory Relief

Plaintiffs seek a judicial declaration that the permit

renewal fee imposed without compliance with APA procedures is

void. “To give weight to an improperly adopted regulation . . .

would permit an agency to flout the APA by penalizing those who

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4 Defendants argue that Tidewater is distinguishable from

this case because the regulations at issue in Tidewater were

“written interpretive policies” whereas the regulations in this

case were authorized by statute. However, these differences are

irrelevant. In both Tidewater and this case, defendants failed

to comply with the APA in adopting regulations.

7

were entitled to notice and an opportunity to be heard but

received neither.” Tidewater Marine Western, Inc. v. Bradshaw,

4

14 Cal. 4th 557, 577 (1996) (quoting Armistead v. State Personnel

Bd., 22 Cal. 3d 198, 204 (1978)). Therefore, “[f]ailure to

comply with the APA nullifies the rule.” Kings Rehab. Ctr., Inc.

v. Premo, 69 Cal. App. 4th 215, 217 (1999) (citing Cal. Gov. Code

§ 11350); see also Hillery v. Rushen, 720 F.2d 1132, 1134 (9th

Cir. 1983). 

As discussed in the court’s August 29, 2005 order,

defendants were required to comply with the APA in setting the

permit renewal fee. Defendants failed to comply with any APA

procedures in setting the $92 fee. Therefore, the $92 permit fee

set without compliance with APA procedures is void.

Defendants argue that declaratory relief is improper because

the time for this remedy has passed. However, the proper relief

for an individual seeking a determination of the validity of a

regulation is declaratory relief. Cal. Gov. Code § 11350 (West

2005). Because plaintiffs seek determination of the validity of

the permit fee, declaratory relief is the appropriate remedy and

the request for this type of relief is not untimely. 

Defendants also argue that none of the public policy

concerns protected by the APA were violated by setting the fee

without compliance with APA procedures; rather, the legislative

intent to increase the permit renewal fee would be frustrated by

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declaring the fee void. Plaintiffs correctly point out, however,

that the relevant legislative intent is that set forth in §

11346(a) of the APA, which requires all state agencies to

regulate in compliance with the APA except where the Legislature

authorizes an express exemption. As set forth in the court’s

August 29, 2005 order, no such exemption applies to the setting

of the permit renewal fee. Therefore, the purposes of the APA

would be frustrated by a failure to declare the fee invalid. 

Plaintiffs’ motion for declaratory relief is GRANTED. The

permit fee is void for failure to comply with the APA.

B. Injunction Against Enforcement of the Fee

Plaintiffs seek a permanent injunction, enjoining defendants

from future enforcement of the permit fees and from penalizing

plaintiffs in any way for non-payment of the fees. California

courts commonly grant both declaratory and injunctive relief in

cases brought under § 11350. Hillery, 720 F.2d at 1139. 

California Government Code § 11340.5(a) prohibits a state agency

from enforcing or attempting to enforce a regulation not adopted

in compliance with the APA. Cal. Gov. Code § 11340.5 (West

2005). An injunction preventing enforcement of the fees or

penalties for non-payment of the fees would be consistent with

this prohibition.

Defendants argue that plaintiffs’ request for injunctive

relief is moot because defendants have initiated APA rulemaking

procedures in setting the 2006 fee and because the parties

entered into a stipulated injunction entered by the court on

December 1, 2005. However, defendants have not completed the APA

procedure at this point. The court cannot speculate that

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defendants will continue through the APA process, thereby making

plaintiffs’ requested injunction moot. Further, the stipulated

injunction provides that defendants are permanently enjoined from

imposing any penalties upon plaintiffs for failure to pay the

2006 permit renewal fees before December 31, 2005. This is a

more limited injunction than that which plaintiff requests in

this motion. Plaintiffs request a permanent injunction

prohibiting any future enforcement of the invalid fees as well as

prohibiting the imposition of penalties for non-payment of the

invalid fees. Therefore, plaintiffs’ request for an injunction

is not rendered moot by the more limited permanent injunction

stipulated to by the parties. 

Plaintiffs are entitled to injunctive relief in order to

enforce the court’s finding that the permit fee set without

compliance with the APA is void. As such, plaintiffs’ request

for a permanent injunction prohibiting future enforcement of the

current, invalid permit renewal fee that was not enacted pursuant

to APA procedures, as well as penalties for failure to pay that

fee is GRANTED.

C. Refund and Interest for Past Fees Paid

Plaintiffs seek a refund in the amount of $72 per permit for

the years 2003-2005, when the fee was set without compliance with

the APA. The plaintiffs seek the difference between the new fee

set, $92 per permit, and the previous fee, $20 per permit, plus

seven percent interest. Defendants oppose the refund of any

fees.

/////

/////

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5 Plaintiffs cite to decisions of California courts as an

independent ground for granting the refund. However, while many

of these cases do not explicitly reference the Due Process

clause, the analysis of the relevant facts and issues is similar

to a traditional Due Process analysis. Compare Flynn v. City and

County of San Francisco, 18 Cal. 2d 210 (1941) with McKesson

Corp. v. Div. of Alcoholic Beverages & Tobacco, Etc., 496 U.S.

18, 38-39 (1990). Both inquiries involve an inquiry into the

applicable predeprivation remedy, either for purpose of the

voluntariness component analyzed in state law cases or for the

adequacy of the procedure analyzed in due process cases.

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1. Refund

Plaintiffs argue that both due process and California state

case law5 support the refund of fees paid pursuant to an invalid

regulation. Plaintiffs analogize their case to cases concerning

refunds of a void tax, arguing that the rationale of those cases

is equally applicable to plaintiffs’ circumstances. Exaction of

a tax constitutes a deprivation of property for which the State

must provide procedural safeguards against unlawful exactions in

order to satisfy the commands of the Due Process Clause. 

McKesson Corp. v. Div. of Alcoholic Beverages & Tobacco, Etc.,

496 U.S. 18, 36 (1990). California courts have held that where

taxes or fees have been illegally levied and payment is effected

by compulsion, the taxpayer is entitled to a refund. See Jordan

v. Dept. of Motor Vehicles, 75 Cal. App. 4th 449 (1999)

(affirming refund of unconstitutional smog impact fee to

plaintiffs who brought suit); Flynn v. City and County of San

Francisco, 18 Cal. 2d 210, 216 (1941); Vitale v. City of Los

Angeles, 13 Cal. App. 2d 704, 706 (1936); White v. State of

California, 110 Cal. App. 314, 315-16 (1930). 

Involuntary payment of the tax is a prerequisite to recovery

of a refund. Flynn, 18 Cal. 2d at 216. In Flynn v. City and

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County of San Francisco, the court held that the plaintiff was

entitled to a refund of an illegal license tax where the

plaintiff had a reasonable belief that payment of the license tax

was necessary to protect his business. 18 Ca. 2d at 217. The

court stated that the involuntary or voluntary character of a

payment “is to be determined from the terms of the ordinance

under which the taxes are imposed, the circumstances attendant

upon payment, and a consideration of the consequences which might

follow upon non-payment. Id. The Flynn court held that a refund

was warranted because the “motivating cause of the payments was

fear of infliction of the penalties,” which included monetary

penalties for delinquencies, civil actions resulting in writs of

attachments, and criminal liability. Id. 216-17. 

Plaintiffs assert that, like the plaintiff in Flynn, they

were coerced into making payments pursuant to an invalid

licensing system because of the potentially damaging

repercussions to their business interests that would result from

non-payment. Specifically, plaintiffs argue that the invalid fee

payments were coerced and, thus, involuntary due to the structure

of the regulations relating to permit acquisition and renewal. 

California Business and Professions Code § 5350 requires that

plaintiffs possess a permit as a condition of placing billboard

areas near a major highway. Cal. Bus. & Prof. Code § 5350 (West

2005). Payment of the fee is required to renew such a permit. 4

C.C.R. § 2424(a). Failure to renew a permit is grounds for

revocation of the permit. 4 C.C.R. § 2443. Further, the

director may remove or destroy any advertising display if the

permit is not renewed. Cal. Bus. & Prof. Code § 5463. Finally,

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6 Defendants also contend that Flynn is inapplicable to

this case because the tax at issue in that case was a general

revenue tax as opposed to a specific regulatory fee. Defendants

neither provide authority nor offer explanation as to why the

purpose of an invalid tax or fee bears any relationship to

whether a refund is warranted. To the contrary, the court finds

that, regardless of what the tax or fee sought to fund or

accomplish, the relevant issue of concern is that payments were

made pursuant to an invalid statutory scheme and defendants have

been unjustly enriched. 

12

any person who violates the permit requirement is guilty of a

misdemeanor. Cal. Bus. & Prof. Code § 5464. Because of the

monetary, civil, and criminal penalties accompanying non-payment

of the renewal fee, plaintiffs argue that the payment was not

voluntary.

As an initial matter, defendants argue that state tax cases

are not relevant to plaintiffs’ claims. Defendants contend that

because the statute granting defendants authority to set a new

fee has not been held unconstitutional, the cases cited by

plaintiffs are inapplicable.6 There is no dispute that § 5485

granted defendants the authority to set a new permit renewal fee. 

However, the court has held that the fee setting regulation

adopted pursuant to this statutory grant is void for failure to

comply with the ADA. Therefore, plaintiffs money was paid

pursuant to an invalid regulation. As such, plaintiffs’ analogy

to state tax cases, where tax payers sought a refund for moneys

paid pursuant to illegal, unconstitutional, or void laws or

regulations, is relevant to plaintiffs’ claims for a refund for

fees paid pursuant to an invalid regulation. 

Defendants also argue that plaintiffs’ payments were

voluntary because plaintiff had pre-deprivation remedies

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7 Section 2424(b) was subsequently amended and the new

regulatory language became operative on Dec. 23, 2004. 

13

available to them. At the relevant times in this case,7 § 2424

of the California Code of Regulations provides that “[u]pon

timely written request . . . for review” of a violation, the

Department “does not revoke the permit or remove the Display

until . . . a final decision is issued.” 4 C.C.R. § 2424 (West

2002, West 2003). This regulation does provide for a predeprivation review of the permit. However, as plaintiff argues,

the remedy still results in exposure to monetary, civil, and

criminal penalties. Section 2424 of California Code of

regulations provides that non-payment penalties include a

“mandatory penalty” of $100 per permit if payment is late. 4

C.C.R. § 2424 (West 2006). The permit may also be revoked, the

permit holder’s license may be revoked, the sign may be removed,

and there are potential misdemeanor penalties. 4 C.C.R. §§ 2442-

43; Cal. Bus. & Prof. Code §§ 5463-64. Where the sanctions for

failure to comply are merely prolonged by the pre-deprivation

hearing, as indicated by the language “until” in § 2442, such a

pre-deprivation remedy is meaningless. See McKesson Corp. v.

Div. of Alcoholic Beverages & Tobacco, Etc., 496 U.S. 18, 38-39

(1990). 

In McKesson, the Court stated that a meaningful predeprivation remedy requires not only a fair opportunity to

challenge the accuracy and legal validity of the obligation, but

also a clear and certain remedy for any erroneous or unlawful

collection of money. Id. at 38. The court also acknowledged

that it has long held that “when a tax is paid in order to avoid

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financial sanctions or a seizure of . . . property, the tax is

paid under ‘duress’ in the sense that the State has not provided

a fair and meaningful pre-deprivation procedure. Id. at 39 n.20.

Because the pre-deprivation procedure requires plaintiffs to

expose themselves to penalties, sanctions, and a threat of

seizure of personal property, the procedure is not meaningful. 

Therefore, the existence of this remedy does not render

plaintiffs’ payment of the fees voluntary. Plaintiffs’ payments

were motivated by the fear of infliction of the penalties. See

Flynn, 18 Ca. 2d at 216-17. As such, plaintiffs are entitled to

a refund of the fees paid to defendants.

2. California Tort Claims Act

Defendants argue that if the court finds that plaintiffs are

entitled to a refund of fees paid, not all plaintiffs have a

valid claim for a refund. Defendants contend that many of the

plaintiffs did not file a claim with the Victim Compensation and

Government Claims Board as required by the California Tort Claims

Act (“CTCA”). Therefore, defendants assert that these plaintiffs

cannot seek a refund. 

The CTCA requires that any party seeking “money or damages”

from the State file a claim with the appropriate government

entity. Cal. Code § 905 (West 2005). However, California courts

have held that “the language of section 905 makes clear that the

requirements for presentation of claims apply only to ‘claims for

money or damages’ and not to claims for other forms of relief,

such as specific recovery of property.” Minsky v. City of Los

Angeles, 11 Cal. 3d 113, 117 (1974). In Minsky, the California

Supreme Court held that in a suit for recovery of sums seized and

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allegedly wrongfully withheld from the plaintiff, failure to file

a claim with the government entity did not bar the action because

it was not a suit for “money or damages.” Id. at 122. Further,

California courts have held that claims brought under the

doctrine of unjust enrichment do not require filing of a claim

with a government entity. Gonzales v. State of California, 68

Cal. App. 3d 621 (1977).

Plaintiffs seek a refund of fees paid pursuant to an illegal

fee. Their claim for a refund is for return of specific funds

that defendants collected without proper legal authority. As

such, plaintiffs’ claim is for restitution and has its foundation

in the doctrine of unjust enrichment. See Gonzales, 68 Cal. App.

3d at 627-28. Therefore, plaintiffs have not brought a claim

seeking “money or damages” and non-compliance with the claims

statutes erects no bar to the instant action.

3. Amount of Refund 

Plaintiffs seek a refund of $72 per permit, which reflects

the increase in the fee from the former $20 fee set pursuant to

statute to the $92 fee which failed to comply with APA

procedures. Plaintiffs also seek prejudgment interest of seven

percent pursuant to Article XV, Section 1 of the California

Constitution. Because the court has found that a refund is due

to each plaintiff, the court directs defendants to refund to each

plaintiff $72 per permit for each permit issued between 2003 and

2005, when the fee was set without compliance with APA

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8 The parties do not dispute the amount paid in total by

each plaintiff. (RUF ¶¶ 8-9, 11-14, 16-21). At the February 10

hearing, the parties stipulated to the amounts paid by three of

the plaintiffs which were disputed in the parties’ submissions. 

The parties agreed that plaintiff Viacom Outdoor, Inc. paid

defendants $858,388, plaintiff Clear Channel Outdoor, Inc. paid

defendants $429, 544, and plaintiff Acturus Outdoor Advertising,

Inc. paid defendants $7,464. 

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procedures.8 The court also directs defendants to include 7%

prejudgment interest in the refund paid to each plaintiff. 

D. Attorneys’ Fees

Plaintiffs also bring a motion for attorneys’ fees, arguing

that they are prevailing parties pursuant to 42 U.S.C. § 1988. 

Section 1988 provides:

In any action or proceeding to enforce a provision of .

. . 42 U.S.C. § 1983 . . . the court, in its

discretion, may allow the prevailing party, other than

the United States, a reasonable attorney’s fee as part

of the costs.

42 U.S.C. § 1988 (West 2006). Defendants argue that plaintiffs

should not be able to recover attorneys’ fees because (1)

plaintiffs are not the prevailing party for purposes of § 1988;

(2) plaintiffs’ APA claim and § 1983 claim do not arise from a

common nucleus of operative facts; and (3) plaintiffs’ § 1983

claim is not a substantial claim. Defendants also argue that the

amount claim is not supported by the documentation provided by

plaintiffs. The court will address each argument in turn.

1. Prevailing Party

The Supreme Court held that “[i]f the plaintiffs has

succeeded on any significant issue in the litigation which

achieved some benefit the parties sought in bringing the lawsuit,

the plaintiff has crossed the threshold to a fee award of some

kind.” Texas State Teachers Assn. v. Garland Independent School

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District, 489 U.S. 782, 791-92 (1989). The plaintiff seeking

fees must obtain an enforceable judgment against the defendant

from whom fees are sought. Gerling Global Reinsurance Corp. of

Am. v. Garamendi, 400 F.3d 803, 806 (9th Cir. 2005) (citing

Hewitt v. Helms, 482, U.S. 755, 760 (1987)). In other words, a

plaintiff is a prevailing party for purposes of § 1988 “when

actual relief on the merits of his claim materially alters the

legal relationship between the parties by modifying the

defendant’s behavior in a way that directly benefits the

plaintiff.” Id. (quoting Farrar v. Hobby, 506 U.S. 103, 111-12

(1992)). 

Defendants argue that plaintiffs are not prevailing parties

because the legal relationship between plaintiffs and defendants

has not changed and any issue upon which plaintiffs prevailed is

de minimis. These arguments are without merit. Plaintiffs have

prevailed on their claim that the fee set and collected by

defendant is invalid for failure to comply with the APA. 

Plaintiffs have been granted declaratory relief and injunctive

relief, preventing defendants from enforcing the invalid

regulation or penalizing plaintiffs for non-payment. This relief

directly benefits plaintiffs because it prevents defendants’

ongoing collection of an invalid fee. Plaintiffs have also been

granted a refund of the fees collected by defendants pursuant to

the void regulation.

Defendants assert that the relationship between plaintiffs

and defendants has not changed because, in the future, defendants

will impose a fee pursuant to APA procedures and will administer

its imposition and collection. However, the legal relationship

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between plaintiffs and defendants has changed because defendants

are required to follow APA procedures in imposing the fee. 

Further, defendants are enjoined from imposing the invalid fee

upon plaintiffs as they had done between 2003-2005. 

Defendants also assert that plaintiffs prevailed on a purely

procedural matter, and therefore the issue prevailed upon was

only de minimis. See Texas State Teachers Assn, 489 U.S. at 792

(stating that where a plaintiff prevails on a purely technical or

de minimis issue, the “generous formulation” for a prevailing

party may not be met). While compliance with the APA is a

procedural matter, plaintiffs prevailed by invalidating the fee

because defendants failed to comply with the procedural

requirements of the APA. The invalidation of the fee was the

core of plaintiffs’ claim for relief. This invalidation rendered

declaratory relief, injunctive relief, and payment of refunds in

favor of plaintiffs. As such, plaintiffs prevailed on more than

a de minimis matter, and are prevailing parties for the purposes

of § 1988.

2. Common Nucleus of Operative Facts

Plaintiffs prevailed on their APA claim, not on the § 1983

claim for violation of the First Amendment. In the August 29,

2005 order, the court did not reach the First Amendment issue

because the fee was invalidated on adequate state law grounds. 

In drafting § 1988, “Congress was not limited to awarding fees

only when a constitutional or civil rights claim is actually

decided.” Maher v. Gagne, 448 U.S. 122, 132 (1980). Rather, §

1988 fees may be awarded “ in a case in which the plaintiff

prevails on a wholly statutory, non-civil-rights claims pendant

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to a substantial constitutional claim.” Id. 

Such a fee award furthers the Congressional goal of

encouraging suits to vindicate constitutional rights

without undermining the longstanding judicial policy of

avoiding unnecessary decision of important

constitutional issues.

Id. at 133. 

In order to collect fees in a case where the court declines

to enter judgment for the plaintiff on a claim supporting

attorneys’ fees, plaintiff must prevail on a non-fee claim that

arises out of a “common nucleus of operative fact[s].” 

Garamendi, 400 F.3d at 808 (citing United Mine Workers v. Gibbs,

383 U.S. 715, 725 (1966)). Claims arise from a common nucleus of

operative facts where fee-supporting claims are so interrelated

with non-fee claims that plaintiffs would ordinarily be expected

to try them all in one judicial proceeding. Id. (internal

quotations omitted).

All of plaintiffs’ claims arose from defendants’ collection

of permit renewal fees pursuant to an invalid fee setting

regulation. Each of plaintiffs’ claims sought to invalidate the

fee rate set by defendants, either for procedural or substantive

defects. Plaintiffs correctly brought all of these claims in one

action. Therefore, the non-fee claim challenging the

regulation’s validity for failure to comply with APA procedure

should have been brought and was brought with the fee claim

challenging the regulation’s validity for violation of the First

Amendment. See Garamendi, 400 F.3d at 809. As such, the non-fee

claim arose out of the common nucleus of operative facts

implicated in the § 1983 claim.

///// 

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Defendants argument that the § 1983 claim and the APA claim

do not arise out of a common nucleus of operative facts is based

primarily on the fact that there are two different legal theories

implicated by plaintiffs’ fee-claim and non-fee claim. 

Defendants emphasize that plaintiffs prevailed on a nonconstitutional theory of recovery, not a constitutional theory. 

However, the common nucleus test requires only similar facts, not

similar legal theories. Further, the Supreme Court has

explicitly held that § 1988 fees may be awarded to a plaintiff

who “prevails on a wholly statutory, non-civil-rights claims

pendant to a substantial constitutional claim.” Maher, 448 U.S.

at 132. Thus, defendants’ arguments are without merit. 

Plaintiffs’ First Amendment claim and APA claim arise out of a

common nucleus of operative facts.

3. Substantial First Amendment Claim

A plaintiff seeking to collect § 1988 fees on a non-fee

claim must also demonstrate that the constitutional claim is

substantial. See Maher, 448 U.S. at 132 n.15; Garamendi, 400

F.3d at 808. “A claim is constitutionally insubstantial if it is

‘essentially fictitious . . . wholly insubstantial . . .

obviously frivolous . . . or obviously without merit.” 

Garamendi, 400 F.3d at 808 (quoting Hagans v. Lavine, 415 U.S.

528, 537-38 (1974)). Constitutional claims are substantial for

the purposes of attorneys’ fees if they are sufficiently

substantial to support federal jurisdiction. See Hagans, 415

U.S. 528. Application of the Hagans substantiality test does not

require the court to determine whether the constitutional claims

have merit. 

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9 While not dispositive of this issue, it is somewhat

troubling to the court that defendants removed the case to

federal court on what it now argues is “insubstantial.”

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Plaintiffs’ § 1983 claim does not fail the Hagans

substantiality test. Plaintiffs’ claim is not so wholly or

obviously fictitious, frivolous, or without merit as to deprive

the court of federal jurisdiction. Hagans, 415 U.S. at 537-38. 

In this case, defendants removed this case to federal court on

the basis of plaintiffs’ § 1983 claim.9 The § 1983 claim

remained in this action until the court granted plaintiffs’

motion for summary judgement and the entire dispute was settled. 

See Maher, 448 U.S. at 131 (“[T]he constitutional issues remained

in the case until the entire dispute was settled by the entry of

a consent decree.”). Therefore, because plaintiffs’

constitutional claims are sufficiently substantial to support

federal jurisdiction, plaintiffs have met the substantiality

requirement to recover fees pursuant to § 1988.

4. Amount of Attorneys’ Fees

Plaintiffs seek attorneys’ fees in the amount of

$347,661.50. Defendants argue that this amount is not supported

by plaintiffs’ documentation and that the amount claimed is not

reasonable.

In determining a reasonable attorneys’ fee, courts employ

what is known as the “lodestar” method. See Morales v. City of

San Rafael, 96 F.3d 359, 363-65 & nn. 8-12 (9th Cir. 1996). The

“lodestar” is calculated by multiplying the number of hours the

prevailing party reasonably expended on the litigation by a

reasonable hourly rate. McGrath v. County of Nevada, 67 F.3d

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248, 252 (9th Cir. 1995). After computing the lodestar figure,

the district court assesses whether it is necessary to adjust the

amount on the basis of any of the twelve Kerr factors which were

not already taken into account. Id.; Kerr v. Screen Guild

Extras, Inc., 526 F.2d 67, 70 (9th Cir. 1975); Cunningham v.

County of Los Angeles, 879 F.2d 481, 487 (9th Cir. 1988). There

is a strong presumption that the lodestar figure represents a

reasonable fee and “[o]nly in rare instances should the lodestar

figure be adjusted on the basis of other considerations.” See

Harris v. Marhoefer, 24 F.3d 16, 18 (1994); Oviatt v. Pearce, 954

F.2d 1470, 1482 (9th Cir. 1992). 

While determining the lodestar often is difficult and

imprecise, the court should provide some indication of how it

arrived at its conclusions. See Domingo v. New England Fish Co.,

727 F.2d 1429, 1447 (9th Cir.), modified, 742 F.2d 520 (9th Cir.

1984); see also Hensley v. Eckerhart, 461 U.S. 424, 437

(1983)(while the district court has discretion in awarding fees,

the court must provide “a concise but clear explanation of its

reasons for the fee award.”).

a. Reasonable Hours Expended

In determining the reasonable hours expended, the party

seeking attorneys’ fees bears the burden of submitting detailed

time records which justify the hours spent working on the claims. 

Id. at 434 (district court should exclude hours not “reasonably

expended”). “Where the documentation of hours is inadequate, the

district court may reduce the award accordingly.” Id. at 433;

Chalmers v. City of Los Angeles, 796 F.2d 1205, 1210 (9th Cir.

1986). Here, plaintiffs provided detailed time sheets attached

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to Terri Walter’s declaration filed with this court on December

28, 2005.

In opposition, defendants contend that the number of hours

expended is unreasonable. Plaintiffs seek fees of nearly

$350,000.00. While the large amount of fees in this case can be

attributed in part to complex administrative and constitutional

issues, it does not justify the award sought by plaintiffs. 

Accordingly, the court has reduced plaintiffs’ hours to reflect

only those hours which the court finds were reasonable. See

infra section II(c).

b. Reasonable Hourly Rate

In order to decide what rate is “reasonable,” courts look at

“prevailing market rates in the relevant community.” Blum, 465

U.S. at 895; Davis v. City of San Francisco, 976 F.2d 1536, 1545

(9th Cir. 1992)(a reasonable hourly rate should be determined “by

reference to the fees that private attorneys of an ability and

reputation comparable to that of prevailing counsel charge their

paying clients for legal work of similar complexity”). 

Determination of a reasonable hourly rate is not made merely by

reference to rates actually charged by the prevailing party or

rates charged in the prevailing party’s locale. See White v.

City of Richmond, 713 F.2d 458, 461 (9th Cir. 1983). Rather, the

rate assessed is based on the prevailing rate in the relevant

community for similar work. Chalmers, 796 F.2d at 1211; Blum,

465 U.S. at 895 n. 11. Generally, the relevant community is the

forum in which the district court sits. Davis v. Mason County,

927 F.2d 1473, 1488 (9th Cir. 1991). However, rates outside the

forum may be used “if local counsel was unavailable, either

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because they are unwilling or unable to perform because they lack

the degree of experience, expertise, or specialization required

to handle properly the case.” Gates v. Deukmejian, 987 F.2d

1392, 1405 (9th Cir. 1992).

Plaintiffs’ calculation of attorneys’ fees uses the

“reasonable rate” for partners, associates, and paralegals in

Southern California, where the attorneys’ law firm is located.

Plaintiffs have not established that this action required unique

expertise that could not be obtained locally. Thus, the court

will not assess the prevailing rates of the Los Angeles and

Orange County area. 

The court finds that reasonable hourly rates are as follows:

$300 per hour billed by a partner; $225 per hour billed by an

associate; and $90 per hour billed by a paralegal or legal

assistant. These figures represent the prevailing rates for

similar work in the relevant community of Sacramento in the

Eastern District of California, which is the venue of this

action. 

c. Determining the “lodestar”

The reasonable hours expended by each attorney defending the

claim and the corresponding reasonable hourly rates are set forth

below. The court excluded hours allocated to duplicative

research, communication, or discovery work, excessive billing, or

which were otherwise unwarranted. In this regard, based upon the

court’s review of the breadth and complexity of the issues

involved in this litigation and upon the court’s experience with

the parties and the submissions by the parties in this case, the

court has made the following findings regarding the reasonable

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number of hours expended by plaintiffs on each component of the

litigation:

Project Submitted Hours Reasonable Hours

Pre-lawsuit Work 42.9 NONE

Pleadings & Removal 29.45 29.45

First Amendment

 Research & Analysis 74 50

OAA Research

 & Analysis 29.75 15

APA Research

 & Analysis 117.1 50

Case Administration

 & Procedural Issues 75.4 25

Misc. Legal

 Research & Analysis 122.1 55

Client Communication 74.75 25

Communication with 

 Defendants 20.9 10

Discovery 47.95 20

Motion for Partial

 Summary Judgment 228.1 150

Motion for 

 Summary Judgment 213.55 125

Motion for Fees 128 50 

The court calculated the time spent on each project by each

attorney or paralegal and adjusted the number of hours performed

by each attorney and paralegal, using the same ratio. 

After adjusting the hours to take these considerations into

account, the total amount of the attorneys’ fees is

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10 Defendants have not asserted an inability to pay the

requested attorneys’ fee or suggested that an award of fees would

be a hardship. 

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$164,203.80.10 The following is a breakdown of this

determination:

Attorney/ Hours Rate Total

Paralegal/

MFW 453.14 $300 $135,942 

AT 108.77 $225 $24,473.25 

AH 0.93 $225 $209.25

TW 38.67 $90 $3,480.30

LB 1.1 $90 $99

Total = $ 164,203.80

d. Kerr Factors

In Kerr v. Screen Guild Extras, Inc., 526 F.2d 67, 70 (9th

Cir. 1975), the Ninth Circuit outlined twelve factors the court

should evaluate in determining whether to adjust the Lodestar:

(1) the time and labor required, (2) the novelty and difficulty

of the questions involved, (3) the skill requisite to perform the

legal service properly, (4) the preclusion of other employment by

the attorney due to acceptance of the case, (5) the customary

fee, (6) whether the fee is fixed or contingent, (7) time

limitations imposed by the client or the circumstances, (8) the

amount involved and the results obtained, (9) the experience,

reputation, and ability of the attorneys, (10) the

“undesirability” of the case, (11) the nature and length of the

professional relationship with the client, and (12) awards in

similar cases. Id.

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After evaluating the Kerr factors, the court finds that

plaintiffs’ attorneys’ fee should not be adjusted. Accordingly,

the court finds that defendants’ attorneys fee are properly

calculated at *$ 164,203.80. 

CONCLUSION

For the foregoing reasons, plaintiffs’ motion for summary

judgment is GRANTED and plaintiffs’ motion for attorneys’ fees is

GRANTED. The Clerk is instructed to close the file.

IT IS SO ORDERED.

DATED: March 6, 2006

/s/ Frank C. Damrell Jr. 

FRANK C. DAMRELL, Jr.

UNITED STATES DISTRICT JUDGE

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