BILL ANALYSIS
SB 238
Page 1
Date of Hearing: June 12, 2001
ASSEMBLY COMMITTEE ON JUDICIARY
Darrell Steinberg, Chair
SB 238 (Kuehl) - As Amended: March 27, 2001
SENATE VOTE : 22-15
SUBJECT : BOND AND UNDERTAKINGS: PUBLIC INTEREST ACTIONS
KEY ISSUE : SHOULD TRIAL COURTS HAVE DISCRETION TO WAIVE THE
BOND REQUIREMENT IN PRELIMINARY INJUNCTION CASES WHERE THE COURT
FINDS THAT THE LAWSUIT IS BROUGHT IN THE PUBLIC INTEREST AND THE
MOVING PARTY HAS NO DIRECT FINANCIAL INTEREST IN THE OUTCOME?
SYNOPSIS
This measure allows a judge to waive the requirement of posting
bond when a preliminary injunction is granted, in public
interest cases where the moving party has no direct financial
interest in the outcome. The bill is intended to ensure that
public interest litigants are not deterred or prevented from
seeking injunctions due to the cost of posting bond.
SUMMARY : Allows the bond requirement in cases where a
preliminary injunction is sought to be waived in proceedings
brought in the public interest where the principal has no direct
financial interest in the determination of the matter.
EXISTING LAW :
1)Requires a party obtaining an injunction to post an
"undertaking," or bond, in an amount sufficient to pay the
damages which the party enjoined may suffer by reason of the
injunction. Exempts public entities and parties to divorce
proceedings from this requirement. (Code of Civil Procedure
section 529.)
2)Permits the judge to waive a bond requirement if the principal
is indigent. (Code of Civil Procedure section 995.240.)
FISCAL EFFECT : The bill as currently in print is not keyed
fiscal.
COMMENTS : The author has introduced this bill to remove one of
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the barriers to nonprofit organizations litigating, and
obtaining, injunctions in the public interest. The author
states:
Section 529 of the Code of Civil Procedure requires
plaintiffs seeking an injunction in almost every civil case
to post a bond if the injunction is granted. Although this
statute had generally been treated as discretionary, one
judge, in a recent high-profile case, ruled that the
statute created a mandatory requirement that applies in all
civil litigation, including cases when public interest
groups succeed in enjoining potentially illegal behavior.
This is a particularly egregious result when the plaintiff
enjoins illegal activity in an action brought through a
citizen suit provision or private attorney general statute
where there is specific and unambiguous legislative
direction for private parties to help enforce state law.
The Headwaters Case. The need for this bill was brought to the
author's attention by a recent high-profile case involving the
Headwaters forest in Humboldt County. In that case, the Sierra
Club and the Environmental Protection Information Center sued
Pacific Lumber and the California Department of Forestry (CDF)
over alleged violations of the California Forest Practices Act
and the California Environmental Quality Act (CEQA) with regard
to CDF's approval of an amended timber harvest plan by Pacific
Lumber. The amended plan, which had not gone through the
required process of public comment and environmental review,
would have allowed for significant changes in various practices,
notably how the logs were to be removed from the forest. The
judge granted a preliminary injunction barring the
implementation of the amended plan, but ordered the
environmental groups to post a $250,000 bond. While in some
cases plaintiffs pay sureties a percentage of the bond amount
for the surety to post the bond, in this case, even that
percentage was more than the plaintiffs could afford. The bond
was posted only because the high-profile nature of the case
allowed the plaintiffs to raise large contributions from
supporters in the entertainment industry.
Existing law allows a judge to waive the injunction requirement
in two specific instances, in divorce proceedings or where the
party in question is indigent. (Code of Civil Procedure
sections 529 and 995.240.) This bill, to address the problem
which was highlighted in the Headwaters case, would give the
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judge discretion in any public interest case to waive the bond
requirement where the party granted the injunction has no direct
financial interest in the outcome.
Public Interest Litigation . Both state and federal law provide
for litigation by private parties to enforce laws in the public
interest. (Code of Civil Procedure section 1021.5, allowing an
award of attorneys' fees in "any action that has resulted in the
enforcement of an important right in the public interest," and
Alyeska Pipeline Co. v. Wilderness Society (1975) 421 U.S. 240
(denying an award of attorneys' fees in "private attorney
general" suit brought under federal law without specific
statutory authorization for such an award.) ) (See also,
Woodland Hills Residents Ass'n, Inc., v. City of Los Angeles ,
where the California Supreme Court noted "The [private attorney
general attorney fee] 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?")
As much as an award of attorneys' fees to the prevailing party
in a public interest suit may appropriately encourage such
suits, the imposition of an injunction bond may inappropriately
discourage them, by making it financially difficult or even
impossible for the plaintiff to proceed. Federal law already
recognizes this fact by providing federal courts broad
discretion to reduce or waive injunction bond requirements.
Rule 65(c) of the Federal Rules of Civil Procedure states "No
restraining order or preliminary injunction shall issue except
upon the giving of security by the applicant, in such sum as the
court deems proper , for the payment of such costs and damages as
may be incurred or suffered by any party who is found to have
been wrongfully enjoined or restrained." [Emphasis added.] In
setting the sum for bond in public interest cases, federal
courts have taken into consideration the policy Congress has set
of encouraging private suits to enforce certain statutes. In
People ex rel. Van de Kamp v. Tahoe Regional Plan , the Ninth
Circuit Court of Appeals stated "The court has discretion to
dispense with the security requirement, or to request mere
nominal security, where requiring security would effectively
deny access to judicial review." (9th Cir. (1985) 766 F. 2d
1319, 1325.)
Need for Legislative Guidance. The issue of whether California
courts have discretion to waive the bond requirement in public
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interest cases has been discussed, but not resolved, in
California case law. In Mangini v. J.G. Durand , the First
District Court of Appeal stated:
To date this recurring issue remains unresolved: Do courts
of this state, under the provisions of Section 529 or
otherwise, have the power to order a nominal bond or to
waive any bonding requirement as a condition to issuing a
preliminary injunction in "environmental" litigation? Our
trial courts, counsel who must provide legal advice, and
the litigants of this state will continue to debate this
issue until it is finally resolved. ((1994) 31 Cal. App.
3d 214, at 219-220.)
ARGUMENTS IN OPPOSITION : The California Manufacturers &
Technology Association (CMTA) argues that the bond requirement
is needed to protect the interests of defendants, who may
otherwise suffer unrecompensed losses in a case where a
preliminary injunction is granted but the defendant later
prevails. CMTA argues that the amount of the bond is
discretionary under existing law, depending on the judge's view
of the defendant's potential loss, and further notes that bonds
can be obtained for a cost of a small percentage of the total
value of the bond. Finally, they state "There is no bond
requirement unless the defendant is subjected to the injunction
and forced to stop some activity; absent an injunction, the suit
proceeds on its merits and the plaintiffs have their case fully
reviewed by the court."
The California Building Industry Association (CBIA) and
California Business Properties Association argue that this bill
will encourage NIMBY (Not In My Backyard) litigation, described
by CBIA as "designed to stop a host of infrastructure projects
including roads, energy production facilities, water facilities,
schools, and infill or low-income housing."
Opponents' concerns regarding the protection of their interests
appear to be misplaced. In granting a preliminary injunction,
the trial court must consider the likelihood that the plaintiff
will prevail at trial, and then compare the harm the plaintiff
will suffer if no relief is granted with the harm the defendants
will suffer if the injunction is issued. (See, e.g. King v.
Meese (1987) 43 Cal. 3d 1217.) In weighing the potential harm
to the parties, the court must consider "? such things as the
inadequacy of other remedies, the degree of irreparable harm,
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and the necessity of preserving the status quo." ( Abrams v. St.
John's Hospital & Health Center (1994) 25 Cal. App. 4th 628,
636.) A defendant who will suffer severe or irreparable harm if
an injunction is granted can raise that in the proceedings just
as the plaintiffs can raise the harm that will result if the
injunction is not granted. In the Headwaters case noted above,
for example, the court found that if the defendants had been
allowed to proceed with their amended timber harvest plan, the
changes in log removal would have done irreparable harm to the
environment. Thus the interests of defendants will receive some
protection even under the potential for bond waiver under this
bill, when the court weighs the harm that may be caused the
defendants if an injunction is granted. Moreover, in granting a
preliminary injunction, the court makes a finding that it is
more likely that plaintiffs will prevail. Thus it seems
unlikely that giving the court discretion to waive the bond
requirement, a practice as noted already available in the
federal courts, will result in a large number of cases where the
defendant suffers harm due to the injunction, prevails in the
litigation, and then is unable to recover due to the lack of a
bond.
REGISTERED SUPPORT / OPPOSITION :
Support
American Lung Association
California Association of Nonprofits
California Public Interest Research Group
Consumer Attorneys of California
Consumers Union
Sierra Club California
Opposition
California Building Industry Association
California Business Properties Association
California Manufacturers and Technology Association
Civil Justice Association of California
Consulting Engineers and Land Surveyors of California
Analysis Prepared by : Kathy Sher / JUD. / (916) 319-2334