State must pay charities' counsel $600K for unlawful statutes

The California attorney general will have to pay more than $600,000 in attorney fees to two charities after a judge ruled that statutes used to fine them for misleading solicitations were unconstitutional.

In achieving the statutes' removal, the ruling on Thursday held, defense attorneys provided a significant public benefit to 115,000 charities who regularly solicit in the state of California, entitling their clients to recuperation of their fees. Catholic Medical Mission Board, Inc. v. The Attorney General of the State of California, et al., 20STCP01520 (L.A. Super. Ct., filed Apr. 28, 2020).

"The court concluded that we provided a benefit to the entire citizenry of California and to charities because we got two unconstitutional statutes thrown out," said Paul D. Murphy of Murphy Rosen LLP in an interview.

Murphy and Daniel N. Csillag, also of the Santa Monica law firm, represented the Catholic Medical Mission Board Inc. in the case, which also involved the charity Food for the Poor. Food for the Poor, Inc. v. The Attorney General of the State of California, et al., 20STCP01626 (L.A. Super. Ct., filed May 8, 2020).

Invoking Section 2599.6(f) (2) of the Government Code, which references "using any unfair or deceptive acts or practices or engaging in any fraudulent conduct that creates a likelihood of confusion or misunderstanding" the attorney general filed an injunction against the charities earlier this year, alleging they had overvalued gift-in-kind donations in their solicitations.

However, in a March 18 order, Los Angeles County Superior Court Judge James C. Chalfant ruled that, while the solicitations may have been deceptive, the rule itself "does not survive strict scrutiny, facially or as applied." Chalfant wrote that the section "does not provide the breathing room required for protected speech and is not narrowly tailored to meet a compelling state interest."

"Judge Chalfant ruled that, first of all, the procedure that [the attorney general] used to immediately enjoin us into a cease-and-desist order was unconstitutional on its face, and he threw it out," Murphy said.

Murphy also noted that a separate statute used to prosecute the charities without proof of intended fraud or harm was also thrown out by Chalfant.

"The issue in this case was, 'Well, can you do that to charities? Are these advertisements or is this fully protected speech under the First Amendment?'" said Csillag in an interview. "There's a higher standard, and we won in saying these are not advertisements; these are something else you can't regulate."

After the final judgment was entered in July, Murphy and Csillag filed a motion under CCP 1021.5 entitling prevailing parties to attorney fees if a ruling presents a significant benefit to the public, the burden of enforcement makes the award appropriate and if fees should not be paid out of recovery.

The Los Angeles Superior Court found these conditions were met in the ruling won by the plaintiffs, thus entitling them to the $625,000 payout. According to Murphy, roughly $375,000 went to the Catholic Medical Mission Board, while around $375,000 went to Food for the Poor.

Because Murphy Rosen LLP charged the Catholic Medical Mission Board a discounted rate for their services, the attorneys were awarded a multiplier of 1.2 on their fees, according to Thursday's tentative ruling.