The opinion
Filed 8/19/25
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION FOUR
RUSSELL L. JOHNSON,
Plaintiff and Respondent, A170383
v.
STONERIDGE CREEK (Alameda County Super.
PLEASANTON CCRC LLC et al., Ct. No. 21CV004133)
Defendants and Appellants.
Russell Johnson filed a class action complaint against Stoneridge Creek
Pleasanton CCRC LLC, Spieker Senior Development Partners LLC, and
Continuing Life LLC (collectively, Stoneridge Creek). Johnson is a resident
of Stoneridge Creek’s continuing care retirement community in Pleasanton
and seeks to represent a class of current and former residents. He alleges
that Stoneridge Creek violated numerous statutes, including Health and
Safety Code section 1770 et seq., the Unfair Competition Law (Bus. & Prof.
Code § 17200 et seq.) (UCL), the Consumer Legal Remedies Act (Civ. Code
§ 1750 et seq.) (CLRA), and Welfare and Institutions Code section 15600
et seq. (the Elder Abuse Act), and also breached the Residence and Care
Agreement (RCA) between residents and Stoneridge Creek.
After the trial court denied its motion to compel arbitration of
Johnson’s claims, Stoneridge Creek finalized its annual budget for 2023,
allocating $500,000 for legal fees, including its anticipated defense costs in
this litigation. The 2024 budget similarly allocated $500,000 in legal fees,
1
whereas prior budgets had set substantially lower amounts. These budgets
served as the basis for annual increases to the monthly fees that residents
pay.
Johnson moved for a preliminary injunction, seeking to enjoin the
increases to the extent they included Stoneridge Creek’s defense costs in this
litigation. He argued that the increases violated litigation fee-recovery
provisions of the CLRA and Elder Abuse Act, which provide for an award of
fees only to prevailing plaintiffs, and constituted unlawful retaliation under
the UCL. Stoneridge Creek disputed those contentions and further argued
that the inclusion of its anticipated defense costs was authorized by Health
and Safety Code section 1788, subdivision (a)(22)(B) (section 1788(a)(22)(B)),
which provides that “changes in monthly care fees shall be based on projected
costs, prior year per capita costs, and economic indicators.”1 It noted that, in
response to a complaint from Johnson, the California Department of Social
Services (Department), which is responsible for regulating CCRCs and
enforcing the statutory scheme, found that Stoneridge Creek’s anticipated
legal expenses qualified as “projected costs” under section 1788(a)(22)(B) and
that it had not engaged in retaliation. Stoneridge Creek contended that the
trial court should defer to these findings.
The trial court granted Johnson’s motion on the grounds he raised.
Stoneridge Creek appeals, arguing that Johnson failed to establish a
likelihood of success on any claim that would render the proposed increases
unlawful, and that the balance of harms tips in its favor because it cannot
recover its legal costs from residents in the future, whereas if Johnson
prevails, he will be entitled to damages and attorneys’ fees. Stoneridge Creek
1 Undesignated statutory references are to the Health and Safety Code.
2
also challenges as inadequate the $1,000 bond the trial court ordered
Johnson to deposit with the court.
We will reverse. We conclude that the increases do not constitute a
recovery of attorneys’ fees in violation of the litigation fee-shifting statutes on
which Johnson relies. We also agree with Stoneridge Creek that, as the
Department concluded, section 1788(a)(22)(B) permits it to use monthly fee
revenue to fund its defense costs, and accordingly permits an increase to
those monthly fees based on reasonable projections of future litigation
expenses. That said, the statute is not a license for retaliation, including in
the form of inflated projections of legal expenses, and the trial court was not
required to defer to the Department’s finding that Stoneridge Creek did not
retaliate. However, because the trial court evaluated Johnson’s retaliation
claim in the context of its conclusion that the increases were unlawful in
their entirety under the CLRA’s fee-recovery provision, and never decided
whether the inclusion of legal expenses in monthly fees would otherwise be
authorized by section 1788(a)(22)(B), we believe that remand is appropriate
so the trial court can revisit its retaliation finding as well as its assessment of
the balance of interim harms. Should it determine that issuance of a
preliminary injunction remains warranted, it can reevaluate the appropriate
bond amount at that time.
BACKGROUND
I.
Stoneridge CCRC opened in 2013, with “565 residential living units
and more than 750 residents.” The minimum age of residents is 60 years old,
and the entrance fees in 2023 ranged from around $400,000 to more than
$3 million.
3
Johnson, like other residents, agreed to the RCA when he joined the
community in 2017. He paid close to $1.5 million as an entrance fee and his
monthly care fees started at $6,705 for himself and his partner.
Paragraph 8.4.3 of the RCA he signed states: “Stoneridge Creek reserves the
right, in its sole discretion, to increase your Monthly Fee upon thirty (30)
days’ advance written notice to you. A determination by Stoneridge Creek to
adjust or not to adjust your Monthly Fee shall be conclusive and binding on
you. . . . Such adjustments shall be based on Stoneridge Creek’s projected
costs, prior year per capita costs and economic indicators, as determined by
Stoneridge Creek in its sole discretion . . . .” The RCA grants Stoneridge
Creek the authority to terminate the RCA if a resident fails to pay the
monthly fees. A resident who terminates the agreement early forfeits to
Stoneridge Creek a portion of the entrance fee, up to a maximum of
25 percent of the fee after four years.
In December 2021, Johnson filed his initial complaint. Stoneridge
Creek moved to compel arbitration of Johnson’s claims, but the trial court
denied the motion and we affirmed, agreeing that the RCA’s arbitration
provision was unconscionable. Afterward, Johnson filed his second amended
complaint, alleging that Stoneridge Creek unlawfully increased vulnerable
elderly residents’ monthly care fees, charged retaliatory legal fees to
residents, and engaged in other practices that violated the UCL, CLRA, Elder
Abuse Act, and Health and Safety Code. Johnson alleged that the RCA
contains unlawful provisions and that Stoneridge Creek’s financial practices
violate the RCA, the covenant of good faith and fair dealing, and its fiduciary
duty to residents. Johnson requested damages, penalties, and attorneys’ fees.
Since 2017, Stoneridge Creek has budgeted the following amounts for
legal fees: $125,000 (2017, 2018, 2019); $25,000 (2020); $75,000 (2021);
4
$50,000 (2022); and $500,000 (2023, 2024). The record does not reveal
whether or to what extent those legal fees were related to litigation matters
and, if so, the nature of those matters. Stoneridge Creek began preparing the
2023 budget—which included the $500,000 expense for legal fees—around
the time the trial court denied its motion to compel arbitration. Resident
representatives were told that the $500,000 expense included Stoneridge
Creek’s attorneys’ fees in this case.
In August 2023, Zeke Griffin, Stoneridge CCRC’s executive director,
made the mid-year budget presentation for 2024. During the presentation,
he “discussed and compared the actual revenues and expenses for the first six
months of [2023] with the budget.” Griffin informed residents that
Stoneridge CCRC “had spent only $50,000 for legal fees in the first six
months of the year, just 10 percent of the $500,000” charged to residents.
According to Johnson, in later budget discussions, Stoneridge Creek
representatives stated that Stoneridge Creek’s fees for 2024 were increasing
by 5.9%, whereas fees at the owner’s other CCRCs were rising by between
4.7% and 4.9%, with the additional percentage point at Stoneridge Creek
attributable to the costs of Johnson’s lawsuit. As the case progressed,
Johnson stated, resident resistance to the litigation “became more vocal,”
including with comments that residents would ultimately end up paying all of
Stoneridge Creek’s legal fees, and some residents told Johnson they could not
afford to pay the extra costs. Resident demands that Johnson settle this case
also increased.
According to Griffin, the budgeted $500,000 covered all legal expenses,
not just those for this litigation, and the increases projected for 2023 and
2024 “were reasonable estimates based on what Stoneridge Creek expected to
incur for all of its legal matters in 2023 and 2024.” Stoneridge Creek, he
5
explained, neither retroactively charges residents for negative budget
variances, nor provides refunds for positive ones. Instead, “Stoneridge Creek
uses past expenses and variance[s] in budgeted revenue and expenses as a
way to inform future budgets.” Stoneridge Creek’s actual legal fees for 2023
totaled $96,812. Because there are roughly 565 units at Stoneridge Creek as
well as approximately 70 residents at its Creekview higher care facility,
Griffin calculated that, on average, the legal fees for 2023 and 2024 would be
$787 annually, or $66 monthly, for each living unit/Creekview resident.
II.
Johnson sent a letter to the Department on November 21, 2022, asking
it to investigate the lawfulness of the monthly care fee increases and
discussing the Department’s 2021 decision in a case involving another CCRC,
the Vi at Palo Alto (Vi). In the Vi decision, the Department reviewed similar
claims about whether the CCRC was entitled to include in residents’ monthly
fees legal expenses incurred in a wage and hour lawsuit. In that case, the
Department concluded that, although government-imposed fines and
penalties were not “legitimate costs of operation” passed on to residents as
monthly fees, other legal expenses arising from the settlement of the wage
and hour claims—including the legal fees incurred to defend the case—could
be charged to residents pursuant to section 1788(a)(22)(B), at least absent
evidence that, as provided in the contract between the CCRC and the
management company, the management company engaged in systematic,
willful, or intentional misconduct.
After the Department failed to respond to Johnson’s letter, another
resident, Patricia Kohnen, wrote to the Department on January 30, 2023,
asking it to expedite its response to Johnson’s letter. After she, too, did not
receive a timely reply, she sent a follow up email on June 29, 2023,
6
referencing her and Johnson’s earlier letters and expressing residents’
anxiety at having to pay the legal costs for 2023 and anticipating increased
legal costs for 2024. Around the same time, at least one resident stated his
understanding that Stoneridge Creek was increasing monthly care fees to
punish residents for this lawsuit. Johnson sent a second letter to the
Department on June 29. On June 30, the Department sent Kohnen a
Complaint Intake Notification, acknowledging receipt of her email.
A Department investigator spoke with Kohnen for about 10 minutes on
July 28.
Griffin sent the Department’s investigator an email on August 10, in
response to investigation questions that came up in a call and email.
Griffin’s letter includes a statement that “residents have since communicated
that they hope this litigation will end soon in order to curtail their monthly
fee increases needed to cover these legal defense expenses.”
The Department issued a one-page Complaint Investigation Report on
August 29, 2023, identifying it as a response to Kohnen’s complaint. The
report describes the single operative allegation as that Stoneridge Creek
“incorrectly included litigation expenses in the monthly care fee increase
calculation” as “ ‘projected costs, prior year per capita costs and economic
indicators,’ under . . . section 1788(a)(22)(B).” It states that the investigator
met with Griffin and viewed Stoneridge Creek’s “2023 Budget Presentation”
and “Summary of projected legal expenses for 2022 and the 2023 budgeted
legal expense.” The investigator found that, “[a]s to the 2022 projected legal
expense and 2023 budgeted legal expense, the Department believes that legal
expense to defend the community from suits can be an appropriate cost in the
operation of a community. So, it does not find a violation as to the
2022 projected legal expense or 2023 budgeted legal expense. . . . [¶] Based
7
on the review and investigation the Department finds the allegation
‘unsubstantiated.’ ”
On November 22, 2023, the Department sent a follow up letter to
Johnson’s counsel, stating that his claims had been investigated, but that the
Department had failed to notify him of the investigation results. It stated
that the Department determined that litigation costs could be included as a
“projected cost” within the meaning of the statute and compared it to the Vi
case, noting its determination that the inclusion of fees in that case was not
evidence of retaliation because it was “consistent with the continuing care
contract statutes.” It ended by saying that it investigated Johnson’s
allegations of “harassment and retaliation,” but “[b]ased on the evidence
gathered during the investigation, the Department found no evidence that
Stoneridge Creek suggested that the resident association sanction [Johnson]
for his complaints.”
III.
In March 2024, Johnson moved to enjoin Stoneridge Creek from
compelling Johnson and members of the putative class to fund its “attorneys’
fees and costs incurred in or related to the instant litigation.” He argued that
he was “likely to prevail on his claim for injunctive and/or declaratory relief
that Defendants may not compel residents to fund their defense costs.”2 He
argued, first, that by requiring residents to bear its litigation expenses in the
form of increased monthly fees, Stoneridge Creek was violating laws that he
2 The complaint includes a request for preliminary and permanent
injunctive relief in the prayer for relief, but it does not specify the nature of
the injunctive relief Johnson is seeking. The complaint includes a cause of
action for declaratory relief, but states only that it is seeking declaratory
relief “regarding the rights and responsibilities of the respective parties
under the RCA and [the Health and Safety] Code.”
8
contends would entitle only him, as a prevailing plaintiff, to recover legal fees
in the action insofar as it asserts claims under the Elder Abuse Law, the
CLRA, or the UCL (through Code of Civil Procedure section 1021.5).3 Second,
he argued that Stoneridge Creek’s conduct would deter him and other
members of the putative class from pursuing their claims, in violation of
Health and Safety Code section 1771.7(a), which provides that “[a] resident of
a continuing care retirement community shall not be deprived of any civil or
legal right, benefit, or privilege guaranteed by law, by the California
Constitution, or by the United States Constitution, solely by reason of status
as a resident of a community,” and section 1771.7(g), which provides that
“resident[s] ha[ve] the right to freely exercise all rights pursuant to this
section, in addition to political rights, without retaliation by the provider.”
And third, he argued that the RCA would be unconscionable if construed to
authorize Stoneridge Creek to pass its litigation expenses onto members of
the putative class.
In response, Stoneridge Creek argued that its conduct was not a
violation of litigation fee-shifting provisions because those statutes concern a
court’s power to order one party to pay another’s legal fees, not how a CCRC
may budget for legal fees when setting or adjusting residents’ monthly fees.
It also pointed to section 1788(a)(22)(B), arguing that its litigation expenses
3 Both Johnson and the trial court referred to the CLRA’s fee-recovery
statute as “one-way” provision, but it might better be characterized as “non-
reciprocal”: A prevailing plaintiff is entitled to an award of fees, whereas a
prevailing defendant may recover fees only at the discretion of the court and
only if the defendant establishes bad faith by the plaintiff. (Civ. Code,
§ 1780, subd. (e).) Although the parties have not addressed the issue, we
assume that absent class members could not be held liable for an award of
fees under this provision even if Johnson could. (Cf. Earley v. Superior Court
(2000) 79 Cal.App.4th 1420, 1431; Van de Kamp v. Bank of America (1988)
204 Cal.App.3d 819, 869.)
9
qualified as “projected costs,” as the Department found. It criticized
Johnson’s reliance on section 1771.7 because that statute does not create a
private right of action and because it was “unclear” how Johnson’s allegation
of retaliation, which was made in his motion but not in the second amended
complaint, “connects to any of the claims.” Finally, Stoneridge Creek
contended that Johnson’s motion failed to supply any competent evidence
that the inclusion of legal fees was motivated by a desire to harass him, and
it asserted that Johnson’s contention that it would include any judgment
entered against it in this case in future budgets was “speculative.”
The court found, first, that there was a “substantial basis” to conclude
that Stoneridge Creek’s conduct was retaliatory. Although the action had
been filed in late 2021, Stoneridge Creek did not propose to increase
residents’ monthly fees to account for this litigation until July 2022 (when it
circulated proposed budget documents for 2023), which the trial court found
notable because it had held the RCA’s arbitration provision invalid earlier
that month, in part because the provision “unconscionably denied [Johnson’s]
statutory fee rights.” In addition, the size of the increase was unusually large
and the projected amount “far exceed[ed] the legal fees included in any prior
budget since 2017.” The court noted: “The 2023 and 2024 legal fees are each
ten . . . times the fees in 2022, and four . . . times the next largest budgeted
amount (i.e., $125,000). However, there is no evidence that the fees actually
incurred by [Stoneridge Creek] ever approached $500,000 in one year. Based
on this record, the most [Stoneridge Creek] incurred in legal fees was in 2022,
when they incurred roughly $232,000 in fees. . . . In 2023, . . . [Stoneridge
Creek’s] legal fees dropped to $96,812 and resulted in roughly $403,188 of
unspent funds budgeted for legal fees. . . . The leftover from 2023 is more
than triple the next largest amount budgeted for legal fees (i.e., $125,000)
10
and exceeds the highest fees incurred by [Stoneridge Creek] in a single year.
As [Stoneridge Creek] acknowledge[s], residents are not ‘refunded’ fees when
the budgeted expenses exceed the actual expenses. . . . Therefore, even
considering this litigation, [Stoneridge Creek’s] projected budgets of $500,000
far exceed[] the fees that could be reasonably incurred and support[] a finding
of retaliatory intent.”
The court then turned to Johnson’s argument that allowing Stoneridge
Creek to include its defense costs in monthly fees charged to residents would
violate the fee-recovery provision of the CLRA or other litigation fee-shifting
laws. It concluded that it would undermine the express statutory purpose
and policy of the CLRA’s fee-recovery provision (Civ. Code, § 1780, subd. (e))
to allow Stoneridge Creek to fund its legal expenses with residents’ monthly
fees.4 In response to Stoneridge Creek’s argument that its conduct is
authorized by section 1788(a)(22)(B), the court stated that the statute “cannot
be read in isolation” and does not define “projected costs.” The Department’s
interpretation, the court found, was not entitled to great deference because
courts “regularly construe statutes” and interpreting section 1788(a)(22)(B) in
this context “does not require technical knowledge or expertise.” It faulted
the Department for failing to consider the CLRA, or in the Vi case, PAGA,
which has a similar fee-shifting provision.
Finally, the court found that Stoneridge Creek’s conduct was likely to
violate section 1771.7, subdivision (g), which guarantees residents the
exercise of their civil and legal rights “without retaliation” by the CCRC, and
that the UCL gave the putative class the ability to sue for a violation of that
4 The court also cited the fee-recovery provision for elder abuse claims
(Welf. & Inst. Code, § 15657.5, subd. (a)), but expressly found only that
Johnson established a likelihood of success on his fee-shifting theory under
the CLRA.
11
provision. It rejected the Department’s finding that Stoneridge Creek had
not retaliated against Johnson, stating that the Department “has no greater
ability to recognize retaliation than a court” does.
Based on the foregoing analysis, the court found that Johnson “has
established a likelihood of prevailing on the merits of the CLRA and UCL
claims.”
As to the comparative interim harm, the court stated that “there is
evidence that at least one resident has left Stoneridge Creek as a result of the
increase,” referencing the declaration of Harry Wong, who wrote that the
increase in Stoneridge Creek’s monthly fees, “including the increases to pay
ownership’s legal costs for this litigation, was a major motivator for my
decision to leave. . . .”5 The court noted that the lawsuit appeared to be
responsible for an increase per resident of over $500 annually, and that
“[c]onsidering this is a retirement community and that at least one resident
declares that the increase has forced them to move, the evidence
demonstrates a risk of irreparable injury absent injunctive relief.” The court
added that residents who cannot pay the fees face the prospect of potential
eviction, and noted that the fact that the putative class had not been certified
was not a bar to provisional relief because Code of Civil Procedure section 527
expressly authorizes a trial court to enter a preliminary injunction before
certification. Stoneridge Creek argued that it would suffer financial
hardship, including impacts to its operating income and corresponding
5 Wong was added as a plaintiff in a later-filed third amended
complaint. Like the parties, we refer in our discussion to the second amended
complaint because it was the operative pleading when the motion for
preliminary injunction was filed and adjudicated. Counsel also indicated at
oral argument that the trial court has since certified the class, but there has
been no suggestion, and we do not find, that certification impacts our
analysis of the issues on appeal.
12
decreases to other services, with “no clear path to recovering these fees in the
future.” The court noted, however, that Stoneridge Creek had not argued
that it “would be forced out of business or unable to defend [itself] in this
litigation if th[e] injunction were granted.”
On balance, the court concluded, Johnson had “establish[ed] a
reasonable probability of prevailing on the merits and irreparable harm from
[the] denial of injunctive relief.” The court ordered Johnson to post a nominal
$1,000 bond, explaining that “there is no evidence of lost income” and
Stoneridge Creek had already obtained a “significant windfall” because its
2023 budget for legal fees substantially exceeded the amount expended.
Stoneridge Creek filed a writ of supersedeas and request for immediate
stay of the order granting the preliminary injunction in this court, arguing
the injunction was mandatory and therefore automatically stayed. We
denied the writ, ruling that the injunction was prohibitory, not mandatory,
and further that Stoneridge Creek had not shown that a discretionary stay
was warranted.6
DISCUSSION
I.
We begin with some background before taking up the parties’
arguments. “Continuing-care communities are a new business for old
Americans. They promise to provide housing and health-care assistance . . .
for as long as their residents live. The residents pay very large sums both
6 We reject Stoneridge Creek’s renewed arguments that the injunction
was mandatory, rather than prohibitory, because Stoneridge Creek
historically included legal fees in its annual budgets. The injunction
prohibited from charging residents for this litigation, and in any event,
Stoneridge Creek did not show that it previously included its anticipated fees
to defend lawsuits filed against it by residents.
13
upfront and over time to the communities to provide for services of uncertain
duration and cost. The communities must make sure they earn returns on
their investments despite these uncertainties. And state governments
recognize that elderly people who have given up very large amounts of money
in exchange for a promise need to have someone make sure the promise is
kept.” (Continuing Life Communities Thousand Oaks LLC v. Commissioner
(2022) 123 T.C.M. (CCH) 1148, *1 (Continuing Life Communities).)
CCRCs are funded by two primary means: entrance fees and monthly
care fees. (See § 1771, subds. (e)(3), (m)(1).) There are no statutory limits on
the amount of entrance or initial monthly care fees, but the CCRC statute,
section 1700 et seq., limits CCRCs’ ability to increase monthly care fees.
(§ 1788(a)(22)(B).) Over time, an increasing percentage of residents’ entrance
fees becomes nonrefundable; in this case, the RCA makes up to 25 percent of
residents’ entrance fees nonrefundable after four years. (See § 1788,
subd. (a)(33).) One of the principal benefits to CCRC residents is the right to
receive memory care, assisted living, and skilled nursing as they age without
an increase in their monthly care fees based on those increased services.
(§§ 1771, subds. (l), (p)(5); 1787, subd. (i); 1788, subd. (b)(1).) But that right
also creates a financial risk to CCRCs; they must make projections about the
percentage of residents who will need those more expensive services and for
how long. (Continuing Life Communities, supra, 123 T.C.M. (CCH), at p. *1.)
“Because elderly residents often both expend a significant portion of their
savings in order to purchase care in a continuing care retirement community
and expect to receive care at their continuing care retirement community for
the rest of their lives, tragic consequences can result if a continuing care
provider becomes insolvent or unable to provide responsible care.” (§ 1770,
subd. (b).)
14
II.
A trial court may enter a preliminary injunction pursuant to Code of
Civil Procedure section 526, subdivision (a). “In deciding whether to issue a
preliminary injunction, a court must weigh two ‘interrelated’ factors: (1) the
likelihood that the moving party will ultimately prevail on the merits and
(2) the relative interim harm to the parties from issuance or nonissuance of
the injunction. . . . [¶] The trial court’s determination must be guided by a
‘mix’ of the potential-merit and interim-harm factors; the greater the
plaintiff’s showing on one, the less must be shown on the other to support an
injunction.” (Butt v. State of California (1992) 4 Cal.4th 668, 677–678.)
“Our review of a preliminary injunction ‘may trigger any or all of the
three standards of appellate review.’ [Citation.] The trial court’s evaluation
and weighing of the parties’ likelihood of success on the merits and the
balance of harm is reviewed for abuse of discretion. [Citation.] We review de
novo the trial court’s application of legal principles and we review its findings
of fact under the substantial evidence standard.” (Anderson v. County of
Santa Barbara (2023) 94 Cal.App.5th 554, 568.) The same standards guide
our review of the trial court’s order requiring Johnson to post a bond. (See
Smith v. Adventist Health System/West (2010) 182 Cal.App.4th 729, 737–
739.)
III.
We start with whether the trial court abused its discretion in
concluding that Johnson established a likelihood of success based on his fee-
shifting theory under the CLRA. For present purposes, the relevant CLRA
claim is not that Stoneridge Creek engaged in actionable misrepresentations
under the CLRA and that Johnson will be entitled to an award of fees at the
conclusion of the litigation if he prevails. As Stoneridge Creek acknowledges,
15
regardless of whether it funds its defense costs through residents’ monthly
fees, the court will be able to order it to pay Johnson’s attorneys’ fees if he
prevails on that claim in the litigation. So that issue is not before us—nor is
any question about what sources of funds Stoneridge Creek could permissibly
use to satisfy such an award if ultimately entered by the court. Here, the
relevant claim is that Stoneridge Creek violated the CLRA’s fee-recovery
provision by causing its litigation opponents—Johnson and members of the
putative class—to fund its defense costs without any showing that it would be
entitled to an award of its fees from them at the end of the case. As it did in
the trial court, Stoneridge Creek responds that raising its defense costs
through residents’ monthly fees does not constitute fee shifting in violation of
the CLRA’s fee-recovery provision, and that it is authorized to include those
fees by section 1788(a)(22)(B), as the Department concluded. In this section,
we explain why we agree that the CLRA’s fee-recovery provision does not
prohibit Stoneridge Creek from funding its defense costs through the monthly
fees it charges to residents.
The provision reads as follows: “The court shall award court costs and
attorney’s fees to a prevailing plaintiff in litigation filed pursuant to this
section. Reasonable attorney’s fees may be awarded to a prevailing
defendant upon a finding by the court that the plaintiff’s prosecution of the
action was not in good faith.” (Civ. Code, § 1780, subd. (e).) The reason the
statute provides for an award of fees to a prevailing plaintiff is to “allow[]
consumers to pursue remedies in cases . . . where the compensatory damages
are relatively modest.” (Hayward v. Ventura Volvo (2003) 108 Cal.App.4th
509, 512.) Without the potential for an award of fees, it would be
uneconomical for a plaintiff to file suit when the expense of prosecuting the
litigation exceeds the potential recovery, significantly reducing the
16
effectiveness of the CLRA. Because that rationale does not apply to
defendants, the Legislature did not extend the same rule to them, instead
permitting the court to award fees to a prevailing defendant only on a
showing of the plaintiff’s bad faith. (See Corbett v. Hayward Dodge, Inc.
(2004) 119 Cal.App.4th 915, 924.) Again, here the court will be able to order
Stoneridge Creek to pay Johnson’s attorneys’ fees if he prevails, removing as
a financial obstacle to filing that Johnson’s potential recovery could be
dwarfed by what he would owe his lawyers for prosecuting the case.
(Johnson has not shown that his potential recovery in the case is unlikely to
exceed the amount of his monthly fees attributable to Stoneridge Creek’s
legal expenses—$787 annually.)
As quoted above in full, Civil Code section 1780, subdivision (e)
addresses only fee awards made by the court based on judicial findings at the
conclusion of litigation—an order that requires one party to pay the legal fees
incurred by the other. It says nothing about how a defendant may raise
funds to pay its legal fees. Recall that a CCRC has two primary sources of
revenue—money it receives or earns from entrance fees that residents pay
when they join the community, and money it receives from residents’ monthly
fees. It would stretch Civil Code section 1780 subdivision (e) far beyond its
plain language to construe it as prohibiting Stoneridge Creek from relying on
one (or both) of those two sources of funds to pay its own defense costs.
Johnson points out that the trial court also cited Civil Code section 1760,
which states that the CLRA “shall be liberally construed and applied to
promote its underlying purposes, which are to protect consumers against
unfair and deceptive business practices and to provide efficient and
economical procedures to secure such protection.” But while the prospect of
an increase in monthly fees could operate as a disincentive for a CCRC
17
resident to sue, the interpretive guidance in Civil Code section 1760 cannot
make the CLRA’s fee-recovery provision mean more than it says. (Outboard
Marine Corp. v. Superior Court (1975) 52 Cal.App.3d 30, 40 [“A liberal
construction does not permit us to disregard or enlarge the plain provisions of
the statute, nor does it go beyond the meaning of the words used when they
are clear and unambiguous”].)
Johnson repeatedly writes that Stoneridge Creek is shifting its fees to
the “putative class,” but that description is, at a minimum, imprecise. To
begin with, the proposed class includes former residents, who therefore may
not have been subject to the monthly fee increases targeted by the
preliminary injunction motion. More importantly, the members of the
putative class who are subject to the increased fees are not subject to them
because they are putative class members, but only because they are current
residents of Stoneridge Creek. As Johnson himself writes, “Appellants were
only able to charge Mr. Johnson and other putative class members for
attorneys’ fees not recoverable by law because of their status as residents i.e.,
by including Appellants’ attorneys’ fees in ‘monthly fees’ that residents are
forced to pay in full, on pain of eviction.”
Johnson’s observation highlights the flaw in his argument that
Stoneridge Creek violates the CLRA’s fee-recovery provision by funding its
defense costs through residents’ monthly fees. Suppose Johnson had brought
the case only on his own behalf. In that situation, other residents would still
pay increased monthly fees even though they have no connection to the
litigation. As to those residents, there would be no sense in which Stoneridge
Creek could be said to be causing its litigation opponents to bear its defense
costs, and thus no colorable basis to claim a violation of the CLRA’s fee-
recovery provision. The situation would be no different from any other
18
business—a hotel, say, or a fitness club—raising its prices to cover defense
costs after being sued under the CLRA. And as to Johnson himself, because
Stoneridge Creek’s defense costs would be spread across hundreds of
residents, he would bear only a tiny fraction of those costs, even though he
was the sole plaintiff—with the fractional share depending on the number of
residents at the Stoneridge community and having nothing to do with the
merits of his claims. That situation is not analogous to a court ordering
Johnson to pay Stoneridge Creek’s legal fees at the conclusion of the case.
The mere fact that Johnson has styled his suit as a class action does
not change the analysis. Even putting aside the fact that Johnson sought the
injunction before moving for class certification, the point remains that
residents (including Johnson himself) are not bearing Stoneridge Creek’s
defense costs because they are actual or potential opponents in the litigation.
They are bearing those costs because, for as long as they stay, they are the
source of Stoneridge Creek’s revenue. Johnson identifies nothing in the
CLRA’s fee-recovery provision, nor anything in the case law interpreting it,
that prohibits a business from raising its prices to fund its defense costs
simply because its customers happen to be plaintiffs or members of a class.
Again, the statute merely limits the circumstances in which a court may
order a plaintiff to pay the defendant’s legal fees. When the court does so, the
plaintiff is liable for those fees because it is the plaintiff, and at that point is
legally obligated to pay them. That is not what is happening here.
To point out the difference is not to diminish Johnson’s arguments that
CCRC residents may be in a uniquely difficult situation. A person who
wishes to avoid the increased monthly fee by leaving the community might
not have the financial ability to do so (in part because a significant
percentage of the entrance fee has become nonrefundable), and a person who
19
is unable to afford the increased monthly fee could potentially face eviction.
But the seriousness of those possible hardships does not mean that
Stoneridge Creek violated the CLRA’s fee-recovery provision. As the parties
recognize, there are laws, like section 1788(a)(22)(B), that govern the fees
that CCRCs may charge residents, and indeed, the parties take contrary
positions on whether Stoneridge Creek’s fee increases comply with them.
Those rules may take into account the hardships Johnson identifies along
with countervailing risks that Stoneridge Creek invokes: Any rule that
permits CCRCs to increase monthly fees could threaten some residents’
financial ability to remain in the community, but a rule that imposed
excessive limits on fee increases could compromise a CCRC’s financial
viability, placing all of its residents at risk. (See § 1770, subd. (b).)
Presumably these and other competing considerations are what the CCRC
statutory scheme is intended to balance.
But Johnson’s preliminary injunction motion sought relief on the
ground that the increases violated the CLRA’s fee-recovery provision and
other litigation fee-shifting statutes, not that they violated
section 1788(a)(22)(B). We conclude that subdivision (e) of Civil Code section
1780 does not prohibit the challenged monthly fee increases and that the trial
court erred insofar as it held otherwise. And although the trial court
ultimately relied solely on the CLRA’s fee-recovery provision, the same
reasoning leads us to the same conclusion with respect to the other fee-
recovery provisions Johnson raised: Elder Abuse Act section 15657.5,
subdivision (a); Code of Civil Procedure section 1021.5; and the American
rule. Accordingly, any claim based on this theory—whether the CLRA, the
UCL, or (as Johnson wrote in his motion in the trial court) for injunctive or
20
declaratory relief—does not support the trial court’s issuance of the
preliminary injunction.7
IV.
Because Johnson did not raise section 1788(a)(22)(B) as a ground for
relief and the trial court accepted his theory based on the CLRA’s fee-
recovery provision, it did not decide whether section 1788(a)(22)(B) would
otherwise permit Stoneridge Creek to include within monthly fees the legal
expenses that it will incur to defend against this lawsuit.8 Having disagreed
with Johnson’s fee-shifting theory, we could similarly decline to reach the
question except for the fact that, as we discuss in the next section, a
conclusion that litigation fees may be included in “projected costs” under
section 1788(a)(22)(B) could affect the trial court’s remaining retaliation
finding, its analysis of the comparative interim harm, and the balance
between the two. Because we will remand for the trial court to revisit those
questions, we could in principle also leave the interpretation of
section 1788(a)(22)(B) to the trial court in the first instance. But when the
7 Johnson argues that Stoneridge Creek violates the substantive
provisions of the CLRA by representing in the RCA that it “ ‘complies with
the minimum statutory requirements applicable to continuing care
contracts’ ” while “tak[ing] the position that the RCA was designed to
authorize their conduct, even though it is in direct conflict with” litigation
fee-shifting rules. He also argues that the RCA would be unconscionable in
violation of the CLRA if construed to permit Stoneridge Creek to include its
defense costs in monthly fees because it would nullify residents’ “statutory
right to recover their attorneys’ fees and to litigate free of the risk of paying
Appellants’ fees.” We reject these arguments based on our discussion above.
8 At the hearing, the court stated, “I didn’t reach that issue [of
operating costs] because it wasn’t raised.” Referring to
section 1788(a)(22)(B), it stated, “In isolation, perhaps these [fees] can be
imposed,” but added that “allowing [Stoneridge Creek] to get fees now does
seem like an end run around” the CLRA’s fee-recovery provision.
21
issue is one of law that we would review de novo in any event, there is little
to be gained by doing so and it could risk further delay. (See Barrera v. Apple
American Group LLC (2023) 95 Cal.App.5th 63, 77.) The parties fully briefed
the issue both in the trial court and on appeal, and no one has asked us to
refrain from deciding it. We therefore take it up here.
A.
The first question is whether we should afford the Department’s
interpretation of section 1788(a)(22)(B) any deference. Although the trial
court ultimately did not interpret section 1788(a)(22)(B), it nonetheless stated
that it did not believe the Department’s interpretation warranted deference
in part because there was no indication that the Department considered the
CLRA’s fee-shifting provision. Although we have found no violation of that
provision, we note that statutes generally should be interpreted together only
when they concern the same subject matter. (Kaanaana v. Barrett Business
Services, Inc. (2021) 11 Cal.5th 158, 175; cf. Shiheiber v. JPMorgan Chase
Bank, N.A. (2022) 81 Cal.App.5th 688, 702 [statutes addressed different
subjects and had different purposes]; Water Quality Assn. v. County of Santa
Barbara (1996) 44 Cal.App.4th 732, 747 [declining to construe statutes
together that do not relate to the same subject and have different purposes].)
There is nothing to indicate that, when enacting the CLRA’s fee-recovery
provision, the Legislature had in mind the regulation of CCRC finances and
charges to residents—that statutory scheme was enacted years later—or the
purposes it is designed to further. If “projected costs” in
section 1788(a)(22)(B) includes fees a CCRC will incur to defend a suit
brought by a resident, it may reflect the Legislature’s assessment that those
fees are an appropriate expenditure to protect the community and that a
contrary rule could in some cases threaten a CCRC’s solvency. To find that
22
an unrelated litigation fee-shifting statute prohibits CCRCs from using
monthly fee revenue to pay defense costs notwithstanding any policy
judgments embodied in section 1788(a)(22)(B) could risk undermining the
CCRC statutory scheme. Accordingly, we do not believe the Department’s
failure to address the CLRA’s or (in the Vi case) PAGA’s fee-shifting statutes
calls into question its interpretation of section 1788(a)(22)(B).
Johnson contends that the Department’s report in response to his and
Kohnen’s complaints not only overlooked the fee-shifting statutes he raised
but also was “based on an argument no resident had made”—i.e., that
Stoneridge Creek’s inclusion of its legal expenses in residents’ monthly fees
was contrary to section 1788(a)(22)(B). We disagree. Although it is true that
Johnson did not rely on section 1788(a)(22)(B) in his preliminary injunction
motion—even his complaint did not clearly allege such a theory of liability—
his letter to the Department argued that Stoneridge Creek’s inclusion of its
legal expenses was contrary to the Department’s decision in the Vi case,
which, as the letter itself pointed out, rested on section 1788(a)(22)(B). In
light of this argument, it was reasonable for the Department to conclude that
Johnson was challenging the lawfulness of Stoneridge Creek’s conduct under
that section.
Stoneridge Creek asks us to treat the Department’s interpretation of
the statute as a quasi-legislative rule or regulation to which we are required
to defer. We decline to do so. Although the Department has authority to
promulgate regulations (§ 1776), it offered its interpretation of section
1788(a)(22)(B) in its response to Johnson’s and Kohnen’s complaints. Its
investigative report is not equivalent to a regulation adopted pursuant to a
delegation of legislative authority. (See Yamaha Corp. of America v. State
Bd. of Equalization (1998) 19 Cal.4th 1, 10 (Yamaha).) Unlike a regulation,
23
“the binding power of an agency’s interpretation of a statute or regulation is
contextual: Its power to persuade is both circumstantial and dependent on
the presence or absence of factors that support the merits of the
interpretation.” (Id. at p. 7.) As described in Yamaha, those factors can be
divided into two categories. First, an agency will be presumed to have “ ‘a
comparative interpretive advantage over the courts’ ” when it has relevant
“ ‘expertise and technical knowledge, especially where the legal text to be
interpreted is technical, obscure, complex, open-ended, or entwined with
issues of fact, policy, and discretion.’ ” (Id. at p. 12.) Second, an agency
interpretation is “likely to be correct” when there are “indications of careful
consideration by senior agency officials,” “evidence that the agency ‘has
consistently maintained the interpretation in question, especially if [it] is
long-standing,’ ” and “indications that the agency’s interpretation was
contemporaneous with legislative enactment of the statute being
interpreted.” (Id. at p. 13.)
Starting with the second set of factors, it is not apparent from the
record that the Department’s interpretation was rendered at high levels of
the agency. Moreover, while its determination that Stoneridge Creek’s
defense costs in this litigation are “projected costs” under
section 1788(a)(22)(B) is consistent with its decision in the 2021 Vi case, the
Vi lawsuit was brought by the CCRC’s employees rather than by a resident,
so the application of the rule in this context may have been a question of first
impression—and one that was answered long after the statute was enacted.
We also note that the Department’s report is only a single page, and no
reasoning is offered to explain its conclusion. (See Yamaha, supra,
19 Cal.4th at p. 14 [court may consider the “ ‘thoroughness’ ” of the agency’s
24
consideration and “ ‘the validity of its reasoning’ ”].) We find little basis for
deference in these factors taken together.
With respect to the first set of factors, by contrast, the financing
arrangements for CCRCs and the risks associated with them are relatively
specialized and complex, so in our view the Department does have relevant
technical knowledge and expertise. Moreover, when the agency is
“interpreting a statute within its administrative jurisdiction, it may possess
special familiarity with satellite legal and regulatory issues.” (Yamaha,
supra, 19 Cal.4th at p. 11.) Section 1788(a)(22)(B) is but one sliver of an
elaborate and interconnected statutory scheme. The Department is
responsible for monitoring and regulating CCRCs, controls entry into the
industry, investigates complaints from residents, and has the authority to
suspend or revoke permits or certificates of authority if it finds a violation of
the applicable statutes or rules. (§§ 1770, subd. (d); 1771.5; 1771.7,
subds. (h)–(j); 1776.2; 1793.21, subd. (a).) Given these considerations, we
would not lightly disregard the Department’s perspective, particularly when,
as discussed below, we find the statutory language ambiguous. Ultimately,
however, we must “independently judge the text of the statute, taking into
account and respecting the agency’s interpretation of its meaning.” (Yamaha,
at p. 7.) We therefore turn to that issue.
B.
Our fundamental task in construing any legislative enactment “ ‘is to
ascertain the intent of the lawmakers so as to effectuate the purpose of the
statute.’ [Citation.] We begin as always with the statute’s actual words, the
‘most reliable indicator’ of legislative intent, ‘assigning them their usual and
ordinary meanings, and construing them in context. If the words themselves
are not ambiguous, we presume the Legislature meant what it said, and the
25
statute’s plain meaning governs. On the other hand, if the language allows
more than one reasonable construction, we may look to such aids as the
legislative history of the measure and maxims of statutory construction. In
cases of uncertain meaning, we may also consider the consequences of a
particular interpretation, including its impact on public policy.’ ” (Even
Zohar Construction & Remodeling, Inc. v. Bellaire Townhouses, LLC (2015)
61 Cal.4th 830, 837–838.)
Again, section 1788(a)(22)(B) provides that “changes in monthly care
fees shall be based on projected costs, prior year per capita costs, and
economic indicators.” Stoneridge Creek argues that we need not go beyond
the plain language. While acknowledging that the statute does not define
“projected costs,” Stoneridge Creek notes that “Black’s Law Dictionary
defines ‘cost’ as the ‘amount paid or charged for something; price of
expenditure,’ and it defines ‘expenditure’ as (1) the ‘act or process of spending
or using money, time, energy, etc.’ and (2) a ‘sum paid out.’ Legal fees are, of
course, the cost paid for legal services.”
We do not think the issue can be so simply resolved. As the Supreme
Court has explained, “ ‘[t]he interpretation of a statute . . . should not end . . .
with a dictionary definition of a single word used therein.’ [Citation.]
Instead, to interpret a statute, we consider all of its language ‘in context’ and
with reference to ‘provisions relating to the same subject’ and ‘the whole
system of law of which [the statute] is a part.’ ” (Skidgel v. California
Unemployment Ins. Appeals Bd. (2021) 12 Cal.5th 1, 20.) Accepting
Stoneridge Creek’s argument would mean that anything a CCRC pays for, for
whatever purpose and without regard to residents’ benefit, could be included
in monthly fees charged to residents. We agree with Johnson that, in the
context of the overall statutory scheme, section 1788(a)(22)(B) is intended in
26
part to impose limits, as the Department treated it when it concluded in the
Vi case that the CCRC could not charge the community for penalties or
government attorneys’ fees for which it was found liable.
As the parties note, while “projected costs” is undefined, the term “per
capita costs” is defined as “a continuing care retirement community’s
operating expenses, excluding depreciation, divided by the average number of
residents.” (§ 1771, subd. (p)(1).) It is reasonable to construe “costs” the
same way each time it appears in section 1788(a)(22)(B), and thus the term
“projected costs” can be understood to refer to the CCRC’s projected operating
expenses excluding depreciation. (People v. Johnson (2020) 45 Cal.App.5th
379, 396 [“ ‘ “It is presumed, in the absence of anything in the statute to the
contrary, that a repeated phrase or word in a statute is used in the same
sense throughout” ’ ”].) Unfortunately for present purposes, “[t]he term
‘operating expenses’ is not one of clear and universal definition. It is a term
which is used in a variety of contexts, including public utility rate regulation,
tax codes, governmental loan programs, commercial leases and other
business contracts, as well as for internal accounting and managerial
purposes. . . . Whether a particular item may be included or excluded from
‘operating expenses’ necessarily depends upon the purpose and context in
which the phrase is used.” (Schabarum v. California Legislature (1998)
60 Cal.App.4th 1205, 1222.)9
9 In its reply brief, Stoneridge Creek adds that the term “net operating
expenses” is elsewhere defined to include “all expenses” except certain
“interest and credit enhancement expenses,” “[d]epreciation or amortization
expenses,” a “reimbursement paid to the provider during the past 12 months
for services to residents other than residents holding continuing care
contracts,” and “[e]xtraordinary expenses that the department determines
may be excluded by the provider.” (§ 1792.4, subd. (a)(2)(A)–(D).) But that
27
Stoneridge Creek directs us to Arizona Oddfellow-Rebekah v. U.S. Dept.
of H.U.D. (9th Cir. 1997) 125 F.3d 771, 773, in which a HUD (Housing and
Urban Development) regulatory agreement limited Arizona Oddfellow, a low-
income housing project for the elderly, to using project revenues to pay for
“ ‘reasonable operating expenses and necessary repairs.’ ” The court held
that attorneys’ fees Arizona Oddfellow incurred to defend against pattern-
and-practice racial discrimination suits qualified as “operating expenses” that
could be paid with project revenues because they primarily benefitted the
project rather than the owner. “Such expenses . . . do not serve to advance or
protect [the owner’s] ownership interests. They do, however, benefit the
project in so far as they protect project resources and help preserve the
project’s discretion in hiring and rentals. Like expenses incurred in actions
to collect rent or evict tenants, expenses incurred in defense of discrimination
suits arising from day-to-day business are the unavoidable costs of running a
project, and are therefore ‘operating expenses.’ ” (Id. at p. 775.) The court
acknowledged that an adverse judgment might be a “serious indictment” of
management, including the owner, but emphasized that it would not
“implicate the owner’s ownership interests any more than other [non-pattern-
and-practice] discrimination suits” because nothing in the record suggested
that, if it lost a case, Arizona Oddfellow “would have forfeited its ownership
interest, or suffered a default or foreclosure.” (Ibid.)10 Stoneridge Creek
argues that here, too, the lawsuit does not implicate ownership interests, and
section, which requires CCRCs to maintain a reserve, expressly states that
its definitions are “[f]or purposes of this section.” (Id., subd. (a).)
10 In reaching a contrary conclusion, the district court reasoned that
pattern-or-practice suits should be treated differently because they “are
directed at management in a way that other discrimination actions are not.”
(Arizona Oddfellow, supra, 125 F.3d at p. 775.)
28
that its defense “helps preserve Stoneridge resources, such as those to
provide care to its residents and to enhance the community’s marketability,”
and further “safeguards the Stoneridge community’s public image and
reputation, its contractual and statutory rights, and its managerial
discretion.”
Johnson does not take issue with the distinction Arizona Oddfellow
drew between ownership and project interests in analyzing whether defense
fees were “operating expenses,” but argues that a defense judgment in this
case would preserve ownership profits with no benefit to residents. According
to Johnson, because the care and services Stoneridge Creek must provide are
fixed by the RCA and by statute—and are separately funded by other line
items in the monthly fees—prohibiting Stoneridge Creek from including its
defense costs could have no negative impact on the care or services residents
receive. But Arizona Oddfellow treated “ownership interests” much more
narrowly than Johnson does, focusing on whether the dispute implicated the
owner’s ability to maintain its ownership of the project or property. For
Johnson, by contrast, anything that increases the CCRC’s profitability serves
ownership rather than community interests, but he does not explain how the
distinction between funds available for the operation of the community and
funds that contribute to the owner’s profits is to be drawn ex ante. Moreover,
because budgets are imperfect, the fact that there are different line items for
different categories of expenditures does not mean that Stoneridge Creek’s
inability to rely on monthly fees for its legal expenses can have no impact on
the availability of funds for included expenses—even if one assumes, as
Johnson does, that residents cannot derive any benefit from Stoneridge
Creek’s defense of this litigation.
29
But we do not believe that assumption is warranted. Johnson contends
that Stoneridge Creek’s expenditure of fees to defend the lawsuit cannot
serve the interests of the community because it only protects Stoneridge
Creek “from liability for numerous legal violations that have harmed
residents. . . .” At this point, however, whether Stoneridge Creek has
committed legal violations remains to be determined. Because the parties
agree that the propriety of including litigation fees as an item of “costs” must
be determined prior to the adjudication of any claims, an approach that starts
by assuming the resident’s claims are meritorious is unworkable. From a
vantage point before the claims have been adjudicated, it would be incorrect
to say that the defense of the lawsuit has no potential benefit to the
community.
For example, the ongoing viability of the community depends on the
willingness of new people to join as space becomes available. Marketing is a
line item in the budget covered by monthly fees, and Johnson’s complaint
does not allege that it is improper. If marketing is a legitimate operating
expense, then so too may be the defense of a lawsuit that charges Stoneridge
Creek with, among other things, creating “a financial and legal nightmare”
for its residents, “misappropriating the entrance fees” they pay, engaging in
“scofflaw and retaliatory behavior,” and “routinely violat[ing] the statutory
protections afforded to residents.” If these claims are true, then the
community stands to benefit if Johnson proves them, but if they are not true,
then the community has an interest in Stoneridge Creek establishing that
they are not. Similarly, we cannot say that the preservation of management
discretion when faced with efforts to hamper it—efforts that may prove
legally unfounded—offers no possible benefit to the community.
30
Taking another tack, Johnson argues that, because monthly care fees
are defined as “the fee charged to a resident in a continuing care contract on
a monthly or other periodic basis for current accommodations and services,
including care, board, or lodging” (§ 1771(m)(1)), we should interpret “costs”
or “operating expenses” to encompass only legal fees incurred to provide
services or accommodations to residents. But Johnson’s lawsuit relates to
those matters, challenging, for example, Stoneridge Creek’s alleged failure to
provide services promised in the RCA and the way it has financed its
provision of affordable housing, as well as its budget planning process, the
validity of monthly fee increases, and the RCA’s compliance with applicable
laws. In our view, a CCRC’s legal costs to provide accommodations and
services may reasonably include defending against allegations that the way it
has done so fails to comply with applicable laws—allegations that may prove
to be incorrect.
Lastly, Johnson notes that section 1771.7, subdivision (a) provides that
“[a] resident of a continuing care retirement community shall not be deprived
of any civil or legal right, benefit, or privilege guaranteed by law, by the
California Constitution, or by the United States Constitution, solely by
reason of status as a resident of a community.” While Johnson’s reference to
this provision is tied almost entirely to his discussion of retaliation, which we
discuss separately below, there is a passing suggestion in his brief that
residents would lose a meaningful ability to sue the CCRC if the CCRC’s
defense costs would be drawn from, and could potentially increase, their own
monthly fees. We are not persuaded.
In a run-of-the-mill lawsuit—suppose a resident trips over an
obstruction in a sidewalk and sues the CCRC for negligence in maintaining
it—there will be only one or a small number of plaintiffs, with the defense
31
costs spread across the entire community. Because the CCRC may anticipate
some litigation expenses and will budget accordingly, there may not be any
increase tied to a specific lawsuit. Even if the knowledge that defense costs
would be drawn from all residents’ monthly fees might cause the resident to
think twice before suing, we cannot say that the resident has been “deprived”
of access to the courts as a result.
Johnson does not argue that the interpretation he offers should apply
only to class actions, but again, even in this case we do not see Stoneridge
Creek’s ability to pay its defense costs from monthly fee revenue as depriving
Johnson or members of the putative class of their right to sue. While
Johnson filed a declaration stating that there was a drop in support for the
lawsuit among residents once it became clear that Stoneridge Creek would
raise monthly fees to pay its defense costs, both his declaration and other
evidence indicates that some residents opposed the suit even before
Stoneridge Creek proposed any increase and that their concerns about the
increases were not necessarily independent of their questions about the
merits of Johnson’s claims. Moreover, as we discuss in the next section, we
agree with Johnson that Stoneridge Creek cannot retaliate by increasing fees
based on an unreasonable projection of its costs. Yet even taking the
proposed $500,000 annual budget for legal fees at face value, it adds $66 to
monthly fees that range from just under $4,000 to over $7,500, depending on
the residential unit. Neither in this case nor as a general matter do we think
Johnson has established that section 1788(a)(22)(B) would deny residents
their civil or legal rights within the meaning of section 1771.7, subdivision (a)
if “projected costs” were construed to include defense costs, especially when,
as discussed above, the expenditure could potentially benefit the community.
32
In sum, although the statutory language does not unambiguously
compel the answer, we think the better view is that litigation fees incurred to
defend the CCRC in a suit by a resident are operating expenses that
constitute “costs” as that term is used in section 1788(a)(22)(B). They are
likely an unavoidable cost of doing business, and contrary to Johnson’s
arguments, the expenditures are not necessarily contrary to the community’s
interests. While Johnson argues that Stoneridge Creek has “ample resources
with which to defend the case,” the meaning of the statute cannot depend on
the current financial condition of Stoneridge Creek, and it is beyond dispute
that one of the principal concerns of the statutory scheme is to ensure the
solvency of CCRCs. (§ 1770, subd. (b).) Moreover, because the Department is
responsible for overseeing CCRCs and is familiar with their financial
structure, operations, and risks, we give some weight to its interpretation.
“Of course, if the Legislature disagrees with our construction of the statute, it
remains free to amend the statute to better reflect its intent.” (Chevron
U.S.A., Inc. v. Workers’ Comp. Appeals Bd. (1999) 19 Cal.4th 1182, 1199.)
Lastly, we note that our analysis is subject to an important
qualification that Stoneridge Creek acknowledged at oral argument.
Consistent with the Department’s decision in the Vi case, Stoneridge Creek
agreed that if it is ultimately found to have engaged in intentional
misconduct, then its litigation costs to defend against those allegations, if
paid from residents’ monthly fee revenue, constitute damages to the class.
Thus, to the extent the trial court on remand does not enjoin Stoneridge
Creek from using monthly fee revenue to pay its defense costs while the
litigation is ongoing, it may still determine, when the claims are adjudicated,
that some or all of those costs are not an appropriate charge against the
community and should be awarded as damages to the class.
33
V.
Having concluded that section 1788(a)(22)(B) authorizes Stoneridge
Creek to include its defense costs when setting or raising residents’ monthly
fees, we now explain our decision to remand to the trial court to reconsider its
remaining findings in light of that conclusion.
A.
We start with the trial court’s finding that Johnson established a
likelihood of success on his claim that the monthly fee increases were
unlawful under the UCL because they were retaliatory. Section 1771.7,
subdivision (g) provides that “[t]he resident has the right to freely exercise all
rights pursuant to this section,” which includes the rights in subdivision (a),
“without retaliation by the provider.” Although Stoneridge Creek argues that
section 1771.7 does not provide for a private right of action, the trial court
correctly concluded that this provision is actionable under the UCL, which
“borrows” legal violations from other statutory schemes where those
violations were undertaken pursuant to business activity. (Turner v. Seterus,
Inc. (2018) 27 Cal.App.5th 516, 545; see Long Beach Memorial Medical Center
v. Kaiser Foundation Health Plan, Inc. (2021) 71 Cal.App.5th 323, 342 [“[A]
plaintiff states a claim under the unlawful prong of the unfair competition
law by showing that [a] challenged [business] practice violates a California
‘statute or regulation’ ”].)
The trial court cited the timing and size of the monthly fee increases as
the bases for its finding that Stoneridge Creek retaliated against Johnson for
prosecuting this lawsuit. To the extent Stoneridge Creek contends that
section 1788(a)(22)(B) immunizes it from liability for retaliation, we reject the
argument. The fact that Stoneridge Creek may include its litigation fees as
an item of “projected costs” under section 1788(a)(22)(B) obviously does not
34
mean that it may use unreasonable or inflated projections to retaliate against
Johnson. We also reject Stoneridge Creek’s argument that the trial court
erred insofar as it declined to defer to the Department’s conclusion that there
was no retaliation. While we have given some weight to the Department’s
interpretation of section 1788(a)(22)(B), its retaliation finding does not
warrant the same consideration. The Department never interviewed
Johnson, even though its own procedures required it to do so. In its belated
response to Johnson’s counsel, the Department stated that it found no
evidence that Stoneridge Creek “suggested that the resident association
sanction your client for his complaints.” That is not what Johnson claimed
happened, and the Department’s finding did not address Johnson’s
contention that circumstances surrounding the imposition of the fees showed
retaliation. (Yamaha, supra, 19 Cal.4th at p. 14.) Moreover, because
Johnson’s letter did not clearly allege that the proposed amounts were
inflated estimates of Stoneridge Creek’s likely expenditures—and again, the
Department never followed up with him—the Department had no occasion to
examine that issue.
We cannot ignore, however, that the trial court made its retaliation
finding in the context of its decision that the fee increases were unlawful in
their entirety because they circumvented the fee-recovery provision of the
CLRA. As to timing, the court wrote: “[A]lthough this action was filed in late
2021, Defendants started including fees related to this litigation in the
projected budget only after this court denied Defendants’ motion to compel
arbitration, in part because it unconscionably denied plaintiff statutory fee
rights.” Stoneridge Creek argues that it always prepares its budgets for the
upcoming year starting in July, as it did here, and it followed the typical
process to prepare and present the budget to residents, and then to finalize it.
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The new fees did not go into effect until 2023, again consistent with
Stoneridge Creek’s usual practice. At a minimum, we think the significance
of the timing identified by the trial court may appear different if section
1788(a)(22)(B) authorized Stoneridge Creek to include its defense costs in the
budget and it simply adhered to the same planning schedule it used year
after year.
As to the amounts, the trial court entered an injunction that prohibited
Stoneridge Creek from charging residents for any defense costs related to this
litigation, not simply amounts that it believed were excessive. We assume
that egregious conduct could warrant such a sanction, but given the trial
court’s ruling based on the CLRA, it was unnecessary for it to consider by
how much Stoneridge Creek’s projections were inflated and whether the
increases should be reduced rather than prohibited altogether. We express
no opinion, but remand to the trial court to consider those questions.
B.
Turning to the balance of harms, the trial court determined that they
tipped in Johnson’s favor because increases in monthly care fees could cause
residents to leave or be evicted, whereas Stoneridge Creek had not stated
that it could not afford to defend itself in the litigation or that it would be
forced out of business if it was not allowed to charge its legal costs to
residents.
We observe that Johnson’s evidentiary showing on the harms identified
by the trial court was relatively modest. It appears from the Wong
declaration that the increase in monthly fees was not the only reason for his
decision to leave; moreover, only a portion of the increase was attributable to
the inclusion of litigation expenses. As noted above, the evidence indicated
that the increase at Stoneridge Creek as a result of this litigation was
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roughly a percentage point higher than at the owner’s other CCRCs. Johnson
did not offer any evidence that he or other residents would leave as a result of
the increases attributable to the lawsuit.11 Moreover, if the trial court on
remand were to enjoin only the amounts it concludes were excessive, it would
have to assess to what extent that difference would be likely to cause either
voluntary or involuntary departures, measured against any likely irreparable
harm to Stoneridge Creek.12
11 In his brief, Johnson does not assert that other residents are likely to
leave or be evicted, instead contending that “the primary evidence of
irreparable harm was the real and significant social costs” to him, which
included “los[ing] both friendships and the peaceful enjoyment of his
residence and community.” The trial court apparently did not accept this
evidence as establishing cognizable harm, and we see no error in that implicit
determination. Johnson has not shown that the increase in fees exceeds
putative class members’ potential recovery in this case; as Stoneridge Creek
points out, that recovery would include as damages any monthly fees that
were wrongfully charged. Where the potential economic harm residents
would experience from the increased fees is not irreparable—and in the
absence of evidence showing significant interim financial hardship to
residents—any resulting antagonism toward Johnson may reflect his failure
to persuade them of the ultimate value of the litigation. That would not
constitute interim harm to be addressed by the entry of a preliminary
injunction. In any event, because the injunction prevents Stoneridge Creek
from charging fees to all residents, the interim harm to be avoided must be
harm to the putative class members, not to Johnson alone.
12 In its briefing, Stoneridge Creek implied (without explanation) that if
it were preliminarily enjoined from paying its defense costs with monthly fee
revenue, and later established that it was legally entitled to use those
revenues for that purpose, it could not then raise monthly fees to recoup the
amounts it had previously paid from other sources. Asked about that issue at
oral argument, Stoneridge Creek’s counsel answered that
section 1788(a)(22)(B) is forward-looking and does not appear to authorize
such a recovery. Johnson’s counsel was largely noncommittal in response, at
least beyond suggesting that Stoneridge Creek currently appeared to be
accounting for its defense costs in a way that was intended to facilitate a
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Lastly, because the decision whether to enter a preliminary injunction
requires balancing the potential-merit and interim-harm factors—“the
greater the plaintiff’s showing on one, the less must be shown on the other”
(Butt v. State of California, supra, 4 Cal.4th at p. 678)—the trial court should
reassess the overall balance after revisiting each factor.
VI.
Code of Civil Procedure section 529, subdivision (a) requires a court to
order a party who obtains an injunction to provide an undertaking. “The
‘purpose of requiring security is to afford compensation to the party wrongly
enjoined or restrained . . . .’ ” (Top Cat Productions, Inc. v. Michael’s Los
Feliz (2002) 102 Cal.App.4th 474, 478.) Stoneridge Creek contends that the
$1,000 undertaking ordered by the court here was inadequate and an abuse
of discretion.
Because we have concluded that the preliminary injunction rests at
least in part on an invalid ground, the trial court must reevaluate on remand
the proper amount of the undertaking Johnson must post if it determines
that entry of a preliminary injunction remains appropriate. The adequacy of
the undertaking will depend on the nature of any injunction entered.
DISPOSITION
The trial court’s order granting Johnson’s motion for preliminary
injunction is reversed. On remand, the court shall evaluate whether a
preliminary injunction should be entered on grounds not inconsistent with
this opinion, and if so, the proper amount of the undertaking. Stoneridge
Creek is entitled to recover its costs on appeal.
GOLDMAN, J.
later effort to recover them. Because the parties have not briefed the issue,
we do not resolve it here, but note that it may be relevant to the remaining
questions for the trial court on remand.
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WE CONCUR:
BROWN, P. J.
CLAY, J. *
*Judge of the Alameda Superior Court, assigned by the Chief Justice
pursuant to article VI, section 6 of the California Constitution.
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Trial Court: Alameda County Superior Court
Trial Judge: Honorable Brad Seligman
Counsel for Plaintiff and Respondent: GLYNN, FINLEY, MORTL, HANLON &
FRIEDENBERG, Adam D. Friedenberg
Counsel for Defendants and Appellants: HANSON BRIDGETT, Gary A. Watt,
Shannon M. Nessier, Matthew J. Peck, Patrick
T. Burns, Matthew B. Seipel
40