In Toy v. City and County of San Francisco (Cal. Ct. App., 1st Dist., July 24, 2026), the First District Court of Appeal held that a challenge to municipal water rates has to be brought as a reverse validation action. That’s a specialized procedure, one with its own short deadline and its own strict notice rules, and the court held that failing to follow it is fatal no matter how strong the underlying claim.

Here’s the background in plain terms. California’s validation statutes let a public agency file a lawsuit to confirm, or validate, something it has done, such as adopting a rate. Private parties can bring the mirror image, a reverse validation action, to invalidate that same decision. When these statutes apply, they take over, and they replace whatever other route a private party might have imagined using to challenge the agency. In 2021 the Legislature added Government Code section 53759, which says any action attacking a water or sewer rate adopted after January 1, 2022 must be filed within 120 days and must run through the validation procedures.

The plaintiffs here didn’t do that. In October 2023 they filed an ordinary class action attacking San Francisco’s new water rates under Proposition 218, the voter initiative that bars local governments from charging more for a property-related service than the service actually costs. They styled it as a claim for a refund and related relief. The City answered, asserted its defenses, and then litigated. For roughly fourteen months it filed case management statements, posted jury fees, took depositions, and agreed to consolidate the two related cases. Then, in early 2025, the City moved for judgment on the pleadings, a motion that asks the court to decide the case on the complaint alone, on a single ground: the plaintiffs had used the wrong procedure. The trial court agreed and dismissed the case without leave to amend. The Court of Appeal affirmed.

The most useful part of the opinion for anyone who litigates against a government body is what the court did with the waiver argument. The plaintiffs said the City gave up the validation defense by litigating the case for over a year before raising it. The court disagreed, and the reasoning matters. Waiver means the intentional surrender of a known right, and simply defending a lawsuit isn’t that. A public agency doesn’t give anything up by answering a complaint and fighting it. More to the point, compliance with the reverse validation procedures isn’t an affirmative defense the agency has to raise early or lose. It’s a prerequisite to the court’s jurisdiction. If the plaintiff never satisfies it, the court never had the power to hear the case, and the agency can point that out late.

The plaintiffs also argued that because they really wanted a refund, validation law didn’t apply. The court rejected that too, consistent with earlier decisions holding that a refund label can’t rescue a claim that is, at bottom, an attack on the validity of an agency’s rate. And the court found no good cause to excuse the misstep, noting that the requirements were well established and, in its words, all in the books. The City’s own rate notice had even told ratepayers about the 120-day deadline and the reverse validation procedure.

What This Means for Businesses, Property Owners, and Ratepayers

If you might challenge a municipal water or sewer rate adopted after January 1, 2022, treat it as a validation action from the first day. That means a 120-day clock that starts running at adoption, a summons in the specific form the statute requires, and service by publication to all interested persons, not just service on the agency. Miss any of those, and the strength of your Proposition 218 argument won’t matter.

It also means you can’t read anything into the agency’s conduct. A city can litigate your case for a year and still move to dismiss it as procedurally improper, because the defect goes to the court’s power to act, not to a defense the city can forfeit. Waiting for the government to raise the issue is not a strategy.

The Bottom Line

Challenges to government rates and fees are won or lost on planning as much as on the merits. Before you file, confirm whether the validation statutes apply, calendar the 120-day deadline, and build the notice and publication steps into your plan from the start. A meritorious claim filed the wrong way is still a losing claim. Real estate litigation, disputes with public agencies, and challenges to government fees and assessments are central to our practice at Horst Legal Counsel. If you’re weighing a challenge to a rate or fee, or you’ve received a notice of a new one, we’re glad to talk it through. Contact us here.

The post San Francisco Litigated a Water Rate Class Action for a Year, Then Won by Showing It Was Filed the Wrong Way appeared first on Horst Legal Counsel.

The case is Sunflower Alliance v. Department of Conservation (Cal. Supreme Ct., June 25, 2026). A company called Reabold wanted to reopen a dormant oil well in Contra Costa County, plugged and idle since the 1980s, and convert it into a well for injecting treated wastewater deep underground, about 12,600 gallons a day for twenty years. CalGEM, the state division that regulates these wells, approved the project and declared it exempt from the California Environmental Quality Act, the law that forces environmental review of projects that may carry impacts. It leaned on the “class 1” categorical exemption, which covers minor alterations to existing facilities involving “negligible or no expansion” of an existing or former use. A community group, Sunflower Alliance, sued. Turning an oil-extraction well into a wastewater-injection well, it argued, is no negligible change.

What the Class 1 Exemption Actually Asks

The Court of Appeal sided with the company, but its reasoning is what should get your attention. It read “negligible” to mean environmental risk. Because the agencies had found the injection posed little danger to nearby water, the court called the change in use negligible and the exemption satisfied. Strip the case to its core and one question remains. Does “negligible” measure the change in use, or the risk of environmental harm?

The Supreme Court’s Answer

The change in use, and only the change in use. Writing for a unanimous court, Chief Justice Guerrero held that the exemption’s text speaks to expansion of use and says nothing about environmental risk, and a court doesn’t get to write in words the regulation left out. The risk question has its own home in CEQA’s structure. When the state built its catalog of categorical exemptions, it decided once, at the rulemaking stage, that those categories of projects don’t typically cause significant environmental effects. Let an agency or a court relitigate that risk project by project, at the exemption stage, and you collapse two separate steps of the law and skip the public environmental review reserved for projects that don’t qualify.

So the court reversed and handed the case back to answer the right question, whether converting a shuttered oil well into a high-volume injection well is a negligible change in use. Justice Kruger, concurring, put her finger on the part left unresolved. Deciding what counts as “negligible” still needs a yardstick, and she pointed to the Guidelines’ own examples, adding a bike lane to a street, turning a home into an office, as the measure of how much change the exemption can absorb.

What This Means for Developers, Property Owners, and Operators

If your project reaches approval through a CEQA categorical exemption, the takeaway is blunt. Anchor your case to the scope of the change in use, not to how safe the project is. A file thick with evidence of low environmental impact, however convincing, answers a question the exemption never asked. For anyone who learned to win exemptions by pointing at minimal harm, that’s a genuine reset.

It cuts both ways. A genuinely low-risk project can still be too large a change in use to qualify, so some projects that used to slip through will now draw full review. But the same rule protects a truly minor change from being second-guessed on risk grounds. For oil and gas operators, water agencies, and industrial users eyeing conversions of existing facilities, the scope-of-use framing now governs. For developers and property owners, the play is to show, on the record, how the project fits the nature and degree of an existing use, and to treat the categorical exemption as the narrow tool the Supreme Court says it is.

Bottom Line

Categorical exemptions exist to spare routine projects from full environmental review, not to let agencies make the case-by-case risk calls the Legislature assigned to the rulemaking process. After Sunflower, the question at the exemption stage is clean, and it isn’t whether your project is safe. It’s whether your project is a negligible change in use. If the honest answer is no, a mountain of risk evidence won’t rescue the exemption, and an approval built on that evidence is a challenge waiting to happen. The time to get the framing right is at the application, before the exemption is granted and then fought over in court. Horst Legal Counsel advises developers, property owners, and businesses on land use, CEQA compliance, and the disputes that follow. If a categorical exemption sits on your project’s critical path, let’s pressure-test it before someone else does.

The post Your Project’s Low Environmental Risk Won’t Win You a CEQA Exemption appeared first on Horst Legal Counsel.

The California Supreme Court just narrowed that authority, unanimously, in a decision that changes the calculus for anyone navigating the coastal development process.

Two Decades of Permits and Denials

The developer in Shear Development Co., LLC v. California Coastal Commission (Cal. Supreme Ct., Apr. 23, 2026) purchased eight residential lots in Los Osos, an unincorporated community in San Luis Obispo County near Morro Bay, back in 2003. The lots were zoned Residential Single-Family and surrounded on three sides by existing homes. The County approved a coastal development permit in 2004 to build in two phases: four homes immediately and four more after the community sewer system was completed.

Shear built the first four homes without issue. When the sewer system was completed in 2016, Shear went back to the County for permits on the remaining lots. The County approved three of the four in 2019, finding that water and wastewater capacity was sufficient.

Two members of the Coastal Commission appealed the County’s decision to the Commission itself. The Commission denied the permits, asserting appellate jurisdiction on two grounds: that the proposed development was located in a sensitive coastal resource area under the County’s local coastal program, and that because the zoning designation listed more than one principal permitted use, the proposed homes did not qualify as “the” principal permitted use. Shear challenged both grounds in court. The trial court and the Court of Appeal sided with the Commission. The Supreme Court reversed on both counts.

When Two Agencies Disagree, the Court Decides for Itself

One of the threshold questions was what standard of review applies when a court evaluates whether the Commission properly exercised jurisdiction. The Commission argued for deferential substantial evidence review. The Supreme Court disagreed.

Because the dispute turned on how to interpret the County’s local coastal program, a legal question rather than a factual one, the Court held that courts must exercise their own independent judgment. An LCP is enacted law. Interpreting enacted law is a legal task, and courts do not defer to agencies on legal questions.

The more interesting part came next. Both the County and the Commission claimed deference for their respective interpretations of the same LCP. The County said its reading should control because it authored the document. The Commission said its reading should prevail because of its statewide expertise. The Court applied the standard Yamaha factors to both and concluded that neither entity had a clear interpretive advantage over the other. Both had participated in drafting and enforcing the LCP. Both had relevant expertise. Neither had a long-standing, consistent track record of interpreting the provision at issue. The result: no deference to either. The Court read the LCP for itself.

That principle will matter in cases well beyond coastal development. When two agencies that share responsibility for administering the same statutory scheme offer conflicting interpretations, a court owes no deference to either. The agency that gets to the courthouse first does not get to fix the meaning for everyone else.

The Development Was Not in a Sensitive Coastal Resource Area

The Commission’s primary jurisdictional claim rested on a single figure in the Estero Area Plan, Figure 6-3, which depicted the geographic extent of sandy soils known as the Los Osos Dune Sands. The Commission argued that the entire area shown on the map, including the developed urban portion of Los Osos where Shear’s lots are located, was part of a designated sensitive resource area.

The Court was not persuaded. The LCP’s text states that the sensitive resource area includes the dune sands “outside of Los Osos.” The standards for development within the SRA appear in the section of the LCP governing rural areas, not the section governing the Los Osos urban area. When the County proposed the amendment that created the SRA in 2008, the Commission itself recognized that the amendment did not apply to urban Los Osos and rejected portions that would have extended to the urban area.

The combining designation maps in the LCP do not depict all of urban Los Osos as a sensitive resource area. And the Commission could not point to a long-standing or consistent interpretation supporting its position. The Court noted that the Commission had not cited anything demonstrating it considered urban Los Osos to be part of the SRA at any time before it decided to take the appeal of Shear’s permit. That is a revealing gap. An agency claiming jurisdiction based on a decades-old designation should be able to show it actually treated that designation as applying to the area in question before the dispute arose.

The text, the structure, the maps, and the legislative history all pointed the same direction. The development was not in a sensitive resource area, and the Commission did not have appellate jurisdiction on that basis.

Multiple Permitted Uses Do Not Trigger Commission Jurisdiction

The Commission’s fallback argument was that it had jurisdiction because the site’s zoning designation listed three principal permitted uses (passive recreation, coastal accessways, and single-family dwellings) rather than one. The statute gives the Commission appellate jurisdiction over developments “not designated as the principal permitted use.” The Commission read “the” as meaning the sole use, so any zone with multiple listed uses would fall within its appellate reach.

The Court rejected this reading as well. The Public Resources Code contains a number inclusivity provision that says the singular includes the plural. Applied here, “the principal permitted use” means the principal permitted use or uses. If a local government designates several principal uses and the proposed development is for one of them, it qualifies. The Commission has appellate jurisdiction only when the development is not for any of the designated principal permitted uses.

The practical consequence of the Commission’s reading would have been sweeping. The County pointed out that its entire coastal zone is designated for more than one principal permitted use. Under the Commission’s interpretation, every coastal development in the County would be subject to Commission appellate review, effectively eliminating local permitting authority and rendering the other statutory bases for Commission jurisdiction meaningless. The Court was unwilling to read the statute in a way that would produce that result.

What This Means for Property Owners, Developers, and Investors

When the Commission’s jurisdiction depends on how a local coastal program is read, courts will no longer simply defer to the Commission’s interpretation. If the question is legal rather than factual, the court decides for itself. And when the local government disagrees with the Commission’s reading of its own LCP, the Commission does not automatically win. That alone changes the dynamic in contested permit cases.

The Commission also cannot use an ambiguous map or figure in an LCP to extend its jurisdiction into areas the text does not clearly designate as sensitive. The burden is on the Commission to point to something in the LCP that affirmatively designates the site as a sensitive resource area. If the text, the maps, and the legislative history do not support that designation, the jurisdiction claim fails. An illustration that happens to shade an area on a map is not the same as a legal designation, and after Shear, courts will be expected to recognize the difference.

For every coastal county that zones land for multiple principal permitted uses, the Commission’s authority to appeal local permit decisions just became meaningfully narrower. As long as the proposed development is for one of the designated principal uses, the Commission does not have appellate jurisdiction on that basis. That removes a theory the Commission has used for years to extend its reach into local permitting decisions.

For buyers and lenders evaluating coastal properties, this decision removes one source of regulatory uncertainty. A property that was previously at risk of Commission intervention based on aggressive jurisdictional readings may now have a clearer permitting path. For developers with pending or anticipated applications, Shear provides a framework for pushing back when the Commission’s jurisdiction rests on interpretive overreach rather than clear legal authority.

The Bottom Line

The Coastal Commission plays an important role in protecting California’s coastline. That role has statutory limits, and those limits matter. When the Commission overrides a local government’s permitting decision, it needs clear legal authority to do so. When it relies on a strained reading of a local coastal program to claim jurisdiction the LCP does not support, courts are now empowered, and obligated, to say no.

Shear is the most significant check on the Commission’s appellate jurisdiction since Nollan v. California Coastal Commission nearly four decades ago, decided unanimously by the California Supreme Court in an opinion authored by Chief Justice Guerrero. The principles it establishes will govern how courts, local governments, and the Commission interact on jurisdictional questions for years to come. Property owners along the coast should know what those principles are.

Coastal development permitting, real estate litigation, and disputes involving regulatory authority over land use are central areas of Horst Legal Counsel’s practice. If you have questions about how Shear affects your property, your portfolio, or a pending application, we are glad to talk through it. Contact us here.

The post The Coastal Commission Just Lost Its Biggest Jurisdictional Fight in Forty Years appeared first on Horst Legal Counsel.

Horst Legal Counsel | April 2026

Someone torpedoes your deal. You spend north of a million dollars in court forcing the sale through. You win. Then you sue the people who caused the mess in the first place, and you win again. But the second lawsuit cost you another $841,000 in legal fees. Can you recover those fees too?

The First District Court of Appeal just said no. In Guinnane Construction Co., Inc. v. Chess, the court confirmed that California’s “tort of another” doctrine covers the attorney fees a business is forced to spend litigating against an innocent third party because of someone else’s wrongful conduct. It does not cover the fees spent going after the wrongdoer directly. That distinction sounds technical, but for any business that has been dragged into layered litigation by a bad actor, it is the difference between full recovery and absorbing six figures in legal costs.

What Happened in Guinnane

The dispute started with an 80-acre parcel of land in Livermore. Guinnane Construction held the right to purchase a 50 percent interest in the property through an assigned right of first refusal. Edmund Jin, a prospective buyer, and his real estate agent Stephen Chess knew about that right. They pursued the deal anyway, ultimately convincing the sellers to breach their agreement and sell to Jin for $1.5 million.

Guinnane sued the sellers for specific performance. That case was fully litigated for over a year, culminating in a bench trial. Guinnane prevailed, obtaining a court order directing conveyance of the property interest in exchange for $1.2 million.

Guinnane then turned to the people who had caused the problem. It filed a separate action against Jin and Chess for inducing breach of contract and intentional interference with contractual relations. After years of litigation, including a meritless anti-SLAPP motion by the defendants that this same appellate court had already rejected, the trial court entered judgment in Guinnane’s favor. The compensatory damages totaled $1,798,994, consisting of the attorney fees Guinnane had incurred prosecuting the specific performance action plus prejudgment interest.

So far, the tort of another doctrine was working exactly as designed. The fees Guinnane spent suing the sellers were recoverable as damages against the people whose interference made that lawsuit necessary. The question was what came next.

The Fee Request the Court Denied

After judgment, Guinnane moved for an additional $841,133 in attorney fees: the cost of prosecuting the tort of another action against Jin and Chess. Guinnane argued that without recovering those fees, its judgment would be significantly diluted. It had spent over $800,000 just to collect the damages the defendants’ own conduct caused. If the doctrine existed to make Guinnane whole, shouldn’t it cover the full cost of getting there?

The trial court denied the motion, and the Court of Appeal affirmed. Presiding Justice Stewart, writing for a unanimous panel, traced the doctrine from its 19th-century English common law origins through the California Supreme Court’s foundational decisions in Prentice v. North American Title Guaranty Corp. and Gray v. Don Miller & Associates. The through line was consistent: the tort of another doctrine allows a plaintiff to recover fees spent in litigation with a third party that the defendant’s tortious conduct made necessary. It does not extend to the fees incurred in the action against the tortfeasor.

Why the Court Drew the Line

The court’s reasoning rested on the structural relationship between the tort of another doctrine and the American Rule, codified in Code of Civil Procedure section 1021, which requires each party to bear its own attorney fees absent a statute or contract providing otherwise. The tort of another doctrine is not a general fee-shifting rule. It is a narrow equitable exception that treats certain attorney fees as consequential damages, specifically, the fees a plaintiff was forced to spend because of the defendant’s wrong. Those fees are recoverable as damages “like any other damages,” but the key phrase is “in the action against the third party.”

Gray itself made this distinction. The Supreme Court there remanded for an apportionment of attorney fees, directing the trial court to award only the portion “attributable to [the plaintiff’s] action against the sellers,” not the fees incurred in the fraud action against the broker. Subsequent decisions reinforced the boundary. In Lewis v. Edmonds, this same court rejected a tort of another claim for fees incurred suing the tortfeasor, noting the doctrine “arguably would support a recovery from [the defendant] for the attorney fees incurred in [plaintiffs’] defense of the foreclosure proceeding” but not fees from “the ordinary two-party action” against the wrongdoer. Third Eye Blind, Inc. v. Near North Entertainment drew the same line, distinguishing fees recoverable under the doctrine from “attorney’s fees qua attorney’s fees” incurred in suing the tortfeasor defendant.

Guinnane tried an alternative argument: that “fees on fees” are recoverable under the private attorney general doctrine (Code of Civil Procedure section 1021.5), and the same logic should apply here. The court rejected the analogy. The private attorney general doctrine exists to incentivize enforcement of important public policies. Without fee recovery, such litigation would often be impracticable, and statutory rights would go unenforced. The tort of another doctrine serves a different function. It compensates a plaintiff for a specific economic injury. It does not aim to encourage litigation or deter bad conduct. Those are fundamentally different engines, and extending “fees on fees” from one to the other would require the kind of policy decision that belongs to the Legislature.

The court acknowledged the practical unfairness. Guinnane spent over $841,000 to collect damages that the defendants’ own tortious interference had caused, and the defendants’ aggressive litigation tactics, including a meritless anti-SLAPP motion, made the case more expensive than it needed to be. The opinion closes by noting that sanctions for frivolous litigation tactics exist as a potential remedy, but the bar is high. As for changing the underlying rule, the court said plainly: “this court is not at liberty to depart from current law.”

What This Means for California Businesses

For companies involved in real estate transactions, commercial contracts, or any business relationship where a third party’s interference might trigger cascading litigation, Guinnane offers three practical lessons.

First, budget for the full cost of enforcement. If you are the victim of tortious interference and need to sue both the breaching party and the interfering party, the tort of another doctrine will help you recover the fees from the first lawsuit. It will not help you recover the fees from the second. That reality should inform how you structure your litigation strategy, how you allocate resources, and how you evaluate settlement offers.

Second, look for contractual and statutory fee provisions early. The American Rule applies by default, but contracts can change the calculus. If your agreements include attorney fee provisions that cover disputes arising from interference or breach, you may have an independent basis for fee recovery that the tort of another doctrine does not provide. Review your contracts with this gap in mind.

Third, consider injunctive relief and other early intervention strategies. The cheapest way to deal with cascading litigation is to prevent it. When a third party is actively interfering with a deal, tools like lis pendens, temporary restraining orders, and preliminary injunctions can stop the interference before it metastasizes into years of multi-front litigation. The earlier you involve litigation counsel, the more options you have.

Guinnane Construction v. Chess is a well-reasoned opinion that confirms what practitioners have long suspected about the boundaries of the tort of another doctrine. It is also a reminder that winning on the merits does not always mean recovering every dollar you spent getting there.

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