Two years ago, Norco homeowner Ron Mugar received a notice indicating he had violated the city’s housing code. Ron had admittedly allowed his home and backyard to become cluttered with hobby machinery. But this time, instead of fining him or asking him to bring his property up to code, the city’s private, for-profit prosecutors—lawyers with the firm of Dapeer, Rosenblit & Litvak LLP—declared they were going to take over ownership of his house using a legal process known as “receivership.”
Ron cleaned up his yard, hired a lawyer, and fought back in court—spending his hard-earned savings to defend himself—and won. Ron’s attorney got the receivership halted without a receiver ever doing any work or taking the property. Ron then brought the property into full compliance. Ron also fought the private prosecutor’s demands that he fix things for which he was never actually cited.
The court eventually ruled that Ron had brought his property into compliance and it then vacated the receivership order. But that didn’t stop the city’s hired lawyers from seeking more than $60,000 from Ron in attorneys’ fees. Attempting to collect attorneys’ fees for a prosecution that the city lost is patently illegal, which is why Ron has partnered with the Institute for Justice to put an end to the city’s use of private lawyers to enforce municipal code violations once and for all.
“Ron has always followed orders to comply—there was no need to threaten to take his home. Moreover, it’s unconscionable that he is facing crippling fees after successfully fighting back,” said Joshua House, an attorney at the Institute for Justice, which represents Ron. “By penalizing people for defending their property rights, Norco is violating Ron’s constitutional right to defend himself in court.”
House continued: “There is an old saying that ‘to the victor go the spoils.’ But in Norco, the lawyers working for the city seem to think that’s reversed. They lost in court, but they are nevertheless attempting to recover outrageously large attorneys’ fees. That’s because Norco’s scheme of using a private law firm creates perverse incentives to maximize profits, rather than efficiently and justly enforce the city’s municipal code.”
Receiverships were once intended to be a tool of last resort—meant to fix homes that posed a danger to the health and safety of the community. Receivership laws allow a city to take possession of a home, fix it up and then charge the original owner for the cost of repairs. If the homeowner cannot pay those costs, the receiver sells the home.
But now, an increasing number of California cities are empowering private, for-profit law firms to use receivership laws address minor code violations by threatening to take away residents’ homes. In the process of doing so, these firms charge enormous, sometimes bankruptcy-inducing amounts of money for their “services.” And the more they fine and charge homeowners, the more money they make.
Moreover, California courts don’t allow private, for-profit law firms to prosecute nuisance violations and then seek fees from those they prosecute. The Due Process Clauses of the United States and California Constitutions require city attorneys to be neutral, without a financial stake in the cases they bring. But in Norco, they have a strong financial incentive to seek unnecessary receiverships.
“Norco’s receivership scheme is unconstitutional,” said IJ attorney Jeffrey Redfern. “Both the U.S. and California Constitutions give citizens the right to face a neutral prosecutor and judicial system. By introducing a profit incentive to the system, Norco and the private lawyers it has hired have created an illegal incentive to rack up fines and legal fees, rather than neutrally enforce the city’s laws.”
This is not the first time IJ has sued to stop private prosecutors from abusing citizens’ constitutional rights. In nearby Indio, California, the city had hired a law firm called Silver and Wright LLP to enforce its municipal code. There, the lawyers charged an elderly woman nearly $6,000 in attorneys’ fees because her tenants were keeping chickens in their backyard. Indio no longer uses the firm for prosecution, and it has agreed to settle the lawsuit.
The Institute for Justice has been at the forefront of fighting efforts by the government to use fines, fees and civil forfeiture to raise revenue. Most recently, it secured a unanimous victory at the U.S. Supreme Court ruling that states cannot impose excessive fines.
Thomas V. Loran III and William Palmer of Pillsbury Winthrop Shaw Pittman LLP are serving as local counsel for the case, which they are taking pro bono.