Catalyst Theory Cannot Rescue a Plaintiff That Lost on the Merits: Third District Affirms Denial of Attorney Fees in CEQA Case

The “catalyst theory” of California law governing attorney’s fees sometimes allows a plaintiff to obtain fees even in the absence of a favorable judgment, if the plaintiff can show that the lawsuit was the catalyst for a voluntary change in position by the defendant. But does the theory apply if the voluntary change follows the conclusion of litigation that the plaintiff lost?  No, said the Third District Court of Appeal in Physicians for Social Responsibility – Los Angeles v. Department of Toxic Substances Control, 118 Cal.App.5th 1071 (2026).

The case has its origins in the Santa Susana Field Laboratory (SSFL), a Ventura County site where the federal government conducted liquid-rocket engine and nuclear research for decades. The Boeing Company owns most of the land, and California’s Department of Toxic Substances Control (DTSC) has long regulated the cleanup of chemical contamination there pursuant to two consent orders. When Boeing announced plans in 2013 to demolish several buildings in Area IV of the site, a coalition of environmental and public health organizations filed a petition for writ of mandate arguing that DTSC had failed to subject the demolition activity to environmental review under CEQA.

The litigation proved unsuccessful for the petitioners at every turn. The superior court denied the writ petition, and the Third District affirmed in 2023, holding that Boeing’s demolition of its own buildings was a private activity not subject to DTSC’s discretionary approval, and therefore not a “project” triggering CEQA review. The California Supreme Court declined to review the decision. Then, in June 2023—after the Court of Appeal ruled but before the Supreme Court denied review—DTSC issued its final Environmental Impact Report for the SSFL cleanup and chose to include an analysis of Boeing’s demolition activity “as if it were part of the project” in order to provide a more conservative assessment of impacts. Seizing on this development, petitioners moved for attorney fees under Code of Civil Procedure section 1021.5, arguing that the litigation had served as a catalyst for DTSC's decision to broaden the scope of its EIR analysis.

The superior court denied the motion, and the Court of Appeal affirmed. To recover fees under section 1021.5’s catalyst theory, a moving party must show, among other things, that its lawsuit “had merit and achieved its catalytic effect by threat of victory, not by dint of nuisance and threat of expense.” The court held that this standard cannot be satisfied where a party has fully litigated and lost its case on the merits. As the court explained, the catalyst theory exists to address situations where a defendant provides relief voluntarily before any judicial resolution—not situations where, as here, both the trial and appellate courts have definitively concluded the plaintiff's legal theory was wrong. A final judgment against the moving party “settles the question” of whether the lawsuit had merit, and DTSC’s post-judgment decision to expand its EIR analysis could not have been motivated by any “threat of victory.”

Petitioners argued that the court should focus on the practical impact of the litigation rather than the adverse judgment, citing the California Supreme Court’s landmark decision in Graham v. DaimlerChrysler Corp., 34 Cal.4th 553 (2004), which recognized that fees may be awarded “even when plaintiff's legal action does not result in a favorable final judgment.” The Third District was unpersuaded. It distinguished Graham on the ground that the defendant there had provided the relief sought while the case was still pending—before any court had ruled against the plaintiffs on the merits. Here, by contrast, DTSC provided its voluntary accommodation only after the litigation had concluded in the agency’s favor. The court also drew on its prior decision in Coalition for a Sustainable Future in Yucaipa v. City of Yucaipa, 238 Cal.App.4th 513 (2015), for the proposition that none of the cases applying the catalyst theory has ever awarded fees to a party that suffered an adverse judgment before the defendant's voluntary action.

The opinion also rejected petitioners’ chronological argument. Petitioners pointed out that DTSC’s internal draft signaling the expanded EIR scope was dated February 2023, three months before the appellate court issued its opinion, and argued this timing raised an inference that the ongoing litigation motivated DTSC’s decision. The court found the inference unwarranted. DTSC presented evidence that the final EIR’s timing reflected the complexity of the regulatory program, ongoing mediation with Boeing, and delays attributable to the COVID-19 pandemic—not the litigation. And in any event, the fact that the final EIR was published after the appellate ruling in DTSC’s favor categorically eliminated any possibility that a “threat of victory” had driven the agency’s actions.

Finally, the court addressed petitioners’ public policy argument. Petitioners contended that denying fees was inconsistent with the purposes of section 1021.5 because they had fought for a decade to obtain a public benefit—CEQA review of Boeing’s demolition activity—that DTSC ultimately delivered voluntarily. The court expressed some sympathy for the underlying environmental concerns but concluded that the catalyst theory’s policy rationale did not extend to this situation. The theory exists to prevent defendants from vigorously resisting a meritorious public interest suit and then avoiding fee liability by capitulating at the last moment. Where, as here, the defendant fully litigated and won, its post-judgment decision to go beyond what the court required it to do should not expose it to fee liability it otherwise would never have owed.

Physicians for Social Responsibility has potentially significant implications for environmental and land use litigants. By making explicit that the catalyst theory is categorically unavailable after a final judgment on the merits against the fee-seeker—a proposition that prior case law had suggested but not squarely held—the decision strengthens the ability of public agencies and project proponents to defend CEQA challenges without fear that any subsequent voluntary environmental initiative will retroactively transform losing plaintiffs into “successful parties.” At the same time, the decision may give plaintiffs pause before pressing claims all the way through appellate judgment when early settlement or voluntary agency action might otherwise have supported a catalyst theory fee claim.