(a) In any civil action between a small business or a licensee and a state regulatory agency, involving the regulatory functions of a state agency as applied to a small business or a licensee, if the small business or licensee prevails, and if the court determines that the action of the agency was undertaken without substantial justification, the small business or licensee may, in the discretion of the court, be awarded reasonable litigation expenses in addition to other costs. Funds for such expenses and costs shall be paid from funds in the regular operating budget of the state regulatory agency where the appropriation therefor encompasses the payment of such costs and expenses, and not from unappropriated money in the General Fund.
§ 1028.5.Reasonable Litigation Expenses In Action Between Small Business Or Licensee and State Agency
Title 14. Of Miscellaneous Provisions · Chapter 6. Of Costs · Last amended 1983 · Last verified July 28, 2026
In one sentenceSection 1028.5, the Carpenter-Katz Small Business Equal Access to Justice Act, lets a small business or licensee that prevails against a state regulatory agency's unjustified action recover up to $7,500 in reasonable litigation expenses, defines who qualifies as a small business or licensee, and requires the agency to report awards paid each year.
Full Text of § 1028.5
(b) "Reasonable litigation expenses" means any expenses not in excess of seven thousand five hundred dollars ($7,500) which the judge finds were reasonably incurred in opposing the agency action, including court costs, expenses incurred in administrative proceedings, attorney's fees, witness fees of all necessary witnesses, and such other expenses as were reasonably incurred.
(c) "Small business" means a business activity that is all of the following:
(1) Independently owned and operated.
(2) Not dominant in its field of operation.
(3) Not exceeding the following annual gross receipts or other criteria in the categories of:
(A) Agriculture, one million dollars ($1,000,000).
(B) General construction, nine million five hundred thousand dollars ($9,500,000).
(C) Special trade construction, five million dollars ($5,000,000).
(D) Retail trade, two million dollars ($2,000,000).
(E) Wholesale trade, nine million five hundred thousand dollars ($9,500,000).
(F) Services, two million dollars ($2,000,000).
(G) Transportation and warehousing, one million five hundred thousand dollars ($1,500,000).
(H) A manufacturing enterprise not exceeding 250 employees.
(I) A health care facility not exceeding 150 beds or one million five hundred thousand dollars ($1,500,000) in annual gross receipts.
(J) Generating and transmitting electric power not exceeding 4,500 megawatt hours annually.
(d) "Licensee" means any person licensed by a state agency who does not qualify as a small business, but whose annual gross receipts from the use of such license do not exceed one million dollars ($1,000,000).
(e) A small business or a licensee shall be deemed to prevail in any action in which there is no adjudication, stipulation, or acceptance of liability on the part of the small business or licensee.
(f) A small business or licensee shall not be deemed to have prevailed in actions commenced at the instance of, or on the basis of a complaint filed by, a person who is not an officer, employee, or other agent of the state regulatory agency if the action is dismissed by the agency upon a finding of no cause for the action, or is settled by the agency and small business or licensee without a finding of fault.
(g) Section 800 of the Government Code shall not apply to actions which are subject to the provisions of this section.
(h) Every state regulatory agency against which litigation expenses have been awarded under this section shall, at the time of submission of its proposed budget pursuant to Section 13320 of the Government Code, submit a report to the Department of Finance and the Legislature as to the amount of those expenses awarded and paid during the fiscal year.
(i) This section shall be known and may be cited as the Carpenter-Katz Small Business Equal Access to Justice Act of 1981.
Plain-English Summary
This section levels the playing field when a small business or an individually licensed person goes up against a state regulatory agency. If the small business or licensee prevails in a civil action challenging the agency's regulatory action, and the court finds the agency acted without substantial justification, the court can, in its discretion, award reasonable litigation expenses beyond ordinary costs.
Those expenses are capped at $7,500 and defined broadly under subdivision (b): court costs, expenses from administrative proceedings, attorney's fees, necessary witness fees, and other reasonably incurred expenses. The money comes from the regulatory agency's own operating budget where the appropriation covers it, not from unappropriated general fund money, echoing the accountability structure §§ 1028 and 1029 use for other government cost awards.
Subdivisions (c) and (d) draw careful lines around who qualifies. A small business has to be independently owned and operated, not dominant in its field, and under detailed annual gross-receipts thresholds that vary by industry, from $1,000,000 for agriculture to $9,500,000 for general construction or wholesale trade. A licensee is someone licensed by a state agency who doesn't qualify as a small business but whose license-related gross receipts stay under $1,000,000.
Subdivisions (e) and (f) define when a small business or licensee is deemed to have prevailed, and subdivision (h) requires an agency that's had expenses awarded against it to report the amount to the Department of Finance and the Legislature when it submits its budget.
Frequently Asked Questions
What must a small business or licensee show to recover litigation expenses under this section?
That it prevailed in a civil action against a state regulatory agency involving that agency's regulatory functions, and that the court found the agency's action was undertaken without substantial justification.
How much can be recovered under Section 1028.5?
Reasonable litigation expenses up to $7,500, covering court costs, administrative-proceeding expenses, attorney's fees, and necessary witness fees, among other reasonably incurred expenses.
How does the statute define a qualifying small business?
An independently owned and operated business, not dominant in its field, that stays under industry-specific annual gross-receipts thresholds set out in subdivision (c).
What is this section commonly known as?
The Carpenter-Katz Small Business Equal Access to Justice Act of 1981.
Where does the money for an award under this section come from?
The regulatory agency's own regular operating budget, not unappropriated General Fund money.
Amendment History
Amended by Stats. 1983, Ch. 445, Sec. 1.
Source & verification. Section text is reproduced verbatim from
the Deering's California Codes Annotated / vLex. Enacted by the California Legislature.
Last verified July 28, 2026.
· Official source
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