Senate Bill 35 (Government Code section 65913.4) was enacted in 2017 as part of an effort by the State Legislature to increase housing production. The law compels local agencies, including charter cities, to issue streamlined approvals for qualifying multifamily residential projects, even, at times, where a project conflicts with a local ordinance. In Ruegg & Ellsworth v. City of Berkeley, the court rejected Berkeley’s claim that SB 35 impermissibly interfered with the constitutional “home rule” authority over historic preservation granted to charter cities. No. A159218 (1st Dist. Apr. 20, 2021). The decision represents the first published opinion to uphold SB 35 against challenge.

To qualify for streamlined, ministerial approvals under SB 35, a project is required to comply with several criteria, among them that the development is not located where it would require demolishing “a historic structure” placed on a national, state, or local historic register. (Gov’t Code § 65913.4(a)(7)(C).) In Ruegg, the City of Berkeley denied a streamlining application on several grounds, including that the controversial, proposed mixed-use development would affect part of the West Berkeley Shellmound, a designated local landmark. The court rejected the City’s determination, finding there was no evidence that this (widely-acknowledged) subsurface resource reasonably could be viewed as an existing “historic structure” under SB 35.

The court also held that the Legislature was not prohibited from addressing through SB 35 the “municipal affair” of local historic preservation. SB 35, the court determined, addresses a matter of statewide concern—the lack of affordable housing—and the streamlining law is reasonably related to resolving that issue and does not unduly interfere with the City’s historic preservation authority. On these grounds, the court determined that the project at issue was not subject to a requirement in Berkeley’s Landmark Preservation Ordinance that a city commission approve construction in a designated landmark.

The court’s conclusion rested, in part, on its recognition that “historical preservation is precisely the kind of subjective discretionary land use decision the Legislature sought to prevent local government from using to defeat affordable housing development.” In upholding SB 35, the court had little trouble sustaining the direct connection the Legislature drew between subjective local land use decisions and the statewide affordable housing crisis.

Multiple applications for a development project are not required where the first permit denial makes clear that no development of the property would be allowed under any circumstance. Felkay v. City of Santa Barbara, No. B304964 (2nd Dist., March 18, 2021).

Felkay purchased an ocean-front lot with the intention of building a residence. The planning commission rejected the application for the residence finding that it violated City Policy 8.2 which prohibits any development on the bluff face regardless of size. On appeal to the City Council, the City found that Felkay’s takings claim was not ripe because Felkay had not investigated other potential uses of the land, including development of the area above the bluff face, agricultural or educational uses, or merging the property with the adjoining lot he owned. Felkay filed a consolidated petition for writ of administrative mandamus and complaint for inverse condemnation.

The court of appeal explained that, in general, before an inverse condemnation action is ripe, a landowner must have made at least one development proposal that has been rejected and pursued at least one meaningful application for a zoning variance or similar exception, which has also been finally denied. Once the permissible uses of the property are known to a reasonable degree of certainty, a takings claim is likely to have ripened. However, in this case, the court found that Felkay was not required to submit a second development proposal because the City “made plain” that it would not allow any development below the 127-foot elevation, and had determined that the area above that elevation was “not buildable.” Therefore, submission of a second application would have been futile because the agency’s decision was certain to be adverse. For these reasons, the court found that Felkay’s claim was ripe and that all administrative remedies had been exhausted.

Additionally, the court rejected the City’s argument that Felkay’s failure, as part of his mandamus claim, to challenge the City’s decision declining to waive the requirements of Policy 8.2 estopped him from seeking damages for inverse condemnation. The City had stipulated that limited issues would be heard under the mandamus claim and that the inverse condemnation claims would be reserved for trial — the Policy 8.2 waiver was not among the claims to be heard as part of the mandamus proceeding. The City forfeited the issue by failing to object to the apportionment of issues between the writ proceedings and inverse condemnation trial. Therefore, Felkay had also effectively exhausted his judicial remedies.

Three months ago, the Fourth District Court of Appeal upheld a Coastal Commission fine of $1 million on homeowners who performed major reconstruction on their Malibu home without obtaining coastal permits and refused to halt construction after notification of the violation by Commission staff. (See our report: Coastal Commission Order to Homeowners to Remove Seawall and Pay $1 Million Fine Upheld). Now, the Second District Court of Appeal has upheld a Commission penalty of $4,185,000 on Malibu homeowners who refused to remove structures that blocked a public access easement granted to the Coastal Commission by a prior owner of the home. Lent v. California Coastal Commission, No. B292091 (2nd Dist., April 5, 2021).

Background

In 1978, the owner of beachfront property in Malibu applied to the Coastal Commission for a coastal development permit to build a house. As a condition of approving the permit, the Commission required, and the owner dedicated, a five-foot-wide easement for public access through the property from the highway to the beach.

Notwithstanding the easement, in 1983, the owner built a wooden deck and stairway (shown in the photo below) over most of the easement area. The owner also constructed a fence and gate that entirely blocked access to the easement area from the highway. The Coastal Commission did not issue a permit or otherwise approve any of these structures.

 

The Lents bought the property in 2002. In 2007 the Commission notified the Lents that the structures were inconsistent with the easement and violated the Coastal Act. After subsequent failed attempts to convince the Lents to remove the structures, the Commission served them with a notice of intent to issue a cease-and-desist order. The notice informed the Lents that the Commission could impose administrative penalties under Public Resources Code section 30821 of up to $11,250 per day per violation.

Two weeks before the hearing on the cease-and-desist order, Commission staff issued a report stating that a penalty of up to $8,370,000 was warranted because the violations caused “significant blockage of public access” and the Lents refused to undertake any “voluntary restoration efforts” despite the Commission’s efforts over many years.  The staff report, however, recommended a penalty between $800,000 and $1,500,000, and specifically $950,000.

The $4 Million Penalty

After hearing testimony from the Lents and other interested parties, the Commission voted unanimously to issue the cease-and-desist order, requiring removal of the structures and imposing a penalty of $4,185,000 (50% of the maximum authorized penalty). The Lents sued to set aside the penalty, contending that its imposition violated their rights to due process of law and that the penalty was an excessive fine under the federal and state constitutions.

The appellate court found no merit in the Lents’ due process claims. “[A]lthough not as robust as trial-like proceedings,” the notice and hearing procedures governing imposition of penalties by the Commission guaranteed that a property owner had notice of the alleged violations, an opportunity to present evidence, notice of the recommendation by the Commission staff and supporting evidence prior to the hearing, and an opportunity to present a defense prior to and at the hearing. The court likewise rejected the claim that the Commission violated due process by imposing a penalty over four times the amount recommended by its staff. The court said due process did not mandate advance notice of the exact penalty the agency intended to impose, so long as the agency provided adequate notice of the substance of the charge.  The court also pointed out that staff had informed the Lents in writing that the statute authorized a penalty of up to $11,250 per day; “the Lents at that point knew all they needed to know about the potential penalty they faced, how the Commission would calculate it, and why.”

The court also found that the penalty did not amount to an excessive fine under the state or federal constitutions. A fine is constitutionally excessive only if “grossly disproportionate to the offense.” Examining the factors relevant to proportionality, the court held that the penalty was constitutionally valid because (1) the Lents had a high degree of culpability evidenced by their willful refusal to remove the structures for over nine years after the Commission told them the structures violated the Coastal Act; (2) the Lents’ conduct effectively precluded the Commission from using the easement to enable public access to a beach that was part of a three-mile stretch of the coast with no other public access; (3) other statutes authorized daily penalties for activities similar to those involved here—including undertaking activity without obtaining a required permit—some of which were higher than the amounts authorized under section 30821; and (4) the Lents had submitted no evidence of inability to pay the penalty.

A City municipal transit agency did not violate equal protection, substantive due process or state anti-age discrimination laws when it disfavored some taxi cab medallion holders from accessing lucrative airport pickups because, among other things, the law was rationally related to legitimate government interests. San Francisco Taxi Coal. v. City & Cty. of San Francisco, 979 F.3d 1220 (9th Cir. 2020).

Taxi cabs that operate in San Francisco and pick up riders from the San Francisco International Airport are regulated by the San Francisco Municipal Transportation Agency (SFMTA). Among other things, the SFMTA issues taxi cab medallions that allow the taxi cabs to operate within SFO. In 2010, the SFMTA enacted regulations that provided for the sale of medallions (at a price of $250,000) and changed the medallion structure to create three tiers of drivers: (i) those issued medallions pre-1978, (ii) those issued medallions between 1978-2010, and (iii) those that purchased issued medallions after 2010.

The only relevant difference among the tiers was that the post-2010 medallion holders paid $250,000 to the City for each medallion. Uber, Lyft and other ride hailing technologies began to disrupt the industry shortly after the post-2010 medallion holders began purchasing taxi medallions. In response the SFMTA adopted regulations in 2018 that, among other things, disfavored pre-2010 medallion holders “from [airport] pickups with priority given at a fluctuating ratio to [p]urchased medallion holders depending on demand.” The pre-2010 medallion holders sued the City, the SFMTA, and its directors for violations of substantive due process, equal protection, CEQA, and anti-age discrimination law.

The court rejected the substantive due process claim, observing that the court was not free to engage in policy judgments regarding laws that were otherwise constitutional. The court also rejected the CEQA claim, holding that the 2018 regulations did not qualify as a “project” under CEQA and that plaintiffs’ claim that the regulations would have indirect effects on physical environment was speculative. The court also held that the pre-2010 medallion holders did not plausibly state a claim for age discrimination.

The court likewise found no equal protection violation because there were legitimate reasons for the distinctions the policy drew amongst medallion holders. The court upheld the trial court’s ruling that the 2018 regulations rationally served several legitimate purposes, including (1) reducing traffic congestion at the airport; (2) encouraging drivers to service the City; and (3) mitigating economic injury to holders of purchased medallions. The court reasoned the 2018 regulations did “not single out [p]urchased medallion holders for favorable treatment with no rational or logical reason for doing [so].” Purchased medallion holders obtained expensive permits from the City only “to have the rug pulled out from under them by an unexpected disruptive technology.” Mitigating the adverse impact on those most affected by a shift in the market was a permissible state purpose, even if some might question its policy wisdom.

A challenge to a water district’s increase in its ad valorem property tax was untimely under the 60-day statute of limitations in the validation statutes. Coachella Valley Water District v. Superior Court (Roberts), No. E074010 (4th Dist., March 9, 2021).

Code of Civil Procedure sections 860-870 provide for accelerated procedures for determining the validity of certain bonds, assessments and agreements entered into by public agencies. Referred to as the validation statutes, they allow a public agency to file an action to promptly determine the validity of any of the agency’s acts that fall within the scope of their provisions. They also allow any “interested person” to bring an action challenging the validity of such acts (sometimes referred to as “reverse” validation actions) within 60 days of the challenged action.

The Coachella Valley Water District adopted a two-cent increase in its ad valorem property tax levied annually to satisfy its contractual obligations to the State Water Project (SWP). Roberts filed suit to invalidate the tax under provisions of the Water Code and the California Constitution (Propositions 13, 26, and 218) and to obtain a refund. The water district argued the entire action was time-barred because the validation statutes required Roberts to present his claims in a “reverse validation action” no later than 60 days after the water district adopted the tax.

The appellate court agreed and ordered the case dismissed. The court began its analysis by noting that the validation statutes do not specify the matters to which they apply; rather, their procedures apply to “any matter which under any other law is authorized to be determined” under the Code of Civil Procedure. The court concluded that provisions of the County Water District Law empowering water districts to levy and collect taxes on “property within the district” and providing that an action “to determine the validity of an assessment, or of warrants, contracts, obligations, or evidences of indebtedness pursuant to [the County Water District Law] may be brought pursuant to [the validation statutes]” constituted such authorizing law.

Roberts argued that this wasn’t the case because the word “tax” did not appear in the provisions authorizing a validation action. The court found this focus unduly narrow in light of “the County Water District Law’s overarching tax scheme and the obvious interplay [between] provisions authorizing imposition of property taxes and those making the validation procedures applicable to any county water district ‘assessment.’” The court relied on another provision of the Water District Law defining an “assessment” in this context as including setting a tax rate based on the value of property. The tax at issue, it concluded, was “clearly such an ‘assessment.’”

Roberts also contended that even if his claims were barred under the validation statutes, they were still valid as a taxpayer action under Code of Civil Procedure section 526a because he challenged both imposition of the tax and the act of expending the allegedly illegal funds. The court disagreed, observing that a validation action and a taxpayer action were not mutually exclusive. Both types of claims could be pursued provided they were filed within the 60-day period governing a validation action. The “crux of Roberts’ claim,” the court said, was “a challenge to the validity of the SWP tax.” Roberts’ taxpayer claim was based on his allegation that the SWP tax was invalid; hence “Roberts’ imposition and spending challenges [were] two sides of the same coin.”

The court likewise found no merit in Roberts’ argument that imposing the 60-day statute of limitations in this setting would effectively immunize the water district’s future tax rates from judicial scrutiny. It pointed out that a water district must fix the SWP tax rate anew annually, thereby creating a new “assessment” the validity of which could be challenged under the validation statutes. And in fact, the court noted, Roberts had already filed a timely reverse validation action against the SWP tax rate the water district fixed for the following fiscal year.

The Ninth Circuit reversed a conviction for three counts of violations under the Clean Water Act because the district court failed to instruct the jury that the defendant needed to knowingly discharge material “into water” to convict. United States v. Lucero, No. 19-10074 (9th Cir. March 4, 2021).

In the summer of 2014, Lucero executed a scheme under which he charged construction companies to dump dirt and debris on lands near the San Francisco Bay, including wetlands and a tributary subject to the Clean Water Act. Although Lucero admitted to “walking the land” where the dumping happened, the period when the dumping occurred was unusually dry due to drought. The trial court found Lucero guilty on two counts of discharges into wetlands and one count of discharge into a tributary.

The Ninth Circuit overturned Lucero’s conviction because the trial court had failed to instruct the jury that the defendant needed to knowingly discharge a pollutant in violation of the Clean Water Act. In order to determine the proper standard of proof, the court analyzed the language of section 1319(c) of the Clean Water Act, which makes it a felony to “knowingly violate[] section 1311” of the Act. The majority concluded that the statute requires the defendant to knowingly add a pollutant “into water” but does not require that the defendant must knowingly discharge pollutants into “waters of the United States.” The majority reasoned that this was the proper reading based on the construction of the statute and Congress’s broad concern for preventing water pollution.

The court concluded that the failure to include instructions regarding the knowledge requirement was not harmless error and warranted a remand. The evidence that Lucero knew he was dumping into water was “underwhelming and contested” due to the drought conditions at the time.

The court rejected the defendant’s argument that the definitions of “waters of the United States,” “wetlands,” and “tributaries” were unconstitutionally vague. The court held that the term “wetlands” was not vague, despite the Supreme Court’s “significant nexus” interpretation, because it provided an “ascertainable standard” given the facts of the case. The term “tributary” was not vague because the court had long recognized a common understanding of the term. Lastly, the narrower 2020 “waters of the United States” definition did not apply to Lucero because the incident occurred in 2014 and the new statute did not apply retroactively.

The Court of Appeal held that an agreement obligating a developer and city to indemnify LAFCO against claims arising from its annexation decision lacked consideration because the agreement simply required LAFCO to do what it was already obligated to do by statute. San Luis Obispo Local Agency Formation Commission v. City of Pismo Beach, No. B296968 (2nd Dist., March 3, 2021).

The City of Pismo Beach approved a 252-unit residential subdivision and the City and developer applied to the San Luis Obispo LAFCO to annex the property. The LAFCO application signed by the City and developer included an agreement to indemnify LAFCO against any claims arising out of its action on the application, including claims brought by the City and/or developer. The City and developer later filed a mandamus action challenging LAFCO’s denial of their application. The suit was unsuccessful and LAFCO sought attorney’s fees of more than $400,000 under the indemnity agreement.  The City and developer refused to pay, contending there was no consideration underlying the indemnity agreement because LAFCO was already legally required to accept and act upon the annexation application.

The Court of Appeal agreed. It noted that all contracts must be supported by consideration in the form of either a benefit to the promisor or a detriment to the promisee, and a promise to do what the promisor is already legally bound to do is neither. LAFCO had a statutory duty under the Cortese-Knox-Hertzberg Act to accept all completed applications and to review and approve or disapprove them. LAFCO argued that, under its power to assess fees to cover processing costs, it was entitled to charge anticipated attorney fees as part of the application fee. The court rejected this claim, noting that the statute authorized fees to fund the cost of the administrative process, not costs of post-decision court proceedings. Moreover, the statute required that any such administrative fees be adopted in compliance with the Mitigation Fee Act. LAFCO had not complied with the procedural requirements of the Act with respect to assessment of attorney’s fees and these procedures could not “be avoided by inserting a provision in an application form.”

The court likewise rejected LAFCO’s claim that it had the power to require the indemnity agreement implied from other express powers granted by statute. The court pointed out that Code of Civil Procedure section 1021 allows recovery of attorney’s fees only as “specifically provided for by statute,” not implied by the grant of other powers. Because LAFCO lacked such specific statutory power and the indemnity agreement lacked consideration, there was no legal basis for recovery of attorney’s fees.

The state was required to reimburse municipalities for the cost of state-mandated trash receptacles at transit stops because local governments lacked authority under Proposition 218 to impose fees either on transit agencies or on owners of adjacent property to recover such costs. Department of Finance v. Commission on State Mandates, No. B292446 (2nd Dist., Jan. 4, 2021).

The Regional Water Quality Control Board, Los Angeles Region issued a permit authorizing the County of Los Angeles and certain cities (collectively, the Operators) to operate stormwater drainage systems. The permit required the Operators to (1) install and maintain trash receptacles at transit stops; and (2) periodically inspect commercial facilities to ensure compliance with various environmental regulatory requirements. Some of the Operators filed claims with the Commission on State Mandates seeking a determination that the state must reimburse them for the costs related to the trash receptacle and inspection requirements under article XIII B, section 6 of the California Constitution. The Commission determined that the trash receptacle requirement was a reimbursable state mandate but that the inspection requirements were not.

In general, when the state imposes a new program or higher level of service on a local governments, section 6 of the California Constitution requires the state to reimburse the local governments, unless they have the authority to levy service charges, fees, or assessments sufficient to pay for the mandated program or increased level of service.  The court found that local governments did have authority to levy fees to cover the inspection costs based upon their police power authority to impose regulatory fees that did not exceed the reasonable cost of the inspections.

The court reached the opposite conclusion regarding fees for the trash receptacles. The trash receptacles would be located either on the local government’s own property or that of the local transit district, and the court concluded that local governments lacked authority to impose fees for the receptacles on transit agencies. Responding to the state’s argument that local governments could, instead, impose fees on owners of property adjacent to the transit stops, the court found that such fees would likely run afoul of Proposition 218, which prohibits fees incident to property ownership unless, among other requirements, the fees are for a service that “is actually used by, or immediately available to, the owner of the property in question.”  The court observed that “common sense dictates that the vast majority of persons who would use and benefit from trash receptacles at transit stops are not the owners of adjacent properties but rather pedestrians, transit riders, and other members of the general public; [and that] any benefit to property owners in the vicinity of bus stops would be incidental.” Moreover, the court said, even if local governments could establish that the need for the trash receptacles was in part attributable to, and would be used by, adjacent property owners, the fees for that service would violate a separate provision of Proposition 218, which prohibits fees for a “service available to the public at large in substantially the same manner as it is to property owners.”

Another court of appeal has held that local special taxes adopted by a citizen-sponsored initiative do not require two-thirds voter approval.  Howard Jarvis Taxpayers Association v. City and County of San Francisco, No. A157983 (1st Dist., Jan. 27, 2021, as modified Feb. 22, 2021).

In June 2018, 51 percent of San Francisco voters passed the “Universal Childcare for San Francisco Families Initiative.” This initiative proposed a tax on certain commercial rents to fund early childcare and education.  The Howard Jarvis Taxpayers Association brought suit challenging the initiative, claiming that Proposition 13 (1978), Proposition 218 (1996) and the San Francisco City Charter required two-thirds approval for all special taxes, including those adopted via a citizen-sponsored initiative.

The case was considered by Division Five of the First District, which rejected the Association’s challenge.  The Division Five justices agreed with a decision issued by Division Four of the First District regarding a similar challenge the Association had brought against a special tax enacted by the San Francisco voters in the November 2018 election, City and County of San Francisco v. All Persons Interested in the Matter of Proposition C.

Division Five agreed with the All Persons Interested decision that California Supreme Court precedent mandated a conclusion that the provisions of Propositions 13 and 218 imposing requirements on cities, counties, special districts and other local governmental entities were to be interpreted as applying only to councils, boards and other representative bodies, not the electorate.  As determined in those prior cases, there is nothing in either Proposition 13 or Proposition 218 that implicitly overruled the power of initiative to enact laws by simple majority vote.  Moreover, while voters are bound by the substantive limitations applicable to legislative actions taken by boards and councils, they are not bound by procedural requirements such as a two-thirds vote requirement.

Division Five also addressed two new issues.  First, it considered the fact that a member of the Board of Supervisors had been a proponent of the initiative.  The Association argued that the supervisor’s involvement was tantamount to the Board itself proposing a tax to the voters, which would have required a two-thirds majority vote.  The opinion noted that “we fail to see how the sponsorship and involvement of the single official here gives rise to the inference that the City intentionally circumvented Propositions 13 and 218 or effectively controlled the initiative.”

Second, in a lengthy footnote, the court issued a warning to all litigators by discussing the failure of the Association’s attorneys to bring the All Persons Interested case to its attention.  The court “admonish[ed] counsel to candidly acknowledge such authority in the future.”  It quoted a treatise noting that “Your failure to confront unfavorable relevant holdings will be regarded as an attempt to deceive and mislead the court.”   It cited Rule 3.3(a)(2) of the Rules of Professional Conduct stating that “A lawyer shall not:. . . fail to disclose to the tribunal legal authority in the controlling jurisdiction known to the lawyer to be directly adverse to the position of the client and not disclosed by opposing counsel.”

The court upheld the summary judgment the trial court had granted for San Francisco.

The Court of Appeal held that a landowner’s petition for “exclusion” under the Subdivision Map Act seeking orders declaring a parcel map void and restoring the historical lot lines was barred under the doctrine of laches. Decea v. City. of Ventura, 59 Cal. App. 5th 1097 (2021).

Decea bought a house in the Lake Sherwood community of Ventura County in 2007. The house sat within “Parcel A” on a map recorded by a former owner in 1974. The 1974 map also included historical lot lines from a subdivision map recorded by the original developers in 1923. Parcel A overlaid three of these historical lots and parts of two others, totaling 1.04 acres.

In 2017, Decea sought to reconfigure Parcel A into two half-acre lots, but was told by the County that Parcel A consisted of one legal lot, not five. This meant Decea could not subdivide the property without falling below the area’s one-acre minimum lot size. Decea disputed the validity of the 1974 parcel map and whether the former owner had legally merged the five original lots into one.

The County did not change its position, and Decea filed suit seeking to exclude his property from the 1974 map under the Subdivision Map Act’s “exclusion” provisions, which require local agencies to disregard a recorded map under some circumstances. Decea claimed that even if the 1974 map had been properly recorded, it had not been intended to erase the 1923 lots and merge them into Parcel A. His evidence included excerpts of a prior owner and County officials discussing the effect of the parcel map at two administrative hearings in 1985.

The County objected to Decea’s petition for exclusion, arguing that the prior owner knew at the 1985 hearings that the land was considered a single parcel by the County and failed to contest that interpretation of the 1974 parcel map. The County moved to dismiss the petition under the doctrine of laches, under which an otherwise timely claim may be dismissed when a party unreasonably delays enforcing a right, resulting in prejudice to the other party.

The court upheld the trial court’s dismissal of the petition under the laches doctrine, finding that there were unnecessary and prejudicial delays because the prior owner had known of possible errors on the parcel map in 1985 but failed to raise them.  The court noted that the prior owner’s dialogue with the County in 1985 showed that he acknowledged the 1974 map’s validity and knew what he had to do to correct any errors. However, the County heard nothing further from the property owner until Decea approached it 2017.

The court pointed out that the testimony of the prior owner and his contemporaries would have been highly probative as to the issues raised the petition, and that the loss of this testimony constituted substantial evidence of prejudice to the County. “The time to address the map’s purported errors,” the court said “passed 35 years ago [and] [i]t would be inequitable to awaken the issues now.”