Settlement Between City, Developer Tossed Out: Malibu Cut Improper Deal In Closed Session

 

A settlement agreement between the City of Malibu and a developer has been thrown out by the Second District Court of Appeal because the agreement limited the city’s police powers and was improperly adopted in closed session.

The agreement committed the city not to make zoning decisions that would block the proposed housing development and to exempt the project from density requirements. The court ruled that the density exemption amounted to a variance that required administrative proceedings and findings for which the city did not provide. Additionally, the city’s actions required public proceedings. Because the city acted in closed session, it violated the state’s open meeting law, known as the Brown Act, the court held.

The settlement “is intrinsically invalid because it includes commitments to take or refrain from regulatory actions regarding the zoning of Trancas’s development project, which may not lawfully be undertaken by contract,” Presiding Justice Candace Cooper wrote for the unanimous three-judge panel.

The city has requested a rehearing, and City Attorney Christi Hogin said the Brown Act issue may be one the state Supreme Court is willing to consider. Hogin said the Second District decision was erroneous largely because the court read more into the settlement agreement that either the city or the developer did.

“We all agree that you can’t contract away the police power. And we all agree that you can’t grant a variance in closed session. And we all agree you can’t guarantee zoning forever unless there’s a development agreement, and then it’s only for 10 years,” Hogin said. “What we disagree on is whether our settlement agreement did these things.”

The proposed project has a lengthy administrative and legal history. Before Malibu incorporated, Los Angeles County approved a subdivision map for the 35 acres near Pacific Coast Highway and Trancas Canyon Road in 1980. That map apparently was never acted upon, and the county approved two subdivisions in 1985. These called for 15 single-family lots on 26.5 acres, and 52 condominiums on the remaining 8.5 acres. Eight years later — and after the coastal enclave incorporated — the landowner submitted proposed final maps to the city, one of the final steps before pulling building permits. The city refused approval, saying the tentative maps had expired. The landowner sued and both the trial court and the Second District determined that a combination of extensions had preserved the maps’ vitality.

However, other issues held up the final maps, including the question of permits from other agencies. There was more litigation, this time involving the Coastal Commission. The property changed hands. And still the city refused to approve the final maps, citing unfulfilled tentative map conditions. In 2002, property owner Trancas-PCH sued the city to prevent it from disapproving the final maps. But in March 2003, with the lawsuit pending, the City Council voted unanimously to disapprove the final maps because Trancas lacked necessary permits from the Coastal Commission and the Regional Water Quality Control Board.

A few weeks later, the city and Trancas began negotiating, and, in April 2003, the City Council approved the settlement agreement in closed session. The settlement required Trancas to record a deed restriction limiting development to 32 townhouses on 8.5 acres, and to dedicate the 26.5-acre parcel to the city for parkland. In exchange, the city agreed not to enact regulations that would prohibit the development and to expedite the processing of a general plan amendment.

The Trancas Property Owners Association, whose members own houses on nearby Trancas and Broad beaches and who have been fighting development on the site for decades, then sued the city. The property owners association argued the decision to disapprove the final map was correct, the revised project did not conform with the tentative map, the settlement agreement should have undergone environmental review, and the City Council violated the Brown Act. Los Angeles County Superior Court Judge David Yaffe ruled for the city. On appeal, the Second District overturned Yaffe.

The court first dealt with what it called “retraction of zoning authority.” The court likened the situation to that in the landmark case, Avco Community Developers, Inc. v. South Coast Regional Com., 17 Cal.3d 785 (1976). In Avco, the state Supreme Court ruled that the government may not contract away its ability to exercise the police power in the future. (Avco led to the passage of laws permitting “vesting” tentative maps and development agreements.)

In the Malibu case, the property in question is zoned for one residence per five acres. According to the Second District, the settlement agreement’s exemption from this density regulation was exactly what Avco condemned.

“Moreover, it functionally resembles a variance,” Cooper wrote. “Such departures from standard zoning, however, by law require administrative proceedings, including public hearings followed by findings for which the instant density exemption might not qualify. Both the substantive qualifications and the procedural means for a variance discharge public interests. Circumvention of them by contract is impermissible.”

The city argued that the settlement agreement did not ensure development would occur and that Trancas would still have to go through the administrative process. But the court determined the city “has already made impermissible promises and commitments, which, contrary to its representations, extend beyond simply renewed consideration of the final maps.”

Regarding the Brown Act, the court found the question was whether the act’s public meeting exemption for advice about pending litigation “authorizes approval in closed session of a settlement agreement containing dynamic features.” Courts have construed Government Code § 54956.9 to permit a city council to decide in closed session to settle litigation. But that authority must be harmonized with the need for public hearings, the court ruled.

“We believe it ineluctable that, when such a settlement extends to authorization or taking of action that by law requires public decision-making, § 54956.9 cannot and does not provide an exemption either from that mandate or from the public meeting norm of the Brown Act. The City Council therefore was not authorized to adopt the present SA [settlement agreement] in closed session, and the SA was void for that reason as well as those previously discussed.”

City Attorney Hogin found that court’s Brown Act conclusion particularly disturbing. The court’s invalidation of the settlement based on a Brown Act violation places a new limitation on what may be discussed in closed session, she said. In a letter supporting Malibu’s rehearing request, San Francisco Deputy City Attorney Paul Zarefsky agreed with Hogin, writing that the court’s decision “introduces uncertainty into the law regarding closed sessions for pending litigation that was previously well-settled.”

After the decision, the developer, whose 2002 lawsuit against the city is still pending, indicated it would pursue the larger development originally approved in 1985.

The Case:
Trancas Property Owners Association v. City of Malibu, No. B174674, 05 C.D.O.S. 8605, 2005 DJDAR 11697. Filed September 26, 2005. Modified October 6, 2005 at 2005 DJDAR 12037.

The Lawyers:
For the property owners association: John Bowman, Jeffer, Mangels, Butler & Marmaro, (310) 203-8080.
For the city: Christi Hogin, Jenkins & Hogin, (310) 643-8448.
For Trancas PCH: Barry Levy, Horvitz & Levy, (818) 995-0800.