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Home My WebLink AboutAGENDA REPORT 2000 0119 CC REG ITEM 11CITEM // • C - CITY OF MOORPARK, CALIFORNIA City 0,mr,6114eeting MOORPARK CITY COUNCIL ACT�� '� 'S-: Vhf( AGENDA REPORT BY:�� -� TO: Honorable City Council FROM: Deborah S. Traffenstedt, City Clerk -3S l DATE: January 7, 2000 (CC Meeting 1119100) SUBJECT: Consider Amicus Support in Galland v. City of Clovis, California Supreme Court Case No. S080670 BACKGROUND The City Attorney has forwarded a request for amicus support for the California Supreme Court Case of Galland v. City of Clovis. The Legal Advocacy Committee of the League of California Cities is urging cities to join in on the brief. No specific date was given for returning amicus support form; however, the timeframe would appear to be before the end of January. The City Attorney has advised that this case has broad ramifications not just for rent control cases, but also for any case in which the plaintiff alleges that they have been denied a "fair hearing" by the City. DISCUSSION The background of the case and the primary issues in this lawsuit are summarized on the attached letter. The concern expressed on page 3 of the attachment is that all such future cases seeking lost rents or lost profits based on a City's economic regulation will potentially subject municipalities to huge damage awards. Also stated on page 3 of the attachment: In addition, the application of Galland's "arbitrary and irrational" standard to determine if an administrative decision violates "due process" would put every City at risk for damages every time a court determines that a Board or Commission either has made an erroneous decision or denied a "fair hearing." STAFF RECOMMENDATION Direct the City Attorney to sign the representation form authorizing the City of Moorpark to be added to the amicus brief. Attachment: Letter dated December 2, 1999 000239 ENDEMAN, LINCOLN, TUBER & HEATEB RONALD L. ENDEMAN ATTORNEYS AT LAW DONALD R. LINCOLN 600 ..8.. STREET, SUITE 2400 KENNETH C. TUREK HENRY E. HEATER SAN DIEGO, CALIFORNIA 62101 -4508 DAVID SEMELSBERGER JAMES C. ALLEN GEORGE H. KAELIN III LINDA B. REICH December 2, 1999 Re: Galland v City of Clovis California Supreme Court Case No. S080670 To All California City Attorneys: TELEPHONE (619) 544-0123 FACSIMILE (619) 544-9110 91 X- DEC 08 1999 CITY CLERK'S DEPARTMS,NT CITY OF MOORPAW The Legal Advocacy Committee of the League of California Cities has approved the preparation of an Amicus Brief in support of the City of Clovis in the above - entitled case. In addition, the League is urging other cities to join in on that brief. I will be drafting the Amicus Brief and request that your City join in that Brief due to the issues of major significance to all California Cities. Issues Presented by This Case 1. If a municipality makes an erroneous administrative decision or denies a party a fair hearing, should the municipality be liable in damages for a violation of due process? 2. Is the test for determining whether the actions of a municipality violates substantive due process "arbitrary and irrational conduct" or conduct which "shocks the conscience "? 3. If a municipality slakes an erroneous rate setting (e.g., rcnt control) decision, is it immediately liable for damages for a denial of substantive due process or instead must the aggrieved parry first attempt to seek compensation for any loss through future higher rates (or rents) from its customers (tenants)? Summary Background of the Case In 1978 the City of Clovis enacted a Mobilehome Rent Review and Stabilization Ordinance ( "Ordinance ") which regulated space rent increases in the City's Mobilehome Parks. In 1978 Roger and Virginia Galland ( "Gallands ") 'purchased the 9800.100 \1trdr1 \a11atty2 000240 To All California City Attorneys December 2, 1999 Page 2 Woods Mobilehome Country Club ( "Park "), a 260 -space Mobilehome park for approximately $4,160,000. In 1988, 1989, and .1990 the Clovis Mobilehome Rent Review Commission ( "Commission ") heard the Gallands' application for space rent increases. In each instance, the City Council on appeal upheld the Commission's decisions granting only a portion of the rent increases requested. The Gallands sued the City, seeking damages for an alleged regulatory taking, denial of substantive procedural due process and violation of 42 U.S.C. § 1983, alleging the application of the ordinance denied them a fair return on their investment. In addition, the Gallands sought writs of administrative mandamus challenging the rent decisions. The Superior Court of Fresno County (Hon. Ray Kerkorian, Judge) found that the Commission and City Council had violated Gallands' substantive and procedural due process rights because of the way the hearings were conducted. Based upon the due process violation, the Trial Court granted the writs and vacated the Commission's rent decisions. It further ruled that the expense and delay caused by the due process violation made the normal remedy of remand for rehearing by the Commission "potentially inadequate." The Trial Court therefore dismissed the administrative proceedings and after holding its own "fair return" hearing concluded that the Gallands had been denied a fair return. The Court awarded $1,019,269.50 in damages against the City, including (1) $236,806 for lost rents from 1988 through March 31, 1995; (2) 247,885 for Gallands' costs of t_he administrative proceeding; and (3) attorney fees of $378,955. On appeal the Court of Appeal (5th Dist.) affirmed. See Galland v. City of Clovis, 1999 Daily Journal D.A.R. 5590 -5602, formerly partially published at 73 Cal.AppAth 371 -90 (June 7, 1999, as modified July 7, 1999). In the published portion of its decision, the Court of Appeal distinguished Kavanau v. Santa Monica Rent Control Board, 16 Cal.4th 761 (1997) and Yee v. City of Escondido, 62 Cal.App.4th 1409 (1998) which had held that in a rent control context "lost rents" due to an erroneous rent board decision are recoverable in the form 9800.100 \1trdr1 \a1 1atty2 000241 To All California City Attorneys December 2, 1999 Page 3 of increased future rents from the property owner. The Court of Appeal stated that neither Kavanau nor Yee had involved viable Section 1983 claims, distinguished Kavanau because it involved a "taking," not a "substantive due process" claim, and also distinguished Kavanau on the grounds that since the large amounts of "lost rents" were due to the City's administrative proceeding delays, recovery should be from the City in the form of damages rather than from the residents in the form of higher future rents. In an unpublished portion of its decision, the Court of Appeal concluded that the standard for a "substantive due process" violation under 42 U.S.C. § 1983 is "arbitrary and irrational conduct" and not the "shock of conscience" standard as set forth in Clark v. Citv of Hermosa Beach, 48 Cal.AppAth 1152 (1996) and Stubblefield Construction Co. v. City of San Bernardino, 32 Cal.AppAth 687 (1995). Applying the former standard, the Court concluded that Clovis' application of its rent control ordinance violated "substantive due process" because the application had denied the Gallands a "fair return." In another unpublished portion of the decision, the Court of Appeal affirmed the Trial Court determination that if the administrative hearing procedures have been "unfair," the Trial Court need not remand for further proceedings, but may determine for itself what constitutes a "fair return" and may award damages for the difference between the rent approved and the rent required to provide a "fair return." Issues of Maior Significance to California Cities The issues raised in this case are important to all California cities. As discussed above, the Galland Court ruled that Kavanau and Yee were inapplicable to cases brought under § 1983. If this approach is adopted by the California Supreme Court, all such future cases seeking "lost rents" or "lost profits" based on a City's economic regulation will be tried as § 1983 claims and potentially subject municipalities to huge damage awards. In addition, the application of Galland's "arbitrary and irrational" standard to determine if an administrative decision violates "due process" would put every City at risk for damages every time a court determines that a Board or Commission either has made an erroneous decision or denied a "fair hearing." 9800.100 \1trdr1\a1 1atty2 ®00)24;2 To All California City Attorneys December 2, 1999 Page 4 Finally, in instances where the Board or Commission engages in rate setting (including particularly the 90+ California Cities that have some sort of mobilehome space rent regulation) the Galland Court's rulings will make it much more likely that a reviewing Court, rather than remanding an erroneous action or decision to the Board or Commission, will decide the rate matter itself, and award damages against the City for any loss by the aggrieved party. In effect, the administrative agency could only have one chance to do it right and if it for any reason failed, the matter could be taken from it. The result would be the courts, not administrative agencies, .vould decide such issues de novo. The Amicus Brief The Amicus Brief will focus on the constitutional issues and judicial standards for determining the validity of administrative decision (including particularly rate setting decisions) by a municipality. The City's Opening Brief is currently due on December b, 1999. The Gallands' Brief is due on January 5, 2000. No date has been set by the court for filing the Amicus Brief, however, according to California Rules of Court, Rule 14(b), our request for permission to file an Amicus Brief and the Brief must be received no later than 30 days after all briefs other than the supplemental briefs have been filed. We are planning to file the Request and Amicus Brief 20 days after the filing of the Gallands' Brief, or at approximately the same time as the City's Reply Brief is filed. If you have any questions concerning the case or the position to be taken in the Amicus Brief, please call me. If you agree to join in this Amicus Brief, please fill out the enclosed Authorization of Representation form and return it to me as soon as possible. Very truly yours, Donald R. Lincoln DRLULBR/ks 9800.100 Attachment 9800.100 \Itrdr1\a1 1atty2 ®002,3 AUTHORIZATION OF REPRESENTATION I hereby authorize Donald R. Lincoln of Endeman, Lincoln, Turek & Heater to represent the City of as an amicus curiae in Galland v. City of Clovis, California Supreme Court No. S 080670. I understand that there is no financial contribution requirement for our participation. (Signature Name (Print or Type) Title State Bar Number (Please give us your State Bar number if you are supporting our brief as City Attorney) Address City /State /Zip (Phone) Please mail me a copy of the completed brief. Please return this form to : Donald R. Lincoln ENDEMAN, LINCOLN, TUREK & HEATER 600 "B" Street, Suite 2400 San Diego, CA 92101 9800.100 \1trdr1\a1 1atty2 ®0O;A..4