9th Circuit Court of Appeals Overturns District Court and Damages Award to Developer, Finding City Did Not Violate Equal Protection

Plaintiff North Pacifica sought to develop a 4.3 acre parcel for a proposed condominium project.  After filing its initial application in August 1999, in December 2001 North Pacifica filed a lawsuit claiming that the City unreasonably imposed processing delays in violation of substantive due process and equal protection. What follows is a “brief” review of the history of this litigation.

 

The District Court initially dismissed the substantive due process claim but not the equal protection claim. Following a motion to reconsider, the District Court ruled that the substantive due process claim was not ripe because the Plaintiff had not yet finished seeking compensation in state court. The heart of the equal protection centered on a condition inserted into the permit approval that required the Plaintiff to make condominium purchasers jointly and severally liable for the maintenance of common areas.  This condition was inserted by outside counsel retained by the City to protect the City from potential future litigation surrounding an access road for the development. Although the Plaintiff objected to the condition, there was no evidence that when the Planning Commission voted to approve the project subject to the condition, they had notice of the objection.  During the hearing, the Plaintiff did not verbally object to the condition.  On appeal to the City Council, the Plaintiff again objected to the condition in a letter that was sent to the City Attorney, outside Counsel, a member of the Planning Department and the City Clerk. The letter also argued that the City was treating North Pacifica different from all other condominium developers in the State of California.  Although the permits were approved subject to the conditions, North Pacifica pursued litigation based on its objections to the condition. The district court dismissed the delay-based due process claim for failure to pursue State remedies, and a delay-based equal protection claim remained.  In separate litigation that followed the district court found that the condition at issue (joint and several liability for purchasers for the maintenance of the common areas), was a violation of equal protection.  Although the City Planner had previously indicated to the Plaintiff that the City would not enforce this condition, the district court said that the planner’s representation could not bind the City. Although the City then took action passing a resolution saying it never intended to, nor never will enforce the condition, a bench trial on damages resulted in an award of compensatory damages of $156, 741.19.  Attorney fees and costs were also awarded. Meanwhile, after the City had approved the project, and agreed to remove the condition, the California Coastal Commission denied a coastal development permit to the Plaintiff, keeping the project still on hold today.  While the project is currently on hold for reasons unrelated to the City, the City now argued that the award for damages should be overturned.

 

The 9^th Circuit Court of Appeals said that following Lingle v. Chevron, U.S.A., , 544 U.S. 528 (2005),  “the irreducible minimum of a substantive due process claim challenging land use regulations is failure to advance any legitimate governmental purpose.” And, that in land use cases, a due process claim will be present where the action lacks any substantial relation to the public health, safety or general welfare.  This claim is not a takings claim, and therefore, the Court held that the district court got it wrong when they dismissed the due process claim based on failure to pursue state remedies, since no takings claim was made. However, the Court still upheld the dismissal of the claim because the Plaintiff did not show that the City’s delays in processing its application lacked a rational relationship to a governmental interest, and the City’s requests for information were all reasonable.

 

 Turning to the equal protection claim and the district court’s award of damages, the 9^th Circuit said in a “class of one” claim (see, Village Of Willowbrook v. Olech, 528 U.S. 562 (2000)), the Plaintiff “must establish that the City intentionally and without rational basis, treated the plaintiff differently from others similarly situated.”  The Circuit Court found that the City did not single out North Pacifica for discriminatory treatment. Not only did the City Council not know when they voted that no other developer had been subject to a similar condition, but the Plaintiff never even verbally raised the objection at the public hearing before the Council voted on it.  The Court noted that once the City became aware that the condition was objectionable, they even removed it.  Therefore, the Court concluded, the district court erred in when finding an equal protection violation and with a subsequent awarding of damages and attorneys’ fees. Lastly, the Court said that compensatory damages were inappropriate nonetheless because there was no reduction in value of the project while the condition had been in effect since the Plaintiff still had not secured a permit from the Coastal Commission.  Therefore, the City’s condition never caused any actual delay.    

   

North Pacifica LLC v. City of Pacifica, 2008 WL 2026985 (C.A. 9 (Cal.) 5/13/2008).

The opinion can be accessed at:

http://www.ca9.uscourts.gov/ca9/newopinions.nsf/93C293C00C55746288257448005839BC/$file/0516069.pdf?openelement