Spring Conference - Cal Cities

Spring Conference

City Attorneys Department

Resort at Squaw Creek, Olympic Village

May 2009

Name:___________________________

Mission Statement:

To restore and protect local control for cities through education and advocacy in order to enhance the quality of life for all Californians

This publication is provided for general information only and is not offered or intended as legal advice. Readers should seek the advice of an attorney when confronted with legal issues and attorneys should perform an independent evaluation of the issues raised in these materials. The League of California Cities does not review these materials for content and has no view on way or another on the analysis contained in the materials.

1400 K Street, Suite 400 Sacramento, CA 95814

916/658-8200 Fax: 916/658-8240 www.cacities.org

City Attorneys Spring Conference 1400 K Street, Suite 400 Program Materials Sacramento, CA 95814 May 2009 916/658-8200 www.cacities.org

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City Attorneys Department 2009 Spring Conference

Program Materials

Table of Contents

Page

I. About MCLE Credit ......................................................................... iv II. Program Materials a. Writing That Works; 20 Ways to Transform Your Prose …………………1 Kiko Korn, Founder of Legal Writing Works b. Reasonable Accommodations from Zoning Regulations Related to

Handicapped Housing............................................................................ 21 James Markman, Richards, Watson & Gershon

c. Land Use and CEQA Litigation Update ................................................. 39

(Cases reported between August 8, 2008 and March 24, 2009) M. Katherine Jensen, Rutan & Tucker; City Attorney, La Quinta

d. Public Works Contracts: Make Sure You are Shovel-Ready ................ 57

Mary Beth Coburn, P.E. Best, Best & Krieger

e. Public Employee/Military Reservist – What You Need to Know When an Employee is Recalled to Active Duty ................................................ 67 Martin “Pete” Grover, Assistant City Attorney, Vista

f. Climate Change and Regional (Transportation and Housing) Planning;

SB 375 (Steinberg) – Chapter 728 2008 Statutes.................................. 87 Betsy Strauss, Special Counsel, League of CA Cities


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II. Program Materials (continued)

g. CEQA Streamlining and Climate Change ............................................ 107 Whit Manley, Attorney, Remy Thomas Moose & Manley

h. Meeting of the Minds: Avoiding Misunderstandings in Municipal Contracts: Making Contracts Stick ...................................................... 121

Steven L. Dorsey, Richards, Watson & Gershon; City Attorney, Cities of Buena Park, Norwalk, San Marino

i. Meeting of the Minds: Avoiding Misunderstandings in Municipal Contracts: Indemnity Issues................................................................. 133

Michael Jenkins, Jenkins & Hogin; City Attorney, Cities of Diamond Bar, Hermosa Beach, Rolling Hills and West Hollywood

j. Signs of the Time—Play Now, Pray Later: Regulating Signs, Sex and

Religious Facilities ............................................................................... 143 Deborah J. Fox, Meyers Nave

k. General Municipal Law Update ........................................................... 163

John Pomidor, City Attorney, Livermore

l. City Revenues 101 .............................................................................. 177 Michael Coleman, Fiscal Policy Advisor, League of CA Cities

m. The ABC’s of PPP’s: The Basics Regarding Public-Private Partnerships......................................................................................... 195

Michael N. Conneran, Assistant City Attorney, Millbrae n. Are You Prepared to Advise Your Clients About Municipality Bankruptcies Under Chapter 9 of the Bankruptcy Code ...................... 215 Marc A. Levinson, Orrick, Herrington & Sutcliffe LLP o. Challenges in Employee Compensation, Pension Funding, and Post-

Employment Benefits ........................................................................... 241 Charles D. Sakai, Renne, Sloan, Holtzman, Sakai p. Federal Prosecution of Local Corruption .............................................. 259

Patrick K. Hanly, Law Offices of Patrick K. Hanly


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II. Program Materials (continued)

q. Due Process in Local Administrative Hearings After the

California Supreme Court’s Opinion in Morongo Band of Mission Indians v. California State Water Resources Control Board,45 Cal.4th 731 (2009) ................................................... 271

Manuela Albuquerque, Retired City Attorney r. Supreme Court Update: Vargas v. City of Salinas .............................. 321 Thomas B. Brown, Hanson Bridgett s. Municipal Tort and Civil Rights Litigation Update ................................. 339

Eugene P. Gordon, Office of City Attorney, San Diego

t. Identifying and Exposing the Many Faces of Bias in the Legal Profession ………………………………………………………….. 367 Samuel L. Jackson, Assistant City Attorney, Sutter Creek and Stephanie L. Quinn, Raldolph, Cregger, Chalfant

III. Speakers’ Biographies .......................................................................... 385


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MCLE Information

The League of California Cities is a State Bar-certified minimum continuing legal education (MCLE) provider. This activity is approved for 11 hours of MCLE credit, including one hour for elimination of bias. A pre-conference session on Wednesday morning is available for an additional 1.5 hours of MCLE credit. Sign-In Sheets Sign in sheets for MCLE credit are available for the entire program. You only need to sign in once. Certificates of attendance are available next to the sign in sheets. Please make sure you pick up your attendance certificate when you sign in. You should have one attendance certificate for this conference. Evaluations PLEASE TELL US WHAT YOU THINK! We value your feedback. Hard copy evaluation forms for the MCLE-approved sessions are available at the tables located outside the room. Please tell us what you liked, what you didn’t, and what we can do to improve this learning experience.

“Vigorous writing is concise. A sentence should contain no unnecessary words, a paragraph no unnecessary sentences, for the same reason that a drawing should have no unnecessary lines and a machine no unnecessary parts.” William Strunk Jr.

Writing That Works [20 ways to transform your prose]

Kiko Korn May 6, 2009

2009 City Attorneys Spring Conference www.legalwritingworks.com

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Writing That Works [20 ways to transform your prose]

About the Presenter

Kiko Korn is the founder of Legal Writing Works, a consulting firm that provides in-house writing workshops and one-on-one consultations for lawyers, law students, and other legal professionals across the country. Each year, Kiko helps hundreds of legal writers improve their craft. Before founding LWW, she was an adjunct professor of Legal Writing and Advocacy at the USC Gould School of Law.

Kiko’s practice experience includes serving as a senior deputy city attorney in San Francisco and as a deputy attorney general in the Appeals, Writs, and Trials division of the California Attorney General’s Office. She also worked for the international law firm Kirkpatrick & Lockhart and clerked for the Honorable John Webb (ret.) of the North Carolina Supreme Court. While practicing law, Kiko taught several courses in law and writing. She frequently presented seminars and MCLE workshops on topics such as recognizing and preventing sexual harassment, implementing the disciplinary process in the public sector, and writing winning arbitration briefs. Kiko graduated from Stanford University in 1991 with a degree in American Studies. In 1995, she received her J.D. with Honors from the University of North Carolina at Chapel Hill School of Law, where she was a published staff member and editor of the North Carolina Law Review. Former Los Angeles Times columnist Jack Smith called Kiko’s writing “exemplary in its clarity.” He wrote the compliment in 1977 after reading her “Great Banana Snack” recipe, which was published in her grammar school cookbook. Decades later, her writing is still better than her cooking. Kiko lives in Los Angeles with her husband and two children.

© 2009 Legal Writing Works. All rights reserved. i

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REASONABLE ACCOMMODATIONS FROM ZONING

REGULATIONS RELATED TO HANDICAPPED HOUSING

Presented at the

League of California Cities

2009 City Attorneys Spring Conference

Resort at Squaw Creek, California

May 6, 2009

James L. MarkmanRichards, Watson & Gershon

1 Civic Center CirclePost Office Box 1059

Brea, California 92822-1059(714) 990-0901

jmarkman rwglaw.com

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Reasonable Accommodations From Zoning RegulationsRelated to Handicapped Housing

A. Principles Applicable to Requests for Reasonable Accommodation From HousingRegulations

Right to Seek a Reasonable Accommodation

The most basic principle with which this paper is concerned is that thehandicapped may seek the right to operate or occupy any facility at any time and in any zone byseeking a reasonable accommodation (exemption or variance) from a land use regulation whichwould preclude that use. In the focus area of housing, the opportunity to so seek to beaccommodated is articulated in the Fair Housing Act (42 US.C. 9 3604(f)(3)(B)) ("FHA"), theAmericans with Disabilities Act (42 US.C. 9 12131(2) ("ADA"); 28 C. R. 935. 130(b)(7)and/or the Rehabilitation Act of 1973 (29 US.C. 9 794; 29 CF.R. 9 1614.203.) The FHAdefines discrimination in part as "a refusal to make reasonable accommodations in rulespolicies , practices , or services , when such accommodations may be necessary to afford suchperson equal opportunity to use and enjoy a dwelling." 42 US. 3604(f)(3)(B).

Courts have also recognized that the Rehabilitation Act and the ADA authorizereasonable accommodation claims , and that the requirements for such a claim are the sameregardless of the authorizing statute. See Oconomowoc Residential Program v City ofMilwaukee 300 F.3d 775 , 783 (7th Cir. 2002); see also McGary v. City of Portland 386 F.1259 (9th Cir. 2004).

In Behavioral Health Services, Inc. v. City of Garden a 2003 WL 21750852 (CD.Cal. 2003), the District Court held that a city s failure to provide a reasonable accommodationunder federal law also violated the California Fair and Equal Housing Act ("FEHA"), Cal. Gov.Code 9 2955 et seq. See 2003 WL 21750852 , *10- 11 ("Because FEHA' s protections are bydefinition as great as those under the FHA , failure to accommodate which violates the FHA alsoviolates FEHA.

The requirement to afford reasonable accommodation in the context of zoningregulations is well established and specifically articulated in Bay Area Addiction and TreatmentInc. v. City of Antioch 179 F.3d 725 (9th Cir. , 1999).

Standing to Sue

Standing to sue under the ADA and FHA is to be broadly construed. SeeInnovative Health Systems, Inc. v. City of White Plains 117 F.3d 37 , 47 (2nd Cir. 1997)(superseded by statute and overrled on other grounds); see also Jeffery v. City of Boca Raton

---

Supp.2d ----- , 2007 WL 628131 (S. Fla. 2007).

I The contribution to this paper made by my colleague Steven Flower is acknowledged and appreciated.

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In Jeffery 0. the District court held not only that current residents of a grouphome for persons recovering from substance abuse have standing under the FHA, but that so toodo persons who testify that they would return to a group home if they relapsed. !d. The courtalso recognized that the FHA provides standing for the providers of housing for the disabled onbehalf of residents. Id. ; see also, e.g., Community House, Inc. v. City of Boise 490 F.3d 1041(9th Cir. 2007). Finally, courts have also recognized that organizations which promote oradvocate for fair housing may bring suit under the FHA if the challenged action or policy causesthe organization to divert resources to combat the alleged discrimination. See Nevada FairHousing Center, Inc. v. Clark Co. 2007 WL 610640 , (D.Nev. Feb. 23 2007).

To summarize, the following persons and organizations have standing to sueunder the ADA, the FHA , or both:

Disabled residents who allegedly are subjected to discrimination;

b. Disabled persons who allegedly may be subjected to discriminationif they may require residential care in the future;

The providers of residential care to disabled persons; and

Advocacy groups which promote or advocate on behalf of thedisabled.

Applicable Legal Test

In City of Edmonds v. Washington State Building Code Council 18 F.802 (9th Cir. 1994) (affrmed by City of Edmonds v. Oxford House, Inc. 514 US. 725 (1995)),the Ninth Circuit Court of Appeal stated: ''' (W)hile a (city) need not be required to makefundamental' or ' substantial' modifications to accommodate the handicapped , it may be

required to make ' reasonable ' ones. '" quoting Alexander v. Choate 469 US. 287 , 300 (1985).Most courts now appear to employ some version of a two pronged formulation of the ruleenunciated in City of Edmonds which requires the requested accommodation to be bothnecessary and reasonable. For example, in Us. v. City of Chicago Heights 161 F. Supp.2d 819(N.D. Il. 2001), the District Court held a follows with respect to necessity:

The concept of necessity requires at a minimum theshowing that the desired accommodation wil affirmativelyenhance a disabled plaintiff s quality of life by ameliorating theeffects of the disability. Plaintiffs must show that but for theaccommodation, they likely will be denied an equal opportunity toenjoy the housing of their choice. Id. at 834 (internal quotes andcitations omitted).

As to reasonableness, the District Court held that a requested accommodation is not reasonable ifit requires a fundamental alteration in the nature of the zoning scheme , or imposes unduefinancial or administrative burdens. Id. at 836

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In A1cGary v. City of Portland 386 F.3d 1259 , 1270 (9th Cir. 2004), theCourt stated that " (W)hat constitutes a reasonable accommodation. . . requires a fact-specificindividualized analysis of the disabled individual' s circumstances and the accommodations thatmight allow him to meet the program s standards." (internal citation quotation omitted).

4. Case Law Applications and Factors Sufficiently or InsufficientlySupporting Denials of Accommodation Applications

Necessity

Reasonable accommodation case law demonstrates that severalconsiderations are potentially relevant in determining whether a given accommodation isnecessary. Following is an effort to create useful subcategories of those factors:

(i) Difficulty in meeting procedural requirements. This factorexamines whether the procedural requirement should be excused because of the nature of thedisability.

Additional time to comply. In McGary v. City of Portland 386 F.3d 1259 (9th Cir.2004), a man with AIDS was cited by a city for maintaining a nuisance for failure tomaintain his yard free of garbage and debris. After receiving an order to clean theproperty, the man asked for additional time to comply with the order because he hadAIDS related meningitis. The city ignored the request, hired a contractor to clean theproperty, and sent the man a bill for the cost.

Held Accommodation Required: The man stated a reasonable accommodations claimunder the FHA and the ADA. The additional time requested by the plaintiff was found tobe necessary to allow him equal opportunity to live in his house.

Submittal Requirements. In Erdman v. City of Fort Atkinson 84 F.3d 960 (7th Cir.1996), a city denied an application by the operator of a proposed group home for personswho were elderly and disabled to operate in a residential zone on the grounds that theapplication failed to show required development plans for the entire 9-acre parcel andshowed a cul-de-sac that was inconsistent with the City s master zoning plan.

Held Accommodation Not Required: The City did not fail to make a reasonableaccommodation because there were no facts to indicate that the residents ' disabilities inany way necessitated submitting an incomplete application.

(ii) Economic Viability. An accommodation might benecessary to allow a provider to the handicapped to remain economically viable. At the sametime , however, the mere fact that the City s rules and regulations impose some extra expense onsuch an applicant might not by itself require an accommodation.

In BryantWoodslnn, Inc. v. Howard County, 124 F.3d 597 (4th Cir. 1997) a group homeoperator requested permission to expand an existing group home from 8 to 15 beds.

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Held Accommodation Not Required: The expansion was not necessary where there wasno evidence that it was needed to make the facility economically viable.

In Hemisphere Building Co. , Inc. v. Vilage of Richton Park 171 F.3d 437 (7th Cir.1999), a developer claimed a village failed to accommodate its plan to construct a 4-unitbuilding, in which the first floor units would be built to meet the needs of wheelchairbound persons. The village approved a 3-unit version, but the developer claimed it wouldresult in more expensive units that would be harder to sell.

Held Accommodation Not Required: The added expense caused by the villagedecision was a burden that anyone would have to bear regardless of disability.

In Woodward v. City of Paris, Tennessee 520 F.Supp.2d 911 (W. Tenn. 2007), a personwho had multiple sclerosis and was confined to a motorized wheelchair requested avariance to allow the construction of a carport within the required 15- foot side yard setback.

Held Accommodation Not Required: The requested accommodation was not requiredmerely because compliance with the setback requirement would have caused greatermconvellence or expense.

Reasonableness

Case law also demonstrates that several considerations are potentially relevant towhether a given accommodation is reasonable. Following are examples of cases dealing with

reasonab I en ess. "

(i) Community Character. A requested accommodation is notreasonable if it would fundamentally alter the character of a community.

In Gamble v. City of Escondido 104 F.3d 300 (9th Cir. 1997), the plaintiff soughtpermission to operate a residential facility for the elderly and disabled that would includea health care facility which would be open to the general public.

Held Accommodation Not Required: The reasonable accommodation requirement didnot require the city to allow a health care facility in a residential area.

In Hovsons, Inc. v. Township of Brick 89 F.3d 1096 (3d Cir. 1996) a nursing hOlleoperator sought permission to operate in a residential area in which retirementcomllunities were already allowed.

Held Accommodation Required: Allowing a nursing home in the residential area wouldnot fundamentally alter the character of the neighborhood in light of the similaritiesbetween a nursing home and a retirement community.

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In United States. v. City of Chicago Heights 161 F. Supp.2d 819 (N. IlI. 2001), the cityestablished a requirement that group homes be separated by 1000 feet from similar usesbased in part on the belief that clustering would create an institutional environment.

Held Accommodation Required: Allowing a group home to operate within 1000 feet ofa similar group home would not under the facts of the case result in such a clustering ofuses as to promote institutionalization of group home residents and cause a fundamentalalteration of the city s zoning scheme. The court in Us. v. City of Chicago Heights alsoexpressly recognized , however:

There may be situations in which the distance between the homes is so littlewhere there is already more than one group home within 1000 feet, or where thehomes are so similar in nature or operation, under which a request for a specialuse permit would fundamentally alter the City s purpose of avoiding clusteringand preserving the residential character of certain neighborhoods. Id. at 837.

(ii) Substantial increase in traffic or insuffcient parking. Arequested accommodation might not be reasonable if it would substantially increase traffic orlead to insufficient parking.

In Means v. City of Dayton 111 F. Supp. 2d 969 (S.D. Ohio 2000), a residential carefacility for the mentally disabled was required to provide additional off-street parking thatwas not required of other residential uses as a condition of approval.

Held Accommodation Not Required: The condition was valid notwithstanding theadditional expense absent a showing that the expense actually prevented the disabledfrom living in a residence. The court' s opinion indicates that the extra parkingrequirement would not have been allowed ifthere had been suffcient evidenceintroduced that the added cost of that parking would make operation of the group homeprohibitively expensive.

(iii) Undue Financial or Administrative Burden. A requestedaccommodation is not reasonable if it would impose undue financial or administrative burdenson the City.

In Hovsons, Inc. v. Township of Brick 89 F.3d 1096 (3d Cir. 1996), discussed above , anursing home operator sought permission to operate in a residential area. The townargued that allowing the use in the residential area would impose a financial burden dueto increased demands for municipal services.

Held Accommodation Required: Allowing a nursing home in a residential area wouldnot impose undue financial or administrative burdens because residents would becomenew taxpayers and would not impose any specialized burdens on municipal services.

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Public Safety Exception

A requested accommodation is not required if it would pose "direct threat to the heath or safety of other individuals or result in substantial physical damage tothe property of others. See 42 U. c. 9 3604(f)(9). The following cases address or are relatedto this very limited exception.

In Howard v. City of Beavercreek 108 F. Supp. 2d 866 (S.D. Ohio), a man suffering frompost traumatic stress disorder requested a reasonable accommodation in the form of avariance from the city s fence height limits.

Held Accommodation Not Required: The accommodation was properly denied pursuantto the public safety exception because the higher fence would have posed a direct threatto pedestrians and vehicular traffc by blocking sight lines at an intersection.

In Behavioral Health Services, Inc. v. City of Garden a 2003 WL 21750852 (C. Cal.2003), a city granted a conditional use permit to a residential rehabilitation facilitysubject to the condition that the operator was required to report to local law enforcementif any resident left without authorization or supervision.

Held Accommodation Required: The condition was tantamount to refusing a reasonableaccommodation because it violated the patients ' right under federal law to not beidentified as a resident of a rehabilitation facility without consent. Although the casedoes not directly address the health and safety exception, it nonetheless demonstrates thelimits of the City s authority to regulate based on generalized (and possibly unwarranted)fears of the risks posed by disabled persons, particularly recovering addicts.

Reasonable Accommodations From Use Restrictions: The Newport Beach Experience

This second part of this paper will very specifically focus on a city s ability to regulatethe location of handicapped housing facilities while still reasonably accommodating them inzones where the uses are not allowed. Newport Beach provides a case study of thatcircumstance.

In January, 2008 , the Newport Beach City Council adopted its Ordinance No. 2008- , aregulatory ordinance intended to maintain the rights of recovering alcoholics and drug dependentpersons to be afforded recovery facilities in Newport Beach residential areas and also to maintainthe residential character of those areas. For approximately four years , recovery facilities hadproliferated in Newport Beach, with a heavy concentration of those institutional facilities on atwo mile stretch of the Balboa Peninsula. Finding No. 7 contained in Ordinance No. 2008-described the Newport Beach circumstance as follows:

The City has a disproportionately high number of licensedand unlicensed residential group uses serving the disabledrecovering from drug or alcoholic use. Specifically: (i) the Cityhas 2.63 licensed recovery beds per 1 000 residents , the highestratio of any city in Orange County; (ii) the City contains 2. 7%-

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8% of the total population of Orange County, but is close toapproximately 14.6% of all licensed residential beds in the County;(iii) the City has at least 26 licensed residential alcoholic and drugtreatment and recovery facilities that provide a total of 213licensed residential beds , and are licensed for a total occupancy of238 individuals. Three of these facilities are treatment locationsonly; (iv) the City has at least 55 known unlicensed facilities mostwith six or fewer residents; (v) combining the known number oflicensed beds with an estimate of known unlicensed beds, the Cityhas 614 total recovery beds within the City limits. The City islikely to have the highest amount of recovery facilities in OrangeCounty and possibly the State of California. Analysis by the Citydemonstrates that , based on the 2003-2004 National Survey onDrug Use and Health, the City has approximately twice thelicensed bed days needed on an annual basis.

Ordinance No. 2008-05 included the following general features:

1. Definitional language distinguishing group homes (including recoveryfacilities) from single housekeeping units (covering traditional families and those choosing toreside together while jointly sharing financial and other household responsibilities);

2. Exclusion of all group homes (e.

g.

boarding houses and fraternities) otherthan facilities serving the handicapped from single family residential zones;

3. Exclusion of all new recovery facilities from single family residentialzones except those licensed for non-medical treatment by State of California Department ofAlcohol and Drug Programs ("ADP") for six or fewer persons/

4. Abatement within one year of all recovery facilities then located in singlefamily residential zones (excepting six or under ADP licensed facilities) unless such a facilityobtains a conditional use permit to continue its operations.

The core of the effort to regulate group recovery homes already in operation in singlefamily zones is a conditional use permit process which examines an operation s impact and theimpact of other closely located facilities on the residential character of its neighborhood.Finding No. 13 in Ordinance No. 2008-05 described the impacts to be avoided in theneighborhoods as follows:

Evidence presented to the City reveals that certain areas ofthe City, including West Newport and the Central BalboaPeninsula have significantly higher numbers of group residentialuses than other parts of the City, and in other parts of the State.City staff distributed a questionnaire asking about impacts causedby group residential uses and revealed the following concerns and

2 For the most part, these facilities , referred to as "six or under licensed" must be treated as though they were singlefamily residences in accordance with California Health & Safety Code Section 11834.23.

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secondary impacts: Extensive secondhand smoke; impacts totraffc and parking; conversion of garages to other uses; slower orgridlock transportation routes , if such routes are blocked by transitvans; more frequent deliveries (laundry, food, medicine, offcegoods) than is typical for a residential area; noise and trafficassociated with more frequent trash collection; lack of frequenttrash collection, in some instances , leading to vern1in and odors;persons unwilingly removed from the facilities left ' on the streetswith few resources to return home, leading to scavenging or pettytheft; excessive debris , including cigarette butts , on sidewalks , ingutters , on streets; and/or ilegal smoking in public places wheresmoking is banned , including Oceanfront vValk and beaches;excessive noise , fighting and loud offensive language. Suchactivity changes the residential character of the neighborhood andis not beneficial to persons in recovery as they attempt toreintegrate their new sober life style into typical society. Sucheffects essentially ' institutionalize ' their recovery efforts as well asthe neighborhood.

C. The Element of Necessity in Considering Applications to Reasonably AccommodateHandicapped Housing Facilities From Use Restrictions.

Schwarz v. Ci y of Treasure Island 544 F. 3d 1201 (11th Cir. , 2008) continues a recentiteration of the notion that a person in recovery must be reasonably accommodated at thelocation of his or her choice whether or not a need exists for such facilities in the community.Stated another way, this case does not recognize that a failure to show the economic necessity ofallowing recovery at a particular location should be considered in determining whether anaccommodation must be given. In Schwarz the Court was dealing with a zoning structure whichexcluded from single family zones any use in which occupancy turned over frequently. Thisrestriction was intended to protect single family zones from the secondary effects of highturnover uses such as vacation rentals as well as recovery facilities.

The Schwarz Court found that accommodating four particular facilities in single familyresidential zones made sense because each of the four locations was adjacent to multi-familyuses. Accordingly, the accommodation was given. The Court continued its discussion, holdingthat the accommodation only was required if, upon remand , the District Court would find itnecessary upon evidence being presented showing

. . .

that living in the halfway house addressesa need caused by residents ' addiction. Schwarz , supra at page 1225. Unfortunately, the Courtdid not terminate the discussion at that point. Instead, in what should be considered dictum, theCourt made the following statement at page 1225 , which dismisses the need for an operator toshow a demand for additional recovery facilities in the municipality in order to obtain such anaccommodation:

Necessity . But Treasure Island would be required to makethat reasonable accommodation only if it ' may be necessary toafford (Gulf Coast clients an) equal opportunity to use and enjoy adwelling. ' (citation) The district court concluded that Gulf Coast

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could not satisfy this element because it could operate highturnover halfway houses in Treasure Island' s RFM- , RFH-and CG zones. We reject this rationale because reasonableaccommodation analysis asks whether a handicapped person mustbe accommodated in the dwelling of his choice , rather than atanother location in the municipality....

The holdings of Blyantwoodslnn, Incorporated v. Howard County, lvfmyland 124 F. 3d597 (4th Cir. , 1997) sharply disagree with the above quoted language from Schwarz. There , the

County denied an application of an operator of a group home for elderly handicapped persons toexpand from eight residents to 15 residents. Among other matters, the County s Planning Boardfound that there were more than 30 such facilities in the County operating with eight or fewerresidents , thus demonstrating the financial viability of that smaller operation. Further the districtcourt held that the accommodation was not shown to be necessary because numerous other grouphomes were available in the area having from an 18% to 23% vacancy rate. BlymltwoodslnnIncOlporation , supra at 600.

The 4th Circuit Court of Appeals squarely supported the Planning Board and the districtcourt by establishing a requirement that necessity for a particular facility to be operated in thecommunity must be shown to excuse its compliance with zoning standards. Those supportingstatements (holdings) made on page 605 include the following:

The more serious inadequacy of Bryant Woods Innposition, however, appears in connection with its effort to showthat its zoning change is ' necessary. ' Howard County s existingzoning regulations do not prohibit group housing for individualswith handicaps. Indeed, the regulations permit such housing.(citation) Bryant Woods Inn houses 8 handicapped persons andsome 30 other facilities in Howard County similarly do so.

... While ' some minimum size may be essential to thesuccess ' of group homes (citation) , the Inn had introduced noevidence that group homes are not financially viable with eightresidents. On the contrary, the record before the Board shows thatalmost 30 such homes operate viably in Howard County with eightor fewer residents. .

A handicapped person desiring to live in a group home in aresidential community in Howard County can do so now at BryantWoods Inn under existing zoning regulations and, if no vacancyexists , can do so at the numerous other group homes at whichvacancies exist. The unrefuted evidence is that the vacancy ratewas between 18 to 23 percent within Howard County. We hold

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that under these circumstances, Bryant Woods Inn s demand that itbe allowed to expand its facility from eight to 15 residents is notnecessary, ' as used in the FHA to accommodate handicapped

persons. "

Also worth consideration is Smith and Lee Associates v. City of Taylor 102 F. 3d 781(6th Cir. , 1996). There the Court required a reasonable accommodation for expansion of aresidential home for the elderly disabled contrary to zoning standards. One reason stated for theCourt' s ruling was that there was an insuffcient supply of assisted living facilities in the area.Demonstrated necessity legally supported the ordered accommodation.

Other cases have reached conclusions similar to those stated in BryantwoodslnnIncorporated. In one recent example, a District Court held that a reasonable accommodation wasnot required to allow a sober living operation to increase its occupants from six to 20 in a singlefamily zone unless the increase was shown to be needed to make the operation financially soundor therapeutically viable. Smithers v. City of Corpus Christi 2008 WL 819069 (S. D. Tex). Seealso Means v. City of Dayton 111 F. Supp. 2d 969 (S.D. Ohio , 2000).

Attached to this paper are the provisions included in Newport Beach' s Ordinance No.2008-05 establishing a process and criteria for considering applications for a reasonableaccommodation. A decision to approve such an application must include a finding that " (tJherequested accommodation is necessary to provide one or more individuals with a disability anequal opportunity to use and enjoy a dwelling. " Subsection 20.98.025 B. 2. In our view , thatfinding and the necessity concept it represents must legally survive in order to maintainmeaningful local regulations of group homes for the handicapped. Only then , can a balance beestablished which protects the rights of the handicapped to be provided facilities for recovery andthe rights of residents to maintain the residential character of their neighborhoods.

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A new Accommodation" is

Newport Beach Municipal Code to read as follows:

Chapter 20.

Reasonable Accommodation

Sections:

20. 98. 01020. 98. 01520. 98.02020. 98. 02520. 98.03020. 98. 035

Purpose.Review Authority.Application for a Reasonable Accommodation.Decision.Expiration, Time Extension, Violation, Discontinuance, and Revocation.Amendments.

20.98.010 Purpose

In accordance with federal and state fair housing laws, it is the purpose of this Chapter to providereasonable accommodations in the City s zoning and land use regulations, policies, and practiceswhen needed to provide an individual with a disabilty an equal opportnity to use and enjoy adwelling.

20.98.015 Review Authority

The Hearing Offcer, as defined in Section 20.03.030 ' is hereby designated to approveconditionally approve, or deny all applications for a reasonable accommodation. If the projectfor which the request for reasonable accommodation is made requires another discretionarypermit or approval, then an applicant may request that the Hearing Offcer hear the request for areasonable accommodation at the same time as the other discretionar permit or approval. If theapplicant does not request a simultaneous hearng, then the request for a reasonableaccommodation shall not be heard until after a final administrative decision has been maderegarding the other discretionary permit or approval.

20.98.020 Application for Reasonable Accommodation

A. Applicant. A request for reasonable accommodation may be made by any person with adisability, their representative, or a developer or provider of housing for individuals with adisability. A reasonable accommodation may be approved only for the benefit of one or moreindividuals with a disability.

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, or on a be required for a request for reasonable accommodation, but if the project anotherdiscretionary permit, then the prescribed fee shall be paid for all other discretionary permits.

C. Other Discretionary Permits If the project for which the request for reasonableaccommodation is made requires another discretionary permit or approval

, then the applicantmay fie the request for reasonable accommodation together with the application for the otherdiscretionary permit or approval. The processing procedures of the discretionar permit shallgovern the joint processing of both the reasonable accommodation and the discretionary permit.

D. Required Submittals. In addition to materials required under other applicable provisionsof this Code, an application for reasonable accommodation shall include the following:

20.98.025

Documentation that the applicant is: (i) an individual with a disability; (ii)applying on behalf of one or more individuals with a disability; or (iii) adeveloper or provider of housing for one or more individuals with a disability.

The specific exception or modification to the Zoning Code provision, policy, orpractices requested by the applicant.

Documentation that the specific exception or modification requested by theapplicant is necessar to provide one or more individuals with a disability equal opportunity to use and enjoy the residence.

Any other information that the Planning Director reasonably concludes isnecessar to determine whether the findings required by Section 20. 98. 025.B canbe made, so long as any request for information regarding the disability of theindividuals benefited complies with Fair Housing -Law protections and theprivacy rights of the individuals affected.

Decision

Hearing Offcer Action. The Hearing Offcer shall issue a written determination toapprove, conditionally approve, or deny a request for reasonable accommodation, and themodification or revocation thereof in compliance with Section 20.98.025. Thereasonable accommodation request shall be heard with, and subject to, the notice, reviewapproval, and appeal procedures prescribed for any other discretionar permit providedthat, notwithstanding Section 20.95. 060, the standard of review on appeal shall not be denovo and the City Council shall determine whether the findings made by the HearingOffcer are supported by substantial evidence presented during the evidentiar hearing.The City Council, acting as the appellate body, may sustain, reverse or modify thedecision of the Hearing Offcer or remand the matter for further consideration, whichremand shall include specific issues to be considered or a direction for a de novo hearing.

Findings. The written decision to approve, conditionally approve, or deny a request forreasonable accommodation shall be based on the following findings, all of which arerequired for approval:

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accommodation is by or on behalfindividuals with a disability protected under the Fair Housing Laws.

one more

The requested accommodation is necessary to provide one or more individualswith a disability an equal opportunity to use and enjoy a dwelling.

The requested accommodation will not impose an undue financial oradministrative burden on the City as "undue financial or administrative burden" is

defined in Fair Housing Laws and interpretive case law.

The requested accommodation wil not result in a fundamental alteration in thenature of the City s zoning program, as "fundamental alteration" is defined in FairHousing Laws and interpretive case law.

The requested accommodation wil not, under the specific facts of the case, resultin a direct threat to the health or safety of other individuals or substantial physicaldamage to the propert of others.

In making these findings, the decision-maker may approve alternative reasonableaccommodations which provide an equivalent level of benefit to the applicant.

The City may consider, but is not limited to, the following factors in determining whetherthe requested accommodation is necessar to provide one or more individuals with adisabilty an equal opportunity to use and enjoy a dwellng.

Whether the requested accommodation wil affrmatively enhance the quality oflife of one or more individuals with a disability.

Whether the individual or individuals with a disabilty wil be denied an equalopportnity to enjoy the housing tye of their choice absent the accommodation.

In the case of a residential care facilty, whether the requested accommodation isnecessar to make facilities of a similar nature or operation economically viablein light of the paricularities of the relevant market and market paricipants.

In the case of a residential care facility, whether the existing supply of facilities ofsimilar nature and operation in the community is suffcient to provide

individuals with a disabilty an equal opportnity to live in a residential setting.

The City may consider, but is not limited to, the following factors in determning whetherthe requested accommodation would require a fundamental alteration in the nature of theCity s zoning program.

Whether the requested accommodation would fundamentally alter the character ofthe neighborhood.

Whether the accommodation would result in a substantial increase in traffc orinsuffcient parking.

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In the case of a residential care facility, whether the requested accommodationwould create an institutionalized environment due to the number of and distancebetween facilities that are similar in nature or operation.

Coastal Zone Properties For housing located in the Coastal Zone, a request forreasonable accommodation under this section may be approved by the City if it isconsistent with the requisite findings set forth in 20. 98. 025. , with Chapter 3 of theCalifornia Coastal Act of 1976, and with the Interpretative Guidelines for CoastalPlanning and Permits as established by the California Coastal Commission datedFebruar 11 , 1977, and any subsequent amendments, and the Local Coastal Program.

Rules While Decision is Pending. While a request for reasonable accommodation ispending, all laws and regulations otherwise applicable to the propert that is the subjectof the request shall remain in full force and effect.

Effective Date. No reasonable accommodation shall become effective until the decisionto grant such accommodation shall have become final by reason of the expiration of timeto make an appeal. In the event an appeal is filed, the reasonable accommodation shallnot become effective unless and until a decision is made by the City

Council on suchappeal, under the provisions of Chapter 20. 95.

20.98.030 Expiration, Time Extension, Violation, Discontinuance, and Revocation

Expiration. Any reasonable accommodation approved in accordance with the terms this Chapter shall expire within twenty-four (24) months from the effective date ofapproval or at an alternative time specified as a condition of approval unless:

A building permit has been issued and construction has commenced;

A certificate of occupancy has been issued;

The use is established; or

A time extension has been granted.

In cases where a coastal permit is required, the time period shall not begin until theeffective date of approval of the coastal permit.

Time Extension. The Hearing Offcer may approve a time extension for a reasonableaccommodation for good cause for a period or periods not to exceed three years. Anapplication for a time extension shall be made in writing to the Planning Director no less

than thirty (30) days or more than ninety (90) days prior to the expiration date.

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on a

in Section 1.030. decisions shall notice of right toappeal and to request reasonable accommodation in the appeals process as set forth inParagraph D below.

Appeal of Determination. A time extension for a reasonable accommodation shall befinal unless appealed to the City Council within 14 calendar days of the date of mailing ofthe determination. An appeal shall be made in writing and shall be noticed and heardpursuant to the procedures established in Chapter 20. 95 of this Code, as modified bySection 20.98. 025.

Violation of Terms. Any reasonable accommodation approved in accordance with theterms of this code may be revoked if any of the conditions or terms of such reasonableaccommodation are violated, or if any law or ordinance is ' violated in connectiontherewith.

Discontinuance. A reasonable accommodation shall lapse if the exercise of rightsgranted by it is discontinued for one hundred eighty (180) consecutive days. If thepersons initially occupying a residence vacate, the reasonable accommodation shallremain in effect only if the Planning Director determines that (1) the modification physically integrated into the residential structure and cannot easily be removed or alteredto comply with the Code, and (2) the accommodation is necessar to give anotherdisabled individual an equal opportunity to enjoy the dwellng. The Planning Directormay request the applicant or his or her successor-in-interest to the propert to providedocumentation that subsequent occupants are persons with disabilities. Failure to providesuch documentation within ten (10) days of the date of a request by the City shallconstitute grounds for discontinuance by the City of a previously approved reasonableaccommodation.

RevocationEnforcement.

Procedures for revocation shall be as prescribed by Chapter 20.96:

20.98.035 Amendments

A request for changes in conditions of approval of a reasonable accommodation, or a change toplans that would affect a condition of approval shall be treated as a new application. ThePlanning Director may waive the requirement for a new application if the changes are minor, donot involve substantial alterations or addition to the plan or the conditions of approval, and areconsistent with the intent of the original approval."

Section 20. Paragraph "A" of Section 5.95.010 (definitions) of Chapter 5.95 (Short Term

Lodging Permit" of the Newport Beach Municipal Code is hereby amended to read as follows:

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of on a specified in Section 2091.030. c. All written decisions shall give notice of the right toappeal and to request reasonable accommodation in the appeals process as set forth inParagraph D below.

Appeal of Determination. A time extension for a reasonable accommodation shall befinal unless appealed to the City Council within 14 calendar days of the date of mailing ofthe determination. An appeal shall be made in writing and shall be noticed and heardpursuant to the procedures established in Chapter 20.95 of this Code, as modified bySection 20.98. 025.

Violation of Terms. Any reasonable accommodation approved in accordance with theterms of this code may be revoked if any of the conditions or terms of such reasonableaccommodation are violated, or if any law or ordinance is violated in connectiontherewith.

Discontinuance. A reasonable accommodation shall lapse if the exercise of rightsgranted by it is discontinued for one hundred eighty (180) consecutive days. If thepersons initially occupying a residence vacate, the reasonable accommodation shallremain in effect only if the Planning Director determines that (1) the modification isphysically integrated into the residential structre and cannot easily be removed or alteredto comply with the Code, and (2) the accommodation is necessar to give anotherdisabled individual an equal opportnity to enjoy the dwellng. The Planning Directormay request the applicant or his or her successor-in-interest to the propert to providedocumentation that subsequent occupants are persons with disabilities. Failure to providesuch documentation within ten (l0) days of the date of a request by the City shallconstitute grounds for discontinuance by the City of a previously approved reasonableaccommodation.

Procedures for revocation shall be as prescribed by Chapter 20.96:RevocationEnforcement.

20.98.035 Amendments

A request for changes in conditions of approval of a reasonable accommodation, or a change toplans that would affect a condition of approval shall be treated as a new application. ThePlanning Director may waive the requirement for a new application if the changes are minor, donot involve substantial alterations or addition to the plan or the conditions of approval, and areconsistent with the intent of the original approval."

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38

League of California Cities

2009 City Attorneys Spring Conference


May 6-8, 2009

LAND USE AND CEQA LITIGATION UPDATE

(August 28, 2008 through March 24, 2009)

M. Katherine Jenson City Attorney, City of La Quinta Rutan & Tucker, LLP 611 Anton Boulevard, 14th Floor Costa Mesa, CA 92626

Phone: (714) 641-3413 (direct)

E-Mail: [email protected]

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[NOTE: ORGANIZATION CORRESPONDS TO CHAPTERS OF MUNICIPAL LAW HANDBOOK]

CHAPTER X – LAND USE

Part 2. General Plan

California Native Plant Society v. City of Rancho Cordova, et al (C057018 Third Appellate Dist., Div. 1, March 24, 2009) [Also Discussed in Chapter XI – Protecting the Environment - CEQA]

HOLDING: The Court struck down the approval of a residential/commercial project in a protected species habitat area on the basis of an inconsistency with general plan provisions that required endangered species mitigation to be designed “in coordination with” the wildlife agencies. Although the city had consulted with the wildlife agencies, it had not actually designed the mitigation with the wildlife agencies as required by the general plan.

DISCUSSION: This case involved a challenge to a 530-acre mixed-use project on CEQA (discussed later in this paper) and general plan consistency grounds. The project was planned for an area where rare and endangered species were likely present. The petitioner challenged the city’s finding that the project was consistent with various general plan provisions relating to protecting and preserving rare or endangered species and their habitat. While the court rejected most of the petitioner’s arguments relating the project’s consistency with the city’s general plan, it did conclude that the City’s finding of consistency as to one aspect of the general plan could not be supported. The court held that the question on appeal was whether the finding of consistency “was reasonable based on the evidence in the record.” (Slip Opinion, 55.) The city’s general plan required that where mitigation was required to protect against the decline of special-status species, the mitigation “shall be designed by the City in coordination with [USFWS and CDFG].” (Slip Opinion, 52.) While the court found that the city had “consulted” with the wildlife agencies, it concluded that this did not amount to the coordinated design of the mitigation. The court concluded that the mere solicitation and rejection of input from the wildlife agency could not reasonably be deemed to have satisfied this requirement. “Although our standard of review on the interpretation of the general plan is highly deferential, ‘deference is not abdication.’ (People v. McDonald (1984) 37 Cal.3d 351, 377.)” (Slip Opinion, 64.)

PRACTICE TIP: Carefully select the words used in general plan policies and implementing measures, especially when actions by other agencies are required. Choosing the phrase “in coordination with” as opposed to “consult with” may dramatically impact a court’s interpretation.

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Part 4. Subdivisions

Friends of Riverside’s Hills v. City of Riverside (2008) 168 Cal.App. 743, (Fourth Appellate Dist., Oct. 24, 2008) HOLDING: In addition to complying with the procedural hurdles of CEQA when pursuing a CEQA challenge against a decision involving a subdivision map, petitioners must also comply with the procedural requirements under the Subdivision Map Act, including the service of a summons pursuant to Government Code Section 66499.37.

DISCUSSION: In Friends, the petitioner had not challenged the city’s original approval of the three subject tract maps at the tentative map stage. Instead, eight years later, the petitioner filed a writ of mandate against the city in connection with its approval of the three final maps. The petitioner alleged the approval of the final maps violated CEQA in two respects. First, the petitioner alleged the city weakened the conditions of approval regarding natural open space in violation of Public Resources Code Section 21080(g), which allows the substitutions of mitigation measures in some situations, but only after the new measure is shown in a public hearing to be at least as effective as the prior measure. Second, the petitioner alleged the City failed to enforce and implement the previously approved mitigation measures regarding natural open space. While the petitioner served a copy of the petition in compliance with CEQA, it did not comply with the requirement contained in Government Code Section 66499.37 to serve a summons within 90 days after the date of the City Council’s approval of the final maps.

The trial court dismissed the petition on the grounds that there was no service of summons as required by Section 66499.37. The appellate court affirmed. It held that the 90-day service of summons requirement in Section 66499.37 applies to all legal actions concerning a subdivision, including challenges based on CEQA.

PRACTICE TIP: Always check carefully to verify what documents were served and when, and whether they were properly completed.

Sixells, LLC v. Cannery Business Park, et al, 170 Cal.App.4th 648 (Jan. 27, 2009)

HOLDING: The appellate court invalidated a purchase and sale agreement that required the recordation of a final subdivision map under the Subdivision Map Act (“SMA”) because the agreement gave the purchaser the right to waive the map condition.

DISCUSSION: Plaintiff Sixells, LLC entered into a contract with defendant Cannery to buy four acres of undeveloped land. One of Sixells’ conditions precedent to closing escrow was that on the closing date, a final map must have been recorded over the four parcels, creating a legal parcel. The condition was for the benefit of Sixells, and could be waived by Sixells. Sixells had the right to terminate the contract if any of the conditions for its benefit had not occurred or been waived by Sixells. Cannery terminated the contract and later sold the property to a third party. Sixells filed complaints against Cannery for breach of contract and against the third party for specific performance and intentional interference with contractual relations. The trial court found in favor of the defendants, ruling that the contract violated the SMA, and was thus void from its inception.

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http://ceres.ca.gov/topic/env_law/ceqa/guidelines/

The appellate court affirmed, citing Section 66499.30(b) of the SMA, which prohibits any person from selling real property for which a parcel map is required under the SMA until the final map has been filed for record. The SMA contains an exception for contracts where the sale is expressly conditioned on the approval and filing of a final map. The court found that because Sixells had the ability to waive this condition, the contract did not expressly condition the sale on the approval and filing of a final map. Further, the court found that simply striking the word “waived” from the contract would not solve the problem, as the remaining contract language would still allow for the possibility of the sale of an undivided parcel in violation of the SMA.

PRACTICE TIP: If a transaction requires the recordation of a subdivision map in order for there to be a conveyance of a legal parcel, the requirement should not be subject to being waived.

Part 6. Growth Management

Arcadia Development Company v. City of Morgan Hill (2008) 169 Cal.App.4th 253 (Sixth Appellate Dist., Dec. 16, 2008)

HOLDING: The appellate court held that the voters’ adoption of a growth control measure that extended the life of an earlier voter adopted measure triggered a new statute of limitations.

DISCUSSION: In 1990, the votes of Morgan Hill enacted a series of growth control measures. The 1990 measures were set to expire in 2010. In 2004, the voters adopted another general plan amendment and extended the growth control ordinance for an additional 10 years. A property owner affected by the density restrictions filed suit, challenging the extension. The trial court found that the challenge to the extension of the ordinance was time barred because the original adoption of the ordinance took place in 1990. The court of appeal reversed, concluding that the decision to extend the measure reopened the statute of limitations.

While there are limited circumstances where reenactment of an ordinance will not restart a statute of limitations (e.g., De Anza Properties X, Ltd. v. County of Santa Cruz (9th Cir. 1990) 936 F.2d. 1084, 1086 – reenactment of mobile home rent control ordinance without sunset clause did not give rise to new cause of action for takings claim), the court found that the extension of the growth control measure was a “new burden” on the property, triggering a new inverse condemnation claim.

The court also distinguished Buena Park Motel Assn. v. City of Buena Park (2003) 109 Cal.App.4th 302, where the plaintiff challenged two ordinances: (1) the original ordinance restricting motel stays to 30 days, and (2) an ordinance passed three years later that retained the 30-day restriction, but added additional provisions. In that instance, the court ruled that the plaintiff could not challenge the first ordinance at all, because it had missed the 90-day statute of limitations contained in Government Code section 65009, but also could not challenge the portions of the second ordinance that merely quoted the portions of the municipal code adopted by the earlier ordinance that were not being altered. The court in Arcadia notes that, unlike the Buena Park Motel Assn. case, the property owner was not challenging the 1990 measure, but instead was challenging only the 2004 measures.

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Part 14. Challenges to Land Use Decisions

§ 10.14.05 Regulatory and Physical Takings

Action Apartment Association v. City of Santa Monica, 41 Cal. 4th 1232 (Sep. 2008)

HOLDING: The nexus and rough proportionality tests associated with the Nollan/Dolan line of cases have no application to a facial challenge to a land use regulation.

DISCUSSION: In this case, the city adopted an ordinance that modified its multifamily housing regulations. For developers building multifamily ownership housing in multifamily residential districts, the developer was required to construct affordable housing either on-site or at another location.

The plaintiff filed no application to construct multifamily housing, and instead filed a complaint alleging that the new multifamily housing regulations, including the affordable housing production requirement, resulted in an unlawful taking under the federal and state constitutions, that there was no rough proportionality or nexus between the construction of the new or replacement condominium units and the need for more affordable housing.

The court held that the Nollan/Dolan test only applies in the context of judicial review of an individual adjudicative land use decision, and has no application in cases challenging the facial validity of an ordinance requiring developers to construct affordable housing. The court therefore rejected the facial challenge to the ordinance. The petitioner also challenged the ordinance as being, in effect, an amendment to the city’s Housing Element that required HCD approval. The court rejected that argument out of hand.

John Monks v. City of Rancho Palos Verdes 167 Cal.App.4th 263 (Oct. 1, 2008)

HOLDING: A moratorium on construction in the vicinity of a landside area constituted a taking. The court held that a permanent ban on home construction cannot be based merely on a fear of personal injury or significant property damage.

DISCUSSION: In 1978, the city adopted a moratorium on the construction of new homes in the vicinity of a landslide. The area was zoned for single-family dwellings. The city established an administrative process that property owners could go through to be exempted from the moratorium. The plaintiffs owned lots in the area and filed a joint application for an exemption. While the application was pending, the city toughened the criteria for obtaining an exemption. The property owner was required to demonstrate at least a 1.5 safety factor for the entire zone in which the property was located. This made it impossible for the plaintiffs to build. The court held that, under Lucas v. South Carolina Coastal Council (1992) 505 U.S. 1003, 1027, the application of the moratorium resulted in a permanent taking. The court found that the city’s allowance of the right to build a temporary nonresidential structure not exceeding 320 sq. ft., which did not increase water usage, did not ameliorate the taking.

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CHAPTER XI – PROTECTING THE ENVIRONMENT

Part 2. California Environmental Quality Act (CEQA)

§ 11.2.05 Scope of CEQA

Save Tara v. City of West Hollywood, 45 Cal. 4th 116 (Oct. 31, 2008)

HOLDING: The city was ordered to void two agreements it had entered into with a developer of an affordable housing project prior to completing the EIR for the affordable housing project, even though the agreements were expressly conditioned on subsequent compliance with CEQA.

DISCUSSION: This case involved the question whether, and under what circumstances, CEQA requires preparation of an EIR prior to a city approving an agreement that allows for private redevelopment, conditioned on future compliance with CEQA.

The California Supreme Court held that under certain circumstances, CEQA requires that an EIR be prepared before a city approves an agreement for private development or redevelopment, even if the agreement is conditioned on compliance with CEQA. However, the court provided no bright-line test. If an agreement, “viewed in light of all the surrounding circumstances, commits the city as a practical matter to the project,” an EIR (or other CEQA compliance) is necessary before the city approves the agreement.

In this case, before completing an EIR for the project, the city took certain steps to facilitate an affordable housing project that the California Supreme Court felt constituted a “project approval.” The city council approved an option to purchase the property in favor of a nonprofit developer. The agreement was necessary to allow the developer to proceed with its HUD grant application, which outlined a proposal to redevelop the site with a 35-unit low income housing project for seniors. In a letter to HUD, the city manager stated that the city had approved the sale of the property at a negligible cost and that the city “will commit additional funding” toward development. HUD granted the application, and the city council approved a “Conditional Agreement for Conveyance and Development of Property” to facilitate the development. The agreement was conditioned on all requirements of CEQA being satisfied. Save Tara filed a complaint and a petition for writ of mandate claiming that the City violated CEQA by failing to prepare an EIR before it approved the redevelopment agreement. The trial court denied the mandate petition. The court of appeal reversed. The California Supreme Court affirmed in part and reversed in part.

The Supreme Court relied on CEQA Guidelines to interpret Public Resources Code section 21100, subdivision (a), which states that an EIR be prepared on any project that a public agency proposes to carry out or approve that may have a significant effect on the environment. The court highlighted that an EIR should be prepared late enough in the process to contain meaningful information, but early enough so that an agency can use it in its decision-making process.

The court adopted a position somewhere in between the positions asserted by the parties. “We adopt an intermediate position: A CEQA compliance condition can be a legitimate ingredient in

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a preliminary public-private agreement for exploration of a proposed project, but if the agreement, viewed in light of the surrounding circumstances, commits the public agency as a practical matter to the project, the simple insertion of a CEQA compliance condition will not save the agreement from being considered an approval requiring prior environmental review.” (45 Cal.App.4th at 116.)

Applying this principle to the city’s case, the court concluded that the city should not have approved the conditional agreement without first preparing an EIR because: 1) the agreement’s stated purpose was to “cause the reuse and redevelopment” of the property; 2) the first half of a $1 million loan the city was going to make was not conditioned on compliance with CEQA; 3) the conditional language that the “requirements of CEQA” be “satisfied” did not seem to allow the city to reject the project even if the EIR was legally adequate; 4) the city had told HUD that the city had “approved the sale of the property;” 5) public statements were made by public officials indicating that the property would be redeveloped; 6) alternative uses had been ruled out; and 7) the city began the process of relocating tenants, which was to be completed before an EIR was required to be prepared.

PRACTICE TIP: Warn your city staff and elected officials that the comments they make suggesting a commitment to the project can be used against the city. Let’s hope for a legislative solution.

Riverwatch, et al. v. Olivenhain Municipal Water District, 170 Cal.App.4th 1186 (Jan. 30, 2009)

HOLDING: The appellate court struck down an agreement entered into by a water district to supply water to a project because the agreement had been entered into prior to the preparation of the EIR.

DISCUSSION: This case arises out of a proposal to construct and operate a landfill and recycling center at the Gregory Canyon site in northern San Diego County.

In a previous lawsuit, the EIR for the landfill had been set aside due to its failure to adequately analyze the water supply necessary to operate the landfill. The court had determined that the water rights relied upon were non-existent or undocumented. The court concluded that there was too much reliance on the pumping of groundwater, which had not yet been permitted. An update to the EIR had attempted to correct this problem by discussing the potential to transport the necessary water to the site by truck. However, it noted that the trucking of the water would have other environmental impacts. The project approvals were set aside.

In an attempt to cure the deficiency of an uncertain water supply, the developer of the project entered into an agreement with the local water district for the purchase of 244,000 gallons of recycled water per day for use at the landfill. The term of the agreement was 60 years. It was anticipated that 89 truck trips per day would be required to transport the water. The agreement provided that the developer would be responsible for installing the necessary improvements and equipment on the District’s property, so that the trucks could access the reclaimed water. The agreement also stated that the developer:

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Shall be solely responsible to comply with all [CEQA] and [NEPA] requirements necessary for [the developer’s] receipt, use and transportation under this Agreement. [Developer] shall also be solely responsible for any and all permits required under any state, federal or local law for its receipt, use and transportation of recycled water under this Agreement.

In a subsequent exchange of letters, the parties agreed that this provision made completion of CEQA a condition of the agreement. No CEQA analysis was completed for the approval of the agreement itself.

The County’s Department of Environmental Health, the lead agency for the EIR that had been invalidated, subsequently issued a notice of availability of a revised draft EIR, which attempted to address the issues that had caused the original EIR to be invalidated. The revised draft EIR analyzed the impacts of the proposed use of the off-site recycled water, and it described the trucking process.

While this revised draft EIR was being circulated for public review, Riverwatch issued a new CEQA challenge, this time attacking the water district for having entered into the water purchase agreement without completing CEQA analysis. While the San Diego Superior Court ruled in favor of the water district under the theory that the agreement was conditioned upon compliance with CEQA, the court of appeal found in favor of Riverwatch.

The court first concluded that the activities covered by the agreement were part of the landfill project, and further found that the water district was a “responsible agency” under CEQA with regard to that project. It then concluded that the approval of the water sales agreement constituted an approval of the project, and since the agreement was approved and executed prior to the certification of the revised EIR, the court struck down the agreement. The water district and the developer tried unsuccessfully to argue that, because of the conditions in the agreement that the developer was solely responsible for complying with CEQA and for obtaining the necessary permits, the district approval of the agreement did not constitute an approval of the project. Relying on the California Supreme Court’s decision in Save Tara v. City of West Hollywood (2008) 45 Cal.4th 116, the court rejected the argument. It concluded that because the agreement set forth the specific details regarding the 60-year obligation to deliver water to the developer, the approval and signing of the agreement satisfied the requirement of a commitment to a definite course of action. Regarding the “CEQA condition,” the court noted that the condition did not, under any reasonable construction, provide the water district with complete discretion under CEQA to consider the final EIR and then approve or disapprove its part of the project. The parties’ subsequent exchange of letters regarding the interpretation of the provision did not advance the argument. The letters did not demonstrate that the district would have unfettered discretion under CEQA to approve or disapprove the project. The court further noted that, even if the agreement had contained a condition under which the district had retained its CEQA responsibilities, the facts of the matter would still lead the court to conclude that the district had approved its portion of the larger project. The district had a duty, as a responsible agency, to consider the revised final EIR before it took action on the agreement.

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Great Oaks Water Co. v. Santa Clara Valley Water Dist, 170 Cal.App.4th 956 (Jan 28, 2009)

HOLDING: A resolution raising ground water rates was found to be exempt from CEQA.

DISCUSSION: This case deals with the statutory exemption from CEQA for rate setting contained in Public Resources Code section 21080(b)(8) and CEQA Guideline 15273(c). The Santa Clara Valley Water District replied upon this exemption in adopting a resolution that raised its groundwater-charge rates. Great Oaks Water Co. challenged the reliance on the exemption, and also claimed that the findings made to support the exemption were not supported by substantial evidence.

The case has a good discussion of the standard of review for challenges to the reliance on a statutory exemption from CEQA (as opposed to a categorical exemption). While the court notes that the statutory interpretation of the scope of a CEQA exemption is a question of law, the substantial evidence test applies to the agency’s factual determination that a project falls within an exemption. The court states:

Applying the substantial evidence test in the context of a court reviewing an agency’s statutory-exemption decision (where the exemption itself does not depend on whether the activity will have a significant environmental effect) means determining whether the record contains relevant information that a reasonable mind might accept as sufficient to support the conclusion reached. Although the agency bears the burden to demonstrate with substantial evidence that its actions fell within the exemption, all conflicts in the evidence are resolved in its favor and all legitimate and reasonable inferences are indulged in to uphold the finding, if possible.

The case turned on the requirement in the exemption that “[t]he public agency shall incorporate written findings in the record of any proceeding in which an exemption under this paragraph is claimed setting forth with specificity the basis for the claim of exemption.” (Pub. Res. Code § 21080(b)(8).) The resolution approving the rate increase explained the purpose of the increase as “meeting operating expenses, purchasing or leasing supplies, equipment or materials, and meeting financial reserve needs; and obtaining funds for capital projects necessary to maintain the service area.” These findings tracked the statutory language in the exemption.

Great Oaks argued that the requirement to set forth the basis “with specificity” meant that the district had to do more than just recite the statutory language. The court disagreed, noting that the language contained “the ultimate factual bases” for the exemption. However, it noted that the district had only “minimally satisfied the requirement” and that they could have been more detailed. It notes that its conclusion was based in part on the fact that the context of the case was traditional mandamus arising from a legislative act of rate setting. The court then found that substantial evidence supported the findings.

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§ 11.2.15 Negative Declaration

California Native Plant Society v. County of El Dorado, 170 Cal.App.4th 1026 (Jan. 29, 2009)

HOLDING: Fee-based habitat mitigation programs must be adopted with adequate CEQA review in order to be subsequently relied upon to mitigate an impact to a level of insignificance.

DISCUSSION: The county approved a mitigated negative declaration (“MND”) in connection with the approval of a congregate care facility. Petitioners claimed that an EIR was required because the project would adversely impact two rare plant species. The county argued that the MND was appropriate because a county ordinance had established a program under which developers in a defined geographic area would pay a rare-plant impact fee to be used for the creation of professionally managed rare plant habitats (“Program”), and the approval of the congregate care facility had been conditioned upon payment by developer into that fund. The Program was the product of collaborations among the county, US Fish &Wildlife Service, Department of Fish & Game, Bureau of Land Management, the Bureau of Reclamation, and several conservancy groups, and had been adopted expressly to reduce the risk and uncertainty of case-by-case individual mitigation. The trial court found for the county, holding that this payment mitigated any plant impacts to a level of insignificance.

The appellate court reversed, finding that the payment of the impact fee did not adequately mitigate the environmental impacts to the plants, and that there was substantial evidence in the record to support a fair argument that impacts would occur. Thus, the developer was not entitled to the MND. The court found that, although payment into a fee program CAN be deemed to presumptively establish full mitigation in some cases, here it did not because the fee program had not itself been evaluated under CEQA, either as a tiered review at the programmatic level or on an individual project level. (The ordinance establishing the Program had been found to be categorically exempt from CEQA.) Thus, payment did not eliminate the need to address, in an EIR, the impacts of this particular project on plants.

For cases upholding payment into fee programs as full mitigation, see Save Our Peninsula Committee v. Monterey County (2001) 87 Cal.App.4th 99, 140; Russ Building Partnership v. City of S.F. (1988) 44 Cal.3d 839, 844-46; City of Marina v. Board of Trustees (2006) 39 Cal.4th 341, 363-66; Anderson First Coalition v. City of Anderson (2005) 130 Cal.App.4th 1173, 1188 [fair share contributions to fee-based mitigation programs must be based on a reasonable plan of actual mitigation that the agency commits itself to implement; specific improvements need to be made and specific amounts of fees must be paid].

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§ 11.2.20 Environmental Impact Report

Sheryl Gray, et al v. County of Madera, et al. 167 Cal.App.4th 1099 (Oct. 24, 2008)

HOLDING: The EIR for a mining project was held inadequate based on deficiencies in its water supply, traffic and noise analysis.

DISCUSSION: This case involved a Conditional Use Permit (“CUP”), a Mining Permit, a zone change, and a cancellation of a Williamson Act contract for an aggregate reserve mining operation. The operation was to include an excavation pit, an aggregate processing facility, a hot mix asphalt plan, stockpile areas, and other related facilities. The permit allowed 900,000 tons of aggregate to be mined per year. The appellate court found that the EIR prepared for the project was inadequate.

The EIR concluded that the project could cause water levels and pumping rates in adjacent private wells to decline during the life of the quarry. The EIR imposed monitoring of water levels and further required that the operator replace water for non-consumptive use from the quarry operator’s wells. Consumptive use water would be supplied either by the private well owner or by supplying bottled water. The case has an extensive discussion of the analysis of how quarry operations can impact the operations of wells on adjoining property and how that could be mitigated. Ultimately, the court found that the mitigation was not sufficient. The project proponent argued that the County Board of Supervisors’ conclusions regarding the measures should be given deference. The court concluded that the measures “defied common sense:”

Law is not required to abandon common sense. Here, our common sense informs us that the mitigation measure will not effectively replace the water that could be lost by the neighboring landowners. It is true that the mitigation measure will provide a replacement for the lost amount of water. However, neither [of the measures] will provide neighboring residents with the ability to use water in substantially the same manner that they were accustomed to doing if the project had not existed and caused a decline in the water levels of their wells.

With regard to the concept of supplying bottled water as an alternative, the Court found that the County’s conclusion regarding an effective mitigation measure “defies common sense.” The Court concluded that the mitigation measures do not allow the affected neighboring landowners to use water in a substantially similar manner as their current water use, and would further expose them to regulatory oversight in their use of non-potable water.

Regarding the traffic analysis, the court struck down one of the traffic mitigation measures. The measure required that the operator contribute an equitable share of the cost of construction of future roadway improvements if requested by Caltrans or the County and lay a long-term maintenance fee based on annual aggregate tonnage. A formula was provided for calculating the equitable share of the improvements, but not for the maintenance fee. The court found the measure invalid. Caltrans had submitted letters for the record, but they did not identify what

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improvements would be made or when they would be constructed. The court held that there was no evidence that they would be scheduled to avoid the impacts associated with the project. The court further held that there was no evidence that the County had a mitigation plan in place for either the improvement or the maintenance of the affected roadways. This is an important case to look at if you have “fair share” conditions to mitigate traffic impacts.

Regarding noise impacts, the court found that the County erred in assuming a rule of thumb that a project would not have a significant noise impact if it did not increase the noise levels by at least 3 dB. The court found that the background noise levels were critical to determining impacts.

The cumulative impact discussion may be of interest to lead agencies defending their list of cumulative projects. The court accepted that the DEIR had identified a “cut off date” for purposes of considering projects, and concludes that “probable future projects” can be interpreted to cover “any future project where the applicant has devoted significant time and financial resources to prepare for any regulatory review.”

It also invalidated a portion of the cumulative impact analysis that was based upon the County General Plan because it did not specify where those documents can be publically viewed.

California Native Plant Society v. City of Rancho Cordova, et al (C057018 Third Appellate Dist., Div. 1, March 24, 2009)

HOLDING: The EIR for a large mixed use project that involved loss of habitat for endangered species was upheld against numerous attacks on the habitat mitigation program. This is a great case for lead agencies on the issues of exhaustion of administrative remedies and deferred mitigation.

DISCUSSION: This is an EIR CEQA challenge/general plan consistency case. The general plan issues were discussed earlier in this paper. With regard to CEQA, this case is important as it relates to the following topics: exhaustion of administrative remedies, deferral of mitigation and defending mitigation measures after they have been disapproved by trustee agencies. The petitioner filed a mandate action to challenge a 530-acre commercial/residential project. The site was in the “vernal pool” region. The vernal pools are inundated with water for various portions of the year, depending on their depth. The project area also had a drainage course running through it. The site provided habitat for vernal pool fair shrimp and vernal pool tadpole shrimp. These shrimp species are protected under the federal Endangered Species Act.

According to the EIR, the project would cause the direct loss of habitat for both types of shrimp. This was identified as a significant impact. To mitigate this impact, the EIR required preparation and implementation of a habitat mitigation and monitoring plan to compensate for the loss of habitat. Under the plan, the developer would be required to preserve two acres of existing habitat or create one new acre of habitat for each acre of lost habitat. The plan was required to include target areas for creation or preservation of habitat. It was also required to set performance standards for success to ensure that the compensation ratios are met.

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The project was also identified as having indirect impacts on the shrimp habitat by altering the hydrology in the area. The same ratio of creation/preservation requirements for direct loss of habitat was imposed for the indirect loses.

The project was also going to cause jurisdictional waters of the U.S. to be filled. To mitigate this significant impact, the applicant was required to develop a plan for the creation of jurisdictional waters on at least a 1:1 ratio.

In response to comments on the above mitigation plans, the city added an additional mitigation measure requiring the submission of a wetland “avoidance/mitigation plan” which was required to show the location of the proposed vernal pools and seasonal wetlands. It required a monitoring plan to ensure that the replacement sites were functioning as intended, and a maintenance plan to ensure that the created sites were maintained as wetland habitat in perpetuity.

Exhaustion of Administrative Remedies

The petitioner had specifically commented on the mitigation plans, but its comments were limited to the negative environmental impacts of creating artificial vernal pools within an existing vernal pool ecosystem, and the argument that the requirement to prepare and implement mitigation plans in the future was deferred mitigation, in part because the proposed mitigation sites were not identified.

The opinion contains a very thorough discussion of exhaustion doctrine. The court ultimately rejected four of petitioners six arguments relating to the mitigation programs. The only two arguments that the petitioner had adequately preserved with its comments noted above were (1) whether the mitigation of the impacts was being improperly deferred; and (2) whether the finding that the measures would actually work to reduce the impacts to less than significance was supported by substantial evidence.

The trial court noted, and the appellate court agreed, that the comments submitted during the administrative process had not “alerted” the city that there were deficiencies in the project description or in the description of the background environment. Nor was the city alerted to the notion that the project was being piecemealed or that the EIR needed to be recirculated.

The opinion noted the trial court’s conclusion that the “claimed deficiencies are more than merely alternative legal theories arising from the allegation that the off-site mitigation was being deferred improperly or would not actually reduce the impact of the project on vernal pools to ‘less that significant’; they are also separate factual issues that, if accepted and acted upon, would have required restructuring and rewriting sections of the EIR entirely distinct from those addressing the mitigation measures at issue here.” (Slip Opinion, 18.)

The court of appeal noted that the petitioner’s comments did not “call into question” the various EIR components subsequently under attack (e.g., the project description, the environmental background). Nor did the comments “fairly apprise” the city of the later alleged inadequacies in the EIR.

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The court then adopted a very restrictive reading of Save Our Residential Environment v. City of West Hollywood (1992) 9 Cal.App.4th 1745 (“SORE”). The court concluded that, because the opinion in SORE did not identify what objections the challengers had raised in that case, it is of little assistance here,

. . . as we cannot determine exactly what comments the court found were sufficient to exhaust administrative remedies on the adequacy of the EIR’s alternative site analysis and thus cannot extrapolate from the facts of that case a legal principle that we can apply to the facts at this case. Without that detail, SORE at best stands for the proposition that complaints [that] a project will be deleterious to the surrounding community may be sufficient to exhaust administrative remedies on the EIR’s failure to adequately examine alternative sites. (Slip Opinion, 20.)

The petitioner was again barred by the exhaustion doctrine from attacking the EIR’s water supply analysis. The EIR had incorporated by reference and relied upon the long term water supply analysis that had subsequently been invalidated by the California Supreme Court in Vineyard Area Citizens for Responsible Growth, Inc. v. City of Rancho Cordova (2007) 40 Cal.4th 412. While the petitioner had not raised an objection to the water supply analysis in the instant proceeding, it argued that by incorporating the Vineyard EIR, the city had essentially also incorporated every objection that had been raised in that earlier proceeding. The court disagreed:

The suggestion that an agency must treat as a comment on a current EIR any comment received on an earlier EIR that the current EIR relies on or incorporates by reference has no support in the law, as far as we can determine, presumably because an agency is entitled to know exactly what objections members of the public have to the current EIR.

. . .

An objector cannot simply sit back and wait for the earlier EIR to be invalidated, then belatedly assert after the administrative proceeding is complete (as happened here) that the current EIR is defective because it relied on the earlier EIR that has now been invalidated. (Slip Opinion, 41-41.)

Improper Deferral of Mitigation

Even though the mitigation plans would be created and implemented in the future, the court concluded that the city had not improperly deferred the formulation of the mitigation for the loss of habitat. The court discussed the key deferred mitigation cases — Sundstrom v. County of Mendocino (1988) 202 Cal.App.3d 296 and Sacramento Old City Assn. v. City Council (1991) 229 Cal.App.3d 1011 (“SOCA”) — and concluded that the habitat plans at issue fell within the parameters of what the same court previously ruled was permissible in the SOCA case. After

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noting that the Sundstrom decision was decided by a different appellate district, the court summarized the holding in its SOCA decision as follows:

SOCA stands for the proposition that when a public agency has evaluated the potentially significant impacts of a project and has identified measures that will mitigate those impacts, the agency does not have to commit to any particular mitigation measures in the EIR, as long as it commits to mitigating the significant impacts of the project. Moreover, under SOCA, the details of exactly how mitigation will be achieved under the identified measures can be deferred pending completion of a future study. (Slip Opinion, 27.)

The court found that the required habitat plans satisfied these requirements. The city had not deferred the significance determination, but instead had expressly found the impact significant, and then had identified specific measures to mitigate the impact, namely, preservation or creation of replacement habitat at specific ratios. The court specifically found that nothing in the deferred mitigation line of cases required that the city identify the proposed mitigation site. The court noted that the petitioner and the lower court were confusing the deferred mitigation concepts with the issue of whether the measures were feasible:

Similarly, concerns about whether it is “realistically foreseeable that [a mitigation] measure will actually be carried out as outlined” do not raise an issue of improper deferral. If the agency has identified one or more mitigation measures and has committed to mitigating the impact those measures address, then the principles forbidding deferral of mitigation are not implicated. (Slip Opinion, 29.)

Sufficiency of Evidence Supporting Mitigation Measure Where Trustee Agencies Disapprove of the Measure

The petitioner argued that because the wildlife agencies, the USEPA, and the US Army Corps of Engineers all had concluded that the mitigation plans would actually be detrimental to the shrimp and their habitat, the city’s finding that the measures would reduce the impact to less than significant could not stand. The court disagreed. “Pointing to evidence of a disagreement with other agencies is not enough to carry the burden of showing a lack of substantial evidence to support the City’s finding.”

§ 11.2.40 Legal Challenges

Center for Biological Diversity v. FPL Group 166 Cal.App.4th 1349 (Sep. 18, 2008)

HOLDING: Private parties can sue for violation of the public trust doctrine based upon injury to wildlife.

DISCUSSION: The court of appeals held that wildlife was subject to the public trust doctrine, and that any member of the public has standing to raise a claim of harm to the public trust. However, the court held that the appropriate enforcement action would be one by the member of

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the public against the responsible public agency, seeking to compel the entity, as the trustee under the public trust doctrine, to take action to protect the trust. Because the time periods to bring such an action had passed in this case, the court found that the plaintiffs could not sue for birds being injured by wind turbines.

Part 3. Water Supplies and Supply Planning

O.W.L. Foundation v. City of Rohnert Park, 168 Cal.App.4th 568 (Nov. 19, 2008)

HOLDING: The court of appeal upheld the water supply assessment (“WSA”) prepared pursuant to Water Code Section 10910(f)(5) and rejected the challenger’s claim that the WSA’s scope of analysis was inadequate because it used a study area smaller than the whole basin and failed to analyze future pumping throughout entire basin.

DISCUSSION: The WSA at issue in the case was prepared for six development projects. The city council approved the WSA by resolution. O.W.L. Foundation and others challenged the city’s action by writ of mandate. The trial court struck down the WSA, holding that Water Code Section 10910(f)(5) “appears to require a real analysis of the amount of water available, which seem to require a determination of the amount of water being used and expected to be used by everyone who uses the same water supply.” (Id. at 580.)

The court of appeal reversed. The court noted that while Water Code Section 10910 requires a determination of “sufficiency,” this could not be read as requiring the preparation of a basin-wide study of all current and future pumping. “[T]here is nothing intrinsic in the word ‘sufficiency’ that dictates the preparation of a basin-wide study of existing and future pumping.” (Id. at 589.) The court also reviewed the legislative history of Section 10910 and noted the fact that the legislature had initially considered the inclusion of language that would have required a WSA to address the other groundwater users in the basin, but that language was ultimately rejected. (Id. at 590.)

The court also recognized that the type of analysis that the petitioners proposed was simply not practical. The court noted that it would require a “herculean effort” in the limited 90-day time frame for completion of an analysis of demand and supply in this basin:

A WSA serves the limited function of providing information about ground-water sufficiency for a specific, proposed development project. (§ 10910(f)(5).) It is not a general planning document for the management of groundwater supplies in a basin. … A broad inquiry into basin-wide conditions and uses may be a proper subject for such water management mechanisms, but it is not appropriate to impose that obligation upon water suppliers seeking to comply with section 10910, subdivision (f) and analyze groundwater sufficiency for a particular proposed project. (Id. at 592.)

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Part 5. Air Quality

Association of Irritated Residents v. San Joaquin Valley Unified Air Pollution Control Dist., 168 Cal.App.4th 535 (Nov. 19, 2008)

HOLDING: The court of appeal struck down the adoption of an air quality rule because the air district had not completed a health assessment of the impacts of the regulation.

DISCUSSION: This case struck down San Joaquin Valley Unified Air Pollution Control District’s adoption of an air quality rule because the district had not properly studied its impacts on public health. The rule (Rule 4570) established a permitting process and regulations for large confined animal facilities. The Court found that the District did not satisfy the requirement of Health & Safety Code Section 40724.6 to complete a health assessment prior to adopting a rule or regulation.

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Kathy Jenson has practiced in the Public Law Department of Rutan & Tucker, LLP since her graduation from Ohio State University, College of Law in 1983, and became a partner of the firm in 1990. She is the Chair of the firm’s Land Use/Natural Resources Practice Group. Kathy has taught numerous CEQA courses, including: Update on Regulation of Greenhouse Gas Emissions and Water Supply Issues – 2009; Update on Recent Development in Land Use – 2009; CEQA Training: The Nitty-Gritty of CEQA Compliance, Long Beach – 2008; CEQA Compliance for Property Acquisition: Property Acquisition - Defining the Project, Phasing, Timing and Scope of Environmental Review, Long Beach – 2008; CEQA’s Dirty Dozen: A Guide to Steering Clear of the 12 Most Common CEQA Mistakes, Long Beach – 2007; Update on New CEQA Cases – 2007; Update on Air Quality Developments and New CEQA Decisions – 2007; Review of 2006 CEQA Cases - 2007; Building Communities, Orange County Conference for Woman - 2006; Defending Land Use Approvals in CEQA Litigation and from Challenges under the Federal and State Endangered Species Act, League of California Cities, City Attorneys Conference - Spring 2000; What's New and Exciting Under the California Environmental Quality Act, APA Annual Conference - 1996; CEQA Guerrilla Warfare - A Litigator's Perspective, Cahuilla District of the APA - 1996; Recent Developments Regarding the California Environmental Quality Act, APA Nuts and Bolts Conference on Zoning - 1994. Kathy’s published land use articles include "Twenty Ways to Improve Your Administrative Record and Increase Your Chances for Success in CEQA Litigation" (Public Law Journal, Fall 1999).

Kathy has handled numerous land use cases before various courts of appeal. Her published cases include: Torres v. City of Yorba Linda (1993) 13 Cal.App.4th 1035; Burchett v. City of Newport Beach (1995) 33 Cal.App.4th 1472; Clark v. City of Hermosa Beach (1996) 48 Cal.App.4th 1152; City of Vernon, et al. v. Board of Harbor Commissioners, et al (1998) 63 Cal.App.4th 677; Cantrell v. City of Long Beach, et al. (9th Cir. 2001) 241 F.3d 674; California Earth Corps California State Lands Commission (2005) 128 Cal.App.4th 756. Her unpublished decisions include: Stop Taking Our Parks et al. v. City of Long Beach (Second Dist., Case No. B156347); Citizens of Orange Park Acres Coalition v. City of Orange, et al. (Fourth Dist. Case No. G024841); Huell Howser v. City of Long Beach (Second Dist. Case No. B123336); Sierra Club v. City of Palm Springs, et al. (Fourth Dist. Case No. E023399); Huell Howser v. City of Long Beach (9th Circuit Case No. 98-55351); Friends of Coachella Valley v. County of Riverside (Fourth Dist. Case No. B017901) [tentative opinion]; Ignacio Barajas, et al. v. City of Santa Ana and Orange County Register (Fourth Dist. Case No. G011307); and Raphael Babay, et al. v. City of Lynwood, et al. (Second Dist. Case No. B046883).

Kathy also had the pleasure of arguing before the California Supreme Court on behalf of the League of California Cities in City of Long Beach v Department of Industrial Relations, et al., (Case No. S118450), 34 Cal. 4th 942 (2004), involving charter city and prevailing wages issues.

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CITY ATTORNEYS DEPARTMENT SPRING MEETINGLEAGUE OF CALIFORNIA CITIES

MAY 6-8, 2009

PUBLIC WORKS CONTRACTS:MAKE SURE YOU ARE SHOVEL-READY

By: Mary Beth Coburn, P.E.Partner

Best Best & Krieger LLP

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I.

INTRODUCTION

After months of speculation, on February 17, 2009, President Obama signed into lawthe American Recovery and Reinvestment Act ("ARRA"), which commits $787 billion ineconomic stimulus nationwide. Recent summaries indicate that California will receiveapproximately $31 billion to address budget shortfalls and supplement existing statespending. Experts believe that billions more will be available in competitive grants.Unfortunately, the ARRA allocations - at both the national and state level - fall significantlyshort of anticipated funding for public infrastructure and public works. Nonetheless,rather than take the "glass is half empty" perspective, California cities should see this as anopportunity to compete for the funding that is included in the ARRA, as well as other fundsthat ARRA funding may un-encumber, and focus on getting their projects "shovel-ready."

On March 27, 2009, Governor Schwarzenegger signed California's enablinglegislation contained in five separate bills. Two bills, ABX3 20 and SBX3 27, provideguidelines for the use of construction related stimulus funds.

According to the Governor's press release, ABX3 201 provides for the distribution ofapproximately $2.6 billion for highways and roads and modifies existing law to allowgreater delegation for the selection of projects to regional transportation agencies. The billalso provides Caltrans the flexibility to use $310 million to expedite the construction ofsome Proposition 1B2 projects.

The intended purpose of SBX3 273 is to expedite funding for state water projects, aswell as increase the dollar amount the state is able to award to any single public watersystem project. This legislation revises current state statutes to ensure that federalstimulus funds can be allocated for clean drinking water and wastewater within federaldeadlines and allows California to receive a total of $443 million in federal funds.

"Shovel-Ready" may be the 2009 Phrase of the Year in the public works arenathroughout the country. It might also be the most under-defined phrase in our industry inrecent history.

Wiktionary, a free online dictionary, defines “shovel-ready” as: “ready forimmediate commencement of excavation and construction.”

But what exactly is "Shovel-Ready" and how do California cities get theirprojects to that mysterious, magical designation?

1 ABX3 20 has been codified as California Government Code section 8879.77 et seq. and California Streets andHighways Code section 2420, et seq.2 Proposition 1B is known as the Highway Safety, Traffic Reduction, Air Quality, and Port Security Bond Act of2006 (“Prop 1B”).3 SBX3 27 has been codified as Health and Safety Code section 116760.45 and Amended Water Code sections10631.5, 13476 and 13480.

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A. TIMELINES

1. ABX3 20 – HIGHWAYS AND ROADS

The deadlines for obligating and liquidating funds established by ARRA applyto all federal funds appropriated by Streets and Highways Code section 2420 et seq.

Funds appropriated by Streets and Highways Code section 2422 (highwayinfrastructure investment funds available under Title XII of Division A of ARRA)shall be available for obligation and expenditure by the dates specified in the federalrequirements implementing ARRA.

Within 90 days after March 27, 2009, the Director of Finance will furnish areport describing the schedule of funding to certain legislative committees. TheDirector will also provide notification to the Legislature of any changes in thatschedule at least 30 days prior to any change taking effect.

Funds sub-allocated by Metropolitan Planning Organizations (“MPOs”),county transportation commissions, or regional transportation planning agenciesthat will not be obligated by a city, county, or city and county by ARRA deadlines willbe reallocated and available for expenditure as determined by the MPOs, countytransportation commissions, or regional transportation planning agencies.

MPOs, county transportation commissions, or regional transportationplanning agencies shall notify Caltrans of the projected amount of obligationalauthority that the entity intends to use, including funds sub-allocated to a city,county, or city and county. The report shall include a list of projects that will beobligated by (i) June 1, 2009 – for funds required to be obligated within 120 days offederal apportionment; and (ii) February 1, 2010 – for any funds not obligatedwithin 1 year of federal apportionment.

In addition to complying with all reporting requirements to the FederalHighway Administration (“FHWA”) with respect to ARRA funds, MPOs, countytransportation commissions, regional transportation planning agencies, counties,cities, and a city and county shall provide the same data to Caltrans under the sametimelines required by FHWA or federal law. Caltrans, within 30 days of receivingthe information, shall compile the information and submit a report to the relevantbudget committees and policy committees in the Legislature.

For projects that have been programmed on or before February 17, 2009 tobe funded by Prop 1B, and are ready to be obligated within 120 days of federalapportionment, Caltrans may, with the approval of the Director of Finance, make aloan or loans from the State Highway Account of federal funds for purposes ofadvancing the project or portion thereof.

Contracts for projects to be advanced with loan funds shall be awarded

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within 180 days of federal apportionment.

2. SBX3 27 – STATE WATER PROJECTS

SBX3 27 also became law on March 27, 2009, and allows the CaliforniaDepartment of Public Health and the State Water Resources Control Board to usefederal ARRA funds for the California Safe Drinking Water Act Revolving Fund andthe State Water Pollution Control Revolving Fund. SBX3 27 does not providespecific timelines for applications for funding, or deadlines for expenditure, butdirects both the California Department of Public Health and the State WaterResources Control Board to develop the criteria necessary to implement the act.

B. FUNDING

1. ABX3 20 – HIGHWAYS AND ROADS

ABX3 20, which became law on March 27, 2009, establishes that the highwayfunding will be distributed through the Surface Transportation Program (“STP”).California is receiving a total of $2.57 billion in highway funds. The state willreceive 70%, or $1.79 billion and the MPOs will receive $771 million. Thelegislation requires that 40% of the funding allocated to the MPOs be allocated tocities and counties.

2. SBX3 27 – STATE WATER PROJECTS

As stated above, SBX3 27 provides funding for the California Safe DrinkingWater Act Revolving Fund and the State Water Pollution Control Revolving Fund.Under existing law, the fund is continuously appropriated to provide grants orrevolving fund loans for the design and construction of projects for public watersystems that will enable suppliers to meet safe drinking water standards. SBX3 27allows the California Department of Public Health to expend federal monies in thefund that are received from the ARRA of 2009, in accordance with the guidelines ofthat act. The bill would provide that the maximum amount of a grant is $10,000,000per project for Safe Drinking Water Act Revolving Fund projects. SBX3 27 does notexpressly cap funding for individual State Water Pollution Control Revolving Fundprojects, but largely limits the type of funding to low interest loans, or bond buy-back programs.

C. PROJECT DESIGN

If a city hasn't yet started the design of a major public works project, it will likely notbe ready for construction within the timeframes dictated by ARRA. However, that doesn'tmean that cities should stop planning projects for future waves of funding from ARRA ormore traditional funding sources. The obvious first step is selection of the appropriatedesign team. In addition to the standard design selection and contracting, cities now have

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the ability to utilize the design build procurement method. While these alternate methodsmight not facilitate the requisite timeframes, it is important to alert cities of these options.

1. SELECTION OF DESIGN TEAM

Selection of design professionals is governed by Government Code section4525, et seq. California Government Code § 4526 states:

“Selection of Architectural, Landscape Architectural,Engineering, Environmental, Land Surveying and ConstructionManagement Services be on the Basis of DemonstratedCompetence and Qualifications and at a Fair and ReasonablePrice”

Further, Code requires that a selection process be instituted that prohibitsselection based on political or personal preferences. In an effort to prepare forpotential subsequent waves of federal stimulus, cities may determine that thetimeline for completion of the design effort shall be the lead selection criteria.Experience with complicated environmental requirements and/or federally fundedprojects can also be emphasized in the evaluation process. A city can certainly gearits selection criteria to meet its needs, as long as those criteria are clearly articulatedin the request for proposal.

2. 2009 DESIGN BUILD LEGISLATION

a. Assembly Bill 642 Amending PCC § 20175.2

With the recent passage of Assembly Bill 642 (“AB 642”), which becameeffective January 1, 2009, all general law cities in the state are authorized to use theDesign Build (“DB”) delivery method. AB 642 amends PCC section 20175.2 toauthorize all general law cities to use the DB delivery method, but restricts eligibleprojects to those in excess of $1 million. The exception is for cities in the Counties ofSolano and Yolo and the Cities of Stanton and Victorville, which are not subject tothat limitation prior to January 1, 2011. The amended PCC section 20175.2maintains the existing statute’s restrictions on eligible projects (i.e. buildings andimprovements thereto) and ineligible projects (e.g. streets and highways). Theamended PCC section 20175.2 also establishes a specific procedure for preparingthe request for proposals and selection of the DB entity. The statute also requirescities to establish a procedure to pre-qualify the DB entities and specifies theinformation that should be included in the questionnaire. The statute expiresJanuary 1, 2016.

b. Waste and Recycling Facilities

AB 642 also adds sections 20193–20195 to the PCC, which authorizes“qualified entities” to use the DB delivery method on regional and local wastewater

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treatment facilities, regional and local solid waste facilities, or regional and localwater recycling facilities in excess of $2,500,000. A city that operates wastewaterfacilities, solid waste management facilities, or water recycling facilities is a“qualified entity.” The new PCC statutes authorize only 20 such DB projects. Inorder to utilize the DB authority under the new statutes, a qualified entity mustsubmit a written application to the State Office of Planning and Research (“OPR”).OPR is required to keep track of the entities that have applied for and have beenapproved to use the DB authority. Lastly, entities that no longer wish to use the DBauthority for their projects must notify OPR. This procedure allows OPR to knowwhen the maximum 20 DB projects have been authorized. The new statutes havesimilar provisions to PCC section 20175.2 regarding the requirements for a laborcompliance program, the selection process, selection criteria, and prequalification ofDB entities. The DB authorization under PCC section 20193 expires of January 1,2020 or whenever the 20 projects have been completed, whichever is earlier.

3. DESIGN-BUILD-OPERATE AUTHORITY

a. Government Code section 5956 et seq.

Cities are able to utilize a variation of the DB delivery method by partneringwith the private sector to design, build, and operate (“DBO”) certain fee-producinginfrastructure facilities. Government Code sections 5956 et seq. authorizes a city toenter into an agreement with a private entity whereby the latter will be responsiblefor designing, building, and then operating certain types of fee-producingfacilities/projects, such as those for water supply, treatment, and distribution. Thedefining criterion is that the operation of the facility must be paid for by the personsor entities that use or are benefited by its operation.

The DBO authorization is not limited to cities: joint powers authorities andother public or municipal corporation are also authorized. However, the state andstate agencies are expressly prohibited from using this DBO authority.Furthermore, local governmental agencies are prohibited from using their authorityunder these statutes to design, build, finance, or operate a “state project,” whichdefinition includes “state water projects” and “state financed projects.”

The DBO statutes require that the private entity partner be selected pursuantto competitive negotiation; there is no option to select on the basis of low bid. Thereare also certain provisions that must be included in the DBO agreement, such as thatownership of the facility lie with the city (unless the city agrees to otherwise for theterm of the agreement), and that the lease or ownership by the private entity be fora maximum term of 35 years, with ownership completely reverting to the city uponthe expiration of the term.

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D. ENVIRONMENTAL PERMITTING

To NEPA Or Not To NEPASeems To Be The Most Frequently Asked Question.

The April 3, 2009 LCC City Advocate Weekly includes a list of Frequently AskedQuestions on ARRA and hits this question head on:

Question: Are projects funded through ARRA exemptfrom CEQA or NEPA?

Answer: No.

In general, NEPA is required whenever a major federal action that may have asignificant effect on the environment. This means that almost any public worksconstruction project that utilize federal funding require compliance with NEPA.

It seems most of the ARRA funding streams have developed (or are in the process ofdeveloping) the environmental requirements. Because of the uncertainty associated withwhat is required for environmental compliance, different agencies have taken differentpositions on what constitutes “shovel-ready” for the purposes of ARRA funding. Someagencies, including the California Department of Public Health (“CDPH”) are only issuingfunding to those projects that are currently ready to proceed, essentially requiring projectsto have all environmental requirements in place before funding will be issued. Otheragencies are taking a more pragmatic approach and allowing projects to obtain additionalenvironmental approvals, and begin construction before February, 2010.

Funding under the ARRA came as an infusion of federal funds to existing state andstat-federal grant programs. The ARRA itself did not include any environmentalexemptions or requirements. As a result, any environmental laws or regulations thatwould have applied to a project before the ARRA, will apply if the project receives ARRAfunding. Moreover, although the ARRA did not directly impose any additionalenvironmental requirements, the act of taking federal funds can trigger additionalenvironmental regulations. There are a number of Federal laws, executive orders andgovernment-wide policies that apply by their own terms to projects and activities receivingFederal financial assistance, regardless of whether the statute authorizing the assistancemakes them applicable. These cross-cutting Federal authorities include:

The National Environmental Policy Act (“NEPA”);

The Archeological and Historic Preservation Act; the Clean Air Act;

The Clean Water Act;

The Coastal Barrier Resources Act;

The Coastal Zone Management Act;

The Endangered Species Act;

Executive Order 12898 on Environmental Justice;

Executive Order 11988 on Flood Plain Management;

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Executive Order 11990 on Protection of Wetlands;

The Farmland Protection Policy Act;

The Fish and Wildlife Coordination Act;

The Magnunson-Stevens Fishery Conservation and Management Act;

The National Historic Preservation Act;

The Safe Drinking Water Act; and

The Wild and Scenic Rivers Act.4

Out of the above, NEPA is possibly the most significant environmental law triggeredby the acceptance of federal funding. NEPA applies to all federal agencies and activitiesthat may affect the quality of the environment and is designed to ensure that federalagencies make decisions based on an understanding of the environmental consequences ofthe proposed action. To accomplish this, NEPA requires federal agencies to prepareenvironmental impacts statements for all major Federal actions significantly affecting thequality of the human environment. Rather than establish a single body with authority topromulgate uniform regulations enforcing this obligation, however, NEPA leaves it to eachFederal Agency to formulate its own regulations implementing the Act.

The courts have determined that NEPA requires federal agencies to prepare impactstatements on state and local project when they are federalized through a federal “nexus.”Depending on the amount of funding involved, federal funding programs, such as the ARRA,can federalize state and local government projects. For example, the courts have held thatan impact statement, prepared through NEPA, is required for state highways and othertransportation projects funded wholly or partly with federal aid. (See e.g. Monroe CountyConservation Council, Inc. v. Volpe (1972) 472 F.2d 693.) NEPA has also been held to applyto the federal funding of local government programs. (See e.g. Save Courthouse Comm. v.Lynn (1975) 408 F.Supp 1323.)

If a project is going to receive stimulus funding from the federal government, it islikely to qualify as a “major Federal action” and require NEPA review. This may be the caseeven if the funding comes through a joint state/federal funding mechanism. (See e.g. Boscov. Beck (1979) 475 F. Supp. 1029 [applying NEPA to a project partially funded through theClean Water Act State Revolving Fund].)

When reviewing the applicability of NEPA, and the timeframes required by theARRA legislation, Popular Mechanics magazine opined that “the best example of a shovel-ready project . . . is road resurfacing—important maintenance work, but not a meaningfulway to rein in a national infrastructure crisis.” According to its February 6, 2009investigation, Popular Mechanics concluded that “the programs that would meet the bill’s90-day restriction are, for the most part, an unappealing mix of projects that were eithershelved after being fully designed and engineered, and have since become outmoded orirrelevant, or projects with limited scope and ambition.”

4 California Department of Public Health, Listing of Cross-Cutting Federal Authorities for AssistanceSubgrants Authorized Under the ARRA, March 12, 2009.

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E. CONTRACTOR PRE-QUALIFICATION

Many years ago, the State Legislature adopted Assembly Bill 574 (“AB 574”) addingSection 20101 to the Public Contract Code to authorize most public agencies to pre-qualifybidders for public works projects. Pursuant to this legislation, the Department of IndustrialRelations ("DIR") developed model guidelines for rating bidders and standardizedquestionnaires for use by public agencies during the prequalification process ("ModelGuidelines"). The Model Guidelines request a broad range of information from prospectivebidders, from performance on recent construction projects to history of compliance withCalifornia labor laws.

The prequalification of prospective bidders allows public agencies to make adetermination, in advance of bidding, of whether a prospective bidder is "responsible."Specifically, it authorizes public agencies to require prospective bidders to complete andsubmit a standardized questionnaire and financial statement in a form specified by theentity, including a complete statement of the prospective bidder’s experience in performingpublic works." (Pub. Contract Code § 20101 (a).) Questionnaires and financial statementssubmitted by prospective bidders must be verified under oath.

In order to ensure that Projects are constructed within budget and on schedule, it isoften in the public agency’s best interest to determine that the contractor to whom theproject construction contract is awarded possesses the requisite experience and resources.For instance, the contractor to whom the Project construction contract is awarded shouldhave experience working with public agencies, constructing the type of structure and befamiliar with the extensive legal requirements applicable to public projects. This isespecially important in light of the tight time frames for project commencement dictated byARRA.

The prequalification of prospective bidders prior to the commencement of the bidprocess provides the opportunity to evaluate the responsibility of prospective bidders overa longer period of time, utilizing objective, uniform criteria tailored to the specific needs ofthe owner. The information requested of bidders in a prequalification questionnaire ismore extensive than that required in bid packages. Therefore, public agencies would gain abetter sense of the experience and responsibility of prospective bidders fromprequalification than they would otherwise through the formal bid process withoutprequalification. Moreover, a prequalification of bidders provides interested contractorswith some certainty that the public agency will accept its bid prior to expending time andmoney preparing its bid package.

The prequalification process, if done concurrently with other required pre-bidactivities, can get a city one step closer to meeting the ARRA timelines and ensure thatARRA funded projects commence – and conclude – in a timely manner.

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F. PUBLIC BIDDING

BB&K LLP has received numerous questions regarding possible waiver of publicbidding or shortening of bidding timeframes to comply with ARRA timelines. However, wehave determined that each situation must be evaluated based on the facts. Alteration ofbidding procedures may be appropriate in certain circumstances, but in general, standardpublic bidding will be required.

1. ABX3 20 - STREETS AND HIGHWAYS CODE SECTION 2421 (G)

This legislation expressly states that it is the intent of the Legislature that therecipients of highway infrastructure investment funds made available under thefederal act, including state, regional and local agencies, shall adhere to principlesand policies that ensure government oversight and management of the contractingprocess to ensure taxpayer funds are spent wisely; contracts are not wasteful,inefficient, or subject to misuse; unnecessary no-bid and cost-plus contracts areavoided; and contracts are awarded according to the best interest of Californiataxpayers.

2. SBX3 27 - SAFE DRINKING WATER STATE REVOLVING FUND

No similar references to public bidding are included in SBX3 27. As such, weconclude that bidding requirements are unaffected by the legislation and cityattorneys should advise their clients to adhere by the existing standards for thevarious funding programs.

II.

CONCLUSION

When reviewing the various legislation, analysis and articles pertaining to the ARRAfunding and the associated requirements for public works projects, the one thing that isclear is that nothing is clear. While stimulus money has started to flow on large stateprojects that were always subject to federal funding and the associated requirements, the“how to” for local projects remains largely undefined. Cities should work closely with localMPOs and other state and federal agencies to determine if a project meets the specificfunding timeline for being shovel-ready.

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PUBLIC EMPLOYEE/MILITARY RESERVIST – WHAT YOU NEED TO KNOW WHEN AN EMPLOYEE IS RECALLED TO ACTIVE DUTY

By Martin A. Grover*

Assistant City Attorney City of Vista

City employees who are military reservists or who enlist or receive a commission as an officer in the military are protected by both federal and state law from discrimination. If as a result of their military service, they are absent from their city position entitled to reemployment and other benefits provided they meet certain requirements. The purpose of this paper is to give a brief overview of the applicable laws that apply to such employment relationships and to provide guidance to assist municipalities in meeting their statutory obligations and discuss the legal ramifications in the event an agency violates either the state or federal laws.

I. MILITARY SERVICE AND PUBLIC EMPLOYMENT – STATE LAWS State law prohibits any person from discriminating against a member of the U.S. military or the National Guard.1 A violation of this statue constitutes a misdemeanor.2

City employees who are members of the military reserves are entitled to a temporary leave of absence from their public employer when ordered for purposes of active military training, inactive duty training and the like provided the absence does not exceed 180 days3. One of the challenges faced by anyone called upon to analyze these statutes is to understand the various military terms related to active duty: initial active duty for training4, active duty5, active duty for training6, and inactive duty training7. Fortunately, the “DOD Dictionary of Military Terms” can be found on-line at

* Also holds the rank of Captain, Judge Advocate General’s Corps, United States Navy. Civilian and military titles shown for purposes of identification only. The views expressed are those of the author, and not necessarily the views of the City of Vista, the Departments of the Navy and Defense, or the U.S. government. 1 California Military & Veterans (“Mil. & Vet.”) Code § 394. 2 Id. 3 Mil. & Vet. Code § 395(a). 4 Initial Active Duty for Training – is defined by the Department of Defense (“DoD”) as basic military training and technical skill training required for all accessions and shall not be less than 12 weeks. This is commonly referred to as “Boot Camp”. 5 Active Duty – is defined by DoD as full-time active military service in the United States. This includes members of the Reserve Components serving on active duty or full-time training duty, but does not include full-time National Guard duty. 6 Active Duty for Training – is defined by DoD as a tour of active duty which is used for training members of the Reserve Components to provided trained units and qualified persons to fill the needs of the Armed Forces in time of war or national emergency and such other times as the national security requires. The member is under orders that provide for return to non-active status when the period of active duty for training is completed. Commonly referred to as “Annual Training”. 7 Inactive Duty Training – is defined by DoD as authorized training performed by a member of a Reserve Component not on active duty or active duty for training and consisting of regularly scheduled unit training assemblies. This is commonly referred to as “Weekend Drills.”

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http://www.dtic.mil/doctrine/jel/dodict/ A municipality is not required to, but may provide paid leave for the city employee’s temporary leave of absence.8 A city employee has an absolute right to be restored to the former office position and status he formerly held upon the termination of his temporary military duty for active or inactive training.9 This right also applies to charter cities.10 If the position has been abolished or eliminated, the city employee is entitled to be employed in a position of like seniority, status and pay if a position exists, or if no position exists, the employee has the same rights and privileges that he would have had if he had occupied the position when it ceased to exist and he had not taken temporary military leave of absence.11

A city employee, who prior to beginning his temporary leave of absence was employed with the city for not less than one year, is entitled to the same vacation benefits, sick leave and holiday privileges and the same rights to promotion, continuance in office, employment, reappointment to office or reemployment that the employee would have enjoyed had he not been absent on temporary military leave.12 If the city employee did not complete his probationary period, he must complete his probation upon his return.13 A city employee is entitled to receive his salary for the first 30 days while on either a temporary military leave of absence which is a leave of absence not more than 180 calendar days, or simply a leave of absence, which is a leave of absence of more than 180 calendar days. In either case, the city employee must have been previously employed by the municipality for more than one year.14 Such payment may not exceed 30 days in any fiscal year, however, a municipality may pay an employee during a period of inactive duty training.15

State law also entitles city employees and elected officials who either leave their position during the time of war or a national emergency to be reinstated to their position upon their termination of military service, provided their discharge was under conditions other than dishonorable and their term of office has not expired.16 Further, the employee shall have all of the rights and privileges he would have enjoyed had he not be absent, except sick leave, vacation or salary for the period during he was serving in the military.17 If the office or position has been abolished or no longer exists, the employee is entitled to be reemployed in a position of like seniority, status and pay or to a 8 Mil. & Vet. Code § 395(b). 9 Mil. & Vet. Code § 395(c). 10 Murdy v. City of Los Angeles, 201 Cal. App. 2d 468 (2nd Dist. 1962.). 11 Mil. & Vet. Code § 395(c). 12 Mil. & Vet. Code § 395(d). In calculating the “one year of service” with the municipality, all service in recognized military service shall be counted as service with the municipality. For example, if the city employee served four years in the US Army before being employed with the City, that four year period would count toward the qualifying period for benefits 13 Id. 14 Mil. & Vet. Code § 395.01. 15 Id. 16 Mil. & Vet. Code § 395.1(a). 17 Mil. & Vet. Code § 395.1(b).

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http://www.dtic.mil/doctrine/jel/dodict/

comparable vacant position for which his is qualified.18 For one year after his return, the employee, other than a probationary employee, may only be discharged for cause.19 A city employee or elected official has similar rights even if he resigns his position whether or not a national emergency exists.20 Further, state law allows any city officer, elected or otherwise, who leaves the service of any city in order to enter upon active service with the armed forces of the United States to be reinstated and restored to his office upon his discharge or release from such active service with the armed forces; provided, such discharge or release is prior to the expiration of the term for which he has been elected or appointed.21 The position vacated by the official shall not be considered vacant, but the city council may appoint an officer to temporarily replace any such officer and hold the office until the expiration of the term or until the officer returns.22 Care should be taken when addressing the reemployment rights and benefits when the city employee is a member of the National Guard. Because the Governor has the authority to call out the National Guard in a state of emergency, and the President may call up the National Guard for a national emergency, the rights and benefits to National Guard members differs slightly depending on whether the recall to active duty was for state or national purposes. For example, a city employee, regardless of his length of service with the city, who is a member of the California National Guard and who is called into military service by the Governor during a state of extreme emergency is entitled to return to his former position upon his release at the termination of the emergency.23 The employee is also entitled to his full salary and not lose any vacation or holiday privileges.24 While the protection and benefits under state law are generous, they may not be as generous as the protections and benefits under federal law which will be discussed below. In the event there is a conflict between the protections and benefits under state law and federal law, federal law shall prevail. Further, it should be noted that the benefits and protections under federal law are dependant upon the city employee meeting certain prerequisites. In some cases, the city employee may not qualify for reemployment under federal law, but may be entitled to reemployment under state law. For example, a city employee who is a member of the National Guard who is ordered to active duty by the Governor due to a state of extreme emergency, would not be entitled to reemployment under federal law, but would be entitled under state law. 18 Id. 19 Mil. & Vet. Code § 395.1(c). 20 Mil. & Vet. Code § 395.3 21 Mil. & Vet. Code § 395.8 22 Id. 23 Mil. & Vet. Code § 395.05 24 Id.

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II. MILITARY SERVICE AND PUBLIC EMPLOYMENT – FEDERAL LAWS

On October 13, 1994, President Clinton signed into law the Uniform Services Employment and Reemployment Rights Act (“USERRA”) (Title 38 U.S. Code, Chapter 43, Sections 4301 – 4333, Public Law 103-353). Its purpose was to encourage services in the uniform services, to minimize disruption by providing for the prompt reemployment of those who have served, and to prohibit discrimination against those who service or have served. 38 U.S.C. 4301. USERRA was a complete rewrite of the Veteran’s Reemployment Rights law (“VRR”). Many of the court decisions interpreting VRR are applicable to interpreting USERRA. USERRA gives the Secretary of Labor authority to promulgate regulations about the application of USERRA to employers.25 These regulations are published in the Code of Federal Regulations at 20 CFR Part 1002.

A. USERRA’S SCOPE USERRA applies to virtually all United States employers,26 including Federal, state and local governments, and small private employers. You only need one employee to be covered.27 It applies to all employees regardless of their position or status: Executive or management, temporary, probationary and at-will positions. Even laid-off employees are covered. It does not apply to independent contractors, but the label of the individual’s position is not controlling.

B. RELATIONSHIP TO OTHER LAWS OR AGREEMENTS USERRA does not preempt, supersede, nullify or diminish any Federal or state law, including any local ordinance, contract, agreement, policy, plan or practice that establishes a right or benefit that is more beneficial to, or is in addition to, a right or benefit provided for under USERRA.28 For example, if a collective bargaining agreement or a local ordinance provides greater benefits to an employee than provided under USERRA, the provisions in the bargaining agreement or local ordinance would apply. On the other hand, USERRA supersedes any state law, including any local ordinance, contract, agreement, policy, plan or practice that reduces, limits, or eliminates in any manner any right or benefit provided by USERRA.29 This prohibition would include any attempt to create additional prerequisites to the exercise of any rights or receipt of any benefits afforded under USERRA.30 In a recent case, the United States Court of Appeal for the Sixth Circuit held that a local government’s application of its “return-to-work” policy constituted an additional prerequisite to the right to 25 38 U.S.C. § 4331. 26 Religious institutions and Indian tribes are excluded from coverage. 27 Cole v. Swint, 961 F.2d 58 (5th Cir. 1992). You should note that Cole predated the enactment of USERRA and was based on VRR. However, court decisions interpreting VRR may be used in interpreting USERRA. 28 38 U.S.C. § 4302(a). 29 38 U.S.C. § 4302(b). 30 Id.

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reemployment under USERRA. Petty v. Metropolitan Government of Nashville-Davidson County, 538 F.3d 431 (6th Cir. 2008), involved a police officer, who was recalled to active duty for approximately 15 months for service in Operation Iraqi Freedom. The officer was required to comply with the department’s “return-to-work” policy after his release from active duty and before he could be reinstated to his former position as a patrol sergeant. The return-to-work policy required the officer to update a personal history questionnaire, complete a medical examination, submit to a computer voice stress analysis, submit to a drug screening test and a debriefing with the Police Department psychologist. The Department applied the return-to-work policy on all officers who had been away from the Police Department for an extended period of time, regardless of the reason for their separation. The purpose of the “return-to-work” process was to ensure that every individual entrusted with the responsibility of being a police officer is still physically, emotionally, and temperamentally qualified to be a police officer after having being absent from the Department. The Court held applying such a policy to members of the armed forces returning from military duty was a violation of USERRA.31 While there are no reported cases specifically relating to City Managers or in-house City Attorneys, under USERRA they too would be entitled to reemployment following their military service if they met all of the qualifications for reemployment. It would not matter whether they were under an employment agreement. Nor would it matter whether the term of the employment agreement had expired. If the term of the employment agreement has not expired, the municipality would be required to reemploy the employee without question. On the other hand, if the employment contract had expired the court would look to the municipality’s past practice and whether it’s past practice was to renew the City Manager’s and City Attorney’s employment agreements. The burden of proof would be on the municipality to show that it did not routinely renew such agreements. Some municipalities contract for legal services with private law firms. Whether an attorney that is hired to serve as the City Attorney under such an arrangement would be covered by USERRA would depend on whether the attorney is an employee of the municipality. If he is an independent contractor and not an employee, USERRA does not apply. However, USERRA would apply if he is an employee of the firm. If he is a partner of the firm and the city attorney, he would not be protected by USERRA.

C. USERRA PREREQUISITES The general rule is a city employee is not entitled to any of the rights granted under USERRA until he completes his military service and applies for reemployment. There are two exceptions to the rule which will be discussed below. But before the city employee can qualify for the rights granted under USERRA, the city employee must meet the following prerequisites: 1. He must have left his city position for the purpose of performing service in the uniformed services. 31 538 F.3d 431, 441(6th Cir. 2008).

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2. He must have given prior notice to his city employer. 3. The cumulative period or periods of absence from the municipality for performing military service must not have exceeded the five-year limit, although the period of absence may be longer in some cases. 4. He must have been released from the period of service without receiving a disqualifying discharge. 5. He must make a timely application for reemployment.

1. Previously Employed with the City In order for a city employee to be covered by USERRA, he must have held a job with the municipality prior to his absence for military service. The employment position need not be permanent for USERRA to apply. It also applies in those cases where the employee’s position is either temporary or probationary. However, it does not apply when the employment position is one that was for a brief, nonrecurrent period and there is no reasonable expectation that such employment will continue indefinitely or for a significant period. In such cases, the burden is upon the employer to prove the brief or nonrecurrent nature of the employment without a reasonable expectation of continuing indefinitely or for a significant period.32 The courts have held that probationary and seasonal jobs are covered by USERRA as well.

2. Purpose of Absence to Perform Military Service The second prerequisite for a city employee to qualify for the rights granted under USERRA is that the individual must have left his city position for service in the uniform services. It should be noted that the individual need not be a current member of the National Guard or any other Armed Forces to qualify for protection under USERRA. A city employee who enlists or obtains a commission in one of the branches of the armed services while a city employee would qualify. Additionally, an individual who is going through the process of enlisting or seeking a commission would also be covered. For example, an individual may need to undergo a physical examination prior to his enlistment being approved. If he is required to take time off of work to obtain a physical, his employer would be obligated to allow him to do so under USERRA.

3. Prior Notice

Under USERRA, the city employee must give his employer advance written or verbal notice of his leaving for military service, unless such notice is precluded by military necessity or, under all of the relevant circumstances, the giving of such notice is otherwise impossible or unreasonable.33 The notice may be given by the employee or by an appropriate officer of the uniformed service in which the employee is joining on behalf of the employee, for example, his commanding officer. USERRA does not specify to whom the notice must be given, only that it be given to the employer. Therefore, a city employee could give verbal notice to his immediate supervisor to satisfy the prerequisite. 32 38 U.S.C. § 4312(d)(1)(C) 33 38 U.S.C. § 4312(a)(1).

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Except for short periods of absences, such as weekend drills or two weeks annual

training, it is advisable that the city employee’s department head meet with the city employee and document the meeting when an employee decides to give notice for extended periods of military service, such as when the individual is being recalled to active duty for six months or more. That documentation should be filed in the city employee’s personnel file for future reference. City employees should be advised to put their notice in writing. The notice need only state that the city employee is leaving to perform military service, it need not include any expected date of return.

However, there is no duty for the municipality to seek a notice from an employee

who simply fails to show up for work or give no notice of his intention to resign. In such cases, it would be advisable for the Human Resources Department to investigate and document the reason for the employee’s departure to determine the reason for leaving and whether any notice was given to the employee’s immediate supervisor.

In some rare cases, USERRA excuses the notice requirement for military

necessity or where notice is otherwise impossible or unreasonable. An example might be where an entire elite military unit is recalled and mobilized for duty in Afghanistan and publicity of such mobilization might give the enemy valuable intelligence. In such cases, the employee may be ordered not to disclose the fact that he is being mobilized for operational security. Such cases are rare.

USERRA does not specify the minimum period of advance notice the city

employee must give his employer that he is leaving to serve in the armed forces. In most cases, the city employee will be given adequate warning to get his affairs in order in preparation for mobilization. However, due to exigent circumstances, it is possible that a city employee may be give word that his unit is mobilizing and he needs to report for duty within twenty-four hours.

4. Duration of Service The rights afforded a city employee under USERRA are available provided the period of time the employee is absent from his city job for military duties does not exceed five years in the aggregate. Not all absences are counted against the five year period. For example, if a city employee is involuntarily recalled to active duty, that period of time does not count against the five year period. Likewise, the weekend drills and the two weeks of active duty do not count against the five year period.

Further, any military service the employee may have served prior to his employment with the city, would not count. For example, an employee who is hired by a city after serving six years with the Army and voluntarily requests orders to be recalled to active duty for twenty-four months, would be entitled to reemployment under USERRA. Only the twenty-four month period would apply, not the prior six years of military service.

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5. Discharge Characterization

Another requirement to the reemployment protections under USERRA is that the city employee must not have received a punitive discharge upon his release from active duty. All enlisted service members receive a discharge at their expiration of their enlistment agreement. However a punitive discharge may be issued prior to the termination of their agreement. There are only three punitive discharges: Dishonorable Discharge, Bad Conduct Discharge and Other-Than-Honorable Discharge. A service member may only receive a Dishonorable Discharge from a General Court-Martial, which is equivalent to a felony conviction. A Bad Conduct Discharge may be awarded at either a General or Special Court-Martial. An Other-Than-Honorable Discharge may be awarded as the result of an administrative board hearing. An administrative board hearing is the military’s equivalent to a civil service board hearing. Officers who commit an offense will either receive a dismissal or may be dropped from the rolls. In either case, they would not qualify for the reemployment protections under USERRA.

6. Promptly Return Back to Work

Lastly, the city employee seeking to be reemployed with his former employer, must report promptly back to work. Promptly reporting back to work depends on a number of factors, but primarily the length of time the employee was away for military service. If his absence from his city employment was less than 31 days, he must report at the start of the first full work period on the first day he is scheduled to work, after the completion of the period of service, in addition to the time reasonably required for safe transportation from the place of service, plus eight hours for rest after he gets home. For example, if the city of San Diego employee performs his two weeks of active duty in Washington, D.C. and he is released by his command at 4:30 P.M., he would be entitled the reasonable time to fly back to San Diego, plus an additional eight hours for rest. If the period of absence was more than 30 but less than 181 days, the city employee must apply for reemployment within 14 days after the date of release from the military. If the period of military service was for 181 days or more, the city employee must apply for reemployment within 90 days from the date of release. In some cases the period for applying for reemployment may be extended. For example, a city employee that was injured while on military duty and needs additional time to convalesce must apply for reemployment within a reasonable time.

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D. MUNICIAPALITY’S OBLIGATIONS UNDER USERRA

If the city employee satisfies the five prerequisites above, he is entitled to the following: 1. Prompt reinstatement. 2. Seniority credit. 3. Pension credit. 4. Status. 5. Training or retraining. 6. Protection against discharge without cause.

1. Prompt Reinstatement Once the city employee returns from military service, the municipality must “promptly” reemploy him or her depending on the length of absence.34

a. Absences Less than 91 Days

If the absence for military service is less than 91 days, the employee is entitled to

be reemployed into an appropriate position based on a number of factors. The position may be above, below or the same position that the employee held at the time he left for military service, depending on the facts. Under USERRA, the municipality must first consider whether the employee would have been entitled to a higher position with the city had he not been away performing military duties.

The following scenario will help clarify this point. The City of Goodtime has a

policy in place where new college graduates are hired as junior management analysts. After two years they are elevated to senior management analyst positions. Past experience shows that ninety percent of junior management analysts are promoted to senior management analyst positions. Bob Smith is a naval reservist and a junior management analyst for the City of Goodtime. Mr. Smith, two months before his second anniversary with the city, is recalled to active duty for ninety days. Upon Mr. Smith’s return, the City would be required to reemploy Mr. Smith in senior management analyst position because that is the position he would have occupied had he not be absent for military service. If the elevated position required additional training in order for him to perform his duties, the City would have to make a reasonable effort to provide Mr. Smith with the additional training and only if Mr. Smith was unable to perform the duties of the senior management analyst after the training would the City then be relieved of the obligation to reemploy him at the senior management analyst position.

If the employee is unable to perform the duties of the higher position, the

municipality is required under USERRA to reemploy him in the position he held at the time he began his military service. In the example above, Mr. Smith would be entitled to be reemployed in the junior management analyst position.

34 38 U.S.C. § 4313.

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However, there may be circumstances where the employee may only be entitled to reemployment at a lower position or no position whatsoever. If the City of Goodtime had a round of layoffs due to budget reasons and Mr. Smith’s position was eliminated, Mr. Smith would not be entitled to reemployment. However, the municipality must be careful that the elimination of the position is not due to the fact that the employee is absent for military purposes. The municipality would have the burden to prove that Mr. Smith’s position would have been eliminated had he not been absent. Additionally, if Mr. Smith’s held a classified position and he had bumping rights, he would be entitled to exercise those rights upon his return. He would therefore not be entitled to the position he held prior to beginning his period of military service, but to a lower position.

b. Absences More Than 90 Days If the period of absence is more than 90 days, the position the employee is entitled to hold with the city is slightly different. He is still entitled, as under an absence less than 91 days, to hold the position he would have held had he not been absent for military service, or in a position of like seniority, status and pay. USERRA assumes that an employee normally is promoted to higher positions and given greater responsibilities the longer he is with the employer. USERRA attempts to eliminate any penalty an employee would suffer as a result of performing his military service. In the case of a city employee who is absent for more than 90 days, the city is required to place the employee into a position that he would have held had he not been absent for military service or in a position of like seniority, status and pay. Here is how this issue might be resolved using the management analyst example from above.

Mr. Smith is a junior management analyst in the City Manager’s Office. Under the city’s policy, if Mr. Smith performed well in that position, he could look forward to a senior management analyst position in the City Manager’s Office after two years. This time, however, he is recalled for one hundred and eighty days, two months prior to his second anniversary. As in our first example, he would be entitled to a senior management analyst position in the City Manager’s Office upon his return. The City might be able to reemploy Mr. Smith in another senior management analyst position with the City provided it had the same seniority, status and pay. However, it may be that a senior analyst position in the City Manager’s Office might be considered a higher status, than a senior management analyst position in the Public Works Division based on their respective duties. Arguably, the City Manager’s senior management analyst might involve greater interaction or contact with local citizens. Further, the City Manager’s senior management analyst might look better on an individual’s resume, than the Public Works senior management analyst. In such cases, reemploying the city employee into the Public Works senior management analyst position would not be a “position of like seniority, status and pay” and a violation of USERRA under the above example.

As with a employee who is absent for less than 91 days, the city employee would

have to establish that he is qualified to perform the duties of the higher office and be provided training by the City if necessary. If the employee could not perform the duties

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after training, the city employee would be entitled to the position that he held at the time he began military service or a similar position of like seniority, status and pay.

Further, such an employee might be placed at a lower position or denied

reemployment if the City had reduced its workforce for budget reasons. Again, the City would have to justify its decision by showing that the employee would have resigned or discharged even if he had not been absent performing military services. There is one other exception to the prompt reinstatement requirement. If the city employee becomes disabled during military service or has an aggravation of a pre-existing condition during military service and, who after reasonable efforts by the employer to accommodate the disability is not qualified due to such disability into the position if the continuous employment of such persons with the employer had not been interrupted by military service, he is entitled to be reemployed in any other position which is equivalent in seniority, status, and pay, the duties of which he is qualified to perform or would become qualified to perform with reasonable efforts by the city; or in a position which is nearest approximation to a position referred to above in terms of seniority, status and pay consistent with circumstances of the individual’s case. A police officer who is blinded from an improvised explosive device during his military service in Iraq, will not be able to resume his duties as a police officer. The City will need to find another position that closely approximates his former position in terms of seniority, status and pay. If two or more city employees entitled to reemployment under USERRA in the same position of employment report for reemployment, the person who left the position first shall have the prior right to employment. For example, assume that an assistant city attorney left for three years of military service and a deputy city attorney moved up to the vacant assistant city attorney position. Then assume that the new assistant city attorney decided to obtain a commission in the Navy JAG Corps and left for two years and returned to his prior position as Assistant City Attorney. Subsequent to his return, the first assistant city attorney returns from his three year tour and requests to be reemployed. Under USERRA, the first city attorney would have the right to resume his position as the assistant city attorney. The second assistant city attorney would have the right to reemployment in any other position of employment which he would have been employed if the continuous employment had not been interrupted by military service or in a position that he was employed on the date his military service commenced depending on the length of his absence for military service.35 Identifying that position will take some careful analysis by the city’s legal counsel and its human resources department.

2. Seniority Credit If the city employee meets the eligibility requirements under USERRA, he is entitled to be treated, for seniority purposes, as if he has been continuously employed during the period of his absence.36 USERRA does not create a system of seniority, it 35 38 U.S.C § 4313 (b). 36 38 U.S.C § 4316.

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assumes one. An excellent example of this can be found in Allen v. U.S. Postal Service, 142 F.3d 1444(Fed. Cir 1998.) In Allen, the plaintiff was a tool and parts clerk and worked the night-shift for the USPS. He wanted to work the day shift, but none were available. In 1994 he was called to active duty for four months and during that time USPS created tool and parts clerk day position. Mr. Allen did not learn of the position until he returned. To be assigned to the position, an employee had to bid for it and it was determined by seniority. Upon his return, Mr. Allen requested a day position, but was denied. Mr. Allen appealed the matter to the Merit Systems Protection Board (“MSPB”) and MSPB ruled against him. He then appealed to the United States Court of Appeals for the Federal Circuit, which hears appeals from the MSPB. The Appellate Court ruled in favor of Mr. Allen and held he was entitled to be, for seniority purposes, as if he had been continuously employed during the period of his absence.

While the city employee is absent performing military service, he is to be deemed to be on furlough or leave of absence and entitled to such other rights and benefits not determined by seniority as are generally provided by the municipality to other city employees having similar seniority, status, and pay who are on furlough or leave of absence under a contact, agreement, policy, practice, or plan in effect at the commencement of such absence or established after absence begins. These rights and benefits may be waived by the city employee if he knowingly provides written notice of intent not to return to the municipality after he is released from military service. The municipality has the burden of proving that a city employee knowingly provided clear written notice of intent not to return to his prior position and that the city employee was aware of the specific rights and benefits he is giving up. This seniority credit has also been called the “escalator principle” which came from a 1946 Supreme Court case in which the Court held: “The returning veteran does not step back on the seniority escalator at the point he stepped off. He steps back on at the precise point he would have occupied had he kept his position his position continuously during [his military service.].”37 While Fishgold predates the adoption of USERRA, its holding is incorporated into the federal law. However, if there is no system of seniority, the “escalator principle” does not apply. The “escalator principle” is a double-edge sword. Like a real escalator, the “escalator principle” can descend as well as ascend. As in these times where layoffs are becoming more and more common, a city employee who is covered by a collective bargaining agreement may not be protected from a layoff, if the municipality can establish that based on the employee’s seniority, he would have been laid off during the time he was away, he would not be entitled to reemployment upon his return.

On the other hand, if the city employee was in an at-will position at the time he left for military service and the layoffs were not based on seniority, the city employee would be entitled to reemployment, unless the municipality is able to show that the city employee would have been laid off even if he had not left for military service. For example, if the city decided to eliminate a department and all of the employees of that 37 Fishgold v. Sullivan Drydock & Repair Corp. 328 U.S. 275, 284-85 (1946)

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department were laid off, it would be safe to conclude the city employee on military duty would have been laid off as well.

Lastly, not all promotions or other benefits are tied to seniority. For a benefit to

qualify as a prerequisite of seniority, the Courts have devised a two-part test. First, the benefit must have been intended to be a reward for length of service, not a form of short term compensation. For example, the Supreme Court has held that vacation days are not a prerequisite of seniority.38 Earned vacations days are not given for how long an employee has been employed at the city. On the other hand, the rate of vacation is usually a prerequisite of seniority. A municipality may have a set rate for earned vacation days for the first five years of employment, however, upon the anniversary of the sixth year, the rate increases. If during the city employee’s period of absence for military service, his tenure with the city passes the trigger for qualifying for a higher vacation rate, the city employee would be entitled to the higher rate upon his return.

The second part of the test is that it must be reasonably certain that the city

employee would have attained the promotion or other benefit if he had been continuously employed. He is not entitled to a promotion if the promotion was a mere possibility. On the other hand, he does not need to establish that the promotion was an absolute certainty. In determining whether a promotion was reasonably certain, the court will consider all of the facts. For example, if an employee hold the position as an Office Specialist I and after two years, ninety percent of the Office Specialist I positions are upgraded to Office Specialist II, then the promotion would probably qualify as a prerequisite of seniority, even if the Personnel Handbook labeled it as a “merit” promotion.

3. Pension Benefits The escalator principal applies to pension entitlements. It does not matter whether the pension plan is a defined benefit plan or a defined contribution plan. The PERS account is a defined benefit plan where the amount of the employee’s retirement is based on a formula based on the number of years in the plan times the highest salary. Some municipalities participate in a cafeteria plan where the employee may direct that any excess funds not used for the purchase of health care benefits be deposited into a 401k account. Such a plan would be a defined contribution plan. Additionally, most, but not all, pensions plans are contributory meaning that both the employee and municipality contribute to the plan. In the case of the defined benefit plan, the city employee must be treated as though he was employed with the municipality for the entire period. For example, if a city employee were employed for twenty-five years, but during that period he was called away for military service for four years, his pension plan would be based on the full twenty-five years not twenty-one years. The municipality would be required to pay into the city employee’s account what it would have been required to pay had the employee been present. However, it is not obligated to pay in to the defined benefit plan until the city employee returns from service and is reemployed. 38 Foster v. Dravo Corp., 420 U.S. 92 (1975).

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In a defined contribution plan like the 401k in the example above the municipality would likewise be obligated to contribute what it would have paid if the employee had been continuously employed, but again only after the city employee returned from military service and reemployed. The municipality is not obligated to make up any earnings the city employee missed out on such as interest, dividends and the like. If a pension plan is contributory, the city employee will be obligated to pay into the plan what he would have paid in if he had been continuously employed. However, the city employee is not required to make the payment all at once. Beginning from the date of reemployment, he has a period up to three times the period of the absence for military service, not to exceed five years.39 For example, a city employee who is recalled to active duty for one year would be entitled to make up his contribution to his pension for his missed time within three years from the date of his reemployment.

4. Status

If the city employee’s absence for military service was less than 91 days, the municipality is required to reemploy the employee in the position that he would have attained if he had been continuously employed. It would usually be in the same position that he held before he left, but not always. Assuming that the position has not been eliminated and the employee is qualified to perform the duties of the position.40 If the city employee’s absence was 91 days or more, the municipality does not have the obligation to reemploy the employee in the same position he held before he left, but it is required to reemploy the employee in a position of like seniority, status and pay.41 The term “status” was also used in VRR law and there have been many cases that have defined the term. Status is an intangible concept that may be associated with the position of employment. For example, a management analyst in the City Manager’s Office may have a higher status than one in the Parks and Recreation Department simply due to the nature of the work being performed. A management analyst in the city manager’s office may have assignments that have a higher profile than his counterpart in Parks and Recreation. In the context of USERRA, when a city employee, who has been absent for more than 91 days, returns from his military service the municipality will need to analyze the status of the employee’s prior position and compare it to the new position if the employee is not reemployed in his former position. Placing the hypothetical management analyst for the City Manager’s Office into the Parks and Recreation Department may be a violation of USERRA.

5. Training or Retraining

The municipality also has the obligation under USERRA to make “reasonable efforts” to “qualify” the city employee for the position he would have attained if had been continuously employed. Training and retraining is more likely necessary for a city

39 38 U.S.C. § 4318(b)(2). 40 38 U.S.C. § 4313(a)(1)(A). 41 38 U.S.C. § 4313(a)(2)(A).

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employee who is absent for military service for an extended period, months or years. However, its possible that training or retraining may be required for absences of six months or less. For example, a street maintenance worker for the Public Works Department may need to be trained or retrained on a new piece of equipment that was purchased during his absence.

6. Protection Against Discharge Without Cause

Depending on the city employee’s length of absence to perform military service, he may be protected from discharge, except for cause, even if the position he is reemployed in is classified as “at-will.” If the period of absence was 31 to 180 days, the city employee may not be discharged or terminated for 180 days from the date that the employee is restored to his proper job.42 A city employee who is absent for military service for 181 days or more may not be discharged witout cause for one year. 43 There is no similar protection if the period of absence is less than 31 days.

7. Protection from Discrimination Municipalities may not discriminate against any person who is or was a service member from initial employment, reemployment, retention in employment, promotion, or any benefit of employment on the basis of his military service.44

E. ADDITIONAL PROTECTIONS

To repeat the general rule, a city employee does not have any rights under USERRA, until he completes his military service and applies for reemployment. There are two exceptions to this general rule: Furlough or Leave of Absence Policy and Health Plan Coverage.

1. Furlough or Leave of Absence Policy

If the municipality has a furlough or leave-of-absence policy or practice, the municipality must treat the city employee who is absent for military service as though he is on furlough or a leave-of-absence. To the extent that the employer policy or practice varies among various types of non-military leaves-of-absence, the most favorable treatment accorded any particular leave would be accorded the military leave, regardless of whether the non-military leave is paid or unpaid. Waltermyer v. Aluminum Co of America, 804 F.2d 821. In this case, the city employee is entitled to the same benefits that those on non-military leave-of-absence receive while he is on military leave.

42 38 U.S.C. § 4316(c)(2). 43 38 U.S.C. § 4316(c)(1). 44 38 U.S.C. § 4311(a).

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2. Participating in Health Insurance Plan

A city employee is provided the right to continue with his health care coverage while he is away performing his military duties. The scope of this benefit depends on the city employee’s length of absence. If the period of military service is fewer than 31 days, the municipality can only charge the employee, the employee’s share, if any, of the cost of the coverage.45 Normally, neither a city employee who is performing military service, nor his family is entitled to receive medical services if the period of military service is less than 31 days. For example, when a city employee performs his annual two weeks of active duty, he is not entitled to medical care from the military. In such cases, the city employee will want to continue with his health insurance plan. However, if he is ordered to active duty for more than 31 days, he and his family will be entitled to medical care from the first day. In those cases where the city employee is ordered to active duty for more than 31 days, he has the option to continue with his employer sponsored health insurance plan. If he chooses to continue with the health insurance plan, the municipality is permitted, but not required, to charge up to 102% of the entire premium, including the part that the municipality normally pays in the case of active employees. The city employee has the right to continue to participate in the municipality’s health insurance plan for a total of 24 months, unless he fails to report back to the municipality in a timely manner after his military service is completed. Upon return of the city employee to his former job, even if he doesn’t elect to continue with the municipality’s health insurance plan, he is entitled to immediate reinstatement under the health plan coverage, without exclusion or a waiting period. The only exception is when the Secretary of Veterans Affairs determines that any illness or injury was incurred or aggravated during the performance of military service.46

3. Disabled Veterans Even in times of peace, members of the military often perform hazardous duties. Military units are continuously conducting training operations in preparation for fighting a war, whether it be simulating an amphibious landing on some beach, conducting flight operations on board an aircraft carrier or simply loading cargo into an aircraft or ship’s hold. The risk of an accident is always present. The municipality is required to make reasonable efforts to accommodate for the disability incurred in or aggravated during a city employee’s period of military service.47 If the municipality is unable to reemploy the disabled veteran into a position that the employee would have achieved had he remained continuously employed, then the

45 38 U.S.C. § 4317(a). 46 38 U.S.C. § 4317(b). 47 38 U.S.C. § 4313(a)(3).

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municipality is obligated to reemploy the city employee into another position equivalent in seniority, status and pay, if he is otherwise qualified or could become qualified with reasonable efforts. If no such position exits, then the municipality must employ the disabled veteran in a position which is the nearest approximation to a position referred to above in terms of seniority, status and pay.

III. ADDITIONAL EMPLOYER OBLIGATIONS

USERRA also requires the city to provide to city employees who are entitled to rights and benefits under the law, a notice of the rights, benefits and obligations of such persons.48 This requirement may be met by posting a notice where employers customarily place notices for employees.

IV. EMPLOYEE’S REDRESS FOR VIOLATIONS OF USERRA In the event a city employee is denied his right and benefits under USERRA, he may either request assistance from the Department of Labor in resolving the matter or file a private action in federal court.49 If he chooses to enlist the assistance of the DOL and the parties are unable to resolve the dispute, the city employee may request the Attorney General of the United States to file an action in federal court on his behalf.50 USERRA expressly states that a complaint alleging a violation of USERRA is not subject to the statute of limitations.51 Further no state statute limitations apply.52 However, the doctrine of laches may apply and at least one federal district court has ruled that a provision in a employment agreement provided that any lawsuit challenging any later termination of employment would have to be filed within six months after termination of employment was enforceable and did not conflict with USERRA.53

USERRA provides the following remedies for an aggrieved city employee: 1. The court may order the city to comply with USERRA. 2. Compensation for lost wages and benefits. 3. Liquidated damages in the amount equal to lost wages and damages, if the court determines the employer’s failure to comply with USERRA was willful. 4. The court may award reasonable attorney fees, expert witness fees and other litigation expenses.54 48 38 U.S.C. § 4334. 49 38 U.S.C. § 4322 and 4223. 50 38 U.S.C. § 4323. 51 38 U.S.C. § 4372(b). 52 38 U.S.C. § 4323(i). 53 Aull v. McKeon-Grano Asso., Inc. 207 U.S. Dist. LEXIS 13008 (District Court of New Jersey, Feb. 26, 2007.) 54 38 U.S.C. § 4323.

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V. RECOMMENDED BEST MANAGEMENT PRACTICES

The following recommendations may help to avoid unnecessary litigation and the adverse publicity that arises from these types of cases will likely generate. 1. Obtain a copy of the USERRA statute and the Department of Labor Regulations and read them carefully. They are remarkably clear. 2. Obtain a copy of the USERRA Rights Notice and make sure it is posted in a location where employees can read it. A copy of the notice is attached. It is also advisable, but not required, to provide a personal copy to anyone now currently serving with the military in a reserve status or who provide notice to the municipality that they are leaving to join the armed services. 3. If a city employee gives notice that he is leaving for military service other than his two week period of annual training or his monthly drills, someone from the Human Resources Department should meet with the city employ and document their discussion and the employee’s future plans. While the employee does not have to advise the municipality that he plans to return, the city may be able to make decisions based on the employee’s intentions. For example, they may hire someone on a provisional basis to see if the city employee returns after his military service. Additionally, the issue of prior notice will be resolved. 4. If a city employee simply leaves work and never returns, the municipality should make every effort to find out if the employee made any statement to his immediate supervisor regarding any plans to join the military. Since the employee’s absence could be lengthy, up to five years or more depending on the circumstances, it is in the municipality’s interest to adequately document it’s efforts to determine whether the employee provided any notice. 5. Supervisors should be counseled to be attuned to any situations where an employee’s military service may cause animosity to others in the department. It would not be unusual to hear complaints from other employees who have to cover an employee’s weekend shift due to his military service. Such complaints, even if delivered in a kidding manner may later become evidence against the municipality in a wrongful termination or discrimination lawsuit. 6. The Reserve Officers Association website, located at http://www.roa.org has an excellent list of articles interpreting USERRA. 6. Further assistance can be obtained from an organization called: Employer Support of the Guard and Reserve and can be found at http://www.esgr.org.

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http://www.roa.org/

http://www.esgr.org/

U.S. Department of Labor1-866-487-2365

U.S. Department of Justice

YOUR RIGHTS UNDER USERRA THE UNIFORMED SERVICES EMPLOYMENT

AND REEMPLOYMENT RIGHTS ACT

HH

Publication Date—October 2008

REEMPLOYMENT RIGHTS

You have the right to be reemployed in your civilian job if you leave thatjob to perform service in the uniformed service and:

I you ensure that your employer receives advance written or verbalnotice of your service;

I you have five years or less of cumulative service in the uniformedservices while with that particular employer;

I you return to work or apply for reemployment in a timely mannerafter conclusion of service; and

I you have not been separated from service with a disqualifyingdischarge or under other than honorable conditions.

If you are eligible to be reemployed, you must be restored to the job andbenefits you would have attained if you had not been absent due tomilitary service or, in some cases, a comparable job.

RIGHT TO BE FREE FROM DISCRIMINATION AND RETALIATION

If you:

I are a past or present member of the uniformed service; I have applied for membership in the uniformed service; orI are obligated to serve in the uniformed service;

then an employer may not deny you:

I initial employment;I reemployment;I retention in employment; I promotion; or I any benefit of employment

because of this status.

In addition, an employer may not retaliate against anyone assisting inthe enforcement of USERRA rights, including testifying or making astatement in connection with a proceeding under USERRA, even if thatperson has no service connection.

HEALTH INSURANCE PROTECTION

I If you leave your job to perform military service, you have the rightto elect to continue your existing employer-based health plancoverage for you and your dependents for up to 24 months while inthe military.

I Even if you don't elect to continue coverage during your militaryservice, you have the right to be reinstated in your employer'shealth plan when you are reemployed, generally without any waitingperiods or exclusions (e.g., pre-existing condition exclusions) exceptfor service-connected illnesses or injuries.

ENFORCEMENT

I The U.S. Department of Labor, Veterans Employment and TrainingService (VETS) is authorized to investigate and resolve complaintsof USERRA violations.

I For assistance in filing a complaint, or for any other information onUSERRA, contact VETS at 1-866-4-USA-DOL or visit its website athttp://www.dol.gov/vets. An interactive online USERRA Advisor canbe viewed at http://www.dol.gov/elaws/userra.htm.

I If you file a complaint with VETS and VETS is unable to resolve it,you may request that your case be referred to the Department of Justice or the Office of Special Counsel, as applicable, forrepresentation.

I You may also bypass the VETS process and bring a civil actionagainst an employer for violations of USERRA.

HH

1-800-336-4590

The rights listed here may vary depending on the circumstances. The text of this notice was prepared by VETS, and may be viewed on the internet at this address: http://www.dol.gov/vets/programs/userra/poster.htm. Federal law requires employers to notify employees of their rights under USERRA,and employers may meet this requirement by displaying the text of this notice where they customarily place notices for employees.

Office of Special Counsel

USERRA protects the job rights of individuals who voluntarily or involuntarily leave employment positions to undertake military service or certain types of service in the National Disaster Medical System. USERRA also prohibits employers

from discriminating against past and present members of the uniformed services, and applicants to the uniformed services.

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City Attorneys Spring Conference

May 7, 2009

Climate Change and

Regional [Transportation and Housing] Planning

SB 375 (Steinberg) – Chapter 728 2008 Statutes

Betsy Strauss

Attorney at Law

1595 King Avenue

Napa, California 94559

(707) 253‐0435

87

SB 375 (Steinberg)1

Chapter 728 2008 Statutes

Spring 2009 Update

This paper was originally prepared for the one‐day CLE City Attorney’s seminar in Anaheim in February 2009. This Spring 2009 Update is being written in the beginning of April 2009 and will summarize legislative and state agency actions relating to SB 375 (Steinberg). If you have not previously reviewed this paper, then it would be advisable to read the paper, beginning with “The Historical Context of SB 375,” before reading this Spring 2009 Update.

• SB 575 (Steinberg): This bill has been introduced as the “clean‐up” vehicle for SB 375. As this paper is being written, Senator Steinberg’s office is gathering suggestions from various interest groups (local governments, housing advocates, and environmental groups) for amendments to SB 375 to “clean‐up” unintentional errors or confusion. The following amendments have been proposed by the League of California Cities:

1. Section 65080(b)(2)(B)(iii): delete "pursuant to Section 65584" and add in its place: "determined pursuant to Section 65584.01."

2. Section 65080(b)(2)(H)(ii) and (iv): Section 65080(b)(2)(H) says that the MPO "shall prepare an alternative planning strategy to the sustainable communities strategy showing how those greenhouse gas emission targets would be achieved through alternative development patterns, infrastructure, or additional transportation measures or policies." But then (H)(iv) says that the MPO "may" include an alternative development pattern for the region." The first reference seems to require the alternative development pattern. The second reference seems to make it permissive. I think we've always talked about the APS including an alternative development pattern. So I suggest deleting (ii) in its entirety (or replacing with language described in #3 below).

3. Section 65080(b)(2)(H)(ii): In addition to the problem noted in #2, the reference to "subparagraphs (B) to (F), inclusive" in (H)(ii) is confusing. Only subsection (iii) of Subparagraph (B) applies to the APS. Subparagraph (C) provides that in the SCAG region, a subregional council of governments and the county transportation commission may work together to prepare the SCS. Subparagraphs (D) and (E) are about public participation and Subparagraph (F) is about considering spheres of influence. So I would suggest replacing 65080(b)(2)(H)(ii) with:

1 SB 375 (Steinberg) makes changes to regional transportation planning, housing element law, and CEQA. Please see the paper prepared by Whit Manley on the changes to CEQA for this Spring Conference 2009. Please see the paper prepared by Barbara Kautz on changes to the housing element law prepared for the February 2009 CLE seminar.

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(ii) Subsection (iii) of Subparagraph B and subparagraphs (C) to (E), inclusive shall apply to the development of an alternative planning strategy.

4. Section 65080(b)(2)(H)(iii): delete "most" before "practicable."

5. Section 65080(b)(2)(H)(v): At the end of the sentence, change "whether a project may have an environmental effect" to "whether a project may have a significant adverse impact on the environment."

6. Section 65080(b)(2)(I)(ii): Delete the last sentence and replace with the following:

"The state board shall accept or reject the metropolitan planning organization's determination within 60 days of the date the metropolitan planning organization submitted the sustainable communities strategy or an alternative planning strategy to the board for review."

7. Section 65080(b)(2)(J): In the first sentence, add "for the review" before "as provided by subparagraph (I)" and add "review" before "state approval."

8. Section 65588(b): HCD has interpreted the 120 day time limit to apply to the 4th housing element revision (see "SB 375 Due Dates for Housing Element Update" dated October 24, 2008). This interpretation contradicts 65588(e)(7) whicThe h is an exception to the applicability of the 120 day penalty. I'm not sure that legislation is required but we need to clarify up HCD's interpretation of this requirement.

9. Section 65588(f): This is the definition of "planning period.” It works for most of the housing element law but does not work for Section 65584 – regional need determination. Proposal: change “planning period” in Section 65584 to “projection period.”

10. Section 65583(c)(1)(B): SB 375 added the last sentence: “The identification of sites shall include all components specified in subdivision (b) of Section 65583.2.” The local government community objective to this sentence and carried on a dialogue with the housing advocates about changing it. The changes did not make it into the bill. Based upon Julie Snyder’s email of August 28, 2008, we suggest that the sentence be amended to read:

“The identification of sites shall include the components specified in paragraphs (1) to (3) inclusive of subdivision (b) of Section 65583.2.”

10. We are interested in affording the CEQA streamlining provided in Public Resources Code 21596 to a project that is consistent with a general plan that is consistent with the SCS/APS. However, we will not ask for this amendment unless other parties suggest substantive amendments to the CEQA provisions of SB 375.

The first hearing on the bill is expected on April 21, 2009.

• RTP Guidelines: The California Transportation Commission is required to maintain guidelines for travel demand models used in the development of regional transportation plans by MPOs. The guidelines must include a variety of subjects including “the relationship between land use

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density and household vehicle ownership and vehicle miles traveled in a way that is consistent with statistical research.”2 The RTP Guidelines were most recently amended in 2007. The California Transportation Commission has announced that the process to update the Guidelines to account for changes made to the law by SB 375, will begin in the summer of 2009. The law requires the CTC to convene an advisory panel comprised of a wide range of interest groups, including the local government community. The current version of the RTP Guidelines can be found at: http://www.catc.ca.gov/programs/rtp/2007_RTP_Guidelines.pdf The addendum can be found at: http://www.catc.ca.gov/programs/rtp/Adopted_Addendum_2007_RTP_Guidelines.pdf

• RTAC: SB 375 established the Regional Targets Advisory Committee (RTAC) and charged it with recommending factors to be considered and methodologies to be used for setting greenhouse gas emission reduction targets for the affected region. The RTAC is required to submit the report with its recommendations to the Air Resources Board by September 30, 2009. The ARB must release draft targets for each region no later than June 30, 2010. The RTAC began meeting in January 2009 and continues to meet. The diverse group of RTAC members is having some difficulty in agreeing the factors to be considered and methodologies to be used. Additional information about the work of the RTAC can be found at: http://www.arb.ca.gov/cc/sb375/rtac/rtac.htm

• RHNA and SCS: SB 375 requires each region’s regional housing allocation plan to be consistent with the MPO’s SCS. The Department of Housing and Community Development is concerned that additional changes need to be made to the housing element law to fully coordinate regional transportation planning and housing planning. In addition, there is some indication that the timelines included in SB 375 are not appropriate for the SANDAG region. Changes will be required to correct the scheduling of the SANDAG SCS and regional housing allocation plan. These changes will probably be included in SB 575 (Steinberg).

• Housing Element Annual Report: Government Section 65400 requires each local government to submit an annual report to OPR and HCD that summarizes the status of the general plan and progress in its implementation; and the progress in meeting its share of the regional housing needs determined pursuant to Section 65584 and local efforts to remove governmental constraints to the maintenance, improvement, and development of housing pursuant to paragraph (3) of subdivision (c) of Section 65583. The housing element portion of the report is required to be prepared through the use of forms and definitions adopted by HCD. SB 375 added language to this section to require a section in the annual report that describes the actions taken by the local government towards completion of the programs and status of the local government’s compliance with the deadlines in it housing element.

2 Government Code 14522.1

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http://www.catc.ca.gov/programs/rtp/2007_RTP_Guidelines.pdf

http://www.arb.ca.gov/cc/sb375/rtac/rtac.htm

HCD has distributed a draft of the “forms and definitions” that a local government is required to use to submit the housing element portion of the annual report. The League of California Cities took strong exception to the draft asserting that the “Guidelines” went far beyond the authority given to HCD to adopt “forms and definitions;” and objecting to requirements to submit information that is not within the control or knowledge of local governments. It is not clear at the time this paper is being updated when HCD will distribute a second draft of the “forms and definitions.”

• Climate change and housing element programs: In February 2009, HCD adopted a document entitled “Housing Element Programs and Policies Addressing Climate Change.” The intent of the document is to suggest strategies and programs that benefit housing supply, affordability, and energy and climate objectives. The document can be found at: http://hcd.ca.gov/hpd/HE_PoliciesProgramsAddressingClimateChange.pdf

The Historical Context of SB 375

The Global Warming Solutions Act of 2006 (“AB 32”)3 requires the State of California to reduce greenhouse gas (GHG) emissions to 1990 levels no later than 2020. AB 32 gave the California Air Resources Board (ARB) the authority to monitor and regulate sources of greenhouse gases in order to reach this goal.4 More specifically, the ARB has the authority to reduce GHG emissions from automobiles and light trucks by adopting regulations making the connection between land use development patterns, proximity to transit, vehicles miles traveled, and GHG emissions. Automobiles and light trucks contribute 30% of the GHG emissions in California. In 1990, GHG emissions from automobiles and light trucks were 108 million metric tons. By 2004, these emissions had increased to 135 million metric tons. GHG emissions from automobiles and light trucks will be substantially reduced by new vehicle technology and by the increased use of low carbon fuel.

For the moment, SB 375 takes the place of ARB regulations. 5 The legislation is based upon the premise that “it will be necessary to achieve significant additional greenhouse gas reductions from changed land use patterns and improved transportation. Without improved land use and transportation policy, California will not be able to achieve the goals of AB 32.”6

Summary of SB 375 – Transportation and Land Use Policy Connection

SB 375 uses regional transportation plans developed by metropolitan planning organizations (MPO) to “improve land use and transportation policy.” Under the new law, ARB will develop GHG emissions reductions targets for each region covered by a metropolitan planning organization. Each metropolitan

3 Health & Safety Code 38500 et seq. 4 Health & Safety Code 38500. 5 SB 375 does not reduce the authority of the ARB under AB 32 to adopt regulations that require local land use decisions to reduce greenhouse gas emissions by a certain targeted amounts. 6 Chapter 728 2008 Statutes Section 1(c) [uncodified]

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planning organization is required to adopt a “sustainable communities strategy” (SCS) which seeks to achieve those targets. Streamlined CEQA processing is provided for development projects (approved by cities and counties) that are consistent with the SCS. The Council of Government’s (COG) regional housing allocation plan must be consistent with the SCS. Consistency between city and county general plans and the SCS is not required.

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Metropolitan Planning Organizations (MPO)

Transportation planning in California is an interesting combination of Federal and State law. Federal transportation law requires that a metropolitan planning organization be created in each urbanized area. In California, there are 17 metropolitan planning organizations covering 37 counties representing 97.7% of the statewide population. The four largest MPOs are:

• The Southern California Association of Governments (SCAG )(Los Angeles, Ventura, San Bernardino and Riverside Counties);

• The San Diego Association of Governments (SANDAG) (San Diego County);

• The Sacramento Association of Governments (SACOG) (Sacramento); and

• The Metropolitan Transportation Commission (MTC) ( the nine San Francisco Bay Area Counties).7

An MPO is “the policy board of an organization created and designated to carry out metropolitan transportation planning.”8 It is a regional organization governed by locally elected officials that is a creature of federal law: it is the policy of the Federal Highway Administration Act (FHA) that an MPO be designated for each urbanized area to carry out a continuing, cooperative, and comprehensive multimodal transportation planning process. The process must include the development of a regional transportation plan (RTP) and a transportation improvement program (TIP) that “encourages and promotes the safe and efficient development, management and operation of surface transportation systems….”9 An MPO is the conduit for federal and state funds for region‐wide transportation projects.10 While taking into consideration the federal law, the state law identifies what must be included in the regional transportation plan (RTP).11 SB 375 added the SCS to the list of what must be included in the RTP.

The Regional Transportation Plan Two requirements of federal law significantly impact the contents of the RTP:

• The FHA requires that transportation improvements that included in a RTP must be “fiscally constrained; and

• The Clean Air Act requires the MPO to make a “conformity” determination when it adopts the RTP.

7 With the exception of MTC, each of the other major MPOs is also the Councils of Governments for its region. In the Bay Area, duties are split between ABAG (the COG) and MTC (the MPO). 8 23 U.S.C. 134; 28 CFR 450.104 9 23 CFR 450.300 10 23 CFR 450.308 11 Government Code 65080.

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“Fiscally constrained….”

The federal law requires that the metropolitan planning process include the development of a transportation plan addressing no less than a 20‐year planning horizon. The plan is required to include transportation improvement projects (TIP) for the region and both long‐range and short‐range strategies/actions that lead to the development of an integrated multimodal transportation system.12 A TIP is a prioritized listing of transportation projects covering a period of four years that is developed and formally adopted by an MPO as part of the planning process.13 It is required for projects to be eligible for federal and state funds. The TIP may include a project only if full funding can reasonably be anticipated to be available for the project within the time period contemplated for completion of the project. The transportation improvement projects must be “financially constrained.” This restriction means that the plan and the TIP includes sufficient financial information for demonstrating that projects in the Plan and in the TIP can be implemented using committed, available, or reasonably available revenue sources. Additionally, projects in air quality nonattainment and maintenance areas can be included in the first two years of the TIP only if funds are “available” or “committed.” 14

“Conformity determination…”

The MPO must review and update the transportation plan at least every four years in air quality nonattainment and maintenance areas and at least every 5 years in attainment areas.15 The required contents of the plan are set forth in detail in the federal law.16 When an MPO in a non‐attainment area adopts the Plan, it must make a “conformity determination” in accordance with the Clean Air Act and the EPA transportation conformity regulations.17 The purpose of the “conformity determination” is to ensure that federal funding and approval are given to transportation plans, programs, and projects that are consistent with the air quality goals established by a State Implementation Plan. “Conformity” means that transportation activities will not cause new air quality violations, worsen existing violations, or delay timely attainment of air quality goals.18

A conformity determination must be based upon “the most recent planning assumptions”19 in force at the time the conformity analysis begins. The determination must satisfy the requirements of the law using the planning assumptions available at the time the conformity analysis begins. Assumptions must be derived from the estimates of current and future population, employment, travel, and congestion most recently developed by the MPO. 20 In addition, the transportation plan must “protect and enhance

12 23 CFR 450.322 13 23 CFR 450.324 14 23 CFR 450.104. 15 23 CFR 450.322. A “non‐attainment area” means any geographic region of the United States that has been designated by the EPA as a nonattainment area under section 107 of the Clean Air Act for any pollutants for which NAAQS exists [23 CFR 450.104]. 16 23 U.S.C. 134(h); 23 CFR 450.322(f) 17 23 CFR 450.322(l); 40 CFR 93.104 18 23 CFR 450.104 19 See, also, Government Code 65080(b)(2)(B). 20 23 CFR 93.110. .

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the environment, promote energy conservation, improve the quality of life, and promote consistency between transportation improvements and State and local planned growth and economic development patterns.”21

I. SB 375 and the RTP

Each of the 17 MPOs must develop a regional strategy to reduce greenhouse gas emissions from automobiles and light trucks. If the strategy is part of the RTP, it is called a sustainable communities strategy (SCS). If the strategy is not part of the RTP, it is called an alternative planning strategy (APS). The SCS/APS is at the intersection of land use and transportation planning.

GHG Emission Reduction Targets

By September 30, 2010, the ARB must provide each region covered by a metropolitan planning organization with greenhouse gas emission reduction targets for the automobile and light truck sector for 2020 and 2035. Establishing a regional target requires compliance with the following procedure:

• By January 31, 2009: ARB appoints a Regional Targets Advisory Committee (RTAC) to recommend factors to be considered and methodologies to be used for setting reduction targets. The Committee is comprised of representatives of a wide variety of private and public sector organizations.22 The RTAC’s report is due to the ARB no later than September 30, 2009.

• Prior to setting the targets for a region, the ARB is required to exchange technical information with the MPO and the affected air district. The MPO may recommend a target for the region. The ARB must hold at least one public workshop within the region after receipt of the report from the RTAC.

• By June 30, 2010: ARB releases draft targets for each region.23

Achieving the Targets: The Sustainable Communities Strategy

Each MPO must prepare a sustainable communities strategy as part of its regional transportation plan. A regional transportation plan is directed at “achieving a coordinated and balanced regional transportation system.” It must be an “internally consistent” document which includes a policy element; an action element; and a financial element.24 The “policy element” describes the types of projects and programs that will be encouraged and funded over the life of the plan. The “action element” is a more specific listing of those projects. The “financial element” describes the funding available for the specific transportation projects in the region.

21 23 U.S.C. 134(h)(1)(E). 22 Membership on the RTAC: 23 The ARB is required to update the targets every 8 years and may revise its targets every 4 years (Government Code 65080(b)(2)(A)(iv). 24 Government Code 65080

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SB 375 added the SCS to this list of mandatory elements. Since the RTP must be internally consistent, the projects receiving transportation funding pursuant to the RTP must be consistent with the SCS. Therefore, although a local general plan need not be consistent with the SCS, transportation funding will only be available for those projects which are consistent with the SCS, including the land use pattern and housing allocation found in the SCS.

Because the RTP is a creature of federal law, the SCS is subject to several requirements of federal law.25 An SCS will:

• Identify the general location of uses, residential densities, and building intensities within the region;26

• Identify areas within the region sufficient to house all the population of the region over the course of the twenty‐year planning period;

• Identify areas within the region sufficient to house an eight‐year projection of the regional housing need for the region;27

• Identify a transportation network to service the transportation needs of the region;

• Gather and consider the best practically available scientific information regarding resource areas and farmland in the region;28 and

• Set forth a forecasted development pattern for the region, which, when integrated with the transportation network, and other transportation measures and policies, will reduce GHG emissions from automobiles and light trucks to achieve, if feasible,29 the GHG emission reductions target approved by the ARB.

The two provisions of federal law discussed above may make it difficult for an SCS to achieve the regional targets : (1) The Clean Air Act’s “conformity determination” requires that the RTP is based upon “current planning assumptions.” “Current planning assumptions” must be based upon the most “recent planning assumptions.” In most cases, recent planning assumptions will be found in local city and county general plans. This means that an MPO may not be able to adopt an SCS which calls for high density development in urbanized areas near public transportation if that type of development is not “assumed” by local general plans. However, the SCS must also include a plan to achieve the region’s 8‐year housing goals under the housing element law. Local agencies’ “planning assumptions” will change as they adopt housing elements to plan for their share of the regional housing need. (2) The FHA’s “financial constraint” requirement restricts the “the transportation network” in the SCS. This means

25 See discussion of these requirements infra. 26 A SCS/APS do not regulate the use of land. Government Code 65080(b)(2)(J). 27 A MPO is required to consider adopted spheres of influence when preparing an SCS. Government Code 65080(b)(2)(F). 28 See definitions of “resource areas” and “farmland” in Section 65080.01. 29 “Feasible” is defined in Section 65080.01(c).

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that an SCS cannot include a transportation network that plans for public transportation for which funding is not available.

When the MPO adopts the SCS, it must make a finding quantifying the reduction in GHG emissions projected to be achieved by the SCS. If the SCS does not achieve the targeted reductions in GHG emissions then the MPO must set forth the difference between the amount that the SCS would reduce GHG emissions and the target for the region.

Achieving the Targets: The Alternative Planning Strategy

If an SCS is unable to achieve GHG emissions reductions target,30 an MPO must prepare an Alternative Planning Strategy (APS) which demonstrates how the GHG emissions target would be achieved through alternative development patterns, infrastructure, or additional transportation measures or policies.31 The APS is not part of the RTP. This means that neither the “conformity determination” nor the “fiscal constraint” requirements of federal law apply to the APS. In addition, the contents do not need to be “internally consistent” with the other elements of the RTP. The federal law applicable to regional transportation plans continues to apply “except to the extent that compliance will prevent achievement of the GHG emission reduction targets.”32 The APS must identify the principal impediments to achieving the targets within the SCS. It may include an alternative development pattern for the region that includes each of the components required to be included in the SCS. Finally, the APS must describe how the development pattern, measures and policies in the APS are the most “practicable” choices for achievement of the targets.33

Developing the SCS/APS: Local Government Participation

In an attempt to avoid some of the problems that have occurred during the RHNA allocation process, SB 375 requires an MPO to conduct at least two informational meetings in each county within the region for members of boards of supervisors and city councils on the SCS and APS. One informational meeting in each county will suffice if it is attended by representatives of the county board of supervisors and the city council members representing a majority of the cities representing a majority of the population in the incorporated areas of that county. At the meeting the MPO is directed to present a draft of the SCS (or APS) and solicit and consider the input and recommendations of the locally elected officials.34

Developing the SCS/APS: Public Participation

An MPO must adopt a public participation plan for development of the SCS or APS that includes: (1) outreach efforts to encourage active participation by a broad range of stakeholder groups; (2) consultation with congestion management agencies, transportation agencies, and transportation

30 Note that an MPO is not required to adopt an SCS if it is clear that the SCS will not achieve the regional GHG emission reduction targets. In such a case, the MPO can begin with the APS. 31 Government Code 65080(b)(2)(H). 32 Government Code 65080(b)(2)(H)(iv). 33 Government Code 65080(b)(2)(H)(iii). 34 Government Code 65080(b)(2)(D).

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commissions; (3) one workshop in each county; three workshops in counties with a population of 500,000 or larger; to provide the public with a clear understanding of the issues and policy choices; (4) preparation and circulation of a draft SCS/APS not less than 55 days before adoption of a final RTP; (5) at least three public hearings on the draft SCS/APS. (A single‐county MPO need only hold two public hearings); and (6) a process for enabling members of the public to request receipt of notices, information, and updates.

Air Resources Board Review of SCS and APS

The ARB is given limited review authority over the SCS and APS. After adoption, the MPO must submit the SCS/APS to the ARB for review, including the quantification of the GHG emissions reduction the strategy would achieve and the technical methodology used to obtain that result. Review by the ARB is limited to “acceptance or rejection of the…determination that the strategy submitted would, if implemented, achieve the greenhouse gas emission reduction targets established by the state board.”35 The Board determines that the strategy submitted would not achieve the targets, then the MPO must revise its Strategy or adopt an APS and submit/re‐submit the Strategy. To be in compliance with SB 375, the MPO must receive acceptance of its determination in either the SCS or the APS.36

Giving the ARB limited review was an attempt to avoid the difficulties inherent in the housing element review process.37 Prior to starting the public participation process, the MPO is required to submit a description to the ARB of the technical methodology it intends to use to estimate the GHG emissions from its SCS/APS. The ARB is required to respond to the MPO in a timely manner. The response must include a specific description of any aspects of the methodology it concludes will not yield accurate estimates of GHG emissions and suggest remedies. If an MPO can work together with ARB to come up with an acceptable technical methodology, there is less likelihood that the ARB will not accept the MPO’s ultimate conclusion.38

Timing of Adoption

An MPO in a non‐attainment region is required to adopt its RTP every four years. The SCS will be adopted as part of its RTP. An MPO that is not in a non‐attainment region is required to adopt its RTP not less than every five years. SB 375 allows such an MPO to elect to adopt the RTP every four years. The purpose of such an election would be to take advantage of the provisions of SB 375 that allow for an 8‐year planning period for a housing element.39

35 Government Code 65080(b)(2)(I)(ii). 36 Government Code 65080(b)(2)(I)(iii). 37 Note that SB 375 specifically states: “Neither a sustainable communities strategy nor an alternative planning strategy…be subject to state approval.” Government Code 65080(b)(2)(J). 38 Government Code 65080(b)(2)(I)(i). 39 Government Coode 65080(b)(2)(L).

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Financial Provisions

Because an RTP must be internally consistent, the SCS must be consistent with the financial element and the program element which list projects and their eligibility for funding. These projects must be consistent with the SCS. SB 375 provides for some exceptions to that general rule: Projects programmed for funding on or before December 31, 2011 that (1) are contained in the 2007 or 2009 Federal STIP; (2) are funded pursuant to Proposition 1B; (3) were specifically listed in a ballot measure prior to December 31, 2008 approving a sales tax increase for the project.

An MPO is directed to consider financial incentives for cities and counties that have resource areas or farmland as defined in Section 65080.01. The MPO is required to consider financial assistance for counties to address countywide service responsibilities in counties that contribute towards the targets by implementing policies for growth to occur within cities40.

Interesting Legal and Strategic Issues

This section summarizes provisions of SB 375 which may have special interest to city attorneys and their city councils:

Although SB 375 clearly states that neither the SCS nor the APS “regulates the use of land,” the landscape is actually not quite that clear. The first four points address this issue.

1. Although SB 375 clearly states that neither the SCS nor the APS “regulates the use of land;” and although SB 375 does not require local general plans to be consistent with the SCS or APS; there’s nothing in SB 375 that would prevent the Air Resources Board to adopt regulations which would require, for example, consistency between a general plan and the SCS, under the authority granted in AB 32. Therefore, it is very important for locally elected officials and their staff to participate actively in the development of the SCS/APS that applies to their region. Although a city or county may not think it needs to pay attention to the development of the SCS/APS because it will not have a direct impact on it, future regulatory or legislative activity may not give the city or county a choice. Early drafts of SB 375 required consistency between local general plans and the SCS.

2. An RTP must be based upon “current planning assumptions” under both the Clean Air Act and the state law. This requirement is cited to support the position that local general plans need not conform to the SCS. However, it should be noted that the SCS must also include a plan for the region’s housing needs. And the regional housing allocation plan must conform to the SCS. Local agencies’ housing elements and conforming zoning adopted to plan for their RHNA may be the way that local general plans are required, de facto, to be consistent with the SCS.

3. Transportation funding decisions in an RTP must be consistent with the SCS. A city’s construction of some transportation improvements may need to be consistent with its general plan. Therefore, in order for a city to receive funding from the MPO, it may need to bring its

40 Government Code 65080(b)(4)(C)

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general plan into conformity with the SCS. Note that this does not apply to an APS because it is not adopted as part of the RTP (which is required to be internally consistent).

4. SB 732(Steinberg) was also adopted in the 2008 legislative session. SB 732 establishes the Strategic Growth Council. The Council consists of the Director of OPR; the Secretary of the Resources Agency; the Secretary of Business, Transportation and Housing; the Secretary of Health & Human Services and one member of the public to be appointed by the Governor. 41 $500,000 has been appropriated to the Council which will be used in part to “provide, fund, and distribute data and information to local governments that will assist in developing and planning sustainable communities.”42 The funding source is Proposition B bonds. In order to be eligible for the money, the local government’s project or plan must “reduce on a permanent basis that is feasible, greenhouse gas emissions consistent with…any applicable regional plan.”43 This means that a local government’s general plan must be consistent with the SCS/APS to be eligible for the funding. In addition, the State Attorney General acting independently of this legislation to enforce the reduction of greenhouse gas emissions through general plan policies.44

5. The SCS seeks to achieve the ARB’s regional targets for the reduction of greenhouse gas emissions from cars and light trucks for the region covered by the SCS. The MPO may recommend to the ARB a target for the region (65080(b)(2)(A)(ii)). Locally elected officials that are on the board of the MPO should seriously consider making such a recommendation in order to make sure that the target is reasonable.

6. Before the ARB establishes a target for the region, the state board is required to take into account greenhouse gas emission reductions that will be achieved by improved vehicle emission standards, changes in fuel composition, and other measures it has approved to reduce greenhouse gas emissions in the region; and prospective measures the state board plans to adopt to reduce greenhouse gas emissions from “sources” in the region (Health & Safety Code 38505(i)). This provision of SB 375 was added at the request of the local government community to make it more likely that the target for the region would be reasonable. MPO representatives should pay attention to the ARB process when adopting targets to make sure this section of SB 375 is followed (65080(b)(2)(A)(iii)).

7. A SCS is subject to “the requirements of Part 450 of Title 23 of, and Part 93 of Title 40 of, the Code of Federal Regulations. In particular, attention should be paid to (a) 23 CFR 450.104 (definitions); (b) 23 CFR 450.308 (MPOs and transportation funding); (c) 23 CFR 450.322 (development and content of metropolitan transportation plan); (d) 23 CFR 450.324 (development and content of the transportation improvement program – TIP); (e) 40 CFR 93.100 (implementation of Clean Air Act in federal actions); (f) 40 CFR 93.110 (making Clean Air

41 Government Code 75121. 42 Government Code 75125(c) 43 Government Code 75126(b)(2). 44 See, for example, Memorandum of Agreement between the City of Stockton and the People of the State of California dated September 10, 2008.

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conformity determination in federal actions). It is this last reference that is the source for the language in SB 375 which says that a SCS is “subject to [federal law], including the requirement to utilize the most recent planning assumptions considering local general plans and other factors” (65080(b)(2)(B)). The Clean Air Act requires that the conformity requirement be based upon “current planning assumptions.” A conformity finding is unacceptable if it is based upon planning assumptions which would keep the air clean but which will never occur because they are dependent upon, for example, the extension of public transit. It is important to be aware that the SCS development pattern must be based upon “current planning assumptions” only because of the requirement that the Clean Air Act imposes on the adoption of a regional transportation plan. It is federal, not state law. It relates to maintaining air quality; not local land use principles derived from the police power. It is not based upon local land use autonomy. The APS, which is not a part of the RTP, is not required to be based on “current planning assumptions.”

8. The MPO’s quantification of the difference, if any, between the regional target and the reduction achieved by the SCS, if implemented, must be based on substantial evidence in the record. Likewise, the ARB’s review of the SCS to approve or disapprove that determination must be based on substantial evidence.

9. An SCS must set forth a forecasted development pattern which, when integrated with the transportation network, and other transportation measures and policies, will reduce the GHG emissions from automobiles and light trucks to achieve, if there is a “feasible” way to do so, the target established by the ARB. “Feasible” is defined in SB 375 almost identically to the definition of “feasible” in CEQA: means capable of being accomplished in a successful manner within a reasonable period of time, taking into account economic, environmental, legal, social, and technological factors (65080.01(c)). It is this requirement of feasibility that makes many MPO/COG directors anticipate that an SCS will not be able to achieve the ARB target. This is one of the differences between an SCS and an APS: The APS must describe how the GHG emission reduction targets would be achieved by the alternative planning strategy, and why the development pattern, measures, and policies in the alternative planning strategy are the most “practicable” choices for achievement of the targets (65080(b)(2)(H)(iv)). A much lower bar.

10. The authority and powers of the regional air quality control districts are worth reviewing. Under existing authority, for example, an Air District may consider an indirect source rule (ISR) that regulates the construction and long‐term transportation impacts of land development and requires mitigation or payments in lieu for development which does not meet established standards. Of particular concern could be development which is deemed to increase automobile travel and hence vehicle emissions. An air district may also seek to limit development in certain areas so as to reduce exposure to noxious particulate matter and other localized air toxins.

11. Neither a COG nor an MPO is eligible to be reimbursed by the State pursuant to Article XIIIB, section 6 of the State Constitution. This means that although SB 375 clearly imposes a

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“mandate” on the MPO, the State will not reimburse the MPO for its costs in developing these plans. In all likelihood, an MPO will look to its member cities and counties to fund the effort through the assessment of a fee. The State and some MPOs argue that cities and counties should not object to such a fee because it can be passed on to developers pursuant to Government Code 65041 which allows a planning agency to impose fees to recoup the cost of preparing planning documents. Thought should be given to whether (1) this authority would be applicable in this case; and (2) if applicable, a reasonable means for establishing the amount of the fee.

Conclusion

Reduction of greenhouse gas emissions in an effort to combat global warming is one of the highest priorities of the State. There are many in Sacramento who support consistency between local general plans and SB 375. This may be the time to recommend that amendments to local general plans be adopted which ensure that your city or county is doing its part in this statewide effort. The more progress that is made locally, the less likely the State will be to mandate action.

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California Metropolitan Planning Organizations45

Metropolitan Planning Organization Counties

Association of Monterey Bay Area Governments Monterey, San Benito, Santa Cruz

Butte County Association of Governments Butte *

Council of Fresno County of Governments Fresno *

Kings County Association of Governments Kings *

Kern Council of Governments Kern *

Madera County Transportation Commission Madera *

Merced County Association of Governments Merced *

Metropolitan Transportation Commission/

Association of Bay Area Governments

Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano, Sonoma **

Sacramento Area Council of Governments El Dorado, Placer, Sacramento, Sutter, Yolo, Yuba

San Diego Association of Governments San Diego

San Joaquin Council of Governments San Joaquin *

San Luis Obispo Council of Governments San Luis Obispo

Santa Barbara County Association of Governments Santa Barbara

Shasta County Regional Transportation Planning Agency

Shasta

Southern California Association of Governments Imperial, Los Angeles, Orange, Riverside, San Bernardino, Ventura ***

Stanislaus Council of Governments Stanislaus *

Tulare County Association of Governments Tulare *

45 This chart is taken from the paper prepared by the California State Association of Counties entitled “SB 375 (Steinberg): Addressing Greenhouse Gas Emissions from the Transportation Sector via Regional Transportation Plans.”

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KEY: *TWO OR MORE OF THESE COUNTIES MAY WORK TOGETHER TO DEVELOP REGIONAL GOALS AND/OR MULTIREGIONAL SUSTAINABLE COMMUNITIES STRATEGY OR ALTERNATIVE PLANNING STRATEGY. IF GOALS ARE ADOPTED, THEN INDIVIDUAL SCS MUST BE CONSISTENT WITH GOALS. SECTION 65080(B)(2)(M) **IN THE BAY AREA, THE RESPONSIBILITY FOR THE SCS/APS IS SPLIT BETWEEN ABAG AND MTC. ABAG’S RESPONSIBILITIES ARE LISTED AT SECTION 65080(B)(2)(A)(I), (II), (III), (V), (VI). MTC’S RESPONSIBILITIES ARE LISTED AT SECTION 65080(B)(2)(A)(VIII). JOINT RESPONSIBILITY IS SHARED FOR THE TASK DESCRIBED AT SECTION 65080(B)(2)(A)(VII). ***IN THE SCAG REGION, SUB-REGIONS MAY ADOPT AN SCS FOR INCLUSION IN THE SCS ADOPTED BY SCAG. SECTION 65080(B)(2)(C).

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TIMELINE FOR THE IMPLEMENTATION OF SB 375

December 31, 2008 Projects specifically listed on a local ballot measure prior to this date are exempt from the requirement to be consistent with the SCS.

January 1, 2009 CARB adopts Scoping Plan, which will include the total reduction of carbon in million metric tons from transportation planning.

January 31, 2009 CARB shall appoint a Regional Targets Advisory Committee (RTAC) to recommend factors to be considered and methodologies to be used for setting reduction targets.

June 1, 2009 MPOs in attainment areas and Regional Transportation Planning Agencies not within an MPO may elect to opt into the 8 year housing element planning cycle.

September 30, 2009 RTAC must report its recommendations to the CARB.

June 30, 2010 CARB must provide draft targets for each region to review.

September 30, 2010 CARB must provide each affected region with a GHG emissions reductions target.

October 1, 2010 Beginning this date, MPOs updating their RTP will begin 8 year housing element planning cycle that includes SCS‐APS and alignment for the RHNA process.

December 31, 2010 Transportation sales tax authorities need not change allocations approved by voters for categories of projects in a sales tax measure approved by voters prior to this date.

December 31, 2011 Federal Statewide Transportation Improvement Projects programmed before this date are exempt from the requirement to be consistent with the SCS.

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ACRONYMS

AB 32 The Global Warming Solutions Act of 2006

APS Alternative Planning Strategy

ARB Air Resources Board

Caltrans California Department of Transportation

CARB California Air Resources Board

CEQA California Environmental Quality Act

CTC California Transportation Commission

COG Council of Government

GHG Greenhouse Gas

HCD California Housing and Community Development Department

MPO Metropolitan Planning Organization

RHNA Regional Housing Needs Allocation

RTAC Regional Targets Advisory Committee

RTP Regional Transportation Plan

SANDAG San Diego Association of Governments

SCEA Sustainable Communities Environmental Assessment

SCS Sustainable Communities Strategy

STIP State Transportation Improvement Program

TIP Regional Transportation Improvement Program

TPP Transit Priority Project

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CEQA Streamlining and Climate Change

Prepared by Whit Manley Remy, Thomas, Moose and Manley LLP

Sacramento, CA

April 2009 The enactment of Senate Bill 97 in 2007 made it increasingly clear that cities and counties must consider greenhouse gas (“GHG”) emissions and climate change as part of the CEQA process. Indeed, in issuing preliminary, proposed amendments to the CEQA Guidelines in January 2009, the Governor’s Office of Planning and Research (OPR) stated that “greenhouse gas emissions and their effects are appropriate subjects for CEQA analysis.” (Citing Pub. Resources Code, § 21083.05, adopted as part of SB 97).) It appears to be only a matter of time before a Court of Appeal issues a published decision confirming this conclusion. There is little adopted guidance regarding how local agencies should incorporate these issues into their CEQA documents, much less how they might do so in an efficient manner. In June 2008, OPR issued a “technical advisory” stating that lead agencies should: (1) identify and quantify the greenhouse gas emissions that could result from a proposed project; (2) analyze the effects of those emissions and determine whether the effect is significant; and (3) if the impact is significant, identify feasible mitigation measures or alternatives that will reduce the impact below a level of significance. These recommendations indicate what the lead agency should do, but provide little guidance regarding how the lead agency should go about it. SB 97 directs OPR and the Resources Agency to develop and adopt amendments to the State CEQA Guidelines by January 1, 2010, and OPR has devoted significant energy to this effort. In January 2009, OPR released preliminary draft amendments. On April 13, 2009, OPR transmitted draft amendments to the Resources Agency (available on the web at http://opr.ca.gov/index.php). Finally, Senate Bill 375, enacted in 2008, provides agencies with another potential means of streamlining CEQA review of GHG and climate change, at least in the longer term, and for certain types of projects. GHG and climate change pose a number of questions that cannot easily be addressed in a conventional, project-specific CEQA analysis. For example:

• What sort of “significance threshold” should the lead agency use in

determining whether a proposed project’s contribution to GHG emissions is “cumulatively considerable”? Must the agency use a “zero emissions” threshold, as some have advocated? In October 2008, the California Air

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Resources Board (“CARB”) issued preliminary draft guidance suggesting that a zero-emissions threshold is not required; the preliminary guidance instead proposes one approach for industrial projects, and another approach for commercial/residential projects. The preliminary draft emphasizes performance standards, rather than a numeric threshold. (For a copy, see http://www.arb.ca.gov/cc/localgov/ceqa/ceqa.htm.) Comments submitted on the preliminary draft include recommendations from environmental advocates to adhere to a zero-emission threshold. CARB staff initially proposed to release its recommendations regarding thresholds in December 2008. CARB staff then changed its anticipated release date to March 2009. At present, however, the recommendations have not been released.

Similarly, OPR has proposed new CEQA Guidelines section 15064.4, entitled

“Determining the Significance of Impacts from Greenhouse Gas Emissions. The proposed section states that the lead agency “shall have discretion, in the context of a particular project, whether to” use a model to quantify GHG emissions, or “[r]ely on a qualitative analysis or performance based standards.” (Proposed CEQA Guidelines, § 15064.4, subd. (a)(1)-(2).)

• If the lead agency determines that a project’s contribution to GHG emissions is

cumulatively considerable, how should the agency go about identifying mitigation measures for such impacts, and what standards should the agency use to determine whether those impacts have been substantially lessened or avoided? CARB staff’s preliminary draft guidance, by emphasizing performance standards, suggests one possible approach.

• If a “zero emissions” threshold is used, must the agency consider and adopt

every feasible mitigation measure to make the project “carbon neutral”? How would the agency go about demonstrating the infeasibility of a goal of carbon neutrality? Even then, is carbon neutrality enough? Senate Bills 32 and 97 establish a legislative goal of reducing state-wide emissions to 1990 levels. Must a project more than offset its own emissions if it is to contribute to the state-wide reduction in emissions that the legislation calls for?

• Does the obligation to consider GHG/climate change, and to attain carbon

neutrality (or more), mean that every negative declaration or categorical exemption is vulnerable to attack if the lead agency does not incorporate sufficient mitigation measures to assure carbon neutrality (or more)?

As is often the case, CEQA poses these questions, but does not provide specific guidance regarding how to answer them. Guidance is likely on its way from CARB, OPR and the Resources Agency. In the mean time, the purpose of this memorandum is to identify tools available under CEQA that may provide lead agencies with an opportunity

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to consider and, hopefully, resolve these issues in a way that does not require the agency to revisit them again and again.

1. CEQA Streamlining Devises Climate change represents the ultimate “cumulative impact.” Effects are world-wide. Nor can effects be traced to a particular project. Given the size and scope of the problem, a single project is unlikely to contribute meaningfully to the phenomenon, because no matter how large the GHG emissions of a project, the “denominator” – global GHG emissions -- is so large that it will dwarf the emissions of a single project. The obligation to consider cumulative impacts under CEQA is aimed at this problem. (See, e.g., CEQA Guidelines, § 15130; San Franciscans for Reasonable Growth v. City and County of San Francisco (1989) 209 Cal.App.3d 1502; Whitman v. Board of Supervisors (1979) 88 Cal. App. 3d 397, 408.) CEQA provides a variety of devices available to streamline the environmental review process and avoid redundancy. These devices are particularly well-suited to deal with recurring policy issues, cumulative impacts, and broad planning decisions. As the California Supreme Court recently observed in upholding the “program EIR” prepared for the Cal-Fed program:

An advantage of using a program EIR is that it can “[a]llow the lead agency to consider broad policy alternatives and program wide mitigation measures at an early time when the agency has greater flexibility to deal with basic problems or cumulative impacts.” ([CEQA Guidelines], § 15168, subd. (b)(4).) Accordingly, a program EIR is distinct from a project EIR, which is prepared for a specific project and must examine in detail site-specific considerations. (Id., § 15161.) Program EIR’s are commonly used in conjunction with the process of tiering. [Citation omitted.] Tiering is “the coverage of general matters in broader EIRs (such as on general plans or policy statements) with subsequent narrower EIRs . . . .” ([CEQA Guidelines], § 15385.) Tiering is proper “when it helps a public agency to focus upon the issues ripe for decision at each level of environmental review and in order to exclude duplicative analysis of environmental effects examined in previous environmental impact reports.” (Pub. Resources Code, § 21093, subd. (a); see also [CEQA Guidelines], § 15385, subd. (b).) (In re Bay-Delta Programmatic Environmental Impact Report (2008) 43 Cal.4th 1143, 1169-1170, emphasis in original; see also CEQA Guidelines, §15130, subd. (d) [recognizing that lead agencies may rely on previous

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program EIRs or other large-scale analyses in carrying out the analysis of an individual project’s contribution to cumulative impacts].)

These sorts of devices appear to be well suited to the issue of GHG emissions and climate change. They provide agencies with a means of analyzing the issue of GHG emissions and climate change on a broad, programmatic level, so that the agency does not need to engage in repetitive analysis on a project-specific level. Potential CEQA streamlining devices include:

• Tiering (Pub. Resources Code, §§ 21068.5, 21093-21094; CEQA Guidelines, § 15152).

• Program EIRs (CEQA Guidelines, § 15168). • Projects consistent with planning or zoning (Pub. Resources Code, § 21083.3;

CEQA Guidelines, § 15183). • Streamlining devices enacted as part of SB 375 (Pub. Resources Code, §§

21155.1, subd. (a), 21159.28).

Tiering. The utility of tiering to address GHG emissions may be limited by the Court of Appeal’s decision in Communities for a Better Environment v. California Resources Agency (2002) 103 Cal.App.4th 98, 122-125 (“CBE”). That decision invalidated a portion of CEQA Guidelines section 15152 that identified when a first-tier CEQA document had “adequately addressed” an impact such that the agency did not need to revisit the impact in its second-tier document. Under the invalidated Guideline, the agency had “adequately addressed” the impact in the first-tier document if the agency concluded that all feasible mitigation had been identified, that the impact was significant and unavoidable, and nothing further could be done to address the impact. Under such circumstances, the former Guideline provided that the agency did not need to prepare an EIR simply to disclose the significant and unavoidable impact. In the context of GHG emissions and climate change, the former Guideline would have enabled the lead agency to rely on a negative declaration, notwithstanding the fact that a project made a cumulatively considerable contribution to GHG emissions, an outcome likely to follow from a “zero emission” threshold. The CBE decision raises significant doubts about whether this approach is lawful; at a minimum, the agency would have to revisit, on a project-by-project basis, each proposal’s cumulatively considerable contribution to significant and unavoidable GHG emissions, and adopt a statement of overriding considerations. That strongly implies that the agency would be unable to comply with CEQA by means of a categorical exemption or a negative declaration, forcing the preparation of many more EIRs. (See CEQA Guidelines, §§

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15300.2, subd. (b) [agency cannot rely on categorical exemption where “the cumulative impact of successive projects of the same type in the same place, over time is significant.”]; 15064, subd. (h)(1) [“An EIR must be prepared if the cumulative impact may be significant and the project’s incremental effect, though individually limited, is cumulatively considerable.”].) Program EIRs. Program EIRs represent one type of “tiered” approach. For this reason, they may suffer from the same defect as tiering generally. Nevertheless, once a program EIR has been certified, and an agency considers a project that is consistent with the program, the agency can find that the project is “within the scope” of the program, in which case no further environmental analysis needs to be prepared (subject to the general caveat to consider whether supplemental environmental review is required). (CEQA Guidelines, § 15168, subd. (c).)

In the context of GHG emissions and climate change, a program or ordinance to address this issue, supported by a program EIR, could provide a basis for streamlining subsequent consideration of this issue. To be useful, the program or ordinance would establish measures with which individual projects would have to comply. Project-specific review would then be limited to (1) considering whether the project would have site-specific GHG emissions/climate change impacts that were not examined in the program EIR, (2) applying to the project applicable mitigation measures identified in the program EIR, (3) considering whether “significant new information” triggers the obligation to perform supplemental environmental review. (CEQA Guidelines, § 15168, subd. (c).) The down-side to this approach, obviously, is the extent to which agency resources will be needed to prepare a program EIR and develop and adopt a program or ordinance. In addition, because program EIRs are an example of tiering (In re Bay-Delta Programmatic Environmental Impact Report, supra, 43 Cal.4th at p. 1170), the CBE decision raises questions about how much streamlining would actually occur, given that the agency arguably would still have to adopt a “statement of overriding considerations” at the time the agency approved a project falling within the scope of the program EIR’s analysis. Public Resources Code Section 21083.3. Public Resources Code section 21083.3 provides agencies with an opportunity to adopt General Plan or zoning policies, and then to apply those policies to specific projects that are consistent with the General Plan or zoning ordinance. Under such circumstances, if the impact at issue is not peculiar to the parcel or project, then the particular issues addressed by those policies are statutorily exempt from further CEQA review. Section 21083.3 thus represents a powerful tool to take broad issues out of the purview of CEQA. Because the tool is statutory, it is not subject to exceptions or qualifications that may apply to tiering or -program EIRs. In particular, section 21083.3 provides a streamlining device that is not subject to the limitations of the CBE decision.

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There is one published decision addressing an agency’s reliance on section 21083.3; the case illustrates the potential value of this section as a powerful streamlining device. In that case, the Court held that the City of Turlock properly relied on this section in adopting zoning prohibiting a discount super-store from locating in the city; the Court held the zoning action was exempt from CEQA because it was consistent with General Plan policies aimed at protecting the city’s downtown area, and the city had prepared an EIR in connection with adopting those policies as part of its General Plan. (Wal-Mart Stores v. City of Turlock (2006) 138 Cal.App.4th 273.) The exemption applies to projects that are “consistent” with the development density established by existing zoning, community plan, or general plan policies for which an EIR was certified, except as might be necessary to examine whether there are project-specific significant effects which are peculiar to the project or its site. (Pub. Resources Code, § 21083.3; CEQA Guidelines, § 15183.) “If an impact [that] is not peculiar to the parcel or to the project, has been addressed as a significant effect in the prior EIR, or can be substantially mitigated by the imposition of uniformly applied development policies or standards, . . . then an additional EIR need not be prepared for the project solely on the basis of that impact.” (CEQA Guidelines, §15183, subd. (c).) As this language suggests, in order to qualify for this exemption, applicable “development policies or standards” adopted as part of the previous environmental review process must be applied to the project. (Ibid.) The Guidelines provide the following examples of such policies or standards:

• Parking ordinances

• Public access requirements

• Grading ordinances

• Hillside development ordinances

• Flood plain ordinances

• Habitat protection or conservation ordinances

• View protection ordinances (CEQA Guidelines, § 15183, subd. (g).) OPR’s April 2009 amendments to the CEQA Guidelines propose to add the following, additional example to this list:

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• “Requirements for reducing greenhouse gas emissions, as set forth in an adopted land use plan, policy or regulation.” (Proposed CEQA Guidelines, § 15183, subd. (g)(8).)

OPR thus recognizes section 21083.3’s potential as a device to streamline project-specific review. Once the lead agency certifies an EIR and adopts a GHG emission reduction plan, then a project consistent with the development density set forth in the General Plan or zoning ordinance that adheres to the GHG plan’s requirements has the potential to be exempt from CEQA review, at least as to those impacts covered by the plan. There are two important qualifications to relying on this section. First, in order to invoke section 21083.3, the agency must have certified an EIR in connection with adopting the General Plan or zoning action. Second, the agency must find that the “development policies or standards” (such as the requirements for reducing greenhouse gases) will substantially mitigate the impact to which those policies or standards are addressed. (CEQA Guidelines, § 15183, subd. (f).) This section will be most useful, therefore, for those agencies that have adopted plans or policies addressing GHG emissions as part of a General Plan update for which an EIR is already being prepared. In adopting a General Plan containing such policies, the agency should consider adopting a finding that the policies “substantially mitigate” impacts associated with GHG emissions. Under those circumstances, individual projects that are consistent with the General Plan or zoning standards that adhere to GHG-related policies will be statutorily exempt from CEQA, at least as to GHG emissions. SB 375. SB 375 is structurally similar to the statutory exemption adopted in 2002 for certain farm worker, low-income and infill housing projects. (Pub. Resources Code, §§ 21159.21-21159.24.) Like the 2002 statutory exemptions, SB 375 exempts certain categories of projects from CEQA, but in order to qualify the project must meet a number of detailed criteria. Briefly, the exemption applies to “transit priority projects” that are consistent with a “sustainable communities strategy.” (Pub. Resources Code, § 21155-21155.2.) The project must also satisfy a number of additional, detailed criteria concerning whether the site contains sensitive habitat or significant cultural resources, whether a release of hazardous substances has occurred at the site, and the like. (Pub. Resources Code, § 21155.1, subd. (a).) In addition, the environmental analysis for a “residential or mixed-use residential project” need not analyze growth inducing impacts or project-specific or cumulative GHG-emission and climate change impacts, where the project is consistent with a “sustainable communities strategy” that CARB has certified as meeting GHG emission reduction targets. (Pub. Resources Code, § 21159.28.) SB 375 thus offers the prospect of either exempting certain projects, or obviating the need for analysis of GHG emissions and climate change. To take advantage of these

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streamlining provisions, however, a “sustainable communities strategy” must be adopted for the area, and the project must be consistent with that strategy and applicable zoning standards for density and intensity of use. For this reason, SB 375 does not represent a near-term streamlining option, and in the long term will be available only to those regions that develop sustainable communities strategies.

2. Mitigation The existing CEQA Guidelines encourage the adoption of policies or programs as a means of addressing comprehensively the cumulative impacts of projects. (See CEQA Guidelines, §§ 15064, subd. (h)(3), 15130, subd. (c).) The amendments proposed by OPR in April 2009 expand on these provisions to reference specifically the sorts of policies or programs that agencies may rely upon in meeting their obligations to consider cumulative impacts. In particular, section 15064, subdivision (h)(3) authorizes an agency to conclude that a project’s contribution to a cumulative impact is not “cumulatively considerable” if the project complies with the requirements of a previously approved plan or mitigation program. The proposed amendments add to the list of plans or mitigation programs that an agency may look to for this purpose to include a “plans or regulations for the reduction of greenhouse gas emissions.” OPR also proposes a new subsection of section 15126.4 focusing on the identification of mitigation measures to address GHG emissions. The proposal states:

(c) Mitigation Measures Related to Greenhouse Gas Emissions. Consistent with section 15126.4(a), lead agencies shall consider feasible means of mitigating greenhouse gas emissions that may include, but not be limited to:

(1) Measures in an existing plan or mitigation program for the reduction of emissions that are required as part of the lead agency’s decision;

(2) Reductions in emissions resulting from a project through

implementation of project features, project design, or other measures, such as those described in Appendix F;

(3) Off-site measures, including offsets, to mitigate a project’s

emissions; (4) Measures that sequester greenhouse gases; and (5) In the case of the adoption of a plan, such as a general plan, long

range development plan, or greenhouse gas reduction plan,

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mitigation may include the identification of specific measures that may be implemented on a project-by-project basis. Mitigation may also include the incorporation of specific measures or policies found in an adopted ordinance or regulation that reduces the cumulative effect of emissions.

(Proposed CEQA Guidelines, § 15126.4, subd. (c).)

The invitation to consider off-site measures or the purchase of carbon credits appears likely to lead to the development of fee programs to provide funding for these efforts. The proceeds from the fee would then be used by the recipient to carry out activities that offset the GHG emissions of projects that pay the fee. As the Third District Court of Appeal recently observed, “[i]n-lieu fee programs . . . may offer the best solution to environmental planning challenges, by providing some certainty to developers while adequately protecting the environment.” (California Native Plant Society v. County of El Dorado (2009) 170 Cal.App.4th 1026.) Indeed, the courts have upheld fee-payment programs as adequate mitigation for CEQA purposes, where the agency imposed the fee as part of an adopted program aimed at addressing the impact at issue. (See, e.g., Environmental Council of Sacramento v. City of Sacramento (2006) 142 Cal.App.4th 1018, 1024-1028, 1039-1044 [describing environmental review of a habitat conservation plan funded by mitigation fees, including adequacy of funding]; Save Our Peninsula Committee v. Monterey County Bd. of Supervisors (2001) 87 Cal.App.4th 99, 135-141 [traffic impact fee had sufficient relationship to project’s traffic impacts to serve as adequate mitigation]; Gentry v. City of Murrieta (1995) 36 Cal.App.4th 1359 [payment of fee under adopted habitat conservation plan was adequate to mitigate impacts to species covered by plan].) Conversely, the courts have held the payment of fees is insufficient mitigation where the agency has not adopted an underlying program or otherwise committed to implement the mitigation measure to be addressed by the fee. (See, e.g., Anderson First Coalition v. City of Anderson (2005) 130 Cal.App.4th 1173, 1188 [payment of “fair share” funding for traffic improvements inadequate because agency had not adopted a fee program or other mechanism to actually construct needed improvements]; Kings County Farm Bureau v. City of Hanford (1990) 221 Cal.App.3d 692, 727-728 [fee for water development was insufficient mitigation because EIR did not analyze whether water supplies were available for purchase].) The Third District Court of Appeal’s recent decision in California Native Plant Society v. County of El Dorado (2009) 170 Cal.App.4th 1026, erects new obstacles to adopting, implementing and relying on fee-based programs as CEQA mitigation. In that case, El Dorado County adopted an ordinance requiring developers to pay a “rare plant impact fee.” The county then used the fee to acquire and manage rare plant preserves.

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The county approved a senior care facility that would disturb some of the rare plants “covered” by the impact fee; in approving the project, the county adopted a mitigated negative declaration, citing the payment of the fee as adequate mitigation for the project’s impacts on the plants. The Third District struck down the mitigated negative declaration, citing the fact that the ordinance and rare-plant-fee program had never undergone CEQA review. The Court stated:

For an in-lieu fee system to satisfy the duty to mitigate, either that system must be evaluated by CEQA (two tier approval for later, more specific, projects) or the in-lieu fees or other mitigation must be evaluated on a project-specific basis. (Slip op. at p. 43.)

The Court’s decision in California Native Plant Society suggests that, whatever its attractions as a matter of policy, an in-lieu fee program may not be an effective means of devising mitigation and thereby streamlining CEQA review. In order to serve as defensible CEQA mitigation, the overall effectiveness of the fee program would have to be analyzed in an EIR or negative declaration prepared either at the time the agency adopts the program, or as part of the analysis for the project itself. In either case, in the context of a negative declaration, the agency would still have to prepare an EIR if the agency received comments supported by substantial evidence questioning the effectiveness of the fee program. Fee programs have proliferated over the years, and they have proven an effective means of obtaining resources to address infrastructure needs or environmental impacts associated with cumulative development. It remains to be seen whether the California Native Plant Society decision makes the adoption of those fee programs even more cumbersome than is already the case. It may be that the decision turns on the fact that the project at issue was approved based on a negative declaration, and therefore involved the non-deferent “fair argument” standard of review. The logic of the decision’s critique of the challenged fee program, however, is not limited to negative declarations.

3. Climate Action Plans A number of California cities, counties and districts have adopted, or are in the process of developing, “Climate Action Plans” or similar policy documents, as part of a General Plan, as a means of implementing General Plan policies, or as stand-alone efforts. Particularly if the agencies certify EIRs in connection with these efforts, these plans could provide a basis for streamlining subsequent CEQA review, or even exempting projects from the obligation to analyze GHG emissions/climate change.

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The Climate Action Plan adopted by Sonoma County and the cities in the county is representative. The Plan includes the following elements:

(1) In 2005, the County prepared an inventory of county-wide GHG emissions, broken down by sector. The inventory estimated GHG emissions as of 1990 and as of 2005. Most of the inventory is attributable to energy consumption and transportation sources. The County updated the inventory in 2006, and again in 2007.

(2) The County and its nine cities adopted resolutions establishing a goal of reducing GHG emissions to 25% below the inventory as of 1990. The target thus goes beyond the State-wide goals set forth in Assembly Bill 32 (2006). AB 32 established a goal of reducing GHG emissions to 1990 levels by 2020.

(3) In October 2008, the County and cities released a “Climate Action Plan.” (See

http://www.coolplan.org/ccap-complete-plan.php.) The plan maps out a strategy for reducing GHG emissions. The plan identifies strategies addressing each of four sectors that contribute to GHG emissions:

• Electricity and natural gas consumption from both existing development

and new construction. The strategy calls for retrofitting existing homes and businesses, adopting stringent building standards for new development, and making the investments necessary to transition to renewable energy sources.

• Transportation and land use. The strategies addressing transportation and

land use call upon the County and the cities to adopt General Plan and zoning standards that encourage efficient land-use patterns, and to use the CEQA process to analyze and adopt mitigation measures addressing GHG emissions.

• Agriculture and forests. • Solid waste. The final section of the plan maps out steps necessary to transition from planning to implementation. The plan does not identify specific steps for implementation, but lists “working groups” to take on the various elements of the plan. The plan also lists a preliminary schedule of initial steps.

As the plan moves forward, proposals are likely to be developed implementing various portions of the plan. These proposals may provide opportunities to streamline CEQA review for individual projects.

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http://www.coolplan.org/ccap-complete-plan.php

For example, one element of the plan is to “institute a county-wide mandatory green building ordinance.” If such an ordinance is adopted, and an EIR is prepared in conjunction with the adoption of the ordinance, the compliance with CEQA review may be streamlined with respect to that particular issue. Specifically, under Public Resources Code section 21083.3, if a proposed project’s buildings adhere to the requirements of the ordinance, and there is nothing “peculiar to the parcel or the project” with respect to its energy use, then that aspect of the project would be exempt from CEQA review. As cities and counties implement Climate Action Plans, they may wish to consider how the ordinances or programs adopted under those plans may provide similar streamlining opportunities. In particular, in adopting such ordinances or programs, cities and counties should consider invoking section 21083.3, and making it clear that projects complying with the ordinances or programs will thereafter be treated as exempt from CEQA, at least with respect to the specific issues addressed by the ordinances or programs. Following is a partial list of Climate Action Plans being developed by California agencies, including web sites where additional information can be obtained:

City of Alameda: completed final draft of climate action plan (2/5/08) http://www.ci.alameda.ca.us/community/climate_protection.html. City of Albany: conducted a baseline greenhouse gas emissions inventory; moving forward with development of climate action plan. http://www.albanyca.org/index.aspx?page=256. City of Arcata: adopted a Community Greenhouse Gas Reduction Plan (08/06) http://www.cityofarcata.org/index.php?option=com_content&task=view&id=234. City of Benicia: completed an emissions inventory; moving forward with Climate Action Plan; additional information is at: www.BeniciaClimateActionPlan.com. City of Berkeley: second draft of climate action plan for public review and comment http://www.berkeleyclimateaction.org/Content/10054/ClimateActionPlan.html. UC Berkeley: completed climate action feasibility study; see http://www.aashe.org/resources/climate_action_plans.php. City of Chula Vista: adopted a CO2 Reduction Plan; see http://www.chulavistaca.gov/clean/conservation/Climate/Greenhouse.asp.

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http://www.ci.alameda.ca.us/community/climate_protection.html

http://www.albanyca.org/index.aspx?page=256

http://www.cityofarcata.org/index.php?option=com_content&task=view&id=234

http://www.beniciaclimateactionplan.com/

http://www.berkeleyclimateaction.org/Content/10054/ClimateActionPlan.html

http://www.aashe.org/resources/climate_action_plans.php

http://www.chulavistaca.gov/clean/conservation/Climate/Greenhouse.asp

City of Davis: completed a baseline emissions inventory and intends to draft a climate action plan; see http://cityofdavis.org/pgs/Sustainability/ClimateChng.cfm. City of Fremont: completed a Greenhouse Gas Emissions Inventory and intends to draft a climate action plan; see http://www.ci.fremont.ca.us/Environment/GreenEfforts/default.htm. City of Los Angeles: completed a climate action plan (05/07); see http://www.lacity.org/ead/EADWeb-AQD/GreenLA_CAP_2007.pdf. City of Oakland: launched energy and climate action plan project in November, 2008; first round of public workshops held in December 2008. http://www.oaklandpw.com/AssetFactory.aspx?did=3415. City of San Diego: completed a climate protection action plan (07/05) http://www.sandiego.gov/environmental-services/sustainable/pdf/action_plan_07_05.pdf. City and County of San Francisco: completed a climate action plan (9/04) http://sfenvironment.org/downloads/library/climateactionplan.pdf. City of Santa Cruz: completed a Greenhouse Gas Emissions Inventory and intends to draft a climate action plan. Go to http://www.ci.santa-cruz.ca.us/, then follow the links to the Planning Department, and then to the Climate Action page. City of Stockton: in a settlement agreement between the city and the Sierra Club, the city agreed to develop a climate action plan. See memo: http://online.recordnet.com/projects/blog/2008/1008Settlement.pdf. Contra Costa County: completed a municipal climate action plan (12/08) http://www.co.contra-costa.ca.us/index.asp?NID=1913. Marin County: completed a Greenhouse Gas Reduction Plan (10/06) http://www.co.marin.ca.us/depts/CD/main/pdf/final_ghg_red_plan.pdf. Napa County: completed a preliminary inventory of GHG emissions; moving forward with Climate Action Plan. Sonoma County: completed a Community Climate Action Plan Summary of the plan and the complete plan can be found at: http://www.coolplan.org/.

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http://cityofdavis.org/pgs/Sustainability/ClimateChng.cfm

http://www.ci.fremont.ca.us/Environment/GreenEfforts/default.htm

http://www.lacity.org/ead/EADWeb-AQD/GreenLA_CAP_2007.pdf

http://www.oaklandpw.com/AssetFactory.aspx?did=3415

http://www.sandiego.gov/environmental-services/sustainable/pdf/action_plan_07_05.pdf

http://www.sandiego.gov/environmental-services/sustainable/pdf/action_plan_07_05.pdf

http://sfenvironment.org/downloads/library/climateactionplan.pdf

http://www.ci.santa-cruz.ca.us/

http://online.recordnet.com/projects/blog/2008/1008Settlement.pdf

http://www.co.contra-costa.ca.us/index.asp?NID=1913

http://www.co.marin.ca.us/depts/CD/main/pdf/final_ghg_red_plan.pdf

http://www.coolplan.org/

4. Conclusions Over the longer term, SB 375 provides cities and counties with the opportunity to streamline environmental analysis of GHG emissions and climate change, at least for those regions that adopt “sustainable communities strategies.” CEQA already contains a number of tools available to lead agencies to address GHG emission and climate change. Of these, Public Resources Code section 21083.3 appears to be particularly promising for this purpose, particularly because many cities and counties are already working on “Climate Action Plans.” If these plans culminate in the adoption of ordinances or programs to address GHG emissions and climate change, then individual projects that are consistent with, and incorporate the requirements of, those ordinances or programs may be exempt from CEQA, at least as to those impacts addressed by the ordinances or programs. In order to rely on SB 375, section 21083.3, or other streamlining devices, agencies will have to perform environmental analysis and adopt policies or programs addressing GHG emissions. These efforts will take time. Over the short term, agencies should incorporate GHG and climate change considerations into their environmental review processes. The proposed CEQA Guideline amendments include amendments to Appendix F (addressing energy conservation) and Appendix G (the initial study checklist) calling for consideration of GHG and climate change issues. (See proposed Appendix G, ¶ VII [directing the lead agency to consider whether the proposed project would “[g]enerate greenhouse gas emissions, either directly or indirectly, that may have a significant impact on the environment[,]” or “[c]onflict with any applicable plan, policy or regulation of an agency adopted for the purpose of reducing the emissions of greenhouse gases[.]”].) The proposed Guidelines amendments to not establish a specific significance threshold for GHG emissions. Local agencies therefore have some latitude to adopt such thresholds for their use. Such thresholds are subject to challenge on a case-by-case basis. At least for the short term, however, it would be prudent to adopt formal or informal local policy setting thresholds, so that planners would have some consistent basis for analyzing projects. Agencies may want to check with other agencies or with consultants for ideas regarding potential thresholds.

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City Attorneys Department Spring Conference League of California Cities May 6-8, 2009 Steven L. Dorsey, Esq. Richards, Watson & Gershon 355 South Grand Avenue, 40th Floor Los Angeles, California 90071 City Attorney, Cities of Buena Park, Norwalk, San Marino

MEETING OF THE MINDS: AVOIDING MISUNDERSTANDINGS IN

MUNICIPAL CONTRACTS

MAKING CONTRACTS STICK

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2 RICHARDS WATSON & GERSHON

I. Introduction City attorneys are occasionally requested to sign contracts that have not been

approved in a manner required by the applicable law, whether required by an ordinance, the charter or a state statute. While it can sometimes seem to staff that the city attorney is being overly bureaucratic in requiring minor contracts, especially those that do not involve a payment of funds, to be formally approved, any contract not approved in strict compliance with the required procedures is void and unenforceable, with one possible minor exception discussed in Paragraph A of Section V.

The courts, from the earliest days in California, have been surprisingly consistent in requiring strict adherence to the applicable procedures for approving and executing public contracts. As will be discussed below, parties desiring to enforce contracts with public agencies have used quantum meruit, estoppel, fairness and all of the other expected arguments to convince a court to overlook a trivial defect in the approval process. Nevertheless, the courts have routinely rejected all those arguments and have required strict compliance with the appropriate procedures.

This paper analyzes this line of authority, discusses the required contracting procedures and provides alternative procedures city councils can adopt by which minor contracts can be expeditiously approved. It is hoped that this paper will help city attorneys to convince staff of the need to strictly follow contract approval procedures and offer city attorneys approaches they can suggest to their clients that desire an easier procedure for reviewing and approving routine contracts.

II. Strict Compliance With Contracting Procedures Required As long ago as 1804, Chief Justice John Marshall of the United States Supreme

Court wrote that entities having only a legal existence can be bound only by contracts approved in strict compliance with the enabling legislation:

An individual has an original capacity to contract and bind himself in such manner as he pleases. . . . But with these bodies which have only a legal existence it is otherwise. The act of incorporation is to them an enabling act; it gives them all the power they possess. It enables them to contract, and when it prescribes to them a mode of contracting, they must observe that mode, or the instrument no more creates a contract than if the body had never been incorporated.1

The California Supreme Court applied this rule to municipal corporations in McCracken v. City of San Francisco.2 Perhaps the best short discussion of the general rule is found in the following language in South Bay Senior Housing Corporation v. City of Hawthorne:

1 Head and Amory v. The Provident Insurance Company (1804) 6 U.S. 112, 169. 2 McCracken v. City of San Francisco (1860) 16 Cal. 591.

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. . . when a statute limits a city’s power to make certain contracts to a certain prescribed method and impliedly prohibits any other method, a contract that does not conform to the prescribed method is void and no implied liability can arise for benefits received by the city or for damages caused by it to the other party to the void contract. (Miller v. McKinnon (1942) 20 Cal.2d 83, 91-92 [124 P.2d 34, 140 A.L.R. 570].) “‘Under such circumstances the express contract attempted to be made is not invalid merely by reason of some irregularity or some invalidity in the exercise of a general power to contract, but the contract is void because the statute prescribes the only method in which a valid contract can be made, and the adoption of the prescribed mode is a jurisdictional prerequisite to the exercise of the power to contract at all and can be exercised in no other manner so as to incur any liability on the part of the municipality. Where the statute prescribes the only mode by which the power to contract shall be exercised the mode is the measure of the power. A contract made otherwise than as so prescribed is not binding or obligatory as a contract and the doctrine of implied liability has no application in such cases.” (Ibid., quoting Reams v. Cooley (1915) 171 Cal. 150, 154 [152 P 293].)3

Throughout the years, courts have strictly applied this rule, and it is well established law that agreements entered into by a city not complying with the law specifying the method of entering into contracts are invalid and that cities are not liable for any damages incurred by the other party as a consequence. The rule also applies to improperly approved extra work performed under a properly approved contract.4

III. Charter Cities Courts have consistently held that contracting procedures are a municipal affair

and that the procedure for entering contracts is controlled by the charter.5 As the court stated in First Street Plaza Park v. City of Los Angeles:

It was long ago decided, however, that the manner in which a city is empowered to form a contract is generally a “municipal affair” which can be controlled by the terms of its charter. (See, e.g., Loop Lumber Co. v. Van Loben Sels (1916) 173 Cal. 228, 232 [159 P. 600] [the making of contracts for public improvements is a “municipal affair”]; cf. Domar Electric, Inc. v. City of Los Angeles, supra, 9 Cal.4th 161, 170-171 [expenditure of public funds on public works is a municipal affair].) Thus if a city charter specifies the manner in which that city may enter into a contract, the terms of the charter control over otherwise applicable state law. (Dairy Belle Farms v. Brock, supra, 97 Cal.App.2d 146, 155

3 South Bay Senior Housing Corporation v. City of Hawthorne (1997) 56 Cal.App.4th 1231, 1235 (emphasis omitted) (hereafter South Bay Senior Housing). 4 Katsura v. City of San Buenaventura (2007) 155 Cal.App.4th 104. 5 See, e.g., San Francisco International Yachting Group v. City and County of San Francisco (1992) 9 Cal.App.4th 672.

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[generally, manner of letting contracts is a municipal affair as to which a “home rule” charter is superior to general law]; Loop Lumber, supra, 173 Cal. 228, 232 [when charter makes provision regarding a municipal affair, it is the supreme law, paramount to any law enacted by the state Legislature; this proposition has been so often stated “as to have become practically elementary”].)6

It is clear, based on these and other cases, that the provisions of a city charter and related ordinances governing how a city may properly enter into contract will be strictly applied.

IV. General Law Cities The plaintiff in South Bay Senior Housing argued that the general rule does not

apply to general law cities. The court summarily disposed of this contention, as follows:

. . . although it is true as South Bay contends that the issue before us has not been the subject of any published opinion involving a general law city (all of the cases involved chartered cities or other governmental entities), our response is, so what? The cases involving chartered cities apply the rule of Miller to the city's charter in the same way we apply it here to the general law governing a general law city. (Citations omitted.)7

California Government Code Section 40602 provides the method by which a general law city can enter into a contract. This section provides as follows:

§ 40602. Signature The mayor shall sign: … (b) All written contracts and conveyances made or entered into by the city. … The legislative body may provide by ordinance that the instruments described in (a), (b) and (c) be signed by an officer other than the mayor. In G.L. Mezzetta v. City of American Canyon,8 the city manager and public works

director of the City of American Canyon agreed to provide Mezzetta with a connection to a waste water discharge system. Two years later, after Mezzetta had purchased property, obtained the necessary permits, constructed its facility and commenced operations, the city refused to accept the waste water discharge.

The court upheld trial court’s grant of American Canyon’s demurer on the ground that the agreement had never been approved in the manner required by Government Code section 40602. The court disagreed with Mezzetta’s contention that Government Code section 40602 only applies to written contracts and in no way prohibits or applies to oral contracts of the sort involved in the case. The court said:

6 First Street Plaza Partners v. City of Los Angeles (1998) 65 Cal.App.4th 650, 661 (hereafter First Street Plaza). 7 South Bay Senior Housing, supra, 56 Cal.App.4th at p. 1236. 8 G.L. Mezzetta, Inc. v. City of American Canyon (2000) 78 Cal.App.4th 1087 (hereafter Mezzetta).

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Thus, because the statutes in question specifically set forth the ways in which the City may enter into contracts, any other methods of contract formation–even though not explicitly prohibited by the statutes-are invalid. (Citations omitted.)9

South Bay Senior Housing shows the extent to which the courts will require strict compliance with Government Code section 40602. In this case, the city council of the City of Hawthorne approved an agreement with South Bay Senior Housing Corporation. In furtherance of the agreement, the plaintiff had submitted various applications, which the Planning commission approved. When the City refused to confirm to the applicant that the contract was valid, the applicant sued the City for anticipatory breach of contract, rescission, and restitution.

Neither party could find an executed copy of the contract showing the mayor’s signature. Thus, the court was unable to verify that the mayor had ever signed the contract. The city attorney testified that in the usual course of events the mayor would sign contracts immediately upon the city council’s vote or very soon thereafter. The jury found in favor of the plaintiff and awarded damages of more than $1 million, which were reduced by the trial court to $719,000. The appellate court reversed the judgment and held that the contract was not enforceable, despite its clear approval by the city council, because neither party could produce a document showing that it had been signed by the mayor. As the court said:

It follows that, by the plain language of the statutes, the City’s power to make a contract is limited to the prescribed method and, by necessary implication, that any other method is prohibited–which means that, unless it was signed by the Mayor, the contract with South Bay is void and no implied liability can arise under that contract. (Citation omitted.)10

Thus, the court declared the agreement void, despite the fact the city council had approved it and the plaintiff had expended significant sums in reliance in the contract, because either the mayor neglected to sign it or no one could prove that contract had, in fact, been signed.

V. Special Situations

A. Public Works Contracts

1. Bidding Procedures not Followed

The courts have applied the general rule requiring strict compliance with contracting procedures to public works contracts when the public agency did not follow

9 Mezzetta, supra, 78 Cal.App.4th at p. 1093-1094. 10 South Bay Senior Housing, supra, 56 Cal.App.4th at p. 1236.

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the requisite bidding procedures.11 In order to mitigate this harsh result the legislature enacted Public Contract Code Section 5110. This statute provides that a contractor awarded a construction contract despite an error in the bidding process may be paid its reasonable costs if the award is “determined to be invalid due to a defect or defects in the competitive bidding process caused solely by the public entity.” This provision applies to general law cities and provides a limited exception to the general rule that a party contracting with a public entity cannot receive any compensation if the contract was not awarded in full compliance with the applicable law.

Public Contract Code Section 1100.7 provides that all provisions of the Public Contract Code apply to charter cities “in the absence of an express exemption or a city charter provision or ordinance that conflicts with the relevant provision of this code.” Thus, it is possible a court might apply Section 5110 to a charter city in the absence of a specific charter provision or ordinance exempting the city from Section 5110. A charter city desiring to avoid the provisions of Public Contract Code Section 5110 should, therefore, enact an ordinance specifically exempting itself from the Public Contract Code, in general, or Section 5110, in particular.

2. Change orders.

The courts have applied the general rule to change orders on public works contracts, even when the initial contract was approved in compliance with all legal requirements.12 This situation can likely be avoided by authorizing the construction manager or other city staff member or representative to approve change orders in the body of the agreement.

3. Bidding Procedures Followed.

In what appears to be the only situation in which the general rule is not applied, courts have held that competitively bid public works contracts are valid and binding at the time of award.13 This theory is succinctly stated in Menefee v. County of Fresno, where the court states:

A contract is complete and binding when a valid bid is accepted. (City of Susanville v. Lee C. Hess Co. (1955) 45 Cal.2nd 684 [290 P.2d 520].)14

11 See, e.g., Miller v. McKinnon (1942) 20 Cal.2nd 83 (requiring a contractor to repay the city in a suit brought by a taxpayer to recover funds paid to the contractor by the public agency without required public bidding); Frick v. City of Los Angeles (1896) 115 Cal. 512 (hereafter Frick). 12 See, e.g., Zottman v. The City and County of San Francisco (1862) 20 Cal. 96 (refusal of city of San Francisco to approve a change order that the superintendent of the project, some members of the legislative body and others promised in the presence of the city attorney would be paid for by the city even though the contract itself was properly approved). 13 See, e.g., City of Susanville v. Lee C. Hess Co. (1955) 45 Cal.2d 684, 694 (hereafter Susanville); Williams v. City of Stockton (1925) 195 Cal. 743 (hereafter Williams); Menefee v. County of Fresno (1985) 163 Cal.App.3d 1175, 1178 (hereafter Menefee); Greer v. Hitchcock (1969) 271 Cal.App.2d 334, 337. 14 Menefee, supra, 163 Cal.App.3d at p. 1178.

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These cases are very difficult, if not impossible to reconcile with the general rule. However, a careful reading of Susanville shows that the Menefee court and other decisions stating the same proposition may be reading the precedent incorrectly. The Susanville court states as follows:

“It has long been decided in this and other states and in the courts of the United States that in the letting of contracts for the doing of public works where the legislative body or the administrative officer is required by statute to call for bids and must under competitive bidding conditions let the contract to the lowest responsible bidder, the making of the award gives rise to a contract between the public body or agent and the successful bidder….” (M.F. Kemper Const. Co. v. City of Los Angeles, 37 Cal.2d 696, 700 [1] [235 P.2d 7]; Williams v. City of Stockton, 195 Cal. 743, 748 [4 et seq.], 751 [235 P. 986].)15

Neither M.F. Kemper Const. Co. v. City of Los Angeles16 nor Williams v. City of Stockton, the only two cases relied on by the Susanville court actually hold that a city is legally required to enter into a contract after awarding a bid despite the failure to follow the mandated contract approval procedures. Kemper involved a bidder that desired to withdraw its bid on the basis of a clerical mistake in completing the bid. The case did not involve a situation in which the public agency refused to enter into the contract. In fact, the Kemper court permitted the mistaken bidder to withdraw its bid and, thus, does not even follow the rule for which it is cited in Susanville.

In Williams the Stockton city council refused to honor the award of a competitively bid contract to the plaintiff because the mayor had not signed the agreement. However, the Stockton city charter did not have a clause requiring the mayor to sign agreements. As a result, the court held that the mayor had a ministerial duty to sign the contract after it was been awarded by the city council and that his failure to sign it could not be used as a basis to find the contract to be void. The Williams court distinguishes Frick, which declared a contract awarded by the Los Angeles City Council void because it had not been signed by the mayor. As the Williams court pointed out, the City of Los Angeles charter, unlike the Stockton charter, explicitly required contracts to be signed by the mayor unlike the Stockton charter. Thus, Williams does not actually deviate from the general rule, despite the fact that subsequent courts have essentially cited it as so holding.

In Transdyn/Cresci J.V v. City and County of San Francisco,17 the San Francisco Public Utilities Commission approved award of a contract following competitive bidding and directed the department head to sign the agreement. The award was challenged by an unsuccessful bidder before the department head had signed the agreement. The department head, on the advice of the city attorney’s office, refused to sign the agreement and the Commission rescinded the award.

15 Susanville, supra, 45 Cal.2d at p. 694. 16 M.F. Kemper Const. Co. v. City of Los Angeles (1951) 37 Cal.2d 696 (hereafter Kemper). 17 Transdyn/Cresci J.V v. City and County of San Francisco (1999) 72 Cal.App.4th 746.

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The court held that the rescission was invalid because the contract was entered into when the bid was awarded and the signature of the department head was ministerial. The court uses broad language similar to the language in Menefee to the effect that publicly bid contracts are entered into automatically when the award is made. The court also engages in a thorough discussion of Susanville and Williams and explains that the charter did not specifically require the department head’s signature and, thus, he had a ministerial duty to sign the agreement. This case, then, never holds that competitively bid contracts are exempt from the general rule.

The cases discussed above certainly contain broad statements implying that the general rule does not apply to competitively bid contracts. However, none of the cases explicitly so holds, and, as shown above, a careful reading provides possible grounds for distinguishing each of these cases. Frick appears to still be good law for cities whose charters contain explicit language requiring mayors to approve all contracts. Mezzetta and South Bay Senior Housing, although not addressing competitively bid contracts, nevertheless indicate that the mayor’s signature under Government Code Section 40602 is more than merely ministerial. City attorneys faced with situations in which their clients desire not to proceed with a publicly bid contract after it has been awarded should review these cases and the others discussed in this section very carefully. It seems that a persuasive argument can be made that the general rule applies to these contracts despite the broad statements in some cases that competitively bid contracts are automatically binding upon award.

B. Informal Agreements

City staff sometimes tries to circumvent formal contracting procedures by labeling an agreement a “Memorandum of Understanding,” a “protocol, or some term other than “contract” or “agreement,” as though the mere change of title is relevant. These agreements usually involve one or more public agencies, often relate to training and other types of cooperation between the agencies and frequently contain indemnity clauses. Unfortunately for cities desiring to enforce such agreements, an agreement by any other name is still an agreement and must be approved as required for an agreement.

The court’s decision in Authority for California Cities Excess Liability v. City of Los Altos18 dealt with just such a training arrangement. This case involves a “protocol” entered into by the police chiefs of the cities of Los Altos, Mountain View, and Palo Alto.19 Pursuant to this document the police chiefs agreed to provide training for each others’ officers and to operate a joint SWAT Team.

As a result of a series of tragic errors, discussed in Brassinga v. City of Mountain View,20 a Palo Alto reserve officer was shot to death by a Mountain View police officer

18 Authority for California Cities Excess Liability v. City of Los Altos (2006) 136 Cal.App.4th 1207 (hereafter Authority for California Cities Excess Liability). 19 Although not designated a “memorandum of understanding” by the parties in this case, this document will be referred to as such in this memorandum because that is the term cities frequently apply to such arrangements. 20 Brassinga v. City of Mountain View (1998) 66 Cal.App.4th 195.

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during a training exercise covered by the “memorandum of understanding.” The heirs of the Palo Alto officer filed a claim against Palo Alto for workers’ compensation benefits and against Mountain View for negligence. Mountain View and Palo Alto apparently reached a settlement with the heirs, and the Authority for California Cities Excess Liability (“ACCEL”) sued the City of Los Altos for contribution toward the settlement.

ACCEL contended that Los Altos was jointly liable with Mountain View and Palo Alto under Government Code Section 895, et seq. These provisions apply to “agreements” entered into by public entities and provide the entities are joint and severally liable for any liability imposed upon either entity for “injury caused by a negligent or wrongful act or omission occurring in the performance of such agreement.”21

Los Altos defended itself on the ground that the memorandum of understanding was not an agreement because it had never been approved by the city council or signed by the mayor as required by Government Section 40602. The plaintiffs contended that Government Code Section 895 et seq., create an exception to the general rule and are not limited to formal agreements approved by the city council because Section 895 applies to joint liability agreed to by “resolution, contract, ordinance or in any other manner provided by law.”22

ACCEL contended that the “protocol” was an “agreement” for purposes of Section 895 as it was “expressed” in a “manner provided by law.”23 The basis for this contention was that the Los Altos Police Chief had the power to arrange for training of Los Altos police officers. Since the document involved joint training, ACCEL contended it was within the Police Chief’s authority to execute. The court held, however, that Section 895 is not sufficient authority to authorize the Police Chief to bind the City. Rather, the authority of the Police Chief to execute contracts on behalf of Los Altos must be found in some other statute, ordinance or law. Section 895, the court reasoned, is not self-executing.

This case makes it very clear that the required contracting procedures apply to memorandums of understanding, protocols and other similar arrangements. It is very important, then, that city attorneys assure that such agreements are approved in the same manner as any other agreements.

C. Signature of the City Attorney

Both Mezzetta and First Street Plaza mention that the respective ordinance and charter provision required contracts to be signed by the city attorney. The cases, though, do not directly address whether the absence of the city attorney’s signature would have rendered the contracts void, since the contracts were void for other, more substantial reasons. Cities having an ordinance or charter provision requiring the city attorney’s

21 Authority for California Cities Excess Liability, supra, 136 Cal.App.4th at p. 1213. 22 Cal. Gov. Code, § 895. 23 Authority for California Cities Excess Liability, supra, 136 Cal.App.4th at p. 1213.

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signature on contracts, however, should make sure the city attorney signs the agreement is in order to avoid a dispute over the validity of the contract on this ground.

VI. Unsuccessful Arguments to Support Validity of Contract Parties attempting to enforce contracts against cities have tried to make a

distinction between the city’s exercise of its proprietary as opposed to its police power.24 These arguments have been unavailing.

In almost all cases, parties attempting enforce a contract have raised estoppel, contending that the city and the aggrieved party have acted up until the point at which the litigation commenced as though the contract were valid. This argument has also been unavailing. As the court stated in First Street Plaza, “No case has ever held that a city may be bound to a contract by estoppel.”25

Contracting parties have also attempted to claim detrimental reliance as a basis for upholding the validity of a contract.26 As with all other arguments raised by such parties, the courts have not agreed.

Other contracting parties have contended, also without success, that the required contract procedures only apply to written arguments, not oral arguments.27

Finally, one plaintiff even contended that requiring strict adherence to formal contract procedures will cause parties to be wary of contracting with the government. The court summarily denied this argument.28

VII. Open Issues As discussed above, Government Code Section 40602 requires all contracts to be

signed by the mayor. The section, however, does not explicitly state that contracts must be approved by the city council before they can be signed by the mayor. Authority for California Cities Excess Liability holds that the memorandum of understanding was not enforceable because it was not approved by the city council.29 However, the court cites Mezzetta as its sole authority on this point. Unfortunately, Mezzetta combines its discussion of Section 40602 with its discussion of relevant city ordinances. Thus, it is not possible to know whether the Mezzetta court was relying on Section 40602 or on the city ordinances. This somewhat weakens Authority for California Cities Excess Liability as authority for its holding that Government Code Section 40602 requires all contracts to be approved by the city council. As a result, general law cities might consider enacting

24 See, e.g. Dynamic Land Co. v. City of Long Beach (1958) 159 Cal.App.2d 294, 299. 25 See First Street Plaza, supra, 65 Cal.App.4th at p. 671-672; South Bay Senior Housing, supra, 56 Cal.App.4th at p. 1236. 26 See, e.g., Dynamic Land Co. v. City of Long Beach, supra, 159 Cal.App.2d at p. 299; Zottman v. City and County of San Francisco, supra, 20 Cal. 96; Miller v. McKinnon, supra, 20 Cal.2d at p. 88 (specifically denying quantum meruit). 27 See, e.g., Mezzetta, supra, 78 Cal.App.4th at p. 1093. 28 First Street Plaza, supra, 65 Cal.App.4th at p. 671-672. 29 Authority for California Cities Excess Liability, supra, 136 Cal.App.4th at p. 1212.

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an ordinance providing that as a general matter contracts must be approved by the city council. This will provide clarity on this point and will assure that the city is not bound by a contract that is not approved by the city council.

Poway Royal Mobilehome Park Owners Association v. City of Poway30 involves an “agreement” the Poway City Council approved during a city council meeting. The “agreement” was never formalized in a written contract. The plaintiffs contended that the minutes constituted a written agreement. The court disagreed, pointing out that the minutes could not bind the city because the mayor had not signed them, as required by for contracts by Government Code Section 40602. This case leaves unanswered whether the court would have determined the minutes constituted a written agreement had they been signed by the mayor. Cities in which mayors sign approved minutes should consider adopting an ordinance providing that the minutes will not constitute an agreement.

VIII. Alternative Contracting Procedures As discussed above, Government Code Section 40602 provides that the mayor’s

signature is not required if the city adopts an ordinance providing that another person can sign contracts. General law cities can use this authorization to adopt ordinances authorizing the city manager or some other designated official to approve binding contracts without specific city council approval. The ordinance should provide both the procedure and the types of contracts to which it applies.

In many cases, city ordinances provide that the city manager may sign contracts. Such a general authorization, standing alone, probably does not authorize the city manager to approve agreements. The best reading of such ordinances is that the city manager can sign agreements only following city council approval. In order to avoid confusion and ambiguity on this point, any ordinance authorizing a person other than the mayor to sign a contract should make it clear whether that authority applies merely to signing contracts approved by the city council or also includes the authority to enter into the actual contract without city council approval.

As for charter cities, the degree of flexibility the city can utilize in avoiding having all contracts submitted to the city council will depend on the specific language of the city charter. If the city charter is very explicit and does not allow the city to modify the charter provisions by ordinance, it seems likely that even the simplest and most basic contracts will require city council approval.

IX. Conclusion It is very important that staff understand and appreciate how strictly the courts

apply the rules and manner and means of contract approvals by public agencies. City attorneys must withstand the inevitable pressure from staff that the city attorney is being overly bureaucratic in requiring strict adherence with these procedures. It is hoped that

30 Poway Royal Mobilehome Park Owners Association v. City of Poway (2007) 149 Cal.App.4th 1460.

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this memorandum will provide city attorneys with sufficient authority to convince staff of the importance of having contracts approved in an appropriate manner. In addition, there are methods by which the city council (not staff on its own), can work around these strict requirements to avoid cluttering up an agenda with unnecessary trivia.

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City Attorneys Department Spring Conference League of California Cities May 6-8, 2009 Michael Jenkins1

Jenkins & Hogin, LLP Manhattan Towers 1230 Rosecrans Avenue, Ste. 110 Manhattan Beach, CA 90266 City Attorney, Cities of Diamond Bar, Hermosa Beach, Rolling Hills and West Hollywood

MEETING OF THE MINDS: AVOIDING MISUNDERSTANDINGS IN

MUNICIPAL CONTRACTS

INDEMNITY ISSUES

1 The author wishes to thank Alison Regan, Staff Attorney in the City of West Hollywood for her contributions to this paper.

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I. Introduction There is no “standard” indemnity clause for public agencies or for particular contracts. Cities utilize a wide variety of clauses, ranging from very long and detailed to extremely brief. The purpose of this paper is narrow – it is not to recommend any particular type of indemnity clause, but rather, to highlight some pitfalls that should be avoided when either drafting or negotiating indemnity clauses in contracts. There are at least two excellent and recent papers on the subject of indemnity to which you may want to refer for a broader discussion.2

Ideally, all of our cities would use the most protective indemnity clause.

Often, however, a contracting party raises objections to our preferred clause, requiring negotiation. Some cities refuse to negotiate over indemnity language, but many are reluctant to sacrifice a particular contractor or consultant over disagreement about an indemnity clause, and do negotiate. Also, State law places constraints on our ability to use the indemnity clause of our choice, particularly with regard to contracts with architects, engineers and other design professionals, and with regard to construction contracts.

Consequently, indemnity clauses differ from contract to contract. At

bottom, the indemnity clause should accurately reflect the intent of the parties, as the parties to a contract may allocate risk in any manner they desire.3 Caution should be exercised not simply to rely on boilerplate clauses, but to give serious consideration to the mutual intent of the parties and to utilize sufficiently precise language to accomplish that objective given that these clauses will be strictly construed against the indemnitee.4 II. Indemnification Clauses Generally A. Classifications of Indemnity Clauses.

MacDonald & Kruse, Inc. v. San Jose Steel Company, Inc.5 describes generally three types of indemnity clauses. Type I is a broad provision that expressly indemnifies the indemnitee for all harm, including the indemnitee’s negligence. The use of this provision would indemnify a city for negligent acts,

2 For extensive discussions of indemnity, see “Architect and Engineer Design Liability and AB 573: Big Deal or Ho-Hum,” Roland Nikles, presented at the Spring 2007 City Attorney Conference; “Drafting and Reviewing Insurance and Indemnity Provisions,” William H. Staples, presented at the Spring 2003 City Attorney Conference. 3 Rossmoor Sanitation, Inc. v. Pylon, Inc. (1975) 13 Cal. 3d 622, 633. 4 Heppler v. J.M. Peters Company, Inc. (1999) 73 Cal. App. 4th 1265, 1278. 5 29 Cal.App.3d 413 (1972).

JENKINS & HOGIN LLP 2

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whether they were active or passive.6 The use of language that provides for indemnification for any and all claims, “except those arising from the sole negligence or willful misconduct of indemnitee . . .” has been held to be a Type I indemnification provision.7 The court’s reasoning is that if the only wrongdoing excluded is sole negligence, then any kind of co-negligence short of that is indemnified. Hence, a Type I clause is the most protective indemnity clause and thus is preferred. The second type of provision – Type II -- only indemnifies the indemnitee for passive, not active, negligence. These provisions typically state that the indemnitee is indemnified for liability “howsoever may be caused” or “regardless of responsibility for negligence.” Courts have held that this language is sufficient to provide indemnification for passive negligence, but that the language does not “expressly and unequivocally” provide for indemnification for active negligence.8

Apart from the obvious disadvantage of more limited protection, another disadvantage of a Type II clause is that it generates disputes over whether the city’s negligence was active or passive, a common occurrence with Type II clauses. While State law precludes an indemnity for active negligence in a construction contract (Civil Code §2782(b)), an indemnity clause should otherwise generally not be limited to a city’s passive negligence; in other words, outside of construction contracts, avoid Type II indemnity provisions. The third type of provision only indemnifies the indemnitee for liability caused by the indemnitor if the indemnitee is in no respect responsible for the indemnified injury. Under a Type III provision, any negligence on the part of the indemnitee city will bar indemnification whether or not the contractor is also at fault, even if primarily at fault.9 Repeat: if the city is in any respect at fault, it cannot seek indemnification under a Type III provision. Hence, Type III indemnity clauses should be avoided as they generally provide insufficient protection. Here is the rub: a very minor change in language can convert a Type I to a Type III indemnity clause. Because Type III clauses are to be avoided, precision in language is critical.

6 Active versus passive negligence is very fact-dependent, but active generally means the party created a condition or had knowledge of a condition that causes injury. Passive negligence is where the party did not create the condition that causes injury and lacked of knowledge of it, but failed to perform a legal duty to guard against it. 7 C.I.Engineers & Constructors, Inc. v. Johnson & Turner Painting Co. (1983) 140 Cal.App.3d 1011, 1018. 8 MacDonald & Kruse, 29 Cal.App.3d at 419. 9 Id. at 420.


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MacDonald & Kruse has been heavily criticized as too mechanical and formulaic an approach to indemnity, but the decision has never been overruled.10 Subsequent cases, however, hold that the parties’ mutual intent will control over a rigid application of the classifications established in MacDonald & Kruse. But, even under subsequent cases, precise language matters – for example, in Rossmoor, supra, the Supreme Court held that if an indemnity clause fails to address the indemnitee’s negligence, the clause is considered a “general” indemnity clause, and while it may protect the indemnitee from liability due to its passive negligence, it will not protect against the indemnitee’s active negligence. Even Rossmoor observes that this is not a rigid rule and not always dispositive.11 The lesson to be learned from these cases is that to avoid a court relying on those classifications when interpreting an indemnity clause, the clause must clearly and unequivocally express the parties’ intent; otherwise, an indemnitor may argue for and a court may well resort to a mechanical application of the MacDonald & Kruse or Rossmoor rules. It is too risky to hope that a reviewing court will consider parol or other evidence of the parties’ intentions where the meaning of a boilerplate indemnification is in dispute. While it is the intent of the parties that is important, that intent is illuminated by the court’s interpretation of certain standard language in these types of provisions. In American Motorcycle Assn. v. Superior Ct., the California Supreme Court recognized a common law right of comparative indemnity in the context of tort law, reasoning that the evolution of comparative negligence principles demanded similar changes in suits for equitable indemnification. The Court held that “concurrent tortfeasors have a common law right to obtain partial indemnification from other concurrent tortfeasors on a comparative fault basis.”12 Courts have made clear that contract principles govern the interpretation of any indemnification provision.13 Given the public policy set out in cases like American Motorcycle in favor of allocating liability based on the degree of fault, there does not seem to be anything prohibiting a city from expressly agreeing to some kind of partial indemnification based on comparative fault when the contracting party refuses to accept a Type I clause. B. A Note About Indemnity By Design Professionals.

10 See Rossmoor Sanitation Inc. v. Pylon, Inc. (1975) 13 Cal. 3d 622 (Supreme Court seems to lean towards a different analysis, but fails to overrule); McCrary Construction Corp. v.Metal Deck (2005) 133 Cal. App. 4th 1528, 1538-39; Rodriguez v. McDonnell Douglass Corp. (1978) 87 Cal. App. 3d 626, 674 (“MacDonald & Kruse classification is no longer tenable”). 11 13 Cal. 3d at 628-29; C.I. Engineers & Constructors, Inc., supra, 140 Cal.App.3d at 1014-1015. 12 American. Motorcycle Assn. v. Sup. Ct, (1978) 20 Cal.3d 578, 604. 13 Ralph M. Parsons Co. v. Combustion EquipmentAssoc., Inc. (1985) 172 Cal.App.3d 211, 228.


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For contracts with “design professionals” (i.e. architects and engineers) under Civil Code § 2782.8, a city can only require indemnity for the professional’s negligence, recklessness or willful misconduct. It is not clear, however, whether a public agency can require under Section 2782.8 indemnification for its own negligence (i.e. where the design professional is only partially at fault) by means of a Type I clause, or whether the Section is intended to limit the design professional’s liability to the extent of its own negligent or wrongful conduct; nonetheless, you can expect a design professional to argue that the section implies comparative fault and to resist a Type I clause.14 Shifting to a Type III clause, however, would mean that any negligence on the part of the indemnitee city would entirely vitiate the indemnity obligation of the design professional, which is not a desirable result. Accordingly, as a compromise, a clause should be used that has the effect of allocating indemnity obligations based on percentage of fault. C. A Shorter Note About Construction Contracts. As noted above, in construction contracts, a public agency can only seek indemnification for its passive negligence, and may not shift liability for defects in design.15 But State law does not preclude a city seeking full indemnification for mixed claims, i.e. those claims where both a city (passively) and the contractor are at fault. Hence, while limited to passive negligence, the indemnity clause should require full indemnification even if the city is partially at fault. D. Defense and Insurance. Civil Code Section 2778 creates certain presumptions about indemnity clauses. For example, it provides that implied in every indemnity clause is the duty of defense of an indemnified claim.16 While the issue of insurance coverage is not within the scope of this paper, note that defense obligations associated with contractual indemnity commitments are generally insurable, at least for negligent conduct. E. Summary.

In summary, except when precluded by state law as noted above, cities should aspire to obtain indemnification for both their active and passive negligence and whenever feasible utilize a Type I clause. With this type of broad

14 For an excellent discussion of this issue, see “Architect and Engineer Design Liability and AB 573: Big Deal or Ho-Hum, Roland Nikles, presented at the Spring 2007 City Attorney Conference. Nikles argues that the legislative history of Section 2782.8 contradicts the argument that it was intended to be a proportionate fault statute. 15 Cal. Civil Code § 2782(b). 16 Cal. Civil Code § 2778(3).


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provision, the contractor must immediately defend a city following the occurrence of liability.17 Alternatively, the indemnified party always has the option to defend itself, at the indemnitor’s expense.18 With a clause that only covers passive negligence or the contractor’s wrongdoing, the fight is over the extent of the City’s wrongdoing, which will preclude indemnity until a court decides that issue. Practically, this means that the City must defend itself first before a court rules whether it is entitled to be indemnified. A Type III clause, signified by its failure to address the consequences of the indemnitees’ negligence, should be avoided because it bars recovery against the indemnitor if the indemnitee city is only minimally responsible for the injury. III. Sample Indemnification Clauses19

A. Type I.

The below language has been interpreted as a Type I provision, indemnifying

for both active and passive negligence, the critical language highlighted in bold font:

The Contractor shall indemnify, defend, and hold harmless the City, and its officers, employees, and agents (“City indemnitees”), from and against any and all causes of action, claims, liabilities, obligations, judgments, or damages, including reasonable attorneys’ fees and costs of litigation (“claims”), arising out of the Contractor’s performance of its obligations under this agreement or out of the operations conducted by Contractor, including the City’s active or passive negligence, except for such loss or damage arising from the sole negligence or willful misconduct of the City. In the event the CITY indemnitees are made a party to any action, lawsuit, or other adversarial proceeding arising from Contractor’s performance of this agreement the Contractor shall provide a defense to the City indemnitees or at the CITY’s option reimburse the City indemnitees their costs of defense, including reasonable attorneys’ fees, incurred in defense of such claims.

As noted above, there are many different formulations of this language that will accomplish the goal. The key is (i) not to delete the phrase “except those arising from the sole negligence or willful misconduct of the City” as failure to address the consequences of the city’s negligence will arguably convert this Type I clause to a Type III clause absent contrary evidence of the parties’ intentions; and (ii) though not essential, try to include the phrase “active or passive,” as otherwise, the

17 Cal. Civil Code § 2778(3). 18 Cal. Civil Code § 2778(4). 19 These are for purpose of illustration only. They are not a substitute for the exercise of your own independent legal judgment when drafting the appropriate indemnity clause for any particular contract.


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clause may be interpreted as protecting the city only from its passive negligence. Do not be surprised if the consultant wants to add the phrase “negligent or wrongful,” or some variation thereof, in front of the word “performance” in the 5th line. Another, more detailed version of a Type I clause is as follows:

CONSULTANT shall indemnify, defend with counsel approved by CITY, and hold harmless CITY, its officers, officials, employees and volunteers from and against all liability, loss, damage, expense, cost (including without limitation reasonable attorneys fees, expert fees and all other costs and fees of litigation) of every nature arising out of or in connection with CONSULTANT's performance of work hereunder or its failure to comply with any of its obligations contained in this AGREEMENT, except such loss or damage which is caused by the sole negligence or willful misconduct of the CITY. Should conflict of interest principles preclude a single lawyer from representing both CITY and CONSULTANT, or should CITY otherwise find CONSULTANT’S legal counsel unacceptable, then CONSULTANT shall reimburse the CITY its costs of defense, including without limitation reasonable attorneys fees, expert fees and all other costs and fees of litigation. The CONSULTANT shall promptly pay any final judgment rendered against the CITY (and its officers, officials, employees and volunteers) covered by this indemnity obligation. It is expressly understood and agreed that the foregoing provisions are intended to be as broad and inclusive as is permitted by the law of the State of California and will survive termination of this Agreement.

Note that the above clauses require indemnification by the indemnitor for liability arising from its “performance,” regardless whether negligent or wrongful.

B. Design Professionals.

As noted earlier in this paper, Civil Code Section 2782.8 precludes a public agency from requiring an indemnity of the above kind in a contract with a design professional; instead, the indemnity obligation is restricted to the design professional’s “negligence, recklessness or willful misconduct.” Aside from that, Section 2782.8 does not expressly preclude a Type I clause in a contract with a design professional, as follows:

CONSULTANT shall indemnify, defend with counsel approved by CITY, and hold harmless CITY, its officers, officials, employees and volunteers from and against all liability, loss, damage, expense, cost (including without limitation reasonable attorneys fees, expert fees and all other costs and fees of litigation) of every nature arising out of or in connection with CONSULTANT's negligence, recklessness or willful misconduct in the performance of work hereunder or its failure to comply with any of its obligations contained in this AGREEMENT, except such loss or damage which is caused by the sole active negligence or willful misconduct of the CITY. Should conflict of interest principles preclude a


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single lawyer from representing both CITY and CONSULTANT, or should CITY otherwise find CONSULTANT’S legal counsel unacceptable, then CONSULTANT shall reimburse the CITY its costs of defense, including without limitation reasonable attorneys fees, expert fees and all other costs and fees of litigation. The CONSULTANT shall promptly pay any final judgment rendered against the CITY (and its officers, officials, employees and volunteers) with respect to claims determined by a trier of fact to have been the result of the CONSULTANT’s negligent, reckless or wrongful performance. It is expressly understood and agreed that the foregoing provisions are intended to be as broad and inclusive as is permitted by the law of the State of California and will survive termination of this Agreement.

Some consultants or contractors strenuously resist a Type I clause, because they are on the hook despite the City’s passive contributory negligence. In such instances, do not merely drop the “sole negligence” phrase and inadvertently create a Type III clause. Instead, incorporate language that expresses the precise intent of the parties to allocate liability based on degree of fault. In his paper,20 Nikles cautions that under Civil Code Section 2782, even a Type I clause in a design contract can only protect a public agency from its passive negligence, because it is a species of construction contracts; on page 8 he includes an alternative formulation of an indemnity clause that also expressly excludes the public agency’s active negligence. Also, some city attorneys utilize a bifurcated indemnity clause because professional liability insurers typically will reimburse defense costs but not defend, whereas commercial general liability insurers will provide a defense. C. Comparative Indemnity. In light of the earlier discussion regarding comparative indemnity, the following clause is one example of language allocating liability based on degree of fault:

CONSULTANT shall indemnify, defend with counsel approved by CITY, and hold harmless CITY, its officers, officials, employees and volunteers from and against all liability, loss, damage, expense, cost (including without limitation reasonable attorneys fees, expert fees and all other costs and fees of litigation) of every nature arising out of or in connection with CONSULTANT's performance of work hereunder or its failure to comply with any of its obligations contained in this AGREEMENT to the degree determined in a final and non-appealable judgment to be proportionate to its liability. Should conflict of interest principles preclude a single lawyer from representing both CITY and CONSULTANT, or should CITY otherwise find CONSULTANT’S legal counsel unacceptable, then

20 See footnote 11.


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CONSULTANT shall reimburse the CITY its costs of defense, including without limitation reasonable attorneys fees, expert fees and all other costs and fees of litigation. The CONSULTANT shall promptly pay any final judgment rendered against the CITY (and its officers, officials, employees and volunteers) with respect to claims determined by a trier of fact to have been CONSULTANT’s allocated share of liability. It is expressly understood and agreed that the foregoing provisions are intended to be as broad and inclusive as is permitted by the law of the State of California and will survive termination of this Agreement.

Another formulation of this idea is as follows:

To the extent permitted by law, Consultant agrees to indemnify and hold harmless the City, its officers, employees and agents from any and all claims, damages (including court expenses and reasonable attorneys’ fees) to persons or property, penalties, obligations or liabilities that may be claimed by any person, firm, entity, corporation, political subdivision or other organization arising out of the negligent acts, errors or omissions or willful misconduct of Consultant, its agents, employees, subcontractors, or invitees related to performance or nonperformance of this Agreement. To the fullest extent permitted by law, a party’s total liability to the other party and anyone claiming by, through, or under the other party for any cost, loss, or damages caused in part by the negligence of the party and in part by the negligence of the other party or any other negligent entity or individual, shall not exceed the percentage share that the party’s negligence bears to the total negligence of City, Consultant, and all other negligent entities and individuals.

Finally, a mutual indemnity also accomplishes this objective:

To the fullest extent permitted by law, the parties agree to save, indemnify, defend, and hold harmless each other from any and all liability, claims, suits, actions, arbitration proceedings, administrative proceedings, and regulatory proceedings, losses, expenses, or any injury or damage of any kind whatsoever, whether actual, alleged or threatened, attorney fees, court costs, and any other costs of any nature without restriction incurred in relation to, as a consequence of, or arising out of, the performance of this Agreement, and attributable to the fault of the other. Following a determination of the percentage of fault and or liability by agreement between the Parties or a court of competent jurisdiction, the Party responsible for liability to the other will indemnify the other Party to this Agreement for the percentage of liability determined.

D. Type II Language for Construction Contracts.

Construction contracts typically include a long-form and very inclusive indemnity provision. The following paragraph, when added to an indemnity clause, will create a Type II indemnity provision compliant with state law:


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Contractor's obligations under this section apply regardless of whether or not such claim, charge, damage, demand, action, proceeding, loss, stop notice, cost, expense, judgment, civil fine or penalty, or liability was caused in part or contributed to by an Indemnitee. However, without affecting the rights of City under any provision of this agreement, Contractor shall not be required to indemnify and hold harmless City for liability attributable to the active negligence of City, provided such active negligence is determined by agreement between the parties or by the findings of a court of competent jurisdiction. In instances where City is shown to have been actively negligent and where City active negligence accounts for only a percentage of the liability involved, the obligation of Contractor will be for that entire portion or percentage of liability not attributable to the active negligence of City.

This language mirrors that used by the court in C.I. Engineers & Constructors, Inc. as an example of the type of language that would protect an indemnitee against its own passive negligence.21

IV. Conclusion Examples of indemnity clauses abound. The California Joint Powers Insurance Authority publishes a booklet on the subject. The list serve archives include discussions on the subject. At bottom, when you craft your indemnity clauses, make certain that your indemnification is not merely boilerplate, but reflects the intentions of the parties regarding allocation of risk and does not inadvertently eliminate the protection you are intending to provide to the city.

21 C.I. Engineers & Constructors, Inc. v. Johnson & Turner Painting Co., supra, 140 Cal.App.3d at 1018.


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Signs of the Time--Play Now, Pray Later: Regulating Signs, Sex and Religious Facilities

League of California Cities 2009 City Attorneys’ Spring Conference

Olympic Valley, California

Meyers Nave 333 S. Grand Avenue, Suite 1670

Los Angeles, CA 90071 (213) 626-2906

Deborah J. Fox, Principal [email protected]

Bianca Sparks, Associate

[email protected]

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INTRODUCTION

The First Amendment of the United States Constitution provides “Congress shall make no law…abridging the freedom of speech, or of the press….” Under the Fourteenth Amendment, municipal ordinances are within the scope of this limitation on governmental authority.1 The First Amendment forbids the government to regulate speech in ways that favor some viewpoints or ideas at the expense of others. Yet, a city is not powerless to protect its citizens from unwanted exposure to certain methods of expression and to impose reasonable time, place and manner regulations.2

Sign companies, adult use businesses and religious institutions continuously test the limits of their constitutional and statutory protections. Attorneys for religious institutions are now relying upon adult use case law to support their claims, specifically a city’s need to demonstrate alternative sites and process applications expeditiously. Sign companies attempt to exploit weaknesses in local sign ordinances, often attacking allegedly insufficient procedural protections that are unrelated to the signs they intend to display. Attorneys for adult use businesses press the need for relevant studies and findings and the availability of alternative sites. This paper will discuss the intersection of local regulation and the First Amendment specifically addressing billboards/signs, adult uses and religious facilities. Billboards and Signs

Historically, billboards are a popular means of advertising to the masses.

Billboards are generally placed along highways or major traffic arterials to garner the greatest amount of attention for a specific product. These advertisements often contain witty slogans coupled with high impact graphics and bright colors, artfully designed to catch the eye of passers-by. Over the years, billboards have become more common place and the public has learned to rely on these advertisements as a way of learning about goods available within the marketplace. Supergraphics and digital billboards (LEDs) are becoming the billboard of the modern century, these advertisements may span the height of an entire building or be a virtual mega plasma television mounted on a building’s facade.

Billboards and other signs are protected by the First Amendment.3 However,

billboards may be regulated and even banned by municipalities pursuant to their police 1 Lovell v. City of Griffin, 303 U.S. 444, 450, 58 S.Ct. 666 (1938). 2 See Kovacs v. Cooper, 336 U.S. 77, 69 S.Ct. 448 (1949); see also Ward v. Rock

Against Racism, 491 U.S. 781, 791, 103 S.Ct. 2746 (1989) [the government may impose reasonable time, place and manner restrictions on speech as long as they are content neutral, narrowly tailored to serve a significant government interest and leave open “ample channels for communication”].

3 See Prime Media, Inc. v. City of Brentwood, 398 F.3d 814 (6th Cir. 2005) [holding that billboards and other signs are a medium of expression protected by the First Amendment].

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Signs of the Time--Play Now, Pray Later: Regulating Signs, Sex and Religious Facilities Page 2 power. Cities are able to implement reasonable zoning ordinances in the interest of public health, safety, aesthetics and maintenance of property values.4 Under Metromedia, Inc. v. City of San Diego,5 municipalities may prohibit all off-site billboards for aesthetic and safety reasons, so long as the city’s ordinance complies with the First Amendment. Cities constantly grapple to maintain a fine balance between the legitimate exercise of their police power and the First Amendment.

Standard of Review: Commercial vs. Non-commercial Speech

Stricter standards are applied to governmental regulation of non-commercial

speech than to commercial speech.6 Therefore, regulations that may be unconstitutional with respect to non-commercial speech may be valid when applied to commercial speech.7 In Metromedia, San Diego adopted an ordinance banning outdoor advertising display signs. However, the ordinance provided exemptions for on-site signs and signs falling into twelve different categories. On-site signs were considered those signs actually on the premises of an individual business, that advertised the products available on the property where the sign was located. Off-site advertisements were signs located at any location other than the business’ actual site of operation. Non-commercial advertising was prohibited everywhere unless it fell into one of the twelve enumerated exemptions. A plurality of the Supreme Court held the ordinance unconstitutional.

The Supreme Court held that non-commercial speech is afforded greater

constitutional protection than commercial speech. While the city’s ordinance permitted on-site commercial advertising, it banned on-site non-commercial advertising, but offered no explanation why one was permitted while the other was not. San Diego did not offer any indication that non-commercial billboards would be more distracting to drivers or would have an adverse affect on the aesthetics of the city. The Supreme Court further held that the city could not conclude that commercial messages are of a greater value than non-commercial messages.8 Moreover, with respect to non-commercial speech, San Diego could not choose the appropriate subjects for public discourse.9 San Diego did not ban all billboards and accordingly the Supreme Court rejected San Diego’s argument that the ordinance was a reasonable time, place and manner restriction.10

4 Outdoor Graphics, Inc. v. City of Burlington, 103 F.3d 690 (8th Cir. 1996). 5 453 U.S. 490, 512, 101 S.Ct. 2882 (1981). 6 Id. at 513. 7 National Advertising Company v. City of Orange, 861 F.2d 246, 248 (9th Cir. 1988). 8 Metromedia, 453 U.S. at 513. 9 Id. at 515. 10 Id. at 515-16.

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Signs of the Time--Play Now, Pray Later: Regulating Signs, Sex and Religious Facilities Page 3 Commercial Speech

Municipalities are prohibited from imposing content-based regulation on non-

commercial speech, however these rules do not apply in the context of commercial speech. Cities can in fact prohibit all billboards.11 While there is no concise definition of commercial speech, the courts have articulated three general characteristics: (1) it is an advertisement of some form; (2) it refers to a specific product; and (3) the speaker has an economic motivation for the speech.12 The extension of First Amendment protection to purely commercial speech is a relatively recent development in First Amendment jurisprudence.13 Prior to 1975, purely commercial advertisements of services and goods were considered to be outside the protection of the First Amendment.

In Central Hudson Gas & Electric Corp. v. Public Service Commission,14 the seminal case on commercial speech, the Supreme Court held that the

Constitution accords a lesser protection to commercial speech than to other constitutionally guaranteed expression. The protection available for a particular commercial expression turns on the nature both of the expression and of the governmental interests served by its regulation.

In Central Hudson, the Supreme Court adopted a four-part test to determine the validity of government restrictions on commercial speech:

(1) The First Amendment protects commercial speech only if that speech concerns lawful activity and is not misleading. A restriction on otherwise protected speech is valid only if it (2) seeks to implement a substantial government interest, (3) directly advances that interest, and (4) reaches no further than is necessary15 to accomplish the given objective.16

In Metromedia, the Supreme Court applied the Central Hudson test and held that San Diego could impose a complete ban on billboards so long as the ban is content neutral. Under the fourth prong of Central Hudson, the Supreme Court found

11 Id. at 507-510. 12 See Bolger v. Young Drug Products Corp., 463 U.S. 60, 103 S.Ct. 2875 (1983). 13 Metromedia, 453 U.S. at 505. 14 447 U.S. 557, 562-63, 100 S.Ct. 2343 (1980). 15 In Board of Trustees of the State Univ. of N.Y. v. Fox, 492 U.S. 469, 480 109 S.Ct.

3028 (1989), the Court modified the “reaches no further than is necessary” portion of this prong to require a reasonable fit between the legislative purpose and the chosen means to achieve that purpose.

16 Central Hudson, 447 U.S. at 563-66.

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Signs of the Time--Play Now, Pray Later: Regulating Signs, Sex and Religious Facilities Page 4 that the ordinance was no broader than necessary because “[i]f the city has a sufficient basis for believing that billboards are traffic hazards and unattractive, then obviously the most direct and perhaps the only effective approach to solving the problems they create is to prohibit them.”17 The Supreme Court further held that commercial billboards could be banned off-site even if they were permitted on-site.18

In Metro Lights, L.L.C. v. City of Los Angeles,19 the City of Los Angeles (“Los Angeles”) entered into an agreement with Viacom (later to become CBS), whereby CBS would install public facilities at city-owned bus stops in exchange for the exclusive advertising rights on those facilities. Five months after executing the agreement, Los Angeles adopted an ordinance banning off-site commercial advertising, but excluded bus stops from the ban. Metro Lights owns and operates outdoor signs in Los Angeles, and after the ordinance was enacted, received numerous citations for installing new off-site signs.20 Metro Lights brought suit against Los Angeles, claiming Los Angeles violated its First Amendment rights. The district court held that Los Angeles could not preclude Metro Lights from installing off-site signs while permitting the signs at bus stops.21

On appeal, the Ninth Circuit focused on the third and fourth elements of the

Central Hudson test – whether the ordinance directly advances a government interest and whether the ordinance is narrowly tailored, and found the sign ordinance to be constitutionally sound.22 Los Angeles’ sign ordinance advanced a government interest because it allowed Los Angeles to put a cap on the amount of advertising and therefore the city would not be flooded with advertising.23 Further, Los Angeles had some basis for distinguishing between off-site commercial signs at bus stops and uncontrolled private signs located throughout the city.24 The Ninth Circuit held that by controlling visual clutter via the sign ordinance, the ordinance advanced a government interest.

As to narrow tailoring, the Ninth Circuit found that because Los Angeles’ plan

allowed it to supervise signs only at bus stops, the ordinance was contributing to Los Angeles’ “interest in visual coherence as a part of aesthetic quality.”25 The Ninth 17 Metromedia, 453 U.S. at 508. 18 Id. 19 551 F.3d 898 (9th Cir. 2009). 20 Id. at 901-902. 21 Id. at 903. 22 Id. at 904. 23 Id. at 911. 24 Id. 25 Id. at 912.

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Signs of the Time--Play Now, Pray Later: Regulating Signs, Sex and Religious Facilities Page 5 Circuit went on to hold that Los Angeles was permitted to allow parties to bid for “the right to speak on City-owned land, assuming that the speakers on City-owned land do not undermine the goal of the City’s general prohibition.”26 The Ninth Circuit found that the agreement between Los Angeles and CBS did not undermine the sign ordinance to the point where the ordinance was not able to advance its purpose.27

Metromedia and Metro Lights support a city’s ability to adopt regulations

prohibiting off-site commercial signs. However, because challenges to billboard ordinances usually lead to expensive federal litigation, it is wise for municipalities to include extensive findings and specific references to case law in support of their regulations. A city’s findings should state the governmental interest to be served through the regulation, and provide enough information about the need within the city to show there is a strong correlation between that interest and the regulation. Moreover, a city should exercise its judgment on how best to solve the billboard issue and explain why the final alternative was selected amongst competing interests. Electronic Billboards

Electronic billboards are the wave of the future, and are the latest in billboard

technology. Public safety concerns have been raised regarding the distractive nature of these new billboards leading some cities to ban the technology entirely. The U.S. Department of Transportation, Federal Highway Administration (“FHA”) conducted cursory research as to whether the electronic billboards pose a risk to drivers. While the FHA admitted that further and more comprehensive research must be conducted, it concluded that the billboards do have the potential to distract drivers, thereby posing a public safety hazard.28 Moreover, many sign ordinances do not contain current definitions to adequately deal with these new age signs. Cities are well served to update their codes before confronted with demands for these electronic billboards.

The advent of electronic billboards has created a host of new issues for cities to address. In Naser Jewelers, Inc. v. City of Concord,29 the city adopted an ordinance banning all Electronic Messaging Centers (“EMCs”) and signs that displayed electronically changeable messages. The prohibited electronic signs included those that “appear animated or projected” or “are intermittently or intensely illuminated or of a traveling, tracing, scrolling, or sequential light type” or “contain or are illuminated by

26 Id. at 914. 27 Id. 28 See Research Review of Potential Safety Effects of Electronic Billboards on Driver

Attention and Distraction, available at: http://www.fhwa.dot.gov/realestate/elecbbrd/execsum.htm.

29 513 F.3d 27 (1st Cir. 2008).

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Signs of the Time--Play Now, Pray Later: Regulating Signs, Sex and Religious Facilities Page 6 animated or flashing light.”30 When adopting the ordinance, Concord found that the EMCs were detrimental to traffic safety and the aesthetics of the community.

The First Circuit in adjudging the sign ordinance’s constitutionality did not employ the Central Hudson test. Rather, the court evaluated the ordinance using the O’Brien test.31 The First Circuit held that when a regulation is content neutral, the court must look to the legislative body’s statement of intent to determine whether the ordinance serves a substantial government interest. Both community aesthetics and traffic safety have long been held to be significant government interests.32 Concord’s goals were to improve pedestrian and traffic safety along with the city’s appearance.33 Based on these stated reasons, the First Circuit found that the ordinance served a substantial government interest.34 The First Circuit then evaluated whether Concord’s ordinance was narrowly tailored. While the plaintiff argued that it was necessary for the city to conduct studies to establish that its ordinance would in fact support its stated interests, the First Circuit held that the city had no duty to undertake independent studies or to put them into evidence.35 Instead, the court gave deference to the judgment of the legislative body, and further held that when adopting a content neutral ordinance, local governments are not required to choose the least restrictive approach if that approach would serve the city’s interests less effectively.36 The First Circuit also determined that because businesses were able to use other mediums such as static billboards and manually changeable signs, that the city’s ordinance left open alternative channels of communication. Examining the factors as a whole, the First Circuit held that Concord’s ordinance was a constitutionally permissible, content-neutral regulation.37

30 Id. at 30. 31 In Members of the City Council of the City of Los Angeles v. Taxpayers for Vincent,

466 U.S. 789, 104 S.Ct. 2118 (1984), the Supreme Court validated Los Angeles’ prohibition on signs in the public right of way. In reaching its determination the Supreme Court employed the test articulated in U.S. v. O’Brien, 391 U.S. 367, 377, 88 S.Ct. 1673 (1968), holding that a regulation is constitutional if: (1) it furthers a substantial government interest; (2) it is not broader than necessary to protect the government’s interest; and (3) the interest is unrelated to the suppression of speech.

32 Naser Jewelers, 513 F.3d at 34. 33 Id. at 30. 34 Id. at 34. 35 Id. at 35. 36 Id. at 36. 37 Id. at 37.

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In Clear Channel Outdoor, Inc. v. City of Minnetonka,38 the City of Minnetonka instituted a 60 day moratorium on electronic billboards, which the Minnesota court understood to ban any new LED billboards that changed electronic messages more than once per hour.39 However, the city construed the moratorium to ban the use of all electronic billboards, including those that contained advertisements which changed no more than once per hour. Clear Channel operated electronic billboards that changed messages once every eight seconds. The city adopted the ordinance on the grounds that electronic signs that changed once every eight seconds were a safety hazard to drivers and the city needed to conduct further safety studies. Clear Channel sought injunctive relief to have the signs operate with ad changes once per hour pursuant to the moratorium, rather than not at all.40 The court found that when operated during daylight hours, Clear Channel’s signs do not pose a threat to the public safety, health or welfare.41 In its order, the court permitted Clear Channel to operate its signs during daylight hours provided the signs did not change more than once per hour. Clear Channel was prohibited from operating its signs before or after daylight due to public safety concerns.

Electronic billboards represent the future of advertising. However, cities may

wish to regulate these types of billboards due to traffic safety and visual pollution concerns. As noted in Clear Channel, cities may want to adopt different regulations for day and night to address the bright lights that are emitted from electronic billboards. Cities should also review their sign ordinances to determine whether they should be updated to include definitions for LED and LCD electronic billboards. While cities do not need to conduct actual studies to show support for a billboard ordinance, municipalities should always offer findings which explain the government interest the city is addressing, and offer concrete examples of the harm the municipality is trying to prevent or eliminate. It is further suggested that specific reference to existing case law also be included in the findings. Mobile and Portable Billboards

In Showing Animals Respect and Kindness v. City of West Hollywood,42 the

California Court of Appeal upheld the City of West Hollywood’s ordinance banning all mobile billboard advertising. The city enacted the ordinance to promote traffic safety, improve air quality and improve the appearance of the city.43 A mobile billboard was

38 Clear Channel Outdoor, Inc. v. City of Minnetonka, No. 27-CV-06-23485 (4th Dist.,

MN March 7, 2007). 39 Id. at 2. 40 Id. at 3. 41 Id. at 17. 42 166 Cal.App.4th 815, 83 Cal.Rptr.2d 134 (2008). 43 Id. at 817.

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Signs of the Time--Play Now, Pray Later: Regulating Signs, Sex and Religious Facilities Page 8 defined as “any vehicle, or wheeled conveyance which carries, conveys, pulls, or transports any sign or billboard for the primary purpose of advertising.”44 The ordinance provided for three exemptions—buses, taxicabs and vehicles that displayed an advertisement for the business of its owner, so long as the vehicle was used for the business of the owner, and not used primarily for advertising. A non-profit organization that campaigned against cruelty to animals promoted its message by driving the “Tiger Truck” around the streets of West Hollywood. On the truck were four one-hundred inch video screens depicting scenes of animals being killed or injured by humans. The truck was also equipped with LED signs that ran messages protesting animal brutality and an audio with cries of abused animals. After the organization was cited for violating West Hollywood’s ordinance, the organization filed suit against West Hollywood.

In evaluating the constitutionality of the ordinance, the California Court of Appeal employed the four part Central Hudson test. While the plaintiff argued that West Hollywood’s ordinance was content based, the Court of Appeal held that it was content neutral because the language of the ordinance focused on the speaker’s actions, not on the content of the speech. By using words such as “carries,” “conveys,” “pulls,” and “transports” the ordinance was regulating the manner of the speech. Moreover, the ordinance applied to both commercial and non-commercial vehicles because both were prohibited from driving through the city for the primary purpose of advertising.45 Both parties agreed that promoting traffic safety, reducing air pollution and improving the appearance of the city are all legitimate government interests.46 The Court of Appeal found that under the third prong of the Central Hudson test, the ordinance was narrowly tailored. The Court of Appeal opined that while buses and taxicabs may display advertising, the primary purpose of those vehicles is not advertisement, but transporting individuals between different locations. Therefore, West Hollywood’s ordinance was reasonably calculated to promote traffic safety, reduce air pollution and improve the appearance of the city.47 Lastly, the Court of Appeal examined whether the city’s ordinance left open alternative channels for communication. The plaintiff maintained that there were no alternative means of communication because of the cost efficiency associated with mobile advertising. The Court of Appeal held that cost efficiency is not a reason to grant constitutional protection and that other venues including the internet, newspaper, flyers, and direct mailings were available.

In Ballen v. City of Redmond,48 the Ninth Circuit invalidated the City of Redmond’s ordinance banning portable signs. The city adopted the ordinance to 44 Id. at 819. 45 Id. at 823. 46 Id. 47 Id. at 824. 48 466 F.3d 736 (9th Cir. 2006).

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Signs of the Time--Play Now, Pray Later: Regulating Signs, Sex and Religious Facilities Page 9 promote traffic safety and community aesthetics. There were ten categories of signage that were exempted from the prohibition:

(1) banners on the Redmond Way railroad overpass, (2) construction signs, (3) celebration displays, (4) banner displays in the city center neighborhood, (5) major land use action notices, (6) political signs, (7) real estate signs, (8) temporary window signs, (9) signs on kiosks and (10) temporary uses and secondary uses of schools, churches, or community buildings.49

The Ninth Circuit held that Redland’s ordinance met the first two prongs of the Central Hudson test, the speech was commercial in nature and the city’s goals of promoting traffic safety and improving the aesthetics of the city are substantial government interests. The Ninth Circuit did not evaluate the third prong of the Central Hudson test, whether the ordinance advances the governmental interest, because the court held that Redmond’s ordinance failed to meet the fourth prong of the test.50 The Ninth Circuit found that because Redland’s exceptions to its portable sign ordinance were all content based, the city failed to show how the exempted signs advanced the governmental interests any less than the signs that were prohibited. Moreover, the exempted signs turned the city’s ordinance into a content based regulation. The Ninth Circuit held that Redmond could have employed less restrictive regulations to further its goals of improving traffic safety and preserving community aesthetics, therefore the city’s ordinance violated the First Amendment.51 The Central Hudson analysis is particularly relevant in today’s tumultuous economic climate. Cities are being asked to allow more real estate signs as a result of the housing downturn. It is important that cities are aware of the legal issues that need to be considered as they make these types of decisions.

Mobile billboards present unique safety hazards due to their portable nature.

While exceptions generally make an ordinance suspect, when it comes to mobile billboard ordinances, it is likely that a city may carve out exceptions for buses, taxicabs and other vehicles that are not used primarily for advertising. Municipalities must exercise caution to ensure that any exceptions do not turn the ordinance into a content based regulation which would likely not survive a First Amendment challenge. ADULT USE

The regulation of adult businesses continues to be an issue for municipalities across the nation. Communities consistently struggle to adopt constitutionally sound ordinances that effectively regulate the adverse secondary effects caused by adult

49 Id. at 740. 50 Id. at 742. 51 Id. at 743-44.

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Signs of the Time--Play Now, Pray Later: Regulating Signs, Sex and Religious Facilities Page 10 uses. The owners of these businesses bring challenges to these ordinances on the grounds that a municipality’s findings are insufficient, and that the locational restrictions preclude adult uses from a city entirely. Most recently, Flesh Club attempted to recover more than a million dollars in lost profits from the City of San Bernardino after the court enjoined the business’ operation as an adult use. This is the latest chapter in the protracted legal battle between the City of San Bernardino and Flesh Club. In Manta Management v. City of San Bernardino,52 the Flesh Club opened as a comedy club in the City of San Bernardino’s (“San Bernardino”) CR-3 zone. A few months later, Flesh Club changed the use of the property and brought in topless dancers. San Bernardino did not permit adult uses in the CR-3 zone. The day that Flesh Club began operating as an adult business, it filed suit against San Bernardino on the grounds that its location limitations for adult uses were unconstitutionally restrictive.53 San Bernardino then filed an action against Flesh Club seeking to enjoin Flesh Club’s operation as an adult use on the grounds that the business was a public nuisance that violated the zoning code.

The trial court granted San Bernardino’s motion for a preliminary injunction because the zoning ordinance was consistent with San Bernardino’s general plan.54 After rounds of appeals, the ordinance was held unconstitutional, and Flesh Club was awarded $1.4 million in damages for profits lost while it was subject to the injunction.55 The Court of Appeal affirmed the jury award and found that a “city is liable for damages under section 1983 if it chooses to enforce an unconstitutional ordinance by means of a preliminary injunction.”56

The California Supreme Court reversed the Court of Appeal’s decision, holding

that when a court is given the facts necessary to adjudicate a motion for a preliminary injunction, or stay pending appeal, “the court’s intervening exercise of independent judgment breaks the chain of causation for purposes of section 1983 liability.”57 However, this rule does not apply when a judge reaches an erroneous decision because the judge was pressured or materially misled.58 Because there were allegations that San Bernardino made materially misleading comments that led to the issuance of the preliminary injunction, the Supreme Court remanded the matter to the

52 43 Cal.4th 400, 181 P.3d 159 (2008). 53 Id. at 404. 54 Id. 55 Id. at 405. 56 Id. at 406. 57 Id. at 412. 58 Id.

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Signs of the Time--Play Now, Pray Later: Regulating Signs, Sex and Religious Facilities Page 11 trial court.59 This decision is of great importance to local governments because it provides guidance for enforcement strategies that cities may take when bringing claims against adult businesses. The trial court now has the case and briefing has been completed. The parties have a second case management conference scheduled for May 26, 2009.

In Fantasyland Video, Inc. v. County of San Diego,60 the operators of two adult

bookstores challenged San Diego County’s adult business ordinance which limited the hours of operation for adult businesses, prohibited live nude dancing, required open peep show booths and limited adult businesses to an industrial area. The trial court found the county’s ordinance constitutional and the Ninth Circuit upheld the trial court’s decision.

In reaching its decision, the Ninth Circuit held that the county could reasonably

find that by restricting the hours of operation for adult businesses, crime, disorderly conduct and noise would all be reduced. This would assist the county in accomplishing its goal of reducing the secondary effects of adult businesses. The hours restriction was therefore substantially related to an important government interest.

The Ninth Circuit further held that the county had a substantial interest in

preventing sexual acts from occurring in peep show booths because such activities constitute lewd behavior pursuant to California Penal Code § 647(a).61 Moreover, the Ninth Circuit found that Fantasyland never carried its burden of establishing that the open booth requirement was broader than necessary to curtail sexual activity in the booths. Because the county had a substantial government interest in preventing sexual conduct in the booths, and because the county’s ordinance was not broader than necessary to prevent the conduct, the Ninth Circuit held that the county’s ordinance was constitutional.

In City of Santa Fe Springs v. Foxz Corporation,62 Spicy opened as a totally

nude club in the wrong zone. Santa Fe Springs issued orders for Spicy to cease and desist operating as an adult use and filed a complaint seeking a permanent injunction to enjoin Spicy from operating as an adult business. The trial court issued a permanent injunction precluding Spicy’s adult operation.63

59 Id. at 413. 60 505 F.3d 996 (9th Cir. 2007). 61 Id. at 1003. 62 2009 WL 41633 (Cal.App. 2 Dist.), unpublished decision. 63 Id. at 2.

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On appeal, the Second District Court of Appeal upheld the trial court’s decision finding that Santa Fe Springs relied on a number of studies regarding the secondary effects of adult uses when adopting its ordinance, therefore the ordinance advanced a substantial government interest. Moreover, there were sufficient available sites within the city’s permissible commercial zones for Spicy to locate. To be considered available, the site only needs to be part of the actual market for commercial businesses generally.64 It does not matter that a site is not available for immediate occupancy, whether the property owner is unwilling to rent to an adult business, or whether it would be too expensive to construct a suitable facility.65 The Second District further held that Santa Fe Springs’ reasons for selecting the commercial zone for adult uses was rational and sufficient. The Court found that cities “must be allowed a reasonable opportunity to experiment with solutions to admittedly serious problems.”66

Fantasyland reaffirms prior precedent with respect to time, place and manner

restrictions and explains the burden shifting standards under Alameda Books.67 After the California Supreme Court’s decision in Manta Management, public entities should feel more comfortable pursuing enforcement strategies against adult businesses. Cities should also continue to have specific and detailed information about the availability of sites in order to withstand First Amendment challenges. RELIGIOUS LAND USE AND INSTITUTIONALIZED PERSONS ACT (“RLUIPA”) In 2000, Congress enacted the Religious Land Use and Institutionalized Persons Act (“RLUIPA”) (42 U.S.C.A. §§ 2000cc et seq.) with the purpose of preserving the religious exercise provisions afforded by the First Amendment in the context of state and local land use regulations. RLUIPA provides a general rule prohibiting local government from imposing or implementing a land use regulation in a manner that imposes a substantial burden on the religious exercise of a person, including a religious institution, unless the government can show that the imposition of the burden furthers a compelling government interest and is the least restrictive means of furthering that compelling government interest. A land use ordinance is considered a substantial burden when it is oppressive to a significantly great extent.68

RLUIPA contains provisions mandating that local land use regulations shall

grant “equal treatment” to a religious assembly or institution; not discriminate against any assembly or institutions on the basis of religion or religious denomination; and not

64 Id. at 9. 65 Id. 66 Id. at 11, citing Young v. American Mini Theaters, Inc. 427 U.S. 50, 71 (1976). 67 City of Los Angeles v. Alameda Books, 535 U.S. 425, 122 S.Ct. 1728 (2002). 68 Guru Nanak Sikh Society of Yuba City v. County of Sutter, 456 F.3d 978, 988 (9th

Cir. 2006).

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Signs of the Time--Play Now, Pray Later: Regulating Signs, Sex and Religious Facilities Page 13 impose or implement a land use regulation that totally excludes religious assemblies from a jurisdiction or unreasonably limits religious assemblies, institutions, or structures within a jurisdiction.

RLUIPA also provides rules for legal claims brought under the statute, including the shifting of the burden of persuasion to local government once a plaintiff produces prima facie evidence of a violation.

Substantial Burden

In Petra Presbyterian Church v. Village of Northbrook,69 a church found property in the Village of Northbrook (“Northbrook”) that it wanted to convert into a church and companion classrooms. The property was in an area designated as an industrial zone. To permit a religious use, the property would need to be rezoned and also obtain a special use permit. Prior to purchasing the property, the church made an informal request to Northbrook’s governing board. The board made comments favorable to the proposal but did not reach a final decision. Based on those comments, the church purchased the property, contingent on the rezoning of the property. The church then made a formal application for the rezoning. Landowners expressed opposition to the rezoning, and without formally ruling on the matter, the planning commission directed staff to prepare documents consistent with the denial of the church’s permit. Despite this action, the church moved forward and purchased the property.70 Northbrook subsequently sought an injunction against the church which was granted, and the church then appealed arguing that Northbrook’s zoning ordinance violated RLUIPA.

The Seventh Circuit held that the ban on churches in Northbrook’s industrial zone does not create a substantial burden on religion, because if it did, all zoning ordinances that prevent churches from locating within any zone would constitute a prima facie violation of RLUIPA.71 The Court further held that where there is plenty of land in a city where churches are able to locate, the fact that they are not permitted to build in every zone does not constitute a substantial burden on religion.72 To successfully demonstrate a substantial burden, a church would need to demonstrate that land available for churches was scarce and therefore the exclusion of a church from a particular parcel created a substantial burden.

In Scottish Rite Cathedral Association of Los Angeles v. City of Los Angeles,73 the Scottish Rite Cathedral Association (“Association”), a non-profit organization that

69 489 F.3d 846 (7th Cir. 2007). 70 Id. at 847-848. 71 Id. at 851. 72 Id. 73 156 Cal.App.4th 108, 67 Cal.Rptr.3d 207 (2008).

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Signs of the Time--Play Now, Pray Later: Regulating Signs, Sex and Religious Facilities Page 14 operates the Scottish Rite Cathedral (“Cathedral”), filed a writ petition challenging Los Angeles’ revocation of the Cathedral’s certificate of occupancy. Plaintiffs argued that Los Angeles’ actions burdened their exercise of religion, in violation of RLUIPA. The trial court denied the writ and the plaintiffs appealed.74

The Second District Court of Appeal upheld the trial court’s decision. When

reaching its decision, the Second District examined the use of the Cathedral which had evolved from Masonic study to leasing the space to businesses and film production companies. Approximately 40 years later, the Association entered into a long term lease with the Center to operate the Cathedral. Some forty years later the building was renovated and rented out for private use.75 Due to numerous complaints from neighbors, a public hearing where the Cathedral was declared a public nuisance, and the certificate of occupancy was revoked.76

Because the Cathedral was operating for commercial purposes, the Second District found no violation of RLUIPA. In reaching its decision, the Court held that “a burden on a commercial enterprise used to fund a religious organization does not constitute a substantial burden on “religious exercise” within the meaning of RLUIPA.”77 The Second District found support for its holding in RLUIPA’s legislative history. In the Joint Statement of Senators Hatch and Kennedy, the Senators found that not every activity conducted by a religious group could constitute religious exercise. The Second District held that while a religious group may sponsor activities to raise funds to further its religious activities, fundraising efforts alone do not bring the activities into the ambit of religious exercise. Therefore, there could be no substantial burden to religious exercise.78 79 Equal Terms

In Lighthouse Institute for Evangelism, Inc. v. City of Long Branch,80 a church

purchased property in the commercial district, however churches were not permitted in 74 Id. at 209. 75 Id. at 210. 76 Id. at 211. 77 Id. at 216. 78 Id. 79 In Civil Liberties for Urban Believers v. City of Chicago, 342 F.3d 752 (7th Cir. 2003),

the Seventh Circuit held that a city’s requirement that churches obtain special use permits or engage in other approval processes does not constitute a substantial burden for purposes of RLUIPA. The Court further held that the scarcity of affordable land available for development also does not amount to a substantial burden on religious exercise. Id. at 761.

80 510 F.3d 253 (3rd Cir. 2007).

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Signs of the Time--Play Now, Pray Later: Regulating Signs, Sex and Religious Facilities Page 15 the commercial zone.81 Long Branch later adopted a redevelopment plan further restricting the uses permitted within the Broadway Corridor area. While commercial and entertainment uses were permitted in the area, churches and schools were not. The church filed a claim against Long Branch arguing that the redevelopment plan violated the equal terms provision of RLUIPA because it allowed secular assemblies to locate within the Broadway Corridor but excluded religious assemblies.82

The district court granted Long Branch’s motion for summary judgment and the church appealed. The Third Circuit held that a plaintiff raising a claim under the equal terms provision of RLUIPA does not need to demonstrate that the land use regulation imposes a substantial burden on religion.83 The Third Circuit further held that the equal terms provision requires the plaintiff to identify a secular comparator that is better treated and “that is similarly situated in regard to the objectives of the challenged regulation.”84 It is not necessary for the secular comparator to perform the same functions as the plaintiff.85

Whether or not the equal terms provision is subject to a strict scrutiny analysis was the last issue examined by the Third Circuit. The Court held that RLUIPA’s equal terms provision does not require strict scrutiny analysis, but instead operates on a strict liability standard.86 In reaching its holding, the Third Circuit reasoned that the strict scrutiny standard is applicable only for claims brought under the substantial burden provision of RLUIPA. Because the statute is structured in a manner that creates clear distinctions for each provision, it can be reasoned that Congress did not intend to subject claims brought under the equal terms provision to be determined using the strict scrutiny standard. By reaching this decision, the Third Circuit declined to follow the holding in the Eleventh Circuit, which does require strict scrutiny analysis of claims brought under the equal terms provision of RLUIPA. Under the Third Circuit’s holding, RLUIPA’s equal terms provision does not include a substantial burden or strict scrutiny requirement.87

And, in Midrash Sephardi, Inc. v. Town of Surfside,88 two synagogues sued the Town of Surfside alleging that the zoning ordinance excluding churches and synagogues from the business district while permitting private clubs and lodges,

81 Id. at 257. 82 Id. at 262. 83 Id. at 264. 84 Id. at 268. 85 Id. at 267. 86 Id. at 268-69. 87 Id. at 269. 88 366 F.3d 1214 (11th Cir. 2004).

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Signs of the Time--Play Now, Pray Later: Regulating Signs, Sex and Religious Facilities Page 16 violated RLUIPA. The Eleventh Circuit held that private clubs and lodges are similarly situated to churches and synagogues, therefore the ordinance violated the equal terms provision.89 The Eleventh Circuit further held that requiring the churches and synagogues to locate in the residential district did not violate the substantial burden provision of RLUIPA.

In reaching this determination, the Eleventh Circuit held that because RLUIPA

does not define the terms “assembly” or “institutions,” the terms must be construed in accordance with their ordinary meaning.90 Generally, an assembly is considered a place where individuals come together for a common purpose. Pursuant to the town’s zoning ordinance, churches and synagogues are considered places of assembly. The town’s zoning ordinance defined private clubs as a place where individuals gather for social, educational or recreational purposes. The Eleventh Circuit held that similar to churches and synagogues, private clubs are places where individuals meet for a common purpose. Therefore, churches, synagogues and private clubs are all “assemblies” or “institutions” for purposes of interpreting RLUIPA. Because churches and synagogues were treated differently under the town’s ordinance, there was a violation of the equal terms provision.91

While petitioners argued that a substantial burden was created by the town’s

zoning ordinance because congregants would have to walk farther to services, greatly burdening the young and the elderly, the argument was unconvincing.92 While the Court empathized with the congregants who had to endure the hot, humid weather, the Eleventh Circuit held that walking a few additional blocks does not constitute a substantial burden under RLUIPA.93

In International Church of the Foursquare Gospel v. City of San Leandro,94 a

church purchased property to relocate its mega church in the city’s high-tech industrial zone. The church alleged that San Leandro’s land use restrictions placed a substantial burden on religious exercise, that by denying its rezoning application, San Leandro was treating a religious assembly on less than equal terms with nonreligious assembly, and that denying the church’s use of the property constituted total exclusion from the jurisdiction or unreasonable limits on religious assemblies pursuant to RLUIPA.

The district court held that San Leandro’s land use restrictions did not place a substantial burden on religious exercise because its zoning ordinance was a law of

89 Id. at 1231. 90 Id. at 1230. 91 Id. at 1231. 92 Id. at 1227. 93 Id. at 1228. 94 2008 WL 5384548 (N.D. Cal. 2008).

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Signs of the Time--Play Now, Pray Later: Regulating Signs, Sex and Religious Facilities Page 17 general application that treated religious assemblies the same as other types of assembly uses.95 Under the City of San Leandro’s zoning ordinance, religious facilities were permitted in the residential zone and there were 45 churches already located within the city. San Leandro then added an overlay zone which added an additional 196 properties in both the commercial and industrial zone. Similar to adult use cases, when determining whether the zoning ordinance placed a substantial burden on religion, the district court looked to the availability of sites. The district court found that despite “the fact that there may be no other properties available to which the church can expand its operations in the specific way it wants does not mean that the City’s zoning code imposes a substantial burden on the church.”96 Moreover, the costs associated with the acquisition of real estate are not generally recognized as a burden on religion.97

The district court also found in favor of San Leandro on the church’s equal terms

claims. The church argued that San Leandro’s differentiation between “assembly uses,” “entertainment activities,” and “commercial recreation” violated RLUIPA because RLUIPA’s legislative history suggested that an assembly is any gathering of people for any purpose.98 By differentiating between those three uses and precluding assembly uses from operating in the overlay district, the church argued that San Leandro violated the equal terms provision. In reaching its decision, the district court opined that there was nothing in RLUIPA’s legislative history that supported the church’s contention that Congress intended to set aside all zoning regulations that distinguish between private or non-profit assemblies and commercial gatherings.99 The district court found that San Leandro’s zoning code does not treat churches on less than equal terms than other types of assembly uses because the “assembly use” designation applies to churches, social clubs, lodges, union halls and youth centers – a variety of different uses which all focus on gatherings. The district court held that those uses were distinct from “entertainment activities” and “commercial recreation” uses. Therefore, San Leandro’s zoning code was found to be neutral and of general application.100

There appears to be a trend in RLUIPA jurisprudence that courts will look to site

availability as one means of determining whether a zoning ordinance creates a substantial burden on religion. As long as sites are available, there is no substantial burden. Similar to decisions in adult use cases, the availability of sites is dictated by the market. The court’s interpretation of the equal terms provision however, has not proved as consistent. While the Third and Ninth Circuits have held that the strict scrutiny standard does not apply to RLUIPA’s equal terms provision, the Eleventh Circuit has

95 Id. at 14. 96 Id. at 15. 97 Id. at 16. 98 Id. at 20. 99 Id. 100 Id.

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Signs of the Time--Play Now, Pray Later: Regulating Signs, Sex and Religious Facilities Page 18 held otherwise. However, when looking at the plain language of the RLUIPA statute, the substantial burden provision contains language requiring a “compelling government interest” while that language is notably absent from the equal terms provision. CONCLUSION Sign and billboard ordinances present a means by which a city may regulate traffic safety and prevent visual and urban blight. Some basic guideposts can be drawn from case law including (1) ordinances that are clearly time, place and manner restrictions will generally be upheld with respect to both commercial and non-commercial signs; (2) ordinances which contain exemptions for particular types of signs are inherently suspect; and (3) electronic, and mobile billboards have special considerations due to the unique safety issues they pose. Cities may continue to regulate the adverse secondary effects caused by adult uses so long as their ordinances are founded on detailed analyses and findings. The recent California Supreme Court holding in Manta Management allows cities to enforce their ordinances against adult businesses with less fear of being liable for lost profits should a reviewing court reverse the trial court’s findings. These are areas of extensive and expensive litigation, therefore due care and thoughtful analysis should be dedicated to needed findings and the administrative record. Finally, under the evolving RLUIPA case law, courts are focusing on the availability of sites as one means of determining whether a city’s ordinance poses a substantial burden on religion and analogies can be drawn from the more developed adult use case law. Under the plain meaning of the RLUIPA statutes, it is likely that the equal terms provision does not require a strict scrutiny review. However, this issue has not been resolved by the United States Supreme Court. The intersection of local land use regulations and the First Amendment requires extra vigilance from municipal practitioners to ensure that existing and future ordinances are compliant with the ever shifting case law. By carefully balancing land use concerns with the First Amendment, cities are able to create ordinances which will improve the quality of life for their residents. 1215967.4

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League of California Cities City Attorneys Department

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John Pomidor City Attorney, Livermore

General Municipal Law Update

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GENERAL MUNICPAL LAW UPDATE This is not so much a general update of all municipal law, as an effort to be an update of California’s reported public entity cases and AG Opinions for the last six months or so. You will not find, for example, anything about municipal law in Kansas here; nor will you find anything about California statutes per se, or even cases that opine on employment law, land use, or the things Gene Gordon does so much better. What you will find is a lot of material that our Clerk, Christy Hunsberger, assisted me in presenting for your consideration, if not edification. For the record, the dateline of that information runs from approximately October 1, 2008, through April 1, 2009.

I. FOUNDATIONS OF MUNICIPAL GOVERNMENT

• Widders v. Furchtenicht, 167 Cal.App.4th 769 (Oct. 20, 2008). An Ojai resident, who happened to be an attorney, submitted two initiatives directing the City Council to exercise its informed judgment to draft and adopt ordinances regulating chain stores and providing affordable housing. Ojai City Attorney Monte Widders, faced with 15 days to prepare a ballot title and summary under Election Code §9203, contacted the resident to suggest he withdraw the measures and resubmit them in proper substantive form. Widders was concerned the measures were an invalid attempt to enact indirect legislation under Marblehead (226 Cal.App.3d 1504). After the 15 days came and went without result, Widders filed an action for declaratory relief seeking an order to be relieved of any duty to comply with Section 9203, as well as a declaration that the initiative measures would be facially unconstitutional. The appellate court reversed the trial court’s ruling that the 15 days under Section 9203 acted as a statute of limitations for the City Attorney to seek judicial relief from his duty to prepare a ballot title and summary. Since the obligation to prepare the title and summary was ongoing, even after the 15-day period, the court held that the ability to ask for judicial relief from that obligation also continued. Additionally, the court held that judicial review of an initiative at the pre-petition stage does not violate the right to free speech. Free speech may be precious and come into play in a situation like this, but it is limited in a special forum like the initiative process, especially when that initiative is invalid.

• Community Youth Athletic Center v. City of National City, 170 Cal.App.4th 416 (Jan. 22, 2009).

Community Youth filed a reverse validation action under CCP §863 challenging an ordinance amending a redevelopment plan that would: 1) extend the plan’s time period 2) find blight, and 3) allow eminent domain takings. Community Youth obtained a court

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order to publish the summons, but encountered difficulties outside its control. Namely, one of the newspapers unexpectedly changed its publication schedule, so the summons’s publication was delayed; and, due to that delay, the summons described an incorrect date for responses. The trial court granted the City’s motion for judgment on the pleadings based on its conclusion that the publication was inadequate without good cause. The court of appeal reversed. The court sidestepped arguments about substantial or strict compliance standards since Community Youth’s compliance was not even substantial enough for consideration of that issue. Instead, the court found good cause existed under CCP §863 to excuse the non-compliance and directed the trial court to allow leave to republish.

II. OPEN GOVERNMENT AND ETHICS

• Berkeley Police Association v. City of Berkeley 167 Cal.App.4th 385 (Oct. 7, 2008).

Berkeley’s Police Officers’ Association challenged the Police Review Commission’s (PRC’s) practice of investigating citizen complaints and conducting open and public evidentiary hearings on those complaints. It asked for a court order directing the City and its PRC to close the evidentiary hearings to the public. The City argued that Penal Code §832.7, which protects the confidentiality of investigatory records, only applied when the investigation in the records could lead directly to discipline. Meanwhile, it argued, the PRC furthered policies of transparency and accountability, as evidenced by the fact that no PRC activities ever led directly to disciplining City police officers. PRC investigations might only lead indirectly to discipline: the PRC regularly referred its investigations and conclusions to the city manager and police chief, who, admittedly, could use PRC information when considering discipline. The court of appeal held that PRC hearings investigating citizen complaints against police officers should be closed to the public. Penal Code §832.7 applies to all aspects of disciplinary matters and citizen complaints. This being the case, the PRC’s process of transmitting its findings to the chief of police and city manager must comply with §§832.5 and 832.7’s confidentiality requirements. Even an officer’s identity regarding such records must remain confidential. The court reasoned that the state legislature, in passing §832.7, already balanced the policy of furthering public confidence in law enforcement by making investigations open to the public against confidentiality, and—surprise!—gave privacy more weight. Therefore, Berkeley could not rebalance State policy locally and make its own independent decision.

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• D’Amato v. Superior Court of Orange County Cal.App.4th 861 (Oct. 21, 2008).

The (former) City of Placentia city administrator, D’Amato, supervised the City’s director of public works, Becker. The City Council formed a JPA to facilitate lowering railroad crossings. D’Amato served on the board of the JPA. He encouraged Becker to apply for the JPA’s executive director position and then voted with the other two JPA board members to contract with Becker’s consulting firm, “Becker and Associates,” thereby securing Becker’s services as the JPA executive director. The JPA agreed to pay Becker and Associates a retainer fee of $200.00 per hour for its time and to award 1.5% of the estimated $300 million cost ($4.5 million, less the retainer fee) upon completion of the project. To avoid the appearance of impropriety, Becker’s firm agreed to repay to the City Becker’s public works director salary and benefits while he was acting as the JPA’s executive director. The grand jury indicted Becker for a violation of Government Code §1090. It also indicted D’Amato for aiding and abetting that violation. The trial court denied D’Amato’s motion to set aside the indictment; but the court of appeal issued a writ of prohibition directing the dismissal of the indictment and that the superior court not take any further action against D’Amato, Placentia’s now-former City Manager. Reasoning that separation of powers principles prohibited inquiring into legislators’ minds, the court held that the allegation of aiding and abetting could not stand because D’Amato’s motive could not be proved. Additionally, the court said that §1090 is not meant to defeat legislative immunity if the legislator has no personal financial interest in the contract at issue—and that immunity applies to criminal prosecutions as well as civil suits.

• Galbiso v. Orosi Public Utility District, 167 Cal.App.4th 1063 (Oct. 23, 2008).

The appellate court reversed a trial court decision denying attorney fees after the plaintiff and Orosi Public Utility District (Orosi) settled a Brown Act and Public Records Act case “in open court.” The plaintiff claimed Orosi committed several Brown Act violations arising from a case involving the foreclosure on her property for failure to pay assessments. The Brown Act violations included:

1) A secret vote, as shown by a draft resolution in the agenda that already noted the motion makers and the vote count;

2) Denying plaintiff the opportunity to make a public comment at an open meeting where the resolution to foreclose her property was adopted, after telling her she could not speak about the closed session item where the sale of her property was going to be discussed;

3) Failure to appropriately disclose the subject of closed session meeting items.

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The Public Records Act violations involved telling the plaintiff she could not visit the Orosi offices to get documents. A letter to the plaintiff’s attorney stated that if there was any documentation she sought “. . . concerning the cases [she] may use the discovery method to obtain that information. . . please advise [Galbiso] that she is not to come to the office and disrupt the office as she has done in the past.” The appellate court held that while some Brown Act claims failed, such as the “scrivener’s error” on the draft resolution, others succeeded; the Public Records Act claims also succeeded. (Incidentally, Orosi backed off the tax sale during this matter.) The trial court held wrongly that no Brown Act or Public Records Act violations had occurred: among other mistakes was the conclusion no PRA violation happened because no specific records were withheld—all access to records was withheld. The court of appeal sent the matter back to the trial court to determine reasonable attorney’s fees.

• Dixon v. Superior Court of El Dorado County, 170 Cal.App.4th 1271 (Feb. 4, 2009).

In this Public Records Act case, the court of appeal ruled that a journalist was not entitled to autopsy records concerning a murder victim—not even 31 years after the crime—because the murder trial was on going at the time she sought the records. A journalist covering a murder trial sought the County’s autopsy records to help her write a book about the homicide that occurred 31 years earlier. The autopsy records provided DNA samples that helped link the criminal defendant to the victim. Dixon, the journalist, claimed that the coroner’s autopsies were not covered by the Government Code §6254(f) exemption for law enforcement investigatory files. The court ruled that coroner’s reports fell under subsection (f) because they were records compiled by another local agency for law enforcement purposes. The court limited the exemption to situations in which a concrete and definite prospect of criminal enforcement proceedings existed. Additionally, the court said that the appellant’s status as a journalist did not offer her greater access to the records.

• County of Santa Clara v. Superior Court, 170 Cal.App.4th 1301 (Feb. 5, Feb. 27, 2009).

The court of appeal ruled that GIS maps are public records that generally must be disclosed on request, despite concerns over whether their disclosure might compromise national (or local) security or finances. The County of Santa Clara claimed that GIS maps fell under federal statutory protection as protected critical infrastructure information (PCII) under the Critical Infrastructure Information Act of 2002 (“CII Act”). The County claimed that the CII Act trumped the Public Records Act (PRA). It also claimed that the GIS maps were protected under the PRA catch-all exemption and that access to the maps could be limited under

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Government Code §6254.9 (and more could be charged for producing them than the PRA allowed) because they were copyrighted. In response, the First Amendment Coalition (CFAC) pointed out that the County actually sold the GIS maps to anyone who wanted to buy them and agreed not to share them with others. The County-wide maps, for example, cost $250,000. After some discussion, the court found that the CII Act protections the County relied on did not apply. These protections covered only public entities receiving PCII from the Department of Homeland Security (DHS); but if the public entity submitted the documents to DHS, it did not enjoy federal protections. Next, the court held that the PRA catch-all exemption did not apply. The County claimed that the public interest served by nondisclosure clearly outweighed the public interest served by disclosure. It argued that the public’s interest in the GIS maps was “minimal and hypothetical” and that there were alternate methods to obtain some of same information. In contrast, the public sector’s interest in the documents’ cost and their security was great, and clearly outweighed the interest in disclosure. The appellate court disagreed with how the County applied the cost balance. It found the public interest in disclosure was not minimal; disclosure was likely to contribute “significantly to public understanding of government activities.” Although there might be alternative methods to obtain at least some of the information provided by the GIS maps, this does not negate the public interest in disclosure. Likewise, the court found that the public interest in nondisclosure was actually small. The CFAC showed that 37 counties provided GIS information either for free or only for the costs of reproduction. And the County’s security concerns were belied by the fact it sold the information to those willing to pay—as well as the fact that not all of the GIS information could be claimed to be critical to protect against terrorism. Regarding copyright protection, Government Code §6254.9’s references to copyright only extended to that section’s protection for computer software. The section’s exception did not cover the whole PRA. Further, the protection did not authorize access to copyright as a means to withhold information—it only recognized the availability of copyright protection. Finally, the PRA reference to copyrights did not allow the County to insist on restrictive end user agreements limiting the use of GIS information.

• Kolter v. Commission on Professional Competence LAUSD, 170 Cal.App.4th 1346 (Jan. 8, 2009).

Plaintiff claimed a Brown Act violation because the public body under whom she worked met in closed session without notice to her to consider whether to initiate disciplinary proceedings. The court of appeal ruled the meeting was not a Brown Act violation; Section 54957 requires notice about evidentiary hearings on possible discipline, so as

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to allow the affected employee the choice of an open hearing. This section does not cover deliberations on whether the charges at issue might justify discipline before deciding whether to initiate discipline is different from an evidentiary hearing, even if possible evidence is discussed. Likewise, the court ruled that it was not a due process violation to go into closed session since the employee would have an opportunity later to refute the charges in open session before the discipline became effective.

• 92 Ops. Cal. Atty. Gen. 19, (Jan. 14, 2009) Opinion 07-807. A city redevelopment agency may enter into a loan agreement with the agency member’s adult son’s corporation. It makes no difference that the son lives with the agency member. Government Code §1090 forbids a board of a public agency from entering into a contract when one of its members has a personal financial interest in that contract. A redevelopment agency is a public body and a contract to loan money is a contract under 1090. A parent-child relationship, though, between an agency member and her son does not mean the member has a 1090 “financial interest” in the loan. A child might have no legal duty to support a parent, and here, there was no indication the board member would profit from the transaction. Although the son lived with the board member, he did not have the same remote interest that landlords and tenant share in each others’ official contracts. However, the member should abstain from any official action with regard to the proposed loan and not attempt to influence negotiations regarding the agreement.

• Morongo Band of Mission Indians v. State Water Resources Control Board 45 Cal.4th 731 (Feb. 9, 2009).

An agency attorney prosecuting a matter before the agency’s decision-making body also can advise that body in unrelated matters. This case disapproved Quintero v. City of Santa Ana (2003) 114 Cal.App.4th 810. This case is the subject of another presentation at this conference, so, in the interest of resource conservation, the author declines to elaborate on it.

• County of Santa Clara v. Superior Court (Naymark) 171 Cal.App.4th 119 (Feb. 17, 2009).

This case answers whether the Public Records Act contains the exclusive remedies under which a party potentially seeking records can obtain relief. In short, the answer is no—at the very least, Code of Civil Procedure section 526(a) allows a taxpayer’s action to enjoin public expenditures on policies and practices that violate the PRA.

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The Naymark court distinguished the Supreme Court’s Filarsky decision. (Filarsky v. Superior Court (2002) 28 Cal.4th 419.) In that case, the state supreme court simply ruled that public entities could not bring declaratory relief actions to establish lack of any requirement to disclose particular documents. The CPRA only allows actions by parties seeking disclosure, not the opposite; it does not say it is the only way to challenge CPRA decisions.

• City of Tulare v. Superior Court, 169 Cal.App.4th 373 (Dec. 17, 2008) The rules governing discovery of peace officer personnel records mandate that efforts to access second-level evidence from an agency require the same notice and hearing protections as initial discovery. That is, short-cuts outside the Evidence Code section 1043 procedures violate due process, the statutes, and privacy rights. In this case the defendant successfully and appropriately moved for Pitchess discovery prior to his criminal trial for assault on a police officer. The week before his trial, his attorney e-mailed the city’s attorney to let him know that the complainants identified in the original motion were proving hard to find. For example, one was dead—supposedly. Thus, the defendant would move to see the complaints themselves in nine days—the trial date. If one wants to see what probably was a knock-down, drag-out Pitchess discovery motion described by the appellate court, you can review pages 378-379; the court questioned the city’s attorney repeatedly on such matters as what the police department might be able to find witnesses that counsel for the defendant already hadn’t done. (The defendant’s attorney filed papers a few days earlier stating that his office tried to find witnesses identified in the earlier Pitchess motion, to no avail.) In ruling in favor of the defendant, the court explained that the trial-date hearing actually was a continuation of the earlier Pitchess motion hearing. Thus, the notice Evidence Code section 1043 might require did not apply. The court, however, granted the city’s attorney’s request for a stay, during which time he filed a petition for writ of mandate. The court of appeal took the trial court to task, focusing on the careful balance between the officer’s privacy interests and the defendant’s right to a fair trial.

“Police records are confidential for a reason, and their disclosure must be appropriately guarded. . . a properly noticed motion does not restrict disclosure of the information; it merely allows a sufficient time for the law enforcement agency and its officers to challenge and scrutinize the adequacy of the motion in question. Thus the balance between a fair trial and the officer’s interest in privacy is maintained. [¶] It could also be said that the court’s actions deprived [the officers] of due process.” (383.)

As the court of appeal noted, the trial court repeatedly questioned the city’s attorney’s challenge that the defendant could have tried harder to gather the information. Unfortunately, the city’s attorney was unable to answer to the trial court’s questions because it had little notice of the hearing in time to conduct an investigation.

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Finally, the court of appeal said that an e-mail notice a few days before the actual hearing was no excuse.

III. PUBLIC PROPERTY

• Villegas v. Gilroy Garlic Festival Association 541 F.3d 950 (9th Cir.; September 3, 2008.)

In this case, the 9th Circuit ruled that the City of Gilroy was not liable under 42 U.S.C §1983 after one of its officers escorted festival attendees from the Garlic Festival premises for wearing jackets displaying motorcycle gang information. The organizers of the festival asked the police to help them enforce their unwritten dress code; one of the festival’s functionaries was a sergeant in the Gilroy Police Department—and the supervisor of the officer who escorted the patrons. Nevertheless, the 9th Circuit held that the Association was not a state actor—running festivals is not a traditional municipal function. Likewise, it was not a violation of First Amendment rights to enforce a dress code, since it is not a constitutional violation for an officer to enforce a private party’s rights.

• Dietrich v. John Ascuaga’s Nugget/City of Sparks 548 F.3d 892 (9th Cir., December 1, 2008.)

By contrast to the Villegas case, here the 9th Circuit held that removal of a festival’s patrons because of their political speech at a non-political event violated First Amendment rights. In this case, the plaintiffs wanted to collect voters’ signatures inside the premises of the closed city streets where the “Best in the West Nugget Cookoff” was taking place. The sponsors asked the Sparks police officers to have the petition gatherers removed to another location. After this took place, the signature gatherers found they were unable to collect any signatures, gave up and went home. The Dietrich case distinguished this situation from the seminal Hurley v. Irish-American Gay, Lesbian and Bisexual Group Case. (515 U.S. 557 [1995].) Unlike the Hurley case, in which participants in a parade wanted to express a message the sponsors did not want expressed, Dietrich was engaging in political activities no one supposedly would have attributed to the Nugget. There was “… little chance that the public would have viewed Plaintiff’s petitioning activities as endorsed by the Cook-Off.” Further, even if such a concern existed, the sponsor could have disclaimed the Plaintiff’s activities with a sign or through some other simple mechanism. Supposedly, nothing like that would have worked in Hurley. Given the unlikelihood the political message from the plaintiffs in this case could have been attributed to the event’s sponsor, as well as the ability to use means to distinguish

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from that message, removing the patron from the premises was a violation of First Amendment rights.

IV. ELECTIONS

• Santa Barbara County Coalition v. SBCAG 167 Cal.App.4th 1229 (Oct. 27, 2008.)

A special agency/public entity may study, formulate, sponsor and draft a ballot measure that is consistent with its functions. A governmental entity has First Amendment rights, as well as a duty to “endeavor to secure the assent of voters to fund what is required to discharge its responsibilities.” (1241) When the activities further express statutory duties, courts will recognize and authorize activities that are consistent with those rights and duties. Here, the court extended anti-SLAPP protection. Until a measure is drafted, courts will not typically consider activities in furtherance of such a measure to be campaigning instead of simply governing. (Id.) In this case, SBCAG used a polling firm to craft favorable language; had prepared a new county transportation plan, including a recommendation to extend a tax to support the new plan; and its staff attended public meetings with civic groups to describe the expenditure plan and the importance of a sales tax extension to that plan. However, the county had not yet approved the plan or the sales tax extension ordinance. These activities did not cross the line into the type of express advocacy that Government Code section 54964 prohibits.

V. CODE ENFORCEMENT

• People v. Mentch 45 Cal.4th 274 (Nov. 24, 2008.) The Compassionate Use Act is a defense to marijuana cultivation and possession for sale only if the defendant is a primary care giver. That is, the defendant must

consistently provide primary care at or before assuming primary caregiver status under MMJ statutes, and do so independent of supplying MMJ. (283)

By consistency, the court meant an on-going relationship with regular and repeated actions over time. (Id.) That is, the activities must take place with “persistent uniformity” in a “persistent or even manner,” as opposed to sporadically. The activities must be contemporaneous with assuming primary caregiver status, not after the fact. MMJ assistance itself is irrelevant to the nature of the relationship. (284) The care must be directed at housing, health, or safety, not simply supplying MMJ. The court looked askance at a “dog-chasing-its-tail absurdity” in saying that one becomes a primary caregiver if and when one starts supplying MMJ. (285.)

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“[O]ne must be a ‘primary’—principal lead, central—‘caregiver’—one responsible for rendering assistance in the provision of daily life necessities—for a qualifying or seriously terminally ill patient.” (286.) The Mentch court pointed to the fact that Prop. 215 proponents deliberately made it a “narrow measure with narrow ends” because they recognized they had to walk a “delicate tightrope … designed to induce voter approval.” (286, fn. 6.) Before the supreme court explained what a primary caregiver was, the court of appeal decided that assisting with MMJ, as well as sporadic accompaniment by the defendant to medical appointments was enough to support a conclusion that the defendant was a primary caregiver. The supreme court decided not to be so generous.

VI. REGULATING BUSINESSES AND PERSONAL CONDUCT

Metro Lights v. City of Los Angeles 551 F.3d 898 (9th Circuit, Jan. 6, 2009.) The city may prohibit most off-site commercial signs, while selling and allowing bus-stop commercial signs. Exceptions for bus stops do not swallow an otherwise valid rule against commercial signs because those exceptions do not impermissibly detract from an ordinance’s goals of aesthetics and traffic safety. Likewise, the exceptions do not go so far as to diminish from the rationale for the prohibition against commercial signs in the first place. Here, the ordinance’s exception for bus stops did not ensure that the general prohibition would fail to achieve its end of traffic safety and aesthetics. Additionally, the bus stop exceptions related to public policies, perhaps not perfectly, but reasonably-enough to advance their goals. This does not mean the least restrictive means must be used to further ends. (906.) Likewise, under the earlier MetroMedia v. San Diego case, a city can value one kind of commercial speech over another.

• Manufactured Home Communities v. County of San Luis Obispo 167 Cal.App.4th 705 (Oct. 15, 2008.)

Mobilehome park landlords challenged a rent review board’s decision invalidating a rent increase. The court of appeal ruled that this challenge was successful, since the board did not allow them to cross-examine witnesses at San Luis Obispo County’s hearing. At that hearing, several tenants testified about the unscrupulous practices of the landlord (MHS). MHS supposedly lied about whether they could increase rent, engaged in mob-like bullying tactics, and failed to give proper notice of rent increases. When MHC’s attorney asked to cross-examine the witnesses, the Board said no, as, in the words of one Board member “[The Board] always allows the people to speak without cross-examination, because it is a fearful thing.” The court of appeal had to explain its earlier decision, Stardust v. San Buenaventura 147 Cal.App.4th 1176 (2002), in which cross-examination was unnecessary. The court said that cross-examination is necessary when cases turn on questions of fact

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(especially) when findings are based on live witness testimony. (372.) Here, the tenants had an unfair advantage. This was not a quasi-legislative or informal public hearing, where cross-examination might actually inhibit testimony. Thus, since the decision rested on live testimony, the hearing was unfair without cross-examination. (373.)

VII. MUNICIPAL SERVICES AND UTILITIES

• Ford Greene v. Marin County Flood Control and Water Conservation District _Cal.Rptr. 31 ___ (March 11, 2009.)

Under Proposition 218, ballot secrecy must be maintained for elections on new or increased property-related fees. Despite the measure’s allowance for election procedures similar to assessments, the language in that provision is ambiguous, for example, “similar to” may refer only to vote weighting and secret voting. The intent behind Proposition 218 is to crush the state’s power to fund its operations and to make government beg for any revenue it receives. Allowing voters to pretend they support good government but vote against it is consistent with secret voting, which further Proposition 218’s goals. (In reality, the court did rely heavily on the skepticism of government’s role that Proposition 218 reflects.) Even though District procedures barred voter identity absent a court order, that was not enough for the court of appeals. Further, the failure to extend the equanimity of a secret ballot to voters meant that the election was invalid. Although typically courts validate elections “if possible,” here the lack of confidentiality was such a severe injury to the voters that unfairness was presumed. (18). Thus, the appellate court set aside the election approving the fee. Note, as of this writing, the District expected to petition for rehearing, review, or, presumably, at least depublication.

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©2009 CaliforniaCityFinance.compage 1

City Revenues 101

Michael ColemanFiscal Policy AdvisorLeague of Calif [email protected]

City Attorneys Spring ConferenceLeague of California Cities

May 7, 2009

May 7, 2009CaliforniaCityFinance.com

Cities Vary and so do their finances

Geography: proximity, climate, terrain, access

Community Character / Vision: Land useBedroom? Industrial? Tourist? Rural? etc.

Size – urban / ruralGovernance – full service / not

Statewide generalizations often mask trends among sub-groups

177



The Mechanics of Government Revenue

Who pays?e.g., visitors, residents, businesses, subclass, etc.

What rate / base?e.g., $per gallon, % per price, limited AV, depreciated AV, etc.

How’s it allocated?e.g., situs v pooled / population, etc.

What is the revenue used for? e.g., water fees, roads tax, etc.

Who collects? Who enforces payment?Who decides? o Statewide voters / Constitutiono State law / Legislatureo Local voterso Local law / City Council


California City Revenues

Source: CaliforniaCityFinance.com computations from data from California State Controller (revenues). Does not include data from the following cities that failed to report: Beaumont, Gustine City, Loyalton, San Diego, Taft, and Tulelake.

Utility Fees25%

Fees15%

Not Restricted

37%

Other5%

Federal4%

State4%

Investments& Rents 2% Fines &

Licenses 1%

Taxes5%

Assessments2%

Property Tax12%

Sales Tax8%

Utility User Tax4%

Other Tax8%

Other5%

178



Discretionary Revenues and SpendingTypical Full Service City

Source: Coleman Advisory Services computations from State Controller reports

Other

Hotel Tax

Busn Lic Tax

Utility User Tax

Franchises

Sales & Use Tax

Property Tax

Other

Planning

Streets

Library

Parks&Rec

Police

Fire

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Revenues Exenditures


Where Your Sales Tax Goes

City 1 ¢

State General

Fund 5 ¢

Special / Transportation

(varies)5

Proposition 172 ½ ¢

County Health&Welfare

½ ¢

Countywide Transprtn ¼

¢* For taxable sales in unincorporated

areas, the local 1%rate goes to the

county.

6%Temporary rate now through June 30, 2011 or, if Prop 1A passes, through June 30, 2012

*

179



California Taxable Sales

$275 $273 $271 $278 $293$312

$329$350

$373

$420$447 $437 $448

$480$515

$554 $565 $554$526 $523

14,486

15,800 15,757

14,87014,274

13,41512,805

12,785 13,17813,626 13,855 14,226

15,687 14,78714,56414,982

15,48016,000

13,607

13,027

$0

$100

$200

$300

$400

$500

$600

$700

$800

FY90-91 FY91-92 FY92-93 FY93-94 FY94-95 FY95-96FY96-97FY97-98 FY98-99 FY99-00 FY00-01 FY01-02 FY02-03 FY03-04 FY04-05 FY05-06FY06-07 07-08e 08-09e 09-10e

billi

ons

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

Taxa

ble

Sale

s Pe

r Cap

ita In

flatio

n A

djus

ted

to 2

008

.

taxable sales

PerCapita-InflationAdjusted


Property Tax✔ An ad valorem tax imposed on real property and

tangible personal property✔ Maximum 1% rate (Article XIIIA) of assessed value,

plus voter approved rates to fund debt✔ Assessed value capped at 1975-76 base year plus

CPI or 2%/year✔ Property that declines in value is reassessed to the

lower market value.✔ Reassessed to current full value upon change in

ownership (with certain exemptions)✔ Allocation: shared among cities, counties and

school districts per AB8 (1980)

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Where Your Property Tax Goes

Typical homeowner in a full service city

not in a redevelopment area.

Source: Coleman Advisory Services computations from Board of Equalization and State Controller data.

Includes Property Tax in-lieu of VLF.

Typical city resident

City21%

Special Districts

7%

County27%

Local Schools

45%

Special Districts

7%


200

300

400

500

600

700

1984

-85

1985

-86

1986

-87

1987

-88

1988

-89

1989

-90

1990

-91

1991

-92

1992

-93

1993

-94

1994

-95

1995

-96

1996

-97

1997

-98

1998

-99

1999

-00

2000

-01

2001

-02

2002

-03

Ass

esse

d Va

luat

ion

in M

illio

ns

-

100

200

300

400

500M

edia

n Si

ngle

Fam

ily H

ouse

Pric

e in

Tho

usan

ds

SOURCE: Calif Assn of Realtors, Board of Equalization

AV

Median SF Home

Property Tax Effects Lag a Deflating Housing Bubble

Los Angeles Area AV vs Housing Price

Ass

esss

edVa

luat

ion

in b

illio

ns

181



Assessed Valuation of Property

$1.5 $1.7 $1.8 $1.8 $1.8 $1.8 $1.9 $1.9 $2.0$2.1

$2.3$2.5

$2.7$2.9

$3.2

$3.5

$3.9

$4.3$4.5 $4.4

$110

$117$116

$110

$102

$95$91$88

$86$82$80

$78 $78$78$80$82$83$82$80 $83

$0

$1

$2

$3

$4

$5

$6

FY90-91FY91-92 FY92-93 FY93-94FY94-95 FY95-96 FY96-97FY97-98 FY98-99 FY99-00FY00-01 FY01-02FY02-03FY03-04 FY04-05FY05-06 FY06-07FY07-08 08-09e 09-10e

Ass

esse

d Va

luat

ion

- Tril

lions

$0

$20

$40

$60

$80

$100

$120

Thou

sand

sA

sses

sed

Valu

atio

n Pe

r C

apita

Infla

tion

Adj

uste

d to

200

8 .

Assessed Valuation

Total-PerCapita-InflationAdjusted


The Triple Flipsales tax for property tax

State General Fund

State Fiscal Recovery Fund

Increase State Sales Tax Rate +0.25%

Decrease Local Sales Tax Rate -0.25%

SchoolsProperty Tax

in Lieu of Sales Tax

$1.4 b

$1.4 b

$1.4 b

State

Cities & Counties

182



The VLF-PropTax SwapVehicle License Fee for Property Tax

State General Fund

VLF Backfill

Schools

Property Tax in Lieu of VLF

$4.4 b

$4.4 b

$4.4 b*

*in FY2004-05

State

Cities & Counties


Cities and theCalifornia State Budget

183



Summary of City $ in Play

State Subventions (General Fund)COPS (~$75 to cities)Booking Fees - Jail Facility $

($35m+ via county fees) Redevelopment AgenciesProperty Tax shift ($350m?)

Special-Funded Subventions- State $ to cities & counties only -

Prop.172 Public Safety ($180m)Vehicle License Fee ($150m)

BorrowableProperty Tax (~$2 billion from

cities/counties/spec.distr.)Highway Users’ Tax ($50m/mo)Prop.42 Streets&Roads ($300m)Mandate payment deferrals

State General

Fund

CitiesCounties

Programs

$

OK

OK – now from 0.15 VLFSome FY08-09 loss to COPs in larger citiesFY08-09 depends on VLF collections

OK

OK

OK

OK$91m deferred


Recommended resources:The California Municipal Revenue Sources Handbook, 2008 edition by Michael Coleman. League of California Cities. 2008

Understanding the Basics of City and County Revenue by Charles Summerell. Institute for Local Government. 2008*

Cal Facts, California’s Economy and Budget in Perspective – State and Local Finances. Legisl Analyst’s Office 2006*

A Primer on California City Finance by Michael Coleman. Western City. Mar 2005*

*available on-line at …

Available for purchase at CityBooks

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1

Chapter 1The backdrop of any discussion of municipal

revenues must be the state-local relationship and

the provisions of the state Constitution which

govern that relationship. This relationship has

evolved over time, marked in recent decades by

several landmark Constitutional amendments.

Consequently, today’s municipal revenue

landscape is not the same as your grandmother’s

or even your mother’s.

In California’s early years as a state, local government

authority was strictly controlled by the state

government, and local affairs were the frequent

subject of meddling by the Legislature. California

governors and state legislators often displayed a deep

distrust of local affairs, while local officials sought

more latitude in municipal policy and public services.

Chapter 1Milestones in Municipal Revenues: a Historical perspective

185

Michael

Text Box

Excerpted from The California Municipal Revenue Sources Handbook, 2008 Edition, by Michael Coleman

Chapter 1: Milestones in Municipal Revenues

2

n the 1879 california constitutionThirty years after California’s admission to the union, the second (and current) state Constitution was adopted by the Constitutional Convention during a turbulent period in the state’s political history. That adoption created, for the first time, substantial and meaningful home rule for California’s local governments. The 1879 Constitution included five provisions limiting the power of the state Legislature to interfere with the affairs of cities and vested in cities extensive powers of self-government. This Constitution prohibited the state from imposing a tax for local purposes, but enabled the state to authorize local governments to impose them.

Over the next several decades, local taxation authority was expanded to general law cities. In 1903, in a case upholding the City of Los Angeles’ business license tax, the California Supreme Court stated unequivocally that local taxation is a municipal affair under Article XI, section 5 of the Constitution. Later, in 1982, the Legislature conferred on general law cities by statute the authority to adopt any tax that could be adopted by a charter city.

A 1910 ballot measure known as the “Separation of Sources Act” made the property tax a local government revenue source and established the principle of separate revenue sources for state and local governments. The property tax was ideally suited to fund critical local general services such as law enforcement, jails, fire protection, parks, libraries, schools, hospitals and public health. This concept of the property tax as the largest, most durable and essential source of local government funding would stand for 68 years, until Proposition 13 drastically altered California local government finance.

In 1914, the California Constitution was amended to provide charter cities with the authority to “make and enforce laws and regulations in respect to municipal affairs, subject only to the restrictions and limitations provided in their several charters.” It established the power of charter cities to adopt their own laws with respect to municipal affairs, including flexibility in organizational and program design, latitude to regulate certain activities and the authority to determine spending levels and priorities. But local authority in municipal affairs remained subject to state pre-emption as to matters of statewide concern. In the event of a conflict between a charter city law and state law, the court must decide whether the state law prevails (because it is a matter of statewide concern) or the local law prevails (because it is a municipal affair). Thus, the dynamic interpretation of “matters of statewide concern” and “municipal affairs” controls the scope of home rule.

n statewide concerns and Municipal affairsAlthough cities achieved greater local fiscal authority to determine service levels and levy local taxes and charges, state fiscal rules and constraints have often dominated. In 1935, the state pre-empted

California City Revenues FY05-06 (excluding the City & County of San Francisco)

Devpt Fees & Permits$1,533.0 3%

Special Taxes$2,067.4 5%

Other Non-Discretionary$2,238.5 5%

Electric & Gas $4,981.8 11%

Water Fees$2,862.5 6%

Solid Waste Fees $1,368.2 3%

Sewer Fees$2,297.9 5%

Fees$5,465.7 12%

Fed Grants & Aid $1,888.8 4%

Benefit Assmts $699.9 2%

Fines & Forfeitures $368.0 1%

State Grants & Subventions$1,759.6 4%

Licenses & Permits $150.1 0%

Investmts, Rents, Royalties $995.5 2%

Property Tax $5,642.2 12%

Sales Tax $3,571.1 8%

Busn Lic Tax $977.8 2%Utility User Tax $1,637.1 4%

Trans Occup Tax $877.0 2%

Other Tax $1,235.2 3%Prop Transf Tax $612.9 1%

Franchises $723.2 2%State & Fed $405.4 1%Other General Revs $1,275.7 3%

Discretionary Revenues

Source: CaliforniaCityFinance.com computations from data from California State Controller (revenues). Does not include data from the following cities that failed to report: Beaumont, Gustine City, Loyalton, San Diego, Taft, and Tulelake.

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3


the local taxation of motor vehicles as real property and established a statewide uniform value-based tax on motor vehicles, known as the “motor vehicle in-lieu tax” or Vehicle License Fee (VLF), which it then allocated to cities and counties based on their share of county population.

In 1955, the California Legislature passed the Bradley-Burns Uniform Sales and Use Tax Act, pre-empting then-existing local sales taxes and providing for a uniform, statewide system of sales taxation and collection. The Bradley-Burns Act authorized cities to adopt local sales and use tax rates up to 1% of taxable sales transacted in their jurisdictions, to be administered and allocated by the state. The amounts of revenue remained intact, and the use of those revenues remained at local discretion.

These changes attempted to strike a balance between accommodating the needs of the modern industrial economy for uniform practices and procedures with California’s continuing commitment to meaningful local control of local government finance. They also attempted to address the important issues of taxpayer ease, uniformity and simplicity, but had the accompanying effect of centralizing fiscal authority with the Legislature and governor while constraining local fiscal authority.

Through both Democrat and Republican administrations in the 1950s and 1960s, federal and state policy initiatives meant additional money and additional incentives, but also additional mandates for municipalities. In 1972, the state Legislature responded to the vocal concern of local government over the costs of state mandates by passing SB 90 (Chapter 1406), requiring the reimbursement of costs to local agencies for state mandated programs. The following year, the Legislature required cost estimates of all legislation having a financial impact on local government. In 1979, mandated reimbursement, as required in SB 90, was added to Article XIIIB of the state Constitution as a part of Proposition 4. The obligation to reimburse was further strengthened by Proposition 1A in 2004.

n proposition 13In 1978, a simple majority of California voters approved Proposition 13, seeking property-taxpayer relief and uniformity, but with far-reaching consequences, some unintended. Proposition 13 reduced property tax revenues by more than half and effectively abolished any local control with regard to the property tax. Local governments still have wide latitude on the spending of the remaining revenues they receive, but the allocation of the tax is controlled by the state Legislature. Occasional proposals by the Legislative Analyst or individual policymakers to delegate more authority over property tax allocation to local governments tend to be met with resistance from local officials who fear the local conflicts and power struggles that would ensue in nearly any discussion of revenue reallocation.

six provisions of proposition 13 affecting local Finance

One percent rate cap.1. Proposition 13 capped, with limited exceptions, property tax rates at 1% of full cash value at the time of acquisition. Prior to Proposition 13, local jurisdictions independently established their tax rates and the total property tax rate was the composite of the individual rates.

Assessment rollback. 2. Proposition 13 rolled back property values as determined for tax purposes to their 1975-76 level.

Reassessment upon change in ownership.3. Proposition 13 replaced the practice of annually reassessing property at full cash value with a system based on cost at acquisition. Under Proposition 13, property is assessed at market value for tax purposes only when it changes ownership. Subsequent annual values are limited to this “base year” amount plus an annual growth factor of 2%.

Responsibility for allocating property tax transferred to the state. 4. Proposition 13 gave state lawmakers responsibility for allocating property tax revenues among local jurisdictions. Prior to Proposition 13, jurisdictions established their tax rates independently and their property tax revenues depended on the rate levied and the value of the property located within the boundaries of the jurisdiction.

Voter approval for special taxes.5. Proposition 13 requires two-thirds voter approval for taxes raised by local governments for a designated (“special”) purpose.

Taxes imposed by the State Legislature require a two-thirds vote of the Legislature.6.

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4

Prior to Proposition 13, effective total property tax rates varied, but averaged about 2.5% of market value. The 1% limitation and the rollback to 1975-1976 assessed values resulted in an immediate 57% reduction in property tax revenues statewide.

In 1979-80, the Legislature used its authority to allocate property tax revenues to cushion the fiscal impact of Proposition 13 on local governments. In what is often called the “bailout,” the state was able to shift about $2.7 billion of annual ongoing financial resources to local governments in part because of the state’s $5 billion surplus (about 40% of annual revenues) and the $1 billion-plus annual revenue boost it received from higher personal income taxes due to

lower taxpayer deductions for property taxes. As a result, city property tax losses from Proposition 13 were about 28% less than they might have been.

In addition to the bailout, the Legislature established a system for allocating property taxes. In what was intended as a permanent resolution to the issue of how to distribute significantly reduced property tax revenues, AB 8 reduced school shares of property tax revenues and gave cities counties and special districts greater shares. In return, the state assumed a larger financial responsibility for K-14 schools. The state also increased its share of costs for a number of social service and health programs operated by counties.

effects of proposition 13 trends in california Municipal Finance

Lowered tax burden for elderly and ■n

low-income homeowners (proportionate to income).

Disparate treatment of similarly situated ■n

properties

Disconnect between service costs and ■n

revenues deters balanced planning

Local agency property tax revenues cut ■n

by nearly 60%

Tax rates and shares out of sync with ■n

service demands

Greater reliance on state General Fund for ■n

county and school spending

Greater reliance in cities and counties on ■n

user fees and local taxes.

Decline in predictable discretionary ■n

funding for key services

Sales tax revenues decreasing in service-■n

oriented economy

Population growth increasing service ■n

demands

Public safety and homeland security costs ■n

increasing

Infrastructure cracking under neglect■n

New technologies leading to new ■n

infrastructure demands

Environmental degradation (air and water ■n

pollution) requiring expensive mitigation

Continued fragmentation of local finance ■n

among overlapping agencies

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5


In spite of these efforts to cushion its impact, Proposition 13 dealt a major blow to local fiscal autonomy. As the Supreme Court noted in a 1991 decision upholding AB 8’s property tax apportionment system, Proposition 13 “prevails over the preexisting taxing power” of cities. In a 1994 ruling upholding the state’s shift of property tax revenues from local governments (the infamous ERAF shift), the court noted that the taxing powers of local governments are “derived from the Constitution upon authorization by the Legislature.” With the exception of issuing debt for acquisition of real property for capital improvements, cities lost the authority to alter the property tax rate. The state was handed the authority to determine each local agency’s share within the 1% umbrella for all taxing agencies. There is no local authority to reallocate property tax revenue among local agencies (even those providing “city” services such as fire, parks or libraries). Local voters cannot impose a property tax rate higher than 1%, except for debt service on voter-approved bonds. Thus, where once a community could devote more or less property tax revenue to fire services versus libraries versus schools, now all communities are constrained by taxing decisions made by leaders of a generation ago when California was a very different place socially, economically and politically.

n the 1980s: state Fiscal Retrenchment, local Fiscal innovationIn the years following Proposition 13, local governments faced substantially constrained revenues both from reduced property tax revenues but also from substantial reductions in state and federal aid. The state, after shifting resources to cushion the local impact of Proposition 13 at times found itself in fiscal trouble and repealed various state aid programs and even shifted local revenues to state coffers. Over the fiscal years 1981-82, 1982-83, and 1983-84, the state shifted over $700 million of Vehicle License Fee revenues from cities, revenue that had never before gone to the state General Fund.1 During these years, the state also repealed an assortment of local aid subventions including: the Highway Carriers Uniform Business Tax, Liquor License Fees, Financial Aid to Local Agencies (bank in-lieu

subvention), and Business Inventory Exemption Reimbursements. Most of these payments had been put in place to reimburse locals for the state establishing a uniform statewide tax in lieu of local taxes or the state exempting some category of taxpayers.

Local governments responded by increasing various fees to recover full costs and eliminate subsidies. They sought out ways to raise existing taxes such as business licenses and hotel taxes. Many adopted new taxes such as utility user taxes, admission and parking taxes. With statutory authorization from the state Legislature, they adopted new forms of assessments to provide needed funds for such things as streets, parks, lighting and landscaping.

n the courts Weaken local Fiscal authority Meanwhile local control over fiscal matters continued to weaken. Proposition 13 had shifted the power to allocate what had been the number one source of discretionary local revenue, property taxes, to the state Legislature. Subsequent court decisions further weakened local fiscal autonomy. In 1991, the California Supreme Court gave the state wider latitude to define a “matter of statewide concern” at the expense of home rule authority in fiscal affairs. In California Federal Savings & Loan v. Los Angeles, the court acknowledged that local taxation is generally a municipal affair, but declared the state’s system of taxation of financial institutions to be a matter of statewide concern. The court concluded that the conflicting charter city measure ceased to be a municipal affair and the Legislature was not prohibited by the Constitution from addressing the statewide dimensions of its own enactments. Assuming that financial institutions should be subject to a limited amount of taxation, the state decided that permitting local governments to receive a portion of these revenues through local taxation would interfere with the state’s ability to raise revenues for its own purposes.

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6

n e.R.a.F.: educational Revenue augmentation FundsThe most dramatic example of the shift of power from local governments to the state is the Legislature’s use of local property tax to balance the state’s budget troubles beginning in the early 1990s.

Despite major changes in local priorities and needs, the apportionment formulas for property taxes had remained largely unchanged since AB 8. In 1978, neither the pundits nor the authors of Proposition 13 envisioned the state Legislature using the power to allocate local property tax revenue given to it by Proposition 13 as a means to take local tax revenues to meet its own financial needs. But in 1992, facing a serious state General Fund deficit, the state Legislature turned to these powers as a remedy.

To meet its obligations to fund education at specified levels under Proposition 98, the state enacted legislation that shifted partial financial responsibility for funding education to local government (cities, counties and special districts). The state did this by instructing county auditors to shift the allocation of local property tax revenues from local government to “educational revenue augmentation funds” (ERAFs), directing that specified amounts of city, county and other local agency property taxes be deposited into these funds to support schools.

In fiscal 2007-08, the annual impact of the ERAF shift was a shortstopping of some $7.3 billion from cities, counties, special districts and the citizens those entities serve. Counties have borne some 74% of this shift; cities have borne 16%.

The state has provided some funding to local governments that it considers mitigation of ERAF. However, the vast majority of these funds are earmarked for particular purposes. Moreover, a relatively small portion of these funds has gone to cities. In 1992, California voters approved Proposition 172, which provided sales tax funding for police, fire and other public safety programs. (see Section 6.05 of Chapter Six.) In FY07-08, Proposition 172 funds provided only $3 billion annually to local government, leaving a $4.3 billion net ERAF gap. Considering all state subventions that the Legislative Analyst defines as “ERAF mitigation,” the net ERAF impact on cities was nearly $800 Million in FY07-08.2

As a part of the budget agreement that put Proposition 1A of 2004 on the ballot to protect city revenues from additional shifts and state takeaways, cities, counties and special districts agreed to contribute an additional $1.3 billion per year in FY04-05 and FY05-06. Although these ERAF III shifts ended in FY06-07, the original ongoing shifts that began in 1992-94 have not been reduced.3

n proposition 62 (1986)Reacting to the various forms of new local taxes and increases in fees in the wake of Proposition 13, the Howard Jarvis Taxpayers Association and other taxpayer groups responded with several follow-up initiatives. Proposition 62, a statutory initiative, passed in November 1986, restating the super-majority vote requirement for special taxes, imposing a majority vote requirement for general taxes, and prohibiting the imposition of taxes on the transfer of real estate. For nearly a decade, the applicability of Proposition 62 remained uncertain in the face of various court cases. Most provisions were eventually superseded by Proposition 218 in 1996.

n proposition 218 (1996): the Right to vote on taxes actIn November, 1996, California voters approved Proposition 218, expanding restrictions on local government revenue-raising by adding Article XIIIC and XIIID to the Constitution. The measure allows voters to repeal or reduce taxes, assessments, fees, and charges through the initiative process; reiterates the requirement for voter approval for both “special taxes” and “general taxes;” and imposes procedural and substantive limitations on benefit assessments imposed on real property and on certain types of fees.

Proposition 218 does the following:

Establishes a clear Constitutional standard distinguishing locally ■n

imposed general taxes from special taxes and imposing a majority voter requirement for general taxes (which had already existed for general law cities under Proposition 62) and a supermajority requirement for special taxes (which had already existed under Proposition 13).4

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7


Provides citizens with the power to repeal taxes, assessments, fees ■n

and charges that are subject to Proposition 218.

Establishes a formal balloting procedure for the adoption of ■n

benefit assessments imposed on property.

Requires a distinction between special benefits and general ■n

benefits with regard to assessments and prohibits the funding of general benefits from property assessments.

Requires the assessment of public property within an assessment ■n

district.

Places the burden of proof for demonstrating special benefit on ■n

the local agency imposing the property assessment.

Establishes a new category of fees called “property-related fees” ■n

and requires new approval procedures and substantive provisions for those fees.

n proposition 1a of 2004Reacting to continued state shifts of local property tax revenues, the deterioration of local control of fiscal matters and the substantial limitations imposed by Proposition 218, the League of California Cities (the League), the California State Association of Counties (CSAC) and the California Special Districts Association (CSDA) crafted a local revenue protection initiative and garnered enough signatures to qualify the measure for the November 2004 ballot as Proposition 65. Governor Arnold Schwarzenegger, who had recently taken office in the November 2005 recall of Gray Davis, immediately signaled his opposition to the measure but a willingness to support a new mutually crafted local revenue protection measure as a part of a larger state-local fiscal restructuring package to include local contributions to assist the state budget problem over two years.

With the active involvement of state Legislative leadership, the Schwarzenegger administration, the League, CSAC and CSDA worked on an alternative to Proposition 65 which became Proposition 1A and the Legislature placed the measure on the November ballot. As part of

the 2004 state-local agreement, the state shifted $1.3 billion of local property tax revenues in FY04-05 and again in FY05-06 (the so-called ERAF III). In addition, the state General Fund backfill to cities and counties for state cuts of the Vehicle License Fee was eliminated and instead cities and counties were given additional annual property tax revenues (see Section 6.01 of Chapter Six.) Finally, local government associations agreed to abandon support of Proposition 65 and the Governor agreed to actively support Proposition 1A.

In November 2004, the voters of California approved Proposition 1A with an unprecedented 84% yes vote, Constitutionally protecting major city revenues from additional shifts to the state and strengthening local government’s ability to get reimbursement for unfunded mandates. The measure:

Strengthens prohibitions against unfunded state mandates by ■n

requiring the state to suspend state mandates in any year the Legislature does not fully fund those laws.5

Expands definition of state mandate to include transfer of ■n

responsibility of a program for which the state previously had full or partial responsibility.

Prohibits the state from■n

Reducing the local Bradley-Burns Uniform Sales and Use Tax •rate or altering its method of allocation. Exception to comply with federal law or an interstate compact.

Decreasing VLF revenue from the 0.65% rate without •providing replacement funding to cities and counties.

Shifting property taxes from cities, counties or special districts •with certain exceptions.

Failing to reimburse to cities and counties for the 0.25% local •sales tax shifted under the triple flip.

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8

Sales and Use Tax Rate and Allocation Method. Generally, revenue from the 1% Bradley-Burns Local Sales and Use Tax is allocated to the city in which the sale occurs, or, if in an unincorporated area, the county. Proposition 1A prohibits the Legislature from reducing the local sales tax rate, or changing the method of allocation of local sales tax revenues. Proposition 1A permits the Legislature to change the method of allocation in order to comply with federal law or an inter-state compact.

Local Transactions and Use Tax Authority. Proposition 1A prohibits the state from restricting the authority of a local government to impose a transactions and use tax pursuant to Revenue and Taxation code Section 7251 or altering the method of allocation of these tax revenues.

Local Sales Tax Reduction Under the Proposition 57 Triple Flip. In March 2004, the voters of California approved Proposition 57, the California Economic Recovery Bond Act. Legislative provisions implementing Proposition 57 provide for a swapping of 0.25 cent to be used by the state to repay the bonds effective July 1, 2004. The so called “triple flip” consists of 1) reducing the Bradley-Burns Local Sales and Use Tax Rate by 0.25% and 0.25% to the state’s sales tax rate to fund fiscal recovery bond repayment, 2) repayment to cities and counties with additional local property tax previously allocated to local schools, and 3) repayment to local schools with state General Fund. Proposition 1A prohibits the Legislature from extending this reduction in local authority to impose the full Bradley-Burns Sales and use tax rate beyond the period necessary to repay the Proposition 57 bonds. In addition, it Constitutionally protects the reimbursement to cities and counties under the triple flip.

Vehicle License Fee. Proposition 1A requires the Legislature to provide replacement revenue to cities and counties if it reduces the VLF rate below 0.65%. California Constitution Article XI Section 15 requires that VLF revenue be allocated to cities and counties. The state may charge for administrative costs (DMV, Controller) and the Legislature retains the power to change state law allocating the VLF among cities and counties.

Property Tax. Proposition 1A prohibits the Legislature from reducing the share of property tax revenues going to the cities, county and special districts in any county, and shifting those shares to the schools or any other non-local government function. However, the Legislature may alter the allocation of property taxes among cities, counties and special districts within a county with two-thirds approval in each house.

Under specific conditions, the Legislature may suspend the property tax revenue protection provisions of Proposition 1A. Beginning in FY08-09, the Legislature may “borrow” not more than 8% of total property tax revenues (currently about $2 billion) if:

the Governor issues a proclamation of “severe fiscal hardship;”■n

the Legislature enacts an urgency statute suspending Proposition ■n

1A property tax protection with two-thirds vote of each house; and

the Legislature enacts a law providing for full repayment of the ■n

“borrowed funds” plus interest within three years.

The Legislature may not enact such a suspension more than twice in any ten year period and may only do so if:

the $1.22 billion FY03-04 VLF Backfill Gap Loan (Revenue and ■n

Taxation Code Sec. 10754.11) has been repaid;

any previous borrowing under this provision has been repaid.■n

Proposition 1A did not provide local governments with any new revenue nor reduce or alter the ERAF I and II shifts.

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n the Road ahead for california local FinanceAt the time of this writing, the California state budget faces another massive shortfall and a long-term structural deficit. A variety of state subventions to cities and counties are being considered for reduction or elimination. Even some revenues that are Constitutionally required to go to local governments are at risk under schemes to cover state costs of county programs with city revenue allocations. While the provisions of Proposition 1A make taking property tax revenue substantially more difficult for the Legislature, the coming budget years will be the real test of the effectiveness of this landmark local protection measure.

Beyond the state’s budget problems looms the continuing pressure for statewide uniformity in fiscal matters. This will continue to threaten the ability of communities to finance local services through locally levied taxes and other sources of revenues. Local governments must grapple not only with these risks and changes, but with evolving service needs and a local revenue portfolio that fluctuates with economic and socio/technical changes. This handbook will help you on your way.

For More information:

Proposition 218 Implementation Guide, Sacramento CA: League of California Cities, 2007 Edition. http://www.cacities.org/resource_files/newCybrary/2007/legalresource/26003.PROP%20218%20final.pdf

California Municipal Law Handbook, Chapter V. Sacramento, CA: League of California Cities, 2007 Edition. http://www.amlegal.com/ca_handbook/

Silva, J. Fred, and Elisa Barbour, The State-Local Fiscal Relationship in California: A Changing Balance of Power. San Francisco: Public Policy Institute of California, 1999. http://www.ppic.org/main/publication.asp?i=57

endnotes.1 Subsequently, in 1986, the voters approved Proposition 47 which requires that VLF

revenues be allocated to local governments.

2 Cities not including the City/County of San Francisco.

3 Subsequent to the transfer of these funds, they are reallocated within each county back to cities and counties to compensate for the state’s repeal of the VLF backfill in 2004 and the temporary ¼ cent sales tax shift to support the state deficit reduction bonds. However, this mechanism does not alter the existence or real effect of the ERAF I and II shifts.

4 In 1982, the state Supreme Court decided City and County of San Francisco v. Farrell, which defined the term special tax as any tax earmarked for a specific purpose. Under Proposition 13, a special tax requires the approval of two-thirds of voters.

5 Proposition 1A does not apply to mandates affecting local schools or mandates related to employee relations and collective bargaining.

193

194

City Attorneys Department League of California Cities

Spring Conference May 6, 2009

The ABC’s of PPP’s:

The Basics Regarding Public-Private Partnerships

Michael N. Conneran, Esq. Hanson Bridgett LLP 425 Market Street, 26th Floor San Francisco, CA 94105 415-995-5042, Phone 415-995-3412, Fax [email protected]

1887967.1

195

The ABC’s of PPP’s: The Basics Regarding Public-Private Partnerships

by Michael N. Conneran, Hanson Bridgett LLP

I. INTRODUCTION Overview

The term “public-private partnerships” or “PPP’s” is appearing with increasing frequency in discussions of ways to address the substantial deficit that exists in our nation’s public infrastructure. PPP’s are sometimes posited as a magic panacea for the financial and contracting challenges public agencies face when trying to build new infrastructure. It is important that public officials, and those who advise them, educate themselves about PPP’s in order be able to evaluate the usefulness of this approach, which can provide an effective alternative method of financing public infrastructure.

Background

The term PPP can potentially be applied to a wide variety of arrangements between government agencies and private parties, including concessions and franchises, as well as agreements for the development of public property. The Federal Highway Administration has defined PPP’s as follows: “A public-private partnership is a contractual agreement formed between public and private sector partners, which allow more private sector participation than is traditional.” (USDOT/FHWA Report to Congress on PPPs, 2004.) However, in this discussion, in addition to focusing on arrangements that allow for “more private sector participation than is traditional,” we will also primarily focus on methods that feature the utilization of private capital instead of tax or bond sale revenues to finance the construction of public projects.

There are a number of reasons for the recent focus on PPP’s. First, there is the undeniable need in our state and nation for new infrastructure in the form of roads, bridges, transit systems, and water facilities, not to mention new government buildings for schools, libraries, hospitals and correctional facilities. Second, governments in Europe and Canada, and, more recently, in the United States, have successfully delivered significant public projects using these methods. Third, a very appealing feature of these arrangements is the ability to secure private financing when public capital resources and bonding capabilities are limited or must be dedicated to other projects. Finally, but certainly not least, there are a host of consulting and financing firms that clearly see PPP’s as a way to profit in a new and potentially broad field. These firms are going to great lengths to promote the concept of PPP’s to government leaders, many of whom are eager to complete important public improvements during their tenures, particularly ones that would otherwise be unattainable.

In extolling the virtues of PPP’s, proponents can point to a host of projects, including ones in Europe and Canada, that have utilized private capital and expertise to develop important public facilities. In Vancouver, BC, construction is underway on the $2B “Canada Line” project, a light-rail system connecting downtown Vancouver and its airport. That nation’s clearinghouse for PPP information, the “Canadian Council for Public-Private Partnerships,” boasts of the successful completion of numerous toll roads, hospitals, water and waste-water plants, courthouses and correctional facilities. (See http://www.pppcouncil.ca/) Several provinces within Canada (British Columbia, Quebec and Ontario) have established their own centers to both promote the use of PPP’s and to assist local governments in undertaking

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projects using the PPP model. PPP projects in the United States have included the Hudson-Bergen Light Rail project in New Jersey, as well as toll roads in Virginia, Texas and Southern California.

These projects have captured the attention of a number of federal and state officials, who have sought to promote PPP’s as a potential solution to the problem of financing infrastructure. Governor Schwarzenegger has proposed his own “Performance Based Infrastructure” or “PBI” program as part of his overall “Strategic Growth Plan,” which also included the $42 billion in bonds that the voters of California approved in November of 2007. As part of the recently-concluded budget negotiations, the Governor signed a bill, SB 4, that comprehensively revised the existing law on PPP’s in California. That action sparked this strong reaction from one union:

The 2009 budget package includes expanded PPP authority for state highways. The Legislature, Caltrans, and the oversight board created by the authorizing legislation must ensure public agency oversight and involvement in future PPP projects to prevent foreign, multi-national companies and Wall Street investment houses from taking huge profits out of our transportation system, preventing the improvement of public roads, and inflicting outrageous tolls on motorists. Public agency oversight is the only way to ensure that our history of failed PPP projects and public bailouts does not continue. (Professional Engineers in California Government, “PECG Objectives for 2009”)

Other groups have criticized PPP’s for increasing project costs and failing to deliver projects on the expedited schedule promised.1 Despite these concerns regarding PPP’s, a number of agencies, including the Federal Highway Administration (FHWA), have strongly promoted PPP’s. The FHWA website features many useful resources for understanding and implementing PPP’s. (See http://www.fhwa.dot.gov/ppp/index.htm.)

However, while PPP’s certainly offer the prospect of facilitating the construction of needed public improvements, these arrangements are often quite complex and require the participation of a host of participants, including design professionals, contractors, financiers, and attorneys. This complexity provides a challenge to the municipal lawyer who must help his or her client sort through the competing proposals of project proponents, seeking to ensure that the arrangement provides the benefits that are promised without causing any unexpected risks.

Scope of this Paper

Given the complexity of these issues and the relative unfamiliarity of many municipal practitioners with this approach, this paper is intended to provide a basic overview of PPP’s and describe how this approach fits in with other methods of delivering projects. It will then describe the existing legal authority available to cities and also review the PPP provisions of the latest legislative foray into this field, SB 4. Finally, it will highlight some of the key issues that arise in negotiating and implementing these arrangements. In the course of this discussion, I have tried to note, where appropriate, the criticisms that some groups have raised regarding PPP’s. I have also included, in the bibliography, a list of resources to consult for additional information, so that practitioners can prepare themselves to address these issues should they arise for their clients.

1 See Stuart Murray, Value for Money? Cautionary Lessons about P3s from British Columbia, Canadian Center for Policy Alternatives, BC Office (2006)

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II. PPP’S: A METHOD OF SHIFTING RISK

At its essence, the PPP approach is simply one of many different contracting methods that can be used to deliver public projects. It is useful to view PPP’s as one step within a range of methods for constructing and delivering public projects. These methods, often termed “project delivery methods,” range from the traditional “design-bid-build” approach to a fully privatized model that nevertheless serves a public need. The chart below describes a range of potential delivery methods, showing the various stages of increasing private involvement and private assumption of risk. A key feature of the different project delivery methods is the ability to selectively shift different types of risk to the private sector, including risks involving price, schedule, financing, design or construction. While few arrangements shift all of these risks at once, their ability to selectively transfer risks to the private sector is a feature that offers a great potential to the public agency.

Private Sector Involvement

Priv

ate

Sect

or R

isk

Design - Bid - Build

Design - Build

Design - BuildOperate - Maintain

(Government Financed)

Design - BuildFinance - Operate - Maintain

PPP Model

Build, Own, Operate(Concession/Franchise)

100% Privately Owned and Operated

Given the legal requirements regarding public bidding for construction contracts and the procurement of professional services, many of these methods are not always available to every public agency. The chart attached at the end of this paper shows the range of authority available to various entities in California. In recent years there have been an increasing number of legislative changes that have allowed more agencies to engage in many of these approaches. With the trend of expanding the authority of cities and other agencies to use various project delivery methods, we think it is advisable to examine the full range of these methods before focusing on the legal limitations that may currently prevent cities from utilizing any particular method. That way, not only will the reader be apprised as to the range of options

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that are possible, they will be prepared for any future changes in legislative authority.

Project Delivery Methods

The following are brief summaries of the most popular methods of project delivery.

Design-Bid-Build

Design-bid-build is the most conventional project delivery mechanism and has been used by public agencies for generations to deliver most public projects. Under this method, the public agency separately arranges with a design professional (either in-house or through a professional services contract) for the design of the project and the production of a set of plans and specifications to construct the project. The services of design professionals, under the “Little Brooks Act,” are procured through a process that focuses on qualifications, not price. (Cal. Gov’t Code § 4526.) Bids are then solicited from third party contractors and then construction contracts are awarded to the lowest responsible bidder (although public agencies may “pre-qualify” bidders on construction contracts to eliminate questionable performers). (Cal. Pub. Cont. Code § 20101.) With regard to such projects, it is said that “design risk” remains with the public agency, as it is held to warrant the completeness and accuracy of the plans and specifications. (See Howard Contracting, Inc. v. G.A. MacDonald Construction Co., 71 Cal. App. 4th 38 (1998).)

While this process has successfully produced public projects for many decades, it is not perfect. There are delays due to the need to do two procurement processes (for the selection of the designer and the contractor) and there are often disputes among the designer, city and contractor, which can result in significant delays and expensive litigation. When plans are flawed, cities often find themselves in the uncomfortable situation of being trapped between asserting there was negligence on the part of the designer while trying to prove to the contractor that the design was not deficient. In addition, it can certainly be argued that the lowest bidder does not necessarily do the best quality work and may, through submitting contract claims, end up costing more than a competing bidder would have. Nevertheless, there is a perception that the sealed bid process helps to avoid favoritism and promote economy, even if the lowest bidder is not always the “best” contractor for the job.

Design/Build

The design/build approach has been utilized with success in the private sector and is now increasingly available to select public agencies (including cities for certain projects, pursuant to AB 642, Chapter 214, Stats. of 2008). This process is said to promote cooperation between the designer and contractor by putting them on the same team. The public entity typically designs the project through the preliminary design phase, then hands off the project to the design/build team to complete. This approach is seen as being more efficient, allowing for consultation between the party designing the project and the one that will actually build it. Proponents of design/build claim that projects are completed more expeditiously and at a lower overall cost. One primary benefit is that the public owner is not responsible for any designer/contractor disagreements. However, by combining the procurement of the designer and contractor into a single selection process, this approach requires legislative reconciliation of the inconsistent methods of awarding contracts to designers and contractors. This is normally accomplished by either specifying that contracts be awarded on the “best value” method which can balance several factors or can simply be awarded to the lowest responsible bidder, often after a prequalification process. In California, this process has met with determined opposition

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by public employee labor groups, particularly the Professional Engineers in California Government (“PECG”), who have long opposed any efforts to “out-source” design work on highway projects to non-state employees.

Design-Build-Operate-Maintain

This approach extends the design-build contractor’s responsibilities beyond the delivery of the finished project by requiring the contractor to subsequently operate and maintain the facility. This arrangement provides a clear incentive for the contractor to provide a quality product that will not require substantial maintenance. These arrangements must contain clear performance standards in order to ensure that the public gets the quality of service it expects. Related arrangements are design-build-maintain and design-build-operate, where these selected functions are delegated to the contractor. Each approach has its particular advantages and is appropriate in different situations.

Private Sector Project Methods

At the far range of the spectrum are models in which the private sector, operating through a concession contract, essentially operates the public facility. A further and perhaps final step is where the facility is entirely developed and owned by a private firm, such as is the case with a public utility.

Financing Projects through the Private Sector--the Essence of a PPP

When one of the above arrangements also require the private partner to provide the capital financing for the project, the word “finance” is often added to the title, resulting in a “design-build-finance-operate” contract or similar project descriptor. It is this financing aspect that brings an arrangement within the definition of a PPP as used in this paper. This financing component is often the most crucial element motivating agencies to utilize PPP’s. Although some incorrectly view these arrangements simply as ways to undertake projects without having to either pay the capital costs out of general fund revenues or to sell bonds to raise funding, that analysis is perhaps a bit too facile. The PPP approach, when used for the right type of project, allows agencies to undertake projects they might not otherwise be able to afford with conventional funding approaches. Questions remain, of course, as to whether the overall cost will be lower and whether it is appropriate to shift such costs to the future through a contractual relationship that is not bond financing. In our remaining discussion, when we refer to PPP’s we will mean, at a minimum, projects that will include financing as well as design and construction.

A basic issue in considering use of a PPP is whether a privately-financed project can be delivered more cheaply than one that would be financed through tax-exempt bonds. While some might argue that the efficiencies available through a greater private role may overcome any additional financing costs, there are also a number of tax-free vehicles available to fund PPP’s that can be fairly competitive with bond financing costs. One type of financing, known as “63-20 bonds,” involves financing issued by a special-purpose non-profit corporation. Other programs, like the federal Transportation Infrastructure Finance and Innovation Act of 1998 (TIFIA), provide government funding to private partners for specific types of project.

Other Non-traditional Approaches

While the range of methods discussed above provides a framework for understanding the different methods of project delivery, no discussion of project delivery methods would be

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complete without some mention of the lease-leaseback approach. In some ways this is the oldest of the non-traditional methods. At its essence, the lease/leaseback involves the transfer of public property to a private developer, who constructs the facility and returns it to the public via a leasehold. This process has been criticized for avoiding competitive bidding altogether, although proponents claim it produces a quality project at a lower cost.

Other non-traditional approaches include the “CM at risk” method, where a Construction Manager, or CM, is engaged through a professional services contract, who then hires the major trade contractors in a manner if its choosing (competitively bid or otherwise) and who is contractually obligated to complete the project for a fixed price. Given the requirements of competitive bidding, this process is difficult for public agencies to utilize. A modified approach, known as “multi-prime,” requires the public agency to bid and hold multiple trade contracts, which are then managed by a construction manager who provides management services only and is not at risk to deliver the project for a fixed price.

A more radical approach is termed “Integrated Project Delivery” or “IPD.” Under the IPD approach, all parties agree not to raise disputes and commit to work cooperatively to bring projects in on-time and under-budget. Early involvement of the trade contractors in the design process is vital under this approach. The application of IPD in a public setting is problematic, given incompatibility of the traditional low-bid contracting method with the need for the parties to be willing to work in a cooperative fashion with each other, which is normally the result of some prior experience working together. Such arrangements can also raise issues under conflict-of-interest laws, due to the mixing of the traditional contracting roles. However, these approaches (also called “Lean” contracting principles) are being increasingly explored in the private sector.

III. DESCRIPTION OF EXISTING CALIFORNIA PPP STATUTES

Now that we have reviewed the basic components of a PPP arrangement, it is appropriate to briefly review the existing statutory authority for PPP projects for several reasons. First, one of these statutes, (the California Infrastructure Financing Act, Cal. Gov’t Code §5956 et seq.) currently provides significant PPP authority to cities. Second, the terms of another statute, the recently-adopted SB 4 (2nd Ex. Session, Chapter 2, Stats. 2009), reflect the latest thinking on PPP’s and contains a number of protective provisions that are illustrative of terms that should be in most PPP agreements. Finally, given the many legislative changes in this area, it is very possible that terms contained in SB 4 or other statues could find their way into future legislation that is directly applicable to cities. California Infrastructure Financing Act, Cal. Gov’t Code §5956 et seq.)

The California Infrastructure Financing Act (“IFA”), which dates back to 1996, is broadly applicable to California public agencies, including cities.2 By its terms, the IFA applies only to “fee-producing infrastructure” which limits its utility for general governmental facilities. The permissible projects under Section 5956.4 include the following types of projects: Irrigation; drainage; energy or power production; water supply, treatment, and distribution; flood control; inland waterways, harbors; municipal improvements; commuter and light rail; highways or bridges; tunnels; airports and runways; purification of water; sewage treatment, disposal, and

2 Pursuant to Gov’t Code §5956.3, the IFA applies to “Government agencies, which includes a city, county, city and county, including a chartered city or county, school district, community college district, public district, county board of education, joint powers authority, transportation commission or authority, or any other public or municipal corporation.” Significantly, this authority is not available to the State.

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water recycling; refuse disposal; or structures or buildings, except structures or buildings that are to be utilized primarily for sporting or entertainment events.

Although the IFA does explicitly authorize the PPP approach for fee-producing infrastructure projects, the statute contains several restrictive provisions that affect its usefulness and which may explain the scarce number of projects that have followed its model. For example, it limits the term of any transaction to 35 years. This may not provide sufficient time for private partner to recoup its investment. The statute also does not exempt the project from property taxes, meaning that possessory interest tax would apply to any leasehold interest the private partner takes in public property. It also appears to require 100% bonding, which may not be suitable for a large project in which significant value is not construction-related.

There are also some limitations on the use of the user fees received, including a prohibition on the transfer of surplus revenues for general fund. (§5956.6(b)(4).)3 Public hearings are also required before user fees can be imposed or raised. (§5956.5.) However, by making all fee increases subject to subsequent action of the public entity, this may raise concerns with private firms that their revenue stream may be uncertain, since even indexed increases would require hearings and approval.

The portions of the IFA that address procurement methods are somewhat unique. The statute apparently mandates the use of competitive negotiations. Section 5956.5 specifically exempts IFA deals from the normal competitive bidding laws, as well as the Little Brooks Act. There is also a broad exemption from many other standard contracting limitations in the Government and Public Contract Codes, including subcontractor listing requirements.4 It should be noted that the IFA may be utilized even if private funding is not utilized, thus providing a very flexible contracting method, provided the other requirements of the statute can be met.

Reflecting the ongoing political controversy over the use of design/build or similar methods on the state level, the IFA specifically prohibits the use of the act for “state projects,” which include “state-financed projects.” This provision may prohibit the use of any state grant funds for a project a local agency is developing under the IFA. It should be noted that a bill intended to address many of these concerns with the IFA, AB 1261 (Caballero), was defeated during the last legislative session, after receiving substantial opposition from public sector labor groups. SB 4

As part of the budget negotiations earlier this year, one of the measures sought and obtained by the Governor was SB 4 (Second Ex. Session (Cogdill) (Chapter 2, Statutes of 2009), which modified the existing design-build legislation for toll roads and authorized additional state agencies (Department of General Services, Department of Corrections and 3 “User fee revenues shall be dedicated exclusively to payment of the private entity's direct and indirect capital outlay costs for the project, direct and indirect costs associated with operations, direct and indirect user fee collection costs, direct and indirect costs of administration of the facility, reimbursement for the direct and indirect costs of maintenance, and a negotiated reasonable return on investment to the private entity.” 4 “Other than [the specific provisions stated in Gov’t Code §5956.5] and applicable provisions related to providing security for the construction and completion of the facility, the governmental agency soliciting proposals is not subject to any other provisions of the Public Contract Code or this code that relates to public procurements.” (Gov’t Code §5956.5)

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Rehabilitation and the Judicial Council), as well as redevelopment agencies, to utilize the design-build method for up to 15 projects statewide until 2014. This includes up to five projects (local street or road, bridge, tunnel, or public transit projects) for the local transportation agencies and up to ten projects (state highway, bridge, or tunnel projects) for Caltrans. SB 4 allows regional transportation agencies and Caltrans, until 2017, to enter into an unlimited number of PPP’s for transportation projects.

Although the PPP provisions of SB 4 are not directly applicable to cities, the legislation is worthy of note because it may serve as a model for future PPP legislation or may be amended to allow cities to undertake PPP’s, perhaps for a wider range of projects. The statute, which amends existing Cal. Street and Highways Code Section 143, creates a clearinghouse for PPP information, the Public Infrastructure Advisory Commission or “PIAC,” similar to those in the Canadian provinces. (§143(b)) It also posits the California Transportation Commission to supervise any PPP deals that are proposed and to seek comments from the PIAC and Legislature regarding any proposed transactions. (§143(c)) The statute does not restrict the types of deals to those involving leases, allowing easements and permits to be used, but specifies that the infrastructure must be owned by the public entity and must revert to the agency, at no cost, at the end of the term. (§143(d))

The law allows the use of either competitive bidding or competitive negotiation, but requires that the design-build method of project delivery be used. It is also fairly specific in listing how the procurement process is to proceed. In particular, in requires that at least one competing proposal be obtained before an unsolicited proposal is accepted. (§143(g)) The law contains extensive language regarding the required qualifications of any private partner, as well as language limiting the extent to which a contracting entity can promise not to construct competing facilities. (§143(h)) Unlike the IFA, however, the new statute allows for the agreement to contain a formula for the increase in user fees. (§143(j)) There are similar limitations on the use of user fees, although regional agencies, once other costs of the project are paid, may apply excess fees to other public transportation projects in the vicinity of the PPP project. (Id.) The new statute also contains language that would exempt the private interest in a project from possessory interest taxes. (§143(o)) Thus, SB 4 avoids some of the weaknesses of the IFA for the limited range of projects to which it applies, but unfortunately did nothing to revise the provisions of the IFA.

IV. THE PROS AND CONS OF THE PPP APPROACH

What types of projects have been successful as PPP’s?

Part of the impetus for California government to consider PPP’s is the demonstrated success such projects have enjoyed in other nations, and more recently, in other states within our own nation. While the United Kingdom and Canada have been at the forefront of the PPP movement, many nations around the world have had successful PPP projects. The range of such projects is quite wide, and includes transportation facilities (particularly roads and bridges, but also transit systems and airports) hospitals, schools, prisons and office buildings. The UK has had over 400 operational PPP projects, which comprise 10-15% of all annual infrastructure spending in that nation.5 In the US, most of the PPP projects have involved toll roads, with states such as Texas, Virginia, and Florida taking the lead. There have also been toll road projects developed via PPP’s in California, including SR125 and SR 91, with admittedly mixed

5 “Investigating the performance of operational PFI contracts,” Ipsos MORI Social Research Institute, 2008.

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results.

What are the benefits and potential risks of PPP’s?

Before examining the details of PPP’s arrangements, it would be helpful to review the perceived benefits of PPP’s, as well as the potential problems with the approach. As noted, many proponents argue that PPP projects can be delivered more quickly and with less chance of cost overruns than traditional projects. Perhaps the most fundamental purpose cited for using the PPP project delivery method is to transfer the cost and timing risk to the private party. It is also felt that the more private nature of the process allows for greater efficiency, allowing projects to be delivered at a lower cost. Some of this savings may be attributable to the design-build approach that is often built into such arrangements. These arrangements can also ensure that a proper focus is given to the maintenance of facilities (and to the construction of easily-maintained facilities in the first place) by shifting this obligation to the private partner. The thought is that if the partner knows it will have to maintain a facility for 30 years it will have a greater incentive to design and construct the facility in a way that minimizes the long-term maintenance costs. It is felt that the financial incentives for the developers to complete projects and get them operating so that they can begin receiving revenues is an effective tool to encourage prompt completion.

While many of these perceived benefits may be attainable, critics of PPP’s point to a variety of difficulties that can arise with such projects. Perhaps the primary concern is that deals are often very complex, long-term arrangements, which may be a challenge for many agencies to undertake, particularly when dealing with sophisticated and experienced private partners. The negotiation of these transactions often requires the public agencies to obtain expert advice during negotiations which can be expensive and come with the risk that a final deal may never be consummated. Given their additional complexity, these transactions can take longer to negotiate, potentially undermining any scheduling benefits the process might otherwise provide.

Some of these criticisms may result from agencies having unrealistic expectations about what the PPP approach can attain. It is crucial that agencies considering the use of PPP’s have a clear idea as to what the traditional alternatives might cost, so as to better evaluate the potential cost savings from PPP’s. There can be misconceptions that PPP’s provide “magic money” to fund public needs and that the private partner can solve every challenge that a project involves. Unrealistic expectations can lead to more lengthy (and expensive) negotiations and result in frustration on both sides. It is important for the public agency to have a clear idea of what the business realities are with that particular project.

But perhaps the most significant criticism of the PPP approach involves the fundamental issue of cost. Proponents appear to reflect an organic belief that the private sector can routinely deliver projects at a lower cost than when there is less public involvement. Critics point to potential problems with unsupervised work and argue that the presence of a profit motive can only increase costs. These are difficult issues to resolve globally, and perhaps even more difficult to analyze for a single project. While there are some methods available to estimate the economics of PPP deals, there is no universally accepted method of comparison. And there is certainly an understandable concern on the part of critics that international design and construction firms, allied with major investment firms, might end up draining the municipal till as part of one of these deals. Yet the crying need for new infrastructure presses us to consider new approaches, even ones that will test our skills at protecting our clients from poor contracting decisions.

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Finally, there are often concerns about, and sometimes direct opposition to, PPP projects from public sector labor groups. At best, these arrangements are viewed as limiting the number of potential new members for these organizations as new functions are controlled by private contractors. At worst, these deals are viewed as disguised “out-sourcing” arrangements under which current employees will either lose their jobs or find themselves with inferior working circumstances.

Public employee unions at times express concerns that the development of projects using PPP’s will result in either few jobs in the public sector or a reduction in existing jobs and have in the past challenged such projects. (See Professional Engineers in California Government et al. v. Department of Transportation (1993) 13 Cal.App.4th 585.) Unions may also raise questions regarding the propriety of arrangements that do not feature competitive bidding. While many of these concerns can be addressed by well-crafted PPP arrangements, sometimes the deal never gets to the negotiation stage due to political opposition. Nor is there any guarantee that the deal ultimately reached will adequately address these issues.

V. WHEN IS THE PPP APPROACH APPROPRIATE?

Choosing the right project In considering a project for potential PPP treatment, an agency should consider a

number of factors:

• Is there an urgent need for the project, such that an expedited schedule would provide a special benefit? Assuming a transaction can be negotiated promptly, a PPP approach can result in the development of a project in an expedited fashion, which can provide additional benefits if the project is urgently needed. But, especially for an agency that has never entered into a PPP deal before, such an assumption may be unwarranted if staff and counsel must acquaint themselves with the PPP context.

• Is this the type of project that can get completed more quickly using the PPP method? Some projects lend themselves more easily to PPP treatment and provide efficiencies by combining design, construction and other functions in the same contract.

• Is this the type of project that lends itself to PPP treatment as a result of particular technical or physical features? Some highly technical projects can best be developed by parties with demonstrated experience on similar projects. The long-term operation and maintenance of a highly technical facility might best be left to the builder.

• Has this type of project been successfully developed as a PPP in other places? There is a great deal of information available about successful PPP projects, as well as a host of qualified consultants with experience developing such projects.

• Based on the financial prospects for the project, is there a good chance that the project will attract private investment? If a project can demonstrate a reliable, dedicated flow of funding (such as through toll revenues or user fees) then private sector funding will be more readily available. Such a project lends itself to development without reliance on public funds.

• Does the city have the funding resources (general fund or bond revenues) to undertake the project and is it willing to commit them to the project or would it prefer to fund it via private capital? Some PPP projects are attractive because they can be

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funded privately, freeing other funds for projects that do not lend themselves to private funding.

• Are there likely to be multiple bidders for the project, such that competition will reduce the cost to the agency/public? Just as competitive bidding results in lower costs, having multiple parties compete for a PPP contract will likely provide more value to the public.

• Is the project significant enough to justify the transaction costs that will be required? A city needs to determine whether a project being considered for PPP treatment is of a size that will allow it to recoup the higher costs required to negotiate the deal.

• Will the PPP provide better value than developing the project conventionally (in other words, what is value of the project as a PPP compared to what it would cost normally over the lifetime of the deal)? This is a crucial factor in deciding whether to proceed with the PPP approach. While other factors may influence the decision to proceed with a project (such as the lack of other capital funding or a desire to avoid operating a complex facility) the overall cost analysis should be the primary consideration in deciding whether or not to proceed on the PPP path. There are consultants that can assist with this analysis, as well as publications that propose methods of analysis. However, there is no universally accepted method of determining when projects will work better under a PPP approach.

• Is the project the type that will provide benefits over a long term and not become quickly obsolete, such that it can obtain private investment for long term finance? Given the need to show potential investors that the facility will provide revenue long enough to justify the investment, facilities that are likely to become obsolete quickly do not lend themselves to PPP treatment.

• Is the desired outcome of the project capable of being captured in a contract? Given the need to receive services over an extended period of time, PPP arrangements that produce results that are easily capable of measurement are much more easy to enforce. For example, the output of a desalinization plant is readily measurable, while the proper operation of a conference center or office building may be more difficult to capture in contact language.

VI. ISSUES FACED IN NEGOTIATING PPP AGREEMENTS Environmental Issues

The treatment and timing of environmental reviews can be a complicating factor for

PPP’s. The desired timing of the turnover of the project to the private partner may not necessarily comport with the requirement under CEQA that environmental review occur at the earliest feasible stage, and certainly prior to a commitment to a project by a public agency. A very clear example of this challenge occurred in Save Tara v. City of West Hollywood (2008) 45 Cal.4th 116, where the city entered into a preliminary funding agreement with a non-profit developer to facilitate a project to construction housing on a property classified by the City as a cultural resource. Although the preliminary agreement stated that final transfer of the property would not occur until CEQA had been satisfied, when that agreement was challenged the court found enough evidence of the city having committed to the project to contravene CEQA (including making a half-million dollar loan to the developer). The court in Save Tara did attempt to reconcile its holding with two other decisions that approved a condition in preliminary

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agreements providing for subsequent CEQA review. However, it made it clear that the mere insertion of language making an agreement contingent on subsequent CEQA compliance was not satisfactory:

A CEQA compliance condition can be a legitimate ingredient in a preliminary public-private agreement for exploration of a proposed project, but if the agreement, viewed in light of all the surrounding circumstances commits the public agency as a practical matter to the project, the simple insertion of a CEQA compliance condition will not save the agreement from being considered an approval requiring prior environmental review.

The holding in Save Tara has the potential to pose a significant obstacle for some public-private agreements, as a requirement that a full review be conducted before preliminary agreements can be entered into can limit the options of agencies with limited funding.6 Clearly, in order to craft an agreement that features sufficient clarity as to the business terms of the arrangement, much of the information about the project will need to be provided. At that stage, it would be difficult to assert that a meaningful CEQA review could not be conducted. Indeed it was on that basis that the Save Tara court distinguished the holding in Concerned McCloud Citizens v. McCloud Community Services District (2007) 147 Cal.App. 4th 181) in which many facts were not known at the time of contracting. At the same time, a fundamental principle of CEQA requires that an analysis of potential impacts be conducted prior to an agency committing to a project. Therefore, before entering into any public-private arrangement for which CEQA review has not been conducted, a city should carefully consider the holdings in Save Tara and -Concerned Citizens. While a grant-funded project can obtain funding for environmental review and preliminary engineering costs, thus allowing the proponent from expending general funds for a project, for a fiscally-constrained agency, the need to fund a full environmental review (as well as a full negotiation process) prior to obtaining any funding from the private partner can be a deal-killer.

Other issues arise once the public-private arrangement is approved and the project is

turned over to the private partner, since the partner is likely to have to be responsible for the environmental mitigation for the project. While this might not differ significantly from private projects where mitigation obligations are placed upon the developer, the agreement needs to contemplate that this obligation will be borne by the private party.

Financial Issues

Given the variety of potential PPP projects and the different financial arrangements possible for them, it is hard to make universal statements about the financial structure of PPP transactions. Nevertheless, these deals can be grouped in a number of general categories in terms of their treatment of revenues. One group of transactions involves the transfer of existing facilities to a private operator, who will receive future toll or fee revenues. For such transactions, which often produce significant revenue payments to the public, the issues are generally whether the payment is received in a lump sum at the beginning or is paid over time and how those revenues are used. Some proposals, such as the proposed transfer of the Pennsylvania Turnpike, were criticized as proposing the sale of valuable public assets to raise short-term revenues. Other PPP’s have accepted lump sum payments, but dedicated the

6 See “CEQA Case Before Supreme Court Threatens Public/Private partnerships,” James W. Andrew & Elizabeth L. Bridges, 31 Real Property Law Reporter 153-155 (Sept. 2008).

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revenues to fund similar infrastructure projects, thereby stretching the limited funding to provide more benefits (which of course will be fully realized over time). When the project involves the construction of new facilities, a key question is whether the facility will be able to produce sufficient revenues to pay for itself (and thereby repay any private capital invested to construct the facility). While this may work for roads or bridges due to the potential to produce toll revenues, some projects, such as transit facilities, will not turn a profit. In such cases, the transaction often requires a commitment by the public partner to make subsidy payments, termed “availability payments,” over the life of the project to ensure the continued availability of the facility. Of course, this means that such funds must be taken out of each year’s operating budget. This type of arrangement has been criticized as creating an off-balance sheet obligation disguising the long-term nature of the arrangement. In addition, cities must be cognizant of the Constitutional limitations on long-term financial obligations. (See Cal. Const. Art. XVI, § 18.)

When dealing with very large projects, the initial capital funding can derive from a wide variety of sources, including general fund revenues, private equity contributions, privately-raised debt, funds raised through tax-exempt bonds issued by a related non-profit corporation, as well as federal, state and local grant funding. Each of these sources may have their own legal constraints, particularly when a private party is involved in the transaction. If these requirements are inconsistent, or if other agencies must approve the transaction, this can add complexity to the transaction.

Even before funds are available from bonds or the private partner, the city may need to

front substantial revenues to pay consultants and legal counsel, as well as preliminary engineering costs and the cost of any required environmental review. If the deal is never consummated, these funds may be lost. Perhaps the most important issue, however, is how the private partner is compensated. After all, the private partner is in the transaction to make a profit, as well as to retire any debt it enters into to fund the project. Therefore, a return sufficient to provide the private party with a sufficient return on the capital it invests, to pay to retire any debt and to compensate the private partner for the risk it has taken, is crucial to concluding any such deal. However, although there are several parameters for measuring rates of return, it is not necessarily easy to determine what such a return might be. In addition, if such a return is to be obtained over time from toll or fee revenues, there may need to be terms that provide for a rate-setting procedure over a lengthy term. Some transfers of existing assets have been criticized for giving too much leeway to the private operator to set tolls, resulting in claims that the public agencies have “sold out” the interests of their constituents in order to get immediate revenues, forcing the users of the facility to face higher charges over the life of the deal. A thorny financial issue is the potential exposure of the private interest the developer takes in the project to be subject to possessory interest tax under Cal. Revenue and Taxation Code Section 107. This is essentially a property tax that is imposed on the interest a private party holds in public property. As the tax is gauged to the capital value held by the partner and is subject to the 1% cap on property taxes, it can represent a significant expense to the developer.

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Procurement Issues

Given the magnitude of the typical PPP transaction, the process for selecting the private partner takes on great significance. Some PPP transactions are the result of unsolicited offers from the private sector, which can be challenging to properly analyze and can also raise questions of propriety and favoritism. One approach a city can take in response to an unsolicited proposal would be to initiate a public process to invite proposals from other potential bidders. However, some agencies have proceeded to negotiate with the single proposer. A new statute permitting the State and transportation agencies to enter into PPP transactions requires that a second proposal be obtained before a transaction can proceed, reflecting these concerns about the propriety of accepting unsolicited offers. (Chapter 2, Stats. 2009) In order to encourage proposals from qualified firms, it is important to show a process that both transparent and fair, since, given the high cost of responding to such solicitations, potential competitors will decline to participate if they think their prospects are diminished by an existing “favorite” bidder. Many agencies will begin by seeking “expressions of interest” or issue a request for qualifications, with the intent of obtaining a short-list of qualified parties from whom to receive more detailed proposals. However, the proposal process can be lengthy and quite costly for participants. Some agencies have provided stipends, cash payments to partially defer the cost of bidding, to encourage a larger group of proposers to participate in the selection process. If the proposals will potentially contain useful ideas that the agency may want to utilize, it is possible to condition the payment of a stipend on the transfer of the intellectual property rights in each party’s submittal. That way, if a meritorious idea is submitted by a proposer who is not ultimately selected for the award, the concept can still be utilized for the project. Given the scope and complexity of many PPP deals, as well as the fact that details of the transaction may remain confidential until a final agreement is reached, the process to approve a PPP deal can raise legitimate concerns about transparency and equity among members of the public. It can be tempting, particularly after a long negotiating process, to seek quick approval of a governing body for a deal. However, it is advisable to consider ways in which to brief the public as to the details of the transaction in order to allow adequate public review of the deal. The process to consider the transaction can also raise legal issues for cities. Under the terms of the Ralph M. Brown Public Meetings Act (Gov’t. Code Section 54950), legislative bodies are permitted to meet in closed session to consider the price and terms of payment for real estate transactions. (§54956.8). Although many PPP deals involve real estate assets and may therefore be appropriate for closed session consideration, some do not. (See Shapiro v. San Diego City Council (2002) 96 Cal. App.4th 904.) Complying with open meeting requirements may impact the negotiation process for those transactions. Even when deals do involve real estate issues, the decision in the Shapiro case indicates that counsel should carefully consider which aspects of a transaction involving real estate assets are appropriately discussed in closed session. Contracting Issues Once a private partner is selected, a host of other issues arise regarding the specific terms of the PPP agreement. Some of these points may have been addressed in the solicitation documents in order to focus the proposals on the parameters of the expected deal.

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One key issue, which is often governed by the enabling legislation of the agency entering into the transaction, is the term of the agreement. Common lengths are 35, 50 and 99 years. Cities are permitted to enter into lease agreements for 55 years, but can, by making specific findings, enter into a term of up to 99 years. (See Cal. Municipal Law Handbook, §8.3.01, which notes that this limitation may not apply to charter cities.) There is no fixed limit on other sorts of (non-lease) agreements. Another critical issue is how to ensure performance of the contract. In many deals, the private partner has a strong incentive to perform, since its compensation depends on the use of the facility or some other measurement that would be affected by good or bad performance. It is also possible to build incentives or penalties into a contract. Further protection can be obtained through performance bonds or through letters of credit or other forms of financial guarantees. Finally, the private partner can be required to deposit some revenues into an escrow account that can only be used to satisfy certain obligations under the contract. However, for long-term contracts, it may be difficult to obtain performance bonds for the full value of the contract and such bonds may unduly add to the cost of the undertaking. Some legislation has specifically authorized reduced bonding limits, sometimes tied to the value of the construction element of the arrangement. Other maintenance issues involve the condition of the asset at the end of the term, which is often termed the “hand-back.” Without contractual protections, the private partner may be tempted to allow the condition of the asset to deteriorate in the final years of the deal, delivering a facility back to the public that is barely serviceable. Another important issue, and one that was clearly highlighted in the SR 91 transaction, is the tricky question of how to address the potential for future public projects to “compete” with the PPP facilities. In the case of SR 91, the agency agreed to a “non-compete” clause promising not to build facilities that would compete with the toll road for drivers. When traffic conditions became so intolerable that such competing facilities needed to be built, the public was forced to buy out the toll road operator’s interest. However, since those providing financing to toll-type projects require sufficient assurance that they will be able to obtain the expected return on their investment, similar provisions will be needed to attract investors. Clearly the contractual arrangements for new projects can be better tailored so that sufficient protection is provided to investors, but necessary public facilities aren’t blocked. Another related issue is the need to address future investments or expansions of the PPP facility. While the initial deal will customarily address how the cost of the initial improvements is to be borne, a more challenging issue arises when capital investments must be made after the initial transaction. Such capital requirements can arise through the need to replace initial improvements that wear out over time or the need to add additional capacity (such as additional lanes to a toll road) at some point during the contract terms. Particularly when the initial improvements are funded through grants or other outside funding sources, the issue of who will fund additional capital improvements can be a difficult issue to resolve between the public and private parties. Other Issues

As most PPP projects involve high-profile, high-value undertakings, they are likely to catch the attention of interest groups with a stake in the ultimate project. These include labor unions and environmental groups. From the construction trade union perspective, most PPP projects are of a sufficient size to justify a project labor agreement or other arrangement that

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goes beyond the standard prevailing wage requirement applicable to public projects. It should be noted that most legislation authorizing PPP projects contains a prevailing wage requirement.

Another tricky issue involves indemnity, due to the limitations on indemnity provisions

affecting design professionals imposed by AB 573. One approach to this is to feature separate indemnity provisions with savings language that limits the interpretation of any indemnity to one that would not violate the statute.

VII. THE BOTTOM LINE While PPP’s have proved a valuable tool in other countries and also in other states, we have few California models from which to judge their effectiveness. It is difficult to predict, in the current economic climate, exactly how future public improvements will be funded. But it seems clear that, based on successes in other states and nations, and as a result of the recent legislation, more PPP transactions will be undertaken in California. It is important that public officials, and those who advise them, become knowledgeable about PPP’s in order to more effectively carry out their responsibilities to provide the public infrastructure necessary to support our state in the coming decades.

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STATUTORY AUTHORITY FOR ALTERNATIVE PROJECT DELIVERY METHODS FOR PUBLIC WORKS PROJECTS IN CALIFORNIA

BY DAVID GEHRIG, HANSON BRIDGETT LLP Project Delivery Method

Public Agencies Covered Statute Notes

Design/Build

Transit Operators Public Contract Code (hereinafter “P.C.C.”) §20209.5

does not apply to highway projects

Design/Build All cities

P.C.C.§20175.2 AB 642

applies to projects over $1 million

Design/Build

Sonoma County Health Care District

H&S Code §32132.5

Design/Build Calif. State University P.C.C.§10708 Design/Build School Districts

Education Code §17250.10-§17250.50

Design/Build Community College Districts Education Code §81700-81708

Design/Build Counties P.C.C. §20133 Design/Build State of California

Director of General Services Gov. Code §14661

Design/Build State of California Director of General Services

Gov. Code §8169.5 Applies to contracts for Capital Area Plan

Design/Build Los Angeles County Metropolitan Transportation Authority

P.C.C. §20209.22-.44 for HOV lanes

Design/Build

“Qualified Entity” = cities, counties, city and counties, and special districts

P.C.C.§20193 limited to 20 projects in these categories: 1. regional and local wastewater treatment facilities 2. regional and local solid waste facilities 3. regional and local water recycling facilities

Design/Build “Local transportation entity”; Department of Transportation

P.C.C.§6801 SBX2 4, Cogdill (effective Jan. 1, 2010)

Public Private Partnership

Administrative office of the Courts

Gov. Code § 70391.5


“Public Agency” = the state, a county, city and county, city district, community college district, school district, joint powers authority etc.

Gov. Code §4217.10 - §4117.18 “Energy Conservation Contracts”

allows agencies to enter into ground lease with private contractor who constructs energy conservation facility and sells discounted energy to the agency for a period of years (20-30), before the agency takes possession of the facility.

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“Local Government Agencies“ = city, county , city and county, including a chartered city or county, school district, community college district, public district, county board of education, joint powers authority, transportation commission or authority, or any other public or municipal corporation.

Gov. Code §5956-§5956.10 “Infrastructure Financing Act”

authorizes any combination of: study, plan, design, construct, develop, finance, maintain, rebuild, improve, repair or operate - used by BART for Oakland Airport connector project - only applies to revenue generating projects


“Regional transportation agency” P.C.C. §143 SBX2 4, Cogdill (effective Jan. 1, 2010)

CM at Risk University of California P.C.C. §10503(c) requires prequalification of bidders CM at Risk Port of Oakland CM at Risk California State University Job Order Contracting

Los Angeles Unified School District

P.C.C. §20919-§20919.15

Job Order Contracting

Cal. State University PCC §10710

Job Order Contracting

Counties P.C.C.§20128.5 contract can’t exceed $3 million

Informal Bidding “Public Agency” = city, county,

city and county, chartered cities, chartered counties, special districts etc.

P.C.C. §22000 et. seq. “Uniform Public Construction Cost Accounting Act.”

still requires low bid award

Lease Lease-back

Community College Districts Education Code §81335

Lease Lease-back

School Districts K-12 Education Code §17406 can also be used as a revenue generating mechanism for existing assets

Best Value UCSF P.C.C.. §10506.4 this is a pilot project

Infrastructure Privatization

“Local Agency” = city, county, city and county, special district or county service area

Gov. Code §54250-54256

Local Government Privatization Act; applies to wastewater and sewer projects

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Selected Bibliography 1. Deloitte, Closing America’s Infrastructure Gap: The Role of Public Private Partnerships

(2007)

2. Bay Area Economic Forum, Investing in California’s Infrastructure (2006) 3. HDR, Creating Effective Public-Private Partnerships for Buildings and Infrastructure in

Today’s Economic Environment (2005) 4. Federal Highway Administration, Key Elements of Public Private Partnership (“PPP”)

Agreements 5. Professional Engineers in California Government, PECG Objectives for 2009 6. Ipsos Mori, Social Research Institute, Investigating the Performance of Operational PFI

Contracts 7. Federal Highway Administration, Public Policy Considerations in Public-Private Partnership

(PPP) Agreements (2009) 8. Stuart Murray, Value for Money? Cautionary Lessons about P3s from British Columbia,

Canadian Center for Policy Alternatives, BC Office (2006) 9. Jeffrey N. Buxbaum and Iris A. Ortiz, Protecting the Public Interest: The Role of Long-Term

Concession Agreements for Providing Transportation on Infrastructure, USC Keston Institute for Public Finance and Infrastructure Policy Research Paper 07-02 (2007)

10. National Cooperative Highway Research Program, Public Sector Decision Making for

Public-Private Partnerships (2009) 11. Emily Thornton, “Roads to Riches: Why Investors are Clamoring to Take Over America’s

Highways, Bridges and Airports--and Why the Public Should be Nervous,” Business Week (June 11, 2007)

12. Ellen Hanak and Kim Rueben, Funding Innovations for California Infrastructure: Promises

and Pitfalls, USC Keston Institute for Public Finance and Infrastructure Policy Research Paper 06-01 (2006)

13. Christine Farrugia, Tim Reynolds, and Ryan J. Orr, Public-Private Partnership Agencies: A

Global Perspective, Working Paper #39, Collaboratory for Research on Global Projects, Stanford University (2008)

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CHALLENGES IN EMPLOYEE COMPENSATION, PENSION FUNDING,

AND POST‐EMPLOYMENT BENEFITS

2009 CITY ATTORNEYS SPRING CONFERENCE LEAGUE OF CALIFORNIA CITIES RESORT AT SQUAW CREEK

MAY 6‐8, 2009

Charles D. Sakai Genevieve Ng

Renne Sloan Holtzman Sakai LLP 350 Sansome Street, Suite 300

San Francisco, CA 94104 TEL: (415) 678‐3800 FAX: (415) 678‐3838 [email protected]

www.publiclawgroup.com

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2 2009 City Attorney Spring Conference CHALLENGES IN EMPLOYEE COMPENSATION, PENSION FUNDING, AND POST‐EMPLOYMENT BENEFITS

INTRODUCTION

The recent economic downturn has adversely affected the ability of state and local governments to balance budgets. During healthy economic periods local entities are able to provide services by maintaining a full work force. Tax revenues ‐ whether through property, employment or sales tax ‐ have been severely impacted by home foreclosures and rising unemployment. As these conditions play out over the coming months and years, the likelihood of larger budget deficits faced by state and local entities is very high. Accordingly, to avoid insolvency difficult but necessary budgetary decisions must be made in regards to employee compensation.

Bargaining wage concessions is one avenue a public agency employer may take to begin bringing expenditures back in line with revenues. But wage concessions are only one prong of a multi‐faceted approach to addressing growing budget deficits during lean economic times. This paper will look at the other avenues – layoffs, furloughs, and modifying pension and other post‐employment benefit obligations – to address employee compensation during these difficult economic times. The paper will analyze attendant benefits and issues and provide city attorneys with a legal framework for addressing these issues in their jurisdictions.

CHALLENGES in EMPLOYEE COMPENSATION

One of the most immediate and dramatic ways to close a budget deficit for any public employer is to lay off employees. A less immediate though similarly dramatic method is to furlough employees. Each method comes with benefits and negatives – layoffs are seen as draconian, but remain a managerial prerogative and can be implemented more quickly than negotiating furloughs. Furloughs are less severe but are within the scope of representation and must be bargained with employee organizations.

Before embarking on either course, the employer’s memoranda of understanding with the various employee organizations and other pertinent documents including Personnel Rules and Regulations must be carefully analyzed to determine the employer’s flexibility. A no layoff or furlough clause will preclude these options for an employer quickly, while other restrictions may impact the timing or number of employees who can be released. In considering layoffs, an employer must bear in mind the following:

• The decision to layoff is a managerial prerogative (unless management has bargained it away).

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• The effects of the decision to layoff are negotiable. The union must identify the effects or impacts and then request to bargain those effects. Oftentimes the MOU or applicable Personnel Rules and Regulations address the effects of the layoff and in those instances, there may be little left to negotiate.

• In the event MOU and Personnel Rules and Regulations are silent, identifiable impacts include:

o Order of layoff o Area of layoff o Notice requirements to affected employees o Displacement rights of affected employees

• Special Considerations of Layoff o Skelly‐like pre‐layoff hearing and potential post‐termination

hearing o Interplay with other employment laws (Title VII, ADEA, ADA,

FEHA) An employer may consider furloughs as an alternative to layoffs. For furloughs, an employer must take into account:

• The decision to furlough is most likely negotiable. • The employer and employee organization are required to negotiate the

decision and the impacts of furlough. • If the parties cannot agree, the parties must bargain until impasse is

reached. The employer’s impasse procedures must be exhausted before the employer is able to unilaterally implement furloughs.

• Special Considerations of Furlough o What is the timeframe for implementation? o Because employee pay is decreased, this triggers Fair Labor

Standards Act issues for exempt employees. The Decision to Layoff is Not Negotiable Though the Impacts of Layoffs are Subject to Negotiation

The Decision to Layoff Employees is Not Within the Scope of Representation

Under the Meyers‐Milias Brown Act, the scope of mandatory bargaining encompasses “all matters relating to employment conditions and employer‐employee relations, including, but not limited to, wages, hours, and other terms and conditions of employment.” (“MMBA,” Cal. Gov. Code §§ 3500 et seq.) “The scope of representation

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shall not include consideration of the merits, necessity, or organization of any service or activity provided by law or executive order.” (Cal. Gov. Code § 3504.) The phrase “wages, hours, and other terms and conditions of employment” is generally construed liberally, in a manner consistent with (although potentially broader than) federal precedent under the National Labor Relations Act. (29 U.S.C. §§ 151 et seq.; Cal. Gov. Code §§ 3500, 3504; Fire Fighters Union v. City of Vallejo (1974) 12 Cal. 3d 608, 616‐617; International Assoc. of Fire Fighters Union v. City of Pleasanton (1976) 56 Cal. App. 3d 959, 968.)

The mandatory scope of bargaining does not, however, include “legitimate management prerogatives.” (City of Vallejo, supra, 12 Cal. 3d at 616; Building Material & Construction Teamster’s Union v. Farrell (1986) 41 Cal. 3d 651, 660, 663.) It is well established under California law that, pursuant to this principle, public employers need not negotiate over the decision to layoff employees due to lack of work, lack of funds, or other legitimate reasons. This decision is a policy matter concerning the level of services being provided or the manner in which services may best be provided by management. (City of Vallejo, 12 Cal. 3d at 621‐622; see also Engineers and Architects Association v. Community Development Department of City of Los Angeles (1994) 30 Cal. App. 4th 644, 653‐655 [management decision to lay off because of lack of work and/or lack of funds exercise of managerial prerogative exempt from grievance and arbitration]; City of Richmond (2004) PERB Dec. No. 1720‐M [same].)

The Impacts and Effects of the Layoff Are Within Scope of Representation

Although the decision to layoff employees is not within the scope of representation, the effects of a decision to layoff employees are within scope because of their impact on the terms and conditions of employment. (Fire Fighters Union v. City of Vallejo, supra, 12 Cal.3d at 621‐622.) The employer is only obligated to negotiate those effects upon request. (Kern Community College District (1983) PERB Decision No. 372 at p. 11.)

The Public Employment Relations Board, the administrative agency charged with enforcing the MMBA, does not interpret a demand to bargain the decision also as a demand to bargain the effects of a decision. (Newman‐Crows Landing Unified School District (1982) PERB Decision No. 223.) Any demand to bargain over the effects of the decision must clearly identify the negotiable areas of impact. (Id.) Where a union requests only to bargain over the decision and gives no notice of the desire to negotiate over identified effects, PERB has deemed that the union has waived its right to bargain the effects. (Id.) Impacts may include timing of layoff, severance pay, displacement, order or layoff.

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Special Issues Related to Layoffs Skelly‐like Hearing

In Levine v. City of Alameda, the Ninth Circuit Court of Appeals found that a city employee’s due process rights were violated when he was laid off without first being provided a hearing in which to present his side. (525 F.3d 903 (9th Cir. 2008).) Levine, a property manager for the City of Alameda, was the only employee laid off at the time. He believed his layoff pretextual and demanded a pre‐termination hearing. The City declined because the MOU between the city and the union did not provide the employee with a pre‐termination hearing in the event of a layoff. Levine sued for violation of his due process rights. The district court granted Levine’s motion for partial summary judgment finding that the city violated his due process rights and that he was entitled to a full evidentiary hearing. The court of appeals affirmed. The court found that Levine, as a civil servant, had a property interest in continued employment and, as a consequence, was entitled to a hearing before his layoff. Because Levine had been laid off, the court held that a post‐termination full evidentiary hearing before a neutral was appropriate.

In Levine v. City of Alameda, the court failed to specifically distinguish between a single layoff for potentially pre‐textual reasons and a citywide layoff action due to budgetary constraints or change in the level of service. The court’s failure to distinguish between the two creates a potential additional layer of bureaucracy and delay for employers implementing layoffs. For employers, a conservative approach is to provide a Skelly‐like pre‐layoff hearing for all employees subject to layoff. Then, provide the employee with a notice for a post‐layoff full evidentiary hearing before a neutral. This will, however, cause delay in the layoff process and be extraordinarily burdensome on the employer. The more aggressive approach is to deny the affected employee pre‐layoff and post‐layoff hearings because a mass layoff resulting from budget issues or reorganization does not trigger a Levine‐esque process.

The more circumspect approach is – of course – a middle ground where the employer notifies employees of the option to request a pre‐layoff in the layoff notices. The notice could state that the pre‐layoff hearing will be limited to the issue of whether the layoff is a pretext for discipline. The hearing officer should be instructed to limit their inquiry to whether the layoff is a pretext for disciplinary action. Under this approach, no mention is made of a post‐layoff hearing. In the event that the employee requests one, the employer can decide whether a hearing is necessary at that time.1

1 In a traditional disciplinary action, a post‐termination hearing is typically required in addition to the pre‐termination Skelly hearing. Arguably Levine can be read only to require a pre‐layoff hearing. To the

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Given the level of conflict with layoffs, it can be expected that employees may assert that the layoffs are pretextual in an attempt to delay the layoff. Depending on what individual employees allege, there may be an additional obligation for an employer to investigate the allegations of pretext. Just as in a discipline case, action can be taken – the layoff effectuated – while the investigation is going on and any remedial actions applied as necessary.

The Decision to Furlough is Most Likely Negotiable

It can be argued that the decision to impose budgetary suspensions should also be treated as a managerial prerogative. At least one arbitrator has even held that “furloughs” are, in fact, short‐term periodic layoffs under another name.2 However, this arbitrator’s conclusion is unlikely to be adopted by any other arbitrator or by the courts.3 Moreover, “hours” are expressly included within the scope of bargaining under the MMBA, and reductions in hours or changes to assigned schedules are generally negotiable. (Cal. Gov. Code § 3504; Placentia Fire Fighters v. City of Placentia (1976) 57 Cal App. 3d 9, 21‐22 [40‐hour work week negotiable subject].)

While no published MMBA decision directly addresses “furloughs,” at least one PERB administrative law judge has assumed that “furloughs” are negotiable under the Dills Act. (California Dept. of Personnel Administration (1992) 16 PERC ¶ 23,156.) Moreover, PERB has also found “budget motivated reductions in hours” negotiable under the Educational Employment Relations Act (“EERA,” Cal. Lab. Code §§ 3540 et seq.; San Ysidro School District (1997) 21 PERC ¶ 28,095 [budget‐motivated reductions in hours negotiable absent voluntary consent]; but compare, Oakland Unified School District (1985), 10 PERC ¶ 17,009 [“employer may unilaterally reduce the employees’ work year by means of a layoff and, at the same time, establish a reinstatement date two months hence”].) The National Labor Relations Board has made the same assumption in at least one case. (Long Island Day Care Services, Inc and District Council 1707, Community and Social Employees Union, American Federation of State, County, and Municipal Employees, AFL‐CIO (1991), 303 NLRB 112, 116 [“furloughs are terms and conditions of employment and therefore a mandatory subject of bargaining”].)

extent that an employee can demonstrate that a particular layoff is pretext for discipline, the employee’s claim that a post‐layoff hearing is also required is colorable. 2 The arbitrator failed to address significant and troubling repercussions of treating “furloughs” as merely a form of layoff – for example, potential obligations to pay accrued vacation, eligibility for unemployment payments, or whether separate order of layoff lists would be required before each occurrence. 3 Arbitration decisions are not binding upon the Courts, other arbitrators, or even the same arbitrator addressing different facts. See, e.g., Elkouri & Elkouri, How Arbitration Works (5th Ed., ABA 1997), pp. 600‐606.

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In light of the above principles, any reliance on generic management prerogative to impose “furloughs” would create significant legal risk. The employer should provide notice to employee organizations of the intention to furlough and permit employee organizations to bargain both the decision and the effects. If the parties cannot agree, the parties must bargain until impasse is reached. The employer’s impasse procedures must be exhausted before the employer is able to unilaterally implement furloughs. For law enforcement personnel, impasse procedures may also encompass interest arbitration under Code of Civil Procedure section 1299.4.4 Because impasse procedures must be exhausted, the employer should be mindful of the timeframe for implementation.

Special Considerations of Furlough

Furloughs trigger Fair Labor Standards Act issues for exempt employees because employee pay is decreased. Exempt employees lose exempt status for any workweek in which the furlough occurs and for which the employee’s pay is reduced. (29 C.F.R. § 541.710(b).) The employee remains exempt in all other weeks that a furlough does not occur. Also, because an employee loses their exempt status during the week of a furlough, the employee must be paid his or her regular hourly rate for all hours worked up to forty (40) in a workweek and are eligible for overtime. (29 U.S.C. § 207; 29 C.F.R. §§ 778.101 and 778.107 [ours worked beyond forty (40) are compensated at time and one‐half].) Additionally, for those employees near retirement age, furloughs reduce earnings for purposes of calculating final average compensation.

CHALLENGES in PENSION FUNDING

Other options for an employer to reduce future financial obligations are 1) not enhance retirement benefits for current employees and/or 2) create a second tier retirement benefit for new hires. In recent years many public agency employers and their employee organizations bargained “3% at 50” for their law enforcement personnel and “2.5% at 55” for miscellaneous employees. These pension enhancements come at great expense to the employer. Employer share under these schemes can reach nearly 18% while the employee share is 8% for non‐safety and 9% for safety employees.

4 For law enforcement personnel, impasse procedures may also encompass interest arbitration under Code of Civil Procedure § 1299.4. Currently, the constitutionality of interest arbitration for law enforcement personnel pursuant to Code of Civil Procedure § 1299.4, passed in the aftermath of County of Riverside v. Superior Court (2004) 30 Cal.4th 278 [finding interest arbitration pursuant to SB 402 unconstitutional as an unlawful impingement on a county’s plenary authority to set employee compensation] is being litigated at the court of appeals. Previously, all superior courts faced with this issue found that this statute failed to pass constitutional muster.

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Oftentimes, employee organizations negotiate the employer pick up the employee’s share – requiring the employer to contribute 25% of salary in addition to salary to fund pension obligations.

An agency contracting with CalPERS may amend its contract to provide a different level of benefits to members who receive service credit for the first time after the effective date of the amendment. (Cal. Gov. Code § 20475.) Any creation of a second tier of benefits for new hires, as more fully set forth below, is subject to collective bargaining obligations. The amendments may reduce the benefit, terminate the benefit or provide different benefits. Creating a second tier of benefits for new hires may be costly to the employer with pooled plans. Generally, there is no rate change at the time of amendment for non‐pooled plans. Under CalPERS, the amount the employee and the employer pay is set by the PERS actuarial formula depending on the retirement benefit that the agency has adopted. The amount shared between employer and employee is subject to collective bargaining. (Cal. Gov. Code §§ 3504, 20516.)

Public Employee Pensions are Protected from Modification by the Contract Clauses of the State and Federal Constitutions, Barring Specific and Exceptional Circumstances

In California, the terms and conditions of public employment are controlled by statute or ordinance rather than by contract. (Miller v. State of California (1977) 18 Cal.3d 808, 813; Kim v. Regents of the University of California (2000) 80 Cal.App.4th 160, 164.) Accordingly, public employees have no vested right in any particular measure of compensation or benefits, and their compensation or benefits may be modified or reduced pursuant to proper statutory authority. (Miller, supra, at 813‐814; Butterworth v. Boyd (1938) 12 Cal. 2d 140, 150.) But some terms, such as a promise for compensation or pension benefits, give rise to obligations protected by the contract clause of the Constitution, and therefore are vested. (Kern v. City of Long Beach (1947) 29 Cal. 2d 848, 852‐853 [including the right to the payment of salary that has been earned].) Benefits that are so protected may not be legally denied or impaired by an employer. (See, e.g., Cal. Const. Art. I, § 9; U.S. Const. Art. 1, § 10, cl. 1.) Though the employee’s right to receive pension benefits is defined (and commonly limited) by vesting requirements, their contractual right to earn pension benefits on the terms offered is vested on the very first day of employment. (Kern, supra, 29 Cal. 2d at 855; Miller, supra, 18 Cal. 3d at 814.) That right is not subject to forfeiture. Id.

Even though an employee may acquire a vested contractual right to a pension, that “right is not rigidly fixed by the specific terms of the legislation in effect during any particular period in which he serves.” (Kern, supra at 855.) Thus, the employee does not have a right to any fixed or definite benefit, but only to a substantial or reasonable

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pension. (Id.) A governing body may modify the system, but such modifications occur only where necessary to protect the flexibility of the pension system, or to maintain the system in the face of changing conditions. (Id.) To be sustained as reasonable, such modifications must “bear some material relation to the theory of a pension system and its successful operation, and changes in a pension plan which result in disadvantage to employees should be accompanied by comparable new advantages.” (Allen v. City of Long Beach (1955) 45 Cal. 3d 128, 131.) The validity of attempted changes in vested pension rights depends upon the advantage or disadvantage to the individual employee whose rights are involved, not to other or new employees (Abbott v. City of Los Angeles (1958) 50 Cal.2d 438.)

Modifying Existing Pension Obligations is Exceedingly Difficult

The standard for modifying pension benefits for current employees is very high and often difficult to meet. (Adler v. City of Pasadena (1962) 57 Cal.2d 609 [where a city’s charter was amended to substitute a fluctuating payment for a fixed payment pension was found to be unreasonable and thereby a breach of contract as applied to employees who became employees prior to the date of the amendment]; Wisely v. City of San Diego (1962) 188 Cal.App.2d 482 [increase in pension contributions was invalid where there was no accompanying benefit]; United Firefighters v. City of Los Angeles (1989) 210 Cal.App.3d 1095 [amendment to cap the pension benefit cost of living increases to 3 percent was held unconstitutional since members had a vested right to the pension benefits in effect when they were hired as well as to any additional benefits offered subsequent to hiring].)

Employers offsetting disadvantages by providing comparable advantages have been found constitutional. (City of Downey v. Board of Administration (1975) 47 Cal.App.3d 621 [amendments provided for increase in employee contributions but employer offset with an increase in the amount of retirement allowance]; Packer v. Board of Retirement (1950) 35 Cal.2d 212 [amendment of pension plan that provided for a pension to participating employees’ widows in cases where the employee exercised the option to take a lesser pension during lifetime was permissible].) But an employer would be hard pressed to meet the high standard set for modifications to pensions for current employees and retirees. Current employees have a vested right to earn pension benefits on the terms offered, which includes any improvements to the terms. (Kern, supra, 29 Cal.2d at 855.) Even if an employer’s contemplated modification is on a going forward basis only and would not affect any pension benefits already earned, any reduction by the employer of the current terms will likely subject the employer to litigation.

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Under existing case law, any reduction must be accompanied by a comparable advantage to the employees affected by the reductions. But a comparable new advantage to offset the disadvantage may not solve an employer’s fiscal concern, which prompted the need for a reduction in the first place.5 6 Though the language in Kern v. City of Long Beach states that employees only have a vested right in a “substantial and reasonable pension,” Kern and cases subsequent have consistently held that employees have a vested right to earn pension benefits on the terms offered and that it vests on the very first day of employment.

Modifying Pension Benefits for Newly Hired Employees Need Only Comply with Collective Bargaining Obligations

An applicant for employment does not have a vested interest in any benefits offered by their prospective employer. Applicants may desire those benefits, but they generally have no right to any such benefit and may not sue an employer for deciding to cease offering those benefits prior to their employment. Even the right to a pension vests on the first day of employment – not before. (Kern, supra, 29 Cal.2d at 855; Miller, supra, 18 Cal.3d at 814; Claypool v. Wilson (1992) 4 Cal.App.4th 6464, 662.)

An employer may change benefits at any time for future employees subject to the requirements of collective bargaining. The terms and conditions of employment for future employees within the bargaining unit are within the scope of bargaining. (Kohler

5 If an employer fashioned a comparable new advantage to accompany the disadvantage, the employer could propose the modification to all of its employee organizations. If the modification is agreed to by the employee organizations and the reduction is voted on and approved by the governing body, the courts may view this modification as acceptable. Even where a majority of members of the retirement system agree to the modification, an employer may still be at risk where an individual disagrees with the reduction. A law may be unconstitutional in its application to a particular case, yet valid in its general, application especially where, as here, it is apparent that the Legislature would want the act to prevail where it constitutionally may. (Stork v. State of California (1976) 62 Cal.App.3d 465 [finding that notwithstanding the 1972 amendments to the state’s pension system of abolishing the miscellaneous classification and creating a general safety classification, plaintiff was entitled to the scale of service retirement allowances prescribed to his former classification].) 6 However, as demonstrated by cases cited above, courts have found modifications made to pension benefits by charter cities, pursuant to their charters, to be unconstitutional. (Adler v. City of Pasadena, supra; Abbott v. City of San Diego, supra.) Where the changes to a pension enacted pursuant to the charter or through modification of the charter have interfered with vested rights, the original obligation remains. (San Francisco Police Officers’ Ass’n v. City and County of San Francisco (1995) 37 Cal.App.4th 283 (unpublished decision) [court citing instance in 1975 where the voters, who have the power to change the retirement allowance formulae, eliminated a cost of living adjustment related to current employees, but the city was still saddled with over $1 billion in unfunded liability because the rights were vested in current employees].) A modification made pursuant to and in compliance with the City charter does not guarantee the constitutionality of the change.

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Company (1989) 292 NLRB 7167 [finding that a vacant position is still a position within the bargaining unit and the duties associated with the position cannot be unilaterally transferred out of the unit]; Mendocino County Employees Association v. County of Mendocino (1992) 3 Cal.App.4th 1472.) Any change the employer desires to make to benefits offered to new hires must be negotiated with the appropriate employee organizations before being implemented. (But see California Association of Professional Scientists v. Schwarzenegger (2006) 137 Cal.App.4th 371, 383 [court stated in dicta that “when a collective bargaining agreement purports to secure pension rights for future employees, it may well be that the federal and state contract clauses protect the rights of future employees as much as the rights of existing employees”].)

CHALLENGES in POST‐EMPLOYMENT BENEFITS

Another avenue where an employer may seek to gain concessions and/or reduce overall liability is in the area of post‐employment benefits. GASB 43 and 45 requirements now apply to all public agencies.8 Public agencies should have a firm idea as to the nature and extent of their other post‐employment benefits liabilities. Depending on the nature of the obligation, a public agency may have options in how to gain concessions and/or reduce its liability.

In order to determine whether an employer has the flexibility to modify health benefits for current retirees, the employer must determine the nature of the obligation to current retirees. An employer should consider:

• What does the language of the MOU provide? Are retirees linked to the benefits received by current employees? Is the level of contribution set by statute?

• Is there vesting language in the MOU? If there is vesting language, the employer may have less flexibility in modifying the benefit.

• Aside from the MOU, are there other documents – plan documents, materials distributed to retirees – that promise maintenance of a certain level of benefit?

7 Case law interpreting the NLRA is persuasive in interpreting the MMBA. (Fire Fighters Union v. City of Vallejo, supra.) Similarly, PERB will look to its interpretation of similar language in other collective bargaining statutes it administers when making its determinations. 8 The Government Accounting Standards Board’s standards 43 and 45 obligate public agencies to report costs that pertain to post‐employment benefits other than pensions. Prior to these standards, employers did not have to “book” their liability. Requiring employers to “book” their unfunded liability and begin to address ways of funding the liability has shed light on a significant cost to the employer.

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• Are there statutory provisions that preclude vesting? For 1937 Act Counties, there is a presumption against vesting of retiree medical benefits adopted by ordinance. (Cal. Gov. Code § 31692.)

For current employees, an employer ‐ through collective bargaining ‐ may reduce future liability by:

• Changing the health benefit plan including contribution amounts, co‐pays, and plan design with current employees. One such method is to move from a defined benefit to a defined contribution shifting increased health care costs onto the employee. Any increases on the employer side can be negotiated.

• Moving towards the statutory minimum or capping employer contributions if under CalPERS Health.

• Implementing a supplemental benefit for current employees with a Section 125, or Cafeteria, Plan.

• Creating a second tier of benefits for new hires which caps benefit contributions at a fixed level or creating employee health benefit accounts.

Whether Retiree Health Benefits are Vested is Undetermined.

As we noted above, a promise for compensation or pension benefits gives rise to

obligations protected by the contract clause of the Constitution, and therefore are vested. (California League of City Employee Associations v. Palos Verdes Library Dist. (1978) 87 Cal.App.3d 135, 139.) The California Supreme Court has not decided whether retiree health benefits are a term of employment subject to vesting.

Interplay with Collective Bargaining Labor‐management relationships involving California Cities are governed by the

MMBA. (Cal. Gov Code § 3500 et seq.) The MMBA creates a duty for both an employee representative and an employer to meet and confer in good faith regarding matters affecting wages, hours and other terms and conditions of employment (i.e., within the “scope of representation”). (Cal. Gov. Code §§ 3504, 3505.) Group insurance benefits are within the scope of representation. (Social Services Union v. Board of Supervisors (1990) 222 Cal.App.3d 279, 285.) Similarly, future retirement benefits of current employees have been found to be a condition of employment and a mandatory subject of bargaining under both the NLRA and the State Educational Employment Relations Act, governing bargaining for California’s K‐12 school and community college district. (See,

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e.g., Allied Chemical Workers (1971) 404 U.S. 157; Rincon Valley Union Elementary School District (1988) 12 PERC ¶ 19,162, p. 22.).

Future Hires Have No Vested Right to any Benefit, and the City may Change Benefits Subject only to Bargaining Obligations Under the MMBA

Because those yet to be hired have no vested right to any particular benefit, including post‐retirement healthcare benefits, an employer may change benefits at any time which may be afforded to future employees. As noted above, the terms and conditions of employment for future employees within the bargaining unit are within the scope of bargaining. (Kohler Company, supra.) Accordingly, any change an employer desires to make to benefits offered to new hires must be negotiated with the appropriate employee organizations before being implemented. An employer can negotiate with employee organizations to create a second tier of benefits under the MOU.

Although there is a Split in Authority, More Recent and Better Reasoned Precedent Holds that the City May Renegotiate the Collectively Bargained Post‐Retirement Benefits of Current Represented Employees Consistent Under the MMBA

The Second Appellate District Held in 1978 That Some Other “Fundamental” Benefits Of Current Employees Are Vested In the Manner Of Pensions, And May Therefore Not Be Modified

In 1978, the Second Appellate District of the California Court of Appeal held that

“fundamental” public employee benefits, such as (1) longevity‐based salary increases, (2) additional vacation awarded after ten years continuous full‐time service, and (3) a sabbatical awarded after six years of continuous service, were entitled to protection under the constitutional contract clauses in the same manner as pension benefits. (California League of City Employee Associations v. Palos Verdes Library District (1987) 87 Cal.App.3d 135, 140.) Relying on the case of Bixby v. Pierno, (1971) 4 Cal. 3d 130, 144, the Palos Verdes court judged the “fundamental” nature of the benefits by looking at “the effect of [the benefits] in human terms and the importance of [the benefits] to the individual in the life situation.” (Id. at 140.) The Palos Verdes Court then held that benefits were “fundamental,” and therefore vested, if they acted as an inducement to remain employed with the District. (Id.) Such vested benefits may only be modified under the same circumstances as could vested pension rights. (Id.)

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In 1998, The Fourth Appellate District Held Instead That Collectively Bargained Employment Benefits May Properly Be Modified Through The Collective Bargaining Process

However, in 1998 the Fourth Appellate District of the California Court of Appeal

addressed a similar fact pattern and specifically disavowed the analysis in Palos Verdes. (San Bernardino Public Employees Association v. City of Fontana (1998) 67 Cal. App. 4th 1215, 1223.) We strongly believe that the San Bernardino Court’s analysis was more consistent with the purpose and nature of collective bargaining under the MMBA.

In San Bernardino, the court held that individual employees may not challenge changes to benefits such as longevity pay or personal leave accrual that were negotiated under California’s collective bargaining statutes.9 San Bernardino, 67 Cal.App.4th at 1220, citing Relyea v. Ventura County Fire Protection Dist. (1992) 2 Cal.App.4th 875, 882.) Specifically disapproving the reliance of the Palos Verdes Court on Bixby, the San Bernardino court’s holding that a benefit implicates the constitutional contract clauses only where the circumstances and language of the statute in question “evince a legislative intent to create private rights of a contractual nature enforceable against the state.” (Id. at 1223, citing Valdes v. Cory (1983) 139 Cal.App.3d 773, 786.) Thus, where a party to the contract (i.e., the exclusive bargaining representative) consents to a change, the change does not implicate the contracts clause. (Id.) Moreover, once a negotiated CBA expires, employees have no legitimate expectation that the benefits will continue unless renegotiated as part of a successor agreement. (Id.) 10

In reaching this conclusion, the San Bernardino court cited with approval the case of Olson v. Cory (1980) 27 Cal. 3d 532, wherein the California Supreme Court found that annual salary increases based on the California consumer price index, guaranteed to judges when beginning their terms, could not be limited during those terms, but that “a member who completes one term during which he was entitled to benefits and elects to enter a new term has impliedly agreed to be bound by those benefits only which are offered for the different term.” By “parity of reasoning,” the same principle applies to MOUs governing public employment. (San Bernardino, 67 Cal. App. 4th at 1225‐1226.)

9 San Bernardino also included a challenge to modification of post‐retirement health benefits of current employees; however, the court refused to rule on that issue, finding that it was not ripe because no actual benefits changes had yet been made. (67 Cal. pp.4th at 1226‐1227.) 10 The San Bernardino Court also cited Vielehr v. State of California (1980) 104 Cal. App. 3d 392 for a distinction between “retirement rights,” which may be (but are not necessarily) protected under the contract clause, and “employment rights,” which may not. (San Bernardino, 67 Cal. App. 4th at 1224.) If PERB or a reviewing court were to adopt this dichotomy, and deem retiree health benefits “retirement rights,” there is a possibility that those benefits could be found to be vested even under the San Bernardino standard.

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Harmonizing Palos Verdes and San Bernardino

Given that two California Circuit Court of Appeals have viewed certain benefits as either vested benefits or employment benefits and the California Supreme Court has not weighed in with its determination, any argument that an employer has for its ability to modify post‐retirement health care benefits lies in the employer’s evidence – the language of the MOUs and any other extrinsic materials which demonstrates the employer’s historic practice in changing these benefits.

Under the Better Reasoned View, an Employer May Renegotiate the Collectively Bargained Post‐Retirement Benefits of Current Employees Any Time Before Their Retirement

Under the standard set forth in San Bernardino, post‐retirement health care benefits are a term and condition of employment that may be renegotiated consistent with the requirements of the MMBA. (San Bernardino, supra, 67 Cal.App.4th at 1220; See also Madera Unified School District (2007) PERB Decision No. 1907 [holding that retirement health insurance provisions are within the scope of bargaining “insofar” as they affect the future retirement benefits of current employees”]11; County of Sacramento (2008) PERB Decision No. 1943M [same].) If an employer can demonstrate that health benefits are constantly changing, this is strong evidence that the employer and its employee representative groups operate under the notion that the terms of an MOU are binding for the specified length of the term. (Id. at 1223.)

Such a position is not entirely without risk; because of a current conflict in the California Court of Appeals. A court may adopt the reasoning of Palos Verdes rather than San Bernardino. The California Supreme Court has not settled the issue.12

11 The Board’s decision is potentially problematic in several respects. First, the Board’s holding has the potential to swallow the rule that benefits for retirees are a permissive subject of bargaining. This is because almost any change to the current benefits of retirees arguably affects the future benefits of current employees. Secondly, the decision raises an issue regarding remedies. The Board does not have jurisdiction to order a remedy for current retirees, who were the only individuals affected by the alleged conduct. The Board could only order a remedy as to current employees; but here they suffered no harm. Presumably, the Board could order the change rescinded as it applied to the future benefits of current employees. In order words, the Board could order the employer to restore the promised benefit for current employees. The employer’s promise would not become actionable until the current employee retired; but once that occurred, the Board would again lose jurisdiction! 12 More recently, in following a long line of precedent in the state, the Washington Supreme Court held that retiree welfare benefits (health care) are vested upon retirement and similar to pension benefits can only be modified to protect the integrity of the pension/welfare system. (Navlet v. Port of Seattle (2008) 194 P.3d 221.) Pension and welfare benefits are not distinguishable. (Id. at 231‐232.) Welfare benefits make up part of the core compensatory benefits package offered in exchange for continued service and

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Moreover, and potentially of greater concern, is the distinction made between “employment rights” and “retirement rights” cited, with approval, in San Bernardino (citing Vielehr, supra, 104 Cal.App.3d 392). If post‐retirement health care benefits were found to be equal to pension benefits, these health benefits would be subject to the same high standard set forth in Allen, supra, 45 Cal.3d at 131, for modifications to pension benefits.

Employers Subject to CalPERS Health and the Public Employees Medical and Hospital Care Act

The CalPERS health benefit program offers contracting agencies various plans and programs. In providing health care benefits, PERS is a broker or provider of benefits as compared to its pension arm. For health care benefits, PERS purchases health care products which, in turn, it can provide to its contracting agencies. The rates for insurance are set by the negotiations between PERS Board and health care providers such as Kaiser or Blue Cross. But beyond that, it is up to the contracting agencies to determine contribution amounts for participating employees and retirees and eligibility. A contracting agency must simply inform PERS Health of changes to its contribution for both active and retiree health care benefits. Public agencies can join or drop PERS Health by notification.

Employers contracting with PERS to provide health care benefits are regulated by the Public Employees’ Medical and Hospital Care Act (“PEMHCA”). (Cal Gov. Code §§ 22750 et seq.) Under PEMHCA, the contracting agency – the employer – and each employee “shall contribute a portion of the cost of providing the health benefit coverage afforded under the health benefit plan approved or maintained by the board in which the employee or annuitant maybe enrolled.” (Cal. Gov. Code § 22890.) The division of the health benefit premium is determined through collective bargaining or, where the employees are unrepresented, by the governing body. Madera Unified School District, supra; County of Sacramento, supra.) The employer fixes its contribution by resolution, which is then filed with CalPERS. PEMHCA contains a vesting schedule but it is only applicable to those public agencies that formally adopt the schedule. (Cal. Gov. Code § 22893(a), (c).)

are deferred compensation which create a vested right in retirees who reach eligibility requirements under the terms of the applicable collective bargaining agreement. (Id.) Though California is not bound by decisions of another state’s supreme court, this case may be persuasive. The decisions of another state’s supreme court can be persuasive, depending on the point involved and the lack of authority in California. (Savett v. Davis (1994) 29 Cal. App. 4th Supp. 13, 16 n. 2 [“While decisions of sister state courts are not binding on California courts, they have persuasive value where the issues raised involve conflicting policies and the case is one of first impression in California”].)

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Under PEMHCA, an employer can contribute towards health care premiums for active employees and retiree in two ways – equal or unequal shares. Under the equal method, the employer contributes the same amount for both an active employee and retiree so long as that amount is equal to or greater than the statutory minimum. (Cal. Gov. Code § 22892(b).) The statutory minimum in 2009 is $101.00. (Cal. Gov. Code § 22892(b)(2).) Under the unequal method, an employer can set the amount for retirees at less than its contribution for current employees. (Cal. Gov. Code § 22892(c).) The employer must then increase the amount contributed for retirees based on a formula. (Id.)

Interplay between Requirement of the Public Employee Medical and Hospital Care Act as Applied to Current Employees and Current Retirees

As allowed by the PEMHCA, an employer can set its amount of contribution through collective bargaining. PEMHCA does not require that the employer’s contribution for retiree health care exceed its contribution for active employee health care premiums. (Id.) Indeed, PEMHCA provisions stress equal contributions. (Cal. Gov. Code §§ 22892(b) and 22892(c).) Also, nothing in PEMCHA prohibits employers from reducing its contribution so long as the employers’ contribution meets the statutory minimum. PEMHCA’s provisions inextricably link contributions for retiree health care premiums to the contributions made for active employees. (Id.) If an employer’s contribution for active employees increases, the contribution for retirees also increases and the inverse applies as well ‐ if the employer’s contribution for active employees decreases, the contribution for retires similarly decreases. No provision in PEMHCA requires that an employer’s contribution remain static.

Subject to collective bargaining obligations with current employees, an employer can continue to modify the amounts of its contribution for active employees so long as it 1) meets the statutory minimum; and 2) complies with either the equal or unequal method. An employer’s ability to negotiate changes for active employees and implement those changes for retirees – without bargaining ‐ may be subject to an assertion of a right based in promissory estoppel. Retirees may argue that though the statute does not allow any reduction of the employer’s contribution.

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Anatomy of a Corruption Case

presented by

Patrick K. Hanly, Esq.

The Law Office of Patrick K. Hanly980 Ninth Street

Sacramento, California 95814

I. Overview of Prosecuting Agencies

U.S. AttorneyGrand Jury Indictment

District Attorney/State Attorney GeneralComplaint Grand Jury

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II. How A Prosecution Gets StartedUndercover Operation

Bri-SpecD.C. operation ABScam

Murtha on YouTube

Anonymous InformantQuackenbush/Grays unexplained wealthFPPC fields calls anonymously

Disgruntled Staffer

Cooperating Defendant

Disgruntled ContributorStrip clubs; liquor licensees; others seeking favors for moneyScorned wife/husband

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III. How Evidence is Gathered

Witness interviews

Do not count on Code of Silence

Document subpoenas

IV. Potential ChargesBribery

(a) Whoever, if the circumstance described in subsection (b) of this section exists -

(B) corruptly solicits or demands for the benefit of any person, or accepts or agrees to accept, anything of value from any person, intending to be influenced or rewarded in connection with any business, transaction, or series of transactions of such organization, government, or agency involving any thing of value of $5,000 or more; or

Section 666. Theft or bribery concerning programs receiving Federal funds

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Bribery, cont.Section 666, cont.

(2) corruptly gives, offers, or agrees to give anything of value to any person, with intent to influence or reward an agent of an organization or of a State, local or Indian tribal government, or any agency thereof, in connection with any business, transaction, or series of transactions of such organization, government, or agency involving anything of value of $5,000 or more;shall be fined under this title, imprisoned not more than 10 years, or both.

- Little Used These Days in favor of Honest Services Mail/Wire Fraud

Honest Services Mail and Wire FraudHonest Services Mail Fraud

8.102 MAIL FRAUD—SCHEME TO DEFRAUD–DEPRIVATION OF RIGHT TO HONEST SERVICES

(18 U.S.C. §§ 1341 and 1346)

The defendant is charged in [Count _______ of] the indictment with mail fraud in violation of Section 1341 of Title 18 of the United States Code. In order for the defendant to be found guilty of that charge, the government must prove each of the following elements beyond a reasonable doubt:

First, the defendant made up a scheme or plan to deprive [victim] of [his] [her] right to honest services;

Second, the defendant acted with the intent to deprive [victim] of [his] [her] right to honest services; and

Third, the defendant used, or caused someone to use, the mails to carry out or to attempt to carry out the scheme or plan.

A mailing is caused when one knows that the mails will be used in the ordinary course of business or when one can reasonably foresee such use. It does not matter whether the material mailed was itself false or deceptive so long as the mail was used as an important part of the scheme, nor does it matter whether the scheme or plan was successful or that any money or property was obtained.

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Honest Services Mail and Wire Fraud, cont.Wire Fraud

Same elements but substitute use of thewires for use of the mails and addinterstate nexus

Examples of wires

Use of phoneInterstate computer use

Criminal Record CheckCausing bank to wire money

Use of e-mail

Television transmission

State Equivalent Gov Code 1090, 81001(b), 87100, 87103 Penal Code 68

Honest Services Mail and Wire Fraud, cont.

A. History of Mail Fraud

1. 1970-1980s, Pre- McNally Era

In the 1970s and 1980s, federal prosecutors were allowed to extend the mail and wire fraud statutes to "schemes to defraud ... designed to deprive individuals, the people, or the government of intangible rights, such as the right to have public officials perform their duties honestly." See McNally v. United States, 483 U.S. 350, 358 (1987). With few exceptions, the prosecutions received little resistance from the courts until McNally, when the Supreme Court soundly rejected the "honest services" theory.

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2. U.S. v. McNally CaseIn McNally, a Kentucky public official and others were

convicted of mail fraud under 18 U.S.C. Section 1341 by conspiring to funnel insurance commissions from the company which handled Kentucky’s workman’s compensation insurance to a company they controlled. The Supreme Court overturned the convictions of a Kentucky public official and a private individual who had participated in the patronage scheme.

While acknowledging that the defendants may have deprived citizens of Kentucky of "certain 'intangible rights,' such as the right to have [Kentucky's] affairs conducted honestly," the Court employed the rule of lenity, adopted the less "harsh" interpretation of the mail fraud statute, and held that it was "limited in scope" to the protection of property rights, anddid not encompass schemes to defraud citizens of their intangible rights of honest services and impartial government.


3. Post McNally Legislation

In November 1988, Congress effectively overruled McNally by enacting §1346, in large part to ensure that mail and wire would again reach the deprivation of citizen's rights to the honest services of their public officials. The so-called honest services statute provides:

For the purposes of this chapter [i.e., the mail and wire fraud statutes], the term "scheme or artifice to defraud" includes a scheme or artifice to deprive another of the intangible right of honest services.

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2. Congressman Randy “Duke” Cunningham The government spelled out its definition of honest-services fraud. The defendant "conspired and agreed to devise a material scheme to defraud the United States of its right to defendant's honest services, including its right to his conscientious, loyal, faithful, disinterested, unbiased service, to be performed free of deceit, undue influence, conflict of interest, self-enrichment, self-dealing, concealment, bribery, fraud and corruption."

Classic Public Corruption/Honest Services Mail Frauda. Trading votes for money/propertyb. Citizens of San Diego entitled to his honest vote,

not one paid for and influenced by defense contractors.


B. Issues

What, is the "intangible right of honest services"?

What "honest services" are owed,

By whom?

How are such "honest services" breached?

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6. Doolittle Investigation

In exchange for Abramoff hiring Doolittle’s wife’s firm Doolittle voted in favor of Abramoff’s client’s interests.

7. William Jefferson Investigation

The FBI found $75,000 in cash in his freezer. Any quesitons?

8. Torres- RICO

Bought City Planning Commission members off to secure liquor licenses for business.


C. Sample Cases

1. San Joaquin County Sheriffa. Conflict of Interest Case

b. Sheriff failed to disclose personal,financial interest in company on Statementof Economic Interest form

c. Sheriff used official office, capacity forhis own financial benefit.

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3. SDCERS CaseThe defendants were charged with conspiring to deprive the city and pensioners of their right to honest services by illegally obtaining enhanced retirement benefits for themselves in exchange for allowing the financially strapped city to under fund the pension system.

1. Personal/financial benefit obtained2. Self-dealing3. Failure to disclose material information that

showed the public official benefited personallya. Similar to Statement of Economic Interest.


4. Quackenbush Investigation

Department of Insurance Commissioner and Deputy Commissioner investigated for using money obtained as a result of settlement monies paid by insurance companies after earthquake for personal and political reasons.

5. Jack AbramoffCharged with Conspiracy, Honest Services Mail Fraud and Tax Evasion for illegally giving gifts and making campaign donations to legislators in return for votes or support of legislation.

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V. The Likelihood of Prosecution

Friends in high places

McFall: A case in point

Lonely at the bottom

VI. How To Avoid Being Indicted For

Corruption

a. Avoid the appearance of conflicts of interest.

Do not have an “on the side” consulting business where you could potentially vote on legislation that touches on your side consulting business.

Avoid conflict with family members.

Do not do anything that gives the appearance that you are using public money for private gain. The appearance is enough to get you in trouble.

Seek outside counsel advice.

b. Avoid the appearance of any self-dealing, no matter how slight.

If you have to ask, you have a problem.

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How To Avoid Being Indicted For Corruption, cont.

c. Disclose all information that could possibly touch on your conflict of interest or that of any other official..

Cover up becomes the crime

Martha Stewart, Scooter Libby

Statement of Economic Interest

Federal Jurisdictional hook

FPPC

VII. Potential Sentences

Bring your toothbrush

McFall – 10 years

Abramoff – 5 years 10 months

BriSpec sentences- Sen. Paul Carpenter – 87 months- Sen. Joseph Montoya – 78 months- Assemblyman Patrick Nolan – 25 months- Assemblyman Frank Hill – 46 months- Costal Commr. – Mark Nathanson – 60 months- Lobbyist Clay Jackson – 78 months

Scooter Libby – 30 months

Troy Ellerman – 30 months

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VIII. A Fine Line You Do Not Want To Walk

Perception is everything

Quackenbush

Criminalization of Politics

Letter of the Law Defense

IX. Why They Do It

Hollywood Syndrome

Simple Greed

Caught Up In The Process/Lost Personal Compass

Fast Crowd/Peer Pressure

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LEAGUE OF CALIFORNIA CITIES

CITY ATTORNEYS’ MAY 6-8, 2009 CONFERENCE

Due Process In Local Administrative Hearings After The California Supreme Court’s Opinion in Morongo Band of Mission Indians v. California

State Water Resources Control Board, 45 Cal.4th 731 (2009)

Manuela Albuquerque* Berkeley, California

[email protected]**(510) 548-6250

* Former Berkeley City Attorney 1985-2007, member City Attorney’s 2005 and 2009 Due Process ad hoc committees and author of League and CSAC amicus briefs in the Morongo Band of Missions Indians case in both the California Supreme Court and Court of Appeal.

** The email address is not a typo. (It turns there are many Manuela Albuquerques and malbuquerques on gmail, hence the truncated name. Who knew….)

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mailto:[email protected]

TABLE OF CONTENTS

I. Introduction …………………………………………………… 1 II. Procedural Due Process Overview…………………………… 2

A. Federal Constitution ……………………………………….. 2

B. California Constitution ……………………………………... 3

C. Code of Civil Procedure Section 1094.5 ……………………. 3

D. What Process Is Due? ……………………………. ………... 5

E. Fair Tribunals, Bias and Combination of Functions……….... 6

F. The California Impartial Tribunal Cases …………………… 7

G. California Combination of Functions Cases – Segregating Advisers to Decisionmakers from Advocates In An Adversary Hearing In The Same Case Is Constitutionally Required Under Howitt v. Superior Court (1992) 3 Cal.App.4th 1575 …………….…………………………… 8

H. Extending The Howitt Rule Beyond Adversary

Hearings To Staff Advice And Pre-hearing Advocacy - Nightlife Partners v. City of Beverly Hills (2003) 108 Cal.App.4th 81, New “Appearance of Bias” Test Seemingly Established. ………………………….. ……………………… 10

I. Nightlife Partners Extended To Preclude The

Contemporaneous Commingling of Roles In Separate Matters In Quintero v. City of Santa Ana (2003) 114 Cal.App.4th 81, “Appearance Of Bias” Test Reiterated..……………………………………... 13

J. City Attorneys Department 2005 Due Process Committee …. 14

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III Morongo Band of Mission Indians v. California State Water Resources Control Board (2009) 731 Cal.4th 731……………………………………………………………. .. 15 A. Decisionmakers Are Entitled to a Presumption

Of Impartiality, Absent Pecuniary Bias ……………….. 16

B. Notably Absent From the Morongo Opinion Is The Nightlife Partners and Quintero “Appearance of Bias” Test …………………………… 16

C. The Presumption Of Impartiality Can Be

Rebutted Only By “Specific Evidence Demonstrating Actual Bias Or A Particular Combination of Circumstances Creating an Unacceptable Risk of Bias.” Evidence Not Present In Morongo……………………………………. 16

D. Superficial Assumptions Of Bias Insufficient

To Overcome Presumption of Impartiality; Respect For Public Officials …………………………… 17

E. Concurrently or Sequentially Occupying

Prosecutorial and Advisory Roles With The Same Decisionmaking Body Is Not a Per Se Violation of Due Process …………………………… . 18

F. Open Issue – Sufficiency of Evidence

Rebutting Presumption of Impartiality; Morongo Distinguishes Quintero Facts ………………… 19 G. Open Issue – The Mathews Balancing Test …………… 20

IV. Settled Law…………..…………………………………………… 22

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I

Introduction

On February 9, 2009, the California Supreme Court issued its anxiously awaited opinion in Morongo Band of Mission Indians v. California State Water Resources Control Board (2009) 731 Cal.4th 731 (“Morongo”), holding that the procedural due process rights of the Morongo Band of Mission Indians (“Morongo Band”) in a license revocation proceeding before the California State Water Resources Control Board (“ Board”) were not violated merely because the agency lawyer prosecuting the case before the Board was contemporaneously involved in advising the Board on an unrelated matter. The Supreme Court’s decision thus gave the State of California, cities and counties welcome relief from the per se rule of disqualification that the Court of Appeal in Morongo had imposed. As that Court of Appeal acknowledged, its per se rule would have effectively required the State (and thus cities and counties) to create entirely separate and segregated units of advisory and prosecutorial lawyers for administrative hearings. The legal issue in Morongo, and other recent cases, beginning with Nightlife Partners v. City of Beverly Hills (2003) 108 Cal.App.4th 81 and Quintero v. City of Santa Ana (2003) 114 Cal.App.4th 810, has been whether and when a lawyer for a public agency is deemed to have acted both as a “prosecutor” or advocate, on the one hand, and an adviser to the decisionmaker, on the other, so as to combine “prosecutorial” and/or “investigatory” functions with “adjudicatory” functions in violation of the impartial decisionmaker requirements of procedural due process. This paper discusses: 1) the due process legal landscape in which these combination of functions cases arise including prior related cases and their holdings; 2) the report of the 2005 City Attorneys’ Department ad hoc Due Process Committee and its guidance to city attorneys on due process compliance for separation of functions purposes; 3) the Morongo case; and 4) the issues which are settled since Morongo and those that have not been addressed or remain unclear. This paper considered the comments and questions of city attorneys posted on the City Attorneys’ Department list serve shortly after Morongo was decided, as well as additional comments sent to the author in response to her posted solicitation for such comments on the list serve. The City Attorney’s Department President Michelle Kenyon has established a new Due Process Committee to take a look at these issues (which includes this author as a member) chaired by Ventura City Attorney Ariel Calonne. This paper has greatly benefited from the input of the 2009 Due Process Committee, which commented on a draft. The analysis and views expressed in this paper are, nonetheless, solely those of the author. This paper begins with a due process primer because it is difficult to appreciate Morongo, the combination of functions jurisprudence, and the written guidance of the 2005 City

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Attorneys’ Department Due Process Committee, or how to best protect against future due process mishaps without a fairly sophisticated understanding of the legal terrain.

II

Procedural Due Process Overview

A. Federal Constitution

“Procedural due process imposes constraints on governmental decisions which deprive individuals of ‘liberty’ or ‘property’ interests within the meaning of the Due Process Clause of the Fifth and Fourteenth Amendments.” (Mathews v. Eldridge (1976) 424 U.S. 319, 331, hereafter “Mathews”.) The California Supreme Court decided a federal due process case involving claims of pecuniary bias in Haas v. County of San Bernardino (2002), 27 Cal.4th 1017. While it concluded that the ad hoc appointment of paid hearing examiners violated federal due process by infecting decisionmakers with pecuniary bias in making their decisions, the issue of when due process is triggered is not discussed in the opinion because the applicability of due process was conceded by the parties, as the Court of Appeal decision below noted. (Haas v. County of San Bernardino (2001) 81 Cal.Rptr 2d 900, 902, fn. 1.) 1

Similarly, in Morongo, supra, 731 Cal. 4th 731, the administrative hearing before the Board involved revocation of a license and thus would have triggered due process under Mathews because it involved deprivation of a property right. The parties’ briefed the case as though due process was applicable, focusing narrowly on the combination of functions issue. The opinion did the same. The issue of when due process protection applies under the federal constitution is somewhat academic, however, because of caselaw imposing similar protections under both the California Constitution and the fair trial provisions of Code of Civil Procedure Section 1094.5 to all administrative hearings. It is useful to know the higher thresholds of federal due process, however, because you may be able to foreclose the trial court from conducting a factual inquiry into this question if the complaint alleges only a violation of federal due process and no property right or liberty interest is at stake. But see cautionary comment about such reliance in Section C, infra. The mere fact that procedural due process or some similar principle of law requires a fair hearing and an unbiased decisionmaker is only the beginning of the inquiry, not the end. Not all administrative hearings involve an official playing a prosecutorial or advocacy role, and those that do not should not present concerns about separation of adjudicatory 1 The procedural due process cases involving pecuniary bias are beyond the scope of this paper, which only deals with claims of bias involving an alleged improper combining of prosecutorial, advocacy or investigatory roles with adjudicatory ones.

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and prosecutorial functions. The cases do not begin with an analysis of whether the hearing in question involves officials playing a prosecutorial role. They decide either that functions have been improperly commingled or that they have not. The attached 2005 Due Process Committee report tried to provide some guidance on this question but the 2009 Due Process Committee is looking at this issue further.

B. California Constitution The California Constitution’s due process safeguards are found in Article 1 § 7.

California due process has been held to include a liberty interest in “freedom from arbitrary adjudicative procedures. ” (People v. Ramirez (1979), 25 Cal.3d 260, 268-69; accord Saleeby v. State Bar of California, (1985) 39 Cal.3d 547, 563-64.) Thus, the fairness of all administrative hearing procedures may be judged under California due process, irrespective of whether the hearings involve deprivation of a property or liberty interest. The license application versus revocation distinction we are accustomed to making for purposes of deciding whether a property interest is at stake and subject to due process protection under the United States Constitution, is thus irrelevant for purposes of the California Constitution.

There has been no further development of this independent line of California due

process cases in many decades; all recent cases address only the United States constitution. A claim that decisionmakers are biased because they have improperly combined prosecutorial, investigatory or advocacy functions with adjudicatory ones goes to whether a fair hearing was provided under Code of Civil Procedure Section 1094.5, because California courts have imported federal due process principles into writ of mandate review of administrative adjudicatory decisions, as this paper discusses next.

C. Code of Civil Procedure Section 1094.5

In the land use context, at least two California cases have rejected analyzing fair hearing issues under due process, and have relied only on federal cases without any discussion of either People v. Ramirez, supra, 25 Cal.3d 260, 268-69, or Saleeby v. State Bar of California, supra, 39 Cal.3d 547, 563-64. The leading case of this genre is Clark v. City of Hermosa Beach (1996) 48 Cal.App.4th 1152. There, plaintiff Clark claimed that the City’s denial of his permit to build a two-unit condominium violated substantive and procedural due process based upon the animus of a particular Council member who, as a neighbor, had actively opposed the project. The neighbor was subsequently elected to the Council and participated in a hearing to deny the project. For this reason, Clark asserted that the Council was not an impartial decision maker. The Court first observed that Code of Civil Procedure 1094.5 creates a statutory right to a fair hearing, which must be conducted before an impartial tribunal. (Id at p.1170.) “Biased decision makers are … impermissible and even the probability of unfairness is to be avoided…” Examples of factors that would prejudice a tribunal are common law

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pecuniary bias and personal embroilment. (Ibid.) The neighbor/council member was deemed biased both because of the effect of the condominium project on the property in which he lived and because of his personal animosity towards the applicant for the city permit. Thus, impartiality of the decisionmaker was required in a permit application hearing under Code of Civil Procedure Section 1094.5’ s fair hearing requirements. With respect to the plaintiff’s claim that the city had violated his federal civil rights by denying him due process, the court determined that there was no protected property or liberty interest at stake because the level of discretion granted the City in approving or denying the permit vitiated any claim that the permit was an entitlement rising to the level of a property interest. (Ibid) The opinion is silent on the applicability of the California Constitution’s due process protections, apparently because Clark’s due process claim was an element of his cause of action that his federal civil rights were denied. (Id at p.1159.) The holding in Clark v. City of Hermosa Beach that federal due process does not apply to a land use permit denial was reiterated in Breakzone Billiards v. City of Torrance, (2000) 81 Cal.App.4th 1205, 1223-24. Note however that the California Supreme Court has held that neighboring property owners have a property interest protected by due process with respect to proposed development near them and thus a right to a hearing to object to such development. (Horn v. County of Ventura (1979) 24 Cal. 3d 615.) Thus, it would appear that adjacent property owners would have a protected federal due process right to raise biased decisionmaker claims, including those arising out an allegedly improper commingling of prosecutorial and adjudicatory functions. In any event, under either the California Constitution or, more typically, Code of Civil Procedure Section 1094.5, the combination of functions doctrine may be invoked in administrative proceedings irrespective of whether the subject of the hearing is affects a property right protected by federal due process. If a complaint alleges only federal due process (and not the lack of a fair hearing under 1094.5) the property right/ liberty interest threshold must still be overcome. It may be imprudent to rely on how the complaint is framed, because the Court of Appeal or the California Supreme Court could still reach the related California issues, especially in a Code of Civil Procedure 1094.5 writ proceeding. In the author’s unrelated 2006 case in the California Supreme Court, Evans v. City of Berkeley, the Court decided the free speech issues under both the California and United States Constitutions, even though only the United States Constitution had been argued throughout the trial court and Court of Appeal and in the plaintiff’s petition for review. The Berkeley merits brief pointed out this flaw but addressed the substance of the California Constitutional issue as well. Fortunately, the Court ruled in Berkeley’s favor under both Constitutions In short, it is best to assume that the combination of functions argument could be raised in litigation under any theory at any stage and could first emerge at the writ stage with no

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prior warning during the administrative process. Since the roles that various officials have played are usually not a matter of public record, the issues could first be raised in a motion to augment the record in the trial court or if the record already reflects the key facts, in a brief on appeal. For this reason, it is best to protect against such claims during the administrative hearing process. Procedural errors can be costly, even where the city obtains a favorable court ruling on the substance of the decision under challenge because the violation can also form the basis of a Code of Civil Procedure 1021.5 attorneys’ fees award. (See Bowman v. City of Berkeley (2005) 131 Cal.App.4 173, 182.th 2)

D. What Process Is Due? Since the combination of functions issue arises in an adversarial proceeding where one arm of the City can be said to be acting as an advocate, the first due process issue is whether an adversarial hearing is required by due process in the first place. Due process “unlike some technical rules, is not a technical conception with a fixed content unrelated to time, place and circumstances [citations omitted].” Mathews, supra, 424 U.S. 334. It is “flexible and calls for such procedural protections as the situation demands [citations omitted].” (Ibid.) “[I]dentification of the specific dictates of due process generally requires consideration of three distinct factors: First, the private interest that will be affected by the official action; second, the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; and finally, the Government’s interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail.” (Mathews, supra, 424 U.S. 334.)

In People v. Ramirez, 25 Cal.3d 260, the California Supreme Court, adopted the

federal factors laid out in Mathews, but wove into them the dignitary values it used to trigger due process protections in the first place. As reframed by the Court the California due process factors are: “1) the private interest that will be affected by the official action; (2) the risk of an erroneous deprivation of such interest through procedures used, and the probable value, if any, of additional safeguards, (3) the dignitary interest in informing individuals of the nature, grounds and consequences of the action and in enabling them to present their side of the story before a responsible government official, and 4) the governmental interest, including the function involved and the fiscal and administrative burdens that the additional or substantive procedural requirement would entail.” (Id. at pp. 268-69, italics added.)

It is clear that “the pure adversary model is not entitled to constitutionally enshrined exclusivity as the means for resolving disputes …” (Howitt v. Superior Court (1992) 3

2 The City did not appeal the procedural due process claim because the permit involved an affordable housing project which would have lost its funding by delay. It was therefore foreclosed from arguing the merits of the due process claim in connection with its appeal of the due process award.

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Cal.App.4th 1575 1581 (“Howitt”).) “A more difficult question is presented where the administrative agency chooses to utilize the adversary model in large part but modifies it in a way that raises questions about the fairness of the resulting procedure.” (Id. at pp.1581-1582, italics added.) The roles played by government officials when an adversary proceeding is utilized and whether these roles result in a biased tribunal is the subject of a line of cases which began with a United States Supreme Court case predating Mathews. This line of cases is more occupied with determining when a tribunal is unconstitutionally biased rather than what process is due, however these two strains of due process jurisprudence effectively merge when the claim of bias does not involve personal embroilment or pecuniary property interests but whether the hearing process is structurally flawed because of the official relationships within it. This becomes important in evaluating what administrative flexibility cities and counties retain. This question is addressed in part III G of this paper, infra.

E. Fair Tribunals, Bias and Combination of Functions “When, … an administrative agency conducts adjudicative proceedings, the constitutional guarantee of due process of law requires a fair tribunal.” (Morongo, supra, 45 Cal.4th at 737 citing Withrow v. Larkin (1975) 421 U.S. 35, 46.) “A fair tribunal is one in which the judge or other decision maker is free of bias for or against a party.” (Id.)

Unless they have a financial interest in the outcome (see Haas v. County of San Bernardino, supra, 27 Cal.4th at p. 1025), adjudicators are presumed to be impartial (Withrow v. Larkin, supra, 421 U.S. 35, 47).

(Morongo, 731 Cal.4th at 737, italics added.) Partiality can be shown not only by evidence of actual bias but also by evidence of a combination of circumstances “’in which experience teaches that the probability of actual bias on the part of the judge or decisionmaker is too high to be constitutionally tolerable’.” (Ibid citing Withrow v. Larkin, 421 U.S. 47.)

Thus, when an administrative agency is alleged to have improperly combined adjudicatory functions with investigatory or prosecutorial ones, the constitutional question is in effect whether the presumption of impartiality has been rebutted by adequate evidence of actual bias or of circumstance that makes the probability of actual bias on the part of the decisionmaker too high to be constitutionally tolerable. The seminal case on this question is the United States Supreme Court decision in Withrow v. Larkin (1975) 421 U.S. 35 (“Withrow”) decided one year prior to its decision in Mathews, decided in 1976.

In Withrow, the Court found that a state medical examining board was an independent decision maker and could properly rule with regard to the merits of the same charges it investigated and presented to the district attorney. (Withrow, supra, 421 U.S. at 47.) The

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Supreme Court acknowledged that due process prohibits a “probability of unfairness,” but disagreed that the combination of functions before it created a probability of bias and was unconstitutional. It first reviewed the caselaw up to that point.

I]t is not surprising, therefore, to find that “[t]he case law, both federal and state, generally rejects the idea that the combination [of] judging [and] investigating functions is a denial of due process….” 2 K. Davis, Administrative Law Treatise § 13.02, p. 175 (1958). Similarly, our cases, although they reflect the substance of the problem, offer no support for the bald proposition applied in this case by the District Court that agency members who participate in an investigation are disqualified from adjudicating. The incredible variety of administrative mechanisms in this country will not yield to any single organizing principle.

Withrow, 421 U.S. 726.3 In fact such adjudicators are entitled to a presumption of honesty and integrity. (Ibid.)

In subsequent cases, the Court has also been hostile to claims of bias arising out of officials performing the very functions associated with their official positions. (See e.g. Hortonville Joint School Dist. V. Hortonville Education Assn. (1976) 426 U.S. 482 [school board was not impermissibly biased when it conducted a hearing concerning teacher discharge after a teacher’s strike]; Marshall v. Jerrico, Inc. (1980) 446 U.S. 238, [assistant regional administrator of the Employment Standards Administration was not deemed biased even though he was responsible for both investigating violations of child labor standards and assessing penalties for those violations, because his salary was fixed by law and because the administrator was entitled to a presumption of honesty] This author’s paper presented at the May 2004 City Attorney’s conference entitled “Procedural Due Process Limitations on the Municipal Lawyer Combining Quasi-judicial and Prosecutorial or Investigatory Functions describes all the post Withrow United States Supreme Court, Ninth Circuit and California appellate cases which had been decided until then. The paper can be ordered from the League library for those who wish to delve further into the caselaw.

3 The High Court supported its conclusions by an examination of a number of cases in which the Court itself or lower circuits had rejected claims that the performance of some prior official function rendered a decision maker biased. It concluded that while administrative agencies have long discussed the degree to which distinctive functions should be performed by the same persons, “No single answer has been reached. Indeed, the growth, variety, and complexity of the administrative processes have made any one solution highly unlikely.” (Id. at p. 52.)

The Court further noted that even at the federal level, Congressional approaches to separation of function in particular administrative structures has ranged widely, “from complete separation of functions to virtually none at all.” (Ibid.) “For the generality of agencies, Congress has been content with § 5 of the Administrative Procedure Act, 5 U.S.C. § 554(d), which provides that no employee engaged in investigating or prosecuting may also participate or advise in the adjudicating function, but which also expressly exempts from this prohibition ‘the agency or a member or members of the body comprising the agency.’” (Id.)

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F. The Earlier California Impartial Tribunal Cases

In a California Supreme Court case concerning whether a San Diego County Civil Service Commission was subject to confidentiality restrictions on police records, the California Supreme Court reviewed California caselaw upholding many different types of administrative structures as creating impartial tribunals:

At oral argument, Copley asserted that both Government Code section 3304 and the Charter require administrative appeals to be conducted by a “neutral factfinder,” and that it is “illogical” to characterize the Commission as both neutral and, at the same time, part of the employing agency. Without commenting on the former assertion, we note that the latter is inconsistent with California case law. (See Brown v. City of Los Angeles (2002) 102 Cal.App.4th 155, 178-179, 125 Cal. Rptr. 2d 474 (Brown) [regulation requiring that hearing officer for administrative disciplinary appeal be selected from members of police department satisfies due process]; Hongsathavij v. Queen of Angels etc. Medical Center (1998) 62 Cal.App.4th 1123, 1142, 73 Cal. Rptr. 2d 695 [medical center’s board of directors is “impartial adjudicator” for administrative appeal notwithstanding that its administrator “initiated” physician’s suspension and its “risk management staff prosecuted the action”]; Stanton v. City of West Sacramento (1991) 226 Cal.App.3d 1438, 1443, 277 Cal. Rptr. 478 (Stanton) [police chief hearing administrative appeal of discipline imposed by another officer is “ ‘ “a reasonably impartial, noninvolved reviewer” ‘ “]; Doyle v. City of Chino (1981) 117 Cal.App.3d 673, 681-682, 172 Cal.Rptr. 844 [city council hearing police chief’s administrative appeal of termination decision made by city manager “ ‘was an impartial body’].) (Copley Press, Inc. v. Superior Court (2006) 39 Cal.4th 1272, 1290, fn. 10) G. California Combination of Functions Cases - Segregating

Advisers to Decisionmakers from Advocates In An Adversary Hearing In The Same Case Is Constitutionally Required Under Howitt v. Superior Court (1992) 3 Cal.App.4th 1575.

It has been clear for many decades - both as a matter of common sense and based on established caselaw - that in order to have a fair hearing, the same lawyer cannot act as both the representative of one side in an adversary hearing and also advise the decisionmaker. (Midstate Theaters, Inc. v. County of Stanislaus (1976) 55 Cal.App.3d 864, 870-871.) Since 1992, this rule of law has been interpreted to include a requirement that an ethical wall be constructed between the advisory lawyer and the advocate lawyer.4

4 This limitation was discussed in this author’s 1994 City Attorney Ethical Issues paper on file with the League of California Cities.

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The key California case requiring evidence that there has been segregation of lawyers playing the advisory and prosecutorial functions in the same case is Howitt, supra, 3 Cal.App.4th 1575. Howitt involved a hearing before an Imperial County Employment Appeals Board on an appeal from a sheriff’s transfer and suspension without pay. The record revealed that the deputy county counsel represented the sheriff’s department in the hearing and the county counsel represented the county counsel. The court discussed the Withrow case but distinguished it on the facts, noting that where the county chooses to utilize an adversary hearing procedure, it may not set it up in a way that calls into question the fairness of the resulting hearing. (Id. at pp.1581-82.) The court’s reasoning is instructive:

A more difficult question is presented where the administrative agency chooses to utilize the adversary model in large part but modifies it in a way which raises questions about the fairness of the resulting procedure. Here, for instance, we assume the county constitutionally could have allowed the sheriff or the board of supervisors to review personnel complaints by employees in the sheriff's department. Instead, it created an independent and disinterested administrative board to adjudicate disputes between the county and its employees. The board of employment appeals cannot be overruled by another county agency or even by the board of supervisors. The Board does not have its own investigative arm but instead relies on adversary presentations by the employee and affected county agency to illuminate the facts and relevant legal authority. Each party is entitled to be represented by counsel at a formal hearing. (Ibid.)

The court went on to describe the absurdity of ignoring the combination of functions issue in such an administrative procedure:

It is in the midst of this seemingly adversary system that we discover the same lawyers who represent the various county departments as advocates also advise the Board with regard to its decision affecting those county departments. The mental image comes to mind of a hearing in which county counsel representing a county department raises an objection and then excuses himself from counsel table to consult with the Board members as to whether the objection should be sustained. (See Midstate Theaters, Inc. v. County of Stanislaus (1976) 55 Cal.App.3d 864, 870-871 [128 Cal.Rptr.154].)

(Id. at p.1582.) While the record in Howitt established that the county counsel’s office had assigned the county counsel, himself, to advise the decisionmaking board, while a deputy county

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counsel acted as the advocate at the hearing, the court remanded the case for the county to establish that an ethical wall had existed between the deputy county counsel advocate and the county counsel adviser to the decisionmaker with respect to the particular matter. (Id. at 1587.) A stinging dissent accused the majority opinion in Howitt of conflicting with established principles of administrative law under Withrow and its progeny. (Id. at pp. 1587-1594.) It appears that no petition for review was filed, however. Many city attorneys had believed that the rule in Howitt was limited to adversarial hearings in which lawyers appeared in the hearing itself as advocates for one arm of the city or county and not to pre-hearing advice to staff. That assumption was eroded by the subsequent decision in Nightlife Partners v. City of Beverly Hills (2003) 108 Cal.App.4th 81.

H. Extending The Howitt Rule Beyond Adversary Hearings To Staff Advice And Pre-hearing Advocacy – Nightlife Partners v. City of Beverly Hills (2003) 108 Cal.App.4th 81, New “Appearance of Bias” Test Seemingly Established

In Nightlife Partners v. City of Beverly Hills (2003) 108 Cal.App.4th 81 (“Nightlife Partners”) an adult cabaret had to file a permit renewal request every two years under the city’s governing ordinance. The city and the applicant disagreed as to whether the ordinance required the business to submit exactly the same documents in support of the application as it had done for the initial permit. The deputy city attorney wrote several letters to the applicant, taking the position that the ordinance required a new application to be filed. Under the city’s municipal code the decision was then appealed to a higher level decisionmaker. The same deputy city attorney later advised the hearing officer who deferred a great deal to the attorney and admitted that he had never conducted a hearing before. At the hearing the city was separately represented by a different lawyer. The City of Beverly Hills apparently believed that due process constraints applied to the administrative hearing and that the decisionmaker was required to be impartial because it briefed whether bias was present and not whether due process applied. This is possibly because the application for a renewal might have been viewed as the effective equivalent of a revocation of an existing entitlement entailing the divestment of a property interest. The court found that there had been a commingling of the prosecutorial and advisory functions and a violation of procedural due process. The court held that the deputy city attorney could not serve in an advisory capacity to the appellate decisionmaker after having played an “active and significant” role in a process that is contested, having been a “prosecutor” or “advocate” for staff, or a “partisan advocate for a particular position or point of view.”5

5 Although the Court did not explicitly rely on this fact in coming to its conclusion, the City was contemporaneously engaged in litigation against this adult business, and the same deputy city attorney was one of the City’s litigators.

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Thus, in Nightlife Partners, the Howitt rule, requiring segregation of prosecutorial and advisory functions, was extended to preclude a lawyer who advised the staff whose decision is being appealed from advising the decisionmaker on appeal even where the lawyer did not appear in a hearing below as an advocate. Given the fact that the city in Nightlife Partner had purported to create an appeal from a lower level official’s decision to a new uninvolved decisionmaker and set up an adversary hearing process in which the two protagonists were the city and the applicant, with each represented by lawyers, the court’s conclusions that the applicant did not receive a fair hearing on these facts was not a radical expansion of the holdings of both Midstate Theaters, Inc. v. County of Stanislaus, supra, 55 Cal.App.3d 864, and Howitt, supra, 3 Cal.App.4th 1575. Far more troubling was Nightlife Partners’ analysis of the applicable legal standards. The court’s opinion failed to even discuss the Withrow presumption of impartiality or subsequent caselaw applying it and seemed to enunciate a new highly subjective and vague legal standard for judging whether a hearing was fair and a decisionmaker biased. “Just as in a judicial proceeding, due process in an administrative hearing also demands an appearance of fairness and the absence of even a probability of outside influence on the adjudication.” (Emphasis in original.) (Nightlife Partners, supra, 108 Cal.App.4th 90.) By contrast, the Court of Appeal’s opinion in Breakzone Billiards v. City of Torrance, supra, 81 Cal.App.4th 1205, evaluating whether a decision maker was biased under Code of Civil Procedure Section 1094.5, noted that this question must be analyzed under the Withrow presumption of impartiality which could only be rebutted by the plaintiff establishing ‘an unacceptable probability of actual bias on the part of those who have actual decisionmaking power over their claims.’[citations omitted]” ( Id. at p. 1236.) The court found that the city had not improperly combined adjudicative and prosecutorial functions when a member of the council appealed the decision to the council and then participated in making the Council decision itself. (Id at p. 1240.) Indeed, the court quoted language from California Supreme Court cases rejecting the “appearance of bias” standard because of its vague nature. (Id. at p.1236.) The Nightlife Partners court cited no caselaw for this “appearance of bias” standard. It referred only to two articles about administrative law written by administrative law judges, which in turn cited no constitutional caselaw. Additionally troubling was language in the opinion that seemed to equate fairness with the California Administrative Procedure Act (“APA”), even though it does not apply to cities. (Nightlife Partner, supra, 108 Cal.App.4th 91-93.) In reaching its conclusion the Nightlife Partners seemed to adopt an “ I know unfairness when I see it” approach: “Thus, Boga's presence as Holmquist's adviser was the equivalent of trial counsel acting as an appellate court's adviser during the appellate court's review of the propriety of a lower court's judgment in favor of that counsel's client. It requires no citation of authority exactly on all fours with this fact pattern in order to justify the conclusion that Boga's role as adviser to the decision maker violated

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petitioners' right to due process.” (Nightlife Partners, 108 Cal.App.4th 94, italics added.) Except for Quintero v. City of Santa Ana (2003) 114 Cal.App.4th 810, discussed in greater detail in section II, I infra, the later cases involving local governments have distinguished Nightlife Partners on its facts. For example, one court has held that advising two different decisionmakers and staff regarding applicable law governing appeals does not improperly commingle prosecutorial and advocacy functions with decisionmaking ones. (Witt Home Ranch v. County of Sonoma (2008) 165 Cal.App.4th 543, 568 distinguishing Nightlife.) Similarly, an attorney who represented a mobile home Rent Board and defended the Board in subsequent litigation did not improperly combine functions because the attorney was representing the Rent Board at all times. (Stardust Mobile Estates v. City of San Buenaventura (2008) 147 Cal.App.4 1170, 1190, distinguishingth Nightlife.) However, the California Supreme Court presaged its own holding in Morongo when it cited portions of Nightlife Partners and Howitt with approval in Department of Alcoholic Beverage Control v. Alcohol Beverage Control Board (2006) 40 Cal.4 1, (“Quintanar’).

th

At issue in Quintanar was whether the California Alcohol Beverage Control Board (“ABC”) practice of submitting the prosecutorial lawyer’s summary of the hearing and evidence ex parte to the advisory lawyer for the Board was a violation of the APA. The California Supreme Court favorably quoted Howitt and cited Nightlife to explain the purpose of the APA proscription against combining adjudicatory functions with prosecutorial ones:

This rule … promotes neutral decisionmaking by requiring a limited internal separation of functions. Procedural fairness does not mandate the dissolution of unitary agencies, but it does require some internal separation between advocates and decision makers to preserve neutrality. …. “A different issue is presented, however, where advocacy and decisionmaking roles are combined. By definition, an advocate is a partisan for a particular client or point of view. The role is inconsistent with true objectivity, a constitutionally necessary characteristic of an adjudicator.”

(Quintanar, 40 Cal.4th 10-11, citations omitted.)

In Quintanar the Court held that the ex parte contact of the prosecutorial lawyer with the adviser to the adjudicator was a violation of the APA (Id. at pp. at 16-17.) The court did not reach the constitutional due process issue: “Because limited internal separation of functions is required as a statutory matter, we need not consider whether it is also required by due process. As a prudential matter, we routinely decline to address constitutional questions when it is unnecessary to reach them. (Citations omitted.) Consequently, we express no opinion concerning how the requirements of due process might apply here.” (Id. at p.17, fn.13.)

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Rondon v. Alcohol Beverages Appeals Board (2007) 151 Cal.App.4th 1274, relied on Nightlife Partners and Quintanar in holding that the ABC likely violated both due process and the APA by the practice admitted to in Quintanar of ex parte contacts between ABC advisory and prosecutorial lawyers. (Id. at pp.1287-1291.)

I. Nightlife Partners Was Extended To Preclude The Contemporaneous Commingling of Roles In Separate Matters in Quintero v. City of Santa Ana (2003) 114 Cal.App.4th 810, “Appearance of Bias” Test Reiterated

Quintero v. City of Santa Ana (2003) 114 Cal.App.4th 810 (“Quintero”) took these commingling proscriptions beyond the same case to roles played by the prosecutorial lawyer in unrelated cases. In Quintero, a discharged employee appealed his dismissal to the city’s personnel board. The assistant city attorney who prosecuted the dismissal at the hearing was contemporaneously advising the board in two different cases in which he had defended the board decision in court and the matter had been remanded for further hearings. He also provided other advice to the board. The appellate court ruled that “the appearance of unfairness is sufficient to invalidate the hearing,” and found “a clear appearance of bias and unfairness” because of the probability that the board, having relied on his advice in the past, would give that attorney’s arguments for termination in this case undue influence. (Id at p. 94, italics added.) Once again the “appearance of bias” standard was invoked, suggesting that the court may decide claims of bias on a subjective ad hoc basis without reference to the Withrow presumption of impartiality or evidence showing circumstances creating an unacceptable risk of bias. However, the scope of the ruling in Quintero was unclear:

What is inappropriate is one person simultaneously performing both functions. That is not to say that once a city attorney has appeared in an advisory role, he or she cannot subsequently act as a prosecutor, or vice versa. But the attorney may occupy only one position at a time and must not switch roles from one meeting to the next. We do not hold that the frequent contacts between Halford and the Board are themselves sufficient to demonstrate the probability of actual bias. Rather, our decision is based on the totality of circumstances.

(Id. at p. 817.) Quintero went far beyond any of the reported cases invalidating administrative procedures on due process grounds and the requirements of the APA. It raised the specter that many other benign and routine official relationships between officials outside the roles they were playing in a particular case could render a decisionmaker biased. The

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League filed a letter in support of review in Quintero, but the California Supreme Court denied review.

J. The 2005 City Attorney’s Department Due Process Committee

In the fall of 2004, an ad hoc committee of city attorneys was appointed by the City Attorney’s Department President to develop guidance for city attorneys around the state who were struggling to interpret and conform to these evolving constitutional constraints. Michael Jenkins, City Attorney of Diamond Bar, Hermosa Beach, Rolling Hills and West Hollywood chaired the Committee and this author was one of its members. The recommendations section of the 2005 Due Process Committee’s final report is largely still sound, with one exception, as noted in this paper in Section III, infra. Initially, the committee envisioned providing not only written analytical guidance on the reach of these cases, but also a model procedure for cities to adopt. It issued a draft report in the spring of 2005 with its preliminary analysis and approach and solicited comments. Many city attorneys, especially those from offices with a single city attorney, expressed consternation at this approach. They persuasively argued that the committee’s product would be used as a sword against them, would preclude them from advancing more aggressive responses to these combination of functions claims and uniform procedures could prevent the flexibility they needed to craft ethical walls tailored to their own administrative structures and administrative needs. The Department also wanted to take an aggressive approach to countering these trends. The Committee thereupon revised its approach, which is reflected in its October 2005 report. The written report mounted a stringent written critique of the cases with the intention of incorporating these arguments into an amicus brief in the appropriate appellate case. Neither Nightlife nor Quintero had discussed the presumption of impartiality established in Withrow, which had to be overcome with evidence of circumstances establishing a substantial probability that the tribunal would be biased. The committee also decided to draft legislation to clarify the APA and 1094.5 to limit the doctrines emerging in these cases. The draft legislation did not receive an enthusiastic reception from some key legislative staff and was not introduced because having such legislation defeated would likely be used against cities and in any event the issues were of a constitutional dimension that could not be resolved through draft legislation. Finally, the report provided written guidance to city attorneys who were grappling with how to implement these new constraints under the myriad of circumstances they confronted. Virtually all aspects of the 2005 Due Process Committee’s written guidance continue to be valid today except for its proscription on concurrently or sequentially playing both advisory and prosecutorial roles before the same decisionmaking body, even when the matters are unrelated. See section III, of this paper, infra. Nonetheless, the recommendations section of the 2005 report may be updated and expanded by the 2009 Due Process Committee. The League and CSAC

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amicus brief in Morongo in the Court of Appeal was an implementation of the 2005 Due Process Committee’s litigation goals. To cities and counties dismay, the Court of Appeal decision in Morongo was even worse than Quintero. The opinion concluded that it was a per se violation of due process for any lawyer to concurrently play an advisory and prosecutorial role before a decisionmaking body, in separate unrelated matters. As the court recognized its holding would have had the effect of requiring all public agencies, including cities and counties, to set up entirely separate units of advisory lawyers, segregated from prosecutorial or advocate lawyers. Fortunately the majority opinion did generate a vigorous dissent, which facilitated the Supreme Court granting review. The League and CSAC submitted a joint letter supporting the California Water Resources Control Board’s petition for review as well as an amicus brief on the merits, once review was granted.

III

Morongo Band of Mission Indians v. California State Water Resources Control Board (2009) 731 Cal.4th 731

In Morongo the Board assigned its attorneys to play either a prosecutorial or an advisory role in administrative hearings before them. In each case, the advisory lawyer was precluded by an ethical wall from communicating about the substance of the case with the advisory lawyer on the same case. One supervisory lawyer supervised the prosecutorial lawyers and a different supervisory lawyer supervised the advisory lawyers. The supervisors likewise did not communicate with each other about the substance of the cases they were supervising. These procedures were described in a declaration submitted by the Board. The administrative proceeding at issue in Morongo was a license revocation proceeding. The particular lawyer assigned to prosecuting the license revocation was contemporaneously acting as the adviser to the Board in a separate unrelated matter. The Court of Appeal in Morongo held that it was a per se violation of due process for a lawyer to act as a prosecutor at the time she was concurrently advising the Board in the other matter, even though the two were unrelated. The League/CSAC amicus brief (available at http://www.cacities.org/recentfilings) contained an extensive legal and practical discussion designed to explain to the court the analytical flaws of Nightlife, Quintero and the Court of Appeal decision in Morongo and their impractical nature as applied to local governments. The California Supreme Court reversed the Court of Appeal and adopted some major principles we had advanced.

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A. Decisionmakers Are Entitled to a Presumption of Impartiality, Absent Pecuniary Bias

The most significant doctrinal achievement of the Morongo case was the Court’s clear and unequivocal affirmation that public officials are entitled to a presumption of impartiality in the absence of claims of pecuniary bias or personal embroilment.

Unless they have a financial interest in the outcome (see Haas v. County of San Bernardino, supra, 27 Cal.4th at p. 1025), adjudicators are presumed to be impartial (Withrow v. Larkin, supra, 421 U.S. 35, 47).

(Morongo, 731 Cal.4th at 737, italics added) The court thus flatly disagreed with language in the Morongo Court of Appeal opinion, which interpreted the Withrow presumption as limited to claims that investigatory roles (rather than prosecutorial or other advocacy roles) and adjudicatory roles had been commingled.

B. Notably Absent From the Morongo Opinion Is The Nightlife Partners and Quintero “Appearance of Bias” Test

The recent caselaw had failed to lay out any clear analytical rules for determining when a combination of functions claim would be said to render a tribunal biased and seemed to suggest that the appearance of bias, as subjectively perceived by a reviewing court, was sufficient to conclude that due process had been violated. One of the goals of the due process committee’s amicus brief recommendation was to get away from this “I know it when I see it” approach and from what seemed to be highly suspicious attitude towards public officials as inherently biased by their official associations The Morongo Band had argued that Withrow was inapplicable and that Nightlife Partners and Quintero had articulated a new modern “appearance of bias” test. The Court of Appeal in Morongo had agreed. The California Supreme Court’s reiteration of the Withrow presumption of impartiality and the notable absence of any language in its opinion about an “ appearance of bias” test was thus a return to the Withrow doctrinal analysis we had advocated in the League/CSAC brief. The Court made this clearer by describing the burden required to rebut the presumption.

C. The Presumption Of Impartiality Can Be Rebutted Only By “Specific Evidence Demonstrating Actual Bias Or A Particular Combination Of Circumstances Creating An Unacceptable Risk of Bias”, Evidence Not Present In Morongo

The Withrow analysis envisions that specific facts and circumstance could result in rebutting the presumption of impartiality afforded public officials if these circumstances

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created an unacceptable risk of bias. In Morongo, the Supreme Court laid out the test for rebutting the presumption: “In the absence of financial or other personal interest, and when rules mandating an agency’s internal separation of functions and prohibiting ex parte communications are observed, the presumption of impartiality can be overcome only by specific evidence demonstrating actual bias or a particular combination of circumstances creating an unacceptable risk of bias.” (Morongo, supra, 45 Cal.4th 740, italics added.) The ex parte communications referred to here is communications between the prosecutorial officials and advisory ones (i.e. not ex parte communications with the public.)

D. Superficial Assumptions Of Bias Insufficient To Overcome the Presumption Of Impartiality; Respect For Public Officials

The Morongo Court of Appeal had concluded that whenever a lawyer contemporaneously prosecuted a matter before a tribunal while advising that tribunal in an unrelated matter, that role would render the tribunal biased: “The Court of Appeal's stated rationale for its per se rule is that ‘[h]uman nature being what it is, the temptation is simply too great for the ... Board members, consciously or unconsciously, to give greater weight to Attorney Olson's arguments by virtue of the fact she also acted as their legal adviser, albeit in an unrelated matter.’” (Morongo, supra, 45 Cal.4th 741.) The Supreme Court did not find this reasoning persuasive noting that there were a number of other situations in which the same reasoning could be employed to conclude that a tribunal was biased. Its response is noteworthy in understanding the circumstances that the Court finds insufficient to rebut the presumption:

[The Court of Appeal’s] reasoning would apply also when the prosecuting agency attorney has acted as an adviser to the agency adjudicator in an unrelated matter at any time in the past. Arguably, the rationale would also require disqualification of an attorney representing a license holder like the Morongo Band if that attorney at any time in the past had served the agency adjudicator in an advisory capacity in an unrelated matter. And in countless other situations when the adjudicator may have formed a favorable opinion of the abilities of one of the litigating attorneys through some previous social or professional interaction, the Court of Appeal's reasoning would require the attorney's disqualification, even though this court has concluded that similar relationships ordinarily are not disqualifying. (See, e.g., People v. Carter (2005) 36 Cal.4th 1215, 1243-1244, 32 Cal.Rptr.3d 838, 117 P.3d 544; see also People v. Vasquez (2006) 39 Cal.4th 47, 64, 45 Cal.Rptr.3d 372, 137 P.3d 199 [“As neither judges nor prosecutors can completely avoid personal influences on their decisions, to constitutionalize the myriad distinctions and judgments involved in identifying those personal connections that require a judge's or prosecutor's recusal might be unwise, if not impossible.”].)

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(Morongo, supra, 45 Cal.4th 741.) The Supreme Court rejected this view. “In construing the constitutional due process right to an impartial tribunal, we take a more practical and less pessimistic view of human nature in general and of state administrative agency adjudicators in particular.” The Court concluded that unless the presumption of impartiality is rebutted by 1) actual evidence 2) demonstrating either 3) actual bias or 4) a particular combination of circumstances creating an unacceptable risk of bias. “we remain confident that state administrative agency adjudicators will evaluate factual and legal arguments on their merits, applying the law to the evidence in the record to reach fair and reasonable decisions.” (Ibid.). This language thus reflects more respect and less suspicion of public officials than the Court of Appeal opinion in Morongo and Quintero.

E. Concurrently or Sequentially Occupying Prosecutorial and Advisory Roles With the Same Decisionmaking Body Is Not a Per Se Violation of Due Process.

[Morongo Band] argues that when the agency attorney who is prosecuting an administrative license revocation proceeding has concurrently advised the adjudicator in a separate albeit unrelated matter, the risk that the agency adjudicator will be biased in favor of the prosecuting agency attorney is of a magnitude sufficient to overcome the presumption of impartiality. We disagree. As we explain, any tendency for the agency adjudicator to favor an agency attorney acting as prosecutor because of that attorney’s concurrent advisory role in an unrelated matter is too slight and speculative to achieve constitutional significance.

(Ibid.). Accordingly, the fact that a lawyer is concurrently assigned to a prosecutorial role in one case and an advisory role in another unrelated case is not, by itself, a violation of due process, as long as the advocate lawyer and his/her supervisor is separated from the prosecutorial lawyer and his/her supervisor in each case. Doing so sequentially is likewise not a per se violation either. This favorable holding in Morongo thus supersedes the 2005 Due Process Committee’s guidance on this point at page 16 of its report. The Morongo opinion refers expressly to this Quintero language, when it states it is overruling any language inconsistent with its opinion.6

6 “Although the Quintero Court of Appeal stated and applied a totality-of-the-circumstances test, its opinion also contains language suggesting the existence of a per se rule barring agency attorneys from simultaneously exercising advisory and prosecutorial functions, even in unrelated proceedings. Thus, for example, the court stated that “[w]hat is inappropriate is one person simultaneously performing both functions” and that “the attorney may occupy only one position at a time and must not switch roles from one meeting to the next.” (Quintero, supra, 114 Cal.App.4th at p. 817.) We disprove any language in Quintero that is inconsistent with our decision here.” (Morongo, supra, 45 Cal.4th 740 fn. 2.)

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Additional factors in combination with switching prosecutorial and advisory roles may result in a biased tribunal. See discussion in sections F and G next.

F. Open Issue – Sufficiency of Evidence Rebutting Presumption of Impartiality; Morongo Distinguishes Quintero Facts

Other than disavowing the Quintero language purporting to find a per se prohibition in the concurrent or sequential switching of roles from adviser to prosecutor in different cases, the Supreme Court did not overrule Quintero in its entirety, but distinguished it on its facts, pointing to two circumstances not present in Morongo.

First, in the earlier employee discharge matters involving Cabrera and Pollitt, the agency’s internal separation of functions had not been maintained. Rather, in each of those matters, Deputy City Attorney Halford had acted in both prosecutorial and advisory capacities, taking a confidential and advisory role as the personnel board’s legal representative in superior court mandate proceedings after having acted as a prosecutor in the adversarial proceedings before the personnel board. Second, the record suggested that Halford had become more than just one among a group of legal advisers that the personnel board could consult, and instead had become its sole or primary legal adviser. Under its totality-of-the-circumstances approach, the Quintero Court of Appeal relied on both of these circumstances in combination to support its conclusion that constitutional due process had been violated.

(Id. at 740, italics added.) The Court’s language about the first distinguishing factor seems to suggest that a lawyer who has prosecuted a matter before an adjudicatory board should not defend the adjudicatory board’s decision. Yet, it is difficult to see how a board can become retroactively biased because the prosecutorial lawyer defended its decision after the board acted. It is more likely that the court, despite this confusing language above, was more troubled by the lawyers’ defense of these cases contemporaneously with prosecuting a different case before the same board. The 2005 Due Process Committee had advised against the prosecutorial lawyer defending the writ in case the matter was remanded back to the court if the court’s remand decision required further advice to the tribunal and because the role of defender may be seen as likely to bias the board in favor of that prosecutorial lawyer This language may suggest that the practice creates other exposure as well. The Morongo opinion’s reference to the second distinguishing factor in Quintero suggests that assigning the primary, or sole legal adviser of a decisionmaking making tribunal to a prosecutorial role before the same tribunal may be viewed as rendering the tribunal biased. The 2005 Due Process Committee report counseled against assigning the primary or sole legal adviser to a board to act in a prosecutorial capacity before that same

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board based on these same facts in Quintero. Similarly, the 2005 Committee report also cautioned against the city attorney playing a prosecutorial role before the city council. This language in Morongo distinguishing Quintero in part because of the deputy city attorney’s role as the tribunal’s sole or primary lawyer reinforces the danger of such city attorney prosecutorial involvement. On the other hand, the Morongo Court noted that it was both factors “in combination” with other circumstances that rendered the tribunal biased. The open question is whether any one of these factors by itself will render a tribunal biased. Still, it is risky to engaging in either one of these practices because of this language in Morongo, especially in a trial court or Court of Appeal. Another tricky question is whether the city attorney’s advice to lower level officials on the prosecutorial side will render the council biased, even if the city attorney does not appear before the council and outside counsel advises the council and another official or separate outside counsel presents the city’s prosecutorial case before the council. No case has squarely addressed this specific issue. However, the “sole or primary lawyer” language from Quintero, led the 2005 Due Process Committee’s report to urge that the city attorney be removed from playing any prosecutorial role. That language has now been quoted favorably in Morongo lending further credence to this caution. Some legal issues did not get addressed in Morongo that could be addressed in the future. G. Open Issues - The Mathews Balancing Test The League/CSAC brief and the brief of UCLA administrative law professor emeritus, Michael Asimow, argued that the Mathews balancing test must be employed to evaluate an administrative structure challenged as biased for reasons other than personal embroilment or pecuniary bias. The Board merits brief in Morongo did not argue the applicability of Mathews because of language in Haas v. County of San Bernardino (2002) 27 Cal.4th 1017, 1035(“Haas”) suggesting that it did not apply to bias cases. “The Mathews cost-benefit analysis appears to have no legitimate application in this context.” (Haas, 27 Cal.4th at 1035.) The League/SCAC brief argued that this language indicated that the Haas court was referring to pecuniary bias. For example, the Haas court reasoned that a post Mathews case, Schweiker v. McClure (1982) 456 U.S. 188, had not applied the test to a claim of pecuniary bias: “Indeed, the high court in Schweiker v. McClure gave the Mathews cost-benefit analysis no role in its analysis and rejection of a claim of financial bias, even while applying Mathews to the distinct question of whether unsuccessful Medicare claimants were entitled to an additional level of administrative review.” (Haas, 27 Cal.4th 1035.) Haas also quoted at length from a Third Circuit case, United Retail & Wholesale Emp. Teamsters Union Local No. 115 Pension Plan v. Yahn & McDonnell, Inc. (3d Cir.1986)

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787 F2d 128, 137-38 which in turn concluded that, after Mathews, the United States Supreme Court had not applied the Mathews analysis to claims that a decision maker was biased. However, each of the post-Mathews United States Supreme Court cases cited by the Third Circuit to illustrate its point, involved claims of either pecuniary bias or personal embroilment. The League/CSAC brief agreed that the Court of Appeal decision in Morongo could be reversed simply because the claim of bias on its face did not rebut the Withrow presumption of impartiality. We argued however that if the claim was to be entertained, the administrative structure must be tested under the three-pronged Mathews balancing test. The court did not reach the applicability of Mathews since it was dismissive of the bias claim on its face as demonstrated earlier. Thus this argument is available for a future case and several comments by Supreme Court justices suggest it may be accorded a favorable reception. For example, at oral argument, Justice Kennard, the author of the Supreme Court’s opinion in Morongo, referred several times to the financial burdens that would be imposed on smaller administrative agencies (referring to cities and counties) if the rule urged by Morongo Band were adopted. Justice Baxter was likewise concerned about the effect on small city attorney and county counsel offices, especially in the rural parts of the state. Thus, the Court appeared to have taken particular note of the concerns expressed in the League/CSAC amicus brief in rejecting the per se rule that Quintero suggested and the Court of Appeal in Morongo held was constitutionally required. The Mathews test would provide a doctrinal framework for local governments to advance the many important policy reasons that make it difficult for them to observe separation of roles at the local level beyond segregating the prosecutorial lawyer and officials from the advisory lawyer and officials in a particular case and why such segregation would be unwise. The League amicus brief applies the Mathews balancing test and in its first section contains a detailed explanation as to why such segregation of officials is actually unwise and counterproductive in achieving local government objectives of consistency and coherence in applying laws in light of legislative goals and other regulatory schemes. An earlier case in an unrelated context suggests that the Court understands that the local context is different. Justice Chin’s majority opinion in Copley Press, Inc. v. Superior Court, supra, 39 Cal.4th 1272, 1290, fn. 10 cited with approval to a case holding that a City Council could be impartial in reviewing the employment termination recommendation of the City Manager. “(Doyle v. City of Chino (1981) 117 Cal.App.3d 673, 681-682, 172 Cal.Rptr. 844 [city council hearing police chief’s administrative appeal of termination decision made by city manager was an impartial body’”].) By analogy, where a city attorney is required to provide advice to lower level officials which could result in an adjudicatory proceeding before the city council and separate counsel is provided to advise the council and a different official or outside counsel prosecutes the case before the council, it may well be that the practice will pass muster, especially if the Mathews test is employed.

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Nonetheless, the most prudent course continues to be the guidance provided by the 2005 Due Process Committee’s report, namely to keep the city attorney away from advising lower level officials playing a prosecutorial role in cases which will be adjudicated before the city council.

IV.

Settled Law

Some fairly clear legal principles have emerged from the development of the caselaw concerning the impartiality of a decisionmaker in administrative hearings when claims are made that the improper combining of adjudicatory and prosecutorial functions has resulted in a biased decisionmaker.

• Under the fair hearing provisions of Code of Civil Procedure 1094.5, adjudicatory hearings must be decided by impartial decisionmakers in conformity with federal due process principles concerning separation of prosecutorial and adjudicatory functions, irrespective of whether or not the hearing involves the taking away of property rights or liberty interests.

• The separation of functions between officials playing the role of prosecutors/advocates and officials acting in a decisionmaking capacity must be maintained in all administrative hearings irrespective of whether they involve the deprivation of a property right or liberty interest

• In adversary hearings in which the local government “side” is presented by a lawyer or by staff representatives advocating for particular result acting with advice from a lawyer, a different lawyer and staff should be assigned to advise the decisionmaker official or board.

• The advisory lawyer and his/her supervisor should be insulated from ex parte communications with the staff advocates and their lawyer and supervisors as to that matter or any related matter.

• A lawyer who provides pre-hearing advice to staff advocates is subject to the same proscription, irrespective of whether the lawyer appears at an adversary hearing on the staff advocate’s behalf or not. i.e. he/she must be segregated from the decisionmaker and his/her lawyers and staff

• It is not a per se due process violation for an official to concurrently or sequentially perform advisory and advocacy functions before the same board as long as the matters are not related, and the ethical wall is maintained by officials playing the

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two roles in a particular case. In this respect Morongo has superseded the 2005 Due Process Committee’s guidance.

• If the prosecutorial lawyer defends the tribunal’s decision in litigation that lawyer may render the tribunal biased if s/he subsequently prosecutes before the board.

• If the primary or sole lawyer advising a decisionmaker (such as the city attorney with the city council) prosecutes a case before that decisionmaker, there is a significant risk that the tribunal will be deemed biased.

The 2009 Due Process Committee will be considering these matters further. The good news remains however under Morongo public officials have been afforded the presumption of impartiality to which they have been entitled with the burden squarely placed on the challenger to provide actual evidence of a specific combination of circumstances which create an unacceptable risk of bias.

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LEAGUE OF CALIFORNIA CITIES

CITY ATTORNEYS DEPARTMENT

REPORT OF THE DEPARTMENT’S AD HOC DUE PROCESS COMMITTEE ON THE COMMINGLING OF FUNCTIONS IN QUASI-JUDICIAL PROCEEDINGS IN THE WAKE OF

NIGHTLIFE PARTNERS AND QUINTERO

MICHAEL JENKINS, CHAIR City Attorney, Diamond Bar, Hermosa Beach, Rolling Hills and West Hollywood

MANUELA ALBUQUERQUE BRIAN LIBOW City Attorney, Berkeley City Attorney, San Pablo JOSEPH FLETCHER HILDA CANTU MONTOY City Attorney, Santa Ana City Attorney, Fresno DONNA WEISZ JONES BETSY STRAUSS Assistant City Attorney, Los Angeles

ANNUAL CONFERENCE October 2005

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THE APPLICATION OF PROCEDURAL DUE PROCESS TO

CITY ADMINISTRATIVE PROCEEDINGS – THE NIGHTLIFE PARTNERS AND QUINTERO DECISIONS

I. INTRODUCTION

This analysis has been prepared by the City Attorneys Department of the League of California Cities in response to the challenges posed by two recent decisions of the California Court of Appeal – Nightlife Partners v. City of Beverly Hills1 and Quintero v. City of Santa Ana.2 They hold that the commingling of advisory and prosecutorial functions by city attorneys3 in certain city quasi-judicial administrative hearings renders the procedures in these proceedings a violation of due process. These cases equate a statutory provision of the State Administrative Procedures Act, which is inapplicable to local governments, with a constitutional due process requirement. Yet they fail to discuss conflicting federal and California appellate cases on the threshold questions of: 1) whether the local administrative proceeding is even subject to procedural due process in the absence of any deprivation of a property or liberty interest; or 2) what process is actually due in any particular circumstance under the due process multi-factor balancing test. As a result, these cases represent an aberration in applicable law concerning procedural due process. We believe that cities are deeply committed to enforcing their ordinances and polices in a fair and evenhanded manner within the constraints imposed by their underlying regulatory schemes. We seriously disagree, however, that fairness requires administrative procedures to mimic cumbersome courtroom proceedings. Indeed, both California and federal courts have hitherto rejected any such claims. Nonetheless, cities need to pay close attention to these new cases since they may be used to challenge the procedures employed in certain administrative proceedings.4 This paper is designed to provide the guidance of the City Attorneys Department Due Process Committee, which has been studying these cases and their implications for cities. II. THE PROBLEM-- THE NIGHTLIFE AND QUINTERO DECISIONS

A. Nightlife Partners v. City of Beverly Hills.5

1. The holding.

This paper reflects the comments of the Department membership during and following the May 2005 conference. The Committee appreciates all of those contributions, and further wishes to thank Professors Michael Asimow and Gregory Ogden for their insightful observations. The Committee also wishes to thank Stephen Traylor of the League staff for all of his assistance in this project. 1 (2003) 108 Cal. App. 4th 81. 2 (2003) 114 Cal. App. 4th 810. 3 We use the term “city attorney” interchangeably with deputy and assistant city attorney to mean the municipal lawyer whose role is at issue. This discussion applies equally to other public agency lawyers. 4 Of course, an issue not raised at an administrative hearing, including a claim of bias, may not be raised in later judicial proceedings. Southern Cal. Underground Contractors, Inc. v. City of San Diego (2003) 108 Cal.App.4th 533, 549. 5 Supra, 108 Cal. App. 4th 81.

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In Nightlife, an adult cabaret had to file a permit renewal request every two years under the city’s governing ordinance. The city and the applicant disagreed as to whether the governing ordinance required the business to submit exactly the same documents in support of the application as it had done for the initial permit. The deputy city attorney took an active role in advising staff as to the requirements of the city’s ordinance, sending several letters to the business directly stating the city’s position. The city made the administrative staff decision subject to appeal to an administrative hearing officer. When the same deputy city attorney later advised the hearing officer, the Court found that there had been a commingling of the prosecutorial and advisory functions and a violation of procedural due process. The Court held that the city attorney cannot serve in an advisory capacity after having played an “active and significant” role in a process that is contested, having been a “prosecutor” or “advocate” for staff, or a “partisan advocate for a particular position or point of view.”6 At the hearing the city was separately represented by a different lawyer. Thus, the city had itself created and followed an adversarial administrative model. The significance of this fact becomes more apparent later in this analysis.

2. Nightlife failed to discuss the threshold issue of whether federal due

process was even triggered.

The Nightlife court’s discussion of whether due process is applicable while citing to only federal due process cases completely misses the property right - liberty interest threshold for procedural due process protection under federal law. The Court announced instead a sweeping and erroneous blanket premise:

The protections of procedural due process apply to administrative proceedings (Richardson v. Perales (1971) 402 U.S. 389, 401, 91 S. Ct. 1420, 1427, 28 L. Ed. 2d 842); the question is simply what process is due in a given circumstance. (Morrissey v. Brewer (1972) 408 U.S. 471, 481, 92 S. Ct. 2593, 2600, 33 L. Ed. 2d 484; see Logan v. Zimmerman Brush Co. (1982) 455 U.S. 422, 428-429, 102 S. Ct. 1148, 1153-1154, 71 L. Ed. 2d 265.) Nightlife Partners, Ltd. v. City of Beverly Hills, supra, 108 Cal. App. 4th at p. 90.

However, federal due process is triggered only by the deprivation of a property right or a liberty interest, such as revocation, reduction or termination of previously granted land uses and other entitlements. In Board of Regents v. Roth (1972) 408 U.S. 564, a case decided after the Richardson v. Perales case cited by the Nightlife court, the United States Supreme Court rejected a claim by a probationary university professor that his termination during probation was protected by due process, holding that a property or liberty interest had to be at stake before due process protections were triggered. Id. at pp. 569-570. See also Mathews v. Eldridge (1976) 424 U.S. 319, 331 (“Procedural due process imposes constraints on governmental decisions which deprive individuals of “liberty” or “property” interests within the meaning of the Due Process Clause of the Fifth and Fourteenth Amendment.”) A mere denial of a permit does not constitute deprivation of a property right. The United States Supreme Court in American Manufacturers Mutual Insurance v. Sullivan (1999) 526 U.S. 40, 59-61 rejected a claim that an initial denial of eligibility for workers’ compensation benefits created a liberty or property interest protected by due process:

6 Nightlife, supra, 108 Cal. App. 4th at p. 94. Although the Court did not explicitly rely on this fact in coming to its conclusion, the City was contemporaneously engaged in litigation against this adult business, and the same deputy city attorney was one of the City’s litigators.

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4

In Goldberg v. Kelly, 397 U.S. 254, 25 L. Ed. 2d 287, 90 S. Ct. 1011 (1970), we held that an individual receiving federal welfare assistance has a statutorily created property interest in the continued receipt of those benefits. Likewise, in Mathews, supra, we recognized that the same was true for an individual receiving Social Security disability benefits. In both cases, an individual's entitlement to benefits had been established, and the question presented was whether predeprivation notice and a hearing were required before the individual's interest in continued payment of benefits could be terminated. See Goldberg, supra, 397 U.S. at 261-263; Mathews, supra, at 332. American Manufacturers Mutual Insurance v. Sullivan, supra, 526 U.S. at p. 60 (emphasis in original).7

Nightlife also conflicts with other California reported decisions in the land use context, which have held that due process provides no protection in the absence of a protected property interest.8 Nightlife Partners was applying for a permit and thus had no property interest at stake.9 Nightlife ignores these decisions entirely and instead relies, in part, upon the body of California case law holding that Code of Civil Procedure §1094.5 (which provides for administrative mandamus review of adjudicatory decisions) requires a neutral decision maker for a fair hearing, 10 and a case which assumed that the agency before it had adopted an adversarial model of administrative decision making and, thus, that its procedures should be measured against the norms applicable to such adversary proceedings.11

7 Interestingly, in Horn v. County of Ventura (1979) 24 Cal.3d 605, 615, the California Supreme Court glossed over the property right/liberty interest distinction and went on to reach the due process issue. In assuming that due process applied, the court relied on language from an earlier case, Scott v. City of Indian Wells (1972) 6 Cal.3d 541, 548-549, holding that “land use decisions which ‘substantially affect’ the property rights of owners of adjacent parcels may constitute “deprivations” of property within the context of procedural due process” in combination with allegations of Horn’s complaint that the subdivision plan he opposed “will substantially interfere with his use of the only access from his parcel to the street and will increase traffic congestion and air pollution.” (Emphasis added.) Horn v. County of Ventura, supra, 24 Cal. 3d 615. The implied assumption in Scott v. City of Indian Wells, supra, 6 Cal.3d at pp. 548-549, that discretionary decisions were automatically subject to due process protections, has been expressly disavowed in Board of Regents v. Roth, supra, 408 U.S. at pp. 569-570. (Probationary university professor had no property or liberty interest and thus no entitlement to due process protections when he was terminated during probation.) Subsequent cases which cite Horn treat it as requiring reasonable notice and an opportunity to be heard to be provided to land owners in land use cases; these cases do not address the threshold question of whether there is a triggering liberty or property interest at stake and thus whether due process even applies. See e.g. Cohan v. City of Thousand Oaks (1994) 30 Cal.App.4th 547, 555-56; Van’t Rood v. County of Santa Clara (2003) 113 Cal. App. 4th 549, 570. 8 Clark v. City of Hermosa Beach (1996) 48 Cal. App. 4th 1152, 1168-69; accord Breakzone Billiards v. City of Torrance (2000) 81 Cal. App.4th 1205, 1224. 9 Nightlife did, however, involve an existing permit that had to be renewed. Thus, although the court did not expressly state that a property interest was at stake that triggered procedural due process protection, it is possible that under these circumstances a court could have found that a property interest was being deprived. 10 Clark v. City of Hermosa Beach, supra, 48 Cal. App. 4th 1152; accord Breakzone Billiards v. City of Torrance, supra, 81 Cal. App. 4th at pp. 1235-36 11 Howitt v. Superior Court (1992) 3 Cal. App. 4th 1575, 1581-1582.

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3. California due process-when applicable? The California Supreme Court has held that under the California Constitution there is a liberty interest in freedom from arbitrary adjudicative procedures in all adjudicatory hearings, even those that do not involve deprivation of property rights or liberty interests.12 Under either federal or California due process, the fact that procedural due process protection is applicable does not, however, resolve what process is actually due. As we explain, neither federal nor California due process doctrine requires an adversary hearing that mimics a court proceeding. Both federal and California procedural due process are highly flexible concepts; the type of administrative review required depends on the balancing of various factors.

4. Ascertaining what process is due requires the balancing of various factors under either federal or California due process.

a. Balancing under the United States Constitution

to determine what process is due. Even when a property right or liberty interest is at issue, under federal law, the process provided need not automatically mimic a courtroom proceeding by providing for an adversary hearing before an impartial decision maker. Due process “unlike some technical rules, is not a technical conception with a fixed content unrelated to time, place and circumstances [citations omitted].” Mathews v. Eldridge, supra, 424 U.S. at p. 334. It is “flexible and calls for such procedural protections as the situation demands [citations omitted].” Id. A court must weigh: 1) the private interest to be affected by the governmental action; 2) the risk that the procedures used will result in an erroneous deprivation of that interest; and 3) the probable value, if any, of using different procedures weighed against the governmental burden entailed by the additional procedures.

b. Balancing under the California Constitution to determine what process is due.

The California Supreme Court likewise has held that the type of procedure required under due process is ascertained only after the complex balancing of factors. More specifically, identification of the dictates of due process generally requires consideration of: (1) the private interest that will be affected by the official action; (2) the risk of an erroneous deprivation of such interest through the procedures used, and the probable value, if any, of additional or substitute procedural safeguards; (3) the dignitary interest in informing individuals of the nature, grounds and consequences of the action and in enabling them to present their side of the story before a responsible governmental official;

12 Under the California Constitution, “due process safeguards required for protection of an individual’s statutory interest must be analyzed applying the principle that freedom from arbitrary adjudicative procedures is a substantive element of one’s liberty.” People v. Ramirez (1979) 25 Cal.3d 260, 268-69 (emphasis added). Due process guaranteed under Article I § 7 of the California Constitution thus “presumes that when an individual is subject to deprivatory governmental action, he always has a due process liberty interest both in fair and unprejudiced decision-making and in being treated with respect and dignity.” Id. (Emphasis added.) Here, California law appears to depart from federal due process principles as regards the meaning of “deprivation,” because the plaintiff in Ramirez was not challenging termination from a continuing program in which he was already enrolled, but, was challenging the initial decision not to enroll him. The principle that procedural due process protection is applicable to all adjudicatory actions was affirmed in Saleeby v. State Bar of California (1985) 39 Cal.3d 547, 563-64. There the court upheld a client’s claim that the State Bar’s rules governing a Client Security Fund violated due process. Like the Ramirez case, Saleeby involved an application for benefits, not a termination of existing benefits. This conclusion is difficult to reconcile with cases like Clark, supra, which hold that procedural due process is not applicable to the mere denial of a permit.

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and (4) the governmental interest, including the function involved and the fiscal and administrative burdens that the additional or substitute procedural requirement would entail.13 There have been no California cases applying the California balancing test to conclude that the prohibition against combining prosecutorial and adjudicative functions is required in any given administrative procedure. Instead, Nightlife and Quintero have relied on federal cases either because the court concluded that the local government had adopted an adversarial model of administrative decision-making14 or because they were read into Code of Civil Procedure section 1094.5. 15

5. Code of Civil Procedure section 1094.5.

Prior to Nightlife, Clark v. City of Hermosa Beach, supra, 48 Cal. App. 4th 1152, held that the fairness of land use procedures were to be measured under Code of Civil Procedure section 1094.5 rather than due process. In that case, the applicant whose land use permit was denied claimed that he did not receive a fair hearing because one of the council members was biased against him as reflected in a pattern of hostile conduct. With respect to the plaintiff’s claim that the City had violated his federal civil rights by denying him due process, the court determined that due process did not apply because there was no protected property or liberty interest at stake; the level of discretion granted the City in approving or denying the permit vitiated any claim that the permit was an entitlement rising to the level of a property interest. Id. at p. 1170. However, the court stated that the “writ is appropriate where the petitioner has been deprived of a fair hearing (Code of Civ. Proc., § 1094.5, subd. (b).)” Id. The Clark court then quoted extensively from Applebaum v. Board of Directors (1980) 104 Cal. App. 3d 648, 657-658, a case involving the fairness of review procedures at a private hospital. That case rested on reading a common law requirement of fairness in private administrative decision making into Code of Civil Procedure §1094.5 writ review. The court described the requirements of such common law fairness thus:

[A]n individual has the right to a tribunal 'which meets . . . standards of impartiality.' . . . Biased decision makers are . . . impermissible and even the probability of unfairness is to be avoided. . .. The factor most often considered destructive of administrative board impartiality is bias arising from pecuniary interests of board members. . .. Personal embroilment in the dispute will also void the administrative decision . . ., although neither prior knowledge of the factual background which bears on a decision nor pre-hearing expressions of opinions on the result disqualifies an administrative body from acting on a matter before it. . .. [¶] . . . Our Supreme Court has declined to fix rigid procedures for the protection of fair procedure rights . . ., but it is inconceivable to us that such rights would not include impartiality of the adjudicators.

48 Cal. App.4th at p. 1170.

By contrast to the Clark court’s description of the issue of impartiality, the Appelbaum decision on which Clark relies is actually far more nuanced and cautious:

13 People v. Ramirez, supra, 25 Cal.3d at p. 269. 14 Howitt v. Superior Court, supra, 3 Cal. App. 4th at pp. 1585-1587. 15 Breakzone Billiards v. City of Torrance, supra, 81 Cal. App. 4th at p. 1236, n. 24.

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Specific requirements for procedural due process vary depending upon the situation under consideration and the interests involved. (People v. Ramirez, supra, at p. 264; Mathews v. Eldridge (1976) 424 U.S. 319, 335 [47 L.Ed.2d 18, 33, 96 S.Ct. 893].) Where due process requires an administrative hearing, an individual has the right to a tribunal "which meets at least currently prevailing standards of impartiality." (Wong Yang Sung v. McGrath (1950) 339 U.S. 33, 50 [94 L.Ed. 616, 628, 70 S.Ct. 445].) Biased decision makers are constitutionally impermissible and even the probability of unfairness is to be avoided. (Withrow v. Larkin (1975) 421 U.S. 35, 47 [43 L.Ed.2d 712, 723, 95 S.Ct. 1456]; In re Murchison (1955) 349 U.S. 133, 136 [99 L.Ed. 942, 946, 75 S.Ct. 623].) The factor most often considered destructive of administrative board impartiality is bias arising from pecuniary interests of board members. (See American Motors Sales Corp. v. New Motor Vehicle Bd. (1977) 69 Cal.App.3d 983 [138 Cal.Rptr. 594], and cases cited therein.) Personal embroilment in the dispute will also void the administrative decision (Mennig v. City Council (1978) 86 Cal.App.3d 341 [150 Cal.Rptr. 207]), although neither prior knowledge of the factual background which bears on a decision nor prehearing expressions of opinions on the result disqualifies an administrative body from acting on a matter before it. (City of Fairfield v. Superior Court (1975) 14 Cal.3d 768, 782 [122 Cal.Rptr. 543, 537 P.2d 375].)

104 Cal. App. 3d at p. 658.

On the issue of whether due process or fairness requires a prohibition on the combination of functions the Appelbaum court notes:

The federal position on the issue is that due process is not violated by the combination of investigative and adjudicative functions unless the facts of a case show foreclosure of fairness as a practical or legal matter. (Withrow v. Larkin, supra, 421 U.S. 35.) Most states, including California, have taken the same approach to combination of functions argument.

104 Cal. App. 3d at p. 659.

The actual language of the leading United States Supreme Court decision Withrow v. Larkin cited by the Appelbaum court notes that as contrasted with claims of pecuniary bias:

The contention that the combination of investigative and adjudicative functions necessarily creates an unconstitutional risk of bias in administrative adjudication has a much more difficult burden of persuasion to carry. It must overcome a presumption of honesty and integrity in those serving as adjudicators; and it must convince that, under a realistic appraisal of psychological tendencies and human weakness, conferring investigative and adjudicative powers on the same individuals poses such a risk of actual bias or prejudgment that the practice must be forbidden if the guarantee of due process is to be adequately implemented. 421 U.S. at p. 47.

6. Nightlife ignores all these cases.

The Nightlife court’s inquiry into what process was due cited no cases whatsoever. It instead baldly stated:

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Just as in a judicial proceeding, due process in an administrative hearing also demands an appearance of fairness and the absence of even a probability of outside influence on the adjudication. In fact, the broad applicability of administrative hearings to the various rights and responsibilities of citizens and businesses, and the undeniable public interest in fair hearings in the administrative adjudication arena, militate in favor [sic] assuring that such hearings are fair.

108 Cal. App. 4th at p. 90.

As we pointed out earlier, Withrow v. Larkin, cited by the Nightlife court, actually held that in the absence of pecuniary bias, administrative decision makers are entitled to a presumption of honesty and integrity that can only be overcome by demonstrating facts that suggest a risk of actual bias. By contrast, the case it had cited earlier concerning the application of due process to administrative hearings involving the deprivation of property or liberty interests cautioned to the contrary.16 The Nightlife court also relied on Howitt v. Superior Court, supra, 3 Cal.App.4th at p. 1585 in asserting that “California courts, too, recognize that the combination of prosecutorial and adjudicative functions is the most problematic combination for procedural due process purposes.” In fact, the Howitt court said no such thing. It stated instead:

Both Withrow and Kloepfer exemplify administrative procedures that depart to some extent from the pure adversary model of a passive and disinterested tribunal hearing evidence and argument presented by partisan advocates. The departure is perhaps more dramatic in Withrow, where the functions of investigation and adjudication are effectively merged in the same persons, than in Kloepfer, where the commission's staff conducted an initial investigation. Nonetheless, these decisions and numerous others stand for the proposition that the pure adversary model is not entitled to constitutionally enshrined exclusivity as the means for resolving disputes in "[t]he incredible variety of administrative mechanisms [utilized] in this country...." (Withrow, supra, 421 U.S. at p. 52 [43 L.Ed.2d at pp. 726- 727].) The mere fact that the decision maker or its staff is a more active participant in the fact-finding process--similar to the judge in European civil law systems--will not render an administrative procedure unconstitutional.

3 Cal. App. 4th at p. 1581.

A more difficult question is presented where the administrative agency chooses to utilize the adversary model in large part but modifies it in a way that raises questions about the fairness of the resulting procedure. Here, for instance, we assume the county constitutionally could have allowed the sheriff or the board of supervisors to review personnel complaints by employees in the sheriff's department. Instead, it created an independent and disinterested administrative board to adjudicate disputes between the county and its employees. Id. at pp.1581-1582 (emphasis added).

16 Withrow v. Larkin, supra, 421 U.S. 35, 47.

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Thus, the Howitt court judged the constitutional adequacy of the challenged administrative procedure before it, against the quasi-judicial adversary model that the county had itself chosen to establish. The court did not hold that only an adversary administrative proceeding, modeled on judicial proceedings, could pass constitutional muster. Another California court has rejected a challenge to an administrative proceeding where a council member filed an appeal of a lower land use body on the grounds that there had been an improper combination of functions. That court described the law quite differently than the Nightlife court:

Thus, it appears that the highest court of this state construes the state Constitution's due process guaranty of a fair and impartial administrative decision maker in the same manner as the federal courts have interpreted parallel provisions in the federal Constitution. In other words, mere involvement in ongoing disciplinary proceedings does not, per se, violate due process principles. Conversely, [t]hose principles are violated . . . if the official or officials who take part in the proceedings are demonstrably biased or if, in the least, circumstances such as personal or financial interest strongly suggest a lack of impartiality.

BreakZone Billiards v. City of Torrance, supra, 81 Cal. App. 4th at p. 1237 (emphasis added).

Despite these decisions, which have been deferential to local government procedures and the need for administrative flexibility, the Nightlife court imposed a one size fits all APA/judicial model on local government administrative decionmaking where neither the APA nor the due process clause either apply or dictate this particular model of administrative decision making. The central fallacy in Nightlife and, to a lesser extent, in Howitt, is the assumption that local administrative hearings are provided to ensure review by some entirely separate and independent pristine body, which is untarnished or unaffected in any manner by the rest of the agency’s actions or history. To the contrary, in most local public agencies, such review is intended to facilitate the agency’s own internal scrutiny of the actions of its lower officers and tribunals, to correct errors and ensure that the legislative and policy intent of local regulatory schemes are properly implemented without losing the continuity of advice from its own experts. The need for consistent and reliable legal and expert planning and administrative advice by persons such as the city manager, city attorney or planning director is critical to the citizen decision makers that typically serve as the adjudicators in cities and other local public agencies. In the absence of any actual standards of what is “fair” combined with a lack of appreciation of the need for administrative flexibility from one type of proceeding to another or one context to another, each court is free to make its own decision about what is fair in the case before it and to choose to import into due process its favorite state statute or procedure, such as provisions of the APA, even where the California legislature itself has recognized that the law is inappropriate for local agencies. Quintero, discussed below, is an example of just such administrative procedure du jour, masquerading as fairness.

B. Quintero v. City of Santa Ana.17 In Quintero, a discharged employee appealed his dismissal to the city’s personnel board. The assistant city attorney who prosecuted the dismissal at the hearing had at times also acted as attorney for the board, although he was not acting as the decision maker’s adviser in this matter. The

17 Quintero, supra, 114 Cal. App. 4th 810.

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appellate court ruled that “the appearance of unfairness is sufficient to invalidate the hearing,” and found “a clear appearance of bias and unfairness” because of the probability that the board, having relied on his advice in the past, would give that attorney’s arguments for termination in this case undue influence. The Court held that while the city attorney’s office may act as legal adviser to the board as well as advocate for a party at the same contested hearing, it may do so only if it demonstrates that the advocacy and advisory roles have been properly segregated. Thus, the Quintero court held that due process was violated where a lawyer who regularly advises the personnel board on other matters appears as an advocate before the board on an unrelated matter, even though the board was advised by a separate lawyer as to that matter. Quintero goes far beyond any of the reported cases invalidating administrative procedures on due process grounds. The court did not even discuss the Withrow v. Larkin presumption of honesty and integrity to which decision makers are entitled, in the absence of pecuniary bias. See Haas v. County of San Bernardino (2002) 27 Cal. 4th 1017.

C. Nightlife and Quintero conflict with existing law.

The discussion above demonstrates that Quintero and Nightlife represent a radical departure from the prior judicial approach to due process. Administrative flexibility and a careful balancing of competing interests were overlooked in favor of a one-size fits all approach, plucking concepts from inapplicable statutes and importing them into local procedures without any appreciation of the resultant administrative chaos. On a practical level, a broad reading of Nightlife wreaks havoc with attorney-client relationships within public agencies. Cities regularly rely on their city attorney for guidance and direction throughout an administrative process. The Nightlife decision seems to compel the city attorney at some undefined point in a proceeding to cease offering advice to staff in order to avoid risking disqualification from later advising the city council or other decision making bodies. Staff is then forced to go it alone, or to frequently resort to seeking the advice of outside counsel, who usually is less familiar with city rules and practices and whose judgment is an unknown. The city attorney is loathe to place staff in such a precarious position by seeming to abandon her usual duties due to the possibility that she will be declared biased for doing nothing more than offering sound legal advice. Cities with tight budgets will be reluctant to engage outside counsel every time the specter of a due process violation arises. Most importantly, the risk of inconsistent approaches to the same statutory scheme due to prosecutorial mercenaries being brought into an agency on an ad hoc basis is likely to lead to erratic and inconsistent enforcement of local regulatory schemes, the very unfairness that internal administrative review is designed to avoid. Since the commingling prohibition applies to any official engaged in the administrative proceedings, the next frontier may well be disqualifications of planning directors and city managers who would presumably also be subject to the same prohibition as the lawyers providing the advice, since the APA makes no distinction between lawyers and others involved on the “prosecutorial” or “adjudicatory” side.

III. RECOMMENDATIONS

A. Avoid creating adversary administrative proceedings with the city as a party represented by counsel.

As the above discussion has demonstrated, the Nightlife case built upon the holding of the Howitt case. Howitt held that it was improper for an adjudicatory tribunal that was considering an employee’s appeal to be advised by the county counsel, unless the county could show that an ethical wall existed between the county counsel and the deputy in the county counsel’s office who was

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prosecuting the termination before the tribunal. The Howitt court’s conclusion turned on the fact that the county had chosen to utilize the adversary model by having a lawyer present the county’s termination case to the adjudicatory tribunal. If a lawyer is going to appear to represent one arm of the City whose decision is being appealed, a reviewing court is likely to apply the prohibition on commingling prosecutorial and adjudicatory functions to preclude the tribunal from being represented by another lawyer from the same office unless the two lawyers do not consult with one another on the issue. Hence, a city should be deliberate about choosing when and when not to utilize an adversary model for adjudication.

B. Adopt a resolution expressly disavowing an intention to create an adversarial administrative structure in general or selected proceedings, where the case law does not preclude it.

A city can adopt a resolution, for example, in land use proceedings, which expressly disavows any intention to create an adversary type of administrative hearing structure, and articulates its need for consistent advice from its experts, and other such policy goals to aid in the later review of whether the administrative structure meets the balancing test. A sample resolution from the City of Berkeley is attached. It can also create a type of default resolution disavowing reliance on an adversarial administrative structure in all proceedings unless some provision of law expressly requires it. At bottom, however, the characteristics of the procedure, and not the nomenclature, will be determinative of whether it is adversarial or not.

C. Apply the prohibition on the commingling of functions only to those proceedings where the City can be said to be playing a prosecutorial rather than an evaluative role.

Nightlife and Quintero are both grounded in the principle that there is an improper combination of prosecutorial and adjudicative functions if the same lawyer plays both roles, because the advocacy inherent in the prosecutorial role conflicts with the impartiality required of an adjudicator. In each of the two cases, the offending lawyer was described by the court as “advocating” a position. Nightlife calls it acting as “a partisan advocate for a particular position or point of view.”18 The court in Quintero likewise stated: “Accordingly, to permit an advocate for one party to act as the legal advisor for the decision maker creates a substantial risk that the advice given to the decision maker will be skewed, particularly when the prosecutor serves as the decision maker’s adviser in the same or a related proceeding.”19 The challenge is to determine, as a threshold matter, when a proceeding can be said to be of a prosecutorial nature, such that one arm of the City can be said to be functioning as an advocate with a will to win.

We believe that the principles enunciated in these cases pertaining to commingling of functions apply only to prosecutorial proceedings where the local agency lawyer is representing an arm of the city that is advocating a particular result. In short, whether under the rubric of the federal due process clause, the freedom from arbitrary adjudication protected by the California Constitution, or Code of Civil Procedure section1094.5’s guarantee of an unbiased decision maker, the doctrine that prosecutorial and adjudicatory functions should not be combined in the same lawyer should only be applicable to any administrative proceeding in which one arm of the city is playing a prosecutorial

18 Id. at p. 93 (quoting Howitt v. Superior Court, supra, 3 Cal. App. 4th at p. 1585). 19 Quintero, supra, 114 Cal.App. 4th at p. 817 (quoting Nightlife, supra, 108 Cal.App. 4th at p. 93).

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role and a different administrative tribunal or individual is the quasi-judicial decision maker reviewing the decision of that body.20

Accordingly, this paper interprets Nightlife and Quintero as limited to administrative proceedings in which one lawyer represents the city in a prosecutorial role. Where the city presents its “case” before one of its own adjudicatory bodies, the city lawyer arguing for a particular result will be playing a prosecutorial role, and the proceeding itself will likely be subject to the prohibition on combining prosecutorial and adjudicative functions in the same lawyer.21 In such types of proceedings, the reviewing body should be advised by a different lawyer who should not be collaborating on the merits of the case with the lawyer playing the prosecutorial role (that is, they can be said to have erected an ethical wall between them, as we discuss later).22 The prohibition on commingling functions applies to quasi-judicial proceedings in which the government has initiated and is affirmatively prosecuting a party to achieve a particular outcome. These necessarily include, among other things, permit revocations, nuisance abatement hearings, and employee discipline hearings, which may create the appearance that only hearings involving deprivation of a vested property right are involved. This would be wrong – our focus is on the City’s role in the proceeding, not the interest that is at stake. Hence, we do not include proceedings where the government is playing more of an evaluative role – such as the processing of a permit, employment application or a license – where the staff is reacting to an application (even if the agency staff is offering a recommendation). Our analysis is intended to draw a sharp distinction between administrative proceedings in which the city plays a prosecutorial role (to which Nightlife and Quintero apply) and those that are evaluative (to which the commingling doctrine articulated by those cases should be inapplicable). In general, the prohibition against commingling of functions will be triggered when the City is taking away an existing entitlement – such as a license or permit -- or imposing a sanction, because, for example, the subject of the proceeding has violated some ordinance or other standard and a lower official has already taken the position that the subject has committed that violation.23 By contrast, the City engages in a purely evaluative role when it is deciding whether to grant or deny a permit in the first instance. In such proceedings no arm of the City is acting in a prosecutorial role to argue for denial of a permit. Successive decision makers such as the Planning Commission and the Council exercise a review role on the application in question and the staff merely plays an advisory role. While this paper provides some basic principles to assist cities in evaluating whether multiple lawyers may need to be assigned to play independent roles in providing advice and assistance in any given quasi-judicial proceeding, it is essential that the lawyer research the case law applicable to the particular proceedings to ascertain what procedural safeguards may have been held applicable in that

20 For purposes of convenience, the term “decision making body” or “decision maker” will be used but it includes a City Council, Civil Service Board, Planning Commission, or any hearing officer or body which presides over quasi-judicial administrative hearings that are prosecutorial in nature. 21 Howitt v. Superior Court, supra, 3 Cal. App. 4th at pp. 1585-1587. 22 Ibid. See section III H where we recommend that outside counsel or a deputy city attorney be assigned to the role of prosecutor so that the city attorney can remain the lawyer for the decisionmaker. 23 Examples include employee disciplinary and grievance hearings/appeals, administrative citation hearings, revocation of discretionary permits, revocation of business license, dangerous animal hearings, tax delinquency hearings, storm water violation hearings, revocation of “carry” permits for retired police officers, and declarations of public nuisance and determinations of nuisance abatement costs.

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particular type of proceeding. For example, some proceedings that are traditionally regarded as legislative may nonetheless possess a prosecutorial aspect triggering application of these rules.24 These may well be cases of first impression for the courts, and there will be conflicting arguments as to whether the proceeding is an evaluative or prosecutorial one.

D. Meaningful involvement in assisting the staff who are committed to a

particular result prior to the hearing precludes that lawyer from advising the decisionmaker.

We next apply Nightlife and Quintero to determine how far the government attorney may go in advising staff before crossing the line and herself becoming a “prosecutor,” thereby risking an improper commingling of functions if she later seeks to advise decision makers in the same matter. For purposes of this analysis, we will assume that the city attorney has chosen to serve as advisor to the decision making bodies in prosecutorial matters, and seeks to protect that position by avoiding offering advice to staff that will render her a prosecutor. Nightlife relied heavily on California and federal administrative procedural regulations. In the case of the California Administrative Procedures Act (“APA”)(Government Code Sections 11400 et seq.), the investigative, prosecutorial and adjudicative roles must be segregated. Although the APA is explicitly inapplicable to local governments, unless its provisions have been adopted by the local jurisdiction,25 the prohibition against commingling of functions was borrowed by the Nightlife court from Government Code Section 11425.30 of the APA. The Law Revision Comment to that section of the APA explains that “[t]he sort of participation intended to be disqualifying is meaningful participation that is likely to affect an individual with a commitment to a particular result in the case.” Likewise, the prohibition does not apply “to marginal or trivial participation.” In light of the insinuation of APA standards into judicial construction of these procedural due process cases, Nightlife can be interpreted strictly to prevent virtually any substantive interaction between a city attorney who desires to later act as an advisor to the decision making body, and city staff who will be prosecuting the case. Virtually any specific advice given by the city attorney to staff in a matter that would later be subject to a prosecutorial hearing would fall within this prohibition, since such advice can be said to “affect” the lawyer who will be later called upon to give the decision maker impartial advice or the staff member prosecuting the matter. Under this strict reading, activities that are likely prosecutorial include advising staff on what enforcement remedies to pursue as to a particular case after reviewing the facts of the case; reviewing and/or revising a particular letter or other document taking enforcement action or disciplinary action; and pointing out

24 For example, award of public contracts is generally regarded as legislative where principles of due process do not apply. See Ghilotti Const. Co. v. City of Richmond (1996) 45 Cal. App. 4th 897, 904; Mike Moore’s 24-Hour Towing v. City of San Diego (1996) 45 Cal. App. 4th 1294, 1303. Also the United States Supreme Court has held that even if a property right is triggered when the contracting entity withholds money from the contract for failing to comply with prevailing wage laws, no hearing is required at all since the contractor’s right to file a breach of contract action later is sufficient under due process. Lujan v. G. & G. Fire Sprinklers (2001) 532 U.S. 189, 195. “We hold that if California makes ordinary judicial process available to respondent for resolving its contractual dispute, that process is due process.” Obviously, if no hearing under federal due process is required, any hearing provided should become a matter of the entity’s sole discretion and the prohibition on combining adjudicative functions would be irrelevant. However, this does not answer whether a hearing might be required where a contractor is being debarred from future contracting or whether a determination of lack of responsibility might be deemed stigmatizing and, thus, trigger due process as it does in the personnel context. In such cases, the hearing may be deemed one in which the City is playing a prosecutorial role and it is wise to observe the prohibition on commingling prosecutorial and adjudicative functions. 25 Id. at pp. 91-93.

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strategic approaches to enforcement or discipline in a particular case to maximize the desired outcome.

Alternatively, Nightlife can be interpreted narrowly to apply only where the attorney is guiding staff towards a particular objective through extensive participation, and not when merely offering occasional legal advice as to what remedies might be available for certain types of violations if the attorney has not become deeply involved in and committed to obtaining the result sought by the staff. Further, preparing general procedures or general advice, in the absence of particular facts, or generally advising as to what remedies are available for violations of city laws, or for terminating or disciplining employees, without opining as to whether the facts in any particular case are sufficient to pursue the matter further, should be permissible.

Prior to the institution of formal proceedings, some communication with staff by the city attorney might be considered marginal or trivial. “Formal proceedings” should be deemed to have been initiated from and after final discussions leading to the filing of the initial notice of intended action. This may be a notice to abate in a manner concerning a public nuisance; a notice of permit revocation in a land use matter; or a notice of intended disciplinary action. For example, referring staff to the applicable state and local law; or to a prior concluded enforcement action with similar facts might be considered marginal or trivial. The earlier in the process the city attorney gives advice, the less likely it will be held that the lawyer was acting as a prosecutor with a commitment to a particular result. However, a court is likely to consider the totality of all communications between city attorney and staff in determining if the attorney has crossed the line and become involved in the prosecution. Obviously partisan and tactical advice, intended to assist staff in “winning,” will no doubt be deemed prosecutorial whenever it occurs in the process.

E. Ethical wall - the lawyer playing a prosecutorial role should not

communicate about the merits of the proceeding with a lawyer playing an adjudicative role.

The ethical wall is designed to protect against the commingling of the prosecutorial and adjudicatory function. It does not require any particular type of structure or physical separation. The purpose of the ethical wall is to protect against the lawyer who is playing the prosecutorial role from biasing the lawyer who is advising the decision maker in order to preserve the latter’s impartiality. City attorney offices with more than one attorney should be able to avoid due process issues by designating one attorney to advise staff, a second attorney to advise the decision making body, and constructing an “ethical wall” between them.26 Originally, the purpose of establishing an “ethical wall” was to prevent confidential information from being given to opposing counsel.27 The term was originally used to describe a barrier of silence and secrecy.28 It has been extended to retain confidentiality of information within a single office. An ethical wall may be maintained without having to establish separate units within an office,

26 For over a decade prior to Quintero, the courts recognized that performance by the same law office of the roles of advocate and adviser to a decision-maker was appropriate when there were assurances that the adviser for the decision maker was screened from any inappropriate contact with the advocate. (See Howitt v. Superior Court, supra, 3 Cal. App.4th at p. 1586.) 27 People v. Clark (1993) 5 Cal.4th 950, 1000. 28 Peat, Marwick, Mitchell & Co. v. Superior Court (1988) 200 Cal.App.3d 272, 294.

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so long as appropriate safeguards are instituted.29 However, the party relying on the ethical wall must demonstrate its existence and effectiveness when challenged in court.30 Cities may want to consider adopting written procedures designed to meet the burden of proving that a viable wall exists. While not legally required, having them may help defend the actions of the city in a particular case and alleviate the perception or accusation of impropriety. Because each city attorney office will have different constraints based upon size and composition, the policies, procedures and practices will necessarily vary. Particularly in smaller offices, where creating ethical walls may present insurmountable challenges, the policies and procedures should take into account the practical problems of supervision, training and morale when attorneys are isolated from their colleagues. An ethical wall should prohibit discussion of the merits of the case by the involved attorneys, either directly or through intermediaries, including supervisors, and should also forbid one attorney from having any access to the information or advice provided by the other attorney, including access to documents and files.31 The ethical wall in any given case should prohibit such attorneys from communicating with one another about the matter except as part of the proceeding itself or where the lawyer in the adjudicator role communicates with lawyers for both parties, including the City’s prosecutorial lawyer.

• The lawyer in the prosecutorial role should not be the supervisor of the adjudicator. In light of Quintero, it could be argued that the adjudicator will feel like he or she has to defer to the arguments made by his or her supervisor when that supervisor is playing a prosecutorial role. However, there appears to be no problem with the supervising lawyer advising the adjudicator since the adjudicator is already in a position to review the prosecutorial lawyer’s arguments in his or her role as adviser to the adjudicator.32

• Similarly it is probably best that the head of the office (the city attorney) not be

involved in supervising the prosecutorial lawyer because it could again be argued that the deputy advising the adjudicator will tend to defer to the head of the office and thus be biased.

• During office discussions or staff meetings about the case, the two functions should

be segregated.33

29 Howitt, supra, at pp. 1586-1587; 80 Ops.Cal.Atty.Gen.127 (1997). 30 Henricksen v. Great American Savings & Loan (1992) 11 Cal. App. 4th 109, 116. 31 “The typical elements of an ethical wall are: physical, geographic, and departmental separation of attorneys; prohibitions against and sanctions for discussing confidential matters; established rules and procedures preventing access to confidential information and files; . . ..” (Id. at p.116, n. 6). It is imperative to keep support staff, as well as attorneys, informed of ethical wall rules and procedures. 32 This was the case in Howitt v. Superior Court, supra, where the County Counsel advised the board of supervisors and a deputy argued the case before the board. The court remanded the case solely for purposes of determining whether the two lawyers had maintained an effective ethical wall between them. 33 City of Santa Barbara v. Superior Court (2004) 122 Cal. App.4th 17, 27 (issue of disqualification of entire office based upon attorney switching sides).

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F. Do not switch lawyers’ roles from case to case before the same tribunal.

The prior sections of this paper have explained that the courts have required the lawyer advising the adjudicator to be insulated from the lawyer playing a prosecutorial function in the same quasi-judicial proceeding in order to ensure an unbiased decision maker. The Court in Quintero expanded this prohibition to include a lawyer’s role on other matters. The court found that a personnel board advised by a separate lawyer was biased because the city attorney who played the prosecutorial role before the personnel board in that matter had previously advised and represented the board in unrelated matters:

Here, there is no evidence that [the deputy city attorney] acted as both the Board's legal adviser and in a prosecutory function in this case. However, [the deputy city attorney’s] other interactions with the Board give the appearance of bias and unfairness and suggest the probability of his influence on the Board.

Id. at p. 814.

In two other adjudicatory proceedings which began before the Quintero disciplinary proceeding and which continued during the time the lawyer was playing the prosecutorial role before the board in the Quintero proceeding, this same lawyer represented the City and thus defended the personnel board action in the two writs arising out of these proceedings. One was before the board on remand during the pendency of the Quintero disciplinary proceeding before the board. The Court also pointed to draft hearing procedures that the same attorney had prepared for the board over several meetings spanning the time period in which the Quintero proceeding was before the board. These various matters spanned a three-year period prior to and during the Quintero proceeding (Id. at p. 815.)

Taking all these into account the court noted:

This is enough to show the probability of actual bias. It would only be natural for the Board members, who have looked to [the deputy city attorney] for advice and guidance, to give more credence to his arguments when deciding plaintiff's case. Whether or not they actually did is irrelevant; the appearance of unfairness is sufficient to invalidate the hearing. (Nightlife, supra, 108 Cal.App.4th at p. 94.)

Quintero, supra, 114 Cal. App.4th at p. 816.

In explaining the limits of its holding, the court stressed:

That is not to say that once a city attorney has appeared in an advisory role, he or she cannot subsequently act as a prosecutor, or vice versa. But the attorney may occupy only one position at a time and must not switch roles from one meeting to the next.

Id. at p. 817. Under Quintero, it is inappropriate for one person to simultaneously perform both functions. Once a city attorney has established an on-going advisory role, he or she should not act as a prosecutor before the same body. If an attorney must change roles, the safest course would be to go from prosecutor to advisor to a board. But the Court provided no guidance regarding how long an

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attorney must wait to permanently change roles or the minimum amount of contact the attorney must have had before the conflict arises.34

In light of Quintero some lessons can be drawn:

1. Practices At-Risk Under Quintero

• Assigning a lawyer to act interchangeably in a prosecutorial or adjudicative capacity before the same adjudicatory body.

• Assigning the lawyer who prosecuted the case before the adjudicatory body to

defend the writ proceeding challenging the adjudicatory body’s actions, if that same attorney is to handle the same case on remand or prosecute different matters before the same Board in the future.

• Assigning a lawyer to prosecute a case before an adjudicatory body to which that

lawyer has recently provided advice, especially of a substantial nature.

• Allowing the city attorney to prosecute a case before the city council with a different lawyer providing advice to the Council in its adjudicatory capacity.

2. Practices Likely to Be Found Acceptable

• Allowing a lawyer who advised the adjudicatory body to defend the writ

challenging the action and to advise the body on remand.

• Assigning a deputy/assistant to prosecute while assigning the city attorney to advise the adjudicatory body while creating an ethical wall between the two.

• Allowing different deputies or outside counsel to prosecute the case while the city attorney supervises only the lawyer advising the adjudicator.

• Assigning a deputy who gave advice many years earlier on a one-time or infrequent basis to an adjudicatory body to prosecute a case before that body many years later.

3. Prohibition on Commingling Applies Only To City Quasi-Judicial Proceedings, Not

Later Court Actions

The prohibition on combining prosecutorial and adjudicative functions in the same lawyer is a constraint only where the enforcement procedure contemplates a later administrative quasi-judicial hearing before the city’s own adjudicatory body, such as a civil service commission. If the initial prosecutorial action is to be succeeded by the city filing a civil action, the lawyer that represented the city in the prosecutorial action may represent the city in the civil action because filing the suit is a prosecutorial, not adjudicative function.

34 The Court did find it “notable” that several of the Board members had served on the Board for several years dating from the deputy city attorney’s first service to the Board, thus establishing an “on-going relationship.” It is conceivable the court would reach a different result with a high degree of turnover on the Board between an attorney’s service as advisor to the Board and a later appearance as prosecutor. Quintero, supra, 114 Cal. App. 4th at p. 815.

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G. Advising successive adjudicatory tribunals is not a commingling of functions. The advice provided in this section assumes that the city is playing a prosecutorial role and a prosecutor has been assigned to represent the city in the prosecution. Under these circumstances, may the city attorney advise both the subsidiary body and the city council in their deliberations on the matter? In an advocacy proceeding, the initial decision making body, and any decision making body hearing the matter on appeal or by right, will generally be advised by an attorney from the city attorney’s office. We believe that there is no reason that the same attorney may not advise both the subsidiary body and the city council in their deliberations on the matter since it is the role of the attorney to provide technical and legal advice based upon his or her professional judgment not to advocate for any particular position or party in the dispute. The attorney is an advisor, not an advocate, under these circumstances. The attorney is reacting to the facts and argument presented to the decision maker and evaluating whether those facts support the requested action. The attorney is not advocating a particular result with a will to win. The attorney advising the city council on appeal is not an advocate for the decision of the subsidiary body that has been appealed. The subsidiary body is not adverse to the city council. The cases that prohibit commingling of functions seek to protect the individual’s due process interest in both fair and unprejudiced decision making. Absent actual bias, one court has expressed the test of the ability of the attorney to advise both bodies as whether “in light of the particular facts experience teaches that the probability of actual bias” on the part of the attorney is “too high to be tolerated.”35 In fact, we believe that experience teaches just the opposite: that the probability of actual bias is almost non-existent and the city’s need for consistent, coherent and experienced advisers outweighs any claimed bias from the attorney involvement at any earlier stage of the administrative proceeding. Although the mere fact that the same attorney advises a subsidiary body as well as the city council does not mean that the decision-making will be biased. However, because the courts have been acting in unpredictable and contradictory ways in these cases, establishing rules on an ad hoc basis, it is probably good to be cautious not and not become embroiled in any controversy which may take place at the hearing of the subsidiary body so as not to be perceived as taking as advocating a particular result at the next decision making level where that controversy is again at issue.

H. Outside counsel is best used in a prosecutorial role.

Legal, policy or budgetary reasons may dictate that two attorneys in the same office or firm will not assume the roles of advocate and legal advisor in a prosecutorial proceeding. Rather, special or outside counsel may be retained to assume one of those roles. Two material issues must be dealt with when consideration is given to retention of outside counsel. The first involves the role of outside counsel as advocate for staff or advisor to the decision maker. The second involves the process to be used to select outside counsel.

We recommend that the city attorney assume the advisory role and outside counsel be assigned the role of prosecutor to preserve the role of advising the highest decionmaking body to the city attorney, who can thus ensure that any errors committed at the lower levels can be corrected, and to avoid Quintero claims that would inevitably arise if the city attorney plays a prosecutorial role before the city council. This allocation preserves city attorney’s ability to fulfill his/her primary role as chief

35 Menning v. City Council (1978) 86 Cal. App.3d 341, 350.

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legal officer of and adviser to the highest level of decision makers of the city. In addition, where the city attorney functions in an adjudicative role, he or she may litigate subsequent judicial challenges to the administrative decision and still be able to advise the council if there is any remand. Whether outside counsel will serve as prosecutor or legal advisor, the next question is whether the city attorney may participate in selection of the counsel. The best answer is “yes.” Not only is the city attorney the official most likely to have expertise in evaluating the qualifications of an attorney to do the job, he or she most always must approve contracts as to form. The mere fact that the city attorney was influential in selecting outside counsel does not establish an inference that the city attorney controls or in any way influences how the outside counsel handles a particular administrative hearing. The retention letter or contract can make this clear. The city attorney should not, however, discuss the substance of the advice or representation in order to maintain the requisite ethical wall between prosecutors and advisers to the decision maker. Once outside counsel is retained, efforts must be made to preserve the city attorney’s independence as adviser to the adjudicator. The city attorney cannot supervise the outside counsel if the attorney is playing a prosecutorial role. Either city staff or perhaps a different attorney in the office who is segregated from the city attorney can do so. Ex parte communications between the city attorney and outside counsel should be prohibited unless the city attorney is communicating with both parties’ lawyers in his or her role as adviser to the adjudicator. Thus, for example, the city attorney could properly communicate with both sides in order to set up ground rules for the hearing.

I. Use of outside hearing officers can avoid commingling problems. One approach to the commingling problem is to utilize legally trained hearing officers as decision makers in lieu of staff or citizen boards. Under this approach, the city attorney could even choose to prosecute a particular matter that may have significant organizational or political implications, without creating a commingling problem. The selection of hearing officers must comply with the dictates of Haas v. County of San Bernardino, supra, 27 Cal.4th 1017 or the city could contract with the State office of administrative hearings.

J. The adjudicatory attorney should handle the writ proceeding, so as to preserve the ability to give advice to the adjudicatory body if there were a remand.

Once a final decision has been rendered by a decision making body or hearing officer, the next resort is to the courts. There are two basic types of judicial action that may occur after a quasi-judicial hearing. First, the aggrieved party may file a writ of administrative mandamus under California Code of Civil Procedure section 1094.5. Second, the city may file a judicial action to enforce the decision. The judicial means to challenge a city’s administrative decision from a quasi-judicial hearing is a writ of administrative mandamus. If the court determines that the decision-making body acted in excess of its jurisdiction or abused its discretion, or that the petitioner was not afforded a fair hearing, the matter is remanded for further proceedings in accord with the court’s reasoning.36 It is important for the city to make a reasoned decision as to which attorney should defend the decision in the writ proceeding. In general, the advisor attorney, the prosecutor, or an independent

36 CCP § 1094.5(b); Witkin, California Procedure, Third Edition, Volume 8, Extraordinary Writs § 253.

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attorney may represent the city with no legal consequences in the actual writ proceeding. But the selection will be important if there are any concurrent or subsequent proceedings before the decision making body in that matter. If a choice has to made between the adviser and the prosecuting attorney between the advisor attorney and prosecuting attorney, we conclude that the advisory attorney should be chosen since that attorney is the adviser for the decionmaking body and would undertake no change in role by either defending the writ or advising the body on the remand or in concurrent proceedings. We conclude that the advisory attorney’s representation of the decision making body in the writ proceeding does not disqualify that advisory attorney from advising the decision making body on remand after the writ proceeding results in a reversal of the decision making body’s determination because the advisory attorney plays no different role in that proceeding than the decision making body itself. If the decision making body is capable of rendering an impartial decision after reversal it would seem that the lawyer who represented it may continue to play an advisory role on remand. This also makes practical sense because that lawyer will be the one most familiar with the rationale for the court’s reversal and thus with how to avoid the flaw which resulted in the initial reversal on remand. We believe that the prosecuting attorney should not be assigned to defend the writ since, in the event of reversal and remand, that attorney’s continued role as prosecutor before the decision making body would likely render the decision making body biased. In addition, the prosecuting attorney who defended the writ would not be able to advise the decionmaking body as to how to comply with the writ without turning into an adviser to that body and thereby improperly commingling prosecutorial and decision making functions.

K. The advisory lawyer can file enforcement actions once the decision is final or where a civil enforcement action is pursued as an alternative to administrative enforcement.

If the period for filing a writ of mandamus has run, the city may proceed to enforce or implement the decision. In some instances, the decision is implemented administratively such as recording the denial of a permit or disciplinary action. There are some final decisions that require judicial action. For example, a demolition order or other nuisance abatement may require a court order. Generally speaking, if the timeline for filing a writ challenging the decision has run,37 it is highly unlikely that there will be further proceedings before the decision making body as such an enforcement action cannot be remanded. Because of this, the concerns raised above relating to defending the decision making body and the switching of roles are not present. In such instances, it would make sense to have the prosecuting attorney continue her advocate role, assuming the attorney is also skilled in such litigation. In any event, there are no constraints imposed by the doctrine that prohibits the commingling of prosecutorial and adjudicative functions and the city is free to choose the lawyer who will do the best job enforcing the city’s decision. Similarly, if the City chooses to file a nuisance abatement action as an alternative to administrative abatement of a nuisance, the commingling of functions doctrine would have no application at all and any lawyer for the entity irrespective of his or her role in advising staff pursuing enforcement may file the action.

37 Although certainly not a rule in all cases, for many decisions by local administrative hearing bodies, the statute of limitations under CCP § 1094.6 is 90 days.

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L. It may be safer not to assign a lawyer to defend litigation and advise decision maker when the suit is contemporaneous with the pending adjudicatory proceeding.

In Walker v. City of Berkeley (9th Cir. 1991) 951 Fed.2d 182, the deputy city attorney advising the City Manager on a post termination decision as to whether to uphold the termination also represented the City in a suit filed to challenge the validity of the termination while the administrative appeal of the termination was still pending. The deputy city attorney filed a motion in federal court to dismiss the suit as premature, while at the same time, preparing her recommendations for the City Manager as to whether to adopt the Personnel Board’s recommendation to overturn the termination decision. Id. at p. 184. In a curious turn of events, the jury found that the deputy city attorney, rather than the city manager she was advising, was the actual decision maker. The court found that the role of decision maker was inconsistent with the role of an attorney advocate for the City in the federal litigation and thus found a violation of due process. In our view, the holding turns on this peculiar set of facts. We are aware of no law that would preclude a lawyer from advising the decisionmaker in an administrative matter while representing the same decisionmaker in a case filed against that decisionmaker by a party to the administrative proceeding. “[A] public attorney, acting solely and conscientiously in a public capacity, is not disqualified to act in one area of his or her public duty solely because of similar activity in another such area.” In re Lee G. (1991) 1 Cal. App. 4th 17. See also, People v. Superior Court (Hollenbeck) (1978) 84 Cal. App. 3d 491 and People v. Municipal Court (Byars)(1977) 77 Cal. App. 3d 294. If resources and circumstances permit and the city wishes to insulate itself from such claim it may still be advisable to assign a different lawyer to defend litigation than the lawyer who will advise a decision maker in related administrative proceedings when the two are pending at the same time where there has been any significant motion or other practice in which the lawyer is likely to be seen as biased as a result of the attorney’s role.

IV. CONCLUSION

Because the case law in this area is so contradictory, it is difficult to offer clear and pragmatic guidance to city attorneys. Nightlife and Quintero exacerbate the confusion. We believe that the law remains fluid, and that it is not certain how the holdings in these two cases will be applied in future cases involving different fact patterns. The purpose of the analysis and recommendations in this paper is not to establish bright line rules of conduct, but rather to offer a credible interpretation of the two cases, to alert city attorneys to practices that may give rise to allegations of due process violations, and to suggest some possible ways to avoid missteps. It is imperative that city attorneys carefully review the procedures that are utilized in all of the various types of administrative proceedings undertaken in the cities they serve and make particularized determinations in each instance as to what process is due and what roles may properly be played by all of those involved. As always, the discussion and recommendations contained herein are not a substitute for legal research and advice.

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RESOLUTION NO____ N.S.

ESTABLISHING FAIR PROCEDURES IN LAND USE QUASI-JUDICAL PUBLIC HEARINGS BEFORE THE CITY COUNCIL, PLANNING COMMISSION, LANDMARKS PRESERVATION COMMISSION, ZONING ADJUSTMENTS BOARD AND HOUSING ADVISORY COMMISSION AND REPEALING SECTION I F OF THE COUNCIL RULES BY AMENDING RESOLUTION 62,420. TO DO SO WHEREAS the City of Berkeley has adopted a range of regulations to regulate land uses in Berkeley; and WHEREAS these include the City’s Zoning ordinance, Landmarks Preservation ordinance and Subdivision ordinance; and WHEREAS these regulatory schemes adopt procedures to guide the application of the standards contained in these regulatory schemes to particular land uses, structures and divisions of property; and WHEREAS these procedures generally provide for boards and commissions to implement these regulatory schemes in the first instance, with ultimate oversight and review by the City Council; WHEREAS the purpose of Council review is to ensure adherence to the Council’s legislative intent in enacting the regulatory scheme and because the Council is the elected body ultimately responsible to the voters for appropriate regulation of land uses; WHEREAS, the Council does not intend, by the procedural hearings and review established in the City’s regulatory procedures, to adopt or utilize in any way the adversary criminal or civil justice system used in the courts, and indeed finds that such a system is completely unsuitable to making land use decisions at the local administrative level; and WHEREAS, the City Council and its subordinate agencies and staff are not partisans on any side of any land use dispute but are charged with making land use decisions in the best interests of the entire City after weighing all input, and this process is in fact a form of mediation between divergent community interests; and WHEREAS, the City staff and City Attorney are charged with assisting the City Council and subordinate City boards and commission to adjust competing interests affecting land use decisions and are not advocates of any side, but play the role of providing technical assistance and advice to the decision making bodies; and WHEREAS, the United States Supreme Court has noted that due process “unlike some technical rules, is not a technical conception with a fixed content unrelated to time, place and circumstances [citations omitted].” Mathews v. Eldridge, supra, 424 U.S. 319, 334 (1976). It is “flexible and calls for such procedural protections as the situation demands [citations omitted].” Id; and WHEREAS, the provisions of the California Administrative Act (“APA”) regarding state adjudicatory proceedings properly have no application to local agencies in light of the very substantial difference in state agencies and local administrative procedures; and WHEREAS, even the APA recognizes that its prohibition on combining prosecutorial and adjudicatory functions applies only to prosecutors and other advocates who are committed to specific result and have a will to win and not merely to staff providing professional recommendations who are accustomed to serving decision making bodies with views on matters that differ from one another and from recommendations of staff; and WHEREAS, a unique aspect of land use decision-making and the administrative procedures of cities with subordinate citizen boards and an elected City Council is that City staff regularly

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provide technical assistance to boards and commission that may disagree with one another, with the City staff and with the City Council; and WHEREAS the City planning and legal staff are not advocates for any party or body’s position but merely provide expert technical advice and recommendations to each decision making body including the City Council; and WHEREAS when the differing perspectives of the different decision-making bodies and differing input at each stage of a decision-making process result in an approach which differs from that originally recommended by staff, City staff nonetheless regularly assist in implementing and guiding such changed approaches at successive stages of a decision-making process within the City; and WHEREAS in addition the differing perspectives of the different decision-making bodies, as well as the differing input at each stage of a decision-making process often results in City staff gaining an improved understanding of the nature and implications of development proposals, thus improving staff’s ability to analyze such proposals under the applicable land use regulations, and make useful recommendations to decision-makers; and WHEREAS, it is not uncommon for applicants or opponents of projects, or both, who come before the City Council to claim that the City staff and City Attorney are biased towards them; and WHEREAS, because the City is largely built-out and its limited number of remaining developable sites are surrounded by existing uses, its land use regulations are detailed and complex, in order to allow flexibility to address the difficult issues sometimes raised by infill development, and as a result, consultations among planning, legal and other staff concerning the proper interpretation and application of the City’s land use regulations is particularly vital; and WHEREAS, consistency of technical and legal advice is critical to a coherent and consistent implementation of a local government’s laws and regulations and this result cannot be achieved if different staff members who act wholly independently of one another provide conflicting technical and legal advice concerning a land use matter pending before the City; and WHEREAS, resolving land use issues requires a unique appreciation of the context of the development, community values and similar considerations have historically been resolved through local government decision making procedures that are uniquely accessible to ordinary citizens and into which they expect and demand broad input; and WHEREAS, the time which can be set aside by an elected or appointed body to conduct a hearing is inherently limited; and WHEREAS, citizens expect to be able to contact their elected and appointed representatives on pending land use matters and find restrictions on their ability to do so artificial, confining and undemocratic and an impairment of their reasonable expectation to be able to communicate with their elected and appointed representatives; and WHEREAS Council members can play a constructive role in facilitating public discussion and resolution of land use disputes through mediating seemingly irreconcilable positions; WHEREAS, most information gathered in these contacts usually results only in elaboration of issues already delineated in staff reports and other parts of the written and oral record; and WHEREAS, even the state APA, in Government Code section 11430.30(c)(2) recognizes, as a policy matter, that land use determinations by members of state land use commissions such as the San Francisco Bay Conservation and Development Commission should not be subject to a prohibition on such contacts; and

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WHEREAS while commissioners and Councilmembers often express tentative opinions on various projects pending before them, the expression of such opinions assists interested persons and the public to address the concerns expressed and makes for a robust and far-ranging exploration of the issues raised by a project, final decisions are nonetheless based upon the entire record, after all evidence and testimony has been considered, and such tentative opinions, even if expressed in strong language, are a necessary part of the review process and do not constitute prejudgment of the project; and. NOW THEREFORE IT BE RESOLVED by the Council of the City of Berkeley that the Council hereby establishes the following procedure for conduct of land use hearings in the City of Berkeley, in addition to any other procedure required by applicable federal state or local standards as follows:

1. Bodies such as the Planning Commission, Zoning Adjustments Board, Landmarks Commission and Housing Advisory Commission that make adjudicatory decisions shall withhold final judgment on such matters until the close of the hearing relating to the pending land use matter. Nothing in this section shall preclude a decision maker from articulating areas of concern for the staff or public to react to in the decision making process or to express tentative opinions on the matter.

2. City planning and legal staff are to provide their technical and legal advice and professional judgment to each decision making body and the Council and are not advocates of any party or position in a dispute, notwithstanding the fact that their technical judgment may lead them to make recommendations concerning the matter. In the absence of clear evidence in the record that a staff member has lost his or her impartiality as a technical adviser, the City’s need for consistent, coherent and experienced advisers outweighs any claimed bias from the adviser involvement at any earlier stage of the administrative proceeding.

3. Council members and Commissioners may receive information relevant to the land use decision by contacts with the parties, the public or staff and are not confined to reading the record or hearing presentations at pubic hearings.

4. Where information of a specific nature is gathered by a member of the City Council or a board or commission, through contacts outside the record, and the information is not already in the record, the member shall, to the extent feasible, keep contemporaneous notes of the substance of the contact and shall disclose the contact and its substance on the record prior to the commencement of the hearing to which such contact relates. Where the information is received during the pendency of a hearing the matter shall be disclosed prior to completion of the hearing and the parties and public shall have an opportunity to respond if the matter is substantially new information.

5. Where such contacts were made and information gathered prior to a pending decision by the Council or any decision making body whether or not to grant a hearing, the substance of the information shall be reported to the secretary of the relevant body as soon as it is made. The secretary shall maintain a file on such disclosed contacts for review by members of the public.

6. All written communications to the decision making body shall be submitted to the secretary of that body, or the City Clerk, in the case of a matter pending before the City Council.

7. Nothing in these procedures shall be construed as limiting any procedural protections that a party or the public may be entitled to by law over and above the protections of this resolution, based upon the facts of any particular proceeding.

BE IT FURTHER RESOLVED that Section I F of the Council Rules of Procedure, Resolution number 62,420, is hereby repealed and Resolution 62,420 is so amended.

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League of California Cities Spring Conference Squaw Valley, California

May 2009

Supreme Court Update:

Vargas v. City of Salinas

Thomas B. Brown Hanson Bridgett LLP 425 Market Street, 26th Floor San Francisco, CA 94105 (415) 995-5857

[email protected]

1888738.1

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I. INTRODUCTION.

In Vargas v. City of Salinas, the California Supreme Court addressed an issue it had not taken up since Stanson v. Mott (1976) 17 Cal.3d 206 (Stanson), namely, the propriety of actions and expenditures by a public agency in connection with a ballot measure. While the City and the League had urged that the Court reject Stanson’s subjective “stvle tenor and timing” approach to determining the validity of such public expenditures, in favor of an “express advocacy” standard under which expenditures are valid as long as they do not “expressly advocate” an election outcome, the Court did not do so. Nevertheless, the decision, while essentially adhering to Stanson, provides guidance on several important issues, as well as an effective roadmap for compliance in future cases.

II. PRE-VARGAS: STANSON V. MOTT.1

Prior to Vargas, a public agency’s ability to spend public funds in connection with a ballot measure election has been governed by the California Supreme Court's decision in Stanson v. Mott (1976) 17 Cal, 3d 206. In Stanson, the Director of the California Department of Parks and Recreation conceded that he had expended public funds to "promote" the approval of a statewide park bond measure. Funds were used for “promotional" mailings, speaking engagements, and travel expenses. (Stanson at 277.) The Department contended that as a matter of law promotion of public support for the measure was an appropriate use of public funds. (Id. at 211.) The Supreme Court rejected the Department’s contention. It held to the contrary that "expenditures by an administrative official are proper only insofar as they are authorized, explicitly or implicitly, by legislative enactment." (Id. at 273.) With respect to the Department’s expenditures at issue, the Court determined that "no legislative provision accorded the Department of Parks and Recreation such authorization." (Id., at 209-210.) The Court further stated that "[u]nderlying this uniform judicial reluctance to sanction the use of public funds for election campaigns rests an implicit recognition that such expenditures raise potentially serious constitutional questions. A fundamental precept of this nation's democratic electoral process is that the government may not 'take sides' in a election contests or bestow an unfair advantage on one of several factions." (Id. at 217.) The Court never reached the constitutional issue in Stanson. Rather, the Court’s decision was limited to the following: absent "clear and unmistakable" legislation

1 The author thanks, and acknowledges the scholarship and work of Salinas City Attorney Vanessa W. Vallarta. Much of this paper is taken directly from Ms. Vallarta’s excellent February 2008 presentation and paper for the League of California Cities’ one-day continuing education seminar on Election Law issues.

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authorizing such expenditures, the Department “could not …spend public funds to campaign for the passage of the bond issue." (Id. at 220.) The Court readily acknowledged the difficulty of distinguishing valid informational activities from inappropriate campaign expenditures. (Id. at 221.) The Court said that the Department could expend public funds for informational activities, or provide a "fair presentation of the facts" in response to a citizen request for information, and could authorize an agency employee to present the department's view of a ballot proposal at a meeting of a public or private organization, upon request. (Id.) The Court also provided guidance on the kinds of expenditures are prohibited:

“[T]he use of public funds to purchase such items as bumper stickers, posters, advertising "floats," or television and radio "spots" unquestionably constitutes improper campaign activity …, as does the dissemination, at public expense, of campaign literature prepared by private proponents or opponents of a ballot measure.” (17 Cal.3dat22l.)

In determining the validity of any publicly-funded election-related activity, the Court stated that the result "depends upon a careful consideration of such factors as the stvle tenor and timing of the publication; no hard and fast rule governs every case." (Id. at 222.) III. POST-STANSON // PRE-VARGAS CASES.

Since Stanson, the courts of appeal have been called upon repeatedly to clariff what constitutes impermissible campaign activities for which public funds cannot be spent without express legislative authorization.

A. Miller I.

Miller v. Miller (1978) 87 Cal.App .3d 7 627, 647-661 (“Miller I”) involved expenditures by the California Commission on the Status of Women to advocate the state Legislature's ratification of the Equal Rights Amendment to the U.S. Constitution. The Commission had engaged in traditional lobbying, but had also conducted "grass roots lobbying" in which it urged voters to contact the Legislature in support of ratification. The Miller l Court held that those expenditures were invalid under Stanson’s prohibition against the Commission making a direct appeal to the voters. (Id. at 768-769,771-772.)

B. Miller II.

Miller v. California Com. On the Status of Women (1984) 15l Cal.App.3d 693,698 (“Miller II”) considered expenditures made after the Legislature, following Miller I, enacted a statute specifically authorizing the Commission to disseminate its views on a wide variety of women's issues. The Miller II Court held that the new legislation "can only be interpreted as “legislative warrant to advocate and promote the Commission's

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positions on these subjects." (Miller II, 151 Cal.App.3d at 698.) The court rejected the argument that the Commission's expenditures, even if legislatively authorized, unlawfully infringed his speech rights as a citizen by expending public funds to promote controversial issues with which he disagreed. (Id. at 700.)

“This claim fails to make the critical First Amendment distinction between "the government's addition of its own voice [and the] government's silencing of others.' [Citation.] "That government must regulate expressive activity with an even hand if it regulates such activity at all does not mean that government must be ideologically neutral.” (Miller II at 700.)

The Court acknowledged that "[o]rdinarily, government may not compel citizens to express a view any more than it may forbid someone to express a view." (Id.) "But none of this means that government cannot add its own voice to the many it must tolerate, provided it does not drown out private communications." (Id.)

C. League of Women Voters.

League of Women Voters of Cal. v. Countywide Crim. Justice Coordination Com. (1988) 203 Cal.App.3d 529 followed. It involved a challenge to public expenditures made to assist in the drafting of a statewide initiative measure to change existing law. The Court rejected the challenge, holding that "the development and drafting of a proposed initiative was not akin to partisan campaign activity, but was more closely akin to the proper exercise of legislative authority." (Id. at 550.) The court held that a "ballot measure" does not become an official measure triggering any prohibition on the use of public funds to advocate a single viewpoint, until the measure begins circulating among the voters for potential qualification. (Id. at 555, 556.) The Court also found that various materials prepared by public employees regarding the proposed initiative were 'relatively balanced and neutral in tone" and provided "a considerable body of useful information," thus providing "'a fair presentation' of relevant information ..." (Id at 559, quoting Stanson at 221.) Finally, the court held that the board of supervisors did not unlawfully expend public funds by holding a hearing at which it officially recorded its support for the qualification of the proposed initiative. (Id. at 560.)

D. Schroeder v . Irvine City Council.

Schroeder v . Irvine City Council (2002) 97 Cal.App.4th 174 involved a city’s anti-SLAPP motion in response to a complaint alleging the city had illegally expended public funds on a voter registration program encouraging residents to register and vote even though city was on record as opposing a measure that would appear on the ballot. The Court held that the plaintiff failed to make a prima facie showing that the program was an unlawful expenditure of city funds. The city, as a charter city, had broad discretion to make public expenditures. While a governmental agency may not spend public funds for a partisan campaign advocating the passage or defeat of a ballot measure, this program did not do so. Specifically, the funds spent on the program were not political expenditures under the Political Reform Act of 1974 (Gov. Code, § 81000 et seq.). The

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court also held that, while state law requires state and county governments to undertake certain voter registration activities, local governments are not precluded from supplementing that effort.

E. Yes on Measure A v. City of Lake Forest.

In Yes on Measure A v. City of Lake Forest (1997) 60 Cal. App.4th 620,625-626, a city's “expenditures” on a pre-election challenge to the legality of a ballot measure are not reportable political expenses under the Political Reform Act. The Act requires any person who makes one or more “expenditures” to report them once certain thresholds are reached. ( Gov. Code § 82013(b), 84200.) Under it, an "expenditure" is defined as "a payment, a forgiveness of a loan, a payment of a loan by a third party, or an enforceable promise to make a payment, unless it is clear from the surrounding circumstances that it is not made for political purposes." (Gov. Code § 82025, italics added.) Because the Act does not define "political purposes," the Court relied on the FPPC’s regulation 18225 which provides that an expenditure is made for "political purposes" if it is "[f]or the purpose of influencing or attempting to influence the action of the voters for or against . . . the qualification or passage of any measure" (§ 18225 (a)(1)), or "is used for communications which expressly advocate the . . . qualification, passage or defeat of a clearly identified ballot measure." (§ 18225 (b).) The Court concluded that a city's pre-election challenge to a ballot measure, based on a claim it is unconstitutional or illegal, is not an attempt to influence the electorate.

F. Choice-in-Education League v . Los Angeles Unified School Dist.

In Choice-in-Education League v . Los Angeles Unified School Dist. (1993) 17Cal.App.4th 415, 429-431 held that a school district did not illegally expend public funds by holding and broadcasting school board meeting at which the board took a position opposing a statewide ballot initiative. The Court distinguished Stanson as involving (1) a state agency, and not a local school board granted broad powers and fiscal authority by the Education Code, (2) expenditure of funds for partisan campaign materials and for travel expenses and speaking engagements to promote passage of a bond act, as opposed to expenditures for the televising of a public meeting, an expenditure undertaken by the LAUSD since 1988, and (3) a "use of public funds to advocate one side only of the controversial question without affording the dissenters the opportunity by means of that financed medium to present their side." G. Citizens for Responsible Government v. City of Albany. In Citizens for Responsible Government v. City of Albany (1997) 56 Cal.App.4th 1199, the court considered the wording of a ballot form drafted by a municipality seeking voter approval of a proposed card room. At issue was the city's inclusion of unnecessary and arguably partisan language in a ballot form used for a local initiative. (Id. at 1224- 1225.) The court held that the particular language before it violated Business & Professions Code section 19819, which prescribes the ballot form for local initiatives seeking approval of new gaming clubs. Although the court reviewed Stanson v. Mott, its

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holding went no further than finding the language at issue "directly conflicts with the legislative intent [in section 19819] to submit the measure to the voters in a concise and neutral manner." (Id. at 1227-1228.)

H. Santa Barbara County Coalition Against Automobile Subsidies v. Santa Barbara County Association of Governments.

In Santa Barbara County Coalition Against Automobile Subsidies v. Santa Barbara County Association of Governments (2008) 167 Cal. App. 4th 1229, a nonprofit organization alleged that a county transportation agency (SBCAG) had unlawfully advocated and spent public funds for passage of a ballot measure to extend a to extend a one-half percent sales tax for certain transportation projects. SBCAG had retained a private consultant to survey voter support for an extension of the sales tax. The consultant determined the arguments in favor of extension that were received most favorably by the voters polled, potential arguments in opposition, and the best strategy to maximize voter support. In addition, SBCAG staff and committee members attended public meetings with civic groups during which staff presented information regarding the transportation expenditure plan, and the importance of extending the 1989 sales tax to satisfying the county's transportation needs. The Court of Appeal affirmed. The court concluded that the organization's claim arose from SBCAG’s constitutionally protected activity and, therefore, was a SLAPP suit. There was no probability that the organization would prevail on the merits of its claim. SBCAG demonstrated that the organization's complaint challenged conduct expressly defined by the anti-SLAPP statute as acts in furtherance of free speech rights. SBCAG was statutorily authorized to formulate and sponsor ballot measures. Moreover, SBCAG’s activity was not electoral advocacy because it was in furtherance of its express statutory duties and occurred before the measure was qualified for placement on the ballot. IV. LEGISLATION.

Under Stanson, the expenditures must be authorized by statute. The following statutes authorize local government to analyze proposed ballot measures and their impacts, merits and consequences.

A. Constitutional Authority. Under the Constitution, local governments have broad constitutional authority to make fiscal decisions. Charter cities have “broad discretion to make public expenditures, subject to the limitations that the expenditure be for a public purpose and not expressly forbidden by law." (Schroeder v . Irvine City Council, supra, 97 Cal.App.4th 174, 184-185, citing West Coast Advertising Co. v. City and County of San Francisco (1939) 14 Cal.2d 516, 52I-522.) General law cities, unless otherwise prohibited by law, may expend funds "'where it appears that the welfare of the community and its inhabitants is involved and ... benefit results to the public."' (Albright v. City of South San Francisco (1975) 44 Cal.App.3d 866, 869, quoting 4 McQuillin, Municipal Corporations (3d ed.) p.

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66.) What constitutes a public purpose justifying the expenditure is primarily a legislative determination that will be upheld so long as it has a reasonable basis. (County of Alameda v . Carleson (1971) 5 Cal.3d 730, 746. )

B. Elections Code Sections 9212, 9282 and 9222. The Legislature has specifically authorized cities to analyze local initiatives. Elections Code section 9212 vests cities with authority to refer a proposed initiative that would enact or amend a city ordinance for a report on any or all of the following:

(1) Its fiscal impact.

(2) Its effect on the internal consistency of the city's general and specific plans, including the housing element, the consistency between planning and zoning, and the limitations under Section 65008 and other housing obligations.

(3) Its effect on the use of land, the impact on the availability and location of housing, and the ability of the city to meet its regional housing needs.

(4) Its impact on funding for infrastructure of all types, including, but not limited to, transportation, schools, parks, and open space. The report may also discuss whether the measure would be likely to result in increased infrastructure costs or savings, including the costs of infrastructure maintenance, to current residents and businesses.

(5) Its impact on the community's ability to attract and retain business and employment.

(6) Its impact on the uses of vacant parcels of land.

(7) Its impact on agricultural lands, open space, traffic congestion, existing business districts, and developed areas designated for revitalization.

(8) Any other matters the legislative body requests to be in the report.

(Cal. Elec. Code, § 9212(a).) Unlike the analysis prepared for measures that qualify for the ballot, there is no statutory requirement that reports prepared under § 9212 be balanced or impartial. § 9212 thus is far different from § 9280, requiring an impartial analysis of city measures. The § 9212 report is prepared early in the process, either while the initiative

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petitions are being circulated, or within 30 days from the initiatives certification for the ballot. (Id. § 9212 (a) & (b).) Once an initiative qualifies for the ballot, a city council may take a position on the measure. Section 9282 provides:

(a) For measures placed on the ballot by petition, … the legislative body may submit an argument against the ordinance. (b) For measures placed on the ballot by the legislative body, the legislative body, … may file a written argument for or against any city measure.

Nor is the local government's authority restricted to analyzing and commenting on initiatives submitted by others. The local legislative body may submit to the voters its own measure for the repeal, amendment or enactment of an ordinance. (Elec. Code, § 9140 [county board of supervisors] & § 9222 [legislative body of municipality]; see also League of Women Voters of Cal. v. Countywide Crim. Justice Coordination Com., 203 Cal.App.3d at 550.) The mere fact of doing so puts local government squarely on one side of the issue. Similarly, local government must submit to the voters proposals to amend or repeal a city or county charter. (Elec. Code, § 9255.) Presumably it submits only those proposals that it believes should be approved by the voters. By statute, then, local governments are not required to remain impartial about local initiatives. Whether the initiative has been prepared by the government itself, or by other interested citizens, local government is affirmatively authorized to analyze and speak about the impacts of the measure.

C. Government Code § 54964. The Legislature have has also expressed what local governments are not permitted to do. Government Code section 54964 expressly prohibits the expenditure of local agency funds "to support or oppose the approval or rejection of a ballot measure, or the election or defeat of a candidate, by the voters." (Gov. Code § 54964(a).) The statute also defines prohibited expenditures:

(a) An officer, employee, or consultant of a local agency may not expend or authorize the expenditure of any of the funds of the local agency to support or oppose the approval or rejection of a ballot measure, or the election or defeat of a candidate, by the voters.

(b) As used in this section the following terms have the following meanings:

(1) "Ballot measure" means an initiative, referendum, or recall measure certified to appear on a regular or special election ballot

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of the local agency, or other measure submitted to the voters by the governing body at a regular or special election of the local agency.

(2) "Candidate" means an individual who has qualified to have his or her name listed on the ballot, or who has qualified to have write-in votes on his or her behalf counted by elections officials, for nomination or election to an elective office at any regular or special primary or general election of the local agency, and includes any officeholder who is the subject of a recall election.

(3) "Expenditure" means a payment of local agency funds that is used for communications that expressly advocate the approval or rejection of a clearly identified ballot measure, or the election or defeat of a clearly identified candidate, by the voters. "Expenditure" shall not include membership dues paid by the local agency to a professional association.

(4) "Local agency" has the same meaning as defined in Section 54951, but does not include a county superintendent of schools, an elementary, high, or unified school district, or a community college district.

(a) This section does not prohibit the expenditure of local agency funds to provide information to the public about the possible effects of a ballot measure on the activities, operations, or policies of the local agency, if both of the following conditions are met:

(1) The informational activities are not otherwise prohibited by the Constitution or laws of this state.

(2) The information provided constitutes an accurate, fair, and impartial presentation of relevant facts to aid the voters in reaching an informed judgment regarding the ballot measure.

(Gov. Code § 54964.) Significantly, the Legislature defined the term "expenditure" to only include funds used for communications that "expressly advocate" the approval or rejection of a ballot measure. In addition, in subd. (c), it reiterated its intent not to prohibit expenditures to provide “accurate, fair, and impartial” information to the public about the possible effects of a ballot measure on the agency’s operations. The phrase “expressly advocate," as used in § 54964(b)(3), is undefined. Courts have resorted to the PRA and FPPC regulations in determining whether communications “expressly advocate.” (California Pro-Life Council, Inc. v. Getman (9th Cir. 2003) 328

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F.3d 1088, 1096-1100; Governor Gray Davis Com. v. American Taxpayers Alliance (2002) 102 Cal.App.4th 449,461-463,470-471; Schroeder v . Irvine City Council, 97 Cal.App.4th at 185; League of Women Voters v. Countywide Crim. Justice Coordination Com., 203 Cal.App.3d at 550.) For example, the FPPC defines “expenditure” as “any monetary or nonmonetary payment made by any person . . . that is used for communications which expressly advocate the . . . qualification, passage or defeat of a clearly identified ballot measure." (2 Cal. Code Regs., § 18225(b).) The regulation further states that a communication "expressly advocates" the passage or defeat of a measure if:

“[I]t contains express words of advocacy such as "vote for," "elect," "support" "cast your ballot," "vote against," "defeat," "reject," "sign petitions for," or otherwise refers to a clearly identified . . . measure so that the communication, taken as a whole, unambiguously urges a particular result in an election.”

(Id., § 18225( b)(2) (emphasis added).) "[T]he definition of 'express advocacy necessarily requires the use of language that explicitly and by its own terms advocates the election or defeat of a [ballot measure]. If the language of the communication contains no such call to action, the communication cannot be ‘express advocacy.’” (Governor Gray Davis Com. v. American Taxpayers Alliance, 102 Cal.App.4th at 471, quoting Chamber of Commerce of U.S. v. Moore (5th Cir. 2002) 288 F.3d 187, 197 .)

D. Government Code section 8314. Government Code § 8314 prohibits the use of “public resources” as follows:

(a) It is unlawful for any elected state or local officer, including any state or local appointee, employee, or consultant, to use or permit others to use public resources for a campaign activity, or personal or other purposes which are not authorized by law.

(b) For purposes of this section: …

(2) "Campaign activity" means an activity constituting a contribution as defined in Section 82015 or an expenditure as defined in Section 82025. …

…

(a) Nothing in this section shall prohibit the use of public resources for providing information to the public about the possible effects of any bond issue or other ballot measure on state activities, operations, or policies, provided that (1) the

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informational activities are otherwise authorized by the constitution or laws of this state, and (2) the information provided constitutes a fair and impartial presentation of relevant facts to aid the electorate in reaching an informed judgment regarding the bond issue or ballot measure.

…

(Gov. Code § 8314.) By its reference to the PRA, the question again becomes whether the expenditure was used for "communications which expressly advocate the . . . qualification, passage or defeat of a clearly identified ballot measure." This is the language of the Fair Political Practices Commission's regulation clarifying the definition of "expenditure" in Government Code section 82025(b). (Cal. Code Regs., tit. 2, $ 18225(b).) As noted earlier, in Yes on Measure A v. City of Lake Forest, 60 Cal.App.4th 620, the Court of Appeal held that a city-funded, pre-election challenge to the validity of an initiative did not constitute a reportable expenditure within the meaning of section 82025. The court expressly rejected the argument" that removing a measure from the ballot represents the ultimate political act and attempt to influence the electorate because it prevents them from participating in the political process." (Id. at 626.) What is more, as in § 54964, in enacting subd. (d), the Legislature again made explicit its intention not to prohibit expenditures to provide “accurate, fair, and impartial” information to the public about the possible effects of a ballot measure on the agency’s operations. V. VARGAS V. CITY OF SALINAS.

A. Facts. Vargas grew out of a local tax-relief initiative called Measure O, which qualified for the November 2002 ballot in the City of Salinas. Had Measure O passed, it would have repealed the city's long-standing utilities users tax (UUT). That tax provides the city with approximately $ 8 million in annual revenue, representing about 13 percent of the city's general fund budget. In response to the qualification of Measure O, city staff prepared a series of reports analyzing the effect of the loss of utility tax revenue and recommending the reduction or elimination of services and programs. Starting in November 2001, over the course of several public hearings, the city manager and the city's department heads presented fiscal impact reports to the city council. The departments' presentations took the form of slide presentations. The presentations embodied staff recommendations for service cuts, some in dire terms. In July 2002, the city council adopted the departments' recommendations as presented, thereby identifying the service cuts that would be implemented in the event of Measure O's passage.

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The staff's reports, analyses, and presentations concerning Measure O were placed on the city's Web site. As a matter of course, the Web site also includes minutes of city council meetings; the minutes of the meetings at which these reports were presented and discussed thus were posted on the Web site. The city also informed the electorate of its analysis of Measure O through articles in the Fall 2002 edition of the city's periodic newsletter to residents, and by means of a one-page summary of the anticipated service cuts, which the parties sometimes refer to as a leaflet or flyer. Like the reports and presentations, the flyer was posted on the city's Web site. Plaintiffs disagreed with the city's analysis of the consequences of Measure O. In plaintiffs' view, repeal of the UUT would benefit the city's residents by reducing their taxes and by eliminating local government waste. They made written and oral presentations to the city council in August 2002. The minutes of those meetings were placed on the city's Web site. Plaintiffs’ supplemental complaint accused defendants of interference with the electoral process, improper use of public monies for “campaign materials” intended to influence voters against Measure O, and violation of plaintiffs' rights to free expression under the state and federal constitutions. The City filed a special motion to strike plaintiffs' complaint as a strategic lawsuit against public participation, pursuant to Code of Civil Procedure section 425.16. In support of their motion, defendants submitted declarations from the city clerk, city manager, city attorney, and city finance director, and from its computer system manager, whose duties included maintaining the city's Web site. Defendants also submitted declarations from other city officials who had made presentations to the city council on the fiscal impact of Measure O. In addition, defendants supported their motion with voluminous materials, including copies of the communications challenged by plaintiffs as improper. Plaintiffs opposed the motion. Their opposition included a “statement of undisputed facts” and three supporting declarations. Among other things, plaintiffs asserted that the city had ignored offers by Measure O proponents to provide material supporting their viewpoint, and that the proponents would have utilized access to the city's Web site and other media had it been offered. The trial court granted the motion to strike. B. The Supreme Court’s Ruling.

1. The Anti-SLAPP Statute Applies To Governmental Speech.

• The Court affirmed “a long and uniform line of California Court of Appeal decisions,” citing Bradbury v. Superior Court (1996) 49 Cal.App.4th 1108, 1113-1116; Shroeder v. Irvine City Council, supra, 97 Cal.App.4th 174, 183-184; San Ramon Valley Fire Protection Dist. v. Contra Costa County Employees’ Retirement Assn. (2004) 125 Cal.App.4th 343, 353; Tutor-Saliba Corp. v. Herrera

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(2006) 136 Cal.App.4th 604, 609; Santa Barbara County Coalition Against Automobile Subsidies v. Santa Barbara County Assn. of Governments, supra, 167 Cal.App.4th 1229, 1237-1238; Schaffer v. City and County of San Francisco (2008) 168 Cal.App.4th 992, 1001-1004.

• The Court did not decide whether the First Amendment of the federal

Constitution or article I, section 2 of the California Constitution directly protects government speech in general or the types of communications of a municipality that are challenged.

2. Government Code § 54964 Does Not Authorize Expenditures Or Override Stanson.

• The Court rejected the Court of Appeal’s determination that there was no need to

apply the principles set forth in Stanson, in deciding whether the communications and activities of the City challenged in this case constituted campaign or informational materials.

• The appellate court had concluded instead that the validity of the City’s

expenditures turned on whether the challenged materials “expressly advocated” the approval or rejection of Measure O. In reaching this conclusion, the Court of Appeal relied primarily upon the provisions of Government Code § 54964, enacted in 2000.

• The Vargas Court held that § 54964 was not intended (and may not be

interpreted) to displace Stanson. Ruled that § 54964 does not affirmatively authorize (or permit) a municipality or other local agency to expend public funds on a communication that does not expressly advocate the approval or rejection of a ballot measure, but instead simply prohibits a municipality’s use of public funds for communications that expressly advocate such a position.

• Vargas rejected the League’s argument that the Stanson standard is unduly

vague and imposes an unconstitutional chilling effect on a public entity’s right to provide useful information to the voters.

• Stanson explicitly identified materials and activities that unquestionably constitute

campaign activities (without any need to consider their “style, tenor and timing”) — for example, the use of public funds to purchase bumper stickers, posters, advertising “floats,” or television and radio “spots” — and also identified a number of activities that are clearly informational — for example, providing a fair presentation of facts in response to a citizen’s request for information.

• That in some instances it may be necessary to consider the style, tenor, and

timing of a communication or activity to determine whether, from an objective standpoint, the communication or activity realistically constitutes campaign

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activity rather than informational material, does not render the distinction between campaign and informational activities impermissibly vague.

3. The City’s Expenditures And Activities Satisfied Stanson.

• The question whether the City’s expenditures were or were not validly incurred turns upon whether the activities fall within the category of informational activities that may be funded through such general appropriations or, instead, constitute campaign activities that may not be paid for by public funds in the absence of such explicit authorization.

• None of these materials--(1) the material posted on the City’s official Web site,

(2) the one-page document made available to the public at the city clerk’s office and in public libraries, and (3) the municipal newsletter mailed to all city residents on or before October 1, 2002-- constitute the kind of typical campaign materials or activities identified in Stanson, such as bumper stickers, posters, advertising floats, or television and radio spots . . . or the dissemination, at public expense, of campaign literature prepared by private proponents or opponents of a ballot measure.

• The items listed in Stanson do not exhaust the category of potential campaign

materials or activities.

• Stanson’s statement that the government “may not ‘take sides’ in election contests” properly must be understood as singling out a public entity’s use of the public treasury to mount an election campaign.

• Stanson does not preclude a public entity from analytically evaluating a proposed

ballot measure and publicly expressing an opinion as to its merits.

• Under Stanson, a governmental agency “pursues a proper informational role when it . . . authorizes an agency employee to present the department’s view of a ballot proposal at a meeting of [a private or public] organization,” thus making it clear that a public entity may evaluate the merits of a proposed ballot measure and to make its views known to the public.

• Affirmed Choice-in-Education League v. Los Angeles Unified School Dist., supra,

17 Cal.App.4th 415, 429; League of Women Voters v. Countywide Crim. Justice Coordination Com., supra, 203 Cal.App.3d 529, 560.

• In many circumstances a public entity inevitably will “take sides” on a ballot

measure and not be “neutral” with respect to its adoption. The mere circumstance that a public entity may be understood to have an opinion or position regarding the merits of a ballot measure is not improper. (Citing Elec. Code, § 9282 [authorizing local legislative body to author a ballot pamphlet argument for or against any city measure].)

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• The potential danger to the democratic electoral is not presented when a public

entity simply informs the public of its opinion on the merits of a pending ballot measure or of the impact on the entity that passage or defeat of the measure is likely to have. Rather, the threat to the fairness of the electoral process arises when a public entity devotes funds to campaign activities favoring or opposing such a measure.

• In posting on the City’s Web site the detailed minutes of all the city council

meetings relating to the council’s action, along with the detailed and analytical reports prepared by the various municipal departments and presented by department officials at city council meetings, the City engaged in permissible informational rather than campaign activity, simply making this material available to members of the public who chose to visit the City’s Web site.

• Because the proponents of Measure O spoke and made presentations at a

number of city council meetings, summaries of the proponents’ positions were included in the minutes of those meetings, were posted on the Web site, and thus were available to persons who visited the Web site. The City had no obligation to provide the proponents of Measure O with special access to enable them to post material of their own choosing on the City’s official Web site.

• Similarly, the City did not engage in campaign activity in producing the one-page

document listing the service and program reductions that the city council had voted to implement should Measure O be adopted, or in making copies of the document available to the public at the city clerk’s office and at public libraries.

• The document does not advocate or recommend how the electorate should vote

on the ballot measure, and its style and tenor are not at all comparable to traditional campaign material. Viewed from the perspective of an objective observer, the document clearly is an informational statement that merely advises the public of the specific plans that the city council voted to implement, should Measure O be adopted.

• Finally, the City did not engage in impermissible campaign activity by mailing to

city residents the newsletter containing articles describing the reductions in city services that the council had voted to implement, should Measure O be adopted.

• Under some circumstances the mailing of material relating to a ballot measure to

a large number of potential voters shortly before an upcoming election unquestionably would constitute campaign activity that may not properly be paid for by public funds.

• However, this newsletter was a regular edition of the City’s quarterly newsletter

that as a general practice was mailed to all city residents, rather than a special

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edition created and sent to would-be voters, specifically because of the upcoming election regarding Measure O.

• In addition, the council’s resolution — identifying a significant number of current

city services and programs that would be reduced or eliminated, should Measure O be adopted —was an obvious and natural subject to be reported upon in a city’s regular quarterly newsletter, and the style and tenor of the publication in question was entirely consistent with an ordinary municipal newsletter and readily distinguishable from traditional campaign material.

• The article setting forth answers to frequently asked questions about the utility

users tax provided city residents with important information about the tax in an objective and nonpartisan manner.

• A variety of factors contribute to conclusion that the actions are providing

information rather than campaigning: (1) the information conveyed generally involved past and present facts, such as how the original UUT was enacted, what proportion of the budget was produced by the tax, and how the city council had voted to modify the budget in the event Measure O were to pass; (2) the communications avoided argumentative or inflammatory rhetoric and did not urge voters to vote in a particular manner or to take other actions in support of or in opposition to the measure; and (3) the information provided and the manner in which it was disseminated were consistent with established practice regarding use of the Web site and regular circulation of the city’s official newsletter.

C. Lessons and Tips.

• Vargas puts us back to where we have been since Stanson.

• Consider Justice Moreno’s concurrence. In the post-Prop 13 world,

something more may be permissible. • The League’s September 2003 paper, “BALLOT MEASURE

ADVOCACY AND THE LAW: LEGAL ISSUES ASSOCIATED WITH CITY PARTICIPATION IN BALLOT MEASURE CAMPAIGNS,” remains sound advice. Thus, consistent with that previous advice:

• Fair, objective information is acceptable. Advocacy is not.

• The public’s time, money and other resources may not be used to

promote or oppose ballot measures. • A city council may still officially endorse or oppose a ballot measure.

• City officials should not take part in ballot measure campaigns while on

“city time”.

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• Cities may still analyze the effect of ballot measures on cities and

publicize this information. The fair and impartial analysis may then be made available to the newspapers, advocacy groups, and others who may make use of the information if they choose.

• City officials may still respond to telephone calls, letters, and e-mails

about a ballot measure while on city time. Their response is limited to (1) stating that the city has either endorsed or opposed the measure and (2) presenting fair and impartial information about the measure.

• An official may not use public resources to “take sides” on the

measure. Public resources may not be used for campaign materials that expressly advocate a position on a ballot measure.

• City may not link from the city’s website to a ballot campaign website. • A public employee may still make a presentation on a public agency’s

position on a ballot measure at local organizations, such as the Chamber of Commerce, as long as the employee presents fair and impartial information on the ballot measure.

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League of California Cities City Attorneys Department Spring Conference May 2009

MUNICIPAL TORT AND CIVIL RIGHTS LITIGATION UPDATE

Eugene P. Gordon Office of City Attorney 1200 Third Avenue, Ste. 1100 San Diego, CA 92101 Phone: (619) 533-5821 Fax: (619) 533-5856 [email protected]

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MUNICIPAL TORT AND CIVIL RIGHTS LITIGATION UPDATE

TABLE OF CONTENTS

PAGE 1. Pearson v. Callahan, 555 U.S. ____, 129 S. Ct. 808 (2009).

COURTS ARE NO LONGER REQUIRED TO CONDUCT A TWO-STEP ANALYSIS FOR RESOLVING GOVERNMENT OFFICIALS’ QUALIFIED IMMUNITY CLAIMS IN § 1983 CASES ........................... 1

2. Rodis v. City and County of San Francisco, 558 F.3d 964 (9th Cir. 2009).

UNDER PEARSON V. CALLAHAN, WHEN A GOVERNMENTAL OFFICIAL ASSERTS QUALIFIED IMMUNITY IN A § 1983 ACTION, THE COURT MAY DECLINE TO DECIDE WHETHER THERE WAS A CONSTITUTIONAL VIOLATION AND MAY PROCEED DIRECTLY TO THE ISSUE OF WHETHER THE OFFICIAL’S CONDUCT WAS CLEARLY UNLAWFUL............................................ 3

3. Maropulos v. County of Los Angeles, 2009 WL 751193 (9th Cir. 2009).

DISTRICT COURTS WITHIN THE NINTH CIRCUIT SHOULD ARTICULATE THE BASIS FOR DENYING QUALIFIED IMMUNITY IN § 1983 CASES, AND IN CASES WHERE MATERIAL FACTS ARE IN DISPUTE, SPECIFY WHICH FACTS ARE IN DISPUTE AND WHY THEY ARE MATERIAL......................... 5

4. Johnson v. Walton, 558 F.3d 1106 (9th Cir. 2009). POLICE OFFICERS ARE ENTITLED TO QUALIFIED IMMUNITY IN § 1983 CASES WHERE A SEARCH WARRANT LACKS PROBABLE CAUSE, PROVIDED A REASONABLE OFFICER COULD BELIEVE THAT PROBABLE CAUSE DID EXIST ............................................... 6

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5. Fisher v. City of San Jose, 558 F.3d 1069 (9th Cir. 2009). DURING AN ARMED STANDOFF, ONCE EXIGENT CIRCUMSTANCES JUSTIFY THE WARRANTLESS SEIZURE OF THE SUSPECT IN HIS HOME, POLICE OFFICERS ARE NOT REQUIRED TO OBTAIN AN ARREST WARRANT BEFORE TAKING THE SUSPECT INTO FULL PHYSICAL CUSTODY HOURS LATER .............................................. 9

6. Van de Kamp v. Goldstein, 555 U.S. ___, 129 S. Ct. 855 (2009). THE ABSOLUTE IMMUNITY OF A PROSECUTOR UNDER § 1983 EXTENDS TO CLAIMS OF A FAILURE TO PROPERLY TRAIN AND SUPERVISE PROSECUTORS, AND A FAILURE TO ESTABLISH AN INFORMATION SYSTEM CONTAINING POTENTIAL IMPEACHMENT MATERIAL ABOUT INFORMANTS.......................... 13

7. Porter v. Osborn, 546 F.3d 1131 (9th Cir. 2008). THE ACTIONS OF A POLICE OFFICER WHO SHOT AND KILLED A SUSPECT IN AN URGENT SITUATION MUST BE EVALUATED UNDER AN “INTENT TO HARM” STANDARD IN A § 1983 ACTION BROUGHT UNDER THE FOURTEENTH AMENDMENT BY THE HEIRS .................................. 15

8. McCown v. City of Fontana, 550 F.3d 918 (9th Cir. 2008). ATTORNEY’S FEES AND COSTS AWARDED IN § 1983 CASES MUST BE ADJUSTED DOWNWARD WHERE THE PLAINTIFF HAS OBTAINED LIMITED SUCCESS ON HIS PLEADED CLAIMS AND THE RESULT DOES NOT CONFER A MEANINGFUL PUBLIC BENEFIT ........................... 17

9. City of Los Angeles v. Superior Court (Collins), 168 Cal. App. 4th 422 (2008).

AN ACTION AGAINST THE CITY BY DRUNK DRIVERS TO RECOVER MONEY PAID TO THE CITY FOR EMERGENCY RESPONSE COSTS IS SUBJECT TO THE GOVERNMENT CLAIMS ACT............................................................. 20

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10. Sun v. City of Oakland, 166 Cal. App. 4th 1177 (2008). THE REMOVAL OF CROSSWALK MARKINGS AT AN INTERSECTION DID NOT CREATE A DANGEROUS CONDITION ..................................... 21

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COURTS ARE NO LONGER REQUIRED TO CONDUCT A TWO-STEP ANALYSIS FOR RESOLVING GOVERNMENT OFFICIALS’ QUALIFIED IMMUNITY CLAIMS IN § 1983 CASES

1. Pearson v. Callahan, 555 U.S. ____, 129 S. Ct. 808 (2009). FACTS AND PROCEDURAL BACKGROUND

In 2002, one Brian Bartholomew, who became an informant for a narcotics task force after having been charged with the unlawful possession of methamphetamine, informed a narcotics agent that Plaintiff had arranged to sell Bartholomew methamphetamine later that day. That evening, Bartholomew was admitted into Plaintiff’s house and confirmed that Plaintiff had methamphetamine available for sale. Bartholomew then told Plaintiff he needed to obtain money for his purchase and left. Bartholomew met with members of the task force and told them he would be able to buy a gram of methamphetamine for $100. The officers searched Bartholomew, determined he had no controlled substances on his person, gave him a marked $100 bill and a concealed electronic transmitter to monitor his conversations, and agreed on a signal that he would give after completing the purchase. The officers drove Bartholomew to Plaintiff’s trailer home, and Plaintiff’s daughter let him inside. Plaintiff sold Bartholomew a gram of methamphetamine which he put into a small plastic bag. Bartholomew gave the arrest signal to the officers, and they entered the trailer through a porch door. The officers then conducted a protective sweep of the premises. The officers recovered a large bag of methamphetamine, the marked bill from Plaintiff, and a small bag containing methamphetamine from Bartholomew. They also found drug syringes in the residence. Plaintiff was charged with unlawful possession and distribution of methamphetamine. The trial court held that the warrantless arrest and search were supported by exigent circumstances, but the Utah Court of Appeals disagreed and vacated the conviction. Plaintiff then brought a § 1983 action, alleging that the officers had violated his Fourth Amendment rights by entering his home without a warrant. The district court granted summary judgment in favor of the officers based on qualified immunity, holding that the officers could reasonably have believed they had the authority to make an entry based on the consent to enter that had already been granted to the informant. On appeal, the Tenth Circuit held that the officers’ conduct violated Plaintiff’s Fourth Amendment rights. The court concluded that while the officers might be authorized to enter the home based on consent given to an undercover law enforcement officer, entry based on consent given to an informant violates the Fourth Amendment. The court further held that the Fourth Amendment right it

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recognized was clearly established at the time of Plaintiff’s arrest. Thus, according to the court, the officers were not entitled to qualified immunity. The U.S. Supreme Court granted certiorari. In granting review, the Court directed the parties to address whether Saucier v. Katz, 533 U.S. 194 (2001), which set forth a mandatory two-step procedure for analyzing claims of qualified immunity by public officials in § 1983 cases should be overruled.

U.S. SUPREME COURT DECISION The U.S. Supreme Court unanimously held (1) that the mandatory, two-step inquiry under Saucier for resolving all qualified immunity claims should not be retained, and (2) that the police officers in this case were entitled to qualified immunity on the ground it was not clearly established at the time of their warrantless entry into Plaintiff’s home that their conduct was unconstitutional. Qualified immunity is “an entitlement not to stand trial or face the other burdens of litigation.” Mitchell v. Forsyth, 472 U.S. 511, 526 (1985). The doctrine of qualified immunity protects government officials “from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known.” Harlow v. Fitzgerald, 457 U.S. 800, 818 (1982). Because qualified immunity is “an immunity from suit rather than a mere defense to liability . . . it is effectively lost if a case is erroneously permitted to go to trial.” Mitchell v. Forsyth, 472 U.S. 511, 526 (1985). The Supreme Court has repeatedly stressed “the importance of resolving qualified immunity questions at the earliest possible stage in litigation.” Hunter v. Bryant, 502 U.S. 224, 227 (1991) (per curiam). In Saucier, the Court mandated a two-step procedure for resolving government officials’ qualified immunity claims. First, the court must decide whether the facts taken in the light most favorable to the party asserting the injury show that the officer’s conduct violated a constitutional right. If there is no constitutional violation, then plaintiff’s § 1983 claim fails as a matter of law. Second, if the court finds a violation of a constitutional right, the court must then decide whether the right at issue was “clearly established” at the time of defendant’s alleged misconduct. In determining whether a right was “clearly established,” the question is whether it would be clear to a reasonable officer that his conduct was unlawful in the situation he confronted. Qualified immunity is applicable unless the officer’s conduct violated a clearly established constitutional right. On reconsidering the procedure mandated in Saucier, the Court concluded “that, while the sequence set forth there is often appropriate, it should no longer be regarded as mandatory. The judges of the district courts and the courts of appeals should be permitted to exercise their sound discretion in deciding which of the two prongs of the qualified immunity analysis should be addressed first in light of the circumstances in the particular case at hand.” Pearson, 129 S. Ct. at 818. Lower court judges have been frequent critics of the rigid Saucier rule. Members of the Supreme Court have also voiced criticism of the rule. According to the

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Court, Saucier’s two-step protocol sometimes results in a substantial expenditure of scarce judicial resources on difficult questions that do not affect the outcome of the case. Under the new procedure, however, the lower courts are not required to render a decision on the constitutional issue, as in appropriate cases they can skip over that issue and find that a constitutional right (if one existed) was not clearly established. The Court emphasized that its decision does not prevent the lower courts from following the Saucier procedure, as those courts will have the discretion to decide whether that procedure is worthwhile in particular cases. With respect to the conduct of the officers in this case, the Supreme Court held that the officers were entitled to qualified immunity because it was not clearly established at the time of their entry into Plaintiff’s house in 2002 that their conduct was unconstitutional.

UNDER PEARSON V. CALLAHAN, WHEN A GOVERNMENTAL OFFICIAL ASSERTS QUALIFIED IMMUNITY IN A § 1983 ACTION, THE COURT MAY DECLINE TO DECIDE WHETHER THERE WAS A CONSTITUTIONAL VIOLATION AND MAY PROCEED DIRECTLY TO THE ISSUE OF WHETHER THE OFFICIAL’S CONDUCT WAS CLEARLY UNLAWFUL

2. Rodis v. City and County of San Francisco, 558 F.3d 964 (9th Cir. 2009). FACTS AND PROCEDURAL BACKGROUND

Plaintiff, an attorney and a locally elected public official, entered a drugstore near his office to purchase a few items. He tendered a 1985 series $100 bill, which lacked the security thread, watermarks, microprinting, and other anti-counterfeiting features of current $100 bills. The cashier examined the bill for authenticity, and asked the store manager for assistance. The manager suspected the bill was counterfeit, and took it to the store office to compare it to other $100 bills in the store’s safe. While the manager was in the office, Plaintiff pulled another $100 bill from his wallet and paid the cashier. After determining that the second bill was authentic, the cashier gave Plaintiff his change, his receipt, and the purchased items. The manager returned to the front of the store, and tested the bill with a counterfeit detector pen, which indicated that it was authentic. He remained suspicious, however, because of the bill’s appearance and texture, and told Plaintiff that he was going to call the police so that they could settle the issue. Plaintiff remained in the store willingly until the officers arrived. Upon the arrival of four police officers at the scene, the store manager conveyed his suspicions, and some of the officers examined the bill themselves. The officers concluded that the bill was probably counterfeit, but, because they were uncertain, decided it would be necessary to call the United States Secret Service

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to get an expert opinion. The officers believed it would be easiest to continue the investigation from the police station, and they arrested Plaintiff on suspicion of violation of a federal law which criminalizes the possession and use of counterfeit currency. Plaintiff was handcuffed and transported to the police station. A Secret Service agent was contacted by telephone, and after a five to ten minute discussion, the agent confirmed that the bill was, in fact, genuine. The officers released Plaintiff from custody, removed his handcuffs, and drove him back to the drugstore. The entire incident lasted about one hour. Plaintiff filed suit against the City and County of San Francisco, the Police Department, the police chief, and two police officers. The complaint alleged, among other things, false arrest in violation of the Fourth Amendment. The Defendants moved for summary judgment. The district court granted the motion in many respects, but denied the motion as to the false arrest claim. The court held that because the police officers lacked evidence of Plaintiff’s intent to defraud, there was no probable cause and the arrest was therefore unlawful. The court also found that the illegality of the arrest was clearly established at the time. Therefore, according to the court, the officers were not entitled to qualified immunity. The officers filed an interlocutory appeal to the Ninth Circuit, and the Ninth Circuit affirmed the district court’s order. The officers subsequently petitioned the Supreme Court for a writ of certiorari. The Supreme Court granted the petition, vacated the Ninth Circuit decision, and remanded for further consideration in light of Pearson v. Callahan, 555 U.S.____, 129 S. Ct. 808 (2009).

NINTH CIRCUIT DECISION On reconsideration, the Ninth Circuit reversed the decision of the district court which had held that the officers were not entitled to qualified immunity. The Ninth Circuit held that that the officers were entitled to qualified immunity as the arrest was not clearly established as unlawful. Three Ninth Circuit cases had previously held that to support a conviction for possession of counterfeit currency with intent to defraud under federal law, “the government must prove three elements: (1) possession of counterfeit money; (2) knowledge, at the time of possession, that the money is counterfeit; and (3) possession with intent to defraud.” United States v. Rodriguez, 761 F.2d 1339, 1340 (9th Cir. 1985). Possession of counterfeit currency is a specific intent crime. United States v. Dearing, 504 F.3d 897, 902 (9th Cir. 2007). Thus, according to the court, in the instant case, it was clearly established that the officers were required to have probable cause of Plaintiff’s specific intent to defraud the store for a lawful arrest. The officers contended that they had probable cause as to Plaintiff’s intent based solely on the evidence suggesting that the bill might have been fake. Plaintiff contended that without specific evidence of his intent to defraud, above and beyond the tender of a potentially counterfeit bill, the arrest was unlawful.

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The Ninth Circuit declined to decide the issue of whether evidence beyond the tender of a counterfeit bill is required in order to furnish probable cause to make an arrest. All of the other circuits which have answered this question, however, have found that the passing of a counterfeit bill, by itself, is enough to establish probable cause for an arrest. The Ninth Circuit has never addressed this issue, and the court in this case found that it was unnecessary to decide the question for a disposition of the case. Accordingly, under the authority of Pearson, the court skipped over the first prong previously mandated in Saucier v. Katz, 533 U.S. 194 (2001), and proceeded directly to the second prong, namely, whether the arrest was clearly established as unlawful. The court concluded that assuming tender of a counterfeit bill is enough to establish probable cause for an arrest, the officers’ belief that the bill was fake was reasonable. Plaintiff’s $100 bill looked odd, and lacked many modern security features. According to the court, the officers’ belief that it was fake was not “plainly incompetent.” Therefore, it would not have been clear to a reasonable officer that Plaintiff’s arrest was unlawful, and thus, the officers were entitled to qualified immunity.

DISTRICT COURTS WITHIN THE NINTH CIRCUIT SHOULD ARTICULATE THE BASIS FOR DENYING QUALIFIED IMMUNITY IN § 1983 CASES, AND IN CASES WHERE MATERIAL FACTS ARE IN DISPUTE, SPECIFY WHICH FACTS ARE IN DISPUTE AND WHY THEY ARE MATERIAL

3. Maropulos v. County of Los Angeles, 2009 WL 751193 (9th Cir. 2009). FACTS AND PROCEDURAL BACKGROUND

Plaintiffs claimed that Defendant sheriff’s deputy Steve Lankford set fire to their home, then hindered rescue efforts by firefighters. Plaintiffs brought a § 1983 action against Lankford for violation of their Fourth and Fourteenth Amendment rights. The district court denied qualified immunity to Lankford. Lankford appealed, contending that Plaintiffs failed to present sufficient evidence to create a triable issue as to proximate cause; whether he set fire to Plaintiffs’ house; and whether he knowingly or intentionally lied to firefighters such that his statements violated any clearly established due process right.

NINTH CIRCUIT DECISION The Ninth Circuit dismissed Lankford’s appeal. The court noted that it could not tell for sure on what basis the district court denied qualified immunity, because the court issued a summary order without explanation. However, the Ninth Circuit was satisfied from the arguments made on appeal and the examination of the record that the district court must have believed that there were genuine issues of material fact that precluded summary judgment on qualified immunity. An order denying qualified immunity on the ground that a genuine issue of material

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fact exists is not a final, immediately appealable order. Johnson v. Jones, 515 U.S. 304, 307 (1995). For that reason, the court in the instant case dismissed the appeal. The Ninth Circuit explained that the district courts are in the best position to sift through submissions of fact in order to identify those that are genuinely disputed and material, or alternatively, to isolate those that are not controverted for the purpose of deciding sufficiency to show a violation of a clearly established right. According to the Ninth Circuit, “[a] clear statement of the basis for a decision by the district court not only facilitates appellate review, but assists the parties in evaluating whether to take an appeal in the first place.” Accordingly, the court used this case to “encourage all district judges within the circuit to articulate the basis upon which they deny qualified immunity and, when it is for reasons of sufficiency of the evidence to raise genuine issues of fact, to spell out the triable issues and why they preclude immunity before trial.”

POLICE OFFICERS ARE ENTITLED TO QUALIFIED IMMUNITY IN § 1983 CASES WHERE A SEARCH WARRANT LACKS PROBABLE CAUSE, PROVIDED A REASONABLE OFFICER COULD BELIEVE THAT PROBABLE CAUSE DID EXIST

4. Johnson v. Walton, 558 F.3d 1106 (9th Cir. 2009). FACTS AND PROCEDURAL BACKGROUND

Sun Hi and Wilfred Johnson owned and operated a house of prostitution under the guise of a legitimate business named Oriental Acupressure. Hi and Johnson and Plaintiffs, Kim and Sun Min, all resided in the same house in Rancho Palos Verdes. Sgt. Angela Walton of the Los Angeles County Sheriff’s Department was one of the lead officers in investigating a prostitution ring in Los Angeles. The investigation focused on a college which was suspected of selling massage certificates fraudulently and arranging for the certificate holder to engage in prostitution. During the course of the investigation, an undercover female officer, serving as a decoy, fraudulently bought a massage certificate from the college. The school’s CEO told the decoy that a job could be arranged for her that paid $20,000 per month. The CEO further told the decoy to be careful of undercover officers, and if an undercover officer was detected, she should then only perform legitimate massage techniques. The CEO assigned the decoy to Oriental Acupressure, and the decoy was informed by the CEO that the owner of the business, Sun Hi, had much experience, and “is familiar with how things are.” The decoy later went to Oriental Acupressure to meet with the owner, where the decoy observed five or six scantily clad women leading men around the various rooms. The men wore nothing but small towels. The decoy also saw many of the

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women handing unspecified amounts of cash to Sun Hi. Sun Hi told the decoy that she would be furnished with a regular customer. During the operation, officers recorded the license plate of an automobile driven by a person fitting Sun Hi’s description. DMV records showed that Sun Hi was the registered owner of the vehicle. An officer who drove by the address of Sun Hi, as recorded in the DMV record, observed the vehicle parked in the driveway. Based on the information gathered from the investigation, Sgt. Walton determined that Oriental Acupressure was a front for prostitution. Sgt. Walton obtained a warrant authorizing the search of three business locations and two residences, including the residence occupied by Plaintiffs, and Sun Hi and Wilford Johnson, where the officers found and seized $2,434,000 in cash in cardboard boxes. Sun Hi and Wilford Johnson faced state criminal charges for multiple counts of pimping, pandering, and money laundering. The Superior Court suppressed the evidence seized at Sun Hi and Wilford Johnson’s residence, finding that the affidavit in support of the warrant failed to allege sufficient facts to constitute probable cause to search the residence. Sun Hi and Wilford Johnson entered into a plea agreement to federal charges of attempting to defeat or evade income taxes. The state court criminal case was resolved based on the federal plea. Sun and Kim Min, who resided at the same residence as Sun Hi and Wilford Johnson, subsequently filed a § 1983 action seeking damages from Sgt. Walton and other officers for violating their Fourth and Fourteenth Amendment rights from the search of their home in the course of the prostitution investigation. The district court denied summary judgment to Sgt. Walton based on qualified immunity because, in its view, insufficient evidence existed “to establish a fair probability that any contraband or evidence of a crime might be found at [Plaintiffs’ residence].” The district court subsequently granted Plaintiffs’ motion for summary judgment as to Sgt. Walton. Following a trial on the issue of damages only, a jury awarded Kim Min $80,000 in damages and $100 to Sun Min. The district court also awarded Plaintiffs $260,782.50 in attorneys’ fees and costs. Sgt. Walton timely appealed.

NINTH CIRCUIT DECISION The Ninth Circuit reversed the district court’s judgment denying Sgt. Walton qualified immunity. The court held that Sgt. Walton’s affidavit in support of the search warrant was not “so lacking in indicia of probable cause so as to render official belief in its existence unreasonable.” Thus, Sgt. Walton was entitled to qualified immunity. When a magistrate judge issues a warrant for the search of a residence, the judge must consider whether there is a sufficient nexus between the residence

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and the contraband sought. The judge must determine that it would be reasonable to seek the evidence at the residence for a warrant to issue. See United States v. Chavez-Miranda, 306 F.3d 973, 978 (9th Cir. 2002). Even if a warrant lacks probable cause, a subsequent search is nevertheless reasonable, unless the warrant is so lacking in indicia of probable cause so as to render official belief in its existence entirely unreasonable. United States v. Leon, 468 U.S. 897, 923 (1984). Officers lose their shield of qualified immunity “[o]nly where the warrant application is so lacking in indicia of probable cause so as to render belief in its existence unreasonable.” Malley v. Briggs, 475 U.S. 335, 344-345 (1986) (citing Leon, 468 U.S. at 923). Here, according to the court, Sgt. Walton’s belief that probable cause existed to search Sun Hi and Wilford Johnson’s home was not unreasonable. The police investigation indicated that Oriental Acupressure served as a house of prostitution. The warrant application noted that typically the manager of the house of prostitution forwards all money charged for services to the owner of the business. The affidavit then stated that Sun Hi, the owner of the house of prostitution, resided at a certain house, and that a vehicle registered to Sun Hi had been seen parked in the driveway of the residence. Based on these facts, the court concluded that the warrant was not so lacking in indicia of probable cause so as to render Sgt. Walton’s belief that she could validly apply for a search warrant unreasonable. Since the warrant in this case was not so lacking in probable cause that no reasonable officer would view it as valid, the court determined that Sgt. Walton was entitled to qualified immunity.

NOTE Additional recent cases involving qualified immunity issues are:

(A) McSherry v. City of Long Beach, 2009 WL 805804 (9th Cir. 2009) (genuine issues of material fact existed as to whether a police detective deliberately fabricated evidence); and (B) Ramirez v. City of Buena Park, 2009 WL 764568 (9th Cir. 2009) (police officer not entitled to qualified immunity for unlawful pat-down search).

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DURING AN ARMED STANDOFF, ONCE EXIGENT CIRCUMSTANCES JUSTIFY THE WARRANTLESS SEIZURE OF THE SUSPECT IN HIS HOME, POLICE OFFICERS ARE NOT REQUIRED TO OBTAIN AN ARREST WARRANT BEFORE TAKING THE SUSPECT INTO FULL PHYSICAL CUSTODY HOURS LATER

5. Fisher v. City of San Jose, 558 F.3d 1069 (9th Cir. 2009). FACTS AND PROCEDURAL BACKGROUND

Plaintiff began the evening of October 23, 1999, in his apartment, drinking beer, watching the World Series on television, and cleaning his collection of eighteen boltaction World War I and II era rifles. When the game ended, Plaintiff continued cleaning his weapons and drinking his way through two cases of beer purchased earlier that day. From time to time, Plaintiff took a break to read from a book entitled, The Second Amendment Primer. Plaintiff lived on the ground floor of an apartment complex. The living room of his apartment had two sliding glass doors which opened onto a small patio. The patio, which was surrounded by a low wall, looked out onto a common lawn area. A person standing in the common lawn area could look through the sliding glass doors and into Plaintiff’s living room. At about 1 a.m., a security guard employed by the apartment complex, was patrolling the grounds of the complex when he heard loud music coming from above Plaintiff’s apartment. The guard climbed the steps and knocked on the door. When he heard no answer, he walked back down and called his supervisor, who apparently notified the police. At some point, Plaintiff saw the guard standing in the common area near Plaintiff’s patio, and he approached the guard carrying a rifle. The security guard asked Plaintiff if he knew his upstairs neighbors and whether they were home. Rather than answering the questions, Plaintiff asked the guard why he wanted that information, and told him that he should not meddle in other people’s affairs. When the security guard informed Plaintiff that the police had been called on account of the noise, Plaintiff’s tone became aggressive. He began ranting about the Second Amendment, and that, in Plaintiff’s view, it guaranteed the right to bear arms and to defend oneself and one’s property. Although the guard was not close enough to smell alcohol on Plaintiff’s breath, the guard nevertheless believed Plaintiff to be drunk based on his slurred speech, unprompted dissertation on the Second Amendment, and his unresponsive answers to the questions. As Plaintiff became more agitated, he shifted the position of the rifle such that it was pointing either at the security guard or in his direction. The guard, fearing for his safety, quickly left the area in front of Plaintiff’s apartment and reported the

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confrontation to his supervisor, who placed another call to the police. Eight officers were initially dispatched to the scene. A sergeant, who arrived at 1:50 a.m., was first on the scene. After hearing the security guard describe his encounter with Plaintiff, the sergeant assigned the other responding officers to take positions around Plaintiff’s apartment to form a containment perimeter. The sergeant then attempted to get Plaintiff’s attention; first by calling his name, then by throwing small rocks at his sliding glass doors. Plaintiff eventually emerged onto his patio. The sergeant explained to Plaintiff why the police had been called. Plaintiff, still noticeably intoxicated, lapsed into a rambling, belligerent diatribe about his Second Amendment rights, and threatened to shoot the sergeant if he came on, or near Plaintiff’s property. Plaintiff also told the sergeant about the eighteen guns inside his apartment. After about ten minutes of yelling at the sergeant, Plaintiff retreated inside. Plaintiff’s threats and actions prompted the sergeant to call for additional help. As more officers arrived, they continued to secure the perimeter around Plaintiff’s apartment and removed his neighbors from any lines of fire. Ultimately, more than sixty officers were deployed in the standoff. The sergeant attempted to reestablish contact with Plaintiff by calling his apartment. Plaintiff’s wife answered the phone and agreed to come outside. She told the sergeant that Plaintiff was alone in the apartment, that he had eighteen rifles, and that he was extremely intoxicated. At about 2:25 a.m., an officer who was positioned behind a parked car across the street from Plaintiff’s apartment witnessed Plaintiff loading cartridges into what he believed to be at least one large caliber rifle, and then saw Plaintiff pacing through his apartment holding the loaded weapon. Plaintiff was also seen loading several magazines with ammunition, and strategically placing guns around his apartment. Throughout the standoff, Plaintiff shouted at the police, using phrases such as “I have guns, I will use them,” and “Leave me alone. I don’t believe in your laws.” At about 3:15 a.m., a tactical negotiator arrived on the scene and tried unsuccessfully to start a dialogue with Plaintiff, who continued talking about his right to bear arms and vowing never to relinquish his weapons. At one point, Plaintiff invited the negotiator into his apartment, but then stated he would shoot or kill her if she entered. The negotiator testified that she believed Plaintiff’s statements to be a criminal threat, and a felony offense under the California Penal Code. During these attempts at conversation with Plaintiff, the officer who was positioned behind the parked car, saw Plaintiff pointing a gun at the negotiator and the sergeant, who had taken cover behind a tree. Plaintiff was last seen holding a rifle at 6:30 a.m. At 7:00 a.m., the police department’s Mobile Emergency Response Group and Equipment [MERGE] unit assumed tactical control of the police effort to end the

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standoff. Members of the MERGE team replaced most of the patrol officers who had maintained the inner perimeter since the inception of the incident. Over the next several hours, the MERGE team tried several methods to establish communication with Plaintiff and resolve the standoff: They used bullhorns and other voice magnifying equipment; shut off the electrical power; drove an armored vehicle with its siren activated onto the grass in front of his patio; and threw a “throw phone” onto the patio. When those techniques failed to induce Plaintiff to surrender, the MERGE unit detonated a flash device, and on two occasions, they shot canisters of tear gas into his apartment. Nothing worked to dislodge Plaintiff from his apartment. At about 2:15 p.m., more than twelve hours after it had begun, the standoff took a different turn. Plaintiff spoke by phone for several minutes with a tactical negotiator, and finally agreed to leave his apartment. He was told to walk toward the officers with his hands above his head, then to lie on the ground. He initially took several steps, but suddenly stopped and turned back toward the apartment. At that point, a member of the MERGE unit shot Plaintiff in the leg with a nonlethal rubber bullet. Plaintiff then surrendered and was finally taken into police custody. It was undisputed at trial that no attempt was made to obtain an arrest warrant at any point during the standoff. Plaintiff was tried for felony violations of the Penal Code which punish, in general, drawing, exhibiting, or using a firearm or deadly weapon against a peace officer with the intent to resist or prevent arrest. The criminal jury deadlocked, and Plaintiff ultimately pleaded no contest to a misdemeanor charge of brandishing a firearm in the presence of a security guard. Plaintiff and his wife subsequently filed an action under § 1983 against the City of San Jose, its police department, and many of the officers involved in the standoff. The complaint alleged, among other claims, that the police violated Plaintiff’s Fourth Amendment right to be free from an unreasonable seizure based on their failure to obtain an arrest warrant before effecting his full physical arrest and on the alleged use of excessive force to effectuate that arrest. The case was tried before a jury which returned a verdict in favor of the police on all claims. The jury found that exigent circumstances excused the need for a warrant. However, the district court granted Plaintiff’s motion for judgment as a matter of law, holding that no reasonable jury could have found that there was insufficient time to obtain a warrant. The court ordered the City to pay Plaintiff one dollar in nominal damages, and to train its officers regarding the Fourth Amendment requirements for arresting suspects in their home. The police appealed the district court’s ruling. A Ninth Circuit three-judge panel affirmed, with one judge dissenting. The court ordered the case to be reheard en banc.

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NINTH CIRCUIT EN BANC DECISION The Ninth Circuit, en banc, held that sufficient evidence supported the jury’s verdict that exigent circumstances excused the need for an arrest warrant, and therefore reversed the order of the district court granting judgment as a matter of law to Plaintiff. The court concluded that during armed standoffs, “once exigent circumstances justify the warrantless seizure of the suspect in his home, and so long as the police are actively engaged in completing his arrest, police need not obtain an arrest warrant before taking the suspect into full physical custody. This remains true regardless of whether the exigency that justified the seizure has dissipated by the time the suspect is taken into full physical custody.” Here, the police conceded that even though Plaintiff was technically taken into custody outside his apartment, he was, for legal purposes, seized inside his home, and thus, the burden was on the police to show that they had obtained a warrant, or that some exception to the warrant requirement excused them from getting one. In this case, the police asserted that exigent circumstances justified Plaintiff’s warrantless seizure. Plaintiff conceded that there was probable cause to arrest him. He also conceded that exigent circumstances existed to arrest him before 6:30 a.m., the last time he was seen holding a gun, and that up until 6:30 a.m., the police could have lawfully entered his apartment, using force if necessary, to complete the arrest. Plaintiff contended that the exigency that existed before 6:30 a.m. dissipated after that time, thus rendering his continued warrantless seizure and the completion of his arrest unreasonable under the Fourth Amendment. The court rejected Plaintiff’s argument. The court concluded “that once exigent circumstances and probable cause justified [Plaintiff’s] seizure, police were not required to obtain an arrest warrant despite the fact that they did not take [Plaintiff] into full physical custody until hours later.” According to the court, when Plaintiff was seized at the beginning of the standoff, the officers were not required to periodically reassess whether the exigency persisted throughout the standoff because the standoff was “no more than an actual continuation of the initial seizure.” The court explained that the entire standoff was an uninterrupted, fluid engagement between Plaintiff and the police, and in this type of siege environment, requiring the police to obtain an arrest warrant for Plaintiff, a person who was already under arrest but not yet in full physical custody, “serves no practical purpose.” The court further stated, “We do not see what a neutral and detached magistrate would have added in helping to peacefully effect [Plaintiff’s] arrest.” According to the court, “[t]here is no support for the position that after [Plaintiff] had been lawfully seized in his apartment, the Fourth Amendment required the police to retroactively justify the arrest to a magistrate judge by asking for an arrest warrant that had in effect already been executed.” Additionally, according to the court, requiring the police to constantly assess whether the exigency justifying the warrantless arrest that existed at the start of the standoff had sufficiently dissipated such that they must immediately divert

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officers from the scene to obtain a warrant would “needlessly restrict law enforcement’s ability to quickly and effectively adjust tactics based on the evolving events on the scene, placing their lives in danger.” Accordingly, the court held that during an armed standoff, once there is a lawful warrantless seizure of a suspect based on probable cause and exigent circumstances, the police are not constitutionally required to obtain an arrest warrant which would have merely authorized them to do what they were already doing. The court concluded: “The task of managing armed standoffs is best left to those trained to handle them. Indeed, the Constitution does not envision judges assuming the role of incident commander in determining how best to resolve a standoff.”

THE ABSOLUTE IMMUNITY OF A PROSECUTOR UNDER § 1983 EXTENDS TO CLAIMS OF A FAILURE TO PROPERLY TRAIN AND SUPERVISE PROSECUTORS, AND A FAILURE TO ESTABLISH AN INFORMATION SYSTEM CONTAINING POTENTIAL IMPEACHMENT MATERIAL ABOUT INFORMANTS

6. Van de Kamp v. Goldstein, 555 U.S. ___, 129 S. Ct. 855 (2009). FACTS AND PROCEDURAL BACKGROUND

Plaintiff filed a habeas corpus action in federal district court. He claimed that in 1980, he was convicted of murder, that his conviction depended in critical part upon the testimony of a jailhouse informant; that the informant’s testimony was false; that the informant had previously received reduced sentences for providing prosecutors with favorable testimony in other cases; that at least some prosecutors in the District Attorney’s Office knew about the favorable treatment; that the office had not provided Plaintiff’s attorney with that information; and that, among other things, the prosecution’s failure to provide Plaintiff’s attorney with this potential impeachment information had led to his erroneous conviction. After an evidentiary hearing, the district court agreed with Plaintiff that the informant had not been truthful and that if the prosecution had told Plaintiff’s lawyer that the informant had received prior rewards in return for favorable treatment, the outcome of the trial might have been different. The court ordered the State to either grant Plaintiff a new trial or to release him. The Ninth Circuit affirmed the district court’s determination, and the State decided to release Plaintiff. Upon his release Plaintiff filed a § 1983 action against the District Attorney and a chief deputy district attorney. The complaint alleged essentially that the prosecution’s failure to communicate to Plaintiff’s attorney the facts about the informant’s earlier testimony-related rewards violated the prosecution’s constitutional duty to provide criminal defense attorneys with all relevant information on each case, including agreements made with informants. Plaintiff

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alleged that this failure resulted from the failure of the District Attorney and the chief deputy to adequately train and supervise the prosecutors who worked for them as well as their failure to establish an information system relating to the use of informants. The District Attorney and chief deputy asked the district court to dismiss the complaint on the ground that they were absolutely immune from liability. The district court denied the motion to dismiss on the ground that the conduct asserted amounted to “administrative,” not “prosecutorial,” conduct, and thus fell outside the scope of the prosecutor’s absolute immunity to § 1983 claims. The Ninth Circuit, on interlocutory appeal, affirmed the district court’s “no immunity” determination. The U.S. Supreme Court granted a writ of certiorari.

U.S. SUPREME COURT DECISION The U.S. Supreme Court unanimously reversed the decision of the Ninth Circuit. The Court concluded that the District Attorney and chief deputy were absolutely immune from liability with respect to Plaintiff’s supervision, training, and information-system management claims. In Imbler v. Pachtman, 424 U.S. 409, 430 (1976), the Supreme Court held that prosecutors are absolutely immune from liability in § 1983 lawsuits for actions that are “intimately associated with the judicial phase of the criminal process.” Absolute immunity applies when the prosecutor acts as an officer of the court, such as when a prosecutor prepares to initiate a judicial proceeding, or appears in court to present evidence in support of a search warrant application. Absolute immunity does not apply when a prosecutor is engaged in other tasks, such as investigative or administrative tasks. Thus, it does not apply when a prosecutor gives advice to the police during a criminal investigation (Burns v. Reed, 500 U.S. 478, 496 (1991)), when the prosecutor makes statements to the press (Buckley v. Fitzsimmons, 509 U.S. 259, 277 (1993)), or when a prosecutor acts as a complaining witness in support of a warrant application (Kalina v. Fletcher, 522 U.S. 118, 132 (1997)). Here, the Court agreed with Plaintiff that his claims pertaining to inadequate training and supervision of deputy district attorneys and the alleged failure to establish a system for prosecutors handling criminal cases to access information pertaining to the benefits provided to jailhouse informants and other impeachment information was an attack on the District Attorney’s administrative procedures. Nevertheless, the Court concluded that the District Attorney and chief deputy enjoyed absolute immunity from those kinds of legal claims. According to the Court, the kinds of legal claims at issue here “focus upon a certain kind of administrative obligation—a kind that itself is directly connected with the conduct of a trial.” The management tasks concern how and when to make impeachment information available at a trial. Unlike other claims related to administrative decisions, an individual prosecutor’s error in Plaintiff’s specific criminal trial constituted an essential element of Plaintiff’s claim. The Court explained that the administrative obligations here are unlike other administrative

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duties where the immunity may not apply, such as workplace hiring, payroll administration, and the maintenance of physical facilities. Accordingly, the Court concluded that the type of management tasks at issue here are directly connected with the prosecutor’s basic trial advocacy duties, and thus under Imbler, the District Attorney and chief deputy are absolutely immune from liability.

THE ACTIONS OF A POLICE OFFICER WHO SHOT AND KILLED A SUSPECT IN AN URGENT SITUATION MUST BE EVALUATED UNDER AN “INTENT TO HARM” STANDARD IN A § 1983 ACTION BROUGHT UNDER THE FOURTEENTH AMENDMENT BY THE HEIRS

7. Porter v. Osborn, 546 F.3d 1131 (9th Cir. 2008). FACTUAL AND PROCEDURAL BACKGROUND

Around 2:00 a.m., Alaska State Trooper Whittom received a call from dispatch about an apparently abandoned vehicle parked in a highway pullout area in a lightly populated area of the state. A light snow covered the parking area, and no other vehicles were around. Trooper Osborn also heard the call and arrived at the scene before Whittom. When Osborn found the car, he initially thought it may have been abandoned, so he got out of his patrol car to investigate. He returned to his vehicle to call in the license plate number when somebody sat up in the driver’s seat, grabbed the steering wheel and looked right at the trooper. Although it was very dark, the headlights from the trooper’s vehicle were shining eye-level at the driver, Casey Porter, and were bright enough to illuminate the interior of the car. A few seconds later, Porter started slowly steering his car to go around Osborn. At this point, Osborn turned on his overhead flashing blue and red lights in an attempt to prevent Porter from leaving. When Porter did not stop, Osborn moved his car a few inches forward to try to block him. Porter continued to turn, and Osborn allowed him to pass because he did not want Porter to hit his patrol vehicle. As Porter drove by Osborn’s vehicle, the trooper made eye contact with him and told him to stop the vehicle. Trooper Whittom arrived as Porter began to maneuver around Osborn, and he tried to pull in front of Porter’s vehicle to stop him from leaving. Whittom’s overhead red and blue lights were on, and the headlights illuminated the interior of Porter’s vehicle. Osborn then got out of his vehicle and began walking alongside Porter’s slow moving car, ordering him to stop. Porter’s car finally stopped about a car’s length away from Whittom, at which point both officers shouted orders at him to get out of the vehicle. Both troopers had their service weapons out. In the heat of the moment, Whittom ordered Porter to both get in and get out of his vehicle, and he later acknowledged that it may have been confusing to have had two people yelling at once. While the

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troopers were ordering Porter out of the car, Porter rolled his window down. Porter asked “What’s wrong, sir?” but Osborn did not respond. Osborn explained that he believed Porter was just ”buying time” with the question. Osborn continued to order Porter to get out while attempting to enter the car through the front and rear doors. Porter was described by Trooper Whittom as having “a confused look on his face,” and kept bringing his hands up above, and then below their sight line. When Porter began to close the car window, Trooper Osborn sprayed pepper spray into the vehicle. Porter reacted in pain and revved the engine. As Porter began to drive the car slowly toward Whittom’s patrol car, and knowing that Whittom had taken cover on the other side of his vehicle, Osborn fired five shots at Porter, killing him. At no time did the troopers see Porter with a gun, nor did they recover a weapon from the car. Less than a minute elapsed between the pepper spray and the shooting. The entire encounter lasted no more than five minutes. Porter’s parents brought a § 1983 action against the two troopers, claiming that the troopers violated their fundamental liberty interest under the Fourteenth Amendment in the companionship and society of their son. The parents did not bring any claims on their son’s behalf because they were not appointed to represent the estate. The estate proceeded separately against the troopers and settled out of court. Thus, the parents’ claims were limited to their own Fourteenth Amendment rights as the parents of the decedent. The district court dismissed all claims against Trooper Whittom. The court denied summary judgment based on qualified immunity to Trooper Osborn. The court concluded that a jury could find that Osborn’s conduct “shocked the conscience” under a clearly established “deliberate indifference” standard of culpability. Trooper Osborn filed a timely appeal.

NINTH CIRCUIT DECISION The Ninth Circuit concluded that in an urgent situation of the kind involved in this case, the standard of culpability under the Fourteenth Amendment is whether Trooper Osborn acted with a “purpose to harm” Porter without regard to legitimate law enforcement objectives. Since the district court incorrectly applied the less demanding standard of “deliberate indifference” to the trooper’s actions, the Ninth Circuit reversed and remanded for reconsideration of the officer’s culpability under the more stringent “purpose to harm” standard. The Supreme Court has made it clear that only official conduct that “shocks the conscience” is cognizable as a due process violation. County of Sacramento v. Lewis, 523 U.S. 833, 846 (1998). Here, according to the court, the relevant question is whether the “shocks the conscience” standard is met by showing that Trooper Osborn acted with “deliberate indifference” or requires a more demanding showing that he acted with a “purpose to harm” Porter for reasons unrelated to legitimate law enforcement objectives.

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The court concluded that under the facts of this case, the “purpose to harm” standard must govern Trooper Osborn’s conduct, not “deliberate indifference.” According to the court, Trooper Osborn was confronted with a situation that did not give him the opportunity to deliberate before acting as it escalated so quickly that Osborn had to make a snap judgment. The events in the roadside parking lot were in constant flux, with much yelling, confusion, and a driver who was refusing to exit or stop his car. Although the incident lasted approximately five minutes, the court explained that “deliberation” for purposes of the “shocks the conscience” test is not so literal a concept. Here, according to the court, there was insufficient time for the kind of actual deliberation required for deliberate indifference. Once Porter’s evasive actions began, the officers had to react quickly. According to the court, under such circumstances, whether Trooper Osborn’s conduct “shocks the conscience” must be evaluated under the “purpose to harm” standard of culpability. Accordingly, the court remanded the case for a determination on whether Plaintiffs could present facts to the district court that would support a jury finding that Trooper Osborn acted with an unconstitutional “purpose to harm” Porter.

ATTORNEY’S FEES AND COSTS AWARDED IN § 1983 CASES MUST BE ADJUSTED DOWNWARD WHERE THE PLAINTIFF HAS OBTAINED LIMITED SUCCESS ON HIS PLEADED CLAIMS AND THE RESULT DOES NOT CONFER A MEANINGFUL PUBLIC BENEFIT

8. McCown v. City of Fontana, 550 F.3d 918 (9th Cir. 2008). FACTUAL AND PROCEDURAL BACKGROUND

Four officers of the Fontana Police Department, responding to complaints of drug activity in a city park, approached a group of people that included Plaintiff. The group began to disperse as the team of officers approached, but one of the officers smelled marijuana where the group had been standing. An officer instructed the group, including Plaintiff, to get down on the ground. After the group complied, an officer approached Plaintiff and told him to interlock his hands behind his back, and get up on his knees. The officer then grabbed Plaintiff’s hands and belt and assisted Plaintiff in standing up. As he stood up, Plaintiff hopped horizontally, and the officer then told Plaintiff to get down. Instead, Plaintiff took a few stutter steps away from the officer. The officer grabbed Plaintiff’s shirt with both hands and forced him to the ground, striking Plaintiff in the head with his forearm or elbow. As this occurred, Plaintiff and the officer rolled downhill. Plaintiff alleged that at this point the officers put him on his stomach and handcuffed his arms behind his back. Then, he alleged that an officer pulled out a Taser and tased him four times, twice in the chest, once on his stomach, and once on his genitals. The officers stated that Plaintiff was only tased twice, both

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times on his stomach. The officers arrested Plaintiff, but no weapons or drugs were found in his possession. Plaintiff filed a § 1983 action in federal district court seeking damages in excess of $75,000, exclusive of costs and fees. Plaintiff alleged the use of excessive force, an arrest without probable cause, and deliberate indifference on the part of the City. The parties undertook discovery, and Plaintiff made a demand in the amount of $251,000 for a global settlement, inclusive of attorney’s fees. The parties were unable to reach an agreement, and they continued discovery and other pretrial preparations. On cross-motions for summary judgment, the district court ruled for the City on Plaintiff’s claims of wrongful detention and arrest, but declined to grant summary judgment on Plaintiff’s excessive force claim regarding the use of a Taser, noting that material issues of fact remained in dispute. Shortly before trial was to commence, the parties reached a settlement on the remaining issue. The settlement agreement stipulated that the City would pay Plaintiff $20,000, that Plaintiff was the prevailing party “both legally and factually,” and that the district court would determine the amount of attorney’s fees due to Plaintiff under 42 U.S.C. § 1988. Plaintiff requested $301,551.22 in attorney’s fees and $15,034.10 in costs. The City opposed the request, arguing that the claim should be adjusted to account for Plaintiff’s failed claims and limited success. The court concluded that the figure requested was excessive and reduced the award of attorney’s fees to $200,000. The court granted Plaintiff all the costs requested, and the City appealed the award.

NINTH CIRCUIT DECISION The Ninth Circuit reversed the award of fees and costs to Plaintiff, and remanded to the district court for reconsideration of the issue of attorney’s fees and costs consistent with the Ninth Circuit’s opinion. The Ninth Circuit concluded that the district court had failed to adequately explain its reasons for the award granted to Plaintiff, and for granting excessive attorney’s fees and costs in light of Plaintiff’s limited success. Under 42 U.S.C. § 1988, the Civil Rights Attorney’s Fees Award Act, a court may award the prevailing party in a § 1983 action “a reasonable attorney’s fee as part of the costs.” The reasonableness of the fee is determined primarily by reference to the level of success achieved by the plaintiff. Hensley v. Eckerhart, 461 U.S. 424, 436 (1983). In order to ensure the availability of meaningful review, the district court must “provide a concise but clear explanation of its reasons for the fee award” and “make clear that it has considered the relationship between the amount of the fee awarded and the results obtained.” Id. at 437. Attorney’s fee awards made pursuant to 42 U.S.C. § 1988 are reviewed for abuse of discretion. Tutor-Saliba Corp. v. City of Hailey, 452 F.3d 1055, 1059 (9th Cir. 2006).

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Here, the district court found that Plaintiff’s requested fees were excessive, and reduced the hourly rate sought by Plaintiff and the number of hours expended on the litigation. However, the court failed to explain how it arrived at the applicable hourly rate, and provided no explanation for the final number of hours it allowed, other than the court “finds that $200,000 is reasonable in light of the degree of success, the overlapping issues involved, and the public interest served by prosecuting a difficult case until the very eve of trial.” According to the Ninth Circuit, the district court’s failure to provide an explanation makes a meaningful review of such lodestar determinations impossible, and thus the appellate court had no choice but to remand the case to the district court to make the necessary calculations and provide the necessary explanations. The Ninth Circuit, however, concluded that the district court did not abuse its discretion when it treated all of Plaintiff’s claims, successful and unsuccessful, as arising out of a common core of facts. A plaintiff is not eligible to receive attorney’s fees for time spent on unsuccessful claims that are unrelated to a plaintiff’s successful § 1983 claim. Hensley, 461 U.S. at 435. Here, however, according to the court, all of Plaintiff’s claims were “related” for the purpose of determining attorney’s fees. Each of Plaintiff’s claims, though brought on the basis of different legal theories against different defendants, arose from a common core of facts, namely, his arrest. Therefore, the district court did not abuse its discretion when it treated all of Plaintiff’s claims as arising out of a common core of facts. Additionally, the Ninth Circuit held that attorney’s fees must be adjusted downward where the plaintiff has obtained limited success on his pleaded claims, and the result does not confer a meaningful public benefit. Here, eight of Plaintiff’s nine claims were dismissed at summary judgment. Plaintiff received $20,000 in damages as part of a settlement agreement for his single remaining claim, and no other relief. The amount he received was roughly one-fourth of the “damages in excess of $75,000” that he pled in his complaint, and less than one-tenth of the $251,000 he requested in settlement which, however, included attorney’s fees and costs. According to the court, Plaintiff’s “victory fell far short of his goal; therefore, it is unreasonable to grant his attorneys more than a comparable portion of the fees and costs they collected.” Thus, the Ninth Circuit instructed the district court to take into account Plaintiff’s limited success when determining a reasonable award. Finally, the Ninth Circuit rejected Plaintiff’s contention that while his monetary success was limited, he achieved an “excellent result” because his success conferred a benefit on the public. The Supreme Court has indicated that when a decision has “served the public interest by vindicating important constitutional rights” an award of attorney’s fees that is disproportionate to the actual damages may be appropriate. City of Riverside v. Rivera, 477 U.S. 561, 572 (1986). Here, however, according to the court, Plaintiff’s settlement did not result in any change of policy within the Police Department and did not establish a deterrent as Plaintiff did not allege or establish any animus within the Police Department against him or others like him.

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AN ACTION AGAINST THE CITY BY DRUNK DRIVERS TO RECOVER MONEY PAID TO THE CITY FOR EMERGENCY RESPONSE COSTS IS SUBJECT TO THE GOVERNMENT CLAIMS ACT

9. City of Los Angeles v. Superior Court (Collins), 168 Cal. App. 4th 422 (2008). FACTUAL AND PROCEDURAL BACKGROUND

Brendan Collins was involved in a traffic accident while driving under the influence of alcohol or drugs and was arrested by City of Los Angeles police officers. The City sent her a bill demanding payment for $966.55 to compensate the City for its emergency response costs incurred in connection with the incident. The City subsequently filed a small claims action against Collins and was awarded a judgment in that amount, plus costs. Collins paid the judgment. Collins, individually and on behalf of persons similarly situated, presented a claim to the City seeking to recover part of the amounts paid. The City rejected the claim. Collins filed a class action complaint against the City seeking to recover amounts that had been paid for fixed costs that did not arise directly from the emergency responses. The trial court granted class certification and defined the class to include all persons who were arrested for driving under the influence and billed for emergency response costs, and who had paid the challenged costs up to three years before the complaint was filed. The trial court determined that the Plaintiffs’ claim for monetary relief was a “claim for specific recovery of property,” and that the Government Claims Act therefore did not apply. The City petitioned the Court of Appeal for a writ of mandate, contending that the Government Claims Act applied and thus limited the class to those persons who paid the challenged costs up to one year before the date of claim presentation.

COURT OF APPEAL DECISION The Court of Appeal granted the petition for writ of mandate. The court concluded that the Plaintiffs’ claim for monetary relief was a claim for “money or damages” within the meaning of Government Code section 905, as the claim was not based on an obligation to return specific property held by the City as a bailee. Accordingly, the Government Claims Act applied. A person must present a timely claim for money or damages to a local public entity before suing the entity for money or damages, except in specified circumstances that are not relevant here. Gov’t Code §§ 905, 905.2, 915, subd. (a), 945.4. A claim relating to a cause of action for death, personal injury, or injury to personal property or growing crops must be presented within six months after the accrual of the cause of action. A claim relating to any other cause of action must be presented within one year after the date of accrual. § 911.2. Nevertheless, Plaintiffs contended that their action was for the specific recovery of money held by the City as a bailee, and thus under Minsky v. City of Los

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Angeles, 11 Cal. 3d 113 (1974), the Government Claims Act did not apply. In Minsky, the Supreme Court held that an action for specific recovery of money taken from an arrestee and held by the city as a bailee was not a “claim for money or damages” within the meaning of the statute. The plaintiff in Minsky alleged that the police had taken $7,720 from his possession upon his arrest, held the money as evidence, and later converted the money by transferring it to a public pension fund. According to the Court, “the government in effect occupies the position of bailee when it seizes from an arrestee property that is not shown to be contraband.” Id. at 121. Thus, an action for specific recovery of sums seized and allegedly wrongfully withheld from plaintiff is not subject to the Government Claims Act. Here, however, according to the court, unlike the situation in Minsky, the City did not seize the money from Plaintiffs and hold it for them as bailee, and was under no obligation to return the specific property. Accordingly, because the Plaintiffs’ claim for monetary relief was not based on an obligation to return specific property held by the City as a bailee, the court concluded that the claim was a claim for “money or damages” under the Government Code and thus was subject to the requirements of the Government Claims Act.

THE REMOVAL OF CROSSWALK MARKINGS AT AN INTERSECTION DID NOT CREATE A DANGEROUS CONDITION

10. Sun v. City of Oakland, 166 Cal. App. 4th 1177 (2008). FACTUAL AND PROCEDURAL BACKGROUND

While crossing International Boulevard in the City of Oakland at an unmarked pedestrian crosswalk, Rong Zeng Peng was struck by an automobile and killed. International Boulevard is a four-lane thoroughfare with two lanes going in each direction. Ms. Peng attempted to cross International Boulevard where it intersects with 7th Avenue. The crosswalk at this intersection had been marked with painted stripes in the past, but it was unmarked at the time of the accident. A driver traveling in the left lane of International Boulevard saw Ms. Peng and stopped to allow her to cross. As she emerged from behind the stopped car and crossed into the right lane, she was struck by a vehicle driven by Ramon Jackson. Jackson had initially been driving in the left lane, but he moved his car to the right lane in order to get around the stopped car and did not see Ms. Peng crossing in his lane until it was too late to stop. He fled the scene immediately and later turned himself in to the police. He pled no contest to felony vehicular manslaughter with gross negligence. Ms. Peng’s husband and minor daughter filed suit against the City of Oakland and others, alleging that Ms. Peng’s death was proximately caused by a dangerous condition of the intersection where the accident occurred. Specifically, Plaintiffs alleged that the intersection in which the decedent was walking had in place a painted crosswalk for pedestrians for several years prior to the subject accident, but a few months before the accident, the City repaved the street and

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installed bulb-out sidewalk extensions, but failed to repaint the crosswalk markings. (A “bulb-out” is an extension of the sidewalk, usually at the corner of an intersection that reduces the distance pedestrians must traverse across a street.) The trial court granted summary judgment in favor of the City, finding as a matter of law that the site of the accident was not a dangerous condition, and that there was no evidence the accident was caused by the City’s earlier removal of the crosswalk markings. Plaintiffs filed a timely notice of appeal.

COURT OF APPEAL DECISION The Court of Appeal affirmed summary judgment granted in favor of the City. The court concluded that the intersection did not constitute a dangerous condition of public property as a matter of law. There was no evidence that any pedestrians had been struck in the unmarked, bulb-out intersection prior to decedent. There was no evidence that the removal of the painted markings increased the risk of such accidents. There was no evidence that either decedent or the motorist who struck her had crossed the intersection before it was paved over. Thus, according to the court, Plaintiffs’ expert’s opinion that persons acting in reliance on the formerly painted crosswalk would lessen their vigilance was of limited relevance. Plaintiffs contended that the failure of the City to follow the procedures set forth in Vehicle Code section 21950.5 before removing the crosswalk exposed the City to liability for maintenance of a dangerous condition of public property. Section 21950.5 sets forth a procedure that public entities are required to follow before removing crosswalk markings, such as giving notice and an opportunity to be heard, before removing a marked crosswalk. However, the court found nothing in the statute that provided a basis for imposing liability on public entities for injuries sustained by pedestrians who are struck in intersections where crosswalk markings have been removed without first having followed the statutory public notice requirements. The court also concluded that the City was immune from liability under Vehicle Code section 830.8 for its decision not to reinstall the marked crosswalk. Section 830.8 immunizes a public entity from liability for accidents proximately caused by its failure to provide a signal, sign, marking, or device to warn of a dangerous condition which endangers the safe movement of traffic unless that condition “would not be reasonably apparent to, and would not have been anticipated by, a person exercising due care.” Here, according to the court, Plaintiffs did not allege the presence of a hazardous condition that would not be apparent to pedestrians and motorists using the intersection with due care. The bulb-outs were not hidden from pedestrians or motorists, thus they did not constitute a concealed trap. The volume and speed of vehicular traffic in combination with heavy pedestrian use does not create a dangerous condition unless some “physical

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characteristics” of the street such as “blind corners, obscured sightlines, elevation variances, or any other unusual condition . . . make the road unsafe when used by motorists and pedestrians exercising due care.” Brenner v. City of El Cajon, 113 Cal. App. 4th 434, 440-441 (2003). “[T]he heavy use of any given paved road does not invoke the application of Government Code section 835.” Mittenhuber v. City of Redondo Beach, 142 Cal. App. 3d 1, 7 (1983). Here, according to the court, “the only risk of harm was from a motorist who failed to exercise due care by not obeying the Vehicle Code provisions requiring him both to yield to a pedestrian and to refrain from passing a vehicle that had stopped for a pedestrian. The bulb-outs and the absence of painted markings did not render the intersection dangerous within the meaning of Government Code section 835.”

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League of California Cities City Attorney’s Department Spring Conference - Squaw Creek May 8, 2009 Samuel L. Jackson, Esq. Assistant City Attorney, Sutter Creek Stephanie L. Quinn, Esq. RANDOLPH CREGGER CHALFANT, LLP 1030 G Street Sacramento, CA 95814 (916) 443-4443; fax (916) 443-2124 [email protected]@randolphlaw.net

Identifying and Exposing The Many Faces of Bias in the Legal Profession

INTRODUCTION This paper serves as the basis for a one hour discussion of a dirty little secret of which our entire profession is already in on. Thus, it may not be so little and it is not always considered dirty. However, it meets the definition of a true secret because no one likes talking about it especially when we might be viewed as one of the characters in the secret. Yet, not talking about it does not lessen its impact or cause its undesired problems to vanish with the passage of time. Of course, the secret to which we refer is the existence of unacceptable bias in our profession and workplace. Yes, this secret continues to exist in 2009 despite layers of legislative enactments to stamp it out. During the presentation of this paper, the focus will be on identifying, owning and eliminating our biases. We have them, you have them and everyone in the entire profession has them. They are sometimes acceptable but never when they adversely impact human relations, especially in the profession and in the workplace. We’ve found the best way to deal with this secret is to quickly recognize and expose bias immediately upon it rearing its ugly head. We should do so in such a manner that the person who exhibits it becomes uncomfortable acting in a similar manner in the future. In fact, the person should be so uncomfortable that he or she instantly realizes the error of his or her ways and demonstrates a willingness to promptly and permanently work on turning over a new leaf. Taking immediate corrective action requires a personal and total commitment to be involved and to speak up in a firm, unequivocal but non-confrontational manner, when we hear those inappropriate off-color jokes about gender, race or national origin, sexual orientation and the like. More often unconsciously than consciously, we contribute to and feed biases simply by our silence, even when we do not like or agree with what we are hearing or seeing. We do so consciously by rationalizing that our friendship, business relationship

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or other status with the speaker or actor is more important than the hurt or harm that might result from his or her bias conduct. How many of us have been afraid, on one or more occasions, to say to a friend, ‘you are too inebriated to operate your motor vehicle safely?’ Better yet, how many of us would knowingly go along for the ride with a friend we know is too inebriated to drive? The answers are VERY few. We should take the same approach when it comes to setting our friends straight about the biases they exhibit. Unfortunately, it is much more comfortable for us to go with the bias flow than to put forth little effort to take corrective action. We rationalize that he or she will be self-enlightened one day; one day someone will put him or her in their place; I am not like that; and/or it didn’t do much harm this time, I’ll wait until it’s important to say something. In almost an equal number of situations, if not more, we unconsciously follow or subject ourselves to the lead of others in a number of areas. We follow that same pattern when we witness bias. We hear what we wish to hear, see what we wish to see, do what we wish to do and believe what we wish to believe even when the clear facts before us suggest that we think before we jump to conclusions. We simply ignore whether biases we witness are inappropriate, perhaps because we have witnessed similar things so many times previously that we have become desensitized to its inappropriateness. When we tune out on inappropriate bias, we may be sanctioning it subconsciously. Just as ignorance of the law is no excuse for violating it, unconsciously fostering biases is not acceptable either. We can and must be more in tune to what we hear and observe in terms of bias. Definition of Bias In this paper and during the accompanying presentation, when we reference “bias,” we are concerned only with the actual or potential adverse impact it has on the legal profession and in the workplace as it relates to human relations or interactions. The American Heritage Dictionary defines bias as: A preference or inclination that inhibits impartiality; prejudice. Webster’s New Collegiate Dictionary defines bias as: To give a settled and often prejudiced outlook to a situation. Webster’s Desk Dictionary defines bias as: A predisposed point of view; partiality, preconception, prejudice. Wikipedia, the free encyclopedia defines bias: A term used to describe the tendency or preference toward a particular perspective, ideology, or result, especially when the tendency interferes with the ability to be impartial, unprejudiced or objective. The Lectric Law Library defines bias as: Any mental condition that would prevent a judge or juror from being fair and impartial is called bias; A particular influential power which sways the judgment; the inclination or propensity of the mind towards a particular object.

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Black’s Law Dictionary defines bias as: A preconceived opinion; a predisposition to decide a cause or an issue in a certain way, which does not leave the mind perfectly open to conviction; a condition of the mind, which sways judgment... Webster’s New World Medical Dictionary defines bias as: When a point of view prevents impartial judgment on issues relating to the subject of that point of view. In a clinical trial, bias refers to effects that a conclusion that may be incorrect as, for example, when a researcher or patient knows what treatment is being given. To avoid bias, a blind study may be done; Deviation of results or inferences from the truth, or processes leading to such systematic deviation. Any trend in the collection, analysis, interpretation, publication, or review of data that can lead to conclusions that are systematically different from the truth. Two Components of Undesirable Biases Inappropriate bias generally consists of a mental aspect and a physical (action) aspect. The former may exist absent the latter but the latter cannot exist without the former even if the former is subconscious. Each of the above referenced definitions, focus only on the mental aspect of bias. And based upon those definitions alone, there is nothing illegal, inappropriate or even immoral about owning a bias. You might recall that all too common expression in your criminal law course in law school - You may hate your mother-in-law as strongly as you wish. You may even consciously wish harm befall her. However, the moment you commence to take action toward harming her, that conduct could turn criminal (an assault or attempted battery or conspiratorial in nature if you act with others). Similarly, actions we take based upon biases we hold could result in sanctionable conduct. We find many instances of such prescribed actions in our code of professional conduct and in employment laws. Accordingly, it is this physical (action) aspect of bias that commands much of our attention in this paper. As we stated previously, we all have biases. It is an almost natural occurrence in the journey of life. For example, when we are placed in a new environment with persons of backgrounds different from ours, it is natural to view this difference as an unwanted barrier or to some even a burden to interaction. But differences could also easily be viewed as a learning experience or challenge. Viewed in this way, differences become a win for you and others in the environment. Many of you will form biases about us as authors and presenters of this paper. Many of you know Sam but there are quite a few who do not. And most have never met Stephanie. Yep! This is an environment that affords the opportunity for you to form some biases about us. And there’s almost a 100% chance that many of you have formed biases of which it will take us a bit of work to undo. Those biases are likely based upon the following: We are new faces or we are not regulars at these bi-annual conferences; the men may not identify with Stephanie and the women may not identify with Sam; some may identify with or against Sam because of his race and with or against Stephanie because of hers; some have formed biased opinions regarding what we might know or not know on the subject of bias; etc. Whatever the biases are, without a doubt, most of you have formed them. We (people generally) accept, encourage or foster certain biases. DOES ANY ONE HAVE AN EXAMPLE OF A BIAS THAT SOCIETY GENERALLY ACCEPTS OR FOSTERS WITHOUT MUCH OBJECTION FROM ANYONE? How about religion and

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religious worship? We shall share more later in this paper regarding the best known most acceptable bias. Because no one is free of biases, it is impossible to legislate or regulate them completely out of existence. When we make attempts to do so, those in charge of the legislative process always seem to carve out exceptions, generally for biases they or special interests own. Nonetheless, we have countless pieces of legislation and regulations in place at the Federal, State and Local government levels to provide for the imposition of sanctions when action on our biases result in harm to another or disrupts the workplace. As previously stated, while these legislative efforts are helpful, they do not constitute a silver bullet for bringing an end to undesirable biases and resulting discrimination. The hallmark of jurisprudence is the civilized resolution of disputes and settling differences. In the criminal and civil tribunals, we do not attempt to regulate away the existence of bias. We simply insist that the final arbiters of fact (the Civil and Criminal Jury respectively) engage in their duties fairly by admonishing them as follows: “Do not let bias, sympathy, prejudice or public opinion influence your verdict.” and “Do not let bias, sympathy, prejudice or public opinion influence your decision. Bias includes, but is not limited to, bias for or against the witnesses, attorneys, defendant(s) or alleged victim(s) based on disability, gender, nationality, national origin, race or ethnicity, religion, gender identity, sexual orientation age or socioeconomic status.”1 In other words, we do not tell them that they are not supposed to possess biases. However, we do expect them not to be influenced by any biases they might possess. You will note that while the instruction to the jury in criminal cases is much more detailed in its explanation regarding bias, neither the criminal nor the civil instruction actually defines bias for the jury. Justice requires that the juries not be influenced by bias in favor of or against any individual subject to the particular cause before the court and that they be perfectly free to act only as the law and facts dictate. A juror may be removed or disqualified from service if bias in favor or against an involved person or the justice system, as a whole, can be properly shown. In addition to a host of Federal, state and local laws and regulations prohibiting bias that results in discrimination, the California Rules of Professional Conduct also preclude bias and resulting discrimination. The language of these rules, in pertinent part, reads: (B) In the management or operation of a law practice, a member shall not unlawfully discriminate or knowingly permit unlawful discrimination on the basis of race, national origin, sex, sexual orientation, religion, age or disability in: (1) hiring, promoting, discharging, or otherwise determining the conditions of employment of any person; or (2) accepting or terminating representation of any client.2

When we engage in harmful action as a direct result of a bias, we refer to such conduct as discrimination. As we shall see later, biases and resulting discriminatory action manifest themselves in many forms. Bias and discrimination may be demonstrated by action or inaction; they may manifest themselves overtly or covertly;

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they could be obvious or subtle, explicit or implicit, or verbal or non-verbal. Regardless of the form, if discrimination is the result of bias, sanctions may attach. Recognizable Forms or Types of Bias Some biases are more recognizable and more prevalent in the profession and the workforce than others are. Below, we have identified and divided some biases based upon whether they are more or less common than others are. More commonly recognized biases - these are biases we witness or hear about frequently in the profession, in the workplace, and in other walks of life. These are not necessarily listed in a particular order. Age - Age bias and resulting discrimination now has the dubious distinction of being in the top spot among forms of bias and discrimination in the workplace.3 Accordingly, we devote more attention to this area than to others referenced in this paper. A recent workplace survey conducted by Adecco USA4 found that most workers surveyed (61%) feel that diversity in their workforce makes their company more successful. Yet nearly half of all employees surveyed (47%) reported experiencing discrimination and 52% of those named age discrimination as the form that impacted them. Age bias in employment negatively impacts the old and the young alike. For example, some employers tend to paint all generation X’ers with the same brush as lacking in loyalty, lacking good work ethics and as being all about themselves. Thus, many employers do not wish to take a chance on employing X’ers. This is the flip side of the bias we usually see, that against the over 40 group. However, the over 40 worker is still the recipients of the vast majority of age discrimination. Employers tend to generalize that they have low productivity as a result of being too slow; having too few technical skills; getting injured easily and are ill too often. Below are some astounding statistics regarding ageism and the U.S. workforce which underscores why we need to change our bias attitude against the older worker, underscores why we need to change our bias attitude against the older worker. By 2012, nearly 20% of the total U.S. workforce will be age 55 or older, up

from just under 13% in 2000. ("Labor force projections to 2012: The Graying of the U.S. Workforce," Monthly Labor Review, February 2004)

The number of U.S. workers between the ages 55 and 64 will grow 51% to 25 million by 2012. At the same time, the number of workers between ages 35 and 44 is expected to shrink by 7%. (Wall Street Journal, Sept 20, 2005)

Nearly 7 in 10 workers expect to continue to work full or part-time following retirement from their career, including 15% who expect to start their own business. (John J. Heldrich Center For Workforce Development, Rutgers University, 2005)

The Bureau of Labor Statistics estimates that between 2002 and 2012, the number of workers 55 and older is expected to grow by nearly 50% and be

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the fastest growing component of the workforce. (John J. Heldrich Center For Workforce Development, Rutgers University, 2005)

The job search is considerably longer for older job seekers. The average duration of unemployment for older job seekers in 2004 was 25.8 weeks, compared to only 18.9 weeks for younger job seekers. (AARP, Public Policy Institute, 2005)

What occurred at the National Maritime Museum in Greenwhich, England when the mandatory retirement age was abolished is worth noting.5 The productivity among older workers increased as competition for upward mobility opportunities increased and a more loyal, stable and dedicated workforce also increased with several 71 year olds going strong with no plans of retiring. In fact, an organization in the UK has drafted a job application form (which is in wide use) that excludes any mention of age (such as date of birth), education or career history (in a manner that signals age) in an effort to tackle UK’s endemic ageism in recruitment. The form was drafted in 2006 by solicitors for the Employers Forum on Age (EFA) in response to the European Union (EU) Employment Directive. Some of the above-referenced type of information would be available to the employer after the completion of the initial screening for hire process. Also worthy of consideration is what we discovered regarding Finland’s efforts to attract and retain the older worker rather than discriminating against and chasing them out of the workforce. Finland has one of the more rapidly aging populations in Europe, easily outstripping the UK. By 2030, Finland is projected to have 26% of its population over 65. Until recently this concern was coupled with a low level of employment of older workers meaning the country was heading for a severe labor shortage. Then between 1998 and 2004, Finland saw the employment rate for 55-64 year olds rise from 34% to over 50%. That was due, in major part, to the advent of a new concept called “work ability” which has dramatic results and has seen governments from Europe to Australia inquiring about its success. The small industrial town of Valkeakoski in Western Finland, located approximately 90 miles North of Oslo is at the leading edge of a workforce revolution. In just one of the town’s several paper industry companies, UPM-Kymmene Tervasaari, a quiet but steady change in the age of its workforce is taking place. Four years ago UPM employed approximately 260 workers with almost 40% of the workforce over the age of 50 but rather than winding down for retirement, the older workers are being encouraged to stay at work. In 2009, UPM employs 840 workers and despite significant numbers of young hires in recent years, it maintains an average workforce age of 44 years. The company is giving the older worker extra training and moving them to more appropriate jobs where possible and treating them like senior and seasoned company elders. In addition, workers who remain in the workforce after age 63 are given the carrot of a 4.5% increase in their pensions for every year they stay until the age of 68. In just three years, between 2000 and 2003, the company’s average retirement age rose from 57 to 59. Since the work ability program was introduced, the employment rate of Finns aged 55-64 has jumped more than 13% (the highest in the EU) with no adverse impact on productivity. Simple but radical reasoning gave rise to the “work

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ability” program. According to Professor Juhani Ilmarinnen, Finnish Institute of Occupational Health, who studied the aging change in the Finnish workforce, “We have been blaming the wrong source - the human beings - saying ‘you are poor’ although really it’s the job that is poor.” It is this philosophical change that is behind this positive shift in the Finnish workforce - “Naturally you decline physically but a lot of cognitive functions improve with advancing age” continued the professor. If employers do not understand that their workers are changing as they age and change the work accordingly, he said, then all they (the employers) see is decline in productivity.6 It seems Finland has a book on improving ageism in the workforce from which the U.S. could take another page, namely, a major shift in our attitude toward the older worker. Gender - For the last two decades gender bias and discrimination was listed as the fastest growing form of bias and discrimination in the workplace. In the above-referenced survey by Adecco USA, consistent with other studies and surveys on the subject of gender bias, found that gender bias and discrimination was listed as the second most prevalent form of workplace bias and discrimination at 43%, followed by race at 32%. Some think the recent economic crisis has hit women more harshly than men. A recent article in Forbes Magazine addressed concerns that women in the financial services and insurance industry are being laid off in disproportionate numbers. 7 According to Forbes, 72% of the 260,000 jobs cut at financial services and insurance firms have been women, even though women made up 64% of employment before the economic meltdown. Financial giants like Citigroup and Bank of America are seeing a rise in claims for gender discrimination. The chair for the American Bar Association's Commission on Women in the Profession has recently echoed these concerns for women in the legal profession, noting that law firms are laying off part-time attorneys, 75% of which are women. A November 2007 survey by the National Association of Women Lawyers ("NAWL") found that women are about six times more likely than men to work part-time. In the average law firm, 1 in 8 women work part-time, as compared to 1 in 50 men.8 The most recent study by NAWL found that only 16 percent of equity partners at large law firms are women and they earn almost $90,000 less than their male counterparts. Fewer than 10% of managing partners at large firms are women.9 The public sector is closer to reflecting the percentages of women coming out of law schools.10 In fact, women are more attracted to government practice for a number of reasons, including more control over their work schedules. It is believed that women experience less gender inequality in the public sector, than in private firms.11

A report by the ABA Commission on Women in the Profession said that stereotypes may be the reason women lawyers are more likely than males to report bias in job interviews. For example, assertive women lawyers are rated poorly for interpersonal skills while male lawyers are praised for the same behavior.12

Pregnancy (sub-set of gender but distinctly different) - In 2009, in the Unites States and in many other countries, pregnancy discrimination is still so prevalent that it remains a distinct sub-category of gender bias and discrimination worthy of individual discussion. Can we do without them in the workplace? Can we do without them giving birth to new workers who will be responsible for our care and well being tomorrow? The answer to both is no. Then what’s all the fuss about when it comes to

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being flexible in the workplace as to hiring them and preparing to share their work responsibilities while they are away for child birth? Sadly, the legal profession and U.S. employers, in general, are not alone in how they view child-bearing women in the profession and the workplace. We reviewed two articles on the subject (one from management-issues.com and the other from the Times OnLine).13 Both articles carried the same message - women of child-bearing age need not apply for jobs with small businesses. Those of us who secretly join that line of thinking could take a page from the book on how the country of Norway treats the subject. In Norway, women are entitled to 12 months off work with 80% pay, or 10 months with full pay. Mothers are required to take off at least the first six weeks after birth as maternity leave. The husband of a pregnant woman is entitled to take almost all of the 12 or 10 months off instead of the pregnant mother and he must take off at least 4 weeks of that time off or it will be lost for him and the mother.14

Ethnic or Racial - In the United States, we notice race quicker, more often and generally form stronger opinions about it before we process any other information about another person. If the other person is of our race, we tend not to notice it or we tend to give the benefit of any doubt in favor of persons of our own race. Despite the accuracy of this, there are instances where the wrong assumption feeds bias. Example, recall the allegations regarding President Obama and the Black vote. The prevailing opinion in the U.S. was and is that the only reason he received such a high percentage of the Black vote was because he identified with Blacks and vice versa. That fostered the idea that Blacks were so emotionally tied to race that they would vote for another Black regardless of qualifications. Yet none of the news media that promulgated this idea took the time to analyze or question why three other Black Democrats, Shirley Chisholm (ran once), Jesse Jackson (ran twice) and Al Sharpton (ran once) and one Black Republican, Alan Keyes (ran three times), failed to gain the same or similar vote percentages during the primaries when they also ran for the Presidency. This is but one example of how we unconsciously and consciously hold on to preconceptions and stereotypes that foster racial bias and promotes more of the same in the profession and the work force. National Origin - The United States and the United Kingdom are the greatest melting pots in the world in terms of differences in the faces of their inhabitants. The differences in these faces are what make these countries unique. The people of these countries have come from many places with their variety of talents, cultures and determination to better themselves and their countries. Yet, these are two countries are where we find the greatest internal strife between the people. And much of it is based upon the very things that make these countries great. Yes, we find disharmony among the inhabitants of other nations but it generally centers on issues other than differences in national origin. This is due, in some part, to the fact that most of the other countries are practically homogeneous. While we non-indigenous looking visitors to homogeneous countries are items of curiosity, we are generally treated much better than members of their country are treated while visiting long term or residing in the United States. This adverse treatment escalates after immigration and assimilation into the U.S. workforce. There is generally no reason for this other than they appear to be of a national origin we hold in low esteem and we often cannot articulate a sound reason for doing so. Skin Color - While this sounds like race, it is far different. However, similar to pregnancy being a sub-category of gender bias, skin color bias could easily be

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classified as a sub-category of racial or national origin bias. Yet, as is the case with not all women being subjected to bias and discrimination in a particular organization, some persons of the same race or national origin may be subjected to bias and discrimination while others are not. For example, fair skinned Native-American, East Indians, Latinos and even African-Americans generally face much less skin color bias and discrimination than darker skinned members of these ethnic groups. There have been many studies regarding the treatment of pale whites vs. whites w/ some skin tone; light complexion blacks vs. dark complexion blacks, dark complexion East Indians vs. lighter complexion East Indians, etc. All such studies reveal disparity in acceptance and or treatment, especially in the workplace. Religious - Far too many people are the subject of bias and discrimination simply because of their religion. When it comes to biases and discrimination, nothing is sacred and no one is truly safe from one group or another. Despite knowing this, the world’s people generally accept the world’s greatest bias - difference based upon our respective religions. Because of differences in our religious beliefs, we self-segregate. Some care little about learning why the religious tenants of other groups are different than ours or whether such knowledge would be useful in removing bias barriers. We are comfortable with hearing only the teaching of our beliefs, even in cases where different groups hold to the same concept that there is one supreme being and those groups worship that same supreme being. Our religious teachings are supposed to guide our daily existence and interactions with others. Again, we generally hold that religious bias is off limit if it does not result in outward manifestation of harm prohibited by the law. For example, it is not unlawful and acceptable not to associate with members of a particular religious group. However, it is unlawful to adversely impact a person’s employment opportunities because of membership in that religious group. Sexual Orientation - California and other jurisdictions have slowly enacted laws over the past decade and a half to include sexual orientation among the basis on which discrimination shall not exist in education, employment, professions, public accommodations, and the like. Yet we continue to witness bias and discrimination against gays in the profession and in the workplace. We leave the discussion of Proposition 8 for another day. There is one bright spot in this area, reports of bias and discrimination against gays are far fewer in the legal profession than in the workplace generally. And reports of the same are fewer in relation to public employment than in private employment. Disability - There was a time in the not-too-distant history of this country and others when those with disabilities (mental and physical) were hidden away as if they were a source of embarrassment to those close to and responsible for their care. They had absolutely no rights and took the brunt of all sorts of ills. Prior to 1992, in American jurisprudence, we recognized medical conditions (permanent and temporary) as affording limited protections to the American worker. However, these laws were not consistent from state to state or even from one local jurisdiction to the next in the same state. Private business had one set of regulations which governed them and the public sector had another with some similarities between the two. Then the American with Disabilities Act (ADA) was passed. Not only did the ADA level the playing field for those with disabilities, in many cases, public and private business began claiming that the field was turned upside down and given to the disabled on a silver platter. Among the classes of persons who have long been the subject of wide-spread, intentional and overt bias and discrimination, those with disabilities seem to be the best protected today

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as a result of the enactment of ADA. This is an instance where legislation has gone the farthest in reversing bias and discrimination. But we still see far too many instances where discrimination against persons with disabilities exists in the workplace. Sources of Biases We probably start learning biases prior to birth from the words and acts of our parents. That learning process continues as we venture out into the world; we learn them during our education process (both secondary and post secondary education); we learn them from friends; we learn them from our social and cultural environments; from the news media; We continue to learn biases until we die. We shed some and sometimes replace them with others. We find them throughout life’s experience for good or bad and they will always be with us regardless of how much we wish them away. As was stated previously, there are good (or least acceptable) biases. For example, there are biases in favor of distancing ourselves from those who we know are bent on a life of crime and destruction; and there are negative biases that are acceptable provided they do not color our appreciation for other individuals. The religious bias of self-separation falls into this category. We refer to this as viewing of the world through those proverbial rose-colored glasses and that cannot be legislated, regulated or rewarded out of existence. Thus, we just accept this as part of life’s journey. How to Identify Bias There is no magical answer to the question of how does one recognize bias. Sure, we have definitions and examples that explain bias. However, we know it comes in many forms, which seems to make it difficult to recognize at times. But recognizing it just isn’t difficult at all. We need only remember and apply Justice Potter Stewart's Definition of Obscenity, The Casablanca Test: ". . . I know it [obscenity/pornography] when I see it." In Casablanca, as a Navy lieutenant in World War II and watch officer for his ship, Justice Stewart had seen his men bring back locally produced pornography. He knew the difference between that hardest of hard core and much of what came to the Court. He called it his "Casablanca Test." In 1964, Justice Potter Stewart explained his understanding of "hard-core" pornography, or what is obscene, in a case before the court, by saying, "I shall not today attempt further to define the kinds of material I understand to be embraced . . . [b]ut I know it when I see it.”15

We too know bias when we see or hear it. We need only choose to recognize it rather than continuing to turn a blind eye to unacceptable bias. What Should We Do Upon Recognizing Bias Here we refer to both the mental and physical aspects of bias because if we witness the unacceptable mental part and do nothing, we give tacit approval for the physical part and resulting harm to follow within or outside of our presence. After we recognize and accept that biases are a part of life, we can move more effectively toward devoting meaningful time and attention to changing or eliminating those that are doing the greatest harm in the profession and the workplace.

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Again, as was stated previously, it is not unlawful and is acceptable to own one or more biases. But it is always a best to reexamine one’s biases and to work on changing those that do more harm than good in human relations. We can and we do change to lessen or eliminate the negative impact of our biases, especially the most offensive one. You might recall Governor George Wallace’s apology to Blacks for his biases and inappropriate actions he took against them. And more recently, in February, 2009, Former Klansman, Elwin Wilson, appeared on international TV (CNN) and apologized to Congressman John Lewis for inappropriately beating him nearly 50 years prior during the latter’s exercise of his right to peacefully demonstrate at a South Carolina bus station against racism. As CNN commented, this “demonstrates the capacity of people to change” negative biases. Every member of the legal profession and all who are connected with the administration of justice in the U.S. have an obligation to do all that is legally within their power to promote positive changes in the unlawful biases we hold and the actions we take upon them. This does not mean that we should simply become tolerant or more tolerant of others. It means we must be more accepting of one another and make a better effort at understanding our differences. In fact, we should strive to delete from our vocabulary the term “tolerant and tolerance” as it relates to our social interactions with other human beings because more often than not it means to put up with others.... We should all want others to do more than put up with each other and we should take the steps to initiate this acceptance rather than wait for someone else to do so. The Honorable Dennis Archer, former Michigan Supreme Court Justice and former Mayor of Detroit, while serving as the first African American President Elect of the American Bar Association in 2002, delivered a speech entitled “The Value of Diversity: What the Legal Profession Must Do To Stay Ahead of the Curve” to law students at Washington University. In that speech, he made some profound and memorable comments regarding diversity which are also applicable to discovering and confronting biases. Speaking of the defiance of Rosa Park to an unjust Alabama law requiring Blacks (regardless of gender, health or medical condition) to give up their seats on public transportation to Whites (regardless of the gender, health or medical condition), Justice Archer said, ”Think about that the next time you witness or experience an injustice. Your refusal to perpetuate, participate in or stand idly by something you know is not right - be it law or not - could inspire a champion (such as Martin Luther King Jr.) who might change the world because of your tiny action. You might even be that champion. It is a great risk, and though it may bring great costs, the alternative is far costlier.” Then he quoted Dr. King as stating, “[t]he ultimate measure of a man is not where he stands in moments of comfort and convenience, but where he stands at times of challenge and controversy.” Although Justice Archer quoted from a speech, on race relations and diversity, delivered by Dr. King many years previously, those quotes are still true today and are fully applicable to the elimination of bias in the legal profession and the workplace. We are governed by the rule of law and the legal profession is viewed as the keeper of the same. We must cease being afraid to speak up when we hear, see or otherwise come upon unlawful bias in words or deeds. If there is no more reasons for doing our part to

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eliminate bias, and we hope we all believe there are, we should feel compelled to do so for the good of the profession and because it would be good for business. The world is rapidly changing. None in the U.S. know this better than Californians. It is projected by the year 2056 that people of color will constitute a majority of the U.S. population. We are only a few years short of this population shift in the State of California. Yet we still find that ethnic minorities and women (combined and based upon their race and gender) are 60% more likely to be the subject of bias and discrimination than any other group.16 As these population shifts occur so does the norms of our way of life. Undesirable biases in our profession and the workplace that go unchecked today will be waiting to confront us tomorrow. Now is the time for action by each of us. We should not tolerate or accept expressions of bias or action that foster them. Efforts to Reduce Negative Biases, Especially in the Workplace We should not take offense but be ready to listen when an apparent improper bias is exhibited in the workplace and some one has pointed it out to us. It is the recognition that growth and positive change occurs only when we are made aware that we might be engaging in improper bias conduct and we accept that fact. “It is always easier for us the look at the speck in our brother’s eye than to consider the plank in our own eyes. We must, first, remove the plank from our own eye, and then we will see clearly to remove the speck from our brother’s eye.”17 We should never be afraid to extend apologies for perceived bias conduct. We have become such a litigious society that we equate extending an apology with the creating the first cause of action in a lawsuit. As a consequence, we lawyers, universally advise our clients to say nothing because it might be used against their position later. While continuing to protect the rights of our client, we need to also consider whether our action sometimes add fuel to the flames or does more harm than good to possible early resolution. Finally we should seek out others (for purpose of growth and change) to get a better understanding of why certain words or conduct are considered bias. Most of the time, we should have a clue that we are exhibiting inappropriate bias. However, there are many occasions when ones cultural, geographic habits or other aspects of our growth do not readily indicate to us that certain words or actions are deemed to be biased and offensive to others. For example, the use of the phrase, “he welshed on me” or “they were engaged in a Mexican stand-off” are offensive to the groups referenced therein. But some of us use these phrases meaning no harm or disrespect to members of those groups. We’ll see other examples of this in hypotheticals below. You will note that all of the above recommendations for reducing negative biases in the profession and the workplace suggest looking inward to one’s self. The reason is

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it is much better to start looking at yourself than to receive mandates to do so from those in positions of authority. And you can’t help others until you have placed yourself in the best position to do so. If you approach another with an offer to help him or her with a bias and that person is able to instantly list your offensive biases, perhaps a few of which he or she picked up from you, your credibility for promoting change is reduced to zero. After one has focused inward to reduce possible negative impacts of bias in the profession and the workplace, the next step is to review what policies the employer has in place to address bias. These should include sound (substantive, understandable and achievable) policy objectives which are applied and enforced fairly. This should include a fair, objective and serious complaint process; adequate training which is updated and repeated with some degree of frequency to ensure new hires know what is acceptable; and a fair and objective mechanism of monitoring compliance. Finally, select the best time, place and approach to raise the subject of bias; discuss what it means to work on eliminating bias; what you did to eliminate your own bias; how you feel after doing so; and what it would mean to other individuals and the workplace, as a whole, to reduce biases. Recruit that person to work on his or her own biases and then join you in approaching others to do the same. Relevant Bias and Discrimination Statistics • One in six U.S. employees complained of discrimination in 2008. • 15% of all U.S. workers perceived that they were the target of bias in 2008. • 31% of Asians, 26% of African Americans, 22% of white women, 18% of

ispanics and 18% workers over 40 complained of some form of bias treatment. H • Religious discrimination involving Muslims has doubled since 9/11/01. • In 2005, the Council of American-Islamic Relations received more discrimination omplaints in California than any other state, 378 or 19% of all complaints that year. c

• Gender was the number one bias in the workplace for the past two decades. • Age is the current number one bias in the workplace. • Women make up 50% of the current law school grads but only 17% of partners in rivate law firms. p

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• In a 2006 survey conducted by The Women in Law Committee of the State Bar of California, 85% of the women surveyed perceived a subtle but pervasive gender bias

ithin the legal profession. w • Assertive, demanding women in law are scored as too aggressive during performance reviews while their male counterparts are given high marks for the same ehavior. b

• 53% of workers surveyed in a 2008 workplace survey stated that they believe their companies would become more productive if it had greater appreciations for iverse backgrounds. d

• And if none of the above gives rise to great concern for bias and discrimination in the workplace, try this: Workplace bias costs companies $64 billion annually. Bias and Discrimination Hypotheticals We shall briefly examine and discuss as many of these hypotheticals as time permits to determine what, if any, bias is readily apparent and what course of action could the attorneys have taken to diplomatically but directly address them. 1. All counsel (four male counsel for plaintiffs; one female and three male counsel for defendants) and their clients are present for a settlement conference, the presiding female judge says to the female lawyer, “Ms. Counsel I’ll hear from you first because the women always go first in my courtroom.” And then in a clearly joking manner, she says, “besides we women have to stick together.” All counsel just smirk as the female attorney proceeds to explain her client’s position. 2. A Hispanic Attorney had been serving in the City of Las Wages City Attorney’s office for more than 15 years when he was appointed City Attorney. The office is comprised of 30 attorney and 65 support staff members. The new City Attorney was the only attorney of color in the office at the time of his appointment. At the initial staff meeting following the appointment, staff comprised of attorneys and support personnel asked whether the future hiring criteria would include race as a factor. There are no Prop 209 laws in the Federal territory where Las Wages is sited. 3. Upon recognizing that the short list of qualified applicants for a recent vacancy consisted of three Republicans and one Democrat candidate (an educated assumption based upon their resumes). The hiring authority, a Democrat, hired the one with the Democratic affiliation despite the fact that at least two of the Republicans demonstrated qualifications far superior. 4. A female attorney is assigned to work on a case with a more senior male attorney. The female attorney does the majority of the work in the case, including handling depositions and law and motion matters. A mediation is scheduled in the case. The female attorney appears for the mediation with her client, the defendant's representative, who is another female in her mid-30's. The plaintiff's attorney, a male in

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his 50's, states at the mediation that the Defendant must not be taking the case seriously because of the representatives it sent to the mediation. 5. The City Attorney of the City of Alpha and Omega is a Black male. His four Assistants consist of three white males and one Hispanic female. At a meeting at the City Attorney’s office to discuss a major litigation matter with outside counsel (three white males), the City Attorney had a prepared list of detailed questions which were propounded to outside counsel. Each response given by outside counsel was directed to the three white male Assistants. 6. The City Attorney had a bouncy habit of entering the office each morning greeting the staff (attorneys and support alike) “good morning men and ladies.” Would the response differ if the greetings were made to a group of females all of whom were superior to the greeting attorney? For example if he greeted the mayor and council members in the same fashion and a substantial majority of the council was composed of females. 7. The City Attorney was a devout Christian. He frequently wrestled with differences in his religious teachings and the secular laws that governed how he should interact with others in the workplace. During the hiring process, he learned that one of the finalists is gay, something that his religious tenants disfavor. He talks to his religious leader, not about the specifics of the individual applicants but about the fact that he might be faced with the prospect of going against the teachings and laws of God if he hires a gay but against the secular laws if he factors the person’s gay status into his decision not to hire her. 8. A female attorney appears at a court reporting firm to take the plaintiff's deposition in a sexual harassment case. The plaintiff is a male who alleges sexual harassment by a female manager. The plaintiff's attorney, a middle aged male, introduces his client to the female defense attorney. The plaintiff responds by stating that "at least I have something good to look at during the deposition". 9. A white male law and motion judge has a policy of reserving the jury box for female lawyers (who he refers to as the gals) to sit until their matter is called while requiring male lawyers to sit on the first two rows behind the bar. 10. An Assistant City Attorney has provided impeccable legal work to the City of Logos for 12 years. He has a gift of gab and considered himself a ladies man. He frequently tells off-color gender and race based jokes (some in mixed company and other while he is with the boys). Those present when he tells the jokes just laugh at them because they know that he does not have a prejudice bone in his body. However, some staff consider themselves the brunt of some jokes and are increasingly complaining to each other that something should be done. 11. Apparently intending to be complementary, a white male judge frequently states to municipal clients who appear in his court with a Deputy City Attorney, “You know you have one of the best Black attorneys around representing you.” 12. City Attorney for the City Fairness is interviewing for the position of DAC. The City has an extremely tight budget. The top applicant for the position is legally blind. She utilizes the service of a guide dog and needs the assistance of another

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person to assist with reading materials. Since the City Attorney has no funds available to hire an aid for the candidate, he hires the next best candidate.

13. A male attorney is starting trial in a complicated, multi-party lawsuit. A young, female attorney in his office has assisted him in all pre-trial proceedings and trial preparation. The male attorney tells his superior that he really wants the female attorney to try the case with him, but he thinks she is "too attractive" to take to trial. 14. Maria Chin, assigned to the misdemeanor prosecution unit, was given all cases involving Chinese-speaking citizens. This assignment was disfavored by most prosecutors. 15. Melinda Davis, a Deputy City Attorney, was assigned to the asset seizure unit which required an unusual amount of note taking and record keeping. She was assigned by her supervisor to take notes at all team meetings because she had typing skills which she acquired as a legal secretary prior to becoming an attorney and because she has good handwriting. We are fully appreciative that much of this paper and the accompanying presentation was preaching to the choir. We are hopeful that something written here or discussed during the presentation has and will continue to be a source of encouragement for you to reach out and bring others into the fold of those who are committed to the never-ending task of stamping out negative bias, especially in our profession and the workforce. If you know of other matters we should include in similar discussions of this topic in the future, please do not hesitate to send us an email. On behalf of our firm, RANDOLPH CREGGER AND CHALFANT LLP, it has been our distinct pleasure to share some information on the subject and a few of our thoughts with such a distinguished group of cutting-edge lawyers in the field of municipal law. We leave you with this thought - We will get the upper hand on bias, and discrimination in the profession and the workplace and everything will be alright if we all treat (and expect those with whom we work and associate to treat) everyone the way we would like to be treated if we were in their shoes because one day, if we live long enough, we will be in at least one group where we will be on the other side of the bias and possible discrimination issue. Remember to live each day as if it is your last - and one day you’ll be right and

appy that you lived it that way. h

1 Revised Judicial Council of California Civil (CACI) and Criminal (CAL CRIM) Jury Instructions, 2008 - Instructions 100 and 200 respectively 2 California Rules of Professional Conduct, Rule 2-400 3 Diversity Jobs.com Network, July 15, 2008 4 Adecco USA Workplace Insights Survey, Diversity Jobs.com Network, July 15, 2008 5 Management - Issues - The Shape of Things to Come, February 11, 2005 6 BBC News, Finland, June 2005

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7 "Terminated: Why the Women of Wall Street Are Disappearing," by Anita Raghavan, March 16, 2009, Forbes Magazine. 8 2007 National Association of Women Lawyers Survey on the Retention and Promotion of Women in Law Firms, can be found at www.nawl.org/Assets/Documents/2007+Survey+Report.pdf 9 2008 National Association of Women Lawyers Survey on the Retention and Promotion of Women in Law Firms, can be found at www.nawl.org/Assets/Documents/2008+Survey.pdf 10 "The Progress of Women Lawyers at Big Firms: Steadied or Simply Studied?" by Judith S. Kaye and Anne C. Reddy, Fordham Law Review, March 2008 Vol. 76, No. 4) can be downloaded at http://law.fordham.edu/lawreview.htm 11 Women in the Law, by Shimon Shetreet, Kluwer Law International, 1998, Chapter 8, "Perspectives on Women in Public-Sector Law," by Deborah S. Katz 12 "Fair Measure: Toward Effective Attorney Evaluations, Second Edition," August 2008, can be purchased as www.abanet.org 13 Management-Issues, August, 2006; Times OnLine, July 2004 14 BBC News, Norway, March 2006 15 Jacobellis vs Ohio, 378 U.S. 184, 197 (1964) 16 Management - Issues, December 9, 2005, citing results of a Gallop Poll conducted to mark the 40th Anniversary of the EEOC 17 Book of Matthew 7:3 and 5

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League of California Cities May 2009

City Attorneys Spring Conference

Speakers’ Biographies

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MANUELA ALBUQUERQUE

Manuela Albuquerque was City Attorney of the City of Berkeley from 1985-2007 serving in the Berkeley City Attorney’s office since 1981. She was President of the City Attorneys’ Department in 1994 and represented City Attorneys on the League Board of Directors from 2004 - 2006. She has served on many City Attorneys’ Department Committees over the years, including committees that developed written guidelines on ethics, due process, and Proposition 218. Since its inception, she has been a member of the City Attorney’s Department’s Municipal Law Institute Committee, which sponsors an annual academic symposium on cutting edge municipal legal issues. On Manuela’s retirement at the end of 2007 after twenty-two years as Berkeley’s city attorney, she vowed to take at least a year off from city attorney related work to smell the roses. Proving the point that you can take the girl out of the city attorneys’ office but you can’t take the city attorney’s office out of the girl, in 2008 Manuela wrote the League’s California Supreme Court amicus brief in Morongo Band of Mission Indians v. California State Water Resources Control Board (2009) 731 Cal.4th 731 and was actively involved in putting together the Municipal Law Institute Committee’s October 2008 program on immigration and economic issues. Manuela’s unfortunate addiction caused her to volunteer to prepare a paper on due process for the May 2009 conference in light of the Supreme Court’s decision in Morongo Band of Mission Indians v. California State Water Resources Control Board, and to accept appointment to the 2009 Due Process Committee and reappointment to the Municipal Law Institute Committee. In her defense Manuela points out that she has also traveled extensively, been taking Brazilian jazz piano lessons, become a birdwatcher and has engaged in other leisure activities of which she only dreamed those many late Tuesday Council meeting nights. Ah……but the siren call of municipal legal work irresistibly draws her back.

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THOMAS BROWN Tom joined Hanson Bridgett in 2005 after serving for 12 years as the City Attorney for the City of Napa. Before his tenure with Napa, Tom served for six years as Senior Deputy City Attorney for the City of Berkeley. He attended Hastings College of the Law, from which he received his J.D. in 1982, and the University of California at Santa Barbara, where he received a BA in English in 1978. Tom represents public agency clients in all aspects of municipal law, including land use, zoning and planning, the California Environmental Quality Act ("CEQA"), the Subdivision Map Act, real property entitlements, permit streamlining, affordable housing, density bonuses, exactions, general plan conformity, the Housing Element law, the Least Cost Zoning law, growth control police power, municipal taxation, code enforcement, intergovernmental relations, grand juries, elections, initiatives and referenda. Tom has litigated extensively. His published decisions include: Black Property Owners Association v. City of Berkeley, 22 Cal.App.4th 974, the successful defense of the City’s Housing Element; Saad v. City of Berkeley, 24 Cal.App.4th 1206, the successful defense of the City’s denial of a Use Permit; Fisher v. County of Alameda (1993) 20 Cal.App.4th 12 and City of Berkeley v. Cukierman (1993) 14 Cal.App.4th 1331, the successful defenses of the City’s Real Property Transfer Tax and the City’s Business License Tax against constitutional and statutory challenges; Home Builders Association v. City of Napa, 90 Cal.App.4th 188, cert.den. 535 U.S. 954, the successful defense of the City’s Inclusionary Ordinance; Smith v. City of Napa (2004) 120 Cal.App.4th 194, the successful defense of the denial of PERS disability retirement benefits to a former city firefighter who had been terminated for cause.

Tom has taught California Land Use Law at Sonoma State University. He has spoken at both the National and State Planners Conferences. He has presented many papers on municipal law, land use and CEQA issues to the City Attorney’s and City Clerks’ Departments of the League of California Cities, to the County Counsels Association and to the City Clerks Association.

He has authored or co-authored several amicus curiae briefs for the League of California Cities. Most recently Tom wrote the amicus brief for the League and the California State Association of Counties to the California Supreme Court in the case of Hernandez v. City of Hanford (2007) 41 Cal. 4th 279. The Court agreed with the amicis’ argument in support of Hanford's adoption of zoning to accommodate certain larger retail uses.

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MARY BETH COBURN, P.E.PartnerSan Diego655 West Broadway15th Floor

TEL: (619) [email protected]

Ms. Coburn is a Partner in the San Diego office of Best Best & Krieger LLP. Ms.Coburn is also a California licensed professional civil engineer with over ten yearsexperience in design and construction of public facilities, including positions with LosAngeles County Department of Public Works and several consulting engineering firms.

Her primary practice area is public works construction law, including constructioncontracting and construction claims resolution and litigation. Ms. Coburn’s uniquecombination of engineering and legal experience is invaluable when assisting with thepublic procurement process, including preparation and negotiation of contractdocuments, prequalification and selection processes and performance and paymentdisputes.

Ms. Coburn assists cities throughout California in virtually every phase of theconstruction process. Additionally, Ms. Coburn’s public works practice includesadvising counties, school districts and water and sewer districts with their public worksprojects.

She has successfully terminated contractors for failure to perform and routinelyworks with sureties on various payment and performance bond issues, including suretytake over of projects in default.

Ms. Coburn is frequently involved in actions brought under the California FalseClaims Act and has experience in false claim actions against contractors for inflating orfalsely submitting extra work claims.

Ms. Coburn routinely speaks to professional organizations, including ASCE,CMAA, CASH and CASBO on various topics related to the construction of publicprojects. In addition, Ms. Coburn regularly presents intensive public works seminars tofirm clients.

She is a member of the San Diego County and the American Bar Associations,Construction Section. She is a member of the State Bar of California and the AmericanSociety of Civil Engineers. Ms. Coburn received a B.S. in Civil Engineering fromMichigan Technological University and received her J.D. from the University of SanDiego School of Law.

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http://www.bbklaw.com/contact-6.html


About . . . Michael Coleman

Michael Coleman is a widely recognized expert on California local government finance. He is the creator of CaliforniaCityFinance.Com, the California Local Government Finance Almanac, an online resource of data, analyses and articles on California municipal finance and budgeting. He has been the League of California Cities' principal fiscal policy advisor for over twelve years, and is a popular guest presenter at conferences and graduate schools. Michael previously worked for the cities of San Mateo, Milpitas, Daly City and Sacramento. He received his BA in Policy Analysis from UC Davis, his MPA from the University of Southern California, and is a graduate of the Coro Fellows program.

Articles and Publications • The California Municipal Revenue Sources Handbook, 2008 Edition. Sacramento, CA,

2008 • "The Road Ahead for Funding City Infrastructure Needs" Western City November 2007 • "Is Your City in Good Financial Shape?" Western City November 2006 • "A Primer on California City Finance" Western City March 2005 • "Local Fiscal Authority and Stability: Control and Risk in California City Revenues"

Western City August 2003 • "The Origin & Devolution of Local Revenue Authority" Western City June 2003 • "State Intrusion Creates Fickle Fiscal Future for Cities" Western City April 2003 • "A Primer on California City Finance" Western City November 2002 • "A Diagnosis and Remedy for City Finance and Governance" Western City November

1999 • "Property Tax Fairness Among Local Governments Means Consolidating Local

Governance" Cal-Tax Digest November 1999 • "A Fair Deal for Internet Sales is A Fair Deal for Communities" Western City July 1999 • "How Cities Put Dollars to Work," Western City June 1999 • "Waiting for the State to Get Its House in Order: The Origin of Cities' Fiscal Relationship

With the State" Western City November 1998 • "Facts About City Dollars" Western City November 1998 • Financing Cities: City Financing in the Decades after Proposition 13, League of California

Cities, May 1998 • "The Finances of Public Safety" Western City, November 1997 • "Drafting a Blueprint for Fiscal Reform" Western City, September 1997 • Proposition 218 Implementation Guide, (contributor) League of California Cities, January

1997 • Living With Proposition 218, (contributor) League of California Cities, November 1996

A wide variety of topical and regularly updated issue briefs and data resources on city revenues, spending, finance and governance topics is available at www.CaliforniaCityFinance.com

For materials from recent presentations by Michael see http://www.californiacityfinance.com/ConferenceMaterials.htm

For more information contact Michael Coleman at 1.530.758.3952 or email to [email protected]

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http://www.californiacityfinance.com/

http://www.californiacityfinance.com/ConferenceMaterials.htm


Michael N. Conneran Hanson Bridgett LLP Michael N. Conneran is a partner is the San Francisco law firm Hanson Bridgett LLP. Michael serves as Assistant City Attorney for the City of Millbrae and General Counsel for the Livermore Amador Valley Transit Authority. He specializes in the representation of public agencies in a variety of matters involving real estate, transportation, and environmental law. He has played an active role in several acquisitions of railroad rights-of-way on behalf of public transportation agencies, including the purchase of the San Francisco to San Jose commuter rail line on behalf of the Peninsula Corridor Joint Powers Board. He is currently assisting that agency with planning and regulatory approvals for electrified rail service on the Peninsula. Michael led the legal effort for the acquisition of real property required for the extension of the BART system to the San Francisco Airport. Michael has counseled public agencies with regard to transit-oriented development projects and has negotiated long-term ground leases and other types of public-private partnerships. Michael received his A.B. degree from the Woodrow Wilson School of Public and International Affairs at Princeton University and his J.D. from Hastings College of the Law.

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Steven L. Dorsey | Shareholder

Practice Areas: E-Documents and Public Records Brown Act, Conflicts of Interest and Ethics Public Agency and Municipal Law Public Works, Construction and Contracting

Education: A.B., Stanford University, 1970 J.D., Stanford University, 1973

T 213.626.8484

F 213.626.0078 E [email protected]

w www.rwglaw.com

Steven L. Dorsey is a shareholder in the Public Law Department at Richards, Watson & Gershon. Since joining the Firm in 1973, Mr. Dorsey has specialized in public agency law. He currently is City Attorney for the Cities of Buena Park, Norwalk and San Marino and is Co-General Counsel to the Los Angeles to Pasadena Metro Blue Line Construction Authority. He also serves as special conflict of interest counsel for L.A. Care Health Plan, a public agency, and as special construction contract counsel for the City of Palo Alto. He has previously served as City Attorney for South El Monte, Cudahy and Rancho Palos Verdes.

Mr. Dorsey is very active in the League of California Cities and has served as a member of the League's Board of Directors. He also has been President of the City Attorneys' Department, chair of the Department's Legal Advocacy Committee, a member of the Department's Legislative Committee and chair of the City Attorneys' Department Fair Political Practices Commission committee.

Mr. Dorsey was a member of the editorial board that wrote the first edition of the League's Municipal Law

Handbook, and personally edited the chapters on Public Property, Public Works and Public Utilities.

Mr. Dorsey also was a member of the City Attorneys' Department committee that authored Practicing

Ethics: A Handbook for Municipal Lawyers and chaired the committee that drafted the Ethical

Principals for City Attorneys, which were recently adopted by the City Attorneys' Department.

Mr. Dorsey has represented various public agencies as special construction counsel. Among the projects on which he has worked are the Pasadena Police Facility, the $82 million South Coast Air Quality District Headquarters building and the Buena Park Police Facility, which is currently under construction. Mr. Dorsey has frequently represented public agencies on conflict of interest issues.

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DEBORAH J. FOX Deborah Fox is principal-in-charge of Meyers Nave’s Los Angeles office, and a member of the firm’s litigation and land use departments. Deborah's practice area includes a variety of constitutional issues relating to the validity of ordinances with an emphasis on First Amendment issues. She has been extensively involved in both federal and state litigation on such challenges. These issues have included testing the legal sufficiency of adult use licensing provisions, sign ordinances, billboard restrictions, solicitation provisions, newsrack provisions, and zoning/permitting for religious entities. Deborah is one of California's foremost experts on First Amendment issues affecting the public sector. Deborah has written and lectured frequently on the First Amendment. She has drafted and defended sign/billboards ordinances, newsrack ordinances, adult use regulations, public forum provisions, parade and park permits, and RLUIPA. Deborah was lead counsel in Gammoh v. City of La Habra (9th Cir. 2005) 395 F.3d 1114, amended 402 F.3d 875, cert. denied 126 S.Ct. 374, where the Ninth Circuit Court of Appeals affirmed the district court=s granting of summary judgment and motion to dismiss, concluding that the City=s ordinance requiring Aadult cabaret dancers@ to remain two feet away from patrons during performances, was carefully tailored to reduce secondary effects. This case serves as the touchstone by which operating standards are judged in the Ninth Circuit and throughout the country. It is the first appellate case to address the evidentiary basis needed for cities to regulate Aclothed@ performances in adult establishments. Deborah is AV rated by Martindale-Hubbell for reaching the height of professional excellence and has been recognized for the highest levels of skill and integrity. She is listed in Martindale-Hubbell's 2004, 2005 and 2006 Register of Preeminent Lawyers. In 2007, she was also named one of California's Top Women Litigators by the Daily Journal for her career achievements and overall contributions to the legal profession.

Deborah received her J.D. from the University of San Diego School of Law in 1983, and her B.A. in Political Science and Cultural Anthropology from the University of Michigan in 1980.

Deborah J. Fox Meyers Nave 333 South Grand Avenue, Suite 1670 Los Angeles, CA 90071 213.626.2906; 213.626.0215 Fax [email protected]

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BIOGRAPHICAL SKETCH

Eugene P. Gordon

Eugene P. Gordon is a Deputy City Attorney in the San Diego City Attorney's Office. Since February 2008 when he retired from the City, he has been working on a part-time basis in the City Attorney’s Office. He is assigned to the Trial Unit in the Civil Division where he specializes in the defense of personal injury cases brought against the City and its employees. Such litigation involves alleged dangerous conditions of public property, such as highway design and trip-and-fall cases, police K-9 bite cases, false arrest and excessive force cases, including section 1983 cases, and City vehicular accidents.

From 1971 to 1978, Mr. Gordon was Legal Advisor to the San Diego Police Department where he was instrumental in providing legal in-service training programs, including the publication of legal training bulletins for police officers. He provided on-the-scene legal advice to police supervisors in the proper handling of civil demonstrations and disturbances, was available for consultation on legal matters to officers in the field and played an important role in drafting legal policies and procedures. While Police Legal Advisor, Mr. Gordon was a member of the Legal Officers Section of the International Association of Chiefs of Police, and in 1976 he was General Chairman of the section. He was also a contributor to the “Chief's Counsel,” a legal column in the “Police Chief Magazine,” a monthly publication of the International Association of Chiefs of Police.

Mr. Gordon was a prosecutor in the Criminal Division of the City Attorney's Office from 1969 - 1971 where he prosecuted a variety of misdemeanor cases. He served as Assistant Chief Criminal Deputy for one year prior to becoming Police Legal Advisor in May 1971.

Mr. Gordon teaches extensively at the San Diego Regional Public Safety Training Institute at Miramar College in San Diego on the subjects of civil and criminal liability of law enforcement officers, constitutional law, and use of force to police recruits, advanced officers and Field Training Officers. He was an instructor in the San Diego Sheriff's Department Academy at Southwestern College on the subject of civil and criminal liability of law enforcement officers, and he taught the sixteen-hour course on search and seizure at the San Diego Police Academy from 1972-1979.

Mr. Gordon has lectured at numerous seminars for police administrators sponsored by the International Association of Chiefs of Police on the subjects of police discipline, civil liability and discovery of police officers' personnel records. He has also lectured on municipal tort liability at NIMLO and League of California Cities conferences. Mr. Gordon has provided legal updates at numerous PRIMA and PARMA conferences.

In 1992, Mr. Gordon served on the California Commission on Peace Officer Standards and Training (POST) Committee on “Police Use of Force,” Executive Report, July 1992. In 1996, he assisted POST in revising the Police Supervisory Course curricula.

Admitted to the California State Bar in 1968, Mr. Gordon received his legal education at Hastings College of Law in San Francisco. He received his B.A. degree from the University of California, Riverside.

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MARTIN “PETE” GROVER

Pete Grover is an Assistant City Attorney for the City of Vista. Mr. Grover holds a Bachelor’s of Arts Degree in History from San Diego State University and received his Juris Doctorate (cum laude) from California Western School of Law. Mr. Grover, also holds the rank of Captain in the United States Navy Judge Advocate General Corps.

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Patrick K. Hanly Sacramento, California Phone: (916) 773-2211 Fax: (916) 449-9543 http://www.patrickhanlylaw.com Patrick K. Hanly has been practicing criminal law since 1989. He is a former federal prosecutor of 15 years and a graduate of the University of Southern California Law Center. Mr. Hanly represents individuals and businesses throughout California who are being investigated or who have been charged by state or federal authorities. He practices in all areas of criminal law, with a special emphasis on business and professional crimes. Mr. Hanly uses his experience in criminal matters in state and federal courts to help his clients who are under investigation or who have been charged with crimes in state and federal court. An accomplished and respected trial lawyer with over 60 criminal jury trials to his credit, Mr. Hanly knows his way around a courtroom and he puts that knowledge to work for his clients every day in all areas of criminal law. As a former prosecutor, Mr. Hanly knows the inner workings of the prosecutor's office. He knows what does and does not work in the criminal prosecution game. Moreover, his experience allows him to quickly spot the weakness in the government's case and use that weakness to his client's advantage. Navigating the treacherous waters of a criminal prosecution is difficult. To deal with the awesome power of the government you need someone with experience; someone who has been there. Mr. Hanly will put his knowledge of the inner workings of the prosecutor's to work for you. Put knowledge and experience on your side. Mr. Hanly's experience can provide you with peace of mind, knowing that you are in capable, experienced hands.

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Areas of Practice: Criminal Defense Fraud Mail and Wire Fraud Bank Fraud Tax Fraud Consumer Fraud Health Care Fraud Embezzlement Money Laundering Civil and Criminal Matters Involving the SEC Criminal Tax Defense Forgery Computer Crime Environmental Crime Major Narcotics Defense Official Misconduct Criminal Law

Bar Admissions:

California, 1987 U.S. District Court Central District of California U.S. District Court Eastern District of California U.S. District Court Southern District of California U.S. Bankruptcy Court Northern District of California U.S. Court of Appeals 9th Circuit

Education:

University of Southern California Law Center, Los Angeles, California, 1986 J.D.

University of Texas, Austin, Texas, 1980 B.A.

Classes/Seminars Taught:

Speaker, White Collar Crime Issues, California Lawyer, 2005

"Honest Services Fraud," State Association of County Retirement Systems (SACRS) Spring Conference 2006, Sacramento, California, May 10, 2006

"Health Care Fraud," California Association of Health Plans, Indian Wells, California, October 20, 2005

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"Confidentially Under Fire: How In-House Counsel Can Survive the Onslaught against the Attorney-Client Privilege and the Attorney Work Product Doctrine," Association of Corporate Counsel, SoCal Chapter, Los Angeles, California, July 20, 2005

"Handling Administrative Law Cases In the Face of Criminal Law Issues" Sacramento County Bar, Administrative Law Section, April 13, 2007

"Anatomy of a Public Corruption Case" Conference Lecture for League of California Cities, Monterey, July 2007

Professional Associations and Memberships: Sacramento Federal Bar Association Member

American Bar Association, Criminal Law Section Member

Los Angeles County Bar Association Member

Past Employment Positions: Prosecutor, Criminal Division, United States Attorney's Office for the Eastern District of California

Nossaman Guthner Knox & Elliott LLP, Partner

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Samuel L. Jackson - Of Counsel RANDOLPH CREGGER AND CHALFANT LLP

Mr. Jackson currently practices law with the law firm of Randolph Cregger & Chalfant LLP in Sacramento, California. He also serves as Assistant City Attorney for the City of Sutter Creek. Mr. Jackson is a former Sacramento County Deputy District Attorney, a former Deputy City Attorney and the retired City Attorney for the City of Sacramento, having retired from the latter in January, 2006, after serving approximately 12 years in that position. He was a 27 year veteran of the Sacramento City Attorney=s Office. Mr. Jackson holds an AA degree and a BA degree in the Administration of Criminal Justice and a Juris Doctorate Degree.

As a Deputy City Attorney, City of Sacramento, he served in capacities ranging

from the entry-level deputy to supervising deputy. He has more that 30 years of personal experience in the Courts of the State of California, all Federal District Courts located within the State of California, the Ninth Circuit Court of Appeals and the United States Supreme Court.

During his tenure with the City Attorney=s Office, Mr. Jackson served in a

number of job-related volunteer capacities including frequent lecturer at law schools and with the City Attorney=s Department of the League of California Cities (LCC), he served on numerous ad hoc and standing LCC committees, including service as counsel to the Committees on Public Safety, Transportation Communication and Public Works, Housing Community and Economic Development, Community Services, Employee Relations and Legislation.

Mr. Jackson has served on numerous local, state and federal boards and

commissions in both the public and private sectors. He is a Past President of the Sacramento County Bar Association, Past Vice President and Treasurer of the California State Bar Board of Governors, Past President of his Law School Alumni Association, Former College Professor, Past Chairman of the California Committee of Bar Examiners and the author of a text book. He is the recipient of numerous awards and honors for his professional and community services.

He has taught Ballroom dancing since 1999.

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MICHAEL JENKINS CHRISTI HOGIN MARK D. HENSLEY BRADLEY E. WOHLENBERG KARL D. BERGER GREGG KOVACEVICH JOHN C. COTTI LINDA A. BURROWS LAUREN B. FELDMAN

MANHATTAN TOWERS 1230 ROSECRANS AVENUE, SUITE 110

MANHATTAN BEACH, CALIFORNIA 90266 (310) 643-8448 • FAX(310) 643-8441

WWW.LOCALGOVLAW.COM

WRITER’S EMAIL ADDRESS: [email protected]

Michael Jenkins currently serves as City Attorney for the cities of Diamond Bar, Hermosa Beach, Rolling Hills and West Hollywood, as General Counsel to the Antelope Valley Mosquito & Vector Control District, the Los Angeles County West Vector Control District, the San Gabriel Valley Mosquito and Vector Control District and the West Valley Mosquito & Vector Control District, as General Counsel to the South Bay Cities Council of Governments and the Westside Cities Council of Governments, and as special counsel for numerous municipalities around the State.

Michael served as President (1993) and Director (2005-2007) of the City Attorneys Department of the League of California Cities (1993), co-authored the original version of the League’s Municipal Law Handbook, and served as editor of Open & Public III and IV. Michael also served as President of the City Attorneys Association of Los Angeles County and Member of the Executive Committee of the Public Law Section of the State Bar (and Editor of the Section Newsletter). For the past twenty-five years he has taught local government law at the University of Southern California Law Center and is a frequent lecturer on municipal law subjects and author of training programs and exercises for municipal lawyers and elected officials.

Michael is an honors graduate of Haverford College and Duke University School of Law, where he served as Executive Editor of the Duke Law Journal.

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Kathy Jenson has practiced in the Public Law Department of Rutan & Tucker, LLP since her graduation from Ohio State University, College of Law in 1983, and became a partner of the firm in 1990. She is the Chair of the firm’s Land Use/Natural Resources Practice Group. Kathy has taught numerous CEQA courses, including: Update on Regulation of Greenhouse Gas Emissions and Water Supply Issues – 2009; Update on Recent Development in Land Use – 2009; CEQA Training: The Nitty-Gritty of CEQA Compliance, Long Beach – 2008; CEQA Compliance for Property Acquisition: Property Acquisition - Defining the Project, Phasing, Timing and Scope of Environmental Review, Long Beach – 2008; CEQA’s Dirty Dozen: A Guide to Steering Clear of the 12 Most Common CEQA Mistakes, Long Beach – 2007; Update on New CEQA Cases – 2007; Update on Air Quality Developments and New CEQA Decisions – 2007; Review of 2006 CEQA Cases - 2007; Building Communities, Orange County Conference for Woman - 2006; Defending Land Use Approvals in CEQA Litigation and from Challenges under the Federal and State Endangered Species Act, League of California Cities, City Attorneys Conference - Spring 2000; What's New and Exciting Under the California Environmental Quality Act, APA Annual Conference - 1996; CEQA Guerrilla Warfare - A Litigator's Perspective, Cahuilla District of the APA - 1996; Recent Developments Regarding the California Environmental Quality Act, APA Nuts and Bolts Conference on Zoning - 1994. Kathy’s published land use articles include "Twenty Ways to Improve Your Administrative Record and Increase Your Chances for Success in CEQA Litigation" (Public Law Journal, Fall 1999).

Kathy has handled numerous land use cases before various courts of appeal. Her published cases include: Torres v. City of Yorba Linda (1993) 13 Cal.App.4th 1035; Burchett v. City of Newport Beach (1995) 33 Cal.App.4th 1472; Clark v. City of Hermosa Beach (1996) 48 Cal.App.4th 1152; City of Vernon, et al. v. Board of Harbor Commissioners, et al (1998) 63 Cal.App.4th 677; Cantrell v. City of Long Beach, et al. (9th Cir. 2001) 241 F.3d 674; California Earth Corps California State Lands Commission (2005) 128 Cal.App.4th 756. Her unpublished decisions include: Stop Taking Our Parks et al. v. City of Long Beach (Second Dist., Case No. B156347); Citizens of Orange Park Acres Coalition v. City of Orange, et al. (Fourth Dist. Case No. G024841); Huell Howser v. City of Long Beach (Second Dist. Case No. B123336); Sierra Club v. City of Palm Springs, et al. (Fourth Dist. Case No. E023399); Huell Howser v. City of Long Beach (9th Circuit Case No. 98-55351); Friends of Coachella Valley v. County of Riverside (Fourth Dist. Case No. B017901) [tentative opinion]; Ignacio Barajas, et al. v. City of Santa Ana and Orange County Register (Fourth Dist. Case No. G011307); and Raphael Babay, et al. v. City of Lynwood, et al. (Second Dist. Case No. B046883).

Kathy also had the pleasure of arguing before the California Supreme Court on behalf of the League of California Cities in City of Long Beach v Department of Industrial Relations, et al., (Case No. S118450), 34 Cal. 4th 942 (2004), involving charter city and prevailing wages issues.

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Kiko Korn is the founder of Legal Writing Works, a consulting firm that provides in-house writing workshops and one-on-one consultations for lawyers, law students, and other legal professionals across the country. Each year, Kiko helps hundreds of legal writers improve their craft. Before founding LWW, she was an adjunct professor of Legal Writing and Advocacy at the USC Gould School of Law.

Kiko’s practice experience includes serving as a senior deputy city attorney in San Francisco and as a deputy attorney general in the Appeals, Writs, and Trials division of the California Attorney General’s Office. She also worked for the international law firm Kirkpatrick & Lockhart and clerked for the Honorable John Webb of the North Carolina Supreme Court. While practicing law, Kiko taught several courses in law and writing. She frequently presented seminars and MCLE workshops on topics such as recognizing and preventing sexual harassment, implementing the disciplinary process in the public sector, and writing winning arbitration briefs. Kiko graduated from Stanford University in 1991 with a degree in American Studies. In 1995, she received her J.D. with Honors from the University of North Carolina at Chapel Hill School of Law, where she was a published staff member and editor of the North Carolina Law Review. Kiko lives in Los Angeles with her husband and two children.

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MARC A. LEVINSON Marc Levinson is a partner in Orrick, Herrington & Sutcliffe LLP, resident in its Sacramento office. Since starting his career as an associate in Shutan & Trost in Los Angeles in 1975, his practice has been limited to insolvency planning, bankruptcy cases and workouts and other out-of-court reorganizations. Current and recent clients include the City of Vallejo, a chapter 9 debtor in a case pending in Sacramento; a creditors committee in the chapter 11 case of a real estate developer, also pending in Sacramento; an equity committee in a case in Las Vegas (and now the revested debtor); and several institutional lenders in the workout of their substantial loans to real estate developers. He has served as an examiner in cases in Oakland and Sacramento. Mr. Levinson is a conferee of the National Bankruptcy Conference, and is a member of the Board of Directors of the American College of Bankruptcy. He is a past president of both the California Bankruptcy Forum and the Sacramento Valley Bankruptcy Forum. In April 2009, he was named by The American Lawyer as one its Dealmakers of the Year for his role in the Vallejo chapter 9 case. Mr. Levinson received his B.A. in English from UCLA in 1970, and his J.D. from the U.C. Davis School of Law in 1973, where he was the Editor-in-Chief of the Law Review. He served as a law clerk for Chief Justice Donald R. Wright of the California Supreme Court (1973-74) and for Judge William H. Orrick, Jr. of the U.S. District Court for the Northern District of California (1974-75). Orrick, Herrington & Sutcliffe LLP 400 Capitol Mall, Suite 3000 Sacramento, CA 95814-4497 Bus: (916) 329-4910 Fax: (916) 329-4900 email: [email protected]

OHS West:15674951.9

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{00028380.DOC; 1}

Biography for Whitman F. Manley

March 2009

Whit Manley is a partner at Remy, Thomas, Moose and Manley LLP, an environmental law firm located in Sacramento, California. His practice focuses on the California Environmental Quality Act, the California Planning and Zoning Law, and other State and Federal environmental and land-use laws. He represents and advises public agencies, developers and citizens groups in administrative proceedings and in trial and appellate litigation. With his partners, he is co-author of Guide to the California Environmental Quality Act (11th ed. 2007, Solano Press Books). Whit received his undergraduate degree in philosophy from the University of California at Berkeley (1981). He received his law degree from Cornell Law School (magnu cum laude, Order of the Coif, 1987), where he served as Editor in Chief of the Cornell Law Review. He lives in Woodland, California with his wife, two daughters, and a poorly behaved puppy. Wfm/01/bio

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Biographical Sketch - James L. Markman

Mr. Markman obtained his Bachelor of Arts Degree from Dartmouth CollegeHanover, New Hampshire , in 1965 and Law Degree from Cornell University Law Schoolin 1968. From 1968 through 1970 , he served as Deputy Attorney General for the State ofCalifornia, Los Angeles Offce , where he specialized in water rights and pollutionmatters. He personally represented numerous California Regional Water Quality ControlBoards and , in that capacity, instituted the first four civil suits brought under the Porter-Cologne Water Quality Control Act, which cases were related to the pollution ofMonterey Bay. While with the Attorney General's offce , he also solely handled 53 casesin the appellate courts of this State , including three before the California Supreme Court.

From 1970 to November 30 , 1978 , he was employed by and a principal in the firmWhelan and Markman , a Professional Law Corporation. A high percentage oftheservices performed by that firm during that period were on behalf of public entitieslocated in Los Angeles , Orange , Kern , San Bernardino and Ventura Counties. Clients Whelan and Markman included the City of Brea, Brea Redevelopment Agency, City ofBaldwin Park, City of Villa Park, City of Whittier, Whittier City School District , WhittierUnion High School District, Central and West Basin Water Replenishment DistrictLa Habra Heights County Water District and Tehachapi-Cummings County WaterDistrict. In serving those clients , he obtained extensive experience in all areas ofmunicipal , redevelopment and water law. Specifically, as to water rights mattersMr. Markman has represented public entities in virtually all of the major groundwateradjudications in southern California from 1970 to the present. Those adjudicationsinclude the Upper San Gabriel Valley adjudication, the Central Basin of Los AngelesCounty adjudication, the Chino Basin adjudication, the Cummings Basin adjudicationthe Mojave River Basin adjudication, the Santa Maria adjudication and the AntelopeValley adjudication.

From December 1 , 1978 through July, 1997 , Mr. Markman practiced municipalredevelopment and water law through his own firm , serving as City Attorney for sixmunicipalities.

As of August 1 , 1997 , Mr. Markman joined Richards , Watson & Gershon, a firmwhich represents numerous cities and other public entities. In addition to the cities itpreviously represented , Mr. Markman s addition has brought as clients to RichardsWatson & Gershon the City ofBrea, Brea Redevelopment Agency, the City of La MiradaLa Mirada Redevelopment Agency, the City of Upland, the Upland RedevelopmentAgency, the City of Buena Park, Buena Park Redevelopment Agency, the City ofRancho Cucamonga, Rancho Cucamonga Redevelopment Agency, Walnut Valley WaterDistrict and other public and private concerns. Mr. Markman presently is the CityAttorney for the cities ofBrea, La Mirada and Rancho Cucamonga. He also serves asGeneral Counsel to the Brea, Buena Park, La Mirada, Rancho Cucamonga and Whittier

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Redevelopment Agencies. Mr. Markman previously served as City Attorney for the citiesof Buena Park (1983- 1999), Hesperia (1988- 1998) and Upland (1994-2003).

Mr. Markman was a principal trial counsel in the successful second effort toadjudicate and bring management to the water resources of the Mojave River Basin. Heargued the position of the Stipulating Parties in the California Supreme Court in theMojave River Basin adjudication (City of Barstow v. City of Ad elan to) , the last waterrights case to be considered by the Supreme Court. Mr. Markman represents publicentities involved in active water rights negotiations and related matters in Orange County(Trabuco Canyon Water District), Los Angeles County (City of Palm dale) and SantaBarbara and San Luis Obispo Counties (Nipomo Community Services District). Hepresently is involved in a major project in Sacramento and Sutter Counties involving thetransition of surface water rights serving agriculture to a combination of surface andgroundwater rights which will serve both agricultural interests and municipal andindustrial interests. Mr. Markman has been involved in water company rate proceedingsbefore the Public Utilities Commission and represents parties in marketing and acquiringwater production rights. Mr. Markman also has both defended and challenged legallyrequired 20 year water supply assessments provided for in the Subdivision Map Act formajor developments.

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Genevieve Ng - Associate Practice Areas: Labor and Employment Experience A recent graduate of the University of Santa Clara Law School, Ms. Ng brings to the firm and its clients experience in labor law, labor relations and human resources. She was the Director of Attorney Recruitment at a large law firm in Grand Rapids, Michigan and a member of the Grand Rapids Bar Association Minority Clerkship Committee. Ms. Ng has already proven her mettle by handling complex labor law issues, including intensive research and analysis for cases before the Public Employment Relations Board and National Labor Relations Board, public sector labor arbitrations, and disciplinary matters. Related Experience During 2004-2005, Ms. Ng served as and extern and Board Agent with the National Labor Relations Board, Region 20, where she investigated unfair labor practice charges and oversaw secret ballot elections. In her previous work as an intern with two different law firms in Grand Rapids, she worked on behalf of employers on labor arbitration issues and on NLRB matters, also finding time to perform pro bono work. Education B.A. in Politics, cum laude, University of San Francisco 1996 Saint Ignatius Institute Certificate J.D. Santa Clara University School of Law 2005 Senior Articles and Comments Editor, Santa Clara Journal of International Law Memberships California Community Activities Archdiocese of Grand Rapids Refugee Resettlement Program Volunteer; Katharine and George Alexander Community Law Center Volunteer (2005)

Contact Information Telephone: (415) 678-3830 Fax: (415) 678-3838 [email protected]

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John Pomidor is the City Attorney of Livermore, and has been so since July 2004. Before then, he was an Assistant City Attorney for Vallejo for 15 years; in private practice at times; and Deputy City Attorney for Fremont in the early-mid ‘80’s. John graduated in 1978 from the University of Chicago with a B.A. in “Behavioral Sciences” (aka Psychology) and received his J.D. in 1982 from Ohio State University’s law school - - though in his last year, he moved to the Bay Area to rejoin his then-fiancée while matriculating at the University of San Francisco as a visiting student. In approximately 1993, two years after the birth of his and his wife’s second son, but long enough after the earthquakes and Oakland fire, he was able to stop answering questions about whether he would ever move back to Ohio. John served on the League’s Legal Advocacy Committee from 2006-2008, and this is his third paper presented to the City Attorneys’ Conference. He was co-president of the Bay Area City Attorneys Association from 2006-2008, also. During his 27 years[1] of public entity practice, John has, as you might expect, practiced in almost all areas of municipal law: litigating civil cases as Vallejo’s lead counsel for a period of his tenure there; staffing Civil Service and Planning Commissions; advising the City Council; and drafting the typical and unusual ordinances our clients need and suggest.[2] He supervises a staff of 3.5 other, better attorneys (one is half-time), two support staff, and the Risk Management Division. While he has been able to experience the wonder of a Buckeye national championship (in 2002) once in his adult life,[3] he still waits for his home-team Indians or Browns to demonstrate the existence of a supreme being.[4]

1 Is it really over a quarter-century? Why am I still behind? 2 He advises not drafting ordinances regulating bows and arrows. 3 For which he paid in 2006 and 2007. 4 Don’t bring up Jose Mesa in his presence.

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Stephanie L. Quinn – Senior Associate RANDOLPH CREGGER AND CHALFANT LLP

Stephanie L. Quinn is a senior associate at Randolph Cregger & Chalfant LLP in Sacramento, California, where she has been practicing civil litigation, primarily in the area of employment law, civil rights, railroad litigation, and public entity defense for the past 6 years. Prior to joining Randolph, Cregger & Chalfant, Ms. Quinn practiced for two years in the area of insurance coverage and bad faith litigation and insurance defense at Farmer, Murphy, Smith & Alliston in Sacramento. Ms. Quinn graduated from McGeorge School of Law with distinction in 2001 and is a member of the Order of the Coif. She earned her Bachelor of Arts degree in Government and Italian in 1998 from California State University, Sacramento.

She is licensed and regularly practices in California state courts and the United States District Courts for the Eastern, Northern and Central Districts, as well as the Ninth Circuit Court of Appeals. She is a member of the Sacramento County Bar Association and the National Association of Railroad Trial Counsel.

Ms. Quinn represents municipal and other public agencies in personal

injury matters, employment and civil rights matters, and administrative proceedings. She provides advice to public agency clients and has conducted independent investigations in employment matters.

Her most recently successful employment case in the Ninth Circuit

resulted in a published opinion, Gibson v. Office of the Attorney General, State of California, et al., 554 F.3d 759 (9th Cir. 2009). In that matter, she represented the Office of the California Attorney General where the principle issue involved a challenge to the authority of a public law office to restrict the private practice of law by public agency attorneys. The matter was framed as a First Amendment retaliation case.

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Charles Sakai – Partner Practice Areas: Labor and Employment Experience Mr. Sakai practices in the areas of employment and labor law, representing primarily public sector and nonprofit employers. His practice focuses on traditional labor relations, including unit determinations and modifications, representation and decertification elections, collective bargaining, interest arbitrations, contract grievances and rights arbitration, and unfair labor practice charges. Sakai handles complex negotiations and collective bargaining issues, including multi-party negotiations, interest arbitrations, and collective-bargaining-related litigation for a variety of clients throughout northern California. Related Experience He began his career at the California Department of Personnel Administration, which represents the State Employer in all aspects of labor relations affecting employees of the State of California. At DPA, Sakai maintained a general labor and employment litigation practice, handling State Personnel Board disciplinary hearings, California Public Employment Relations Board (“PERB”) unfair practice charges, and grievance arbitrations throughout the state while providing negotiations support to the department’s labor negotiators. Sakai also advised various state departments on labor relations and personnel matters and handled State and Federal Court litigation, including civil writs, Fair Labor Standards Act litigation and an amicus brief to the State supreme court. In 1996, Sakai accepted a Governor’s appointment as a Legal Advisor to a member of the PERB, the quasi-judicial administrative agency responsible for administering California’s public-sector bargaining statutes. As a legal advisor, Sakai drafted legal memoranda and decisions for his member, and worked with other Board members and legal advisors to interpret and develop California’s public sector labor relations laws and assisted the Board in deciding requests for Injunctive Relief. Sakai also assisted the General Counsel’s office in investigating unfair practice charges and represented the agency in appellate litigation. Sakai remains one of the youngest legal advisors in the board’s thirty year history.

Contact Information Telephone: (415) 678-3808 Fax: (415) 678-3838 [email protected]

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During his tenure with PERB, Mr. Sakai taught “Labor and Employment Law and Legislation” for the University Extension program at the University of California at Davis.

Education Pomona College (B.A. 1991) University of California, Davis Law School (J.D, 1994.) Bar Admissions California Speaking Engagements and Publications Currently serves on the Editorial Board of Bender’s California Labor & Employment Bulletin.

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Sacramento Office555 Capitol Mall 9th Floor

Sacramento CA 95814916.325.5802

[email protected]

Practice Group LeaderPublic Law

Practice FocusEmployment & Labor Law

Public Agency LitigationEminent Domain

Public Law

Stacey N. Sheston |� Shareholder

Professional ExperienceStacey is the Practice Group Leader for McDonough Holland & Allen’s Public Law practice group, with more than 35 members. Since joining the firm in 1996, her practice has focused on advising public agency employers and on public agency litigation including eminent domain. Her clients include both public agencies and private parties with whom they interact.

Representative Matters

EmploymentCounsels clients on day-to-day employment matters, including dealing with problem employees, responding to grievances, drafting employment/separation agreements and other employment policies

Investigates employment complaints, particularly in areas involving harassment and discrimination

Provides interactive training in areas such as harassment/discrimination prevention, leave laws, wage & hour compliance

Represents employers in mediations, arbitrations, administrative hearings, and court proceedings arising out of employment matters

Counsels personnel boards and civil service commissions hearing employment disciplinary appeals

Participates in labor negotiations, both at the table as negotiator and as advisor regarding contract drafting and policy issues

Litigation/Eminent DomainCounsels clients regarding claims received prior to litigation being filed

Provides guidance and advocacy in adversarial property acquisitions, from precondemnation procedures through trial (where necessary)

Routinely litigates various public agency issues (such as inverse condemnation and public meetings/records claims, as well as more general litigation matters)

Prior Legal Matters/CasesSuccessfully resolved unfair labor practice charges filed against several public agency clients with the Public Employment Relations Board

Successfully prosecuted employee disciplinary charges at disciplinary appeals hearings before arbitrators and personnel boards/commissions

Defended local government agencies in PERS disability appeals hearings

Successfully represented agencies in eminent domain actions to acquire property for airport expansion, road and drainage facilities construction, water well siting, and redevelopment activities (including the K Street Mall in Sacramento)

Admitted to PracticeState Bar of California, 1996

All California State Courts

U.S. District Court, Central & Eastern Districts of California

United States Court of Appeals, Ninth Circuit

EducationUniversity of California, Davis, School of LawJ.D., 1996 Order of the CoifEditor-in-Chief, UC Davis Law ReviewMoot Court Outstanding Oral Advocate (fall 1995)Women’s Caucus (co-chair 1994-1995)King Hall Legal FoundationPhi Delta Phi

Drake University B.A., cum laude, History, 1990

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Stacey N. Sheston |� Page 2

Represented the City of Roseville in acquiring property for its celebrated new Douglas/I-80 Interchange project

Former General Counsel, Rio Linda Elverta Community Water District

Presentations/Publications Presenter, “Coping with the Firefighters Bill of Rights,” April 2008 (fire personnel at various client agencies)

Presenter, “How to be a Better Supervisor,” March 2008 (various client agencies)

Presenter, “AB 1825 / Harassment Prevention Training” 2006, 2007 (various client agencies)

Presenter, “Wage & Hour Issues,” Council on Education & Management, Sacramento, 2005

Presenter, “Workplace Harassment & Internal Investigations,” Council on Education & Management, Sacramento, 2005

Presenter, “Labor Negotiations 101” (various client agencies)

Presenter, “Absence Makes the Heart Grow Fonder. . . Leave Law Issues,” (various client agencies)

Presenter, “Case Law Relating to Public Use Doctrine,” Lorman, Sacramento and Oakland, 2005

Author, “Kelo v. City of New London,” McDonough Public Law Bulletin, 2005

Co-Author, “Del Monte Dunes: Not the Sandstorm California Public Agencies Had Feared,” McDonough Public Law Bulletin, 1999

Leadership Positions/AffiliationsMember, State Bar of California

Member, Sacramento County Bar Association – Labor & Employment Section

Member, Women Lawyers of Sacramento

Member, California Public Employers Labor Relations Association

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Biographical Statement Betsy Strauss

Betsy is an attorney specializing in local government law and conflict resolution. Within the local government law field, her practice emphasizes land use and municipal finance. In addition to her work as special counsel to a variety of cities and counties, Betsy is special counsel to the League of California Cities. In that capacity she provides legal advice on a variety of legislative proposals, initiative measures, and constitutional amendments. Recently Betsy has started working with the Institute for Local Government on its Intergovernmental Conflict Resolution Project. She has served as the city attorney for the cities of Napa, Fairfield, and Rohnert Park.

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