Real Estate and Construction Law Blog

by Michael Wilmar and Mary Klima

In the recent case of Padilla v. Lever, No. 03-56259, 429 F.3d 910 (9th Cir. Nov. 23, 2005), the Ninth Circuit (the “Court”) held that Section 203 of the Voting Rights Act of 1965 (the “Act”), which requires voting materials in certain districts to be distributed in specified minority languages, applies to recall petitions circulated pursuant to California law. Specifically, the Court held that recall petitions were “other materials or information relating to the electoral process” and that the Orange County Registration and Elections Department (the “OCRED”) “provided” the recall petitions within the meaning of the Act. The decision makes it likely, if not certain, that in every locale where bilingual or trilingual ballots are required, a similar requirement will also apply to initiative petitions.

On February 6, 2006, in National Ass'n of Homebuilders v. U.S. Army Corps of Engineers, Nos. 04-5221 et al., 36 ELR 20032 (D.C. Cir. Feb. 6, 2006), the United States Court of Appeals for the D.C. Circuit issued a unanimous ruling in favor of several major trade associations, holding that the validity of the Army Corps of Engineers regulation of "incidental fallback" that can result from activities such as ditch digging and excavation is ripe for review, and requiring the lower court to consider the legality of permit requirements for this type of discharge of dredged material into waters of the United States.

The recent decision of the California Supreme Court in Barratt-American v. City of Rancho Cucamonga(37 Cal.Rptr.3d 149) [covered in an earlier update on this site] raises serious questions as to the way many jurisdictions calculate, collect, and apply fees from developers for building permits and building inspections. Back in 1993, the California Attorney General published an opinion which concluded that fees for building permits and inspections are required to be based on the actual or reasonable costs of providing such services, rather than on the value of the proposed construction or improvements [76 Ops.Cal.Atty.Gen. 4]. Nevertheless, many (perhaps most) cities and counties continue to charge building permit fees which are based on the valuation of the construction, rather than being based on staff time and costs of providing service. To the extent that such valuation-based fees may exceed the reasonable costs of providing those services, recent court decisions may now hold cities and counties accountable for the excess revenues collected.

In Barratt American, Inc. v. City of Rancho Cucamonga, the California Supreme Court clarified questions of procedure and potential remedies available in actions challenging building permit and inspection fees under the Mitigation Fee Act, California Government Code § 66000 et seq. (the "Act"). Appellant Barratt American had sued the City on the basis that its inspection and permit fees (1) exceeded the City's costs of providing building inspection services; and (2) the City was improperly accumulating excessive fee revenues from its building permit operations. The Court agreed with lower court holdings that, when building inspection and permit fees are at issue, the only statutory relief was an action for invalidation of the resolution pursuant to Gov. Code § 66022. However, the Court disagreed with lower courts that Barratt's action was barred by the 120-day statute of limitations applicable under § 66022, finding instead that the City’s reenactment and minor modification of the building permit fee schedule started a new limitations period. Lastly, the Court held that, when building inspection and permit fees are at issue, the appropriate remedy under the Act was not a refund but rather to reduce the fees going forward.

Sierra Club v. United States Army Corps of Engineers, 2005 WL 2090028 (D.N.J. 2005)

This case involved a challenge to a Corps of Engineers 404 permit to allow the filling of 7.69 acres of wetlands for a redevelopment project within the Meadowlands Sports Complex in New Jersey. The district court denied plaintiff environmental groups' preliminary injunction claim that the Corps had defined the project purpose in improperly narrow terms thereby precluding any practicable alternatives determination. Specifically, plaintiffs contended that the Corps substituted a project description for a basic project purpose.

In County of Alameda v. Superior Court, 133 Cal. App. 4th 558 (2005), the California Court of Appeal, First District, ruled that a developer seeking to bring an inverse condemnation action may not invoke the futility exception to the ripeness doctrine until the developer has submitted a development proposal to land use authorities and had it denied.

The California Court of Appeal recently re-affirmed the limits on a city's ability to contract away its police power and placed limits on actions that a government can take in closed session. The Court also re-affirmed development agreements as an appropriate method for a city and an owner-developer to exempt a described development from future changes in zoning and density requirements.

In Endangered Habitats League v. County of Orange, 131 Cal. App. 4th 777 (2005), the California Court of Appeal rejected a development plan in Orange County. The court did so on the grounds that the specific plan approved by the County conflicted with its general plan, and that the County compiled an inadequately detailed environmental impact report (EIR).

Kelo v. City of New London
05 CDOS 5466 No. 04-108 (U.S. Supreme Court, June 23, 2005)

In a 5-4 decision, the U.S. Supreme Court held that economic development constitutes a valid public purpose within the meaning of the U.S. Constitution Fifth Amendment “public use” clause. Relying heavily on previous U.S. Supreme Court takings cases, Justice Stevens, writing for the majority, found that the City's purpose of economic development fit safely within the Court's broad interpretation of public purpose. Justice O'Connor, writing for the dissent, distinguished past U.S. Supreme Court takings cases as involving harmful precondemnation use of the private property whereas in the present case, the precondemnation use was not harmful. The majority only addressed takings under the U.S. Constitution and noted that states may place greater restrictions on its eminent domain power. The majority also rejected Petitioners' argument that the City's economic development plan would provide only purely economic benefits.

In a concurring opinion, Justice Kennedy stated that although the case did not pose such an issue, a higher standard of review may be appropriate for a narrow class of private transfers where a court should presume an impermissible private purpose. He opined that cases where there is suspicion that a private party has been impermissibly favored, for example, may warrant further consideration of this issue.

This decision may have less impact in California than elsewhere because most California cities and counties rely on the California Redevelopment Law when condemning for economic development. The CRL requires a finding of blight before the powers it provides can be invoked. That was not the case in New London.

Michael B. Wilmar is a partner in Sheppard Mullin's San Francisco office.
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San Remo Hotel v. City and County of San Francisco
05CD05 5313 No. 04-340 (U.S. Supreme Court, June 20, 2005)

In San Remo Hotel v. City and County of San Francisco, the U.S. Supreme Court barred Petitioners from raising federal takings claims in federal court after Petitioners advanced in state court, and the state court decided, federal takings claims congruently with state takings claims. The hotel owned by Petitioners was previously used for various purposes—tourist hotel, long-term rooms, and mixed use. In 1981, San Francisco enacted the Hotel Unit Conversion and Demolition Ordinance that required hotel owners to apply for permits and pay fees before they could convert residential units into tourist units. In 1990 when Petitioners applied to convert all of the rooms in the San Remo Hotel into tourist rooms, the City issued a permit that allowed the conversion but for a $567,000 conversion fee. Petitioners challenged the ordinance and the imposition of a conversion fee as unconstitutional.

The U.S. Supreme Court held that the full faith and credit statute, 28 U.S.C. § 1738, bars a federal court from considering federal takings claims where a state had interpreted the state takings claims congruently with federal takings law. In Williamson County Regional Planning Commission v. Hamilton Bank of Johnson City (1985), the Court had held that federal takings claims are not ripe until plaintiffs first seek entry of a final judgment denying just compensation in state court. Petitioners argued that, in light of the Williamson County state-litigation requirement, parties would be barred from raising federal takings claims in federal court if the Court refused to exempt federal takings claims from the preclusive effect of 28 U.S.C. § 1738. The Court unanimously refused to create such an exception to 28 U.S.C. § 1738, although four justices in a concurring opinion questioned the Williamson County requirement.

Michael B. Wilmar is a partner in Sheppard Mullin's San Francisco office.
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Marine Forests Society v. California Coastal Commission
05 CDOS 5501 S113466 (Supreme Court of California, June 23, 2005)

In Marine Forests Society v. California Coastal Commission, the Supreme Court of California unanimously held that the current California Coastal Act (CCA) provisions governing the membership structure of the California Coastal Commission do not violate the California Constitution's separation of powers clause. After the lower courts enjoined the Coastal Commission from performing its functions and pending review of this decision by the Supreme Court, the Legislature passed an emergency measure to amend the challenged provisions of the CCA. Under the amended provisions, a majority of the Commission's voting members were still appointed by the Legislature but members were no longer removable at the pleasure of the Legislature.

The Marine Forests Society argued that the California separation of powers clause categorically precluded the Legislature from appointing executive officers and, in the alternative, the amended provisions impermissibly authorized the Legislature to usurp the functions of the executive branch. While the Court held that the state separation of powers clause does not preclude all legislative appointments of executive officers, the Court recognized limits on such exercise of legislative power.

The Court stated the standard as follows: “[T]he separation of powers clause precludes the adoption of a statutory scheme authorizing the legislative appointment of an executive officer or officers whenever the statutory provisions as a whole, viewed from a realistic and practical perspective, operate to defeat or materially impair the executive branch's exercise of its constitutional functions.” The Court explained that this standard is met in at least two circumstances:

1) where a statute allows the legislative appointment to “improperly intrude upon a core zone of executive authority”; or

2) where a statute, taken as a whole, permits the legislative appointing authority to retain “undue legislative control” over the executive officer.

Applying this standard, the Court found that the current membership structure does not violate the state separation of powers clause. To reach this conclusion, the Court looked to the membership structure set forth in the amended provisions, the nature of the Coastal Commission, and the statutory safeguards within the CCA designed to ensure that Commission members are not improperly interfered with or controlled by the Legislature.

Michael B. Wilmar is a partner in Sheppard Mullin's San Francisco office.
Click here for full bio