On December 16, the Los Angeles City Council unanimously authorized the City Attorney to establish a Land Use/CEQA Panel, which will consist of five municipal law firms, to defend the City in CEQA and land use lawsuits that challenge the entitlements for private development projects, and to require that the project applicant reimburse the City for its legal costs and fees.

This is a significant change in City policy.  For many years, most entitlement approvals for development projects have included a pro-forma condition that requires the project applicant to defend and indemnify the City respect to litigation challenging the entitlements, either on CEQA or other grounds.  However, the City has rarely enforced that condition and the City Attorney has normally defended the City in such litigation.

That will now change.  Based on the Council-approved recommendations in the report prepared by the City Attorney, in the event a lawsuit is filed, the developer will be required to execute a reimbursement agreement pursuant to which it agrees to pay all reasonable costs and fees charged by the firm retained by the City.  The developer will still have the right to retain its own law firm to defend the litigation, but in that case it will be forced to pay two law firms.

This action by the City Council imposes yet another (potential) burden on development in Los Angeles, particularly for the developers of small or mid-sized projects, who can ill-afford any litigation delay, much less having to pay a second law firm.

As a practical matter, it may be possible for developers to reduce somewhat the financial impact of this new policy.  The developer, and not the City, normally bears the risk of an adverse decision in a CEQA/land use lawsuit (which is why most developers strongly prefer to engage their own law firms to defend them and thereby exert control over legal strategy).  Given this reality, a developer in this situation has a strong case to make that the City Attorney should allow the developer’s attorney to take the lead in defending the lawsuit, with the City’s law firm playing a limited role.  In some cases, it might be advantageous to allocate primary responsibilities between the developer’s and the City’s attorneys.  For example, the City’s outside firm could take the lead in preparing the administrative record, while the developer’s attorney has principal responsibility for preparing the main brief.

We will be closely monitoring the implementation of this new policy on behalf of our clients.