October 2010

Santa Monica Mountains Conservancy’s Grant to a Joint Powers Authority of Which It is a Member is Not Prohibited

October 5, 2010, by Jennifer E. Faught

On September 23, the California Court of Appeal held that the Santa Monica Mountains Conservancy’s (“Conservancy”) $200,000 grant to the Mountains Recreation and Conservation Authority (“Authority”) was not illegal. (Robings v. Santa Monica Mountains Conservancy) Challengers to the grant, including individuals, a taxpayer group, and another preservation fund, had asserted that the Conservancy’s grant was a grant “to itself” because the Conservancy is one of three members of the Authority. Because the Conservancy’s enabling act did not specifically give it authority to grant funds to itself, challengers asserted, the grant was prohibited.

Requiring Religious Institutions to Comply with Neutral Conditional Use Permit Process is Not a Substantial Burden under RLUIPA

October 6, 2010, by Jennifer E. Faught

In County of Los Angeles v. Sahag-Mesrob Armenian Christian School, a California Court of Appeal affirmed a grant of preliminary injunction enjoining the religious school from operating in a residential zone until it obtained a conditional use permit. The school had first removed the case to federal court, but the district court remanded to the state court; the district court lacked subject matter jurisdiction because federal law was raised only as a defense.

Increased Contractor Costs on Public Works Projects - Strategies For Reducing Owner Risk

October 11, 2010, by Meyers Nave

General contractors on public works projects often submit claims for extra compensation to public entity project owners for increased costs during construction, and point to information they did not know when preparing their bids. In light of the recent California Supreme Court decision in Los Angeles Unified School District v. Great American Insurance Co. (2010) 49 Cal.4th 739, such claims are likely to increase in the future.

In Los Angeles Unified School District, the Supreme Court held that a contractor does not need to show fraudulent intent in order to recover for extra work or expenses necessitated by unknown conditions. Rather, the contractor can recover for such extra expenses where "(1) the contractor submitted its bid or undertook to perform without material information that affected performance costs; (2) the public entity was in possession of information and was aware the contractor had no knowledge of, nor any reason to obtain, such information; (3) any contract specifications or other information furnished by the public entity to the contractor misled the contractor or did not put it on notice to inquire; and (4) the public entity failed to provide the relevant information."

However, there are various strategies that public entities can employ during project bid phase to reduce the risk that they will be liable for such claims:

(1) Where conditions permit, the public entity should require a mandatory pre-bid site visit to the project location and walk through for all contractors that bid on the project.

(2) Public entities should double check the bid documents to ensure that all information material for bidders to calculate the cost of their performance has been provided. Such information may include reports from consultants that the public entity has hired to provide geotechnical, environmental, and other pre-construction site analysis. Where the public entity does not have any such information, the bid documents should specify that bidders are required to perform a site analysis in coordination with the public entity to determine any information material to their bids.

(3) For public projects that require the use of a design professional and/or project manager, the design professionals and/or project managers should be contractually required to provide any and all information that may be material to bidders in formulating their bids. Additionally, the public entity should require that it be named as an additional insured in case the it receives a contractor claim for increased cost of performance due to the failure to disclose material information. Finally, the design professional and/or project manager should be required to indemnify and defend the public entity with respect to any and all contractor claims for additional compensation that are the result of the failure to disclose information known by the design professional and/o project manager.

By employing these strategies, public entities can reduce the risk that they will be liable for contractor claims for increased cost of performance.

City Officials Immune in Challenge to Sale and Lease of Public Property

October 13, 2010, by Meyers Nave

In a decision filed October 6, 2010 the Ninth Circuit Court of Appeals held that various city officials were immune from liability regarding their decision to lease and sell certain public property. In the case, Community House, Inc. v. City of Boise, Idaho, 09-35780, Community House leased a building containing a homeless shelter and low income housing from the City for over ten years, but in 2004, the City terminated the lease. The next year, the City leased the building to another organization that provided similar services, but that had a religious focus, and later sold the building to the other organization pursuant to an option to purchase clause in the lease. Community House sued the City, its mayor and City Council members, and two high-level City employees, contending that these defendants had violated the First Amendment's prohibition on the establishment of religion. The defendants moved for summary judgment in the trial court, and lost, and sought review with the Court of Appeals.

The Court of Appeals found that the mayor and members of the City Council were entitled to absolute legislative immunity for their actions in promoting and approving the lease. Specifically, the Court recognized that the "decisions about how to further the City's laudable goal of fighting homelessness is a prime example of the need to city council members the freedom to make important and difficult discretionary decisions without fear of being personally sued for it." The Court also found that the two City employees were entitled to qualified immunity because at the time the City approved the lease and sale, a reasonable official would not have known that such actions would violate the Establishment Clause.

The Community House decision is significant for California municipalities because it confirms both that their council members and executives cannot be held personally liable for legislative decisions, and that their employees are immune from liability for constitutional violations where they acted reasonably.

Federal Government Announces it Will Enforce Federal Marijuana Laws if Proposition 19 the “Regulate, Control and Tax Cannabis Act of 2010” Passes

October 15, 2010, by Meyers Nave

If California voters adopt Proposition 19 on November 2, 2010, California will be the first state in the nation to legalize marijuana for recreational use. Marijuana, whether for recreational use or medical use, remains an illegal substance under the Federal Controlled Substances Act (“CSA”). In an October 13th letter to former chiefs of the U.S. Drug Administration Agency, Attorney General Eric Holder stated the Federal Government will continue to enforce its marijuana laws in California, even if Proposition 19 passes.

According to Holder’s letter, “We will vigorously enforce the CSA against those individuals and organizations that possess, manufacture or distribute marijuana for recreational use, even if such activities are permitted under state law.” The Attorney General also said, “If passed, this legislation will greatly complicate federal drug enforcement efforts to the detriment of our citizens.”

This letter may suggest a potential departure from the Administration’s position of not prosecuting medical marijuana users in compliance with state law, as set forth in an October 19, 2009 letter from the Department of Justice (“DOJ”). While the DOJ expressed its commitment to the enforcement of the CSA in all states, it explicitly told Federal prosecutors that the Department’s priorities should not focus on “individuals whose actions are in clear and unambiguous compliance with existing state laws providing for the medical use of marijuana.” 

With the Federal government’s stated opposition to Proposition 19, and the intent to enforce the CSA, local governments face an even bigger challenge of trying to comply simultaneously with State law and Federal law.