By Michael M. Berger (310.312.4185)

This article was originally published in the November 7, 2005 issue of the Los Angeles Daily Journal.

A strange thing happened to the City of Malibu. It thought it had settled years of contentious litigation with a land developer in a way that would benefit both the developer (by allowing a project to proceed) and the city (by having the developer give about three fourths of its property to the city for a park). And then the Court of Appeal said it could not settle the case at all. (Trancas Property Owners Assn. v. City of Malibu, 132 Cal.App.4th 1245 [2005].)

In a time of burgeoning litigation and crowded court dockets, when courts repeatedly praise the virtues of settlement (e.g., Neary v. Regents, 3 Cal.4th 273, 277 [1992]), how can that be? Particularly since land use litigation tends to be intense, extensive, and involving high stakes, are cities and developers doomed to fight to the death like two scorpions in a bottle? I don’t think so, but the Court of Appeal evidently did. The Supreme Court needs to take a look at this. If that is the law, it needs to be changed.

The focal point of the Trancas litigation is a 35 acre parcel of undeveloped land on the inland side of Pacific Coast Highway in a high-rent part of the State. Development efforts go back more than two decades, before the City of Malibu was even incorporated. Twenty years ago, Los Angeles County approved development of this parcel with 15 single family homes and 52 condominiums. Because of government imposed development moratoria (including a freeze imposed by the city when it was created in 1991), time passed without any progress.

Litigation occupied some of that time, including two trips to the Court of Appeal. After the second appeal, the city still refused to allow the project to proceed, resulting in a new round of court proceedings. Apparently tiring of battle, representatives of both sides began searching for ways to resolve their dispute. And they found one. Negotiators agreed that, if the developer would give 26.5 of its 35 acres to the city, reduce the number of dwellings from 67 to 32 and make four homes available for sale only to low or moderate-income families, all in conformity with the city’s general development standards, then the city would approve the reduced project and the litigation could end.

We live in an era of governmental sunshine. Government is supposed to conduct most of its business in the open. And that is a laudable idea. In California, the Ralph M. Brown Act, Govt. Code § 54950 et seq., ensures open governmental operation, with narrowly tailored exceptions deemed necessary for government to function. One of those involves litigation. The law allows a city council to meet in closed session with its attorney to discuss pending litigation. (Govt. Code § 54956.9.)

That is only sensible. Government in the sunshine is one thing, but laying litigation strategy bare on the public table – including any flaws the city attorney may see in the city’s own side of the case – would border on the suicidal. And the courts have generally acknowledged the necessity for such closed strategy discussions. (E.g., Sutter Sensible Planning, Inc. v. Board of Supervisors, 122 Cal.App.3d 813 [1981].) As the Sutter court put it, if all strategy sessions had to be in public, “the ringside seats would be occupied by the government’s adversary, delighted to capitalize on every revelation of weakness.”

After all, California cities are not governed by Athenian agoras. Nor even by New England town meetings. Here, city residents elect representatives to look after their interests – and those interests specifically include settling litigation: “The governing body of a local public entity may compromise . . . any pending action.” (Govt. Code § 949.)

The Brown Act allows a city council to decide to settle a pending action in closed session upon the confidential advice of its lawyer. Once a settlement is agreed to, the city council is required only to notify the public, not seek its approval. Government Code § 54957.1 clearly requires that any approval to settle made at a closed session need only be “reported” to the public, and that report is to be given “after the settlement is final . . . .”

That timing is obviously important. Effective settlement is an art, and a delicate one at that. To succeed, it requires care, nurture, and time to evolve. For better or worse, those are precisely the qualities that are absent from the give and take of a public forum, where posturing and politics usually trump the subtleties of settlement negotiations.

Although the Trancas court expressed some concern over the result it reached, noting it intended neither to disparage the values of settlement nor the substantial public benefit that Malibu would have reaped, it held that this kind of land use dispute could not be resolved without public participation.

The Court of Appeal’s reasoning was that this settlement involved city approval of a development project, and such approval – particularly when it involves changes in the city’s land use regulations (here, a density shift to allow the 32 homes to be clustered on a small portion of the property so the bulk of the property could become a city park) – requires public hearings and the public right of referendum. That court saw the settlement agreement as a surrender of the city’s power. Not necessarily.

An alternative view is that a settlement agreement is not a surrender of city power to control the use of land, but an exercise of that power. That is illustrated by cases like Stephens v. City of Vista, 994 F.2d 650 (9th Cir. 1993). There, the city entered into a settlement similar to the one in Trancas, and then reneged. The courts there held the settlement a valid exercise of city power and awarded damages to the developer for breach of the agreement. In both Stephens and Trancas, the agreements provided for a specific type of development, but each city retained control over the development process. Stephens upheld the city, while Trancas refused.

There’s the clash that the Supreme Court needs to straighten out. If the Court of Appeal is correct, then no land use case can ever be settled. The city and the developer must fight until one is bloody, exhausted, and beaten.

Settlement will no longer be an option. Why? If a negotiated settlement must be subjected to rounds of public hearings (and even a possible referendum election thereafter), then the information given in confidence to the city council by the city attorney explaining the tactical legal reasons for settlement must be publicly disclosed. Without such a full disclosure – including all of the weaknesses in the city’s case – the public will be in no position to evaluate the city council’s decision to end the litigation.

What if, after that disclosure, the public votes its disapproval – either by overwhelming the city council with objections at the public hearing, or by rejecting the settlement by referendum if the city council votes to proceed with it anyway? In that circumstance, the settlement would fail and the litigation would be forced to continue.

But there would be one tactical change. Because of the public hearings which would essentially have laid on the public record all of the legal shortcomings in the city’s position, the city would be in a substantially weakened posture upon returning to court.

The result would be one of two things. First, municipal settlements will disappear, because neither city council members nor seasoned city attorneys will want to risk a public discussion of legal strategy. Alternatively, the city will likely lose the ensuing litigation, in which case a court will order a result far less favorable to the city than the negotiated deal would have been. Is either of those in the public interest?

If the public is displeased with the way its representatives conduct the public’s business, the remedy is not to force all matters to be litigated to the bitter end or to require all settlement discussions to take place in public. The remedy is to replace the representatives at the next available election. Barring that, however, cities as litigants – and those who litigate with them – are just as much entitled to resolve litigation as other parties. Settlement is an end, not the beginning of a new round of proceedings.

Attorneys in the Los Angeles office can be reached at (310) 312-4000 and attorneys in the Orange County office at (714) 371-2500.