e-Bulletin: Court Rules Settlement Agreement Invalid for Violating Existing Zoning Ordinances and the Brown Act

The California Court of Appeal for the Second Appellate District recently held that the settlement agreement (SA) between the City of Malibu (City) and Trancas, a land developer, was invalid because it violated existing zoning ordinances and the Brown Act. The SA was intrinsically invalid, because the City contracted away its right to future zoning restrictions. Further, the SA violated the Brown Act because the City adopted the SA in a closed session although it required a public hearing.

Trancas owned 35 acres of land in Malibu and planned to subdivide the property for single family lots and town homes. Before the City could authorize the subdivision, Trancas had to submit maps for approval. Over the course of ten years, the City and Trancas disagreed over the maps and approval procedures. Finally, in 2002 Trancas unsuccessfully sued the City to enjoin it from disapproving the maps. In an effort to resolve the dispute, the city council met in a closed session and entered into a SA, which stipulated that the City would approve the final maps if Trancas dedicated 26.5 acres to the City and dropped pending legislation. The SA also guaranteed that the City would not block the proposed development by future zoning restrictions.

The Trancas Property Association (Association) filed a writ of mandate and complaint against the City and Trancas arguing the SA violated municipal zoning authority and the Brown Act. The trial court denied the writ of mandate, holding the SA did not violate any provision of the Municipal Code or the Brown Act. More specifically, the Brown Act entitled the City to consider the SA in a closed session under the litigation exception. The Association appealed from the entire judgment.

First, the appellate court held the SA was intrinsically invalid, because the City agreed to refrain from zoning the project. The City promised not to enact zoning restrictions that would prohibit the construction that conformed to the final map. However, the final map violated existing zoning laws, which prohibited more than one residence per five acres. Trancas argued the City merely settled a dispute obtaining consideration in exchange for relaxed zoning restrictions. It further argued that the density violations may not even occur. The court likened this case to Avco Community v. South Coast Regional, 17 Cal.3d 785 (1976), in which a municipality loosened zoning requirements for a development project after the land owner agreed to dedicate property to the city. In Avco, the California Supreme Court held that the government may not contract away its right to exercise future police power. Likewise, the appellate court rejected the SA, which purported to restrict the right to future zoning regulation.

Second, the court held that the SA violated the Brown Act, because the City adopted the SA in a closed session and its approval was not exempt from the public meeting requirement. The City argued that it “technically complied” with the Brown Act. Before the city council met in the closed session, it notified the public by listing the Trancas case on the agenda. In addition, the city attorney announced the SA and its terms at a public hearing following its adoption. The court rejected the City’s arguments, holding that a City may settle litigation in a closed session, but it cannot take action without a public hearing. In other words, while governing bodies may discuss a lawsuit and settlement terms with their counsel in a closed session, they may not adopt such a settlement that requires a public hearing.

In conclusion, the court invalidated the SA between the City and Trancas. A municipality cannot contract away its right to exercise police power. Therefore, the SA was invalid because it allowed the City to exempt the Trancas project from future zoning ordinances. The SA also violated the Brown Act. Although the City could discuss settlement terms with counsel in a closed session, the City could not adopt the SA without a public hearing. Since the SA was non-severable, the court invalidated the entire agreement.