Case Number: BS163332 Hearing Date: December 10, 2019 Dept: 78

Superior Court of California
County of Los Angeles
Department 78

behzad forat;

Plaintiff,

vs.

CITY OF LOS ANGELES, et al.;

Defendants.

Case No.:

BS163322

Hearing Date:

December 10, 2019

[TENTATIVE] RULING RE:

Defendants CITY OF LOS ANGELES AND LOS ANGELES CITY COUNCIL’s amended demurrer to the second, third, and fifth claims in the verified petition for writ of mandate and complaint

The Amended Demurrer to the Complaint of Defendants City of Los Angeles and Los Angeles City Council, is OVERRULED for the Second Cause of Action as it relates to the alleged $400,000 investments in experts and environmental review, and is SUSTAINED with leave to amend as it relates to the loss of the $30,000,000 sale opportunity; and SUSTAINED with leave to amend for the Third and Fifth Causes of Action.

Factual Background

This is a land use/takings and Brown Act action. The Verified Petition for Writ of Mandate and Complaint alleges as follows. Petitioners Behzad Forat and Studio City Car Wash (collectively, “Forat”) seek a writ of mandate to set aside and vacate a decision of the City of Los Angeles (the “City”) and the Los Angeles City Council (“City Council”) to rescind an earlier action that would have commenced processing a General Plan Amendment and Zone Change for property owned by Forat. (Compl. at p. 1.) Forat owns two parcels of located on E. Cahuenga Blvd. (the “Property”), totaling 19 acres on the east side of the 101 freeway in the Cahuenga Pass. (Compl. ¶ 5.) In 2014, a City Councilmember asked to purchase part of the Property for the City to use as open space parkland with a small parking lot and hiking trail. (Compl. ¶ 6.) Following negotiations, Forat agreed to donate ten acres to the City (the “Donation Property”) in exchange for the City allowing Forat to build an apartment building on the remaining acreage of the Property (the “Development Property”). (Compl. ¶ 6.)

On March 18, 2015, the City Council adopted a Motion that authorized the City acquire the Donation Property after the Development Property was rezoned, and instructed the City Planning Department to “initiate consideration of a General Plan Amendment and Zone Change, and other City Planning approvals if needed, including the preparation and adoption of any required ordinances, to rezone [the Development Property] as R3 and rezone [the Donation Property] as open space should the City ultimately acquire that parcel” (the “March 2015 Action”). (Compl ¶ 9.) Following the decision through March 2016, Forat worked with his hired private consultants and the staff at the City Planning Department to prepare an EIR and process the amendments. (Compl. ¶¶ 12-14.)

On April 1, 2016, following a motion from Councilmember Ryu to rescind the March 2015 Action, the City Council held a public hearing on the motion. (Compl. ¶ 19.) The City Council held eight minutes of public comment, only one minute for each of Forat and his counsel, then adjourned to closed session for an hour and a half pursuant to Government Code section 54956.9(d)(2) and (e)(5). (Compl. ¶¶ 19-20.) Following the closed session, the City Council voted on the motion with little discussion (the “April 2016 Action”). (Writ ¶ 20.)

Following a letter from Forat to the City Council asserting that the City Council’s actions violated the Ralph M. Brown Act, the City Attorney’ Office wrote that two motions would be added to the City Council’s agenda: (1) a motion to rescind the April 2016 Action, and if that motion passes, (2) a repeat motion of that addressed at the April 1, 2016 hearing to rescind the March 2015 Action. (Compl. ¶ 22.) At a May 23, 2016 hearing, both motions passed 11-0, with public comment limited to one minute for each Forat and his counsel (the “May 2016 Action”). (Compl. ¶ 23.)

Forat alleges that the May 2016 Action did not cure the Brown Act violations at the April 2016 Action. (Compl. ¶24.) Forat also submitted a claim for reimbursement to the City on April 19, 2016 seeking $400,000 for out-of-pocket expenses of architects, EIR consultants, civil engineers, environmental engineers, traffic engineers, land use consultants, soils consultants and attorneys, and for additional damages of $30,000,000 due to lost opportunity to sell the Property for that amount in May 2016, which the City rejected on May 4, 2016. (Compl. ¶ 26.) Forat submitted updated information to the City on May 19, 2016 but has not received a response. (Compl. ¶ 27.)

procedural history

Forat filed a Verified Petition for Writ of Mandate and Complaint on June 28, 2016 alleging six causes of action:

Writ of Mandate

Inverse Condemnation

Promissory Estoppel

Declaratory Relief

Violation of Civil Rights

Violation of Brown Act

On September 15, 2016, the City filed a Demurrer to the Petition.

On October 6, 2016, the Court in Dept. 85 ordered the second, third, and fifth causes of action stayed pending resolution of the remaining causes of action. The demurrer was ordered to proceed on the other causes of action, only.

On November 15, 2016, the Court sustained the demurrer to the First Cause of Action, and overruled to the Fourth and Sixth Causes of Action.

From approximately October 2016 through April 2018, the parties were engaged in discovery motions.

On February 6, 2019, Forat filed an Opening Brief re: Violation of Brown Act.

On May 28, 2019, the Court denied Forat’s Petition for Writ of Mandate. The Court’s ruling was as follows: “The Petition’s Brown Act and declaratory relief claims are denied. The court previously sustained the demurrer to the first cause of action for writ of mandate without leave to amend. The court also previously stayed the Petition’s second, third and fifth causes of action.” The case was ordered transferred to an IC court for resolution of the remaining claims.

On September 19, 2019, the City filed an Amended Demurrer to the remaining claims in this Department 78.

On November 1, 2019, Forat filed an Opposition.

On November 22, 2019, the City filed a Reply.

Discussion

REQUESTS FOR JUDICIAL NOTICE

Where the motion is based on a matter of which the court may take judicial notice pursuant to Section 452 or 453 of the Evidence Code, the matter shall be specified in the notice of motion, or in the supporting points and authorities, except as the court may otherwise permit. (California Code of Civil Procedure §438(d)). Any request for judicial notice must be made in a separate document listing the items for which notice is requested. (CRC 3.1113(l)). Judicial notice may be taken of “(b) Regulations and legislative enactments issued by or under the authority of the United States or any public entity in the United States. (c) Official acts of the legislative, executive, and judicial departments of the United States and of any state of the United States. (d) Records of (1) any court of this state or (2) any court of record of the United States or of any state of the United States. (e) Rules of court of (1) any court of this state or (2) any court of record of the United States or of any state of the United States. (f) The law of an organization of nations and of foreign nations and public entities in foreign nations. (g) Facts and propositions that are of such common knowledge within the territorial jurisdiction of the court that they cannot reasonably be the subject of dispute. (h) Facts and propositions that are not reasonably subject to dispute and are capable of immediate and accurate determination by resort to sources of reasonably indisputable accuracy.” (Evid. Code § 452.)

The City requests that this Court take judicial notice of various Los Angeles Superior Court Orders, City of Los Angeles Charter and Municipal Code sections, the Los Angeles Zoning Map – Zone Information Map Access System Parcel Numbers, Los Angeles City Council action, and a Master Land Use Application. The Court grants these requests.

DEMURRER

A demurrer should be sustained only where the defects appear on the face of the pleading or are judicially noticed. (Code Civ. Pro., §§ 430.30, et seq.) In particular, as is relevant here, a court should sustain a demurrer if a complaint does not allege facts that are legally sufficient to constitute a cause of action. (See id. § 430.10, subd. (e).) As the Supreme Court held in Blank v. Kirwan (1985) Cal.3d 311: “We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. . . . Further, we give the complaint a reasonable interpretation, reading it as a whole and its parts in their context.” (Id. at p. 318; see also Hahn. v. Mirda (2007) 147 Cal.App.4th 740, 747 [“A demurrer tests the pleadings alone and not the evidence or other extrinsic matters. Therefore, it lies only where the defects appear on the face of the pleading or are judicially noticed. [Citation.]”)

“In determining whether the complaint is sufficient as against the demurrer … if on consideration of all the facts stated it appears the plaintiff is entitled to any relief at the hands of the court against the defendants the complaint will be held good although the facts may not be clearly stated.” (Gressley v. Williams (1961) 193 Cal.App.2d 636, 639.)

“A demurrer for uncertainty is strictly construed, even where a complaint is in some respects uncertain, because ambiguities can be clarified under modern discovery procedures.” (Khoury v. Maly’s of Cal., Inc. (1993) 14 Cal.App.4th 612, 616.) Such demurrers “are disfavored, and are granted only if the pleading is so incomprehensible that a defendant cannot reasonably respond.” (Mahan v. Charles W. Chan Insurance Agency, Inc. (2017) 14 Cal.App.5th 841, 848.)

A demurrer should not be sustained without leave to amend if the complaint, liberally construed, can state a cause of action under any theory or if there is a reasonable possibility the defect can be cured by amendment. (Schifando v. City of Los Angeles, supra, 31 Cal.4th at p. 1081.) The demurrer also may be sustained without leave to amend where the nature of the defects and previous unsuccessful attempts to plead render it probable plaintiff cannot state a cause of action. (Krawitz v. Rusch (1989) 209 Cal.App.3d 957, 967.)

Here, the City and City Council (the “Defendants”) demurrer to the three remaining causes of action for inverse condemnation/unconstitutional takings (Second Cause of Action), promissory estoppel (Third Cause of Action), and violation of civil rights/due process (Fifth Cause of Action). The Defendants argues that Forat’s second, third, and fifth claims do not and cannot state a cause of action and must be dismissed. (Motion at p. 11.)

SECOND CAUSE OF ACTION – INVERSE CONDEMNATION/UNCONSTITUTIONAL TAKINGS

Defendants argue that the Complaint does not state an Inverse Condemnation/Regulatory and Physical Taking claim against Defendants because: (1) Forat does not allege a physical taking, (2) Forat does not allege deprivation of any property interest protected by the takings clause, (3) Forat does not allege deprivation of all economically beneficial or productive use of property, (4) Forat’s takings claim is not ripe because he does not allege any attempt to develop the property under existing zoning, (5) Forat does not and cannot allege a taking under the Penn Central factors, and (6) Forat cannot allege a takings claim based upon failure to “substantially advance any legitimate state interest.” (Motion at pp. 14-19.)

As a preliminary matter, the Court agrees with Defendants that the Petition/Complaint (“Complaint”) does not allege a physical taking, and Forat indicates that such is the case as well (see e.g., Opposition at p. 9 [“Regulatory takings challenges that do no involve a physical invasion…”].) Accordingly, the Court’s analysis regards a regulatory taking only.

Property Interest

Defendants argue that Forat cannot prevail on this cause of action because the Complaint does not support deprivation of a property interest. (Motion at p. 14.) Defendants contend that amendment of zoning regulations and the General Plan are not a property interest and are uncertain, speculative, and discretionary prospects with unknown outcomes. (Motion at pp. 14-15.)

In Opposition, Forat argues that “regulatory takings are actions, even if they do not deprive an owner of all economic benefits and are of temporary duration.” (Opposition at p. 10.) Forat contends that his takings claim is for the lost value of his property which was incurred as a result of the City’s actions. (Opposition at p. 10.)

The United States Constitution provides that no private property may be taken for public use without just compensation. (U.S. Const. amend. V.) When an owner of real property “has been called upon to sacrifice all economically beneficial uses in the name of the common good, that is, to leave his property economically idle, he has suffered a taking.” (Lucas v. South Carolina Coastal Council (1992) 505 U.S. 1003, 1019.)

Here, the Complaint alleges that the “taking” in this case is the undue interference with and deprivation of Forat “of his reasonable and distinct investment backed expectations with regard to the Property and upon which Forat relied in acquiring the Property and incurring significant expense to comply with the March 2015 Action.” (Compl. ¶ 37.) The Complaint alleges that it is now impossible for Forat “to either use or receive benefit from his investment in the Property.” (Compl. ¶ 37.)

“Property” for purposes of a taking is not limited merely to physical property, but extends to a “range of interests that qualify for protection as ‘property’ under the Fifth and Fourteenth Amendments.” (Lucas v. South Carolina Coastal Council, supra, 505 U.S. at 1030.) Property for this purpose may include “all economically productive or beneficial uses of land[.]” (Id.)

Here, for purposes of demurrer, because the Complaint alleges that City Council’s actions have made it impossible for Forat to use the property or benefit from his investment in the property, it is sufficiently alleged that that there is a property interest at stake.

Beneficial or Productive Use of Property

However, Defendants also argue that Forat cannot allege any inability to develop the Property under the existing (RE40 zoning) and thus cannot allege a taking based upon denial of “all economically beneficial or productive use” of the Property. (Motion at p. 16.) Defendants contend, relying on Long Beach Equities v. County of Ventura (1991) 231 Cal.App.3d 1016, that the gravamen of Forat’s Complaint is that a taking occurred because the City “ceased consideration of an uncertain and speculative zone change and negotiations to acquire property,” and that is insufficient. (Motion at p. 16.)

In Opposition, Forat argues that regulatory takings are actionable even if they do not deprive an owner of all economic benefit and are of a temporary duration. (Opposition at p. 10.)

In Long Beach Equities, the plaintiff alleged that the county’s actions in rescinding an area land?? and forbidding all development in the area, downzoning the property, and imposing a growth-control plan resulted in a de facto taking. (Long Beach Equities v. County of Ventura, supra, 231 Cal.App.3d at 1028.) The court found that the plaintiff had not been denied any viable economic use of the property because the plaintiff could still apply for a different type of zoning change or other special uses that are still economically beneficial. (Id. at 1038.)

Takings challenges have generally been held meritless when the challenged governmental actions prohibited the most beneficial use of the property or a beneficial use to which individual parcels had previously been devoted and thus caused substantial individualized harm. (Penn Cent. Transp. Co. v. City of New York (1978) 438 U.S. 104, 125.)

Forat states that the Court should consider the factors articulated in Penn Central Transportation Co. to determine whether an ad hoc regulatory taking has occurred. There is no “set formula” for determining whether a taking has occurred and requires compensation, instead it is fact-based determination “upon the particular circumstances [in that] case.” (Id. at 124.) The Supreme Court has identified several factors of particular significance: the economic impact of the regulation on the claimant and, particularly, the extent to which the regulation has interfered with distinct investment-backed expectations are, as well as the character of the governmental action. (Id.) The government may pursue policies, programs and changes in the law that “adversely affect economic values,” particularly when the government’s decision will positively affect the health, safety, morals, or general welfare of the public. (Id. at 125.)

In the years since Penn Central, California courts have determined that there are two types of regulatory takings: (1) those where a property owner is deprived of all economically beneficial or productive use of the property, and (2) those where the Penn Central factors are considered. (Action Apartment Assn. v. City of Santa Monica (2008) 166 Cal.App.4th 456, 468.) Accordingly, Defendants’ assertion that Forat must show that he has been denied all economically beneficial or productive use of the Property is incorrect.

Here, the Complaint alleges that the March 2015 Action by the City Council required Forat to undertake an environmental review and planning process that cost him $400,000. (Compl. ¶ 37.) The Complaint further alleges that Forat entered into a contract to sell the Development Property for $30,000,000, based on the March 2015 Action, but that Forat is now unable to develop the property at all due to incomplete environmental review. (Compl. ¶ 37.)

Under the Penn Central factors, the Complaint has thus alleged a significant economic impact due to the expenditure of $400,000 for environmental review, required by the City, which it undertook only due to the Defendants’ March 2015 Action of passing the Motion indicating that the Property would be developed. This is an imposition on investment-backed expectations as Forat would not have invested such $400,000 without the expectation that the property would be developed. The Complaint does not allege, and Defendants have not offered, reasons of health, safety, morals, or general welfare of the public for the Defendants to rescind the March 2015 Action to factor into the Court’s review. Accordingly, Forat has alleged sufficient facts that a taking has occurred. (See, e.g., Florida Rock Industries, Inc. v. U.S. (Fed. Cir. 1986) 791 F.2d 893, 905 [“In determining the severity of economic impact, the owner’s opportunity to recoup its investment or better, subject to the regulation, cannot be ignored”].)

However, Forat’s claim for the $30,000,000 is less persuasive because he already owned the property prior to the March 2015 Action and would not have been able to sell the property for $30,000,000 prior to the March 2015 Action either. The Complaint does not contain any allegation that the Defendants’ action reduced the value of the Property below what it was before the March 2015 action or otherwise caused loss in value. In Shaw v. County of Santa Cruz, the court found that the county’s action in denying an electrical permit, without evidence of a loss of return on the property investment or reduced value, did not establish a taking. (Shaw v. County of Santa Cruz (2008) 170 Cal.App.4th 229, 271.)

Defendants argue that Forat’s claim is not ripe because he did not pursue obtaining a different type of permit. (Motion at pp. 16-17.) However, “ripeness” is not typically determined in this manner, usually a plaintiff must show that the government agency has made a “final and authoritative determination of the type and intensity of development legally permitted on the subject property. (Long Beach Equities, Inc. v. County of Ventura, supra, 231 Cal.App.3d at 1032.) Here, the Defendants voted to rescind the March 2015 Action twice, and following Forat’s letter alleging a Brown Act Violation, the City responded that “The Council shall take no further ‘curative’ action on this matter,” indicating finality. (Compl. ¶¶ 20-25.) Accordingly, ripeness is not an issue for purposes of demurrer.

Defendants further argue that Forat cannot allege a takings claim based upon failure to “substantially advance any legitimate state interest.” (Motion at pp. 18-19.) This Court agrees because the Supreme Court has found that the “‘substantially advances’ formula is not a valid takings test[.]” (Lingle v. Chevron U.S.A. Inc. (2005) 544 U.S. 528, 545.)

Accordingly, the Demurrer to the Second Cause of Action is OVERRULED as it relates to the alleged $400,000 investments in experts and environmental review, and is SUSTAINED with leave to amend as it relates to the loss of the $30,000,000 sale opportunity.

Third Cause of Action – Promissory Estoppel

The Complaint further alleges that Defendants may be bound by promissory estoppel in the same manner as private parties because Forat relied upon Defendants’ representations and conduct when he spent approximately $400,000 and then Defendants rescinded the March 2015 Action and refused to further process the EIR, knowing that Forat had already spent the money for the environmental review and project planning as required by the March 2015 Action. (Compl. ¶¶ 44-46.)

Defendants argue on demurrer that Forat cannot state a claim for estoppel because (1) there is no estoppel without permits/vested rights, (2) the City’s action were legally rational and appropriate, and (3) the claim is barred by governmental immunity. (Motion at pp. 19-20.)

As a preliminary matter, principles of promissory estoppel apply to claims against the government, particularly where the application of the doctrine would further public policies and prevent injustice. (US Ecology, Inc. v. State of California (2001) 92 Cal.App.4th 113, 131; Kajima/Ray Wilson v. Los Angeles County Metropolitan Transp. Authority (2000) 23 Cal.4th 305, 313.)

The elements of a promissory estoppel claim are (1) a promise clear and unambiguous in its terms; (2) reliance by the party to whom the promise is made; (3) the reliance must be both reasonable and foreseeable; and (4) the party asserting the estoppel must be injured by his reliance. (Flintco Pacific, Inc. v. TEC Management Consultants, Inc. (2016) 1 Cal.App.5th 727, 734.)

Here, the Complaint alleges that the March 2015 Action instructed the City’s Planning Department to “initiate consideration of a General Plan Amendment and Zone Change,” which included the cost of an EIR to be paid by Forat. (Compl. ¶ 43.) The Complaint alleges that Forat spent $400,000 in reliance on “Respondent and Defendants’ promise in the March 2015 Action to consider the [General Plan Amendment], [Zone Change], SRA and EIR. (Compl. ¶ 43.)

“[A] promise is an indispensable element of the doctrine of promissory estoppel.” (Garcia v. World Savings, FSB (2010) 183 Cal.App.4th 1031, 1044.) A promise must be clear and unambiguous in its terms, and cannot be established from preliminary negotiations and discussions. (Id.)

It is not clear in this case what Forat is alleging to be the promise. The Complaint does not expressly clarify whether the promise is for the City to “consider” making a General Plan Amendment and Zone Change, or whether the promise is for the City to allow Forat to develop his planned apartment complex.

Accordingly, the Demurrer to the Third Cause of Action is SUSTAINED with leave to amend.

Fifth Cause of Action – Violation of Civil Rights/Due Process

Defendants argue that Forat does not and cannot allege deprivation of any property interest protected by the due process clause in his Complaint. (Motion at p. 21.) Defendants contend that Forat cannot state a procedural or substantive due process claim “for the same reasons why Plaintiffs do not and cannot allege a takings claim,” which is that Forat cannot show that the government’s actions results in deprivation of land use to which he was entitled. (Motion at pp. 21-23.) Defendants further argue that, even if Forat did have a property interest, he had the opportunity to be heard and was heard at two separate City Council meetings. (Motion at p. 22.) Even more, Defendants argue that Forat cannot establish an outrageous or egregious abuse of power by Defendants. (Motion at p. 23.)

In Opposition, Forat argues that Defendants’ actions in “rescinding the March 2015 Action and halting the preparation of the EIR and refusing to conduct public hearings on Forat’s pending application […] constitutes a violation of Forat’s rights to procedural due process under the U.S. Constitution because Defendants’ actions were based a change of politics[.]” (Opposition at p. 15.)

“The Fourteenth Amendment provides that ‘[n]o State shall … deprive any person of life, liberty, or property, without due process of law….’ Nonetheless, before reaching any question about the fairness of a particular proceeding under the federal Constitution, we must first address whether a protected interest—life, liberty, or property—is implicated. If no such interest is involved, then the procedural protections of the due process clause do not come into play.” (Clark v. City of Hermosa Beach (1996) 48 Cal.App.4th 1152, 1178, as modified on denial of reh’g (Sept. 11, 1996).)

For purposes of due process, a property interest may exist where a “property-holder possesses a legitimate claim of entitlement to a permit or approval[.]” (Id. at 1180.) A cognizable property interest only exists “when the discretion of the issuing agency is so narrowly circumscribed that approval of a proper application is virtually assured,” and this standard focuses on the amount of discretion allowed to the agency not the amount of discretion exercised. (Id.)

In this case, there is no indication in the Complaint that the Defendants’ discretion was so narrowly circumscribed that Forat was guaranteed approval of his project. The Complaint provides the specific language of the Motion approved by the March 2015 Action, which states: “1. AUTHORIZE and INSTRUCT the Department of General Services to enter into negotiations with the current owner of the property […], in order for the City to acquire the [Donation Property][and…] 2. INSTRUCT the Planning Department, in consultation with Council District Four, to initiate consideration of a General Plan Amendment and Zone Change, and other City Planning approvals if needed […] to rezone [the Development Property] as R3 and to rezone the [Donation Property] as open space should the City ultimately acquire that parcel.” (Compl. ¶ 9.) The Complaint further alleges that Forat worked closely with the City’s staff to prepare the necessary reports for the EIR, and that a draft initial study was in review by the Planning Commission and a traffic study was in review by the Department of Transportation. (Compl. ¶ 12.)

However, the Complaint does not allege that the project had already been approved or that permits has already been issued. Also, the Complaint does not allege that the City was otherwise bound by its action to rezone the Property and acquire the Donation Property. Further, the language provided in the motion approved by the March 2015 Action does not narrow circumscribe the discretion of the City, particularly because the motion only instructs the Planning Department to “consider” a General Plan Amendment and Zone Change, and did not compel the Planning Department to make such change. (See, Compl. ¶9.)

Accordingly, the Demurrer to the Fifth Cause of Action is SUSTAINED with leave to amend.

DATED: December 10, 2019

________________________________

Hon. Robert S. Draper

Judge of the Superior Court