After landowners spent three years securing planning commission approval for a proposed senior living facility project, the city council rejected the project in the face of community opposition. The landowners sued, alleging that city officials made misrepresentations based on “actual fraud, corruption or actual malice.” The trial court dismissed the lawsuit, finding that the city officials were immune from liability because the alleged acts occurred during legislative decision-making that was protected under the California Tort Claims Act (“Act”). The court of appeal affirmed the trial court decision. (Freeny v. City of San Buenaventura (--- Cal.Rptr.3d ----, Cal.App. 2 Dist., June 4, 2013).
Robert and Linda Freeny (“Freenys”) owned two adjoining parcels of land in the City of San Buenaventura (“City”). They spent three years planning with an architect and consulting with City staff to build a senior citizen residential facility on the lots. The City's Planning Commission (“Planning Commission”) eventually approved a 44-unit facility (“Project”), along with a conditional use permit, design review, a variance, and a lot-line adjustment.
Thirty-five nearby residents who objected to the project appealed to the City Council, which sent the project back to the Planning Commission for additional fact-finding. At a later public meeting, the City Council stated that the Project’s size was incompatible with the neighborhood and rejected the Project “without prejudice.” The City Council suggested that the Freenys “rethink the entirety of the project.” The Freenys sued the City and the City Council members who voted down the Project. The lawsuit sought an order to force the City to approve the Project and asked the court to award $1.8 million in compensatory damages and punitive damages for fraud and misrepresentation.
The trial court dismissed the lawsuit, finding that the Freenys had not exhausted available administrative remedies and that the City’s actions were immune from liability under several sections of the Act. The Freenys appealed.
The Act provides immunity to public employees from tort (civil lawsuit) liability when making decisions in a legislative capacity, such as denying approval of a project or rejecting an application for a variance or permit. The Second District Court of Appeal affirmed the trial court’s decision regarding immunity under the Act. The court held that the immunity conferred upon public employees engaged in legislative decision-making applies “‘even when that decision-making is also alleged to involve the making of misrepresentations motivated by ‘actual fraud, corruption or actual malice.’”
The Freenys argued that immunity of legislative decisionmakers under the Act was limited by an exception contained within a different section of the Act (the “Exception”). The court acknowledged that the Exception precluded some public employees from immunity if “guilty of actual fraud, corruption or actual malice.” At the same time, the court observed that the provisions applying to legislative decisionmakers did not refer to the Exception or contain any exception language. The court stated that the language of the Act was ambiguous and did not make clear whether the Exception should be extended to the provisions immunizing legislative decisionmaking.
Because the language of the Act was ambiguous, the appellate court turned to the legislative history of the Act to determine the Legislature’s intent when enacting the immunity provisions. The court referred to Legislative Committee comments explaining that the provisions relating to legislative decisionmaking were intended to restate existing California law contained in case law and earlier statutes. These sources stated that California law confers absolute immunity from tort damages on public employees performing discretionary or legislative functions. These sources also stated that sound policy supported allowing public employees to make legislative decisions without being influenced by the fear of civil lawsuits.
The court concluded that legislative history suggested that the intent of the Act was motivated by the public policy interest of encouraging legislative decisionmakers “to exercise their honest judgment” without being inhibited by the threat of lawsuits. While tort immunity could theoretically allow some improper activity to be shielded, public employees making discretionary legislative decisions are still subject to criminal prosecution and the political pressure of being voted out of office, which helps keep improper or unlawful activity in check. The appellate court noted that public officials not engaged in legislative decisions or discretionary policy making remain liable for some misrepresentations made in the course of their employment.
The appellate court disagreed with the trial court that the Freenys failed to exhaust administrative remedies, noting that the City Council told the Freenys to rethink and redesign the Project. The court stated that when a government agency has denied “a specific use through denial of a special project,” a plaintiff need only show that the agency made a final decision on that project. To decide otherwise “would pervert the exhaustion requirement,” because agencies could delay judicial review indefinitely “by leaving the door open for further applications.” The court observed that re-exhaustion could be necessary in other kinds of land use disputes, such as when a plaintiff claims a regulatory taking has removed all “economically beneficial or productive use” of a property.
However, even though the appellate court found that the Freenys had exhausted administrative remedies, the appellate court nonetheless dismissed the Freenys’ petition for mandamus. The court stated that the Freenys failed to plead facts to support their allegation that the Defendants did not follow legal standards. The court also rejected the Freenys’ argument that the City Council violated their procedural due process rights. The court noted that because the Freenys had not secured an entitlement to a permit or variance, they had not established a protected property interest upon which to base a due process claim.