When a real estate developer used a novel legal argument to win a $36.8 million ruling against the city of Half Moon Bay in November, some worried that the case could set a dangerous legal precedent. But the developer at the center of the case said the circumstances are so unusual they are unlikely to apply to land disputes in other cities.
The case has been in the news after the city announced a settlement agreement with developer Charles "Chop" Keenan last week. The settlement depends on the passage of a bill, AB 1991 by Assembly Gene Mullin, D-South San Francisco. The bill would allow the deal to skirt intervention by agencies such as the Coastal Commission and the Dept. of Fish and Game. Sen. Leland Yee, D-San Mateo, yanked his co-authorship at the end of the week after raising questions about two clauses in the settlement deal.
Keenan and the city emphasized how unusual they say the case is in a press release last week.
"I think there is concern that this might be precedent setting," Keenan said when reached by phone on Tuesday. "In fact, this addresses a very unique set of circumstances. I'm not asking for anything the city didn't already approve once."
A spokesperson for the League of Cities declined to comment on the case, saying the group does not get involved in the affairs of "individual cities." The city of Half Moon Bay referred comments to John Knox, a spokesman for their law firm, Orrick Herrington; Knox was travelling and could not be reached.
Keenan bought the 24-acre property, located near the intersection of Highways 1 and 92, through a trustee for $1 million in a foreclosure sale in 1993. The city had originally approved building on the property in 1990, he said. But when Keenan later tried to develop the parcel, known as Beechwood, the city told him the area was protected wetlands. Keenan sued, claiming the parcel only became "wetlands" due to faulty drainage work done by the city.
In his Nov. 28 ruling, U.S. District Judge Vaughn Walker accepted Keenan's attorney's argument that the city's action-modifying the land, taxing it, and then denying the owners the right to build on it-constituted a form of unauthorized takings. It was this rational, backed up by a judgment that amount to more than three times the city's annual budget, which had some local governments worried. Some speculated that the ruling threatened the power of local city councils and planning commissions to use environmental reasons to try to slow or stop development.
But Keenan said that the specifics of the case would be difficult to replicate: "What this settlement does is turn the clock back in time. It allows everyone-me, the city, the citizens of Half Moon Bay-to come out winners. I come out with what I came in with, to come out with some quality housing. The city gets to come out without a significant legal judgment against it."
The deal depends on AB 1991, however-and Keenan still gets to walk away with $18 million if the bill doesn't pass. The city would then end up with the property. It was this clause, as well a section allowing Keenan to build 46 homes on an adjacent parcel that wasn't part of the original lawsuit, the cause Yee to withdraw his support for the bill.
"It seems as if this ended up as a Christmas tree with all sorts of goodies under it," Yee said. "If it becomes a developers' paradise, I'm not interested."
Mullin said that he will continue to push the bill, adding that he offered the bill to help to city avoid bankruptcy; his office did not participate in the settlement talks.
"We volunteered to them that if they engaged in settlement talks and needed a bill, I would have a spot bill available for them," Mullin said. He added: "They could have gone forward with an appeal. They chose to settle…We will fulfill our commit to carry the bill and work as hard as we can to make sure they don't have to pay $18 million."
The case is the latest in a long line of disputes between pro-development and environmental forces in the town located on the coast 30 miles south of San Francisco. In 1999, candidates allied with environmentalists won a majority on the five-member Half Moon Bay city council, ousting several members of a more pro-development group with long roots in the community. In 2005, former councilmember Naomi Patridge won back her seat on the council, and was joined by three new council members generally seen as more friendly to developers.
It was this group that approved the settlement deal by a 4-1 vote in late March. Councilman Jim Grady, generally viewed as an environmentalist, was the sole "no" vote. The deal was negotiated by the law firm of Orrick Herrington, which was brought in after the city lost the lawsuit. According to postings on local community websites, some in the community viewed Judge Walker as a property rights extremist and urged Orrick at the city to file an appeal, hoping to get a more favorable judgment in a different court.
Environmentalists say Mullin has some alleged ties to the pro-development old guard, but Mullin dismisses these claims. In the early-to-mid 1970s, Mullin said, his divorced father married Dolores Mullin, a longtime Half Moon Bay city councilwoman and one-time mayor. But Mullin notes that he was already in his late 30s at the time, so Dolores Mullin was never really his stepmother or godmother, as some have stated. Mullin's father died in the 1980, and he said he had little contact with Dolores Mullin after that.
"She was a conservative Republican and I'm a liberal democrat," Mullin said. "We didn't have a lot of interaction, to say the least."
Meanwhile, Mullin declined to second-guess the city's decision to settle or their agreeing to let Keenan build on the second parcel. The initial judgment plus legal fees amounted to $41.1 million, enough to gobble up more than 10 percent of the city's annual budget for about 40 years. If they lost an appeal, he said, Half Moon Bay could be on the hook for even more.
"I think it's important to keep in mind that the developer had a $41.1 million judgment against the city," Mullin said. He added: "To think that they would have a settlement that was total to the benefit of the city is unrealistic."