Recently Passed “Sustainable Groundwater Management Act” Allows Local Governments to Restrict the Amount of Groundwater Extracted in California

In September 2014, Gov. Brown approved landmark legislation requiring the management of groundwater basins throughout California. In essence, the new law is meant to empower local government to limit how much groundwater extracted. Proponents of the new legislation say it is necessary because some basins have been depleted, in part because of the recent drought and increased well drilling, and because current oversight of groundwater use has been insufficient to curb the problem.

The new law is intended to shift management of groundwater from the state Dept. of Water Resources to local agencies because, as the legislative findings section declares, “[g]roundwater resources are most effectively managed at the local or regional level.” However, the state retains the authority to intervene if it determines that a local plan is inadequate.

Anyone who has a groundwater well on his or her property should take note of this legislation, since it allows local agencies to create new requirements for pumping groundwater, as well as to inspect local wells and other groundwater facilities to ensure compliance. Collectively referred to as the Sustainable Groundwater Management Act, the legislation actually comprises three separate bills—SB-1168, AB-1739, and SB-1319. Key aspects of each bill are summarized below.

SB 1168: Formation of Local “Groundwater Sustainability” Agencies and Plans

• Requires the Dept. of Water Resources to categorize each groundwater basin in the state as high-, medium-, low-, or very low priority no later than January 31, 2015.
• Requires all groundwater basins designated as high- or medium-priority basins and “subject to critical conditions of overdraft” to be managed under a groundwater sustainability plan by January 31, 2020.
• Requires all other groundwater basins designated as high- or medium-priority basins to be managed under a groundwater sustainability plan by January 31, 2022, with some exceptions.
• Requires a groundwater sustainability plan to be developed and implemented to meet the “sustainability goal,” as established by the law, and would require the plan to include prescribed components.
• Authorizes basins designated as low- or very low priority basins to be managed under groundwater sustainability plans.
• Authorizes a local agency or combination of local agencies to elect to be a “groundwater sustainability agency.” The law defines “local agency” as “a local public agency that has water supply, water management, or land use responsibilities within a groundwater basin.”
• Requires the groundwater sustainability agency, within 30 days of electing to be or forming a groundwater sustainability agency, to inform the Dept. of Water Resources of its election or formation and its intent to undertake sustainable groundwater management.
• Authorizes groundwater sustainability agencies to require registration of a “groundwater extraction facility,” to require that a groundwater extraction facility be measured with a water-measuring device, and to regulate groundwater extraction.
• Authorizes groundwater sustainability agencies to inspect “the property or facilities of a person or entity” to ensure compliance. To inspect property, the agency must either get the consent of the person or entity or obtain an inspection warrant under Cal. Code Civ. Proc. § 1822.50, et seq.

AB-1739: State Oversight of Local Groundwater Management

• Authorizes a groundwater sustainability agency, as defined in SB 1168, to impose certain fees, including fees to recover costs incurred in administering the law. Recoverable costs include “costs incurred in connection with investigations, facilitation, monitoring, hearings, enforcement, and administrative costs in carrying out these actions.”
• Requires the Dept. of Water Resources, by January 1, 2017, to publish on its website best management practices for the sustainable management of groundwater.
• Requires a groundwater sustainability agency to submit a groundwater sustainability plan to the Dept. of Water Resources for review upon adoption.
• Requires Dept. of Water Resources to periodically review groundwater sustainability plans and, by June 1, 2016, to adopt certain regulations pertaining to such plans.
• Authorizes a local agency to submit to the Dept. of Water Resources for evaluation and assessment an alternative that the local agency believes satisfies the objectives of the law. The Dept. must review such submissions at least every 5 years after initial submission.
• Authorizes the State Water Resources Control Board to conduct inspections and to obtain inspection warrants.
• Authorizes the State Water Resources Control Board to designate a basin as a “probationary basin” if it meets certain criteria and to develop an “interim plan” for such a basin.
• Establishes groundwater reporting requirements for a person extracting groundwater in an area within a basin that is not within the management area of a groundwater sustainability agency or a probationary basin. The reports must be submitted to the State Water Resources Control Board or, in certain areas, to a local agency.

SB-1319: Additional Legislation Pertaining to Probationary Basins

• Authorizes the state State Water Resources Control Board to designate certain high- and medium-priority basins as a probationary basin if, after January 31, 2025, prescribed criteria are met, including that the state board determines that the basin is in a condition where groundwater extractions result in significant depletion of interconnected surface waters.
• Adds to the prescribed determinations that would prevent the State Water Resources Control Board from designating the basin as a probationary basin for a specified time period.
• Requires the State Water Resources Control Board to exclude from probationary status any portion of a basin for which a groundwater sustainability agency demonstrates compliance with the sustainability goal.
• Removes the authority of the local agencies to continue to implement parts of the plan or program that the State Water Resources Control Board determines to be inadequate and instead requires the board include in its interim plan a groundwater sustainability plan, or any element of a plan, that the board finds either complies with the sustainability goal for that part of the basin or would help meet the sustainability goal for the basin.
• Prohibits the State Water Resources Control Board, before January 1, 2025, from establishing an interim plan to remedy a condition where groundwater extractions result in significant depletion of interconnected surface waters.

Although the main purpose of this act is to empower local government to manage groundwater, critics have complained that the law undermines this purpose by allowing the state government to oversee and alter local plans if the state determines that those plans are inadequate. Moreover, experts say that it could be decades before the new law has any effect on depleted basins.

Another interesting point that has not garnered much discussion in the media is that in some cases, shifting management of groundwater to local government may actually result in less effective management of groundwater. Many local economies in California, such as Fresno, Tulare, and Kern County, are based largely on farming, which of course requires plenty of groundwater for irrigation. In a local economy dominated by agriculture, a local agency may be reluctant to anger local farmers—who provide a huge portion of local jobs and taxes—by restricting how much water they can pump. This may be part of the reason that the Act allows the state to oversee local plans. For example, local agencies must submit a groundwater sustainability plan to the Dept. of Water Resources for review, and in some cases the state may step in and create an “interim plan.”

In any case, every person or entity in California that has any involvement with pumping groundwater should take note of this Act, because in the next few years they will be subject to new restrictions established pursuant to the Act, whether those restrictions come from local government or the state of California.

Recent Decision Clarifies Property Subject to California’s Transfer Disclosure Law

A recent opinion from the California Court of Appeal, issued just last Thursday,  underscores the importance of complying with the law requiring sellers of real property to provide the buyer with a “transfer disclosure statement,” even if the property is “mixed use” (i.e. contains both commercial and residential property).

In Richman v. Hartley, 2014 Cal. App. LEXIS 257, Hartley entered into an agreement to purchase real property from Richman in Ventura. The property was a single parcel that included two structures: a commercial building and a residential duplex. The contract was a standard “AIR” industry form, which included the following provision: “Seller shall make to Buyer, through escrow, all the applicable disclosures required by law…concerning the property….”  This clause is a reference to Cal. Civ. Code § 1102.3, which provides in relevant part, “The transferor of any real property subject to this article shall deliver to the prospective transferee the written statement required by this article, as follows: (a) In the case of a sale, as soon as practicable before transfer of title.” Under Cal. Civ. Code § 1102(a), the disclosure requirement applies to “real property or residential stock cooperative, improved with or consisting of not less than one nor more than four dwelling units.” However, Richman failed to provide any disclosures.

Although there was a scheduled closing date, Hartley refused to close, citing Richman’s failure to provide the required disclosure statements. Richman sued Hartley for breach of contract. Hartley moved for summary judgment on the grounds that, as a matter of law, Richman could not possibly prevail in an action for breach because he had failed to perform his statutory and contractual duty to provide disclosures. (To state a cause of action for breach of contract, the plaintiff must either establish that he or she performed his or her end of the agreement, or else provide a valid excuse for nonperformance.) The trial court granted summary judgment in Hartley’s favor, and Richman appealed.

On appeal, Richman argued that he was not required to provide the disclosures because the law applied only to real property “consisting of not less than one nor more than four dwelling units,” whereas his property contained both residential and commercial buildings. He contended that the legislature did not intend to protect essentially commercial transactions like his. Richman urged the court to consider the “essence of the transaction” in deciding whether the statute applied. He cited the parties’ experience with commercial property and the fact that they used standard commercial real estate forms.

Like the trial court, the Court of Appeal rejected these arguments. Although Richman focused on the phrase “consisting of” in Cal. Civ. Code § 1102(a), the Court noted that the complete phrase is “improved with or consisting of [residential property].” (emphasis added). Finding this language to be “clear and unambiguous,” the Court held that the disclosure requirement applied to mixed property, as long as the property included “one nor more than four dwelling units.” If the legislature had wanted to exclude mixed-use property, the court reasoned, it would have included an explicit exclusion in the statute.

This case underscores the grim consequences of failing to comply with the Transfer Disclosure Law, even for mixed-use property consisting mostly of commercial buildings. If you fail to comply with this statutory requirement, you will be in breach and, having failed to perform, you will be unable to sue the buyer for breach of contract, even if the buyer backs out of the sale at the last minute. It also shows the importance of consulting with legal counsel when there are questions about disclosure requirements.

California Bill Would Allow Reduction of Damages in “Inverse Condemnation” Actions If Plaintiff Shares Fault

A bill being considered by the California legislature, AB-436, has important implications for plaintiffs who sue government entities in so-called “inverse condemnation” actions. The law would apply the doctrine of “comparative fault” to such actions. Before addressing the new law, it would be useful to explain these two legal terms of art.

When a government entity exercises its power of eminent domain to seize private property for a public use, the government “condemns” the property. In these cases, the government must give the owner “just compensation” for the property, usually its fair market value. This stems from the “Takings” clause of the Fifth Amendment of the Constitution, which provides that government may not take private property for public use “without just compensation.” Much of the litigation surrounding takings, including many of my own cases, involves disputes over the proper valuation of property. In these cases, the government is the plaintiff that initiates the lawsuit in order to seize the property. The owner of the property is the defendant.

With inverse condemnation, the roles are reversed. The property owner is the plaintiff who files a lawsuit against the government, claiming that the government has taken some action that has devalued or impaired his or her property in such a way that it amounts to a “taking,” for which the owner is entitled to compensation or, in some cases, injunctive relief. A common example is when the government builds a dam. Sometimes, release of water impounded by the dam increases flooding to properties in the flood control basin. If this occurs, property owners suffering flood damage can often sue the government for inverse condemnation. Other examples include damage caused by sewage backup, impaired access to property, and noise and air pollution caused by airplanes taking off from a nearby airport.

Comparative fault is a doctrine that allows a plaintiff’s award of damages to be reduced in proportion to how much the plaintiff’s own negligence contributed to the accident. For example, let’s say Plaintiff was walking on Defendant’s property and tripped over a limb that was sticking out too far from beneath a shrub. Defendant introduces evidence at trial that Plaintiff was slightly drunk at the time. The jury may find that Plaintiff is not fully responsible for causing the trip and fall; rather, Plaintiff is 60% responsible (for being intoxicated), and Defendant is 40% responsible (for failing to remove the hazard on his property). If Plaintiff’s damages were $100,000, then he would collect $40,000, or 40% of the total.

California has followed the comparative fault rule ever since the California Supreme Court adopted it in Li v. Yellow Cab Co. (1975) 13 Cal.3d 804. Before then, the rule was “all or nothing”: If the Plaintiff shared any fault—even 1%—he or she would recover nothing. However, the courts declined to extend the Li holding to inverse condemnation cases, on the grounds that such actions are based in the Constitution, not the law of negligence. For example, in Ellis v. California ex rel.Dept. of Transportation (1996) 48 Cal. App. 4th 1334 the Ellises owned a home in Pacific Palisades. In 1988, a landslide caused the street in front their house to crack apart. Cracks also formed in the driveway and front entry. By 1993, the landslide had destroyed the Ellises’ home. They sued Caltrans and the City, claiming that the landslide was caused by road cuts made by Caltrans to build and widen the Pacific Coast Highway and by road cuts made by the City to prevent water from getting into the landslide mass.

The jury found that although the defendants were mostly at fault, the Ellises were 32% responsible because when they bought the home, they knew that a neighbor was suing the City for landsliding that had already caused the Ellises’ home to sink. If they had followed up with further geological investigation, they could have discovered the problems and corrected them. On appeal, the Court reversed, holding that the Ellises’ award could not be reduced, because the comparative fault does not apply to inverse condemnation actions. The court explained, “Tort law and inverse condemnation are not the same. Inverse condemnation is constitutionally based.” Id. at 1344. The Court cited California Supreme Court precedent that “the right assured to the owner by [the Takings clause] is not restricted to the case where he is entitled to recover as for a tort at common law.” Id. In a word, neither the old “all-or-nothing” rule nor the new comparative fault rule applied to condemnation actions; they were simply a different animal from tort.

Now, with AB-463, the California Legislature is seeking to overrule these precedents. The bill would enact Cal. Code Civ. Proc. § 1000. Section § 1000(b) would provide that “[i]n an inverse condemnation proceeding, a court or arbitrator shall reduce the compensation to be paid to a plaintiff in direct proportion to his or her percentage of fault, if any, in the damaging of property that constitutes a taking for a public use.”

This is important because there are many cases where a jury could find that a property owner shares fault with the government for property damage. For example, a City, as part of a project to redevelop blighted areas, condemns an apartment complex and demolishes it. This causes increased drainage to surrounding properties. Plaintiffs buy an adjoining lot to develop. Plaintiffs ignore their soil expert’s recommendation to make provisions to direct surface runoff away from and off the work site and to install subsoil backfilling. Plaintiffs construct industrial buildings. Because of increased drainage from the City’s demolition site, water begins to flow onto the Plaintiffs’ building walls and seeping into the buildings. Plaintiffs sue the City for inverse condemnation. The jury finds the Plaintiffs 15 percent at fault and the City 85 percent at fault. (See West Century 102 Ltd. v. City of Inglewood, 2002 Cal. App. Unpub. LEXIS 1599.)

Finally, the bill would also amend Cal. Code Civ. Proc. § 998, which involves the awarding of costs. Under proposed Cal. Code Civ. Proc. § 998(g)(1)(A), if the defendant in an inverse condemnation action makes an offer that the plaintiff does not accept, and the plaintiff fails to obtain any judgment or award, the plaintiff shall not recover his or her postoffer costs and shall pay the defendant’s postoffer costs. The court or arbiter could also require the plaintiff to pay the defendant’s costs for expert witnesses. Alternately, if the plaintiff rejects the offer and fails to obtain a “more favorable” judgment or award, the plaintiff could not recover postoffer costs, but could not be ordered to pay the defendant’s postoffer costs.

The is only the latest development in an area of constitutional law affecting real property that is constantly evolving. For more recent developments in eminent domain law, see Artin Shaverdian’s excellent summary and keep checking this blog.

Proposed California Law Would Give Homeless People the Right to Sleep in Public, Access to Statewide “Hygiene Centers,” and More

The California legislature is considering a bill that could have major implications for commercial property owners in California, to say nothing of taxpayers in general. It is AB-5, also known as the Homeless Person’s Bill of Rights and Fairness Act. Although the bill has practically no chance of passing in its current, sweeping form, a watered-down version could survive and become law. According to the Legislative Counsel’s Digest, the AB-5 “would provide that no person’s rights, privileges, or access to public services may be denied or abridged because he or she is homeless.”

The law would define “homeless” people as “those individuals or families lacking who lack or are perceived to lack a fixed, regular, and adequate nighttime residence, or having who have a primary nighttime residence in a shelter, on the street, in a vehicle, in an enclosure or structure that is not authorized or fit for human habitation, in a substandard apartment, dwelling, staying temporarily with friends or families, or staying in transitional housing programs or habitation.” Cal. Civ. Code § 53.1(d). The definition also includes “a person whose only residence is a residential hotel or who is residing anywhere without tenancy rights, and families with children staying in a residential hotel whether or not they have tenancy rights.” Id. (That last part is puzzling, since most people would not regard a person who lives in a hotel as “homeless.”)

The bill would extend a laundry list of rights to homeless people, such as the right to solicit donations, to “move freely”; to “eat, share, accept, or give food or water;” to not be harassed by police or private security people; to “engage in lawful self-employment (such as recycling and “junk removal”); to pray, meditate, or practice religion; to “decline admittance to a public or private shelter; and to sleep in one’s vehicle, provided it is “legally parked on public property.” Cal. Civ. Code § 53.1(d)(10).

Most of these rights apply only when homeless people are in a “public space.” “Public space” means “any property that is predominantly within the public domain or owned by any state or local government entity or upon which there is an easement for public use and that is held open to the public, including, but not limited to, plazas, courtyards, parking lots, sidewalks, public transportation, public buildings and parks” and “may also refer to those places that receive additional services through BIDs or other, similar public-private partnerships.” Cal. Civ. Code § 53.1(e). Although the bill expressly states that “public space” does not include “a private business establishment,” business owners need to remember that this refers only to the property of the business itself, such as the interior of a restaurant or supermarket. Any adjoining or nearby property that is public property or a “public easement,” such as a sidewalk, roadway, and some parking lots, would be subject to the law and fair game for homeless resting, praying/meditating, and all the other rights pertaining to “public spaces.”

One curious aspect of AB-5 is that it tries to have it both ways with respect to some of its more controversial provisions. Most of the listed rights are stated in terms that suggest the law is merely trying to put homeless people on equal fitting with non-homeless people in the eyes of law enforcement—in other words, to prevent discrimination—rather than to give the homeless special privileges. For example, Cal. Civ. Code § 53.2(a)(2) gives homeless people the “right to rest in a public space in the same manner as any other person without being subject to criminal sanctions, harassment, or arrest by law enforcement, public or private security personnel, or BID agents because he or she is homeless, as long as that rest does not maliciously or substantially obstruct a passageway” (emphasis added).

However, further down the list, one encounters Cal. Civ. Code § 53.2(a)(6), which also concerns  the right to “rest” but goes much further. It grants to homeless people

[t]he right to rest in a public space, without being subject to criminal or civil sanctions, harassment, or arrest by law enforcement, public or private security personnel, or BID [business improvement district] agents, except that law enforcement may enforce existing local laws if all of the following are true: (1) the person’s county of residence maintains 12 months per year of nonmedical assistance provided for in Section 17000 of the Welfare and Institutions Code for employable, able-bodied adults without dependents who are compliant with program rules established by the county, including work requirements; (2) the locality is not a geographical area identified by the United States Department of Labor in accordance with Subpart A of Part 654 of Section 20 of the Code of Federal Regulations as an area of concentrated unemployment or underemployment or an area of labor surplus; and (3) the public housing waiting list maintained by the county contains fewer than 50 persons.

This goes beyond merely putting the homeless on even ground with everyone else, and in some cases it could lead to disparate application of the law. One example is the curfew laws that apply to minors, who make up a disturbingly large percentage of the homeless in large California cities, including in my city of Sacramento. In Sacramento, it is a misdemeanor “for any minor to remain in any public place or on the premises of any establishment within the county during curfew hours.” Sacramento County Code § 9.28.010. The Sacramento County Code defines curfew hours as being “between 10:00 p.m. and 6:00 a.m. of the following day”—just the time when a homeless person is likely to be sleeping. This means that in a jurisdiction that meets the requirements of Cal. Civ. Code § 53.2(a)(6)(1)–(3), police may arrest a minor who is not homeless on a misdemeanor charge of violating curfew under Sacramento County Code § 9.28.030, but not a minor who is homeless. Of course, before taking action, the police would have to question the minor to determine whether he or she fits the legal definition of “homeless.”

The bill also gives the homeless the right to be free from “harassment” by law enforcement and private security people in public spaces. Cal. Civ. Code 53.2(a)(1). Harassment means “a knowing and willful course of conduct by law enforcement, public or private security personnel, or a BID agent directed at a specific person that a reasonable person would consider as seriously alarming, seriously annoying, seriously tormenting, or seriously terrorizing a person.” Cal. Civ. Code 53.1(c). This seems sensible enough, but the definition could lead to strange results. For example, if, out of concern for a homeless person’s safety, a police officer tries on multiple occasions to rouse him or her, and the person happens to be highly irritable or paranoid (perhaps owing to mental illness or substance abuse), is this “harassment”? It seems that it could easily fit the definition, since it would include conduct that is “seriously annoying” or “seriously alarming” to the homeless person. Cal. Civ. Code § 53.1(c).

One can debate whether this law would be good or bad for the homeless (and society), but there is no question that it would require a great deal of tax money and government resources to put into effect. It would place an especially high burden on local law enforcement, whose resources are already stretched thin. For example, Cal. Civ. Code § 53.5(a) would require “every local law enforcement agency [to] annually compile and review the number of citations, arrests, and other enforcement activities” made for certain types of conduct. These include “[o]bstructing a sidewalk, whether by a person or personal property,” “[l]oitering,” “Sitting,” “[l]ying down, “[c]amping, “[p]ublic lodging, including [engaging in or soliciting lewd conduct in public under Cal. Penal Code § 647], “[s]leeping in a public place,” “[s]oliciting donations, “[s]oliciting donations at certain restricted locations, including citing people for panhandling under Section 22520.5 of the Vehicle Code,” “[b]athing in public places,” “[s]haring or receiving food,” “[i]nhabiting or sleeping in a vehicle,” “[v]iolating public park closure laws,” “[c]rossing streets or highways at particular locations,” “[t]respassing, unless the trespassing charge is coupled with any misdemeanor or felony, except for” committing a public nuisance under Cal. Penal Code § 372 and certain trespassing charges under Cal. Penal Code. § 602. Just what the overburdened police need—more paperwork!

Two other aspects of the bill would add significantly to its cost. First, it would give homeless people a right to counsel if they face charges for any of the behavior listed in Cal. Civ. Code § 53.5(a) (see above). Many of the listed acts are merely infractions akin to a traffic ticket, not misdemeanors or felonies. This is noteworthy because as things stand, one has a right to counsel only for a crime that is a misdemeanor or higher. Once again, the bill is not merely extending to homeless people the same rights that other people enjoy but giving them special treatment. Second, the bill would provide that “[e]very local government and disadvantaged unincorporated community within the state shall have sufficient health and hygiene centers available 24 hours a day, seven days a week, for use by homeless people.” Cal. Civ. Code § 53.4(a). These centers would, at a minimum, contain public bathroom and shower facilities” and would receive funding from the State Department of Public Health. Cal. Civ. Code § 53.4(a).

AB-5 has drawn sharp criticism from many corners. For example, the California Chamber of Commerce included AB-5 on its list of “job killers” list for 2013, saying it would impose “costly and unreasonable mandates on employers.” Even the San Francisco Chronicle calls AB-5 a “bad idea,” stating, “[a] bill that asserts an individual’s right to urinate, sleep and panhandle wherever he wants is neither compassionate nor wise.” Nevertheless, after removal of some of its more controversial provisions, it could be signed into law. For this reason, business owners in California should keep an eye on its progress and consider getting involved.

California Supreme Court Removes Limitation on Use of “Parol Evidence” to Prove Fraud

A recent case has had a great impact on the law that controls what evidence parties may adduce to establish fraud. In Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Assn. (2013) 55 Cal. 4th 1169, the California Supreme Court overruled its own much-maligned holding from 1935, Bank of America etc. Assn. v. Pendergrass (1935) 4 Cal. 2d 258. Although Riverisland involved a promissory note secured by real property, its holding applies to any type of contract. The case involves the scope of the “parole evidence rule.” This rule is (or should be) well-known to every law student who has studied Contracts. As the Riverisland court explains, the rule is codified in Cal. Code Civ. Pro. § 1856 and Cal. Civ. Code § 1625, and it essentially states that “when parties enter an integrated written agreement, extrinsic evidence may not be relied upon to alter or add to the terms of the writing.” Id. at 1174.

The policy behind the rule is that when parties enter into a written contract where one of the terms states that the contract constitutes all of the terms and obligations of the agreement, a party should not be allowed later to bring in “extrinsic evidence” that the other party made some inconsistent or additional promise—usually an oral one—and argue that it is a binding part of the agreement. “Extrinsic evidence” simply means evidence other than the language found in the written contract. The idea is to promote certainty and prevent litigation: Everyone should come away from the table secure in the knowledge that the written contract is the final word on the terms of the agreement.

However, it also long been the law that the parol evidence rule does not apply when a party is claiming that the other party induced him or her to sign the contract by fraud. This is because the parol evidence rule assumes a validly formed contract; if there was some defect in the formation of the contract so that it never came into existence, then there are no “terms of the writing” to be altered or added to, and applying the rule makes no sense. For example, if I am claiming that D never intended to fulfill her obligation under our contract at the time she entered into it, I have an action for “promissory fraud,” also known as “false promise,” and I can offer extrinsic evidence to support that claim. I might call a witness to testify that D confided in him the day after signing the contract that she intended to renege on the deal all along. Again, in this example I am offering the evidence not to “alter or add to the terms of the writing” but to show that, because of D’s fraudulent promise, the contract itself was defective.

This is where the infamous Pendergrass decision comes in. In that case, the Pendergrasses fell behind on their loan payments. They and the bank executed a new promissory note secured by additional collateral that was payable on demand. Not long after entering the contract, the bank seized the encumbered property and sued the Pendergrasses to enforce the note. As the Riverisland court explains, the Pendergrasses defended by arguing that the bank “had promised not to interfere with their farming operations for the remainder of the year, and to take the proceeds of those operations in payment.” Riverisland Cold Storage, Inc., 55 Cal. 4th at 1175. The Pendergrasses alleged that “the bank had no intention of performing these promises, but made them for the fraudulent purpose of obtaining the new note and additional collateral.” Id.

The Court remanded the case, and in doing so had to decide whether the Pendergrasses would be allowed to offer oral testimony to prove the bank’s fraudulent promises. In language that has fired legal debate ever since, the Court held, “Our conception of the rule which permits parol evidence of fraud to establish the invalidity of the instrument is that it must tend to establish some independent fact or representation, some fraud in the procurement of the instrument or some breach of confidence concerning its use, and not a promise directly at variance with the promise of the writing.” Pendergrass, 4 Cal. 2d at 263 (emphasis added). The Court thereby placed a great limit on the rule that extrinsic evidence is admissible to prove fraud: Now such evidence was admissible only if it concerned a promise not “directly at variance with the promise of the writing.”

The case drew sharp criticism from the get-go. A key criticism was that the statutes codifying California’s parol evidence rule contain no such limiting language. For example, Cal. Code Civ. Proc. § 1856(g) simply provides that the parol evidence rule does not exclude “other evidence of the circumstances under which the agreement was made or to which it relates… or to explain an extrinsic ambiguity or otherwise interpret the terms of the agreement, or to establish illegality or fraud.” Critics complained that by placing limits on this broadly stated statute, the court was overstepping its bounds and overriding the intent of the legislature. Moreover, courts and commentators argued that the restriction was bad policy because it allows dishonest parties to use the rule as a shield against a later fraud action. If such a party knows that a fraudulent statement or false promise will be inadmissible in court, then he or she will be more tempted to engage in such misconduct.

In Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Assn. (2013) 55 Cal. 4th 1169, the California Supreme Court sided with the critics, calling Pendergrass an “aberration,” Id. at 1182, that was “ill considered, and should be overruled,” Id. at 1172. The court also cited its own maxim that “it was never intended that the parol evidence rule should be used as a shield to prevent the proof of fraud.” Id. at 1180.

Riverisland has spawned two cases that have further clarified its holding. In the first case, Julius Castle Restaurant v. Payne (2013) 216 Cal. App. 4th 1423, a landlord who owned a restaurant property sued his tenant on a number of grounds stemming from the tenant’s failure to make timely installment payments on the lease. The tenant countersued, alleging that the landlord had induced the tenant to sign the lease by making fraudulent oral misrepresentations about the condition of restaurant equipment. Citing Riverisland, the Court of Appeal affirmed the lower court’s ruling that the tenant could offer evidence of the oral misrepresentations.

The second case, Thrifty Payless, Inc. v. The Americana at Brand (2013) LLC, 218 Cal. App. 4th 1230, involved a commercial lease to operate a Rite Aid store in a shopping center. In that case, before executing a lease, the landlord had sent the tenant a “letter of intent” in which it gave specific estimates of the tenant’s share of the shopping center’s taxes, insurance, and “common area maintenance.” However, after execution of the lease, the landlord attempted to charge the tenant more than double the amounts listed in the letter of intent. The tenant sued for fraud, among other things, arguing that the landlord used the letter of intent to induce it into signing the lease knowing that the true amounts would be far higher than the estimates in the letter of intent. The trial judge ruled that the tenant could not bring in evidence of the estimates in the letter of intent, citing the parol evidence rule. Citing Riverisland, the Court of Appeal reversed, holding that the evidence was admissible to prove fraud.

Riverisland Cold Storage is significant because it is a rare example of the Supreme Court expressly overruling its own precedent. Generally a court will not overrule its own decisions  unless it is convinced that a particular decision is founded on bad public policy or faulty legal reasoning. The case shows that while courts may be slow to overturn their precedents—in this case it took nearly 78 years—they are willing to do so if they believe that common sense, clear statutory language, and public policy are squarely against it.

Confusion Clouds Legality of Medical Marijuana in California

Although I am not a criminal attorney, as a real estate lawyer and a citizen, I have closely followed and to some extent participated in the ever-changing laws concerning marijuana. In addition to affecting the lives of anyone who uses marijuana for medical reasons, the debate raises serious constitutional questions about federal preemption and state’s rights. It can also implicate my area of specialty—real estate law—when the U.S. attorney seizes real property pursuant to asset forfeiture laws. Before considering those issues, however, it is important to know what is at stake: What penalties does a person face for possessing, selling, or growing marijuana under state and federal law?

California Law Regulating Marijuana

In California, possession of any “concentrated cannabis” is a “wobbler,” which means it can be prosecuted as a misdemeanor or felony depending on the circumstances of the case. Cal. Health & Saf. Code § 11357(a); Cal Pen Code § 1170(h). “Concentrated cannabis” means “the separated resin, whether crude or purified, obtained from marijuana.” Cal. Health & Saf. Code § 11006.5.

For possession of simple marijuana, however, the laws are more relaxed. The Code defines “marijuana” as “all parts of the plant Cannabis sativa L., whether growing or not; the seeds thereof; the resin extracted from any part of the plant; and every compound, manufacture, salt, derivative, mixture, or preparation of the plant, its seeds or resin.” Cal. Health & Saf. Code § 11018. Possession of up to 28.5 grams of marijuana is an infraction punishable by a fine of up to $100. Cal. Health & Saf. Code § 11357(b). Possessing more than 28.5 grams is a misdemeanor, with imprisonment and fines varying depending on the person’s age and whether the possession took place on school grounds. Cal. Health & Saf. Code § 11357(d). Cultivating or possessing with intent to sell is punishable as a felony under California’s determinate sentencing laws, the longest sentence being 3 years for a first offense. Cal. Health & Saf. Code §§ 11358, 11359; Cal. Pen. Code § 1170(h).

Marijuana for Medical Use in California

Proposition 215 added a section to the Health and Safety Code known as the Compassionate Use Act of 1996. The Act provides that the laws prohibiting possession and cultivation of marijuana “shall not apply to a patient, or to a patient’s primary caregiver, who possesses or cultivates marijuana for the personal medical purposes of the patient upon the written or oral recommendation or approval of a physician.” Cal. Health & Saf. Code § 11362.5(d). In addition, “no physician in this state shall be punished, or denied any right or privilege, for having recommended marijuana to a patient for medical purposes.” Cal. Health & Saf. Code § 11362.5(c).

In 2004 the legislature expanded Prop. 215 by enacting Cal. Health & Saf. Code §§ 11362.7–8, which implemented a “Medical Marijuana Program.” This law directs county health departments to create an identification card program for qualified medical marijuana users. Anyone with a valid card may not be arrested “for possession, transportation, delivery, or cultivation of medical marijuana in an amount established pursuant to this article.” Cal. Health & Saf. Code § 11362.71(e). In addition, qualified patients, persons with valid identification cards, and their caregivers may “associate…collectively or cooperatively to cultivate marijuana for medical purposes” (though not for profit) without incurring criminal sanctions. Cal. Health & Saf. Code § 11362.775.

The law allows a qualified patient or primary caregiver to possess only eight ounces of dried marijuana per qualified patient unless he or she obtains a “doctor’s recommendation that this quantity does not meet the qualified patient’s medical needs.” Cal. Health & Saf. Code § 11362.77(a). A caregiver may maintain no more than six mature or 12 immature marijuana plants per qualified patient. Cal. Health & Saf. Code § 11362.7(b).

Federal Law Regulating Marijuana

The conflict comes from the fact that under Federal law, marijuana remains an illegal drug with no exceptions for medical use. According to the Controlled Substances Act (CSA), marijuana is a Schedule 1 substance, meaning it has a “high potential for abuse” and, in the eyes of Congress, “no currently accepted medical use.” 21 U.S.C. § 811(b)(1). Penalties for possessing marijuana are harsh indeed. At the low end, possessing any amount of marijuana is a misdemeanor punishable by one year in prison and/or a minimum fine of $1000. 21 USC § 844. At the high end (no pun intended), selling 1000 kg or more “marijuana mixture” or cultivating 1000 or more plants is a felony punishable by imprisonment for 20 years to life and/or a fine of up to $20,000,000. DEA Federal Trafficking Penalties for Marijuana.   

Preemption Debate

If state and federal laws on marijuana conflict, which is the “actual” law? This is the preemption issue, and it is a source of endless confusion. In 2008 the California Dept. of Justice, citing case law, took the position that neither Prop. 215 nor the Medical Marijuana Program conflicted with the CSA “because, in adopting these laws, California did not ‘legalize’ medical marijuana, but instead exercised the state’s reserved powers to not punish certain marijuana offenses under state law when a physician has recommended its use to treat a serious medical condition.”

However, the U.S. Dept. of Justice (USDOJ) has not agreed, although the agency’s position has flip-flopped a number of times. Most recently, in August 2013, the USDOJ sent a memo to U.S. attorneys reiterating its enforcement policy in light of the recent changes to the law in California, Colorado, and Washington. The memo recommends that U.S. attorneys focus their prosecutorial efforts on eight federal “enforcement priorities.” These include preventing “distribution of marijuana to minors,” preventing revenue from marijuana sales from going to criminal gangs and cartels, preventing violence and the use of firearms in connection with marijuana sales, and preventing the growing and possession of marijuana on public lands and federal property.

Nevertheless, the memo acknowledges that U.S. attorneys still retain ultimate discretion to decide how to prioritize their efforts and states that “[a] marijuana operation’s large-scale or for-profit nature may be a relevant consideration for assessing the extent to which it undermines a particular federal enforcement policy.” Evidently, the DOJ identified a great deal of “large-scale or for-profit” marijuana providers in 2011, when U.S. attorneys in California sent out warning letters to the state’s largest dispensaries. Hundreds of them closed as a result. In January of this year, the owner of one dispensary, Aaron Sandusky of Rancho Cucamonga, was given a mandatory sentence of 10 years on two counts involving 1,000 marijuana plants.

In addition, in January of 2012 I blogged about a case here in Sacramento in which the US attorney filed an in rem forfeiture action (also called civil asset forfeiture) against Legacy Ventures, LLC, a property owner who was leasing its building to the Sacramento Holistic Healing Center (SHHC), a medical marijuana dispensary in the midtown area. The complaint alleged that SHHC was using the building “to sell and distribute marijuana in violation of the Controlled Substances Act….” The object of the complaint was to get a court order allowing the U.S. government to seize the building. According to court records, in May 2012 Judge Morrison C. England, Jr. accepted a stipulation and order by which the United States agreed to withdraw the action in exchange for Legacy Ventures, LLC paying the U.S. Attorney $12,720.00.

The Tide May Be Turning

Despite these high-profile cases, there is some indication that the feds are beginning to scale down there prosecutions of dispensaries in light of the August 2013 memo. Patrick Hanly, a prominent defense attorney in Sacramento who has defended dispensary owners, suggests that while there has been no “sea change” in federal attitudes toward prosecuting medical marijuana dispensaries in California, “the trajectory seems to be on a downward spiral.” Hanly points to the case of Abraham and Winslow Norton, two brothers who ran a dispensary in Hayward. Despite the fact that they sold $60,000,000 worth of medical marijuana in three years, the brothers will serve only six months in prison and six months in a halfway house, which the San Francisco Chronicle calls “one of the shorter terms imposed in recent federal prosecutions of pot suppliers.” Hanly himself is representing a man who was convicted of selling $8,000,000 worth of marijuana and who, if the judge approves his deal at sentencing, could receive as little as five years of imprisonment. That is still serious, but it is still a far cry from the usual ten-year mandatory sentence.

 An End in Sight?

A possible resolution of the preemption conflict may be in the offing. ongress is now considering the Ending Federal Marijuana Prohibition Act of 2013 (H.R. 499). The Act would direct the Attorney General to “issue a final order that removes marijuana in any form from all schedules of controlled substances under the Controlled Substances Act.” It would also subject marijuana to the same laws and FDA oversight that apply to alcohol. Introduced in February 2013, the bill is currently in the Subcommittee on Crime, Terrorism, Homeland Security, and Investigations.

According to GovTrack.us, a website that calculates a bill’s chance of passing based on current support, H.R. 499 currently has a “5% chance of getting past committee.” Those are not great odds, and I would give it even less than that. According to Patrick Hanly, such a bill probably would have little chance of succeeding unless it was supported by a large, mainstream drug company with the resources to lobby Congress. Hanly also notes that at a time when the American Medical Association has not signed on to the position that marijuana has a legitimate medical use, having the backing of the pharmaceutical industry would make it easier to for medical marijuana to receive the scientific research necessary to establish its medical benefits to the satisfaction of Congress.

Still, the fact that Congress would even consider a bill to decriminalize a commonly known Schedule 1 substance reveals the frustration caused by this whole preemption mess. The situation shows that although our federal system is undoubtedly the best form of government on the planet, sometimes an unfortunate cost of such an arrangement is conflict between state and federal governments and rampant uncertainty about the law—a state of affairs that attorney David Welch calls “the Wild West.” One can only hope that a resolution comes soon.

The Conflict Between Los Altos School District and Bullis Charter School Rages On

In a lively and informative article recently published in California Lawyer, Lisa Davis chronicles the long-running and acrimonious dispute between the Los Altos School District (LASD) in Silicon Valley and Bullis Charter School, which operates within the district boundaries. The story is fascinating in its own right, but I think it may have big-picture implications in terms of future changes concerning the rules governing charter schools. (Unless otherwise noted, all the facts about the conflict in this blog article are from the California Lawyer article or the “Los Altos School District vs. Bullis Charter School” Timeline compiled by the Los Altos Town Crier.)

The statutes governing charter schools are found in Cal. Ed. Code § 47600, et seq.  Cal. Ed. Code § 47605(a)(1) provides that one or more persons may petition for the establishment of a charter school. The petition must be signed by “a number of parents or legal guardians of pupils that is equivalent to at least one-half of the number of pupils that the charter school estimates will enroll in the school for its first year of operation” as well as “a number of teachers that is equivalent to at least one-half of the number of teachers that the charter school estimates will be employed at the school during its first year of operation.” Cal. Ed. Code § 47605(a)(1)(A) and (B).

The traditional purpose of a charter school was to provide an alternative education for poor students that is on par with the education received by middle- and upper-class students at public schools that are thriving in other parts of a school district.  For example, a recent New York Times article about the New York Democratic mayoral nominee’s position on charter schools noted that “those enrolled in charters are overwhelmingly from poor, minority families.”  However, the Bullis Charter School in Los Altos, CA has turned that model on its head. A substantial number of Bullis pupils are children of most wealthy residents of the town of Los Altos, including some billionaires. Critics have labeled it an “elite” institution that unfairly competes with public schools for government funding. Moreover, since the passage of Prop. 39 in 2000, Bullis and LASD have had to compete for space as well, since Cal. Ed. Code § 47614(a) requires that “public school facilities should be shared fairly among all public school pupils, including those in charter schools.”

That last requirement is the crux of the feud. Bullis wants a single school campus. This has been the goal of the school’s founders ever since they formed the school after LASD shut down a public school in their Los Altos Hills neighborhood due to funding cuts and low enrollment. Instead, Bullis has had to operate at multiple LASD campuses. This is partly because of lack of space and also because some campuses cannot accommodate the youngest pupils. As a result, Bullis supporters feel their children are getting short shrift, whereas LASD supporters resent the suggestion that they must vacate a school at a popular location that a number of LASD students still attend.

Funding for charter schools is based on a formula designed to ensure that charter schools have access to “reasonably equivalent” facilities, in accordance with Cal. Ed. Code § 47614.5. However, Bullis supplements this income with fund-raising and a “suggested donation” of $5000 per student. Both LASD and Bullis combined have spent an estimated $5,000,000 on eight separate lawsuits, including battles over motions and appeals, on everything from funding to campus space. For example, Bullis won a lawsuit in which it established that LASD underestimated nonclassroom space when determining “reasonably equivalent” facilities. See Bullis Charter School v. Los Altos School Dist. (2011) 200 Cal. App. 4^th 1022. In another lawsuit, still pending, LASD has alleged in a cross-complaint that the “suggested donation” is really tuition; hence, Bullis is essentially operating as a private school, and LASD should not have to provide it with public-school space. See Bullis Charter School v. Los Altos School Dist., No. 1-12 CV-232187 (Santa Clara Sup. Ct.).

The conflict has pitted parents on both sides of the conflict against each other.  Parents sometimes march in protest, and people on both sides have maintained polemical websites that blast the other side. An LASD supporter even posted a scathing four-minute movie parody on Youtube portraying Bullis supporters as vindictive elitists and comparing Bullis board members with Nazis.

There is no telling how this brouhaha will end, if it ever does, but it could very well have ramifications for charter schools in general. Traditionally, one of the advantages of charter schools has been their relative autonomy in choosing how to educate their students. With a few exceptions, charter schools are exempt from the laws governing school districts. Cal. Ed. Code § 47610. However, as the LASD-Bullis conflict drags on and gains more notoriety, it is probable that state legislators will take notice and enact restrictions to reduce some of the autonomy enjoyed by charter schools in order to avoid another Los Altos conflagration.

Gov. Brown Signs Bill Banning Lead Ammunition for Hunting in California (AB 711)

A few weeks ago, Gov. Jerry Brown signed Assembly Bill No. 711 (AB 711) into law. The media has reported that the bill banned the use of lead ammunition for hunting in order to protect wildlife and the environment from the toxic effects of lead. But what does this mean exactly? Is it illegal to even possess lead ammunition in a hunting zone, or just to shoot it? Does the ban apply to all hunting grounds and all types of game? And what are the penalties for violating the law?

The bill amended California Fish and Game Code § 3004.5, which already required the use of non-lead centerfire ammunition within the condor range or when taking “big game” or coyotes with a rifle or pistol in specified deer-hunting zones. The existing statute also required the Fish and Game Commission (“commission”) to establish a system for certifying ammunition as non-lead and, “to the extent that funding is available,” to establish a process that will provide hunters in the affected zones with “non-lead ammunition at no or reduced charge.”

The amended statute keeps the requirements that the commission develop certification criteria and provide hunters with free or discounted ammunition, but it extends the ban to the hunting of all game in all hunting areas: “[N]on-lead ammunition, as determined by the commission, shall be required when taking all wildlife, including game mammals, game birds, nongame birds, and nongame mammals, with any firearm.” Cal. Fish & G. Code § 3004.5(b) (emphasis added). Of course, with the current funding shortfalls, we can safely assume that the state will not be handing out free ammunition any time soon. The Dept. of Fish and Game’s website provides a helpful list of manufacturers certified as selling non-lead ammunition.

When the Dept. of Fish and Game promulgates regulations to implement this law, one can expect that they will contain language similar to that of the existing regulations implementing the previous version of § 3004.5. For example, current regulations ban the possession of both lead ammunition and a firearm capable of firing it “while taking or attempting to take any big game” within the specified areas. 14 C.C.R. § 353(h). That final phrase, “while taking or attempting to take,” seems to require more than just possessing the two items, although it depends on what counts as an “attempt.” Is one’s mere presence in a hunting area while possessing the two items sufficient evidence of an attempt? Or do you have to have your firearm pointed at the animal? Arguably, the wording suggests that you must be caught in the act of trying to shoot game with the prohibited ammunition in order to run afoul of the regulation. Under the California Penal Code, an attempt to commit an offence consists of two elements: “a specific intent to commit the crime, and a direct but ineffectual act done toward its commission.” Cal. Pen. Code § 21a. In any case, the existing regulations specifically state that merely possessing lead ammunition without a firearm capable of firing it is not a violation. 14 C.C.R. § 353(h).

The commission must begin phasing in the new regulations on July 1, 2015 and have them “fully implemented statewide by no later than July 1, 2019.” Cal. Fish & G. Code § 3004.5(i). However, the statute does provide some flexibility: If the director finds that “non-lead ammunition of a specific caliber is not commercially available from any manufacturer because of federal prohibitions relating to armor-piercing ammunition pursuant to [18 U.S.C. § 921],”  then the ban “shall be temporarily suspended for a specific hunting season and caliber….” Cal. Fish & G. Code § 3004.5(j)(1).

The new version of the statute keeps the same penalties as before. Violators will be guilty of an infraction punishable by a $500 fine for the first offense. Additional violations are punishable by a fine of between $1,000 and $5,000. Cal. Fish & G. Code § 3004.5(g).

One interesting aspect of this law is how it ties in with regulations for target shooting on public land where hunting is also allowed. In an FAQ for the prior version of the statute, the Dept. of Fish and Game addressed the question, “What about target shooting, ‘plinking,’ or firearms for personal protection?” Answer: “The Commission does not regulate these activities. Use of lead projectiles is legal unless another government entity has determined otherwise for lands they administer. The regulations prohibiting lead only relate to possession while engaged in specified hunting activities.” This leads to some counterintuitive results. For example, a person hunting in a National Forest would be prohibited from shooting lead ammunition at animals, but that same person could shoot as much lead ammunition as he or she wants at a nonliving target. A fair question, then, is whether the legislature will ban the use of lead ammunition for target shooting to remove this inconsistency.

To sum up, if you hunt or target-shoot in California, there are several things to keep in mind about this law: (1) Like its predecessor, the new law does not make it illegal merely to possess lead ammunition. Rather, it makes it illegal to use lead ammunition while hunting. For more specifics, we will have to wait until the Commission promulgates regulations implementing the Act. In the meantime, the preexisting law banning the use (or attempted use) of ammunition for hunting in specified hunting areas remains in effect. (2) The new law has no effect on the legality of shooting targets with lead ammunition on public land where target shooting is allowed, including in areas that allow both hunting and target shooting. (3) It seems likely that the Commission will pass regulations clarifying that lead ammunition is still legal at commercial shooting ranges and private gun clubs.

U.S. Supreme Court Limits Government’s Ability to Demand Money from Permit Applicants to Offset Environmental Damage from Land Development

A recent U.S. Supreme Court case has important implications for those seeking a permit for land development that is expected to impact the environment. In Koontz v. St. Johns River Water Management District, No. (2013) 570 U.S. __, 11–1447, Koontz, the petitioner, owned an undeveloped tract of land in Florida. He wanted to develop a section of the land that had been classified as wetlands.

Under Florida law, Koontz was required to apply for a permit from the St. Johns River Water Management District (“District”), which has the power to require applicants to “offset the resulting environmental damage by creating, enhancing, or preserving wetlands elsewhere.” Id. at 3. The District told Koontz that it would approve his permit only if he agreed to one of two concessions. First, he could develop 1 acre of his land and deed the remaining 13.9 acres to the District as a “conservation easement,” which also would have required him to install a stormwater management system and retaining walls at his own expense. Alternately, he could develop 3.7 acres, deed the rest of his property to the District as a conservation easement, and hire contractors to make improvements to District-owned land several miles away.

Koontz sued the District under a Florida law that allows property owners to recover damages if a state agency’s action is “an unreasonable exercise of the state’s police power constituting a taking without just compensation.” Id. at 5. The Circuit Court applied the U.S. Supreme Court’s holdings from the Nollan and Dolan cases. The Nollan/Dolan rule allows a government unit “to condition approval of a permit on the dedication of property to the public so long as there is a ‘nexus’ and ‘rough proportionality’ between the property that the government demands and the social costs of the applicant’s proposal.” Id. at 8. The Court sided with Koontz, finding that the District’s actions lacked both a nexus and rough proportionality, and the appellate court affirmed. However, the Florida Supreme Court reversed, finding that the Nollan/Dolan rule did not apply.

The U.S. Supreme Court reversed, holding that “the government’s demand for property from a land-use permit applicant must satisfy the requirements of Nollan and Dolan even when the government denies the permit and even where its demand is for money.” Id. at 22. The case has caused some confusion as to whether the Court found the District’s actions to be a “taking.” Part of this confusion is due to the inherently slippery “unconstitutional conditions doctrine” on which the Court relied. That doctrine “vindicates the Constitution’s enumerated rights by preventing the government from coercing people into giving them up.” Id. at 7. The Court acknowledged that in this case, because Koontz rejected the District’s offers and never got a permit, his property was not actually taken. Nevertheless, “[e]xtortionate demands for property in the land-use permitting context (read negotiations) run afoul of the Takings Clause not because they take property but because they impermissibly burden the right not to have property taken without just compensation.” Id. at 10 (emphasis added).

Another issue stemmed from the fact that the Nollan/Dolan rule, by its own terms, applies when the government unit demands property. The Florida Supreme Court had distinguished Koontz’s case from Nollan and Dolan because “the subject of exaction at issue here was money rather than a more tangible interest in real property.” Id. at 15. The Court disagreed, finding it sufficient that the financial obligations the District tried to impose “operate upon or alter an identified property interest.” Id. at 16 (quoting from Eastern Enterprises v. Apfel, another U.S. Supreme Court case).

The Court cautioned that it was not holding that a government commits a regulatory taking by directing someone to spend money. Rather, its holding stood for “the more limited proposition that when the government commands the relinquishment of funds linked to a specific, identifiable property interest such as a bank account or parcel of real property, a ‘per se [takings] approach’ is the proper mode of analysis under the Court’s precedent.” Id. at 17. The Court dismissed the Dissent’s concerns that its holding would make it harder for courts to distinguish between a typical tax or user fee and other types of payments like the one involved in this case, observing that several state courts had been following similar rules for many years with no problems.

The case is important because it establishes that a government entity’s demand that a permit applicant pay money can trigger the “nexus” and “proportionality” tests of Nollan and Dolan. What does this mean in practical terms? One California real-estate lawyer, Chuck Cohen, predicts that “government counsel can now be expected to intercede early in the planning process to eliminate fingerprints on overreaching conditions.” Likewise, he expects that “there will be no written record of city demands for excessive exactions or if there is a record, it will be carefully crafted.” Maybe so, but the risk of such shenanigans may be a small price to pay for limiting government’s power to seriously affect people’s property interests under the guise of negotiating a permit application. That is, after all, the very danger that the Nollan/Dolan rule was designed to prevent.

Gov. Brown Vetoes Bill To Revive Child Abuse Claims (SB-131)

Back in July 2013 I blogged about California Senate Bill No. 131, which at the time was in the Assembly. As I mentioned in that article, SB-131 initially sought to dramatically increase the statute of limitations for actions seeking damages for sexual abuse under Cal. Code Civ. Proc. § 340.1. That and other provisions got watered down as the bill went through the Legislature. The most notable aspect of the final version was that it would have “revived” any claims against private entities that would otherwise be barred solely by the statute of limitations as of January 1, 2014, for one year, so long as the plaintiff’s 26th birthday was before January 1, 2003, and the plaintiff discovered the cause of his or her injuries on or after January 1, 2004. Many commentators, including me, thought this tamed version of the bill would be signed into law. However, three days ago, to the surprise of many, Gov. Jerry Brown vetoed the bill.

Critics of SB-131 pointed to the fact that SB-131 applied only to private entities, largely because lawsuits against public entities are governed by the California Tort Claims Act (CTCA), an entirely separate set of laws left untouched by SB-131. The bill would have given plaintiffs less time to bring a lawsuit against public entities, such as school districts, than against private ones, such as religious schools or the Boy Scouts of America. The revival clause, too, would have applied only to lawsuits against private entities, since the CTCA contains no similar clause.

Not surprisingly, this strange double standard featured prominently in Gov. Brown’s three-page veto message, in which he noted, “This bill also does not change the significant inequity that exists between private and public entities. What this bill does do is go back to the only group, i.e. private institutions, that have already been subjected to the unusual ‘one year revival period’ and makes them, and them alone, subject to suit indefinitely.” This, wrote the Governor, “is simply too open-ended and unfair.” Noting that the revival clause was simply an extension of the existing revival clause from the 2008 amendment of the statute, Gov. Brown delivered a stern rebuke to California’s lawmakers: “I can’t believe the legislature decided that victims of abuse by a public entity are somehow less deserving than those who suffered abuse by a private entity.”

In addition to criticizing this double standard, Brown, a former lawyer, also took the opportunity to discuss the public policy behind periods of limitation: “There comes a time when an individual or organization should be secure in the reasonable expectation that past acts are indeed in the past and not subject to further lawsuits. With the passage of time, evidence may be lost or disposed of, memories fade and witnesses move away or die.”

Needless to say, this veto is a victory for opponents of SB-131, who no doubt included public schools concerned about this seemingly never-ending erosion of the time bar to bring sexual abuse claims. It is also a warning to lawmakers that if they intend to enact such an amendment in the future, they will have to seriously consider removing the double standard by either amending the CTCA or adding a provision to Cal. Code Civ. Proc. § 340.1 stating that it applies to both private and public entities, and confront the issue head on.