Oregon Court of Appeals: LUBA May Not Grant Voluntary Remands

A recent decision from the Oregon Court of Appeals, Dexter Lost Valley Community Association v. Lane County, limits the abilities of Oregon cities to withdraw a decision that a party has appealed to the Oregon Land Use Board of Appeals. Background

Anyone who has worked on behalf of an Oregon city for even a modest amount of time is likely familiar with Oregon’s unique land use system, which has many characteristics that are foreign to other states.  One of these is the Land Use Board of Appeals (“LUBA”).  In virtually all other states, if a party wants to challenge a local zoning or development decision it must initiate a lawsuit.  Lawsuits are expensive and trial court judges generally are not well versed in land use law.

The Oregon Legislature created LUBA to reduce the expense and time associated with seeking review of land use decisions and to ensure a panel of experts in land use law reviewed land use decisions.  This has produced a body of generally consistent land use case law and has permitted Oregon’s circuit courts to focus their resources in other areas.

A LUBA appeal is a relatively straightforward process.  The local government files a record of the decision (i.e. the materials the decision maker considered at the local level).  The parties then submit written briefs urging LUBA to overturn or uphold the decision based on the relevant law and facts.  LUBA permits the parties to present oral argument, and then subsequently issues an order either upholding or rejecting the local government’s decision.

While the state retains significant control over land use issues in Oregon, the system aspires to have as many decisions made – and by extension as many disputes resolved – at the local level.  In that spirit, Oregon cities do not have to proceed with defending a decision if they believe it is vulnerable to a reversal or a remand from LUBA.  Historically, a local government could “take back” its decision at one of two times during the LUBA appeal process:  at any time and for any reason prior to the filing of the record; or  by filing a request for a “voluntary remand” after a petitioner filed its brief.

The Court’s Decision

An Oregon statute, ORS 197.830(13)(b), expressly permits a city to unilaterally withdraw a decision for reconsideration prior to the deadline for filing the record.  However, Oregon law is silent on a jurisdiction’s right to ask LUBA for a voluntary remand after the record is submitted and the petitioner has filed its brief.  LUBA has historically granted requests for voluntary remands because they promote judicial economy and potentially allow parties to resolve disputes at the local level.

In this case, Lane County asked for a voluntary remand after the petitioner filed its brief with LUBA.  Over the petitioner’s objection, LUBA granted Lane County’s request after the county agreed to address on remand all of the assignments of error petitioner raised in its brief. The petitioner then appealed LUBA’s order granting the voluntary remand to the Oregon Court of Appeals.

The petitioner argued that ORS 197.830(13)(b) is the exclusive means by which a city may reconsider its decision and not be compelled to defend it at LUBA.  Because the Legislature expressly permitted local governments to withdraw land use decisions prior to the filing of the local record with LUBA, the petitioner argued that the Legislature implicitly prohibited a withdrawal afterward.  The county argued that LUBA’s policy to allow voluntary remands after a local government submits a record does not conflict with the express statutory authority to seek reconsideration before the record is filed.  In essence, the county asserted that LUBA’s authority to permit voluntary remands is consistent with its statutory duty to render decisions consistent with “sound principles governing judicial review” (ORS 197.805).

After reviewing the legislative history of ORS 197.830(13)(b), the court agreed with the petitioners that LUBA does not have the authority to allow a local government to “take back” a land use decision after it has filed the record in the appeal.  The court noted that the original language of the bill codifying ORS 197.830(13)(b) permitted a local government to withdraw a decision for reconsideration prior to oral argument.  The Legislature amended the bill to require a withdrawal prior to the filing of a record after 1000 Friends of Oregon objected to the original language.  1000 Friends argued that a petitioner could end up spending a lot of time (and money if it hired an attorney) briefing the case and preparing for oral argument, only to have the local government decide to withdraw the decision late in the appeal process.  Based on the legislative history and the fact that Oregon law was otherwise silent about LUBA’s authority to permit voluntary remands, the court held that LUBA erred in allowing Lane County to take its decision back after it filed the record.

The Impact

It is not clear whether Lane County will appeal the court’s decision to the Oregon Supreme Court.  For now, if a city faced with a LUBA appeal believes it has a good chance of losing, it must decide to withdraw the decision prior to the date it must file the record with LUBA.  This is unfortunate, because in many instances a city only realizes after it understands a petitioner’s arguments how vulnerable its decision may be to a LUBA reversal or remand.

The Limits of the Tort Claim Act

Howell v. Boyle and the City of Beaverton, filed by the Oregon Supreme Court March 14, 2013

The Oregon Supreme Court found the Oregon Tort Claim Act’s liability limit to be constitutional, so long as the limits allow a substantial remedy and it does not leave a plaintiff wholly without remedy.  The opinion answered certified questions of law from the United States Court of Appeals for the Ninth Circuit (Ninth Circuit).

Background of Issue

The Howell case revisits an issue that the Oregon courts have addressed numerous times since 1901 - the constitutionality and adequacy of monetary recovery limits for injuries caused by actions or omissions of public bodies or their employees.  This particular case addresses the constitutionality of the claim limits found in the Oregon Tort Claims Act (OTCA), which waives local government’s sovereign immunity to the degree that a tort victim can recover damages up to a specified amount.

Discussion of Court Decision

In 2007, A Beaverton police officer struck plaintiff Jean Marie Howell (Howell) when she darted across Tualatin Valley Highway at an unmarked crosswalk late at night, wearing dark clothes.  Howell sued the officer, Christopher David Boyle and the City of Beaverton (City) alleging over $4 million in economic damages and $1 million on noneconomic damages.  The trial court jury found Howell and Boyle each to be 50 percent at fault and reduced the economic damages to $765,000 and noneconomic damages to $250,000.  Accordingly, the City was liable for $382,500 in economic and $125,000 noneconomic damages for a total of $507,500.  The City moved to amend the judgment to reduce the amount of damages to the $200,000 statutory limit then in effect under the OTCA.  The defendant’s motion was denied based on Howell’s argument that the OTCA limits “emasculated” the plaintiff’s common-law remedy against the defendants in violation of the remedy clause of Article 1, Section 10 of the Oregon Constitution.

The remedy clause of Article 1, Section 10 provides that “every man shall have remedy by due course of law for injury done him in his person, property or reputation.”

On appeal to the Ninth Circuit, defendants argued that Article 1, Section 10 does not apply because at common-law the plaintiff would not recover anything at the time the Constitution was framed because any of the plaintiff’s contributory negligence was a complete bar to recover; further, even if Article 1, Section 10 applies the $200,000 OTCA cap is a constitutionally adequate remedy as evidenced by recent case law.

In brief, the Ninth Circuit certified two questions to the Oregon Supreme Court (Court): 1) Is plaintiff’s negligence action constitutionally protected under Article 1, Section 10 of the state constitution and 2) If protected, is $200,000 an unconstitutional “emasculated” remedy?

In response, the Court only addressed the second question because that answer was dispositive.   After tracing a long line of similar tort claim limit cases, the Court found that Article 1, Section 10 is not violated merely because a statutory limitation reduced the amount a plaintiff would recover had the wrongdoer not been a public entity.  Article 1, Section 10 does not prevent legislation that varies or modifies the form and measure of recovery for an injury so long as the plaintiff still has a “substantial[1]” remedy and they are not wholly with remedy.

In several previous cases, the Court had found remedies to be inadequate. For example, In Clarke v. OHSU, a plaintiff suffered more than $17 million in damages after a negligently performed brain surgery. The Court found that the $200,000 OTCA remedy was inadequate as it represented a very small fraction (1%) of the plaintiff’s actual damages.

The Court found the Howell case more akin to Hale v. City of Portland where the plaintiff sued the City of Portland alleging, in part, that the City had negligently maintained a road causing his accident.  In Hale, the $100,000 limit in effect at the time was adequate where the plaintiff’s damages were more than $600,000 leaving the plaintiff with a substantial remedy.  Here, Howell would have recovered $507,500 but for the $200,000 OTCA limit. The Court determined that while $200,000 does not make the plaintiff whole, it is still substantial and does not create a constitutionally inadequate remedy under Article 1, Section 10.

Impact for Local Governments

The Howell case reiterates for local governments and other public bodies the premise that limits on tort liability, specifically those in the OTCA, are permissible under the state constitution so long as they are adequate.  While there is no hard and fast rule setting an adequate damage level, cases where the damage is greater - - similar to the Clarke case - - will likely lead to bigger payouts for local governments versus situations where the actual damages are much closer to the tort limit set by the legislature as was the case here.

It is important that cities work closely with their insurance carrier to ensure their insurance limits are appropriate.  Cities should also require their contractors to maintain the appropriate comprehensive general liability including bodily injury and property damage, auto, workers’ compensation and professional liability insurance policies also set at appropriate levels.  Taking these steps up front will ensure that even if a City is subject to a high damage tort claim, it will be prepared and sufficiently protected.

[1]The Court preferred the use of the word “substantial” over “emasculated” given the latter word’s “sexist” undertones and discouraged its use further in describing remedies.

Forfeitures and Restitution – Can They Help in Tough Economic Times?

In difficult financial times, like those experienced by Oregon cities over the last few years with  general funds  strained and stretched, city managers and city councils are on the hunt for additional sources of revenue to ease the financial pinch.  So the question may arise:   “Can we charge somebody for that?” A likely candidate for this type of inquiry is in the law enforcement arena, which for many municipalities comprises the largest portion of the general fund budget.  The question is whether cities could seek to recover the “costs” the city police department incurs in performing enforcement or investigative functions relative to a particular crime or criminal.  So what’s the answer?

The Decision

In a case decided in early February, 2013 by the 9th Circuit Court of appeals, that court analyzed this question for the federal government.  The case, U.S.  vs. Samuel  Davis, involved  criminal forfeiture and restitution, where the defendant challenged the government’s ability to get  $95,000 in restitution costs for FBI expenditures in a sting operation involving defendant  as well as forfeiture of approximately $1.29 million the defendant had laundered for the undercover FBI agents.

The case is made somewhat more interesting not only by the juxtaposition of Las Vegas and Sam (my) Davis but also by the fact that this Mr. Davis (no relation) was at the time a well-known and popular leader of the “Sovereign Citizen” movement.

The story starts in 2008, when undercover FBI agents first asked Davis to assist them by laundering money that they told him had been stolen from Wachovia Bank.   Davis agreed, and he (along with an accomplice) then over the course of a year received the “stolen” money from the agents, taking a percentage of the funds given him as his compensation.  By the time of his indictment a year later, Davis had taken $73,782.00 for his work and had transferred approximately $1.2 million in “laundered” funds back to the agents.

Davis, who was indicted in 2009 and in 2011, pled guilty to multiple counts of money laundering and conspiracy to commit money laundering.  He was sentenced to about five years in prison in addition to the forfeiture and restitution payments.

In  Davis’ appeal, his argument was simple:  since there was only one government department - in this case the U.S. Department of Justice of which the FBI is a part - getting both restitution and forfeiture payments was a “double recovery windfall’ and as such, the forfeiture amount should be offset by the amount paid in restitution.

The Court of Appeals rejected this argument, holding that even if the same governmental entity received both the forfeiture and the restitution monies, there is no double recovery (and thus no windfall) inasmuch as each amount is aimed at and reflects a different remedy:   the $95,000 was to compensate the FBI for its expenditure of investigative resources while the $1.29 million was a punitive sanction against Davis for the criminal activity he engaged in.   The two payments represent different types of funds: punitive and compensatory.  They are, in the court’s words, “... different in nature, kind and purpose.  Money levied as a punitive fine does not ‘double’ the money intended to compensate a loss any more than the addition of apples to one’s stores doubles the orange stock.”

The Impact in Oregon

Unfortunately, this case does not answer our question.  Oregon’s criminal code contains provisions for criminal forfeiture (ORS 131.550 to 131.600), civil forfeiture (ORS Chapter `131A) and restitution (ORS 137.103 to ORS 137.109).  Cities have the clear ability to seek both civil and criminal forfeiture.  It also appears that cities have the right to seek restitution in criminal matters as victims, i.e., if their property is stolen or is damaged as a result of criminal conduct.  However, the larger (and more expensive and interesting) issue seems to have been answered in the negative in Oregon.

In a case decided in 2004 by the Oregon Court of Appeals Court – State v. Wilson – and in a more recent one in 2012 – State v. Kuehner – the courts have made clear that state law - specifically ORS 161.665 - prohibits law enforcement agencies (or any governmental agency for that matter) from using the restitution statute as a basis to recover expenditures that are normally part and parcel of the costs associated with their law enforcement function.  As a result, the salaries of police officers and other staff (even overtime costs that may be unexpected) is not recoverable under the restitution statute.

However, that might not be the end of the issue:  could there be a way for cities to recover those types of expenses by claiming some type of damages under a civil claim?  If a city can find an independent legal basis for making such a claim, there might be a second shot at recovering additional funds.  City officials and their city attorneys will need to continue to contemplate whether “We make they pay for that?”

Oregon Supreme Court Provides Guidance on Taxpayer Lawsuits

Anyone who has spent any time in local government knows that almost every time a local government makes a decision of any significance, someone will threaten to sue.  Most often, the person claims that because he or she is a voter, he or she has a right to sue the local government.  Alternatively, the person will claim that because he or she is a taxpayer, he or she has a right to sue.  But not so fast.  As the plaintiff in the recent case of Morgan v. Sisters School District #6 discovered - it’s not that simple. Background

Under Oregon law, in order to file a lawsuit a person must be able to show that his or her rights will be directly and significantly harmed by the challenged action.  This concept is known as “standing” As explained by the Oregon courts, “‘standing” is a legal term that identifies whether a party to a legal proceeding possesses a status or qualification necessary for the assertion, enforcement, or adjudication of legal rights or duties.

The Decision

In Morgan, the Sisters School District issued $2.1 million in certificates of participation under ORS 271.390 to fund improvements to classrooms, buy new furniture, upgrade building systems and the like.  One year later, Morgan, a district resident and taxpayer, filed suit, arguing that the certificates of participation were really bonds under ORS 328.205 to 328.230, which require approval by district voters.

At trial, the court ruled in favor of the district on the merits of the substantive question.  That is, the debt was lawfully issued using certificates of participation rather than bonds, and a vote of district residents was not required.  Significantly, the court also ruled that Morgan lacked standing to bring the suit in the first place.  Here, Morgan claimed that he potentially faced increased tax bills if the district was unable to make complete and timely payments on the certificates and was forced to assess an additional tax levy to make up the shortfall.  Citing the long chain of events that would have to occur before the result Morgan alleged would ever come to pass, the court found that his reasoning was simply too attenuated to meet the “harm” standard required to file the lawsuit.

On appeal, the Oregon Court of Appeals first affirmed the trial court’s ruling that Morgan lacked standing as a taxpayer to sue the school district because the alleged harm was too speculative.  The court then  rejected Morgan’s argument that he had standing as a voter to bring the lawsuit.  In reaching this conclusion, the court relied on prior cases that hold that standing as a voter is limited to those cases in which allowing the person to vote would have affected the outcome.  Morgan failed to claim that this was such a case.

On appeal to the Oregon Supreme Court, the court effectively affirmed the lower courts on both grounds – that Morgan did not have standing to sue the school district either as a voter or as a taxpayer.  In reaching its conclusions, the court set out three principles it will rely on to determine whether a person has sufficient standing to file a lawsuit against the government.  First, the person must have suffered some injury “beyond an abstract interest in the correct application of the law.”  [It should be noted that the supreme court relied on its 2002 decision in League of Oregon Cities v. State of Oregon for this principle.]  Second, the injury must be “real or probably, not hypothetical or speculative.”  Third, the person must seek a remedy that will actually address the alleged injury.

Applying these principles to Morgan’s lawsuit, the supreme court first addressed his argument that he has standing as a voter of the district.  Citing the third principle, the court pointed out that Morgan did not ask the court to order the district to hold an election.  Instead he simply asked for a declaration that the district should have held one.  That, the court found, would be an advisory opinion which the court does not do.  According to the court, “[Morgan] has offered no explanation as to how the issuance of the judicial declaration that he seeks would have any practical effect on his voting rights, and we are aware on none.”  Significantly, the court also expressed skepticism that a voter has standing if the voter’s participation in an election would not change the outcome but declined to rule on that point.

With respect to Morgan’s contention that he has standing as a taxpayer, the court rejected the claim that the certificates of participation will jeopardize the school district’s ability to provide for daily operations, noting that Morgan failed to explain why or how this will happen.  The court also noted that Morgan did not explain why the school district’s inability to pay for operations affects him in any way.  Finally, on the central allegation that his tax bill will increase if the school district is unable to meet its payment obligations on the certificates of participation and is forced to impose an additional tax levy to pay for them, the court held that this is nothing more than a series of hypothetical contingencies, not a “present set of facts” sufficient to establish standing.

The Impact

The important rule in this case is not the distinction between certificates of participation and bonds – the trial court held that the statutes set out the criteria for each and that the school district properly complied with the requirements for certificates of participation.  The important rule is the supreme court’s affirmation of the standards a person must meet in order to bring a lawsuit against a local government.  It is not enough for a person to have an “abstract interest in the correct application of the law” - every member of the commonweal shares that interest.  In order to have standing to sue a city, county or special district, a person must be able to show that the local government’s decision will have an adverse effect on that person.  Moreover, the person must ask the court for a remedy that will actually address the alleged injury.  They simply can’t  ask the court for a declaration that the government was wrong.  In the end, it is not enough to be a voter or a taxpayer - if someone wants to sue the government, they have to show that the government’s decision will injure their rights, not the public’s, and that the court can issue an order that will remedy the specific injury.  Morgan could not make this showing and the court dismissed his lawsuit on that basis.


Local Government Liability for Adverse Employment Actions Could Be Affected by U.S. Supreme Court Case

The U.S. Supreme Court granted a petition for certiorari to hear a case that could have far-reaching consequences for state and local governments.  The question presented is whether the Third Circuit Court of Appeals erred in holding that state and local government employees may sue their employers for retaliation under the First Amendment’s Petition Clause when they petitioned the government on matters of purely private concern, contrary to decisions by all ten other federal circuits and four state supreme courts that have ruled on the issue. The facts of the case involve the Borough of Duryea, Pennsylvania’s dismissal of Police Chief Guarnieri.  After filing a union grievance he was reinstated to his position but upon his return to work, the Borough Council issued eleven directives to Guarnieri regarding things he could and could not do on the job.  Again, Guarnieri filed a union grievance whereby an arbitrator directed Duryea to modify or abandon some of the directives.  Eventually, Guarnieri filed suit against his employer alleging unconstitutional retaliation under the First Amendment for filing grievances against the City.   His grievances included the issuance of the directives, delay in issuing health insurance benefits and withholding of overtime pay.

The Third Circuit found that a public employee who has petitioned the government through a formal mechanism such as the filing of a lawsuit or grievance is protected under the Petition Clause of the First Amendment from retaliation for that activity even if the petition concerns a matter of solely private concern.   Every other federal circuit court has held the opposite – that the matters must be of public concern to be protected.  For example, the Ninth Circuit has held that where an employee grievance related only to refuting false charges of an employee’s ineptitude, those were matters only of a personal interest and as such the employee could not invoke First Amendment protection.  See Gearhart v. Thorn 768 F2d 1072 (9th Cir. 1985).

The ruling will impact local governments if in fact employees are allowed to invoke First Amendment protections for matters of private concern.  While it will negate the need to distinguish between matters of public and private concern where grievances are concerned, it could also result in increased liability for public entities when subjecting employees to adverse employment actions.  Local government employers will need to be much more cautious when disciplining employees who have filed grievances.

Briefing is scheduled to be completed in early 2011, after which time an oral argument date will be set.  Stay tuned for updates on this important case.

From Municipal Court to the Court of Appeals – Limits on Jurisdiction

Interesting new case from the Court of Appeals:  City of Eugene v. Smyth, A141624 (2010), which involves an appeal from a circuit court decision that affirmed a conviction in municipal court.  Briefly, the defendant was convicted in municipal court of violating the City’s DUII ordinance, a decision he appealed to circuit court for a trial de novo under ORS 221.359.  In circuit court, defendant made a number of evidentiary and statutory arguments for reversing the municipal court decision.  The circuit court was not persuaded and affirmed the municipal court’s decision.  Defendant then appealed to the Court of Appeals under ORS 221.360. The Court of Appeals dismissed for lack of jurisdiction because the defendant did not challenge the constitutionality of the city’s DUII ordinance.  Citing earlier cases, the court wrote: “[T]here can be no appeal from the circuit court * * * in cases involving ordinance violations, arising in the municipal court and appealed to the circuit court, excepting only where constitutional questions are involved.”  City of Salem v. Polanski, 202 Or 504, 276 P2d 407 (1954).  The “essential prerequisite--the sine qua non--of our jurisdiction under ORS 221.360 is that the appellant raise a cognizable facial or as-applied challenge to the constitutionality of the ordinance."  City of Lowell v. Wilson, 197 Or App 291, 296, 105 P3d 856, rev den, 339 Or 406 (2005).

This is a very useful case for the municipal lawyer to keep in mind for those rare but inevitable appeals from municipal court.

Medical Marijuana in the Wake of Oregon Ballot Measure 74’s Failure

Oregon Ballot Measure 74 would have, among other things, permitted medical marijuana dispensaries to operate in the state.  Such dispensaries currently exist in California and Colorado.  Fifty-eight percent of Oregon voters ultimately rejected Measure 74. While this means that dispensaries will not be moving in to vacant storefronts in Oregon any time soon, communities throughout the state continue to face various challenges under the Oregon Medical Marijuana Act (“OMMA”).  Two issues that Oregon local governments increasingly confront are: (1) groups of growers seeking to lease common space to grow marijuana for cardholders; and (2) groups seeking to establish medical marijuana clubs where growers and cardholders can exchange marijuana.  Once such club recently opened in Bend and another had operated in Portland but closed last spring.

The OMMA does not explicitly address either cooperative grows or so-called “cannabis clubs,” which leaves many communities asking whether and to what extent they can be regulated locally.  While the issue is still being researched and debated, the “growing” (bad-dum-bump) consensus is that the OMMA would not preempt local governments from regulating these ancillary effects of the OMMA.  Regulations may include limitations or prohibitions on cooperative grows and possibly licensing requirements for cannabis clubs.

At this point, Oregon communities should anticipate an increase in the number and variety of OMMA-related issues that they will face.  While it is likely that local governments in Oregon have some authority to regulate these issues, consultation with a city’s attorney or a county’s counsel is critical prior to establishing any such regulations.

We will continue to monitor such efforts and provide updates accordingly.