California city ordered to pay affordable housing group $3.5 million in legal fees

A state appeals court ordered the city of Huntington Beach to pay $3.5 million in legal fees to an affordable housing group stemming from the organization’s 2015 lawsuit over the city’s housing plan.

The three-judge panel ruled the Kennedy Commission’s lawsuit was a catalyst in forcing the city to bring its 2013-21 “housing element” into compliance with state law.

While the city ultimately amended that earlier plan, Surf City leaders once again are embroiled in new legal battles with the state over their refusal to adopt a new plan, now 19 months overdue.

The appellate ruling Thursday, May 11 also follows news that the Huntington Beach City Attorney’s Office has reached a $5 million to $7 million court settlement with the Pacific Airshow.

Huntington Beach Councilmember Dan Kalmick estimated the airshow settlement could total up to $8.5 million. As of November 2021, the city’s litigation reserve was $14 million. These two cases potentially could eat up $10 million to $12 million of that.

“I’m disappointed we’re going to owe somebody $3.5 million a day after we owe the airshow $8.5 million,” Kalmick said in a phone interview, expressing concern history will repeat itself with this year’s new round of housing litigation.

“By history repeating itself, the city is going to spend more and more money on a quixotic venture to control state (housing) law,” Kalmick added. “I don’t believe the city should be suing the state. They should be working with the state to meet housing goals.”

City Attorney Michael Gates and Mayor Tony Strickland couldn’t be reached for comment.

The city and the California Department of Housing and Community Development traded lawsuits in state and federal court in March in a dispute over the enforceability of several state housing laws.

A city council majority blocked approval of a 2021-29 housing element that was expected to meet state approval, saying the new plan would “urbanize” their suburban, beachfront town.

Ultimately the state is seeking to enforce California’s 53-year-old homebuilding requirement, while the city is seeking in federal court to have that statute declared invalid.

Thursday’s appeals court ruling stems from a three-way legal fight that occurred from 2015-20 between the city, the Kennedy Commission and state leaders.

The Kennedy Commission, an affordable housing advocate, sued after the city council decreased the affordable housing units in a plan for northeast Huntington Beach, seeking to restore those homes to the plan.

Newly elected Gov. Gavin Newsom, who campaigned on a plan to increase housing in California, announced in January 2019 that the state was joining the fight with a lawsuit of its own.

The Kennedy Commission and the state dismissed their lawsuits after Huntington Beach leaders amended their 2013-21 housing plan to include more affordable housing.

But the Kennedy Commission sued for legal fees under the “catalyst theory,” arguing its 2015 lawsuit was “a substantial factor” in the city’s decision to revise its earlier housing plan. The Kennedy Commission maintained further that its lawsuit also contributed to the adoption of Senate Bill 1333, which closed a loophole that allowed the city to gain a partial legal victory over the Kennedy Commission.

The city responded that the Kennedy Commission lawsuit played no part in its decision to amend its earlier housing plan, saying the action was taken to win state approval of $600,000 in state planning grants.

A trial court sided with the Kennedy Commission, and on Thursday, the appeals court upheld that ruling.

“Kennedy met its burden of showing the causation element of the catalyst theory,” Thursday’s ruling said. “We affirm the award of attorney fees.”

Kennedy Commission Executive Director Cesar Covarrubias hailed the ruling as a victory, adding that it’s a warning that future housing litigation isn’t likely to have a different outcome.

“Ultimately, they’re going to have to comply with state law and housing requirements,” Covarrubias said. “They are spending a lot of money on litigation. We think they could turn those energies to create affordable housing in Huntington Beach.”

Covarrubias said it’s possible the city could appeal Thursday’s ruling to the state Supreme Court.

But the Huntington Beach city council voted in late 2021 to add $3.6 million to its litigation reserves in case the Kennedy Commission prevailed in its quest for compensation.

Former Huntington Beach Mayor Barbara Delgleize said she was heartbroken by Thursday’s ruling, saying that $3.5 million will do nothing to bring needed housing to the city.

“We have to pay, and still don’t have the housing,” Delgleize said. “I just think we have enough smarts in the city of Huntington Beach to come up with a housing plan that would be acceptable to the residents in the community.”