City May Not Settle Litigation By Negotiating Away Police Powers; Permits Issued Pursuant To Such Settlement Are Invalid

In Summit Media, LLC v. City of Los Angeles (— Cal.Rptr.3d —-, Cal.App. 2 Dist., December 10, 2012), a California court of appeal considered a challenge to a settlement of a lawsuit between outdoor advertising companies and a city to exempt the companies from regulations contained in the city’s sign ordinance and to the validity of permits issued by the city pursuant to that settlement.  The court ruled that because the city is prohibited from negotiating away its police powers, the settlement was invalid and unenforceable and the permits issued pursuant to it must be revoked.


In 2002, the City of Los Angeles (“City”) enacted an ordinance to prohibit new off-site signs throughout the city, including “alterations or enlargements of legally existing signs.”  Companion ordinances established fees and inspection procedures.  Vista Media Group, Inc. (“Vista”) brought a lawsuit challenging the ordinances.  Vista and City agreed to compromise regulations in order to settle the suit.

Two other outdoor advertising companies, CBS Outdoor, Inc. (“CBS”) and Clear Channel Outdoor, Inc. (“Clear Channel”) brought a lawsuit to challenge the terms of City’s settlement with Vista.  CBS and Clear Channel settled their suits with City, by City granting CBS and Clear Channel exemptions from the ordinance and authorizing permits for new signs.  CBS and Clear Channel commenced adding new signs and altered and modified existing ones.  In 2008, Summit Media, LLC (“Summit”) brought a lawsuit challenging City’s settlement with CBS and Clear Channel.

The trial court nullified the settlement and ordered City to cease and desist from implementing it.  However, the court declined to revoke the permits granted pursuant to the settlement ruling the matter to be decided administratively.  CBS and Clear Channel appealed the portion of the ruling nullifying the settlement agreement and Summit appealed the portion that did not revoke the permits.


The court determined that the settlement terms allowed the two companies to circumvent the general ban in the municipal code that remained in effect for other parties.  That amounted to the City negotiating away its police power to enforce its code, and, the court quoting precedent added, “the government may not contract away its right to exercise the police power in the future.”  It is irrelevant that the City remains free to legislate the subject in the future.  “This is a case where the settlement agreement purports to exempt the real parties from a host of currently existing ordinances and regulations,” the court said.

The city cannot enter into an agreement that some of its laws do not apply to certain parties because it is the proper role of the courts to “to determine the meaning of statutes or ordinances at issue in a lawsuit, not the parties to the contract.”  An agreement by the City to do so is therefore invalid and unenforceable, the court said.

Turning to the validity of permits issued pursuant to the settlement, the court quoted that “just as the City has no discretion to deny a building permit when an applicant has complied with all applicable ordinances, the City has no discretion to issue a permit in the absence of compliance.”  The court cited additional case law that a permit cannot be valid if it is “issued or made in violation of the express provisions of a zoning ordinance.”  In short, the permits issued to CBS and Clear Channel, made in violation of city ordinances, were also invalid.

The trial court’s judgment was affirmed in part and reversed in part.  It was affirmed to the extent that it required the City to cease implementing the settlement agreement.  However, it was reversed in that it failed to revoke the permits issued pursuant to the settlement.  The court remanded back to the trial court with directions to invalidate all permits issued by the City pursuant to the settlement.


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