Federal judge may dismiss CVS lawsuit against Sebastopol

A federal judge handling the CVS Pharmacy lawsuit against the city of Sebastopol may dismiss the case for lack of jurisdiction, suggesting the matter properly belongs in state court.

U.S. District Court Judge Edward M. Chen announced his reservations about the case in an order signed last week inviting the parties to argue he's wrong to worry.

But the notice creates an uncertain future for CVS's legal fight over the city's decision to stop issuing drive-thru window permits - a move the national drug store chain claims was designed to torpedo its controversial plans for a downtown project.

With the development in the case last Wednesday, "it's rather obvious that CVS has some issues that it will need to wrestle with," City Attorney Larry McLaughlin said.

CVS, through its California subsidiary, Longs Drug Stores, and Armstrong Development Properties Inc., a developer of CVS Pharmacy, and J.P. Morgan Chase Bank sites around the country, had filed its case in state court in the first place.

But, for reasons unknown, CVS attorneys had the case dismissed so they could file in federal court, McLaughlin said.

The state suit was dismissed "with prejudice," meaning CVS is prevented from refiling the same case in state court, McLaughlin suit. Whether a modified suit could still be filed at the state level is not clear.

But McLaughlin said the city and the outside legal firm hired to handle the CVS litigation are still analyzing the judge's order to determine what the potential outcomes are.

"We are unclear about how it would all play out exactly," said Edward Grutzmacher, lead attorney for the city. "I don't want to speculate too much about what happens if or when the federal court decides there is no federal jurisdiction."

At issue is whether the City Council, in the winter of 2012, properly put a freeze on building permits for projects with drive-thru windows when only one such project was pending: the CVS/Chase Bank development that had been granted design approval the previous summer after two dozen acrimonious hearings over 16 months.

CVS claims the moratorium, adopted soon after November 2012 city elections, was an effort by a newly shaped council to undo what the previous council majority had agreed several months earlier to permit.

But city officials say the decision reflected an interest in creating consistency among regulations governing drive-thru service windows.

A pre-existing ban prohibited drive-thru windows for new restaurants as part of a a statewide trend driven by urban planning objectives and concerns about green-house gas emissions, among others. When Councilman Patrick Slayter proposed the city consider whether other uses should be prohibited, the council decided a moratorium on the drive-thrus was appropriate until a final decision was made.

Officials also say it wasn't at all clear at the time that CVS and its developers still planned to pursue the hotly contested project.

A CVS representative had promised months earlier, when the general design was approved in August 2012, to return to the city with required adjustments in the ensuing weeks. By the following December, city officials had not been contacted.

Even if CVS and Armstrong decide to build, Councilman Michael Kyes says now, the expectation is they would just proceed without the drive-thru windows.

"Certainly we didn't think that CVS wouldn't build because of it," said Kyes, who was then mayor.

Instead, CVS and its partners sued the city, saying the moratorium had not been legally adopted and that the public health, safety and design concerns used as justification for the move contradicted findings earlier used to approve the proposal.

The plaintiffs' first suit in state court sought to invalidate the city's initial 45-day moratorium. It was then expanded to include a 10 1/2-month extension the City Council approved about a month later.

When CVS moved the case to federal court, it was forced to drop the 45-day moratorium from the case because of a statute of limitations, McLaughlin said. But it was later amended to include a subsequent, yearlong extension on the moratorium approved by the council last November.

If the federal case is dismissed, it may be possible for that second extension to form the basis for a new state suit, though nothing is clear yet, McLaughlin said.

Judge Chen ordered CVS and the city to file final briefings on the issue of jurisdiction by Friday and should decide relatively soon after if the case will go forward, Grutzmacher said.

The City Council is scheduled to meet in closed session at 4 p.m. Tuesday to discuss its options.

You can reach Staff Writer Mary Callahan at 521-5249 or mary.callahan@pressdemocrat.com.