Santa Rosa quietly paid more than $327,000 earlier this year to the law firm that successfully challenged a special city tax on new developments.
And it did so without ever telling the public.
The case illustrates how public agencies can use provisions in the state's public records act to limit publicity about legal matters and sidestep the very transparency the state law was meant to foster.
In mid-January, the city learned that it lost its appeal of the fees awarded to the lawyers who sued the city on behalf of the Home Builders Association of Northern California.
The lawsuit challenged the city's 2008 tax surcharge on most new home construction, contending the law required property owners to give up their voting rights on annexation in exchange for the right to develop their properties.
Sonoma County Superior Court Judge Mark Tansil agreed, striking down the law and awarding $244,000 in legal fees to the Pacific Legal Foundation, the Sacramento public interest law firm that handled the case. Tansil found the lawsuit had "vindicated important constitutional rights that affect the public interest."
The city appealed the fee award as excessive, especially in light of the "extreme dire financial condition" of the city. In January, the state Court of Appeal in San Francisco disagreed, leaving all but $1,800 of the fee award intact.
On Feb 12, City Attorney Caroline Fowler, who handled the case, went into closed session with the City Council to discuss the city's options.
The Pacific Legal Foundation on Feb. 1 had presented the city with a formal settlement offer updating its fee demand, according to foundation attorney Paul Beard.
It is unknown exactly what happened in that closed-door meeting. Fowler and council members declined to discuss those deliberations. But when the City Council returned to the public portion of its meeting, Fowler said "there is no action to report at this time" regarding the case.
Seven days later, on Feb. 19, without ever going back to the City Council on the matter, the city sent a check to the Pacific Legal Foundation for $327,472. The amount represented the $242,000 in fees from the trial, another $58,000 in fees for the appeal, and $27,000 in interest accrued since the 2011 award. The money came from the city's risk management fund, its publicly funded self-insurance pool.
"We negotiated a payoff of the judgment to avoid further costs," Fowler said.
The law requires a public agency to report in public session the action it took behind closed doors regarding pending litigation only if what they did finalizes a settlement agreement, such as accepting a formal settlement offer.
Fowler said she was not required to report on the council's decision because the settlement with the foundation didn't become final until the two sides later exchanged legal documents formalizing the city's agreement to pay the fees.
Once that happened, the city only had an obligation to acknowledge the terms of the agreement when directly asked, which Fowler did last week in response to questions from The Press Democrat.
The city paid all the fees claimed by the firm, she said.
David Greene, an attorney with Bryan Cave LLP in San Francisco, which answers legal questions for the First Amendment Coalition, said the Brown Act is "a little hinky" on when such matters need to be reported. If the City Council accepted the Pacific Legal Foundation's settlement offer on its face, it should have reported that in open session, Greene said.
But if it made payment of the settlement contingent on some other task, such as requiring foundation attorneys to file documents agreeing to dismiss their case, then the city might be able to claim it didn't need to immediately report the decision, Greene said.
"It makes it very easy to get around that provision of the Brown Act," Greene said.
But Jim Ewert, general counsel of the California Newspaper Publishers Association, said the City Council appears to have violated both the letter and the spirit of the law when Fowler remained mum in February.
The Brown Act states that any public agency has to report on an action that amounts to "approval given to its legal counsel to defend, or seek or refrain from seeking appellate review or relief ... shall be reported in open session at the public meeting during which the closed session is held."
"It's clear that she is required, that the City Council is required, to report out an action taken to refrain from seeking appellate review or relief," Ewert said.
It is also clear, Ewert said, that the council authorized her in that closed-door session to pay the fees, something else she should have reported even if the exchange of documents formalizing the deal had not yet occurred.
The exemption exists to protect the city's negotiating position in legal matters, but Ewert said he couldn't see how reporting the council's decision would have done that.
In addition to being a Brown Act violation, he said Fowler's position is out of line with the section of the state constitution requiring that a statute "shall be broadly construed if it furthers the people's right of access, and narrowly construed if it limits the right of access."
"She is way out of narrow interpretation here," Ewert said.
The City Council never made a public announcement after the agreement was final because the law does not require it and "that is not our practice," Fowler explained.
But the city sometimes does so. In October of 2012, Fowler put out a media release regarding the $335,000 settlement of a lawsuit brought by the family of a 20-year-old Santa Rosa Junior College student struck and killed in a darkened Santa Rosa Avenue crosswalk in 2009. In that case, Pacific Gas & Electric Co., another party to the lawsuit, agreed to reimburse the city for the costs of the settlement and its legal fees, a point Fowler said she hoped the release would make clear.
You can reach Staff Writer Kevin McCallum at 521-5207 or kevin.mccallum@pressdemocrat.com. OnTwitter@citybeater.
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