Argument outlined in wetland appeal
Half Moon Bay lawyers: Judge ignored landowner's responsibility

By Julia Scott, STAFF WRITER
Friday, December 28, 2007
 

HALF MOON BAY — Lawyers representing the city in its appeal of the $36.8 million Beachwood verdict say a U.S. District Court judge's own 167-page decision has given them fodder for their arguments before the 9th U.S. Circuit Court of Appeal.
Representatives of the law firm of Orrick, Herrington and Sutcliffe say Judge Vaughn Walker unfairly painted Half Moon Bay as the villain that deprived Palo Alto developer Charles "Chop" Keenan of the right to build 83 housing units on property he owned after discovering sensitive wetlands there in 1999.

Rather than dispute the facts in Walker's judgment, which cites many instances of the Beachwood property east of Highway 1 containing standing pools of water before Keenan acquired it in 1993, the lawyers intend to use those facts to show that Keenan should have known the land had drainage problems before buying it for $1 million in a foreclosure sale. If the lawyers can prove that Keenan should have known of the risks of developing that property and chose to ignore them, they can argue that the judge was wrong to find against the city — or that the city, at least, did not deserve to be punished to the tune of $40 million, after lawyers' fees and other expenses — four times Half Moon Bay's annual budget of $10 million.

John Knox, the city's lead attorney, says Walker failed to apply a key legal doctrine of fairness that considered the question of Keenan's responsibility and whether he was entitled to receive so much money as a result — known as the common law doctrine of equitable estoppel.
"The question the court never asked in its entire decision is: What did Mr. Keenan know and when did he know it? Ironically, the judge answered that question throughout his decision — that the wetlands should have been obvious even to a casual observer by the time Mr. Keenan purchased the property in 1993," Knox said. "Mr. Keenan was on notice that this property walked, talked and looked like a wetland — and he knew or should have known it."

Among the attorney's arguments:

-Although a city consultant did not attest to the presence of potential wetlands on Beachwood until 1999, Walker's judgment found many instances in which officials took note that something was amiss. In 1984, city construction inspector Gary Whelen remarked that the long trenches the city dug on Beachwood to supply an adjacent construction site with dirt that year had turned into standing water ponds. A storm drain system constructed to control water flow in the area ended up trapping water on the site, which eventually transformed it into wetlands.

Wetlands were already known to exist elsewhere on the site in the 1980s. And in 1989, the California Department of Fish and Game reported that 15 to 20 percent of the site was covered in wetland vegetation, as well as three small ponds — although their exact location was unclear.

"You could walk the land and see that it was wet," Knox said. "The information was out there. It would not have been hard to find out."

Keenan's attorney, Edward Burg, called the city's argument "ridiculous."

"The city itself decided in 2000 that new wetlands had developed on the property between 1990 and 2000. The city also decided in 2000 that what it knew in 2000 was not known or knowable previously," he said, quoting from the document the City Council drafted to deny Keenan a development permit in 2000.

-Judge Walker blamed Half Moon Bay for creating the drainage problems on Beachwood and for failing to maintain the land between 1993 and 1999, when all city construction was halted due to diminished sewer capacity. Knox says Keenan could have inspected and drained the land anytime he liked over that six-year period, but chose not to.

"Whether or not the city was responsible for cleaning the storm drains or pumping water off the property, there's no evidence that Mr. Keenan did any of that or asked the city to do any of that," Knox said.

The first time Keenan's assistant attempted to drain the property was one month after the city first documented potential new wetlands in Beachwood in 1999. Fearing a violation of the Coastal Act, the city sent police officers to the site to stop him.

"All of a sudden, they were interested in draining the property after six years," Knox said.

-The city also will dispute the finding that it was completely responsible for the problems that ensued as a result of the development district it created next to Beachwood in the early 1980s, including the impact of the trenches it dug. The city made the changes at the written request of the William Lyon Company, the property owner, in 1982.

The city's lawyers must file a notice of appeal within 30 days of a final judgment Walker will likely issue in January or February. They hope the 9th Circuit Court will reverse Walker's judgment. Failing that, they hope the case will be remanded to Walker's court with instructions that he retry the case and apply the doctrine of equitable estoppel.

Mayor Bonnie McClung said the city was still willing to discuss a settlement with Keenan, but the appeal was key.

"If we didn't appeal and got into settlement talks, we would lose a window of opportunity. It behooves us to make sure we're going forward on every front that we can — and we have been advised that we have a good chance of reversal," she said.

Staff writer Julia Scott covers the Coastside and environmental issues. She can be reached at 650-348-4340 or by e-mail at julia.scott@bayareanewsgroup.com.

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