From the Publisher: Happy 2015, See You in Court

Arnold G. York

After a short holiday recess, last year’s Measure R battle is back on the frontburner. This time, though, it’s not the ballot box but in Downtown L.A.’s Federal Court. Not unexpectedly, the Perenchio family’s Malibu Bay Company (numerous holdings in Malibu and the Civic Center) and Steve Soboroff (Whole Foods project and park in the Civic Center) have filed a joint lawsuit, asking a Federal judge to declare that Measure R violated a number of federal and state constitutional provisions. They are also asking for an injunction, which simply means the city be stopped from enforcing Measure R because of said violations.

Typically, it’s difficult but not impossible to get a federal court to hold that something violates either federal or state constitution, and then enjoin the enforcement of the initiative. There is a certain sanctity to the ballot box, and courts typically will stretch to follow the will of the voters unless there is something that’s basically and fundamentally wrong with the ballot measure. I’ve asked around and talked to a number of lawyers more experienced than I, and there seems to be a general feeling that this lawsuit will probably pass initial attack. That doesn’t mean that they’re necessarily going to win, but it does mean that it’s probably going to be around for quite some time because the defendant — the City of Malibu — is probably not going to be able to get it kicked out in summary fashion. How active it will be, meaning when the legal fee meters start running at hyper speed, will depend in great measure on how fast Soboroff and Malibu Bay Company want to push it. 

The plaintiffs are charging a number of things, including that the measure discriminates again them because it allows only a limited amount of space to chain stores. This issue of favoring local over national is not new to America or to the court system. Historically, from the moment we became a nation, every state passed tariffs, every state tried to give their locals a hometown advantage over the neighboring states, cities and towns. New York tried to block New Jersey. Connecticut tried to out-maneuver New York, etc., etc. Court records are filled with federal and state cases over the last 200-plus years, so claims like this have certain historical legitimacy. Again, that doesn’t mean they are necessarily going to win, because there are as many exceptions as there are cases. But exceptions are almost always based on the facts of the case, and discovery (gathering documents, video tapes, sending out interrogatories and taking depositions) is a long, painstaking and invariably expensive process.

What’s probably going to come up first is the question of who is going to represent the city. It is no secret that there is little love lost between the Reiners, their Measure R allies and Malibu City Attorney Christi Hogin. The Measure R people are going to want to intervene on their own nickel, meaning get into the lawsuit with their own attorneys, and I suspect the City of Malibu is not going to object.

There is also a financial perspective to all of this. Looking at the Civic Center commercial real estate, I would estimate when built out, it is worth roughly $2,000 per square foot. I base that on the recent purchase of the Malibu Village shopping center, a 55,000-square-foot center running in a large “L”-shape from the movie theater to the Wells Fargo Bank. It sold for a reported $120 million to East Coast investors, Jamestown. What Soboroff is proposing with the Whole Foods project is 38,424-square-feet of building on 5.88 acres. Just to give you a sense of proportion, Legacy Park is 19 acres. If Soboroff’s Whole Foods project were built out it wouldn’t be unreasonable to think it might be worth $2,000 per square foot, a total value in the neighborhood of $77 million. The Malibu Bay Company’s proposed project is somewhere between 60,727 square feet and 80,970 square feet on 9.2 acres, giving it all a built-out value of between $120-$160 million. As you can see, the numbers are very big for a city with a roughly $25 million budget.

The risks are very large on all sides. Somewhere along the line, the parties and the city are going to have to sit down and deal with each other face-to-face, but I suspect not yet. All sides are going to have to get beat up a bit before they’re ready to talk. For now, all we can do is wait.