A unanimous California Supreme Court has upheld a local zoning ordinance that regulates who may sell furniture. The decision appears to bolster local zoning decisions that have come under attack from developers and retailers, especially those promoting big-box stores.

In a detailed discussion, the court made clear that a zoning ordinance's regulation of economic competition is inconsequential as long as the ordinance promotes a legitimate public purpose.

Although the decision could boost cities' big-box zoning ordinances, the case at hand involved owners of a small furniture store in the City of Hanford. They challenged an ordinance that restricted furniture sales in an outlying planned commercial (PC) zoning district, where the owners opened a 4,000-square-foot mattress and home furnishings store. The city adopted the ordinance in order to protect the viability of its downtown, where there are about a dozen furniture stores.

"In the present case, it is clear that the zoning ordinance's general prohibition on the sale of furniture in the PC district — although concededly intended, at least in part, to regulate competition — was adopted to promote the legitimate public purpose of preserving the economic viability of the Hanford downtown business district, rather than to serve any impermissible private anti-competitive purpose," Chief Justice Ronald George wrote. "[T]he zoning ordinance's restrictions are aimed at regulating ‘where, within the city' a particular type of business generally may be located, a very traditional zoning objective."

The court also rejected the furniture store owners' contention that an exception — which permits retail stores of at least 50,000 square feet in the PC zone to dedicate up to 2,500 square feet to furniture sales — violates the equal protection clauses of the federal and state constitutions. The court found that the city had a rational reason for creating the exception.

"It really is a good day for local democracy," said attorney Steven Mayer, who argued the case for Hanford at the state Supreme Court. The decision "was even better than I hoped for," he added. "It will restrict the ability of developers to challenge zoning decisions. It gives cities a lot more comfort."

Attorney Russell Ryan, who represented the furniture store owners, told the San Francisco Chronicle that the decision was a rubber-stamp for local government.

"Local elected officials may have a bias or animus against a particular entity or they may have a purely private reason for making that decision, but as long as they state a public reason, they won't be questioned," Ryan told the Chronicle.

Hanford first adopted an ordinance regulating furniture sales in 1989, at about the same time the city designated the PC district elsewhere in town to accommodate a mall and big-box stores. Some of the new department stores and big boxes proceeded to sell furniture, but the issue did not get controversial until early 2003, when Adrian and Tracy Hernandez opened Country Hutch Home Furnishings and Mattress Gallery in the PC zone. A city inspector informed the owners that they were violating the city's ordinance. After they protested, it became evident that the ordinance was unclear, so the City Council conducted a series of study sessions. In July 2003, the council adopted a revised ordinance that generally prohibits the sale of furniture in the PC district, except for 2,500-square-foot displays in stores of at least 50,000 square feet.

The Hernandezes filed a lawsuit claiming the ordinance was invalid because its primary purpose was the regulation of economic competition and because it violated the state and federal constitutions' equal protection clauses. A trial court judge ruled for the city, but the Fifth District Court of Appeal struck down the ordinance because the disparate treatment of large and small stores in the same zone "does not bear a rational relationship to the goal of preserving downtown Hanford" (see CP&DR Legal Digest, May 2007, May 2006).

Although neither lower court accepted the Hernandezes' arguments regarding economic regulation, the state Supreme Court dealt with the issue at length, in part to "clarify" three earlier appellate court decisions: Van Sicklen v. Browne, (1971) 15 Cal.App.3d 122, Ensign Bickford Realty Corp. v. City Council, (1977) 68 Cal.App.3d 467, and Wal-Mart Stores, Inc. v. City of Turlock, (2006) 138 Cal.App.4th 273 (see CP&DR Legal Digest, May 2006).

In Van Sicklen, the court upheld the City of Milpitas's denial of a conditional use permit for a proposed automobile service station because the area already had a proliferation of service stations. However, some of the language in Van Sicklen "is ambiguous and at least potentially misleading" and could be used to support an argument that a zoning regulation is invalid if it impacts economic competition, George wrote. Ensign Bickford involved the City of Livermore's refusal to rezone land for a proposed shopping center, a decision the court upheld as serving the public's interest in controlling the pace and location of growth. In Wal-Mart, the court upheld Turlock's ordinance that effectively prohibits big-box stores from selling groceries, an ordinance the city adopted because such stores could create urban blight by forcing closure of existing supermarkets.

"As the circumstances underlying the decisions in Ensign Bickford and Wal-Mart demonstrate," George wrote, "even when the regulation of economic competition reasonably can be viewed as a direct and intended effect of a zoning ordinance or action, so long as the primary purpose of the ordinance or the action — that is, its principal and ultimate objective — is not the impermissible private anti-competitive goal of protecting or disadvantaging a particular favored or disfavored business or individual, but instead is the advancement of a legitimate public purpose — such as the preservation of a municipality's downtown business district for the benefit of the municipality as a whole — the ordinance reasonably relates to the general welfare of the municipality and constitutes a legitimate exercise of the municipality's police power."

"To the extent that any language in Van Sicklen, Ensign Bickford or Wal-Mart may be interpreted as inconsistent with this conclusion, such an interpretation is disapproved," the court ruled.

The court then turned to the issue of equal protection. What was important to the court was the ordinance's intent to serve multiple purposes — the preservation of downtown's viability and the city's ability to attract and retain large department stores that sell furniture. "Past cases establish that the equal protection clause does not preclude a government entity from adopting a legislative measure that is aimed at achieving multiple objectives, even when such objectives in some respects may be in tension or conflict," the court ruled.

"Because the city viewed large department stores as particularly significant elements of the PC district, and because the management of those stores had made clear the importance to them of retaining their ability to offer furniture sales that typically were offered by their sister stores in other locations, it was rational for the city to decide to provide an exception from the general prohibition of furniture sales in the PC district for such large stores and only such stores," George wrote.

The Court of Appeal's decision "would have undermined the ordinance's overall objective of permitting the sale of furniture in the PC district only to the extent such activity is necessary to serve the city's interest in attracting and retaining large department stores in the district," George concluded.

The Hernandezes, who have been assisted by property rights advocates at Pacific Legal Foundation, are reportedly considering an appeal to the U.S. Supreme Court.

The Case:
Hernandez v. City of Hanford, No. S143287, 07 C.D.O.S. 6554, 2007 DJDAR 8348. Filed June 7, 2007.

The Lawyers:
For Hernandez: Russell Ryan, Motschiedler, Michaelides & Wishon, (559) 439-4000.
For Hanford: Steven Mayer, Howard, Rice, Nemerovski, Canady, Falk & Rabkin, (415) 434-1600.

Download the decision at: http://www.courtinfo.ca.gov/cgi-bin/opinions.cgi