California Supreme Court Clarifies Constitutionality of Zoning Impacts on Economic Competition

Hernandez v. City of Hanford (2007) Cal.Rptr.3d., 2007 WL 1629830. In Hernandez v. City of Hanford , the California Supreme Court reversed the appellate court’s decision, and held that the City of Hanford’s zoning ordinance prohibiting furniture sales in the City’s Planned Commercial (PC) district, with a limited exception for large department stores, did not violate the State or Federal Equal Protection Clause.

The Supreme Court agreed with both the trial and appellate courts that a prohibition on furniture sales within the PC district was not unconstitutional, however, the Supreme Court further held that the Court of Appeal had erred in determining that the ordinance’s exception for large department stores, allowing some limited sales, was not rationally related to any legitimate purpose behind the ordinance.

In addressing the validity of the prohibition on furniture sales, the Supreme Court clarified language in a line of cases beginning with Van Sicklen v. Browne (1971) 15 Cal.App.3d 122, which addressed the impacts of local zoning regulation on economic competition. The Court noted that statements from Van Sicklen , such as “cities may not use zoning powers to regulate economic competition,” were “quite clearly overbroad.” Citing a leading zoning treatise, the Court noted that “all zoning has some impact on competition” and that “[a]ccordingly, competitive impact alone cannot invalidate a zoning ordinance.” The Court also disavowed interpretations of Van Sicklen that suggested that a zoning ordinance was only valid when the ordinance has an indirect impact on economic competition, and is never valid when the impact is a direct and intended consequence of the ordinance. Rather, the Court stated that zoning actions are to be upheld, “even when regulation of economic competition reasonably could be viewed as a direct and intended effect of a challenged zoning action, so long as the primary purpose of the zoning action . . . is to achieve a valid public purpose.” The Court further cited the recent appellate decision in Wal-Mart Stores, Inc. v. City of Turlock (2006) 138 Cal.App.4th 273, as support for the principle that an “anticompetitive effect” does not necessarily defeat an ordinance enacted for a valid purpose.

The Supreme Court also held that an exception in the ordinance, which allowed department stores-defined as retail establishments of at least 50,000 square feet displaying a “variety of merchandise” for sale-to devote up to 2,500 square feet to the display and sale of furniture, did not violate the Equal Protection Clauses of the State or Federal Constitution. The Court found that while the appellate court had correctly identified protection of the City’s furniture stores in the downtown business district as a valid public purpose for the ordinance, the lower court had failed to identify a second, equally important purpose: to further the City’s ability to “attract and retain large department stores in the PC district.” The exception in the ordinance was rationally related to the achievement of this second objective. Therefore, in treating department stores and other retail establishments within the PC district differently, the City had not violated equal protection principles. The Supreme Court, therefore, concluded that the Court of Appeal had erred in invalidating the ordinance.

Meyers Nave is recognized for its work with all types of public agencies in California and provides the full scope of legal services to cities, counties, redevelopment agencies and special districts statewide.