A Challenge Regarding the Interpretation of a Project Condition of Approval may be Filed More than 90 Days Following the Project Approval

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David Blackwell | Allen Matkins

On June 25, 2020, the Fifth Appellate District decided Honchariw v. County of Stanislaus, holding that an applicant’s challenge to a local agency’s interpretation of a project condition of approval was not barred by the Subdivision Map Act’s statute of limitations because it was not a challenge to the validity of a condition of approval. This decision is important for developers, as the 90-day statute of limitations under the Subdivision Map Act (at Gov. Code § 66499.37) and the Planning and Zoning Law (at Gov. Code § 65009(c)(1)) is extremely short, and conflicting interpretations regarding a condition may not arise until months or years later. This decision provides developers with an opportunity to challenge conflicting interpretations of a condition so long as the lawsuit is filed within 90 days after the conflict has materialized.

DISPUTED VESTING TENTATIVE MAP CONDITIONS OF APPROVAL REGARDING WATER SERVICE

In Honchariw, the County Board of Supervisors conditionally approved subdivider Honchariw’s application for a vesting tentative map in 2012. This approval followed years of litigation between Honchariw (as a prolific pro per litigant) and the County regarding this riverfront property that his family had owned for decades. A primary concern was the source of water service for the subdivided lots. The County therefore imposed four conditions to the vesting tentative map approval that sought to address this issue.

During the ensuing several years, Honchariw and County staff worked to address the property’s water supply, but in 2017, the County interpreted the subject conditions to require a fire suppression system that was contrary to Honchariw’s understanding. Honchariw argued that the County’s interpretation “came at him out of the blue” because the Community Services District’s system could not supply the required flows to make fire hydrants functional, as now required by the County. The parties continued to negotiate, with Honchariw insisting that a functional fire suppression system was not required for approval of the final map and could instead be built out as the lots were developed. The parties reached an impasse in the summer of 2017, five years after the vesting tentative map was approved.

A CHALLENGE REGARDING THE INTERPRETATION OF A CONDITION DIFFERS FROM A CHALLENGE TO THE VALIDITY OF A CONDITION

After the trial court conducted a hearing on the merits, it denied Honchariw’s petition and complaint. On appeal, the County argued that to the extent that Honchariw was challenging the project’s conditions of approval imposed in 2012, the challenge was barred by the 90-day statute of limitations set forth in Government Code section 66499.37 relating to decisions regarding subdivisions, including “the reasonableness, legality, or validity of any condition attached thereto.”

Honchariw argued, and the appellate court agreed, that his challenge was not to the validity of the subject conditions, but to the County’s “misinterpretation and misapplication” of the conditions, and that the parties’ respective stances regarding the meaning of the subject conditions were not clarified until July 2017. The court held that Honchariw’s claim did not “accrue” until then, so the filing of the lawsuit on August 25, 2017 was not time-barred by the Map Act’s 90-day statute of limitations.

NO DEFERENCE TO A LOCAL AGENCY’S INTERPRETATION OF PROJECT CONDITIONS

In the unpublished portion of the opinion, the Court sought to interpret the disputed conditions of approval, and remanded the matter to the trial court to resolve conflicting evidence in the record. In so doing, the appellate court applied the general principles for construing written instruments, provided that the principles do not undermine the purposes of the Subdivision Map Act.

The Fifth District also declared that while courts typically defer to a local agency’s interpretation of its own administrative rules, such deference was not appropriate when interpreting a subdivision’s conditions of approval, and that a court should instead “resolve any ambiguity in the conditions of approval in a manner consistent with the objectively reasonable expectations of the applicant.” Failing to do so would “undermine the purpose of the vesting tentative map statute.” The court further stated: “we are not bound to accept the local agency’s interpretation of a condition of approval simply because that interpretation is one of multiple reasonable interpretations. Such an approach would reward local agencies that draft ambiguous conditions of approval by giving them flexibility not conferred by clearly drafted conditions.”

IMPLICATIONS OF HONCHARIW

Although the facts of this case are limited to the Subdivision Map Act’s 90-day limitations period, the Planning and Zoning Law has similar language regarding actions to “determine the reasonableness, legality, or validity of any condition attached to a variance, conditional use permit, or any other permit” (Gov. Code § 65009(c)(1)(E)), thus the rationale in Honchariw would arguably be applicable to disputes regarding the interpretation of basically any project condition of approval.

This decision thus provides developers with a litigation option in the event of a dispute regarding the interpretation of one or more conditions of approval long after the project is approved.

Although the unpublished portion of the opinion cannot be cited as authority, it is provocative in its refusal to provide deference to a local agency’s interpretation of a project condition that it imposes and its admonishment of local agency attempts to impose ambiguous conditions that the agency can interpret to its advantage following the project approval.

Are You Ready For Remote Depositions? Adjusting To The New Normal Of Litigation

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Suzanne Galvin | Thompson Coburn

As a FEMA certified counselor for 12 years, I discussed the concept of adjusting to the “new normal” with those who have experienced floods, tornadoes, earthquakes, even war. This pandemic marks the first time I’ve applied these same talking points to my own life and career.

One key to healthy recovery is information. It is power in uncertain times. That’s why we’ve seen governments conducting COVID briefings during the pandemic. As a counselor entering a disaster site, I made sure I was armed with information so those suffering knew where to get the resources they needed—water, food, clothing, trash pick-up schedules, etc. By having this basic knowledge, people feel empowered to get on with their “new normal.”

Likewise, litigators have seen a shift in their practice as a result of the COVID-19 pandemic. What used to be common practice—cramming lawyers into conference rooms with witnesses, court reporters and videographers, just can’t happen safely in these unprecedented times.

Remember when you were a new litigator taking your first deposition? That is how some of you may feel as you face video conference depositions. You may have done them, but outside of mass toxic tort scenarios, not very frequently. This article is intended to serve as a resource, a checklist of sorts, to assist you as you think through your next video deposition. Careful planning will allow you to continue to provide the excellent representation your clients expect, and avoid common pitfalls as you navigate this new environment.

Preparation

As you prepare for the upcoming deposition, it is helpful to coordinate with opposing counsel as much as possible. Topics to discuss include technology, protective orders and drafting not only a notice of deposition, but also a stipulation memorializing how the deposition will take place.

Thank goodness the pandemic has come when we have the technology to handle remote depositions. That said, not all platforms are equal. Zoom is free, flexible and easy to use; however, it has a reputation of not being as secure as other sites. As a result, some firms actually prohibit its use. WebEx is also easy to use, flexible and secure, but it is not free. Skype is another alternative frequently mentioned, but it too depends on the level of sophistication of the parties and deponent. So, choosing the right platform is the first step to take, and may involve some initial negotiation.

Once the platform is chosen, it is important to check the bandwidth available to each attendee. For example, will the party be attending from their home office or a home in rural setting? I am currently involved in an environmental case where the local plaintiff’s lawyer didn’t have Wi-Fi in his conference room, let alone a platform for remote depositions. Negotiating these situations in advance will be time-consuming but commonplace, and may even eat up the cost savings of not traveling to depositions.

Of course, a technology check before the start of the deposition needs to be worked into the planning. Be sure to set the deposition at a reasonable hour and have an agreement to check the technology at least 15-20 minutes in advance so any bugs can be worked out (a day before would be ideal.) Does the microphone work? Is the connection stable? Is the camera sufficient?

Real-time transcripts are relatively new, but in this environment where it may be more difficult to catch the nuance of an answer, they are no longer optional. Reading the answer as the court reporter is recoding it will be vital and should eliminate surprise caused by a poor connection—just  a bit of insurance for you as you prepare the case.

Terms of the deposition

As mentioned, a stipulation covering the depo arrangements may be necessary. Remote depositions are allowed under Federal Rule 30(b)(4), and almost all local rules. Typically, local courts have also issued COVID-19 orders that may be cited as authority for the proceeding. It used to be mandatory the swearing of the witness was done in person, or the entire deposition was invalid and inadmissible. Best practice would be to include in your stipulation the fact the parties agree the remote swearing of the witness is valid for trial and impeachment.

In addition to date, time and place of each attendee, be sure the stipulation also includes a prohibition of other items of technology available to the witness during the course of the deposition (turn off their cellphone and Apple watch), other programs open on the laptop and designate other people allowed to be in the room with the deponent.

If information covered in the deposition is confidential, and a protective order is in place, be sure all attendees have signed the protective order in advance of the deposition. If there is no protective order in your case, think ahead to whether a protective order may be necessary just for the scope of the deposition. Avoiding surprises the day of the deposition is the name of the game.

Exhibits and their use is probably the stickiest point in a remote deposition. If the litigation has been fairly straightforward, an exchange of documents via FedEx a set number of days in advance of the deposition will work; some depositions have taken place with these arrangements. In other cases, you should check with your court reporter. Some court reporters allow a file to be created for each deposition and a sub-folder that is confidential created for each attorney. During the deposition, the attorney can move any document from their private folder and have it marked as an Exhibit. The downside is it allows for “surprise” documents, but the upside is that this eliminates confusion about Exhibits during the deposition.

Considerations during the deposition

If the technology check hasn’t been done, be sure to set this up early (court reporters request minimum of 30 minutes in advance) and verify good video, audio and a stable connection. Verify the court reporter has Real Time and can hear well enough to transcribe.

Verify the exhibits are accessible to the witness, all counsel and the court reporter.

Include in the stipulation that the deposition will not begin until all counsel are present. Plan ahead for technical difficulties, including a provision that a suspension of the deposition will take place should any counsel lose their connection.

A trickier issue arises when some counsel are present with the witness, but others are attending remotely. Will PPE be required? Will social distancing be necessary? Will both sides be allowed to have representation? The response to this will likely vary from case to case and witness to witness. Obviously, with COVID-19, witnesses with underlying health concerns or over the age of 60 would have different considerations than a younger or healthier witness. In some cases, all or nothing may be proposed—that is, a designated lead counsel from each side is present, with other counsel attending remotely.

As the deposition begins and the witness is sworn, assuming you are remote, remember to position your webcam so you can be seen clearly by a judge/jury if the deposition is played at trial. Face a window. Have a blank wall behind you. Dress as though in trial. You should also make a record about the stipulation or protective order that’s in place. This should include an agreement that remote swearing in is acceptable for trial and impeachment purposes later.

When the witness begins answering, ask them to use the camera to show who else is in the room with him/her. Ask them to verify other forms of technology are turned off.  Also be sure no other programs are running on their computer. Verify no other audio or video recordings are being made. Ask these questions again after each break.

Ask the witness to verify they can hear and see you and have them agree to report it immediately if they have any trouble hearing or seeing or an exhibit as the deposition progresses.

As previously mentioned, exhibits are probably the most difficult part of the remote deposition. As the Exhibits are marked, be sure to keep careful copy of each Exhibit and the number it is assigned. This may take a little extra time, but it will be worth it when assembling the materials later.

Best practice is to avoid communication with the witness once the deposition begins. One in-house counsel we recently spoke to wants everyone to know—the chat feature on Zoom can be seen by all parties. So, even though you break into “rooms” in Zoom, your conversation may be recorded/seen by everyone. Be careful not to disclose any privileged information and also be sure to avoid anything that could be interpreted as “coaching” the witness.

The deposition ‘takes place” in the location where the deponent is located. Rule 30(b)(4). So, consult the rules of that jurisdiction well in advance of the deposition in order to prepare for issues that might arise, particularly if you expect issues with time, exhibits, or technology.

Clean-up at the end of the deposition

At the conclusion, make a record about the conditions and what has transpired. If there is a 7-hour limit (Rule 30 FRCP) and the time the deponent has been deposed is at issue, make a record what time has been used and how it has been calculated. If there was confusion over exhibits, take the time to review them on the record for clarity. If technical issues arose, review on the record how they were dealt with. Finally, as always, f you represent the deponent, include a request to read and review before signing. It will be more important than ever to review with your witness and have them complete an errata sheet in a timely manner. FRCP30(e)(1) allows 30 days from notice of the transcript. When RealTime is available, or when the “rushed copy” is first provided, calculating 30 days from the date of RealTime transcript would be safest bet.

Conclusion

In sum, the remote depositions we are now conducting will soon become normal for us. In the meantime, as we adjust, we encourage you to keep the checklist we’ve prepared handy as you set up your next deposition. Welcome to the “new normal.”

Collapse of Underground Storage Cave Not Covered

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Tred R. Eyerly | Insurance Law Hawaii

    The Eighth Circuit faced unusual facts in determining that the collapse of a cave serving as a storage facility was not covered under the policy. Westchester Surplus Lines Ins. Co. v. Interstate Underground Warehouse & Storage, Inc., 2020 U. S. App. LEXIS 83 8th Cir. Jan. 3, 2020).

    Interstate operated an underground storage facility in a cave that formerly housed a limestone mine. In 2014, Interstate experienced a series of “dome-outs,” in which layers of rock destabilized, detached, and collapsed from above into the cave.

    Interstate’s policy with Westchester included coverage for collapse of a “building” caused by “building decay.” Westchester sought a declaratory judgment that Interstate’s loss was not covered. The district court granted summary judgment for Westchester because the cause of the loss was not “building decay” within the meaning of the primary policy.

    When Interstate constructed its facility, a limestone slab from the middle zone of the Bethany Falls limestone provided a natural ceiling. The rubble zone was above this natural ceiling. To ensure that the slab of limestone from the middle zone did not detach and fall into the facility, Interstate inserted steel bolts through the natural ceiling, through the rubble zone, and into the more stable layers of rock above the rubble. 

    For purposes of the appeal, Westchester accepted that Interstate’s facility was a “building” within the meaning of the policy. The appeal turned on whether the collapse that damaged the “building was caused by “building decay.” So the dispositive question was whether decay in the rubble zone was “building decay.”

    The Eighth Circuit was not convinced that the bolting process transformed the rubble zone and other earth around the bolts into part of the “building.” Rather, the bolts reinforced the facility’s natural ceiling, much like pilings beneath a large building provide support to that structure. 

    The court concluded that the rubble zone above the natural ceiling of Interstate’s facility was not part of the “building.” Because the decay that caused the dome-outs occurred within the rubble zone, the dome-outs were not caused by :building decay” within the meaning of the policy. Therefore, the judgment of the district court was affirmed. 

Coverage for Faulty Workmanship Denied

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Tred R. Eyerly | Insurance Law Hawaii

    The court found there was no coverage for the insureds’ alleged negligent failure to construct a building. Evanston Ins. Co. v. DCM Contracting, 2020 U.S. Dist. LEXIS 63977 (N.D. Ga. Feb. 28, 2020).

    Turning Point Church sued DCM Contracting for faulty workmanship on a construction project. Turning Point sent a demand letter to DCM on August 18, 2017 and filed suit in December. Evanston did not receive notice of Turning Point’s claims and the lawsuit until May 15, 2018. 

    Evanston filed suit for a declaratory judgment and moved for summary judgment. The court first considered the late notice. The policy required notice “as soon as practicable” DCM was also required to provide copies of demands, notices, or legal papers to Evanston. Here, DCM did not give notice to Evanston until nine months after receipt of Turning Point’s demand. A phone communication with DCM’s agent between August 2017 and May 2018 was insufficient. DCM provided no documents, including the summons and complaint, to the agent. DCM waited five months to forward the underlying lawsuit. This was a breach of the policy.

    There was also no occurrence. The underlying lawsuit sought damages to repair DCM’s work and economic losses. Any claims of economic loss by Turning Point did not constitute property damage. 

    Accordingly, summary judgment was awarded to Evanston. 

Prior Material Breach May Excuse Performance, but the Factfinder Must Agree It Was a Material Breach

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J. David Pugh, Ian P. Faria and Amandeep S. Kahlon | Buildsmart

In most jurisdictions, a party may be excused from any future performance under a contract by the prior material breach of the other party. A “prior material breach” is typically defined as conduct that deprives the injured party of the benefit that it reasonably could have anticipated from the breaching party’s full performance. This excuse may serve as a complete defense in a breach of contract action. It is a potent defense, but the devil is in the details: Was it a “material breach?”

Because determination of whether a breach is material is typically a question for the jury, or judge or arbitrators, depending on the forum, failure properly to raise the issue of “prior material breach” may invalidate an otherwise valid defense to a breach of contract action. A homeowner recently learned this hard lesson from the Texas Court of Appeals’ decision in Earth Power A/C and Heat, Inc. v. Page published on June 23, 2020.

In Earth Power, an HVAC contractor alleged a homeowner breached its contract for installation of a geothermal HVAC system by failing to make multiple progress payments. The homeowner asserted an affirmative defense of “repudiation” arguing that the contractor repudiated the contract by not installing the HVAC system in a workmanlike manner.

At trial, the jury found that both parties breached the contract, but that the contractor breached first. The jury also found that the homeowner’s payment obligations were not excused by any repudiation and awarded the contractor damages for nonpayment. The homeowner did not raise the affirmative defense of “prior material breach” or present to the jury the question of whether the contractor’s breach was material or whether the breach excused the homeowner from paying the contractor.

After the jury verdict, the homeowner moved to set aside the judgment and to enter judgment as a matter of law in its favor. The homeowner argued that the jury’s finding that the contractor breached the agreement first should be treated as a finding of “prior material breach,” and the court should vacate the jury award of damages. The trial judge accepted this argument and amended the final judgment in favor of the homeowner.

On appeal, the contractor argued that the trial court erred because there was no finding of “prior material breach” as that question was never properly raised before the jury. The Texas Court of Appeals agreed. The homeowner “failed to secure findings necessary to support the assertion that his failure to perform was excused” by the contractor’s prior material breach. According to the court, although the jury found that the contractor breached the contract first, it was not asked whether that breach was material, and the homeowner submitted no question or instruction to the jury regarding “prior material breach.” Under Texas law, the failure to request a jury question or instruction on “prior material breach” waived the homeowner’s affirmative defense.

An exception to this waiver rule applies if the affirmative defense is “conclusively established,” but the homeowner did not argue this exception on appeal. Absent a prior material breach, the contractor was entitled to recover damages for the homeowner’s failure to pay amounts due under the contract. The Court of Appeals, therefore, reversed the trial court judgment and ordered the homeowner to pay the contractor the damages awarded by the jury, plus attorneys’ fees.

What is the takeaway from this decision?

As we are sure you’ve heard, “it’s complicated.” Prior material breach is a common affirmative defense in construction contract disputes, but it requires more than a mere showing of which party was the first to breach an agreement. If the homeowner in Earth Power had properly submitted “prior material breach” as a defense for its non-payment to the jury, a finding in its favor would have likely survived appellate scrutiny.

However, when materiality is not proven, the party responsible for the first-in-time breach may still recover for subsequent (material) breaches by the other party to a contract. As stated above, this allegation, like the decision to quit performing a contract, may be a “nuclear option” in construction contracts. It should be approached with solid advice and with caution.