Settling for Less and Losing Even More

There have long been indications that City Hall is overly susceptible to litigation pressure from the moneyed interests on the Island. Unfortunately, as non-elected citizens, we are at a disadvantage when it comes to monitoring how the City manages its litigation portfolio, as virtually all discussion and negotiation occur behind the veil of executive session. However, sometimes the results of these efforts to appease the disgruntled citizen come to light and demand our attention. Last year, it was docks on Blakely Harbor. This year, it’s patio houses along the Wing Point Ravine.

As a community we are deeply affected by the financial realities of handling constant litigation. Frivolous, legitimate, malicious or well-intentioned, lawsuits bleed the coffers and are a distraction from the real business of running a city government. Therefore, they should be settled when appropriate. But not at all costs. Re-writing laws, manipulating public policy or making special exceptions to satisfy a complainant jeopardizes the integrity and viability of the government and its policies.

Quid Pro Quo

Capstone Partners, dissatisfied with the Hearing Examiner’s (HEX) decision denying its application for a Conditional Use Permit (CUP) to build 11 houses along a ravine near Wing Point Country Club, filed a lawsuit for damages against the City in August of 2006, one week after filing an appeal of the HEX decision. In July of this year, in an apparent attempt to settle the damages claim, the Mayor authorized the attorney for the City to enter into a stipulation of facts in support of and calling for a remand of the CUP matter to the HEX. The Superior Court accepted the stipulation and remanded the case.

The legal authority to authorize the stipulation to the remand, the subject of an earlier article on this blog, is not dispositive of the question of whether this remand and the context in which it occurred are appropriate. The facts available to the public suggest that even if the mayor had had the authority to agree to a legitimate remand, the decision to remand in this case, in the absence of newly discovered evidence and in the context of a settlement agreement, was at best contrary to the public good. Furthermore, it remains unclear as to whether the Mayor had authority to settle the damages claim at all.

As discussed previously on this blog, there appears to be neither newly discovered evidence nor a clear mistake justifying a remand to the hearing examiner. The issue could have been appropriately litigated before the Superior Court, with the City advocating for its Hearing Examiner’s application of its land use code, and with the Court making a decision as to the appropriateness of a remand. But instead the City, at the behest of the Mayor, agreed to the remand in consideration for the dismissal of the damages claim.

Money Changes Everything

As a general rule, the City Council has final authority over the settlement of lawsuits. In March of this year, the City Council, at the request of the administration, granted the Mayor the authority to settle claims by or against the City “in an amount of $50,000 or less”. In the damages claim at hand, Capstone sought relief under RCW 64.40.020 and alleged that the HEX had acted in an “illegal and/or arbitrary and capricious” manner (a high standard consistent with the deference generally granted to governmental action). The damages alleged included “expenses and losses, including lost sales and profits, enhanced construction costs...” and “costs and attorneys fees”.

Clearly, were the plaintiffs to prevail, potential damages would far exceed $50,000. Clearly, Capstone would never have considered settling for an amount less than $50,000, as that would not have even paid their legal bills. And so the question remains: Under what authority did the Mayor act to settle the Capstone lawsuit?

Even if the Mayor had had the authority to settle the damages claim, a critical public policy question remains. Should the outcome, or even status, of a land use decision ever be on the negotiating table when the Mayor, or Council, is contemplating settling a claim against the City? There can be no dispute as to the answer to that question. We are a society of laws. We expect laws and policies to be applied as fairly and consistently as possible. We expect those we entrust with applying the law to correct mistakes made in the application of the law (to reverse, remand or withdraw) but not to change the rules of the game arbitrarily for privileged members of the community. Aside from the fundamental unfairness to the rest of the community who must abide by the rules, and the implications for whatever public good the law was attempting to protect, what message does this send to those with the financial ability and will to sue over any legal action that causes them inconvenience or discomfort?

Whatever the outcome of the Capstone controversy, perhaps it’s time for the City Council to take another look at the scope of authority that it actually granted to the Mayor to settle claims. Was it ever intended that the Mayor, independent of Council, could settle claims, like Capstone, where the actual relief sought is not in the form of monetary damages but in a favorable land use decision? And perhaps Council should revisit the associated grant of authority to the Mayor to approve contracts valued up to $100,000 (recall the $25,000 no bid contract to Capstone for the parking garage). Surely, decisions concerning such significant amounts of our tax money and critical legal issues should be vetted by more than one person and through a more transparent process.


The HEX is scheduled to hold a public hearing on the Capstone matter on September 27th.