In April, 2006 California’s 5th District Court of Appeal ruled in favor of the City of Turlock on a zoning ordinance designed to prohibit so called "big box" retail stores that include grocery operations. (Yes, Wal-Mart was the ordinance’s target.) The surprising part is that only seven days earlier, the same court struck down a City of Hanford ordinance that allowed large department stores to sell furniture on a limited basis, but prohibited smaller retailers from doing the same. How do we reconcile these two cases?

 

Wal-Mart Gets Shut Out: Wal-Mart’s woes began when it approached Turlock with a plan to develop a so-called "supercenter" and asked for a complete list of all the fees and permits that would be required. After several months of working on requirements provided by the city staff, Wal-Mart found a City Council that was not receptive and instead instructed its planning staff and planning commission to process an ordinance, the practical effect of which was to limit a big box retailer’s ability to sell nontaxable items such as groceries.

 

The ordinance that eventually was adopted prohibited the typical big box discount store (larger than 100,000 square feet) from devoting more than 5% of the store’s floor space to nontaxable items such as groceries. It also required store developers to obtain a conditional use permit from the city. When the city adopted the ordinance, the Council made supportive findings regarding a public policy to spread shopping opportunities through out the city rather than to concentrate them in a "superstore" and the negative impacts on existing neighborhood shopping centers and traffic patterns created by such "superstores."

 

Wal-Mart’s complaint alleged that the city exceeded its authority and specifically targeted the ordinance at Wal-Mart, suppressing competition.

 

In a decision founded on traditional principals of court deference to a local government’s legislative acts, the Court rejected all of Wal-Mart’s arguments. The court summed it up by stating that ". . . it is neither our duty, nor our option to second guess [the] [c]ity’s determination that the ordinance is need to, and will protect the public welfare."

 

The court’s decision in the Turlock case follows a long line of cases that hold land use regulation will be upheld so long as they are reasonably related to the public welfare and have some rational relationship to the stated public welfare goals.

 

But Hanford’s Regulation Gets Turned Around: In contrast to the Turlock / Wal-Mart decision, the same court ruled against a similar Hanford ordinance. In that case a small, low-end furniture retailer sought a certificate of occupancy for a small furniture store in a planned commercial zone near the City's deteriorating center. Based upon a stated city council goal to enhance the downtown area, the city amended its zoning ordinance to prohibit furniture sales within the planned commercial zone but with an exception for 50,000 square foot or larger department stores, so long as the furniture display area did not exceed 2,500 square feet.

 

The retailer challenged the ordinance on the basis that it denied the retailer equal protection under the U.S. Constitution’s 14th Amendment. The city defended on the same grounds as the court upheld in Wal-Mart. That is, that the city had a legitimate interest in protecting its downtown and the ordinance was a reasonable way to do so.

 

The result should be the same right? The city wins right? Wrong.

 

The court held that the there was no rational basis for distinguishing between large and small retailers in the Hanford ordinance. Finding a rational relationship between the size distinction and a legitimate public policy goal is a requirement to meet the equal protection test. The court found that "[T]he small retailer poses the same potential threat, if any, to the downtown merchants as the larger store. Thus, limiting the furniture sale exception to stores with more than 50,000 square feet is arbitrary."

What’s the Difference? So why is the size based distinction in Turlock okay and the one in Hanford not? Was it just because in one place it involved Wal-Mart and in the other place it did not? The court explained it by stating that unlike the Hanford ordinance, the Turlock ordinance was based on a rational relationship to a legitimate public policy to organize the community’s growth. It also observed that no equal protection argument was made in the Turlock case.

 

Confused? You are not alone. Most legal scholars and commentators do not find this explanation convincing and see the Hanford case’s outcome as an aberration from the norm. While both cases are likely to continue to generate attention, it also is likely that a case on similar facts eventually will find its way to the California Supreme Court for a final resolution.