Public Officials Are Immune From Tort Liability For Legislative Actions Involving Misrepresentations That Are Motivated By Fraud, Corruption Or Actual Malice.

By Glen Hansen

In Freeny v. City of San Buenaventura (June 4, 2013, B240893) ___ Cal.App.4th ___, the Court of Appeal for the Second Appellate District held, in an action against a city and five city council members for compensatory and punitive damages for voting against an application for building permits and variances, that public employees’ tort immunity for legislative decision-making under Government Code sections 820.2, 821 and 821.2 applies even when that decision-making is also alleged to involve the making of misrepresentations motivated by actual fraud, corruption or actual malice.

In Freeny, the planning commission for the City of San Buenaventura not only approved plaintiffs’ project consisting of a 44-unit living facility for senior citizens, but also granted a conditional use permit, a design review, an administrative variance, and a lot-line adjustment for that project. The City Council voted to overturn the planning commission’s approval in response to an appeal by a group of neighbors. The City Council stated that plaintiffs “need[ed] to rethink the entirety of the project,” and so it denied the project “without prejudice” and invited plaintiffs to submit a “redesign[ed]” project. Plaintiffs sued the City and five City Council members who voted to reject the project. Plaintiffs sought (1) administrative mandamus that either commanded the City to approve the project or required a new hearing before the City Council; and (2) $1.8 million in compensatory damages and additional punitive damages arising from tort claims for fraud and misrepresentation. The trial court sustained defendants’ demurrers without leave to amend on two grounds. First, the trial court concluded that plaintiffs’ lawsuit was not ripe because the City’s denial “without prejudice” left administrative remedies unexhausted. Second, the trial court ruled that defendants were immune from liability. Plaintiffs appealed. The Court of Appeal affirmed the trial court’s judgment for defendants.

The Court of Appeal first addressed the ripeness issue of “whether the duty to exhaust administrative remedies requires plaintiffs to reexhaust their remedies by vetting an entirely different project through the same administrative process even though the project they seek to challenge judicially has already been definitively rejected through that process.” The court responded that the answer to the question depends on the nature of the subsequent judicial challenge. If a plaintiff claims that the government agency has effected a regulatory taking by denying all economically beneficial or productive use of plaintiff’s property, then the plaintiff’s presentation to the agency of other uses for the property (and the agency’s subsequent rejection of those other uses) may be necessary to establish that the property has no use. However, when all the plaintiff challenges is the denial of a specific use through denial of a special project, then the plaintiff only needs to show that the administrative agency has finally ruled on that project. In the Freeny case, reexhaustion was not required because plaintiffs did not raise a regulatory takings claim and only challenged the denial of their project.

The Court of Appeal then addressed the second issue of immunities. The court reiterated the immunities given to public employees for “an injury resulting from his act or omission where the act or omission was the result of the exercise of discretion vested in him, whether or not such discretion be abused” (Govt. Code § 820.2), for “fail[ing] to adopt an enactment” (§ 821), and for “deny[ing]” or “refus[ing] to issue” “permit[s]” and “approval[s].” (§ 821.2.) Plaintiffs argued that there is an exception to those immunities in the context of legislative policy in Government Code section 822.2. That section provides: “A public employee acting in the scope of his employment is not liable for an injury caused by his misrepresentation, whether or not such misrepresentation be negligent or intentional, unless he is guilty of actual fraud, corruption or actual malice.” The court rejected plaintiffs’ argument and held that “the Legislature intended the immunity from tort liability attaching to legislative policy making decisions to apply even when legislators acted with improper motives.” The court reasoned that legislators benefit from immunity that does not dissipate upon the mere allegation of improper motives or unlawful acts because such immunity “eliminates the ‘“… threat of personal liability …”’, and frees public employees to exercise their ‘“… honest judgment uninfluenced by fear of consequences personal to themselves ….”’” (Citations omitted.) The court further reasoned that absolute immunity in the context of legislative actions furthers the separation of powers: “A rule hinging tort immunity on whether legislators made misrepresentations motivated by ‘actual fraud, corruption, or actual malice’ (§ 822.2) would put legislators’ motives front and center. It would also put judges in the uncomfortable position of ‘question[ing] the wisdom of … legislative decision[s] through tort litigation.’”

The court in Freeny therefore concluded that the City Council defendants were immune from tort damages for their legislative denial of plaintiffs’ application. And because the City Council defendants were themselves immune, so too was the City defendant under Government Code section 815.2. Furthermore, section 818.8 “confers upon public entities an absolute immunity for all misrepresentations, and that this immunity trumps any vicarious liability for egregious misrepresentations of its employees actionable against the employees themselves.”

In what may be considered dicta, the court clarified the application of these immunity provisions to government employees who act outside of a legislative capacity. The court explained: “Public employees not engaged in legislative or other discretionary policy making remain liable for misrepresentations they make in the course of their employment if those misrepresentations (1) do not interfere with commercial or financial interests; or (2) are pled with specific facts and subsequently proven to be motivated by actual fraud, corruption or actual malice.”

Despite the trial court’s erroneous ruling on the reexhaustion issue, the Court of Appeal did not remand the remaining mandamus claim to the trial court. The appellate court merely affirmed the trial court’s judgment because plaintiffs were not entitled to mandamus relief as a matter of law. The court summarily rejected the plaintiffs’ mandamus arguments based on estoppel, procedural due process and the nondescript allegation that defendants did not “follow legal standards.”

 Glen Hansen is senior counsel at Abbott & Kindermann, LLP. For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, LLP at (916) 456-9595.

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, or the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.

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