Slopes case goes against city

The Montana Supreme Court's Oct. 27 ruling in the Walton case will cost the city of Whitefish a lot of money at a time when most cities are cutting back on expenses, but it doesn't affect the city's legal authority to enforce its Critical Areas Ordinance (CAO).

Coming one week before election day during a contentious Whitefish City Council election, however, in which the CAO was one of the top issues, the ruling does have political implications.

The Supreme Court upheld three rulings by Flathead County District Court Judge Ted Lympus, ending the case in favor of William and Theodora Walton.

The couple claimed the city had violated their right to equal protection when they were denied a permit to build a new home on steep slopes overlooking Whitefish Lake.

A jury in June 2007 awarded the couple $300,000 in damages. One year later, Lympus awarded the couple $99,945 for attorney fees and legal costs. The city will also have to come up with about $40,000 in accrued interest.

City attorney John Phelps said the Supreme Court's ruling ended the case for the city. There will be no further appeals.

"We're disappointed, but we accept the outcome," Phelps said, adding that steps were underway to pay what was owed.

"Unless the city council instructs otherwise, we will just write a check to pay for the judgment at the appropriate time," city manager Chuck Stearns said. "It will reduce our reserves, but the city council did cut back expenditures in the fiscal year 2010 budget in order to increase reserves in case we lost the lawsuit."

So far, the Montana Municipal Interlocal Authority has paid out $84,154 for the city's defense team from Kaufman, Vidal, Hileman and Ramlow, Stearns said. Phelps will ask MMIA to take another look at its decision a year ago not to cover the entire cost of the case, Stearns noted.

Whitefish attorney Sean Frampton, who represented the Waltons through the entire case, says numerous opportunities existed to settle the case without going this far.

"We just wanted a building permit," he said. "This lawsuit didn't have to happen."

Reasonable use

The case arose at a time when the city was seeing rapid growth and the city council was considering new regulations to protect water quality in Whitefish Lake and area streams, lakes and wetlands.

About seven months after the Waltons bought three lots on Houston Point, in September 2005, the city council approved an "urgency ordinance" that would temporarily implement portions of the Whitefish Storm Water System Utility Plan.

On April 28, 2006, citing the need to protect critical areas, former city planning director Bob Horne denied the site plan submitted by the Waltons' architect. Horne told them the new urgency ordinance prohibited development on slopes greater than 30 percent, and he estimated the Waltons' plan called for construction on slopes "in the neighborhood of 45 percent."

Horne went on to point out that "because nearly the upper two-thirds of your site is quite level, you have a very reasonable and workable alternative." He apologized to the Waltons but noted that "these regulations were formulated to help preserve the character and qualities of the Whitefish area."

Frampton responded to Horne's denial, claiming the new standard would prevent development on lots in Iron Horse, Big Mountain, Grouse Mountain, Lion Mountain, Northwoods and along Whitefish Lake. He also said the letter to the Waltons reflected Horne's "personal views rather than the terms of the ordinance."

Contained within the language of the urgency ordinance was a provision intended to avoid possible "takings' claims — the 'reasonable use exemption" (RUE).

"The ordinance did not provide any criteria, however for the issuance of a RUE," the Supreme Court said in its ruling. "The city's planning director, Robert Horne, was the ultimate authority on RUE issuance."

During the Waltons' jury trial, it was revealed by witness Greg Carter that Horne had issued an RUE for two properties on Grouse Mountain Estates that had slopes in excess of 30 percent. This evidence likely swayed the jury in favor of the Waltons.

The Supreme Court ruling was written by Justice Patricia Cotter and signed by five other justices with no dissenting opinions. In an unusual step, the court heard oral arguments on whether federal and state equal protection provisions can apply to a "class of one."

The court ruled in favor of the Waltons on three issues:

¥ Sufficient evidence had been presented for the jury to rule that discrimination had taken place, and the city's argument that it was not responsible for Horne's actions was filed 11 months after the trial had ended, so the jury never had an opportunity to consider that argument.

¥ There was no evidence or special circumstances showing that the attorneys fees and costs awarded by Judge Lympus were unjust.

¥ Lympus did not err when he allowed Carter to remain in the court room after he had testified as a witness, and Lympus did not err when he allowed Carter to return to the stand as a rebuttal witness. While witnesses are ordinarily excluded prior to initial testimony, the exclusion rule does not apply to rebuttal witnesses.

The aftermath

City officials today say the RUEs granted for the two properties on Grouse Mountain Estates were for "building envelopes," while the RUE denied to the Waltons was for a 'site plan." Critics of the city, however, say they can't see much difference between the two.

As for the Critical Areas Ordinance, Phelps notes that Judge Lympus upheld the city's authority to enact an ordinance aimed at protecting water quality. Altogether, Lympus denied seven claims by the Waltons that the ordinance was invalid.

Two years after serious consideration of an ordinance to protect water quality first began, the city approved a first reading of a full-blown Critical Areas Ordinance on Feb. 19, 2008. Since then, the ordinance has undergone some revision, including a change of focus nicknamed "CAO Lite."

On June 17, 2008, the city issued the Waltons a CAO compliance permit for their Houston Point project, city planner Wendy Compton-Ring said. Because the property is outside the city limits, there's no requirement for a building permit, she said.

While the urgency ordinance had prohibited development on slopes greater than 30 percent, the Waltons' CAO compliance permit allows them to build on slopes in excess of 40 percent. Contrary to the "black and white" urgency ordinance, the CAO provides steps to address steep-slope issues, Compton-Ring notes.

The Waltons were required to conduct a site-stability analysis and submit both a stormwater management and an erosion control plan, she said.

It's likely an architect would have required a geotechnical report in any event because of the steep slopes, and Frampton claims the city was unwilling to consider a site-stability analysis as part of a settlement.

One reason cited for the $300,000 damage award is the cost of delays to the Waltons, but construction has not yet begun on the home. There is talk about starting work on a boat house next year, which will be located outside of the lakeshore protection zone but on slopes in excess of 40 percent.