California Supreme Court Hands Big-Box Stores Mixed Blessing
By Mike McKee The Recorder June 8, 2007
California cities wanting to ban so-called big-box stores such as Wal-Mart have a new and powerful weapon in their arsenal - and they have the residents of the small city of Hanford to thank.
The California Supreme Court on Thursday unanimously upheld the constitutionality of a Hanford ordinance that prohibits small stores from selling furniture in one commercially zoned district. But while the ruling technically favors large retail stores, attorneys on both sides of the case say it gives cities more authority to block unwanted businesses of any size.
"Basically, what it means," said Hanford's attorney, Steven Mayer, a partner in San Francisco's Howard, Rice, Nemerovski, Canady, Falk & Rabkin, "is that cities and counties can decide to favor big-box stores, as Hanford did, or prohibit them, as other cities have done, as long as doing so furthers some public service."
Mayer's opponent, Russell Ryan, a partner in Los Angeles' Motschiedler, Michaelides & Wishon, agreed, noting that some businesses might regret the ruling.
"Once you give [cities] authority to ban one type of retailer," he said, "who knows? It could be newspapers next."
Wal-Mart, Kmart, Home Depot and other huge chains have been banned by some cities around the country out of fear that they will decimate smaller competitors.
According to Thursday's ruling, Hanford, a city of 50,000 people 35 miles south of Fresno, passed an ordinance in 2003 that prohibited stores with less than 50,000 square feet of floor space from selling furniture in the city's "planned commercial" district. The new law was aimed at encouraging major department stores to open there, while trying to maintain the city's downtown commercial core, which was home to several smaller, but "regionally well-regarded" furniture stores.
The city was sued by Adrian and Tracy Hernandez, who ran a business called Country Hutch Home Furnishings and Mattress Gallery in Hanford's downtown, but wanted to open another store in the "planned commercial" district.
Kings County Superior Court Judge Peter Schultz tossed out the Hernandez suit. But Fresno's Fifth District Court of Appeal reversed him last year, saying the ordinance violated the equal protection rights of small retailers.
In Thursday's ruling, Chief Justice Ronald George reversed the Fifth District. He held that the city's law had the legitimate purpose of trying to attract new and larger stores into Hanford, while also keeping the downtown area economically viable by retaining the presence of smaller furniture stores.
"Past cases," he wrote, "establish that the equal protection clause does not preclude a governmental entity from adopting a legislative measure that is aimed at achieving multiple objectives, even when such objectives in some respects may be in tension or conflict."
George based his ruling in part on Wal-Mart Stores v. City of Turlock, 138 Cal.App.4th 273, a 2006 Fifth District ruling that upheld a Turlock ban on big-box stores. The Fifth District ruled that the ordinance was a proper exercise of the city's police power. (Turlock is about 110 miles northwest of Hanford.)
"The court in Wal-Mart," George wrote Thursday, "upheld the validity of the ordinance because the principal and ultimate objective of the ordinance's regulation of competition was to further the city's legitimate public interest in avoiding the 'urban/suburban decay' that may result from the location of some types of large-scale commercial development in an outlying area of a municipality."
Ryan, the plaintiffs' lawyer in the Hanford case, said he didn't believe the high court ruling on Thursday took a close enough look at the relative impact of small and large businesses.
http://www.law.com/jsp/ca/PubArticleCA.jsp?id=1181207141117
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