Los Globos Corp. v. City of Los Angeles

Filed 11/20/17
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF
CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION ONE
LOS GLOBOS CORPORATION, B275224
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC526006)
v.
CITY OF LOS ANGELES et al.
Defendants and Respondents.
APPEAL from an order of the Superior Court of Los
Angeles County, Frederick C. Shaller, Judge. Affirmed.
Smith Law Firm and Craig R. Smith for Plaintiff and
Appellant.
Michael N. Feuer, City Attorney, Blithe S. Bock,
Assistant City Attorney, and Matthew A. Scherb, Deputy
City Attorney, for Defendants and Respondents.
——————————
The Los Globos nightclub claims that Los Angeles
inspectors harmed its business by reducing the number of
patrons allowed at the club and did so without first
providing the club with a statutorily-required hearing. Los
Globos appeals from the trial court’s order sustaining the
defendants’ demurrer without leave to amend. Los Globos
admittedly failed to exhaust its administrative remedies
prior to filing suit in superior court. This failure bars Los
Globos from pursuing its claim here. We affirm the trial
courts order.
BACKGROUND1
In 2011, the Los Globos Corporation (Los Globos)
operated a nightclub out of a two-story building in Los
Angeles (the City). In September 2011, Los Angeles Fire
Department Inspector Gerald Travens (Travens) examined
the club and issued a warning regarding the building’s
“ ‘unimproved [sic] construction.’ ” Travens also forwarded
his concerns about the club to Frank Lara (Lara), the
principal inspector for the Los Angeles Department of
Building and Safety (the Department). In turn, Lara
dispatched a code enforcement inspector to the club. On
September 22, 2011, the officer issued an “order to comply”
citing the club’s change of use of its first floor and its
unpermitted improvements. On September 26, 2011, Los
Globos says it was told it had the proper permits for the
1 The following facts have been taken from the second
amended complaint filed by Los Globos, which is the
operative complaint in this case.
2
club’s current use and needed no other permits from the
Department. However, on September 28, 2011, the
Department issued the club a formal violation notice based
on its unpermitted improvements.
In October 2011, Los Globos met with the fire
department to discuss the occupant load (the maximum
number of people allowed at any one time) for the building.2
The fire department would not approve any occupant loads
until a sprinkler system was installed. At a subsequent
meeting, a fire department captain (acting on behalf of the
chief) approved a maximum occupant load of 408 people for
2 An “assembly occupancy” refers to a building, or a
portion thereof, which is used for gathering together “50 or
more persons for amusement, entertainment . . . drinking or
dining . . . or activities of a similar nature.” (L.A. Mun.
Code, § 57.202.) The fire department chief determines the
maximum occupant load permitted for a assembly
occupancy. (Id.§ 57.1004.2.1.1.) “The maximum occupant
load shall not exceed the maximum occupant load designated
in the Certificate of Occupancy issued by the Department of
Building and Safety, or in the absence of such certificate, the
maximum occupant load approved by the Chief.” (Ibid.) An
assembly occupancy will be approved only if it “will not
create any undue hazard as a result of fire or panic.” (Id.
§ 57.105.3.9.2.1, subd. (4); see id. § 57.105.3.9.2.1, subd. (5)
[approval subject to terms and conditions necessary to
safeguard life and property from fire, explosion or panic].)
There is no set formula when it comes to occupancy
approvals because “life safety consists of more than exit
requirements alone.” (Id. § 57.4701.1.)
3
the first floor of the building and 330 people for the second
floor, once Los Globos added 24-hour monitoring to the
alarm and other alarm enhancements. The captain put this
conditional approval in writing and Los Globos completed
the work. In January 2012, another fire department captain
inspected the building, ratified the same occupant loads that
were conditionally approved back in October 2011, and told
Los Globos it was approved to operate under them.
In March 2012, a news article about Los Globos
highlighted the club’s all-night dancing. As a result, in May
2012, the Department representatives Lara and Andrew
Longoria (Longoria) told Los Globos that the club lacked a
permit to operate a dance hall and a proper certificate of
occupancy for dancing on the first floor. According to Los
Globos, however, the club showed Lara and Longoria permits
demonstrating the property could be used as a dance hall
and that the two knew a certificate of occupancy allowing a
dance hall on the property had been issued over 30 years
earlier.
On June 6, 2012, Longoria and another representative
from the Department issued Los Globos a “ ‘Not Approved’ ”
notice asserting allegedly “unintelligible” violations. A week
later, with its desired occupancy amounts allegedly
approved, Los Globos resumed talks with the fire
department on the issue. Los Globos had not been issued
occupancy load cards displaying the maximum occupancy for
posting on the premises and learned that none would issue
until the club provided a “Division Four” fire permit, any
4
applicable conditional use permits, and a certificate of
occupancy for the uses shown on plans previously given to
the fire department.
According to Los Globos, although the club complied
immediately with all three conditions, the fire department
did not issue occupancy load cards. Instead, it told Los
Globos that the fire department first had to speak with Lara,
the principal inspector of the Department. Later, Los Globos
posted occupancy load cards on its own, which listed the
occupancy limits it claims the fire department had
approved—408 people on the first floor; 330 people on the
second. The club operated with those occupancies until
December 28, 2012, when Travens confiscated the occupancy
load cards and replaced them with cards allowing the same
330 people on the second floor, but only 49 people on the first
floor—one person less than an assembly occupancy.
In January 2013, Los Globos received a certificate of
occupancy from the Department stating that the building
was a two-story dance hall, restaurant, and office. According
to Los Globos, this certificate of occupancy was subsequently
revoked without justification. Los Globos also alleges that
the Los Angeles Police Commission became involved at some
point by claiming that the club lacked a valid permit to
operate a dance hall business. The police commission later
granted such a permit, but only after imposing numerous
conditions and an unreasonable delay.
On March 21, 2013, Los Globos filed a claim for
damages with the City. The claim sought damages solely for
5
the Department’s determination that part of the club’s first
floor could not be used as a restaurant or for dancing. The
City denied the claim on April 29, 2013.
On October 9, 2015, Los Globos filed a second amended
complaint (SAC). The SAC alleges four causes of action
against the City, the fire department, the Department, the
police commission, Lara, Longoria, and Travens (collectively,
the defendants).3 The first two causes of action allege that
reducing the first floor occupancy intentionally and
negligently interfered with the club’s prospective economic
advantage. The third cause of action alleges ordinary
negligence based on the same conduct. The fourth cause of
action seeks declaratory relief—specifically, a determination
that Los Globos can have an occupancy load of 408 people on
the first floor of the nightclub and holds proper permits for
its use of the property.
The defendants demurred to the SAC based on Los
Globos’ failure to state sufficient facts to support any cause
of action; the defendants’ immunity from damages under
Government Code sections 815.2, 818.4, 820.2, and 821.2;
and Los Globos’s failure to comply with the Government
Claims Act. The trial court sustained the defendants’
demurrer without further leave to amend and dismissed the
complaint on March 29, 2016.
3As noted above, Lara and Longoria worked for the
Department while Travens worked for the fire department.
6
DISCUSSION
I. Standard of Review
“Where a trial court sustains a demurrer without leave
to amend, we review such action under the abuse of
discretion standard. [Citation.] If there is a reasonable
possibility that the pleading can be cured by an amendment,
the trial court’s ruling will be reversed. [Citation.] [¶] On
review, we examine the Complaint’s factual allegations to
determine whether they state a cause of action on any
available legal theory. [Citation.] We treat the demurrer as
admitting all material facts which were properly pleaded.
[Citation.] However, we will not assume the truth of
contentions, deductions, or conclusions of fact or law
[citation] and we may disregard any allegations that are
contrary to the law or to a fact of which judicial notice may
be taken.” (Interinsurance Exchange v. Narula (1995) 33
Cal.App.4th 1140, 1143.) “ ‘The burden of proving such
reasonable possibility is squarely on the plaintiff.’ ” (Zelig v.
County of Los Angeles (2002) 27 Cal.4th 1112, 1126.)
“Plaintiff must show in what manner he can amend his
complaint and how that amendment will change the legal
effect of his pleading.” (Cooper v. Leslie Salt Co. (1969) 70
Cal.2d 627, 636.)
II. Exhaustion of Administrative Remedies
A. Rule of Exhaustion
“[T]he rule of exhaustion of administrative remedies is
well established in California jurisprudence.” (Campbell v.
Regents of University of California (2005) 35 Cal.4th 311,
7
321 (Campbell).) “In brief, the rule is that where an
administrative remedy is provided by statute, relief must be
sought from the administrative body and this remedy
exhausted before the courts will act.” (Abelleira v. District
Court of Appeal (1941) 17 Cal.2d 280, 292.) The rule “is not
a matter of judicial discretion, but is a fundamental rule of
procedure . . . binding upon all courts.” (Id. at p. 293.)
“Exhaustion of administrative remedies is ‘a jurisdictional
prerequisite to resort to the courts.’ ” (Johnson v. City of
Loma Linda (2000) 24 Cal.4th 61, 70, italics omitted; see
Lopez v. Civil Service Com. (1991) 232 Cal.App.3d 307, 311.)
The rule serves several well-established functions.
First, it allows the administrative agency an opportunity to
redress the alleged wrong without resorting to costly
litigation. (Sierra Club v. San Joaquin Local Agency
Formation Com. (1999) 21 Cal.4th 489, 501 (Sierra Club).)
Second, even where complete relief is not obtained, it can
serve to reduce the scope of the litigation or possibly avoid
litigation. (Ibid.; Westlake Community Hosp. v. Superior
Court (1976) 17 Cal.3d 465, 476 (Westlake).) Third, an
administrative remedy ordinarily provides a more
economical and less formal forum to resolve disputes and
provides an opportunity to mitigate damages. (Westlake, at
p. 476; see Rojo v. Kliger (1990) 52 Cal.3d 65, 83.) Finally,
the exhaustion requirement promotes the development of a
more complete factual record and allows the administrative
agency or entity implicated in the claim an opportunity to
apply its expertise, both of which assist later judicial review
8
if necessary. (Sierra Club, at p. 501; Westlake, p. 476.)
Indeed, “[t]he utility of the department’s factfinding
expertise exists even when the plaintiff’s requested relief is
unavailable through the administrative process.” (Wright v.
State (2004) 122 Cal.App.4th 659, 669; see County of Contra
Costa v. State of California (1986) 177 Cal.App.3d 62, 75–78
& fn. 8; Westlake, at p. 476.)
The administrative remedies exhaustion rule has
exceptions, including an exception where the administrative
agency does not provide an adequate remedy. (Campbell,
supra, 35 Cal.4th at p. 322.) The administrative remedy also
must comport with due process. (Bockover v. Perko (1994) 28
Cal.App.4th 479, 486 (Bockover).) In addition, there is an
exception to the exhaustion requirement where it is futile to
pursue the administrative remedy. (Automotive
Management Group, Inc. v. New Motor Vehicle Bd. (1993) 20
Cal.App.4th 1002, 1015.) In Bockover, one of the plaintiff’s
arguments was that her employer’s policy and procedure
manual was ambiguous concerning grievance procedures.
(Bockover, at pp. 489–490.) Despite the possible ambiguity
concerning the procedures, the court held “[w]here there is
some ‘question about the applicability of [a] grievance
procedure,’ the employee must ‘present the question to the
[agency] so that [it can] decide the issue in the first
instance.’ ” (Id. at p. 490.) Thus, a plaintiff’s
“ ‘preconception of the futility of administrative action [does]
not permit [her] to bypass the administrative remedy.’ ”
(Ibid.)
9
The exhaustion doctrine operates as a defense to
litigation commenced by persons who have been aggrieved
by action but who have failed to exhaust the administrative
remedy available to them. (Anthony v. Snyder (2004) 116
Cal.App.4th 643, 657.)
B. Administrative Remedies Available Here
The Los Angeles Municipal Code in effect at the time of
the trial court proceedings set forth the administrative
remedies available when challenging determinations made
by the fire department.4 According to this code, “[t]he
revocation, suspension, or denial of any Permit, Special
Permit, General Approval, or Certificate of Fitness may be
appealed to the Board [of fire commissioners] within 15 days
after such revocation, suspension or denial.” (Former L.A.
Mun. Code, § 57.03.13, subd. (A).) Upon receipt of an appeal,
the board shall hold a hearing and render a decision in
writing. (Former L.A. Mun. Code, § 57.03.13, subd. (B).)
The current Los Angeles Municipal Code, which works
alongside California Code of Regulations, title 24, section
108.1, also sets out an appeal process. (L.A. Mun. Code,
§§ 57.101, 57.101.1, 57.108.) A board of appeals consisting of
4 The City has attached to its brief the relevant Los
Angeles Fire Code sections in effect at that time, as set out
in former Los Angeles Municipal Code sections 57.03.11,
57.03.12, 57.03.13. 57.04.03, 57.04.06, 57.04.11, 57.110.01
and 57.110.02. The current Los Angeles Fire Code took
effect on October 1, 2014, and can be found at
http://www.lafd.org/fire-prevention/fire-code.
10
fire safety experts hears and decides appeals of
determinations made by the fire code official. (Cal. Code
Regs., tit. 24, §§ 108.1, 108.3.)
When challenging determinations made by the
Department, the Los Angeles Municipal Code provides for a
board of building and safety commissioners to hear and
determine “appeals from orders, interpretations,
requirements, determinations, or actions of the Department
pertaining to enforcement of specific ordinances, regulations,
or laws in site-specific cases.” (L.A. Mun. Code, § 98.0403.1,
subd. (b)(2).) If a decision by the board of building and
safety commissioners involves the enforcement or
administration of land use ordinances, the decision also
must be appealed to the director of the department of city
planning, followed by an appeal to the appropriate planning
commission. (L.A. Mun. Code, §§ 12.03, 12.26, subd. (K)(1),
(6)-(8).) Only then does the determination become final.
(L.A. Mun. Code, § 12.26, subd. (K)(10).)
C. Failure to Exhaust Available Remedies
Exhaustion of administrative remedies is jurisdictional
and can be addressed “at any point in the proceedings.”
(Campbell, supra, 35 Cal.4th at p. 322, fn. 2.) Even if the
issue is not raised before the trial court, a plaintiff’s failure
to exhaust can serve as a basis for affirming the sustaining
of a demurrer without leave to amend. (Carman v. Alvord
(1982) 31 Cal.3d 318, 324; Bocanegra v. Jakubowski (2015)
241 Cal.App.4th 848, 856–857.)
11
Los Globos does not allege it exhausted administrative
remedies with respect to the determinations it challenges in
its lawsuit. Rather, Los Globos contends it was denied due
process when Travens improperly confiscated its occupant
load cards and the Department improperly revoked its
certificate of occupancy. Thus, Los Globos claims, it could
not avail itself of any administrative remedies.
Former section 57.03.12 of the Los Angeles Municipal
Code provided: “Generally no permit, Special Permit,
General Approval, or Certificate of Fitness shall be
suspended or revoked until a hearing is held by the [fire
department] Chief.” Los Globos argues that because the
City failed to hold such a hearing, “there was no proper
revocation and therefore nothing to appeal.” 5 However, the
doctrine of exhaustion of administrative remedies applies
despite a plaintiff’s asserted denial of procedural due
process. (Edgren v. Regents of University of California
(1984) 158 Cal.App.3d 515, 522.) Los Globos’s argument also
makes little sense. When its certificate of occupancy was
revoked, Los Globos could have appealed the revocation
itself as well as the City’s alleged failure to comport with due
process when revoking the certificate. Indeed, rather than
having “nothing to appeal,” Los Globos, according to its own
5 Thus, Los Globos does not contend administrative
remedies were unavailable or that it would have been futile
to pursue such remedies. Nor does Los Globos contend it
was exempt from exhausting available administrative
remedies because it sought money damages.
12
version of events, actually had multiple issues to appeal.6
Because Los Globos failed to comply with this jurisdictional
requirement and thus there is no reasonable possibility the
pleading can be cured by an amendment, the trial court did
not abuse its discretion in sustaining the defendants’
demurrer. 7 (See id. at p. 523.) Consequently, we need not
reach the remaining arguments on appeal.
6 Los Angeles Municipal Code section 57.105.5.2
further provides that “[a]ny permit, Special Permit, general
approval, or Certificate of Fitness may be temporarily
suspended by the Chief for violation of the terms thereof
when immediate action is necessary to abate conditions
dangerous to life or property without such notice and
hearing.” Thus, it is unclear whether Los Globos was
entitled to a hearing at all. Los Globos argues there was no
indication that the City was temporarily suspending rather
than a revoking its certificate. In the end, this is a
distinction without a difference. Whether considered a
suspension or deemed a revocation, under former Los
Angeles Municipal Code section 57.03.13, subdivision (A),
Los Globos had 15 days in which to appeal the City’s action.
7 Los Globos also failed to exhaust its judicial remedies
by failing to file a writ petition in superior court. (Mobley v.
Los Angeles Unified School Dist. (2001) 90 Cal.App.4th 1221,
1245.) Thus, the City’s decision “has achieved finality”
(Briggs v. City of Rolling Hills Estates (1995) 40 Cal.App.4th
637, 645–646), and “has the effect of establishing the
propriety” of the City’s decision. (Westlake, supra, 17 Cal.3d
at p. 484).
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DISPOSITION
The order is affirmed. The parties are to bear their
own costs on appeal.
CERTIFIED FOR PUBLICATION.
JOHNSON, J.
We concur:
ROTHSCHILD, P. J.
LUI, J.
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