Tentative ruling in Newport campaign finance case favors city

An Orange County Superior Court judge has tentatively sided with the city of Newport Beach in one of its key arguments in a lawsuit over campaign finance-related allegations.

Judge James Crandall issued a set of tentative rulings Wednesday that said the city is not shirking a mandatory duty to investigate allegations raised earlier this year by resident Martha Peyton in her lawsuit accusing Councilman Scott Peotter and Mayor Marshall Duffield of campaign finance violations, and City Attorney Aaron Harp not doing anything about it because of a presumed conflict of interest.

The announcement doesn’t kill the case. The ruling leaves Peyton the chance to amend her complaint.

However, she’ll have to drop the argument that the city find Harp in conflict.

Crandall found that the city had no mandatory obligation to declare a conflict of interest between Harp and the council, agreeing with outside lawyers for the city, Peotter and Duffield.

Peyton’s lawsuit claims Peotter broke several state and local campaign finance rules by accepting non-cash donations from Duffield and others that either pushed the donors over the contribution limit or were misreported — if they were reported at all. She filed a similar complaint with the California Fair Political Practices Commission.

The lawsuit also requested a court-appointed special prosecutor to investigate the donations. Peotter has denied wrongdoing.

The suit argues that a local investigation of the allegations would require outside counsel because Harp is “beholden” to the City Council majority that ensures his continued employment. Peotter and Duffield are considered part of that majority.

The council could appoint a special prosecutor, but the complaint claims that is unlikely because of the “close, almost incestuous political ties” that most of the rest of the council shares with Duffield and Peotter.

That leaves a court-appointed prosecutor to act in Harp’s place, the complaint argues.

The city’s lawyer said that would be discretionary, and the constitutional separation of powers doctrine bars direct judicial interference with the discretion of the legislative City Council.

Crandall said he found no “explicit and forceful language” in city code that would satisfy Peyton’s argument.

“There is no duty whatsoever in the cited provisions of the Newport Beach Municipal Code to declare a conflict,” he wrote.

On a separate motion, Crandall declined to disqualify Peyton’s attorney Phil Greer from the case after Greer received two emails forwarded from Councilman Jeff Herdman’s city account related to Peyton’s legal complaint.

Harp said the two emails Greer received were confidential conversations between Harp and Herdman that were protected by attorney-client privilege.

One was a note saying the city had retained outside counsel in the Peyton case. In the other, blind-copied to Greer, Herdman argued that Harp shouldn’t give an opinion on the merits of the lawsuit because he has a conflict of interest in serving the City Council.

Greer previously called the motion to disqualify him a frivolous “hysterical screed” meant to stall the case past Peotter and Duffield’s reelection campaign. The two are on the November ballot.

Crandall wrote that he “struggled” with the motion, but denied it because the city did not establish that the emails were without Harp or other city attorney consent.

Nonetheless, rules of professional conduct would have required Greer to tell Herdman that he could not discuss the suit without city attorney approval, and excused himself if necessary, the judge wrote. He also should have told Harp about the emails.

“Finally, the court actively discourages the type of ad hominin attacks, name calling, and rank speculation contained in [Greer’s] opposition,” Crandall wrote. “The [city’s] motion was in no way frivolous, and there is no requirement … that the matters discussed be privileged, or even confidential.”

Peyton has 10 days to serve an amended complaint.

Hearings on the case are set for July 12.

hillary.davis@latimes.com

Twitter: @Daily_PilotHD

UPDATES:

3:10 p.m. This article was updated to include a date change in the court proceedings.

5:30 p.m. This article was update to reflect the court’s tentative rulings in the case.