A citizens group has sued the city, challenging the validity of a local ballot measure passed in April to remove the historic status from 29 properties.
Friends of Sierra Madre are seeking an order to reinstate the landmark status, arguing that the measure approved by a 2-to-1 margin violates state environmental law.
An attorney for the group argued in court papers that property can be removed from the register only if an environmental study concludes that there would be little impact to the area if the building were altered or destroyed.
"We sued because we are concerned about the potential loss of our city's village character and culture," said Margaret Buckner, who is named as a plaintiff in the lawsuit.
The suit alleges that the city sought to circumvent the environmental study process to save the $2,500 per property it costs to conduct such studies.
City officials say they believe the measure complied with state law.
The owners of the properties say they never chose to have their homes given such designation and the system infringes on their property rights by restricting alterations. Protests by those owners last year led to the council placing the measure on the ballot.