Group-home legal costs continue to mount

NEWPORT BEACH — After years of fighting lawsuits over Newport Beach's regulations of rehabilitation homes, the city attorney expects to spend almost another $1 million defending the city's position this fiscal year.

City Atty. David Hunt will ask the City Council on Tuesday to dip into its reserves to cover his office's outside counsel expenses, most of which have been used to defend against rehab-home operators.

The private companies, which operate group homes for those recovering from drug and alcohol addiction, allege that the city has discriminated against their clients.

Newport Beach has one of the most restrictive group home ordinances in the state, one that's intended to thwart the proliferation of homes. The city has paid upward of $2 million drafting and defending its laws.

"While we do try to spend our money judiciously, it's very complex litigation, it's very fact-intensive and there's a lot of passion on both sides of the issue," Mayor Mike Henn said. "That's a recipe for large legal bills."

Hunt's office exceeded its outside counsel "specialty litigation" budget by more than $300,000 during the first half of the fiscal year, which runs from July through June, according to a city staff report.

He will ask council members to shift that amount, mostly from reserves, into the legal account.

The majority of that cost-overrun was due to the group-homes litigation, which has cost nearly $600,000 so far this fiscal year, which ends June 30. The report estimates that for the remainder of the year, the city could spend an additional $325,000 in legal fees, for a total of $925,000.

Newport is fighting many legal battles at once. At issue is the 2008 ordinance and how it was implemented. It requires most recovery homes to go through a public hearing process and, for the ones already operating, to obtain permits.

The city won a partial victory in October when a federal judge declared that the law didn't discriminate against disabled people. But the plaintiffs in that case, including Pacific Shores Recovery, have pressed forward with their suit claiming the city violated the federal Fair Housing Act.

"This case is far from over," said Steven Polin, the attorney representing the group-home operators, after the ruling.

The city is also defending similar claims from Pacific Shores Recovery, Yellowstone Recovery and Newport Coast Recovery.

It negotiated a settlement with Morningside Recovery, but is facing a possible lawsuit from a group of Lido Isle residents who say Morningside is operating illegally — but with the city's blessing.

Multiple operators have also filed complaints with the U.S. departments of Justice, and Housing and Urban Development, which opened investigations.

Hunt said the investigations are still pending, but have apparently been placed on hold as the other cases make their way through court.

Even before lawsuits from the rehab operators were filed, community groups sued the city to take action against a proliferation of homes, especially on the Balboa Peninsula.

Denys Oberman, one of the original community activists against rehab homes, said her organization, Concerned Citizens of Newport Beach, spent more than $400,000 before the 2008 law was passed.

She said the city's investment in the litigation is justified, but it has made costly mistakes along the way.

"The city has a duty to protect the public health and safety," Oberman said. "But they have created a more complicated, convoluted process and they have created more (legal) exposure (for) the city."

Oberman and other activists said the city enforced group-home regulations unevenly, favoring some operators over others.

"If the city had enforced its ordinance in a fair and reasonable manner, there wouldn't have been an explosion of facilities in the first place," she said.

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