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City of Laguna Niguel v. Federal Emergency Management Agency

September 28, 2009


The opinion of the court was delivered by: David O. Carter United States District Judge


Before the Court is Defendants Federal Emergency Management Agency, United States Department of Homeland Security, R. David Paulison, Michael Brown, Joseph Allaugh, James Lee Witt, Dorsey Hughes, David Maurstad, Nancy L. Ward, and Sally Ziolkowski's ("Federal Defendants") Motion to Dismiss or for Summary Judgment (the "Motion"). After considering the moving, opposing, and replying papers, as well as the parties' oral argument, the Court hereby GRANTS in part and DENIES in part Federal Defendants' Motion.


This dispute revolves around the granting of federal disaster relief and the entrance of the City of Laguna Niguel into a unique public-private partnership with private developers in response to the natural disaster caused by the 1998 El Nino storms.

A. Application for and Grant of Relief Funds

On February 9, 1998, following a request from the Governor of California, President Clinton issued Disaster Declaration No. 1203. The Disaster Declaration triggered application of the Stafford Act, 42 U.S.C. §§ 5121 - 5207, through which California could receive federal disaster relief. The Federal Emergency Management Agency ("FEMA") administers grant programs under the Stafford Act, including the Hazard Mitigation Grant Program ("HMGP") which provides assistance for "hazard mitigation measures which ... are cost-effective and which substantially reduce the risk of future damage, hardship, loss, or suffering in any area affected by a major disaster." 42 U.S.C. § 5170c. Under this program, FEMA acts as the grantor of funds, with the State as the grantee. 44 C.F.R. §§ 206.433. The State may then further allocate these funds to other entities including local governments, who act as subgrantees. 44 C.F.R. §§ 206.433(a), 206.437.

On July 22, 1998, California's Governor's Office of Emergency Services ("OES") announced that its priorities included the acquisition of "residential properties destroyed, damaged, or at imminent and continuing risk from earth movement" and that a special HMGP had been developed with FEMA to address the damage caused by the El Nino storms. Administrative Record ("AR") at 746.

On September 18, 1998, the City of Laguna Niguel (the "City" or "Plaintiff") submitted its application for HMGP funds to OES. The City's application for the "Niguel Summit/Crown Cove Land Acquisition" ("Laguna Niguel Project") proposed that residential properties which had been destroyed or threatened by a landslide caused by the El Nino storms be purchased so that they could be demolished and the hillside on and above which they were located could be stabilized. Id. at 60-61. The City requested $5,363,002 in federal funds for the purchase of nine houses and 21 condominium units. Id.

The City's application for the Laguna Niguel Project was forwarded by OES to the FEMA Region IX office on October 19, 1998 along with funding requests for 21 other projects.

Id. at 1140. On November 17, 1998, FEMA approved the City's application. Id. at 1134.

Concurrent with the City's funding application process, the property owners were negotiating a private settlement. On or around October 21, 1998, the developers of the properties at issue, J.M. Peters Company and Hon Development, reached a settlement with the property owners to purchase the damaged properties in exchange for full discharge of the developers from any liability and dismissal with prejudice of the property owners' lawsuits. Id. at 433-435, 466.

The City alleges that it consistently represented that in its original application and in subsequent conversations with OES that it planned to pass on the FEMA funds to the developers to reimburse them for a portion of the property acquisition.

B. Withdrawal of Grant Funds

On October 13, 1999, OES requested that the City withdraw the Laguna Niguel Project. OES stated that it had determined that the project no longer met the HMGP priorities because removing the properties and repairing the hillside had already been accomplished through a legal settlement with the developers, through which the property owners had been compensated. AR at 1051. When the City refused to withdraw its application, OES wrote a letter to FEMA dated March 7, 2000 stating that the Laguna Niguel Project no longer met the HMGP priorities because "[a]ll the residences included in the City of Laguna Niguel's LHMGP application have been purchase and the residents compensated . . . [t]he hazard identified in the original LHMGP application has been mitigated." Id. at 1042. OES requested that FEMA "deobligate" the funds allocated to the project. Id.

FEMA responded to OES's request on March 14, 2000, sending a letter confirming "withdrawal and partial de-obligation" of $5,500,000 of the ...

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