Plaintiffs appealed a judgment of the Los Angeles County Superior Court (California) denying plaintiffs’ request for injunctive and declaratory relief. The trial court ruled that application of Hermosa Beach, Cal., Proposition E (1995) (Proposition E) to real party in interest’s oil drilling project constituted an unconstitutional impairment of a lease agreement between real party in interest and defendant city.

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Overview

Proposition E, adopted by the voters in November 1995, reinstated a total ban on oil drilling within defendant city. The issue in this case was whether Proposition E constituted an unconstitutional impairment of a 1992 lease agreement for oil and gas exploration and production on city-owned property entered between real party in interest and defendant. Plaintiffs argued that Proposition E applied to real party in interest’s project. Defendant argued that Proposition E was not retroactive and did not apply to the oil drilling project and that application of Proposition E to the 1992 agreement constituted an impermissible impairment of contract. The appellate court held that application of Proposition E to the project did not constitute an unconstitutional impairment of the 1992 agreement. In the absence of necessary permits, real party in interest could claim no vested right to continue with the project. Proposition E was a legitimate exercise of defendant’s police powers. Significant health and safety concerns supported application of Proposition E to the project. The trial court utilized an erroneous legal standard to evaluate Proposition E’s reasonableness.

Outcome

Judgment reversed and case remanded for further proceedings consistent with the opinion in this case, including a declaration that Proposition E was intended and did apply to real party in interest’s project and that application of Proposition E to the project was a valid exercise of defendant city’s police power that did not constitute an unconstitutional impairment of contract. Lead plaintiff was awarded its costs on appeal.