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Maytown Sand and Gravel LLC v. Thurston County

Court of Appeals of Washington, Division 2

April 4, 2017

MAYTOWN SAND AND GRAVEL LLC, Respondent/Cross Appellant,
v.
THURSTON COUNTY, Appellant/Cross Respondent, BLACK HILLS AUDUBON SOCIETY and FRIENDS OF ROCKY PRAIRIE, Additional Defendants, PORT OF TACOMA, a Washington special purpose district, Respondent/Cross Appellant. PORT OF TACOMA, a Washington special purpose district, Respondent/Cross Appellant,
v.
THURSTON COUNTY, Appellant/Cross Respondent, BLACK HILLS AUDUBON SOCIETY and FRIENDS OF ROCKY PRAIRIE, Additional Defendants, MAYTOWN SAND AND GRAVEL LLC, Respondent/Cross Appellant.

          MELNICK, J.

         Thurston County (County) appeals the trial court's orders denying its motions for summary judgment, judgment as a matter of law, and for a new trial, and the jury's verdict in favor of Maytown Sand and Gravel, LLC (MSG) and the Port of Tacoma (the Port).[1]Maytown's lawsuit against the County involved claims for tortious interference, negligence, negligent misrepresentation, and a violation of substantive due process[2] arising out of the County's interference with MSG's ability to begin gravel mining on property MSG had purchased from the Port. We conclude that the trial court did not err because neither the Land Use Petition Act (LUPA)[3] nor collateral estoppel barred the tortious interference claim, and MSG presented sufficient evidence of a substantive due process violation to avoid judgment as a matter of law.[4]

         Maytown cross-appeals the trial court's order granting the County's motion in limine to exclude evidence of attorney fees as damages. Because the "American rule, " which generally precludes a prevailing party from recovering attorney fees, does not apply to attorney fees incurred in a different proceeding that are claimed as damages, the trial court erred by granting the motion.

         We affirm the jury's finding of liability and award of damages for the tortious interference claim, but remand solely on the issue of attorney fees as damages on Maytown's tortious interference claim.

         FACTS

         I. Factual Background

         A. Gravel Mine Property

         The Port owned property in Thurston County. The property had a final, vested special use permit (SUP) that the County had issued to the Port in January 2006. The SUP allowed gravel mining on the property if certain conditions were satisfied. The SUP had a 20-year duration from the date mining began and included a mandatory review by a hearing examiner every five years.

         The SUP included explicit preconditions before mining could begin. In particular, condition 6 required the permittee to adhere to the "Maytown Aggregates Groundwater Monitoring Plan." Condition 6A required field verification of off-site supply wells within a year of the SUP issuing. Condition 6C required installation of 17 monitoring wells to check on water levels, water temperature, and water quality. The monitoring was to begin within 60 days of the SUP's issuance. The Port did not comply with these deadlines.

         B. Discussions Before Purchase

         In 2009, MSG became interested in purchasing the property from the Port. MSG wanted to develop and operate a gravel mine on the property.

         In October, the owners of MSG and their attorney, John Hempelmann, met with Mike Kain, the County's Resource Stewardship Department planning manager. Kain told MSG that the SUP was valid, and that "minor staff approvals and things . . . needed to be done."[5] 10 Report of Proceedings (RP) at 2148. He further stated that after MSG filed an application for amendments, the staff would handle them administratively. According to MSG, Kain stated that the SUP had no "skeletons in the closet, " and it could be mining within 30-60 days. 10 RP at 2227. Kain denied making this statement.

         After this meeting, MSG and the Port entered into a purchase and sale agreement on the property. MSG agreed to pay $17 million to purchase the property.

         In December, Kain e-mailed MSG and informed it of its lack of compliance with the conditions of the SUP. The e-mail stated that staff could approve minor amendments to the SUP, but major amendments would need approval by a Thurston County Hearing Examiner.

         On February 16, 2010, Kain sent Maytown a memorandum outlining its compliance status with each of the SUP's conditions. When referencing a condition that required a minor timeline change, Kain stated it "may be approved by staff upon submittal of an application for amendment." Ex. 62, at 5. The document provided that "it is the staff assessment that the applicant is substantially in compliance with the conditions of [the State Environmental Policy Act of 1971] SEPA and the SUP at this time." Ex. 62, at 22.

         On April 1, MSG and the Port closed on the purchase and sale agreement for the property. MSG made a $1 million down payment to the Port.

         C. Request for SUP Amendments

         In late April, MSG requested eight amendments to the SUP, including condition 6.[6]Specifically, MSG requested an amendment of the missed deadlines in conditions 6A and 6C and the elimination of the background testing required in condition 6C.[7] Because it only asked for minor amendments, MSG asked the County to process the amendments administratively.

         Kain wrote to Maytown's lawyers that after County staff reviewed the application for amendments, they determined the amendments were major and required hearing examiner approval. County staff also planned to require SEPA review of the already issued "Mitigated Determination of Non-Significance" (MDNS) for the SUP. MSG appealed the County's decision to a hearing examiner and challenged the need to conduct a SEPA review.

         MSG withdrew some of the proposed amendments in an effort to have the remaining amendments classified as minor. It did not withdraw the amendments to conditions 6A and 6C, which Kain had labeled in his February memorandum as minor timeline changes to be approved upon application for amendments.

         On June 17, Kain informed Maytown that the requested amendments could not be addressed at the administrative level and would be deemed major, which meant that they would be referred to a hearing examiner for a decision. Hempelmann said that Kain told him that the attorney for the Board of County Commissioners (BOCC) directed Kain to label MSG's requested amendments as major.

         In April 2011, the Hearing Examiner issued a decision on the SUP amendment requests.[8]The Hearing Examiner approved the SUP amendment application, which the County supported, and adopted Maytown Sand's water monitoring plan to replace the 2005 groundwater monitoring plan and conditions 6A and 6C. The Hearing Examiner did not approve any other amendments.

         D. Five Year Review Hearing

         In 2010, the County's Resource Stewardship Department issued a summary report on MSG's pending five year review. The report expressed an opinion that because no land disturbing activity had yet occurred, the new 2009 critical area ordinance (CAO) should apply.[9] The County took this same position before the Hearing Examiner at the five year review hearing. The report stated that complying with the new critical area ordinance would likely reduce the mining area, potentially by 100 acres.

         The Hearing Examiner conducted the five year review hearing in December 2010. The Hearing Examiner issued a written decision at the end of the month. In its findings of fact, the Hearing Examiner stated that:

The County asserted that entire site should be re-reviewed for compliance with new codes every five years. In the alternative, the County argued that if the interim CAO provisions are held not to apply to the mine, the entire [property] should be studied for critical areas that currently meet or in 2002 would have met the 2002 CAO definitions and that any areas determined to be critical areas in those studies should be excluded from the mine boundary.

Ex. 11, at 30. The Hearing Examiner concluded this interpretation of the Thurston County Code, "would have the same effect as requiring mines to re-apply every five years, " and that "credible evidence supports the conclusion that no critical areas that should have been protected pursuant to the 2002 CAO were missed." Ex. 11, at 46. The Hearing Examiner granted the five year review subject to minor conditions. "The Applicant has demonstrated compliance with all conditions except MDNS 6.A, 6.C, and 10. Compliance with those conditions can be ensured by new conditions of approval." Ex. 11, at 47.

         Friends of the Rocky Prairie (FORP) and the Black Hills Audubon Society (BHAS), groups opposed to the mine, appealed the Hearing Examiner's decision to the BOCC, arguing that the BOCC should reverse the decision in its entirety.

         Commissioners Sandra Romero, Karen Valenzuela, and Cathy Wolfe comprised the BOCC. Commissioners Romero and Valenzuela belonged to and were donors of BHAS. Generally, the BOCC commissioners became involved in a permit only if it was appealed to them from the Hearing Examiner. The commissioners did not direct the staff on permit issues. However, the BOCC directed staff in this case to continue to determine whether the permit was "considered active" or valid because the property had not been used for mining yet.[10] 15 RP at 3042.

         Each of the commissioners conducted private meetings with Sharon Coontz, FORP's representative, about the SUP and the property. However, Coontz denied conspiring with the commissioners to "kill" or "delay" the mine. 17 RP at 3396.

         Romero did not disclose her membership in BHAS or her frequent correspondence with Coontz about the SUP to Maytown. After a BOCC meeting and learning about FORP's position from Coontz, Romero expressed interest in submitting a written request to open the SEPA review process for the SUP.

         Valenzuela also had meetings with Coontz about the SUP, but did not inform Maytown of those meetings. In particular, Valenzuela invited Coontz, but not Maytown, to attend a BOCC meeting to explain why FORP believed the SUP was illegal. Valenzuela told the County staff that she wanted "strict adherence to SEPA" because it was "meaningful" to her that BHAS objected to the requested amendments to the SUP.[11] 8 RP at 1701. Valenzuela also signed a petition to rezone part of MSG's property.

         Commissioner Wolfe denied ever directing staff on a permit issue. She did meet with Coontz about Maytown once.

         On March 3, 2011, the BOCC heard the appeal by FORP and BHAS. During the BOCC hearing, Romero disclosed that she was "sympathetic" to FORP during her election, but said she could make a "fair and impartial decision." 9 RP at 1904. When asked to declare that she could fairly and impartially judge the case, Valenzuela did not disclose any of her communications with FORP or her membership in BHAS. None of the commissioners disclosed their meetings with Coontz about the property on the record.

The BOCC affirmed the Hearing Examiner, but determined that the
matter shall be remanded back to the hearing examiner for purposes of determining whether critical areas, as specified below, and as defined in the 2002 CAO, are protected within the mine area. ... If the hearing examiner determines that the supplemental habitat management plan reveals the above identified jurisdictional critical areas, the final site plan shall be amended to delineate the jurisdictional critical areas and their buffers before mining can commence. The hearing examiner shall also determine whether or not any other conditions need to be amended or added as a result of the supplemental habitat management plan.

Ex. 7, at 5.

         According to Valenzuela, before the hearing on the five year review, the BOCC did not have verifiable facts to support the County's suspicion that critical areas were missed, and the staff repudiated Coontz's statement that there were streams on the property (critical areas) for months. Wolfe knew the Hearing Examiner had found that the critical areas were studied thoroughly in 2002 through 2005, but she remanded the case to "ask[ ] the Hearing Examiner to look at anything that could have happened, since that decision was made, because there were indications of new vegetation." 18 RP at 3658.

         II. Procedural Facts

         MSG filed a LUPA petition in Lewis County Superior Court appealing the BOCC's decision requiring a remand.[12] In the alternative, it petitioned for declaratory judgment and constitutional writ, injunctive relief, and a complaint for damages against Thurston County for a review of a land use decision made by the County pursuant to LUPA.[13]

         The trial court granted summary judgment on Maytown's LUPA petition and reinstated the Hearing Examiner's decision from December 30, 2010.[14] The trial court also ruled that the disposition of the LUPA petition did not render Maytown's complaint for damages moot.

         Maytown filed an amended complaint for damages. The amended complaint asserted the same causes of action as the original complaint: negligence, negligent misrepresentation, tortious interference with a business expectancy, and violations of chapter 64.40 RCW and 42 U.S.C. § 1983. The complaint excluded the LUPA petition because Maytown deemed the issue resolved.

         The tortious interference with a business expectancy claim alleged that Maytown had a business relationship or expectancy with a probability of future economic benefit, the County knew of the expectancy and improperly and intentionally induced or caused the termination of the expectancy, and caused damages to Maytown. MSG's substantive due process claim under 42 U.S.C. § 1983 alleged that while acting under color of state law, the BOCC actions deprived MSG of its valuable property right (the SUP) without due process, and MSG was entitled to damages and attorney fees under 42 U.S.C. § 1988 as a result.

         The County filed an answer and counterclaim to Maytown's amended complaint. The County pleaded some affirmative defenses and defenses, including that some or all of the claims were barred by statutes of limitations, failure to exhaust remedies, lack of standing, res judicata and/or collateral estoppel, and immunity. In addition, the County alleged that Maytown did not suffer compensable damages.

         A. County's Motion for Summary Judgment On All Claims

         The County filed a motion for summary judgment on all claims. The trial court heard arguments on the County's motion for summary judgment and denied the motion.

         B. Maytown's Motions for Partial Summary Judgment

         1. Arbitrary and Capricious Acts

         Maytown filed a motion for partial summary judgment seeking a finding of liability by the County for "arbitrary and capricious actions and for knowingly unlawful actions." 4 CP at 1413, 1767. The trial court granted Maytown's motion for partial summary judgment, concluding that the BOCC's actions were arbitrary and capricious. It also denied the County's motion for summary judgment.

         2. MSG's Motion on Substantive Due Process Claims

         MSG filed another motion for partial summary judgment on the County's violations of MSG's substantive due process rights. The County also cross-moved for summary judgment. The trial court denied both motions because disputed issues of material facts existed.

         III. Trial

         A. Motions in Limine

         In its motions in limine, the County sought to exclude testimony and argument for any attorney fees sought as damages because the ...


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