By Jonathan Friedman
Lookout Staff

July 7, 2010--Attorneys for the City and the Rent Control Board last week submitted a petition to the Court of Appeal’s Second District for a rehearing on the decision regarding the right of the Embassy Hotel Apartments to cease operation as an apartment.

The three judge panel last month overturned a trial court decision, and ruled that a 2000 settlement agreement between Embassy and the City regarding a tax dispute was invalid. The agreement exempted Embassy from the Ellis Act, the 1986 State law that prohibits local governments from requiring landlords to stay in the rental business. The court wrote in the decision that “the Ellis Act provides that contractual waiver is unenforceable.”

This decision will allow Embassy to cease its apartment operation and transform into a full-fledged hotel, as Embassy told the City it wanted to do in 2008. Currently, half the building’s 38 units are hotel spaces and the other half are apartments subject to Santa Monica’s rent control law.

The petition for a rehearing, which was written by Chief Deputy City Attorney Alan Seltzer and Senior Litigation Attorney Amy J. Regalado for the Rent Control Board, says the court “reached an erroneous decision and, in doing so, calls into doubt many types of agreements, not just the one at issue in this litigation.”

“Until now, compliance with a settlement’s conditions was simply as expected and welcomed good faith behavior,” Seltzer and Regalado wrote. “To call … the terms of a deal, which is mutually struck, conduct forbidden by state law not only makes no sense, but effectively encourages [Embassy] and those like them to invite the ‘error of administrative action’ in their settlements, yet to reap the gain anyway.”

The court has approximately 30 days from the June 14 decision to determine whether it will allow a rehearing. If the request is denied, the City could petition the State Supreme Court to hear the case.

Embassy attorney Tony Oliva said regarding the City’s petition, “I think the matter was correctly decided, and there is no basis for a rehearing.” He declined to predict whether the court would agree to rehear the case.

Also in the request, the City attorneys asked that decision be “depublished.” When a decision is “published,” it becomes a precedent to be used in future rulings on related cases.

“The sweeping impact of its holding, including the potential invalidation of local agency contracts throughout the State, is not supported by sufficient analysis to warrant the opinion to be precedent on the issue whether Ellis Act contractual waivers are void as against public policy.”