USA Response

Response USA

In the United States, cities have wide discretion to prefer an old central business district to a a shopping center on the edge. In most cases, shopping centers have prevailed, but here are some cases where a zoning ordinance designed to protect down town was challenged. In theory zoning cannot be used to control competition but it is difficult to use this argument.

 1. Loretto Development Co. V. Village of Chadron, 695 Northeast Reporter Second 1151 (Ohio 1996)
The City refused to grant a conditional use to a 98,000 square foot Wal-Mart. The trial court invalidated both restrictions on substantive due process grounds because there was no relationship between employee size and traffic congestion and the ordinance was confiscatory. The city defended the ordinance as the prevention of traffic congestion, excessive noise and other objectionable influences and the maintenance of town character. These were not advanced either by restricting either employee number or building size since you could have the same effects from one box store or a collection of stores, but the appellate court, Lorreto Development Co. v, Village of Chardon, 695 N.E.2d 1151 (Ohio App. 1996)  held that the city could distinguish among businesses based on the character of the area.

 2. City of New Rochelle v. Town of Mamaroneck, 111 F. Supp.2d 353 (S.D.N.Y. 2000)
challenged a local impact ordinance that required Mamaroneck to review the impact major developments – an IKEA store- in adjacent towns. The court held that New Rochelle had standing to challenge the law, dismissed New Rochelle’s due process and equal protection claims that the law shifted development away from other parts of the state. However, the court remanded New Rochelle’s claim that the ordinance infringed on its property interest in its municipal power to control development in its borders to state court. However, the federal court retained jurisdiction to decide if the ordinance violated the Commerce Clause because it discouraged interstate shoppers from coming to New Rochelle. Ultimately, a Pace University social justice movement led to internal opposition and IKEA pulled out in 2001.

3. Island Silver & Spice v. Islamorada Village of Islands, 2007 WL 624080 (S.D. Fla. 2007)
holds that a formula retail ordinance- standardized appearance, etc- that limited stores to 50 linear feet frontage and 2,000 square feet held that the ordinance violated the Dormant Commerce Clause because under either the per se facial rule or Pike Balancing as applied the elimination of chain stores serves no legitimate purpose. The town’s small preservation rationale was rejected because there was no small town character to preserve, since there was no designated historic district.

4. Hernandez v. City of Hanford, 137 Cal.App.4th 1397 (2006)
held that an ordinance that allows the sale of “home furnishing” in a planned commercial district but does not allow furniture stores violated equal protection. The ordinance was intended to protected furniture stores in the central business district. After a furniture store opened in the PC district, the town amended the ordinance to allow stores over 50,000 square feet (Walmart) to sell ready-to-assemble furniture in 2,500 square feet) but prohibited smaller stores from selling furniture. The California Supreme Court reversed and upheld that distinction, which excluded a downtown merchant from opening a small furniture store, because preserving the economic vitality of the downtown was a legitimate purpose even if it restricts competition so long as the primary purpose was a valid police power objective. The equal protection challenge failed as commercial retail is not a suspect class and it was rationale to attract large stores to the district by making it attractive to them.

5. Ensign Bickford Realty v. City Council, 137 Cal.Rptr. 304 (Cal.App. 1977)
involved a decision to locate a neighborhood shopping center in a fast growing area of a suburb of San Francisco. Livermore downzoned another commercial area  zone to residential and refused to rezone it commercial although the plan designated commercial  because the city decided that the population base to support a neighborhood shopping center in the area was not adequate now or in the immediate future. The city decided to promote commercial development in another area and based on the need for one but not two neighborhood shopping centers in the city.  The court offered two reasons for not reviewing the choice as to the disappointed applicant: (1) the city made a legitimate land use allocation and the anti-competitive side effects are secondary and thus unstained and (2) separation of powers grounds prohibits any inquiry into the motivation.

6. Forte v. Borough of Tenafly, 255 A.2d 804 (NJ 1969)
(city can preserve core to prevent blight).

7. Jacobs, Visconti & Jacobs Co. v. City of Lawrence Kansas, 715 F. Supp. 1000 (D. Kansas (1989)
Lawrence is a medium sized city that adopted a plan, and backed it up by rezoning denials, that seeks to protect the downtown from mall competition.. The city downzones 12 acres to protect the integrity of the downtown area. The court upholds the rezoning because there was valid, non-anti-competitive motives, for the downzoning such as adequate police protection. The district court upheld a commercial rezoning denial because (1) Kansas law gives cities wide discretion to deny rezonings(2) the fact that rezonings are quaisi-judicial does not create a property right in a  rezoning; it only requires greater scrutiny and (3) treating downtown and suburban mall developers differently does not violate equal protection. At one time, it was thought that US anti-trust law might limit municipal discretion, but this is not longer the case. Hallie v. City of Eau Claire, 700 F.2d 376 (7th Cir. 1983) aff’d 105 S.Ct. 1713 (1985) holds that state compulsion to control competition is not required because a municipality is presumed to act in public interest. There is a two part test: state authorization of municipal activity and intent to displace competition. Thus, the test is the foreseeability of the anti-competitive impacts not affirmative state authorization.

Dan Tarlock, USA