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Here's what you missed with the big Summerset Village fines

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If the Summerset Village hearing had been an election, Chris Henry would have been declared the winner by a comfortable margin.

But it actually was political warfare at its most compelling – and confusing.

Summerset Village, of course, is the 220-unit apartment complex in Central Fresno that went without natural gas service for a period in late 2015.

No natural gas meant no central heating as the weather turned cold. Hot water wasn’t coming from any kitchen or bathroom tap. The result by any definition was immediate danger to the health and safety of more than 1,000 tenants.

City Hall, once alerted, responded with systematic vigor. Henry, Summerset’s owner, was soon looking at 1,450 violations of the city’s municipal building code. Each violation carried a $200 fine — $290,000 total.

Henry appealed to Independent Administrative Hearing Officer Michael Flores. The public hearing was held Sept. 26. Flores spent the better part of a month crafting what became a 41-page decision that probably tops 20,000 words.

The decision was released on Monday. Flores dismissed 66 violations. He upheld 60 violations — $12,000 in fines.

Henry prevailed on 52.4% of the 126 violations on Flores’ plate.

Wait a minute, you say. Didn’t Henry’s appeal deal with 1,450 violations and $290,000 in fines? Haven’t the local media proclaimed Henry the undisputed loser?

The answers: Yes and yes.

You ask: Then how did the story get reduced to 126 violations?

Let’s take a look at Flores’ decision to find out.

“The facts of this case have been widely publicized and are well known to most of the public,” Flores wrote.

We’ll review them, anyway.

Events from the city’s perspective began Nov. 20, 2015 when callers told City Hall that Summerset’s tenants had no heat. City officials, including Code Enforcement Division boss Del Estabrooke, went to the complex and confirmed the problem.

The next three weeks were chaotic. A full-scale city-led inspection of Summerset began on Nov. 23. Henry was reached the same day. Mayor Ashley Swearengin and the City Council declared a state of local emergency on Nov. 25.

Dec. 1 was a key date. That’s when city inspectors issued the “First Administrative Citation.” This contained what Flores described as “approximately 924” code violations at Summerset. The citation was not preceded by a “notice and order.” A notice and order typically gives a landlord a period of time to fix the identified violations before a citation (with fines) is issued.

City officials said they didn’t have to give Henry time to fix things before issuing fines because the violations constituted an immediate danger to the tenants’ health and safety.

Dec. 8 was another key date. The city issued an Amended First Administrative Citation. This one had 1,450 violations, the increase due to additional inspections. This time the citation included a notice and order.

The notice and order was worthless. Henry wasn’t being given time to fix things before the citation (with fines) was issued. The citation (with fines) accompanied the notice and order.

“While repairs to the Property were being done, there were conversations between the newly hired Property manager Brad Hardie, who was supervising the work, and Code Enforcement Director Del Estabrooke and City Manager Bruce Rudd, regarding the fines contained in the Amended First Citation,” Flores wrote. “The specific content of those conversations are in contention and were argued at the appeal hearing. In short, Appellant, through Mr. Hardie, contended that both Mr. Rudd and Mr. Estabrooke informed him that if Appellant invested the dollar amount of the fines back into the Property for rehabilitation and remodeling of the units, the City would ‘waive’ or ‘defer’ the fines. The City contended that although there was some conversation about a ‘fine or penalty proposal’ to be drafted by Mr. Hardie for possible review, neither he nor Appellant was promised that any such proposal would be accepted, and Mr. Rudd and Mr. Estabrooke could not have waived the fines because the authority to waive fines greater than $100,000 was limited to the City Council by the City Charter.” (Emphasis, mine.)

Out in the broader world, people were demanding Henry’s head. He was deemed to be the world’s worst slumlord. That’s why City Hall with its cavalier attitude toward the notice and order felt so confident in shooting first and aiming later – there was seemingly no downside to appearing tough on Henry and no upside to publicly working with him.

Henry filed his appeal on Dec. 16, 2015.

Henry and City Hall were busy over the next nine months. Hardie and Estabrooke/Rudd negotiated without definite result on the possible waiver of fines. The apartments got fixed. Henry in July asked Flores to dismiss all the violations because he hadn’t been given time to fix things.

Flores denied Henry’s motion, but added a new element to the tale.

The city in its argument against Henry’s motion to dismiss had “admitted that some of the violations contained in the Citation may not be considered an immediate danger to the health and safety of the tenants when analyzed in isolation, but when ‘taken as a whole’ the violations satisfied the ‘immediate danger’ requirements” of city law, Flores wrote.

City Hall was having second thoughts about how it had handled some of those 1,450 violations. But, for better or worse, the fines had already been handed down. And, as we already know, the City Charter has firm things to say about how to fix mistakes involving slumlord fines.

Flores in his July 20 decision denying Henry’s motion to dismiss also wrote of his concern over the way the city had issued the citations in December. He said it was legal to cite Henry and give him no fix-it period for violations presenting an immediate danger to tenants’ health and safety. Flores said it wasn’t legal to cite with no fix-it period those violations that didn’t present an immediate danger to tenants.

“The Hearing Officer,” Flores wrote, referring to himself, “went on to categorize the different types of violations included in the Citation into three categories: those violations that were clearly an immediate danger to the public health and safety, those that were clearly not an immediate danger to the public health and safety, and those violations that could be argued either way. The Hearing Officer stated that those violations in the third category or any not stipulated to by the parties could be argued by the parties at the time of the hearing.”

The hearing was rescheduled several times. It was finally took place on Sept. 26.

“In the months prior to the hearing,” Flores wrote, “the parties met several times to discuss possible settlement, or in the alternative, a stipulation of the issues to be heard at the time of the hearing. It was hoped that by meeting, the parties could narrow the issues in dispute, resulting in a shorter hearing, and a reduction in the number of violations in dispute.”

There’s no indication in Flores’ words that the city’s representatives in these discussions were the seven City Council members meeting in open session. And there’s no hint in Flores’ words how these discussions were different than the discussions about waived fines between Hardie and Estabrooke/Rudd.

Let me quote more from this part of Flores’ decision, titled “Stipulated Issues For Hearing.”

It’s here that Flores brought up the concept of promissory estoppel, also called equitable estoppel. Henry’s legal team argued in pre-hearing meetings with Flores and the city’s legal team that Estabrooke and Rudd had in essence orally accepted Hardie’s offer to waive the $290,000 if Henry spent $290,000 on extra improvements to Summerset above and beyond what was necessary to bring everything up to code.

Henry argued that the city had made a binding promise.

“Eventually, that proposal was rejected and Appellant and Mr. Hardie were informed that the City would not be waiving the fines assessed,” Flores wrote. “The City argues that neither City Manager Rudd nor Director Estabrooke had the authority to waive or reduce the fines assessed in the Citation. Only the City Council has the authority under the City Charter.”

Flores then noted that the Henry and city legal teams had done exactly what he had recommended in his July 20 decision on the motion to dismiss. They had reviewed each of the 1,450 violations, putting some in the immediate danger category, some in the not immediate danger category, and some in the still contested category.

There were 126 violations in the third category. Those were the only violations to be heard by Flores at the Sept. 26 appeal hearing.

At this point, we know that Henry no longer cared to appeal 1,324 of the 1,450 violations. We don’t know at this point how many of the 1,324 were in the not immediate danger category, and therefore having their fines waived. We’ll come to that in a bit.

But we do know at this point that it wasn’t the City Council, debating the issue in open session, that decided some of the fines issued on Dec. 8 no longer applied. That decision was made by someone else at City Hall.

I’ll go fast from here.

Stephanie Hamilton-Borchers represented Henry at the Sept. 26 hearing. Chad Snyder and Jonathon Mott, both deputy city attorneys, represented the city.

Snyder cut to the chase in his opening statement.

“In summary,” Flores wrote, “Deputy Snyder contended that under the City’s Charter, the City Council has the sole authority to handle all legal matters on behalf of the City, and has the sole authority to waive fines. Deputy Snyder stated that the Charter has one specific exception allowing the City Manager to waive fines up to $100,000, for a new owner of the property with code repairs and/or improvements on the property. Any agreements, such as an agreement to waive or suspend fines must be in writing approved by the City Council and signed by the City Manager and City Attorney. Deputy Snyder stated that since the fines on Property totaled $290,000, neither City Manager Rudd nor Director Estabrooke could have legally waived the fines as claimed by the Appellant.”

That argument strikes me as powerful. It must have had the same effect on Flores. He rejected Henry’s promissory estoppel claim. However, Flores wrote, Henry failed to win his argument “by the barest margin.”

Finally, Flores reminded the reader that his decision on the Sept. 26 hearing would deal with only the 126 contested violations, not the 1,450 violations listed in the Amended First Administrative Citation.

“At the hearing, the Hearing Officer made it a point to ask both parties’ legal counsel on the record whether the list of 126 violations provided to the Hearing Officer the day before the hearing contained the only violations not already stipulated to, and the only violations which the parties were requesting that the Hearing Officer review and make a determination as to whether they constituted an immediate danger under section 1-308(e), or did not. Then, when that determination was made, to determine whether those violations found not to be an immediate danger under section 1-308(e) had been repaired or corrected in a reasonable time period. Both legal counsel, on the record, confirmed the Hearing Officer understanding.” (My emphasis.)

Flores then tossed the fines for 66 of the 126 contested violations. The Summerset drama was over.

So, what are the final numbers?

Here’s my take, based on city documents:

  •  872 of the 1,450 violations deserved fines of $200 each.
  • 60 of those 872 come from the 126 violations contested at the Sept. 26 hearing.
  • 812 of those 872 were stipulated during behind-the-scenes talks between the Henry and City Hall legal teams.
  • 578 of the 1,450 violations did not deserve fines of $200 each.
  • 66 of those 578 come from the 126 violations contested at the Sept. 26 hearing.
  • 512 of those 578 were stipulated during behind the scenes talks between the Henry and City Hall legal teams.
  • Henry was originally fined $290,000 (1,450 times $200).
  • Henry ended up being fined $174,400 (872 times $200).
  • Henry received $115,600 in killed fines (578 times $200).
  • $13,200 of that $115,600 came from Flores’ decision to kill the fines on 66 of the 126 contested violations.
  • $102,400 of that $115,600 came from stipulation decisions reached behind the scenes by representatives of Henry and City Hall.
  • 1 is number of Charter-approved authorities that can kill slumlord fines before they get to a hearing officer. That lone authority, as the city’s legal team repeatedly told Henry and the public, is the City Council.
  • Zero is the amount of times the City Council in open session reviewed the fate of the 512 violations killed during behind the scenes talks between the Henry and City Hall legal teams.

Folks, City Hall pulled a fast one on us. Hardie pitched his “fine waiver” idea to Estabrooke and Rudd because he knew City Hall had to encourage Henry to move swiftly with the repairs. City officials knew they had to keep Henry focused on fixing Summerset while appearing tough on him in public. A way had to be found to reduce Henry’s fine without reigniting the public firestorm.

So, the public got a lot of blather about the City Charter while, behind the scenes, city officials were cutting a deal. If you ask me, even the 126 violations contested at the Sept. 26 hearing feel like nothing more than PR manipulation.

I’m not saying the city was wrong to operate this way. Far from it. I think the city played it smart in a tough situation.

To be frank, so did Henry.

George Hostetter
George Hostetter is The Sun’s Fresno Civic contributor – covering the City of Fresno, County of Fresno, and Fresno Council of Governments.

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