RECENT CALIFORNIA DECISIONS

March 2007

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Second District Dismisses Constitutional Challenge to AB 687—Underlying Casino Contracts Are Subject to Validation Statutes
California Commerce Casino, Inc., et al. v. Arnold Schwarzenegger, as Governor, et al.

Every public agency that relies on public financing to fund a portion of its projects—which includes virtually all water agencies—should find comfort in the holding and reasoned logic of California Commerce Casino, Inc., et al. v. Arnold Schwarzenegger, as Governor (Commerce Casino). As noted in the case, “A validation action implements important policy considerations,” which include the need for a speedy determination of the validity of the public agency action in question, the need to limit the extent to which litigation can impair a public agency’s ability to operate financially, and the need to facilitate a public agency’s “‘financial transactions with third parties by quickly affirming their legality.’” Commerce Casino, quoting Friedland v. City of Long Beach, 62 Cal.App.4th 835, 843 (1998). By determining that even the more restrictively drafted statutes authorizing validation proceedings must include agreements that are “inextricably bound up” with a public agency’s bonds, warrants or other evidences of indebtedness, the Commerce Casino court has given public agencies additional opportunities to successfully assert a defense based on the failure to timely file a reverse validation action.