Developer Awarded $30 Million When Town Breached Development Agreement

February 14, 2011

A Court of Appeal upheld a multimillion-dollar verdict against a town for anticipatory breach of a development agreement, and held that the developer was not required to await a decision on a permit application or exhaust administrative remedies where the town anticipatorily breached a development agreement. Mammoth Lakes Land Acquisition LLC v. Town of Mammoth Lakes (No. C059239, Dec. 30, 2010)

The Town of Mammoth Lakes entered into a development agreement with a developer pursuant to which the developer would make certain improvements at the Town’s airport and would build a hotel or condominium project at the airport. The Federal Aviation Administration objected to the hotel/condominium project and threatened to cut off federal funding for the airport. Internal emails revealed that Town officials explored ways to avoid the development agreement unless the parties could resolve the FAA’s objections.

The developer claimed that the Town repudiated the development agreement and sued the Town for anticipatory breach of contract. The Town claimed, among other defenses, that the developer could not recover in a breach of contract cause of action because it failed to exhaust its administrative remedies. The court held that the developer was not restricted to pursuing administrative remedies because the Town violated the development agreement by refusing to move forward with the project unless the FAA’s objections, which were not a condition of performance, were resolved. The court further determined that the administrative process for approving or rejecting land use applications was not designed to address such a breach by the Town, which involved an executive decision not to move forward with the project rather than an administrative decision. Accordingly, a breach of contract action was the appropriate remedy, not an administrative mandamus action to review a quasi-judicial decision of the Town concerning a land use application.

The court upheld the $30 million jury verdict for breach of contract damages and the trial court award of $2.3 million in attorney fees to the developer.


This article was originally published by Bingham McCutchen LLP.