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In the corporate world, big is almost always better. But folks in the small city of Turlock, 15 miles southeast of Modesto, don’t believe that’s necessarily so and have picked a fight with Wal-Mart, the world’s largest retailer, to prove their point. Two years ago, as Wal-Mart Stores Inc. was negotiating to build one of its mega-huge Supercenters in Turlock, the City Council thumbed its nose at the Arkansas-based behemoth by passing an ordinance banning “discount superstores” larger than 100,000 square feet with only 5 percent of floor space devoted to groceries. It seemed to target Wal-Mart, which has opened about 2,000 Supercenters � gargantuan “big-box stores” with as much as 200,000 square feet of space � in the last two decades. Officials in the city of 67,000 people claim the ordinance falls within Turlock’s traditional zoning powers and wasn’t aimed at Wal-Mart exclusively. Rather, they say, it was designed to protect a general plan calling for pedestrian-friendly neighborhood centers within the city and larger regional shopping areas on the periphery. But Wal-Mart claims the ordinance circumvents state environmental regulations and is nothing more than an illegal anti-competition law pushed by rival grocery chains and unions. On March 8, both sides will present their arguments to a three-justice panel of Fresno’s Fifth District Court of Appeal. The outcome of Wal-Mart Stores v. City of Turlock, F047372, could have widespread implications and is being heavily followed by retailers, cities, counties and unions. “If the city prevails,” said Oakland attorney Rick Jarvis, who will argue for Turlock, “other cities will have a blueprint they can follow.” Theodore Boutrous Jr., a partner at Los Angeles’ Gibson, Dunn & Crutcher who represents Wal-Mart, countered by saying that the case “raises very important issues” concerning the California Environmental Quality Act “and the harms imposed on consumers when local governments restrict free and open competition.” Wal-Mart filed a parallel suit in U.S. District Court for the Eastern District of California, attacking the Turlock ordinance for allegedly violating equal protection and the commerce clause. In that case, Wal-Mart is represented by Fresno’s Sagaser, Jones & Hahesy. A summary judgment motion in the federal case was argued Feb. 6 before U.S. District Judge Oliver Wanger, but no decision has been rendered. However, in the state case, Stanislaus County Superior Court Judge Roger Beauchesne ruled against Wal-Mart, holding in December 2004 that the ordinance was valid, had nothing to do with regulating competition and was reasonably related to the public welfare. “We think it’s clearly a case where the city acted within its discretion,” said Jarvis, a partner with Jarvis, Fay & Doporto. “If the court were to rule that it’s not within the city’s [zoning] powers, that would be a very significant adverse ruling with dangerous implications for cities throughout the state.” One leading authority on the subject believes Turlock won’t prevail. George Lefcoe, a professor at the University of Southern California Law School who has written several scholarly articles on cities’ attempts to zone out Wal-Mart Supercenters, said he was “astonished” that the city won at trial. In his papers � the latest in the Arkansas Law Review � Lefcoe argued that Turlock will be foiled by the state’s stringent CEQA regulations. Turlock officials contend that CEQA review isn’t necessary because the ordinance “does nothing to change the existing environmental status quo, but rather simply prevents an adverse change in the environment from occurring in the future.” Wal-Mart contends that’s not correct, and Lefcoe agrees. “A city can’t claim to be zoning out superstores because of land use impacts and then deny that its action has any significant environmental impact when it makes its environmental assessment,” Lefcoe wrote in an e-mail. “If there were no such impacts, the city probably couldn’t have legitimately enacted the anti-superstore regulation in the first place.” Jarvis isn’t worried. Even if the court rules that Turlock isn’t exempt from CEQA, he said, the city could simply go back and do a more thorough environmental assessment. “It’s a technical, procedural issue that Wal-Mart is raising.” NATIONAL CONCERN The Turlock fight is part of a broader clash between cities and Wal-Mart nationwide, with communities as far apart as San Luis Obispo and Nags Head, N.C., enacting varying types of zoning laws to block out big-box stores. Most seem designed specifically to keep out Wal-Mart, whose strong anti-union policies and fierce competitive style, critics say, are far more destructive to local businesses than similar big-box operators such as Kmart and the Home Depot. More and more locals fear that the 44-year-old company � which boasts 5,200 stores worldwide � could wipe out nearby mom-and-pop outlets, create enormous traffic congestion, reduce air quality and hasten urban decay. As recently as earlier this month, Wal-Mart withdrew plans for a 168,000-square-foot store in the East Bay city of Hercules after city planners objected. A citizens group called Friends of Hercules had mounted resistance too, attacking the retailer in thousands of mailings. Lefcoe’s law review articles state that some cities and their residents have teamed up with unions � notably United Food and Commercial Workers and Service Employees International Union � and rival grocery chains � including Save Mart Supermarkets and Raley’s Supermarkets. The unions oppose Wal-Mart’s allegedly low wages and poor benefits, while grocers worry about the chain undercutting them with its “always low prices.” “Depending on the community,” Lefcoe wrote in his Arkansas Law Review article, “Wal-Mart superstore opponents could include environmental advocates, local merchants fearful of competition, residents wary of traffic, historic preservation enthusiasts trying to save traditional downtowns from devastating suburban competition, self-described ‘sprawl busters,’ unhappy Wal-Mart employees past and present, and academic critics.” Indeed, Boutrous argues in his Fifth District papers that the Turlock ordinance is “part of an ongoing campaign” by rivals and unions to block Wal-Mart Supercenters. “This coalition of Wal-Mart’s competitors and the UFCW has spearheaded the passage of ordinances banning Wal-Mart Supercenters from numerous cities, including Santa Maria, San Luis Obispo, Arroyo Grande, Oakland and Martinez, as well as Contra Costa County,” he wrote. “Wal-Mart’s competitors and the UFCW,” he added, “provided the Turlock City Council with anti-Wal-Mart literature as well as legal advice on how to construct the ordinance banning Wal-Mart.” Jarvis briefly addressed Boutrous’ “campaign” arguments in his court brief, saying they had no support in the trial record. In a telephone interview, he labeled Wal-Mart’s allegations about “other battles” as “not relevant.” Instead, Jarvis argued in court papers that Wal-Mart is simply wrong in claiming that Turlock’s ordinance was meant to restrict competition. “It has long been recognized,” he wrote, “that most zoning ordinances encourage some economic activity while discouraging other economic activities, and while that will certainly have an effect on competition, it does not invalidate an otherwise valid ordinance.” Jarvis also dismissed Lefcoe’s argument that Turlock can’t escape complying with CEQA standards. “It does not sound like the author really understands the various independent grounds the city identified which justify the city’s finding that the ordinance is not subject to CEQA,” Jarvis said in an e-mail. “There are several applicable statutes, CEQA guidelines and case authorities relating to CEQA exemptions which [he] does not even mention.” NO PARKING ZONE In the federal case, Wal-Mart Stores v. City of Turlock, F-04-5278, Wal-Mart lobbed a few missiles in its allegations that the city’s ordinance was drafted solely to protect local businesses. Court papers written by Sagaser, Jones & Hahesy associate John Kinsey speak of closed-door meetings between city officials, union organizers and homegrown grocers to strategize about protecting local businesses from a Wal-Mart invasion. Kinsey even pointed out that soon after Turlock OK’d the big-box ordinance, Save Mart Supermarkets ran a full-page advertisement in the Modesto Bee thanking city officials for helping “maintain our community’s quality of life, and [make] it possible for each of us, and our friends, to keep our jobs and support our families.” Wal-Mart said the city couldn’t recast the retailer’s suit as a “mere challenge” to zoning powers. “The city cannot ignore,” Kinsey wrote, “that the ordinance was crafted at the special request of Wal-Mart’s local supermarket competitors, who met with the city behind closed doors. Importantly, prior to this closed-door meeting, the city was supportive of a Supercenter, yet this support completely evaporated after the meetings.” In response, Jarvis wrote that any evidence that supermarkets lobbied for the ban with the intent of keeping Wal-Mart out of Turlock “hardly means that the purposes of the ordinance were not those articulated in the ordinance itself.” He then quoted from a 1990 ruling by the Ninth Circuit U.S. Court of Appeals: “‘That a private entity agrees with the state’s legitimate purposes and even provided the impetus for the legislation does not necessarily make the purposes pretextual.’” It’s not clear what would happen if the state and federal judges reach opposite conclusions, but Jarvis said that whichever ruling comes first “as a practical matter would influence” the other. No matter the outcome, Wal-Mart, which had net sales of $312.4 billion for the fiscal year ending Jan. 31, most likely won’t have trouble finding cities clamoring for a Supercenter of their own. As Lefcoe noted in his most recent article: “Approximately every 1.65 days, a Wal-Mart Supercenter opens in America.”

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