The city of Santa Monica and its nonprofit housing partner have closed out a nearly two-year legal fight over a planned affordable housing project at 1217 Euclid St., after a property owner that lost in court agreed to drop its appeals and pay $250,000 in attorney fees.
The settlement, announced Tuesday after a City Council closed session, follows a Sept. 15 ruling in which a Los Angeles County Superior Court judge found the owner's lawsuits lacked merit and were brought "for the purpose of delay." The judge ordered the company to post a $500,000 bond, the maximum allowed by state law, but that bond will be released with the dismissal of the appeal.
The petitioner, La Brea Washington Co. LLC, had challenged the city's December 2024 approval of a development agreement and ground lease with Hollywood Community Housing Corp. for the project, which would replace about 100 public parking spaces with 130 affordable units.
Reporting out of closed session, city attorney Heidi von Tongeln said the city and Hollywood Community Housing had already prevailed in both lawsuits and been awarded attorney fees. The company appealed but agreed to settle by dismissing the appeals and paying $250,000 in fees, split evenly with $125,000 to the city and $125,000 to the housing nonprofit.
The council approved the settlement 6-0. Mayor Pro Tem Jesse Zwick recused himself, citing his job as Southern California director of the Housing Action Coalition, which advocates for housing production.
The settlement amount is less than half of the $548,911.30 in attorney fees the court awarded the city and Hollywood Community Housing in November 2025, according to the ruling.
La Brea Washington, which owns the adjacent historic Wilshire Theater, filed two cases in early 2025. The first alleged the city failed to properly study environmental impacts under the California Environmental Quality Act, including effects on the theater and nearby parking. The second claimed the project violated a 1954 deed restriction requiring the property to be used for public purposes, that the city gave inadequate notice of the loss of public parking and that the project would harm the theater.
Judge James C. Chalfant granted motions by the city and Hollywood Community Housing to strike both petitions in June and July 2025 and dismissed the cases in August 2025. The company appealed the judgment in October 2025 and the fee award in January.
While those appeals were pending, Hollywood Community Housing asked the court to require a bond under a state law meant to protect developers of low- and moderate-income housing from meritless lawsuits brought to delay or thwart projects. Judge Tiana J. Murillo granted the motion.
Murillo rejected the company's argument that the court lacked jurisdiction while the appeal was pending, finding the bond request a collateral matter that does not interfere with the appellate court's review.
On the merits, Murillo summarized the earlier findings bluntly. She wrote that the deed restriction case "was facially defective," noting the company disclaimed any ownership interest in the property, a claim two of its causes of action depended on. She found the environmental claims were filed years after the deadline to challenge the city's Housing Element environmental impact report, which had already analyzed parking impacts near historic resources and identified the Wilshire Theater. She also found the city had no discretion to require replacement parking.
"Thus, all CEQA claims lacked merit," Murillo wrote.
The judge cited a pattern of delay, including filing near the end of the statute of limitations, exercising a peremptory challenge to a judge on the last permissible day, waiting roughly 50 of 60 days to file its appeal and failing to pay required appellate transcript fees, which triggered a default notice. She noted the company did not even state that it was not litigating for delay.
Hollywood Community Housing also submitted evidence that the company's principal, Masoud Netty, said he intended to prolong the case to stop the project unless it settled on terms he preferred. The company objected to the evidence but did not dispute its substance, the ruling said. Murillo said her finding of delay was supported by the record even without those statements.
The nonprofit told the court that further delay was likely to cost the project $33.6 million in forfeited funding. It said it had taken on a $28.5 million construction loan, more than $1 million in predevelopment debt and $967,000 in predevelopment costs.
La Brea Washington argued a $500,000 bond would cause undue hardship because it has no revenue, pays the property's costs out of pocket and could not afford it. Murillo found the company offered only "conclusory statements," noting that operating at a deficit does not prove an inability to post a bond and that the company acknowledged it was paying for litigation in the trial court and on appeal. She gave the company 15 days to post the bond.