California: Court Strikes Down Cost Neutrality in Napa

Napa, California has suspended all court action on red light camera tickets until June 13 at the earliest. The city is scrambling after a May 26 ruling by the Superior Court’s appellate division in Napa County that found the city violated state law by paying Redflex Traffic Systems based on the number of red light camera tickets the Australian company issued. The city is asking for a rehearing of the case, but if that is denied the suspension will last until June 28 while the city files an appeal.

Red light camera contracts under the California Vehicle Code may not include a provision for the “payment or compensation to the manufacturer or supplier based on the number of citations generated, or as a percentage of the revenue generated.” Motorist Melinda Daugherty was mailed a $504 ticket for allegedly turning right on red in May last year. Her defense in court consisted of showing how Napa’s contract included a cost neutrality clause.

“Cost neutrality is assured to city — city will never be required to pay Redflex more than actual cash received,” Section 1.2 of the contract states.

The provision explains Napa would, under certain circumstances, pay Redflex monthly “to the extent of gross cash received by the city.” Daugherty argued that this was in direct conflict with the ban on per-citation payment contract provisions.

“This court agrees with the defendant that the Redflex contract’s cost neutrality provision improperly bases the city’s payment to Redflex on the number of citations generated, at least to the extent there are not enough citations generated to cover the fee in a given month,” Presiding Judge Diane M. Price wrote. “Even if one were to interpret the contract’s provision obligating the city to pay ‘the cumulative balance invoiced’ to mean that any outstanding balance unpaid in a given month due to a deficit of citations will be rolled over to invoices for subsequent months, that cumulative balance obligation is still limited ‘to the extent of gross cash received by the city’ and, therefore, may never have to be paid if insufficient citations are issued.”

Judge Price gave as an example case where the system issued just one $504 ticket per month, Redflex would never receive the contract’s fixed monthly fee of $6000 per intersection. That means, Price argued, that full payment was contingent on the number of tickets issued.

“The more citations issued, the more Redflex will receive, up to the cap,” Price wrote. “That type of arrangement has been specifically prohibited by the legislature and cannot be upheld by the court.”

Price threw out Daugherty’s citation. Appellate divisions in San Mateo County ( view ruling) and Orange County ( view opinion) have also ruled that cost neutrality provision violate state law. City officials now must decide whether it is worth going ahead with a prolonged battle in the Court of Appeal or to allow the contract with Redflex to expire on June 17.

A copy of the decision is available in a 250k PDF file at the source link below.

California v. Daugherty (California Superior Court, Appellate Divison, 5/26/2011

[Courtesy: Thenewspaper.com]