A Flathead District Court ruling that found the city of Whitefish violated a Whitefish couple's right to equal protection in connection with a lawsuit over construction on steep slopes has been upheld by the Montana Supreme Court.

The high court issued a unanimous ruling on Tuesday, affirming the District Court's earlier ruling and order to pay a $300,000 judgment to William and Theodora Walton plus $100,000 in legal fees.

The city also will have to pay roughly $40,000 in accrued interest.

The Waltons bought three lots on Whitefish Lake in September 2005 and sued the city when they weren't issued a reasonable-use exemption to build on a slope steeper than 30 percent. At the time a temporary "urgency" ordinance that prevented building on steep slopes - a precursor to the current critical areas ordinance - was in place.

Bob Horne, then the Whitefish planning director and zoning administrator, denied the Waltons' request for an exemption despite having issued exemptions to other landowners building on steep slopes. The Waltons claimed, and a District Court jury agreed, that the city discriminated against them.

Part of the initial District Court ruling favored the city, saying its interim "urgency" ordinance was constitutional.

"In retrospect there were a lot of opportunities to settle this case and it didn't need to go this far," said Whitefish attorney Sean Frampton, who represented the Waltons. "The city was unwilling to consider a stability analysis [for construction on slopes] in terms of a settlement.

"We just wanted a building permit," Frampton said. "This [lawsuit] didn't have to happen."

The Waltons eventually were issued a building permit but have not yet begun construction on their property.

City Attorney John Phelps said the high-court ruling shouldn't reflect badly on Whitefish's critical areas ordinance. The lawsuit, he noted, dealt with the interim ordinance.

"We're disappointed in the result, but we accept it," Phelps said. "I think the city will pay the judgment and move on."

Phelps said he will ask the Montana Municipal Insurance Authority, the city's insurance carrier, to review an earlier determination that it won't pay the judgment.

City Manager Chuck Stearns said that "unless the City Council instructs otherwise, we will just write a check to pay for the judgment at the appropriate time.

"It will reduce our reserves, but the City Council did cut back expenditures in the fiscal year 2010 budget in order to increase reserves in case we lost the lawsuit," Stearns said.

The city's insurance carrier had paid out $84,154 for Whitefish's defense attorneys as of Sept. 30.

The State Supreme Court took the unusual step of ordering oral arguments in the Walton case, directing counsel to focus their arguments on the issue of whether the federal Equal Protection Clause and Montana's equal protection provision "give rise to a cause of action on behalf of a 'class of one' when the complaint alleges discriminatory and disparate treatment."

Frampton said he has dealt with the state Supreme Court 14 times and the Walton case is the only one in which he has presented oral arguments. In most cases, high-court rulings are based on written briefs submitted by both sides.

Although the U.S. Supreme Court in 2000 said for the first time it recognized a "class of one," Montana has never recognized the same, Frampton said. And although the state high-court opinion favors the Waltons, the ruling is a noncitable opinion that can't be used as precedent for other cases.

A central issue in the appeal was whether the District Court erred in denying the city's request for a Rule 50 motion for judgment as a matter of law.

The city argued the Waltons presented no evidence of disparate treatment by the city between the Waltons and other similarly situated people. The District Court denied the motion and a later request for a renewed motion, concluding that sufficient evidence had been presented to the jury that could allow jurors to find disparate treatment.

During oral arguments, Whitefish appellant attorney James Ramlow argued that the city never agreed that Horne's behavior constituted discrimination, and that "there was confusion on the part of the zoning administrator and what he was communicating, and that is the heart of the case."

In making his case on the equal protection issue, Frampton had pointed out to the District Court jury that Horne had granted the developer of Grouse Mountain Estates reasonable-use exemptions to build on lots with steep slopes, yet the Waltons were denied an exemption.

The city maintained, however, that Horne had looked only at "building envelopes" at the Grouse Mountain Estate lots.

Montana Supreme Court Justice James Nelson, attempting to understand the city's actions, said during oral arguments that it seemed to him that "the city of Whitefish is making up the rules as it goes along," according to an audiotape of arguments.

The Supreme Court agreed with the lower court ruling, and also ruled that the District Court properly awarded attorney fees and properly allowed a witness to testify who had been present in the courtroom, despite an order excluding witnesses during testimony.

Features editor Lynnette Hintze may be reached at 758-4421 or by e-mail at lhintze@dailyinterlake.com