SAN LEANDRO -- The city will pay $2.3 million to Faith Fellowship Church as part of the settlement to a federal lawsuit filed over the denial of the church's application to move to an area zoned for high-tech industrial uses.

The church, a branch of the International Church of Foursquare Gospel, had sued for more than $20 million in 2007 after the city turned down its application to relocate to property it had purchased in 2006 at Catalina Street and Farralon Avenue, in the city's high-tech industrial core. The city maintained that the move would violate its zoning code.

Under the settlement announced at Monday's City Council meeting, the city admits no liability and Foursquare Gospel dismisses all claims against the city.

"Had the city lost, the church's remaining damages plus legal fees could have exceeded $7 million," Mayor Stephen Cassidy said in a release. "Settling the case now was the prudent course of action."

Cassidy said the settlement ends costly litigation while upholding the city's zoning code. He said that while the city had a strong defense, "Trials are inherently unpredictable."

The Rev. Gary Mortara, Faith Fellowship Church's senior pastor, said he was thankful the lawsuit was over.

"It was never our intent to hurt the city," he said. "We're here to serve the people of San Leandro. The city could have been smarter about the whole thing. This wasn't necessary, and it cost the city a lot of money."


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International Church of Foursquare Gospel's lawsuit alleged that denial of the rezoning application violated the Religious Land Use and International Persons Act, the Civil Rights Act and the First Amendment. It included a claim for $14 million in damages because of lost contributions.

In turning down the church's application, the city had re-examined where churches, clubs and lodges could be located. It decided to create what it called an assembly overlay district, which allows churches and other assembly uses, with conditional use permits, on 196 sites in the city's industrial and commercial zones. The parcels were selected using eight planning criteria.

The city rejected Faith Fellowship's application, saying that it violated two of the overlay district criteria: It was not next to or within one-fourth mile of a thoroughfare and it was in a general plan focus area: the West San Leandro Business District.

In 2008, U.S. District Court Judge Phyllis Hamilton dismissed the lawsuit, saying the application denial did not violate the religious land use act. The church appealed, and in 2011 the U.S. Ninth Circuit Court reversed Hamilton's decision.

On Aug. 20, Hamilton dismissed Foursquare Gospel's claim of lost contributions but let stand the church's claim of about $6 million in damages related to losses when it sold the property in 2010. The judge ordered both sides to a settlement conference. The City Council unanimously approved the settlement Monday night.

Faith Fellowship Church, which had delayed its move from 577 Manor Blvd. after filing the lawsuit, has now outgrown the building in the Washington Manor neighborhood, Mortara said.

The church holds three services to accommodate its 2,000 members, and "traffic is a nightmare," he said.

Faith Fellowship is looking at two sites in the city's allowed zoning area and plans to start soon on a new application.

"Hopefully, there won't be residual emotions left over," he said.

Contact Rebecca Parr at 510-293-2473 or follow her at Twitter.com/rdparr1.