The California Supreme Court's June 7 decision in Hernandez v. City of Hanford handed a loss to one small business but opened doors for local government to control zoning of big box stores such as Wal-Mart as well as other retail outlets. In Hernandez, Chief Justice Ronald George wrote that cities have the right “to control and organize development within their boundaries as a means of serving the general welfare.”

In 1989, Hanford, Calif., created a “Planned Commercial” district where big box stores could thrive without negatively impacting the downtown commercial district. To avoid competition with furniture stores in the downtown area, the city prohibited furniture stores from opening in the PC district. Large department stores like Wal-Mart, Home Depot and Sears were allowed to sell furniture in the PC district in a move to attract big box businesses to the area.

When a small furniture dealer opened a furniture store in the PC district in 2002, a city inspector ordered him to remove furniture from the store to comply with the zoning code. The merchant sued the city, arguing its zoning codes restrained competition and violated the equal protection clause.

The Supreme Court upheld the ordinance, noting that “all zoning has some impact on competition,” and even though the ordinance regulated competition, its primary purpose was to “subserve a valid objective pursuant to a city's police powers.” Hanford did not violate equal protection, the court said, because the ordinance was created for “legitimate public purpose,” rather than to protect or punish a particular company.

The ruling gives local governments in California more freedom to regulate big box stores in the name of general welfare of a municipality. In its decision, the court endorsed a state appellate court decision that gave Turlock, Calif., the right to block construction of a Wal-Mart Supercenter because it could take away business from smaller supermarkets in the area–also a valid public purpose, according to the ruling.