Group-home legal costs continue to mount

It negotiated a settlement with Morningside Recovery, but is facing a possible lawsuit from a group of Lido Isle residents who say Morningside is operating illegally — but with the city's blessing.

Multiple operators have also filed complaints with the U.S. departments of Justice, and Housing and Urban Development, which opened investigations.

Hunt said the investigations are still pending, but have apparently been placed on hold as the other cases make their way through court.

Even before lawsuits from the rehab operators were filed, community groups sued the city to take action against a proliferation of homes, especially on the Balboa Peninsula.

Denys Oberman, one of the original community activists against rehab homes, said her organization, Concerned Citizens of Newport Beach, spent more than $400,000 before the 2008 law was passed.

She said the city's investment in the litigation is justified, but it has made costly mistakes along the way.

"The city has a duty to protect the public health and safety," Oberman said. "But they have created a more complicated, convoluted process and they have created more (legal) exposure (for) the city."

Oberman and other activists said the city enforced group-home regulations unevenly, favoring some operators over others.

"If the city had enforced its ordinance in a fair and reasonable manner, there wouldn't have been an explosion of facilities in the first place," she said.