After Rehearing, First Appellate District, Division Five, Holds Exhaustion Requirement Has No Preclusive Effect in Challenge to Exemption Determination and Upholds Previous Decision

In Tomlinson v. County of Alameda (2010) 188 Cal.App.4th 1406 (Tomlinson II), the First Appellate District, Division Five, reexamined its decision in Tomlinson v. County of Alameda (2010) 185 Cal.App.4th 1029 (Tomlinson I), where the court found that the County of Alameda abused its discretion in deeming a proposed subdivision project exempt from the California Environmental Quality Act (Pub. Resources Code, § 21000 et seq.) (CEQA), under the categorical exemption for in-fill development (Cal. Code Regs., tit. 14 (CEQA Guidelines), § 15332). In Tomlinson I, the court rejected the argument by the County and Real Parties Y.T. Wong and SMI Construction, Inc., that Petitioners, the Tomlinsons, had failed to exhaust their administrative remedies pursuant to Public Resources Code Section 21177 with respect to their challenge to the applicability of the exemption, relying on Azusa Land Reclamation Co. v. Main San Gabriel Basin Watermaster (1997) 52 Cal.App.4th 1165. In Azusa, the court held that the doctrine of exhaustion of administrative remedies does not apply in actions challenging an agency’s exemption determination.

After the publication of Tomlinson I, Division Two of the First Appellate District certified its opinion in Hines v. California Coastal Com. (2010) 186 Cal.App.4th 830 (Hines) for publication, which held that section 21177’s exhaustion requirement did apply in circumstances similar to those presented in Tomlinson I. The Division Five court granted rehearing on its own motion to allow for further consideration of the Hines decision. After supplemental briefing by the parties, the court found that, although factually similar, the Hines case was distinguishable in notable respects. The court explained that while the Hines court cited Azusa in support of its holding, it did not purport to construe the language of section 21177, subdivision (a), and did not consider the Azusa analysis holding that section 21177 applies only: “where (1) CEQA provides a public comment period, or (2) there is a public hearing before a notice of determination is issued.” (Azusa, supra, 52 Cal.App.4th at p. 1210, italics added.) Although a public hearing had been held for the exemption determination in Tomlinson, none was required, nor was a notice of determination issued or required to be issued. On that basis, the court found there was nothing in Hines that required the court to alter its prior conclusions that section 21177’s exhaustion requirement had no preclusive effect in the Tomlinson case.

Finally, the court reinforced its previous conclusion that substantial evidence did not support the County’s exemption finding that the proposed subdivision will occur “within city limits,” which was an essential criterion of the in-fill development exemption (Guidelines, § 15332), because the site is located in unincorporated Alameda County. The court rejected the County’s argument that the phrase “within city limits” must be construed in a manner that promotes in-fill development within urbanized areas. Relying on principles of statutory construction, the court found that plain meaning of the phrase “within city limits,” as it is used in section 15332, requires that a project occur within the boundaries of a municipality. The court also held that the requirement that the project occur “within city limits” could not be read out of the statute, as required by the County’s interpretation that the project need only occur in an “established urban area.” Rather, the court found independent effect must be given to both the requirement that the project occur “within city limits” and the final criterion in subdivision (b) that the project be “substantially surrounded by urban uses.” Such construction was supported by the Guidelines themselves, which specifically define the term “urbanized uses,” used in other categorical exemptions. On this basis, the court noted, that in setting out the criteria for the in-fill development exemption, the Secretary for Resources easily could have specified that a project must occur “within an urbanized area,” but used the phrase “within city limits” instead, which strongly suggested that the Secretary intended a different meaning for the “within city limits” criterion.

The court, therefore, in rejecting the County’s interpretation of section 15332, found the County used the wrong legal standard in applying the exemption and that substantial evidence did not show the proposed subdivision satisfied all of the exemption’s criteria. The court held that the County’s action constituted a prejudicial abuse of discretion, and ordered the trial court’s order vacated.