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COURT HOLDS DENSITY BONUS LAW PROHIBITS CITIES AND COUNTIES FROM REQUIRING PROOF THAT PROJECTS WILL BE “ECONOMICALLY” INFEASIBLE WITHOUT REQUESTED CONCESSIONS AND WAIVERS

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The density bonus law (Gov. Code, § 65915) requires cities and counties to allow increased building density, and development incentives and waivers of permit requirements, in exchange for the applicant’s agreement to dedicate a specified number of dwelling units to low or very-low income households. In Schreiber v. City of Los Angeles (2021) 69 Cal.App.5th 549, the Second District Court of Appeal held that the City of Los Angeles’ municipal code is preempted by the state density bonus law to the extent that the city’s code requires an applicant to prove that the concessions it requests under the density bonus law are needed to make the affordable-housing component of the project financially feasible.

The case involves a mixed-use development in the City of Los Angeles, with retail uses on the ground floor and residential units above. Absent concessions and waivers, the city’s zoning code would limit the site’s development to three stories, a height of 45 feet, and a maximum of 40 units. Under the density bonus law, however, the applicant proposed to develop a seven-story building, with 54 units, including five very-low income units and five moderate income units.

Prior to the city planning commission’s first hearing on the project, the California Legislature passed Assembly Bill No. 2501 (AB 2501), which amended the density bonus law to prohibit local governments from conditioning their review or approval of an application under the density bonus law “on the preparation of an additional report or study that is not otherwise required by law.” (Gov. Code, § 65915, subd. (a)(2).) AB 2501 clarified, however, that local agencies are not prohibited from “requiring an applicant to provide reasonable documentation to establish eligibility for a requested density bonus, incentives, or concessions.” (Ibid.) It also clarified that the term “study” does not include “reasonable documentation to establish eligibility for the concession or incentive or to demonstrate that the incentive or concession meets the definitions” set forth in the density bonus law. (Gov. Code, § 65915, subd. (k).)

Based on AB 2501, the city’s planning department advised that financial pro formas and third-party reviews can no longer be required. Although the applicant had provided financial information regarding the project, in response to city staff’s interpretation of AB 2501, the applicant stated that he would not be providing a pro forma for the project.

Following a hearing, the city planning commission approved the project, including the requested density bonus. The planning commission also approved two “off menu” incentives (increased floor area and maximum height) and two waivers (transitional height and rear yard set back requirements).

The plaintiffs, residents of a nearby single-family home, filed a petition for writ of mandate alleging that the city misinterpreted the density bonus law. In particular, the plaintiffs argued that the city erred in granting the off-menu incentives because the applicant had not submitted financial information showing that the incentives were needed to make the project economically feasible—information that, the plaintiffs observed, was required under the city’s municipal code. The trial court denied the petition and the court of appeal affirmed.

The appellate court explained that under AB 2501’s amendments to the density bonus law, a local government cannot condition its approval of incentives on the preparation of a report that is not otherwise required by law. The city’s municipal code, however, provided that a request for an off-menu incentive must include a pro forma or other documentation showing that the incentive is needed to make the affordable-housing component of the project economically feasible. The court held that the city may not require information that an incentive is necessary to make the project economically feasible because that information is not needed to show that the project is eligible for the incentive. Rather, the “economically feasible” language in the city’s municipal code was based on a prior version of the statute, which required applicants to show that an incentive was necessary to render the affordable units economically feasible. That requirement, however, had been removed from the statute in 2008. Because the city code conflicted with state density bonus law, the court held that the city code is preempted to the extent that it requires an applicant to demonstrate that a requested incentive is needed to make the project economically feasible.

The case provides helpful guidance regarding the documentation that local agencies may require in processing a request for incentives and waivers under the density bonus law. The case clarifies that an agency may not require an applicant to prove that the requested incentives and waivers are necessary to make the affordable-housing component of a project economically feasible. The court’s reasoning in the case is consistent with the requirement that the density bonus law be “interpreted liberally in favor of producing the maximum number of total housing units.” (Gov. Code, § 65915, subd. (r).)

THIRD DISTRICT FINDS EIR FOR OLYMPIC VALLEY RESORT PROJECT FAILED TO ADEQUATELY CONSIDER IMPACTS TO LAKE TAHOE’S UNIQUE ENVIRONMENTAL RESOURCES

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In Sierra Watch v. County of Placer (2021) 69 Cal.App.5th 86, the Third District Court of Appeal found that the EIR for a resort development project in Olympic Valley violated CEQA because it contained an inadequate description of the environmental setting and failed to adequately consider the project’s potential air quality, water quality, and noise impacts on Lake Tahoe and the surrounding Basin.

FACTUAL & PROCEDURAL BACKGROUND

In 1983, Placer County adopted the Squaw Valley General Plan and Land Use Ordinance to guide development and growth within the Olympic Valley (formerly Squaw Valley) area. The 4,700-acre area lies a few miles northwest of Lake Tahoe in the Sierra Nevada mountains.

In 2011, Real Party in Interest Squaw Valley Real Estate LLC proposed the first project under the general plan and ordinance—the Village at Squaw Valley Specific Plan—which included two components to be built over a 25-year timeframe: (1) an 85-acre parcel that included 850 lodging units, approximately 300,000 square feet of commercial space, and 3,000 parking spaces (“the Village”); and (2) an 8.8-acre parcel that included housing for up to 300 employees (“the East Parcel”).

The County approved the project and certified its associated EIR in 2016. Following the County’s approval, Sierra Watch filed a petition for writ of mandate, alleging the County violated CEQA in numerous ways. The trial court rejected Sierra Watch’s claims. Sierra Watch appealed.

COURT OF APPEAL’S DECISION

In the published portion of the opinion, the Third District considered whether the EIR sufficiently described the project’s environmental setting and adequately considered water quality, air quality, and noise impacts.

EIR’s Description of the Environmental Setting

The court first considered whether the EIR’s discussion of the environmental setting adequately addressed Lake Tahoe and the Lake Tahoe Basin, particularly with respect to the settings for water and air quality.

Water Quality Setting

As to water quality, the Court of Appeal agreed with Sierra Watch’s assertion that the EIR’s hydrology and water quality analysis failed to adequately describe the regional setting specific to Lake Tahoe. Though the Draft EIR explained that the project would be “located within the low elevation portion of the approximately eight square mile Squaw Creek watershed, a tributary to the middle reach of the Truckee River (downstream of Lake Tahoe),” it concluded that VMT generated by the project would not exceed TRPA’s cumulative VMT threshold, and thus, would not affect the Lake’s water quality. The court rejected this rationale by noting that the EIR’s description failed to discuss the importance of the Lake’s current condition or the relationship between VMT and the Lake’s water clarity and quality, thereby depriving the public of an ability to evaluate and assess impacts on the Lake.

Air Quality Setting

As to air quality, the court found that the EIR’s description of the air quality setting and baseline was more substantial, and thus, adequate. The EIR properly explained the applicable air quality standards and presented data on the current concentrations and sources of criteria air pollutants in the area.

EIR’s Analysis of Impacts

Air Quality Impacts

The court agreed with Sierra Watch’s assertion that the EIR failed to meaningfully assess the project’s traffic impacts on Lake Tahoe’s air quality. The EIR concluded the project would not exceed TRPA’s cumulative VMT threshold but acknowledged it would likely exceed TRPA’s project-level VMT threshold for basin traffic. Nevertheless, the EIR ultimately concluded that TRPA’s VMT significance thresholds did not apply because the project was not located in the Tahoe Basin. The court found this rationale “provided mixed messages.” Rather than summarizing and declaring TRPA’s VMT thresholds as inapplicable, the court held that the EIR should have determined whether the Project’s impacts on Lake Tahoe and the Basin were potentially significant.

The court also agreed that the EIR underestimated the Project’s expected cumulative VMT in the Basin by failing to consider expected VMT from other anticipated projects. Even though the County addressed this issue in post-FEIR responses to comments, the court held that the public was denied an opportunity to “test, assess, and evaluate the newly revealed information and make an informed judgment as to the validity of the conclusions to be drawn therefrom.”

Construction Noise Impacts

The court rejected Sierra Watch’s initial assertion that the EIR failed to adequately disclose the duration of construction noise at any specific location, particularly at the Village parcel. The EIR properly explained that that portion of the Project would be constructed over 25 years based on market conditions, and thus, it would be too speculative to identify specific noise levels for every single receptor.

The court agreed, however, with Sierra Watch’s assertion that the EIR failed to analyze the project’s full geographic range of noises by ignoring activities occurring farther than 50 feet from sensitive receptors. The court reasoned that a “lead agency cannot ignore a project’s expected impacts merely because they occur…’outside an arbitrary radius.’” The EIR only considered impacts to sensitive receptors within 50 feet of construction—yet, according to the court, “ignore[d] potential impacts to a receptor sitting an inch more distant[,] even though the noise levels at these two distances would presumably be the same.” Though the County explained this analysis was standard practice, the court contended that an agency “cannot employ a methodological approach in a manner that entirely forecloses consideration of evidence showing impacts to the neighboring region [and] beyond a project’s boundaries.”

Finally, the court agreed that mitigation requiring “operations and techniques … be replaced with quieter procedures where feasible and consistent with building codes and other applicable laws and regulations” was too vague because “in effect, [it] only tells construction contractors to be quieter than normal when they can.” The court concluded that the measure improperly deferred which construction procedures can later be modified to be quiet but did not explain how these determinations are to be made.

– Bridget McDonald

*RMM Attorneys Whit Manley, Andee Leisy, Chip Wilkins, and Nathan George represented Real Party in Interest Squaw Valley Real Estate LLC in this litigation. 

Second District Court of Appeal Holds That Reduced Parking at National Monument is not a Direct Environmental Impact and Upholds Alternatives Analysis with Only a “No Project” Alternative.

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In Save Our Access—San Gabriel Mountains v. Watershed Conservation Authority (2021) 68 Cal.App.5th 8, the Second District Court of Appeal held that the plaintiff failed to show that reduced parking within the San Gabriel Mountains National Monument would cause any adverse physical changes in the environment, that the lead agency did not abuse its discretion in setting the baseline for parking based on aerial photography that was not included in the record, and that, based on the project’s purpose, analyzing only a “no project” alternative was a reasonable range of alternatives.

FACTUAL AND PROCEDURAL BACKGROUND

The San Gabriel Mountains National Monument was designated in 2014. The project site includes 198 acres along two and a half miles of the East fork of the San Gabriel River, including public roads, recreational facilities, and the riverbed itself. The site is significantly degraded due to heavy public use and a lack of adequate facilities. The project was proposed to improve and better manage recreation facilities along with ecological restoration and reducing environmental impacts associated with recreational use at the site.

The EIR discussed existing issues associated with parking, including the small number of designated parking spaces and the widespread practice of parking in undesignated areas, which created public safety and traffic issues throughout the site. In total, the EIR estimated that there was a total of 417 parking spaces throughout the site, of which only 48 were designated parking spaces. The estimates were based on aerial photography that was included in the EIR. The EIR also included survey data that found that average weekend use at the site from Memorial Day to Labor Day was 273 vehicles per weekend day. To address the parking and related issues, the project proposed to create a total of 270 designated car spaces and three bus spaces, and to reduce undesignated parking with a combination of signage and physical barriers.

The EIR analyzed the project’s potential impacts to recreation and concluded, based on survey data, that impacts would be less than significant because many users of the site would choose to recreate in other nearby areas if parking or other facilities were unavailable, and, given the number and variety of recreation opportunities in proximity to the site, the impacts of those users going elsewhere would be disbursed and would not be cumulatively considerable. The EIR concluded that all impacts associated with the project would be less than significant with mitigation. The alternatives analysis compared the proposed project to a “no project” alternative but did not analyze any other alternatives.

The plaintiff filed a petition for writ of mandate challenging the Watershed Conservation Authority’s certification of the EIR and approval of the project. The trial court granted the petition, in part, based on the court’s conclusion that (1) the parking baseline lacked substantial evidence support because the aerial photography the baseline relied on was not in the record; (2) the agency failed to disclose the exact number of parking spaces available in each area of the site; (3) the parking survey was unsupported by substantial evidence because of the time of day when the surveys took place; and (4) without an accurate parking baseline, the EIR failed as an informational documents because the proposed parking reduction could be significant and require mitigation.

THE COURT OF APPEAL’S DECISION

Reversing the trail court’s decision, the Court of Appeal determined that the EIR adequately discussed the project’s proposed reduction in total parking spaces and that the alleged discrepancy in total parking spaces (plaintiff alleged that there were 473 available spaces, rather than 417) was immaterial because plaintiff failed to identify any adverse physical impacts on the environment resulting from the reduced parking. The court noted that, in fact, the purpose of reducing and formalizing parking at the site was to protect and restore the environment.

The court went on to analyze two CEQA cases addressing parking issues. First, the court considered San Franciscans Upholding the Downtown Plan v. City and County of San Francisco (2002) 102 Cal.App.4th 656, which held that the inconvenience associated with “hunting” for scarce parking was not an environmental impact, but secondary effects, like traffic and air quality are. Accordingly, the court determined that an EIR need only address the adverse secondary effects of limited parking, not the social impact itself. The court also reviewed Taxpayers for Accountable School Bond Spending v. San Diego Unified School Dist. (2013) 215 Cal.App.4th 1013, which rejected the school district’s argument that a parking shortage is “never” a direct physical environmental impact. The court reasoned that each case must be decided on its facts, and that while, in some cases parking deficits may have direct physical impacts on the environment, plaintiff had not shown that the project’s parking reduction would result in direct or secondary physical impacts on the environment.

Turning to the EIR’s analysis of recreation impacts, the court found that the EIR’s analysis of nearby recreational facilities and likely impacts was adequate and that the EIR’s assumptions, based on survey data, were reasonable. The court rejected plaintiff’s speculation that, instead of leaving to recreate elsewhere, visitors to the project site would “circle and idle” until a parking space became available. Thus, the EIR’s conclusion that recreation impacts would be less than significant was supported by substantial evidence.

Regarding alternatives, the court focused on the EIR’s discussion of alternatives that were considered, but not analyzed in the EIR. The EIR explained that, through a series of workshops, three project design concepts were proposed and assessed for their ability to achieve the purposes of the project, but only one (the project), was selected for study in the EIR, along with the required “no project” alternative. The agency also considered an alternative proposed by the California Department of Fish and Wildlife but decided not to analyze it in the EIR either. The plaintiff argued that, as a matter of law, analyzing only one alternative was inadequate. The court rejected plaintiff’s argument, finding that, although CEQA and the Guidelines use the term “alternatives” (i.e., the plural form), the law is clear that the range of alternatives is subject to a rule of reason, and that each case must be evaluated on its facts. The court rejected the plaintiff’s argument that several feasible alternatives were proposed to the agency by a nearby business owner who was concerned that reduced parking at the site would impact his business. The court concluded that plaintiff had failed to show how the proposed alternatives would attain most of the basic project objectives or feasibly avoid or lessen one or more of the project’s significant impacts. The court found, on the facts of this case, that the inclusion of only a “no project” alternative was reasonable, given the purpose of the project and that the project, with mitigation, would not result in any significant impacts.

Lastly, plaintiff argued that the project was inconsistent with the Angeles National Forest Land Management Plan (LMP) and the designation creating the San Gabriel Mountains National Monument. Plaintiff’s argument centered around the reduction in parking and claimed that the corresponding reduction in access to the National Monument created inconsistencies. The court rejected this argument, finding that it elevated public access above all the other objectives and policies in the declaration. The court reasoned that the agency was required, under the proclamation and LMP, to balance public access with other concerns, including protection of the environment, and that the project did so.

– Nathan O. George

Fifth District Court of Appeal Excuses Petitioner’s Failure to Exhaust Administrative Remedies, Holds that Unlined Landfills are Not “Facilities” for Purposes of the Class 1 Categorical Exemption

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In the published portions of Los Angeles Department of Water and Power v. County of Inyo (2021) 67 Cal.App.5th 1018, the Fifth District Court of Appeal held that the issue exhaustion requirement in Public Resources Code section 21177, subdivision (a) did not apply where the County of Inyo did not provide adequate public notice prior to adopting a Notice of Exemption (NOE) and that the County abused its discretion in finding that condemning three landfill sites was categorically exempt from CEQA under the “existing facilities” exemption in CEQA Guidelines section 15301 (the “Class 1” categorical exemption).

FACTUAL AND PROCEDURAL BACKGROUND

Beginning in the 1950s, the County began leasing land within the County owned by the Los Angeles Department of Water and Power (LADWP) for waste management purposes. At issue in this case were three sites leased by the County for use as unlined landfills. The County’s operation of the landfills is subject to permitting by the California Department of Resources Recycling and Recovery (CalRecycle). Beginning in 2012, the County sought to amend the permits for two of the three landfill sites to increase the permissible daily usage, overall capacity, and to accelerate the closure dates, effectively shortening the useful life of the landfills.

After negotiating with LADWP to extend the lease agreement for one of the sites, the County determined that acquiring all three landfill sites through condemnation was necessary. In a letter to the Board of Supervisors, LADWP objected to the County’s decision, in part, arguing that that the County was required to comply with CEQA before taking any action on the proposed condemnation. At the Board hearing on the condemnation proposal, County staff suggested that the Board’s actions would be exempt from CEQA review for several reasons, including the “existing facilities” categorical exemption under CEQA Guidelines section 15301. The Board approved the condemnation proceedings, but its written decision made no mention of CEQA.

LADWP filed suit. The Kern County Superior Court ruled that the County violated CEQA and issued a writ of mandate directing the County to rescind its resolutions relating to the condemnation proceedings, pending compliance with CEQA. The County appealed.

THE COURT OF APPEAL’S DECISION

Before turning to the merits of LADWP’s CEQA claims, the Court of Appeal addressed the “threshold procedural issue” of whether LADWP’s CEQA claims were barred because it failed to exhaust its administrative remedies with respect to the issues that it raised in court. After discussing the statute and relevant case law, the court acknowledged that because CEQA did not require a comment period prior to determining that a project is exempt from CEQA, the relevant question was whether the agency provided adequate notice to the public prior to considering an exemption. Specifically, the court explained, an agency’s notice must inform the public that the agency will consider a CEQA exemption; otherwise, the issue exhaustion requirement in Public Resources Code section 21177, subdivision (a), does not apply. Here, the court found that the first mention of CEQA and the Board’s consideration of an exemption was made by staff during the hearing, and the hearing notice was silent on CEQA. The court concluded that the public was not provided with adequate notice regarding the exemption, and therefore, LADWP was not required to exhaust on its CEQA challenges to the County’s exemption determination.

Turning to the exemptions relied on by the County, the court found that because the issues before it involved the scope of the “existing facilities” categorical exemption and statutory construction, review of the County’s actions was de novo. After reviewing the language of CEQA Guidelines section 15301, the court concluded that the term “facilities” is ambiguous, agreeing with the Second District Court of Appeal in Azusa Land Reclamation Co. v. Main San Gabriel Basin Watermaster (1997) 52 Cal.App.4th 1165 (Azusa). Further agreeing with Azusa, the court reasoned that, because an unlined landfill was “excavated” rather than “built,” an unlined landfill was more akin to an alteration in the condition of land rather than a facility. The court reasoned that because section 15301 was revised following the Azusa decision but did not expressly mention landfills, the court concluded that the Secretary of Resources who issued the revised Guideline must have agreed with Azusa that unlined landfills are not a class of projects that do not have a significant effect on the environment. Thus, the court concluded that the County abused its discretion in finding the condemnation proceedings categorically exempt under the Class 1 categorical exemptions.

– Nathan O. George

First District Court of Appeal Holds That Governor Newsom’s Certification of Oakland Howard Terminal Project Under AB 734 Was Timely

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In Pacific Merchant Shipping Association v. Newsom (2021) 67 Cal.App.5th 711, the First District Court of Appeal held that there was no deadline for the Governor to certify the Howard Terminal Project as qualifying for expedited judicial review under Assembly Bill (AB) 734, and specifically, that the Howard Terminal Project was not subject to the certification deadline in the Jobs and Economic Improvement Through Environmental Leadership Act of 2011 (AB 900).

FACTUAL AND PROCEDURAL BACKGROUND

The Howard Terminal Project is a proposed development located at Oakland’s Howard Terminal. It includes a new baseball stadium for the Oakland A’s, as well as residential, retail, commercial, and other uses.

In 2018, the Legislature passed AB 734, which provided that, if the Governor certified that the Howard Terminal project met specific environmental standards, then litigation challenging the project’s environmental review would be subject to expedited judicial review. AB 734 was a stand-alone bill applicable solely to the Howard Terminal project. In many respects, AB 734 was modeled after separate legislation, generally referred to as AB 900, providing for expedited judicial review of “Environmental Leadership Development Projects” (ELDP projects).

First enacted in 2011, the Legislature has amended AB 900 several times, in part to extend various deadlines embedded in the statute. In September 2018, when the Legislature enacted AB 734, AB 900 provided that the Governor had to certify a project by January 1, 2020, and the lead agency had to approve the project by January 1, 2021, when AB 900 would sunset. AB 900 also authorized the Governor to adopt guidelines to implement the statute. The Governor’s AB 900 guidelines reflected AB 900’s deadlines.

AB 734 provided that the Governor’s AB 900 guidelines apply to the “implementation” of AB 734 “to the extent the guidelines are applicable and do not conflict with specific requirements” of AB 734. Unlike AB 900, AB 734 did not specify any deadlines in the text of the statute.

Shortly after the Legislature adopted AB 734, Governor Newsom amended his AB 900 guidelines to reference AB 734 and the Howard Terminal project, along with a different project – the Los Angeles Clippers’ proposed basketball arena in Inglewood – subject to its own, stand-alone, fast-track legislation (AB 987) that contained a similar reference to the Governor’s AB 900 guidelines.

In March 2019, the A’s submitted an application to the Governor for certification under AB 734. As a precursor to Governor certification, the California Air Resources Board (CARB) had to find that the Howard Terminal project would meet strict greenhouse gas emission reduction targets mandated by AB 734. In August 2020 – 16 months after the A’s submitted their application, and eight months after AB 900’s January 1, 2020, certification deadline – CARB made this finding. Governor Newsom certified the Howard Terminal project in February 2021.

A coalition of businesses operating at the Port of Oakland, led by the Pacific Merchant Shipping Association (PMSA), sued the Governor, challenging his authority to certify the project. PMSA alleged that the Governor’s authority to certify the project under AB 734 had expired as of January 1, 2020—the deadline for certification in AB 900. Specifically, PMSA argued that, by incorporating the AB 900 guidelines into AB 734 “to the extent the guidelines are applicable and not in conflict with the specific requirements” of AB 734, the legislature had incorporated AB 900’s deadline for certification. The trial court rejected PMSA’s arguments. PMSA appealed.

THE COURT OF APPEAL’S DECISION

After discussing the general rules of statutory interpretation, the Court of Appeal concluded that the text of AB 734 was ambiguous as to whether the January 1, 2020, deadline for certification of ELDP projects under AB 900 also applied to the Howard Terminal project under AB 734.

Turning to the legislative history for insight, the court noted that the author of AB 734 proposed a standalone bill for the Howard Terminal project, in part, because the project could not meet AB 900’s deadlines. Thus, one option the legislature considered was whether to simply extend AB 900’s deadlines and have the project proceed under AB 900. The court reasoned that the legislature was aware of this option but chose to adopt AB 734—with no deadlines—instead. Based on its review of the legislative history as a whole, the court concluded that the legislature had not intended to incorporate AB 900’s certification deadline into AB 734.

The court also determined that its construction of AB 734 was supported by the legislative purpose of the statute. As the court noted, the purposes served by enactment of AB 734 are made clear in the legislation: to assist the City of Oakland in retaining the Oakland A’s by streamlining environmental review for a “state-of-the-art baseball park” project; to generate thousands of high-wage, highly skilled jobs during construction and operation of the project; to support the City’s and region’s goals for sustainable, transit-oriented housing, including affordable housing; to provide an opportunity for investment “in new and improved transit and transportation infrastructure”; and to “implement sustainability measures designed to improve air quality and mitigate the emissions of greenhouse gases resulting from the project.” For all these reasons, the special legislation was deemed necessary so that the Howard Terminal Project could be developed in an “expeditious manner.” In light of the significant environmental, economic, and cultural benefits which prompted the adoption of AB 734, the court concluded that PMSA’s reading of the statute would undermine rather than promote the general purposes of the statute and the objectives to be achieved.

Lastly, the court concluded that a practical reading of AB 734, including its lack of deadlines, supported the respondents’ argument that the legislature did not intend to incorporate AB 900’s certification deadline into AB 734. Among other practical reasons for rejecting PMSA’s reading of the statute, the court noted that CARB’s step in the process alone exceeded PMSA’s alleged one-year deadline for certification.

The Court of Appeal agreed with the trial court and affirmed the judgment.

RMM attorneys Whit Manley and Chris Stiles represented Real Party in Interest Oakland Athletics Investment Group LLC in the litigation.

– Nathan O. George

First District Court of Appeal Holds That a Necessary and Indispensable Party is Not Bound to a Tolling Agreement That It Did Not Sign

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In Save Lafayette Trees v. East Bay Regional Park District (2021) 66 Cal.App.5th 21, the First District Court of Appeal held that PG&E, a necessary and indispensable party in the case, was not bound to an agreement to toll the CEQA statute of limitations executed by only the petitioners and the respondent public agency.

FACTUAL AND PROCEDURAL BACKGROUND

On March 21, 2017, the East Bay Regional Park District’s (District) Board of Directors issued a resolution accepting funding from PG&E as compensation for the removal of 245 trees on District property near PG&E’s natural gas transmission pipelines. PG&E issued this funding as a part of its “Community Pipeline Safety Initiative.” The District and PG&E later signed an MOU for the implementation PG&E’s initiative and ongoing maintenance and monitoring of the area near the natural gas pipeline. On June 27, 2017, the District filed a Notice of Exemption after finding the MOU and related activity categorically from CEQA.

On July 31, 2017, Save Lafayette Trees, Michael Dawson and David Kosters (Appellants), and the District entered into a tolling agreement to toll all applicable statutes of limitations for 60 days. PG&E did not consent to this agreement. On September 29, within the 60-day tolling period, Appellants filed a petition for writ of mandate challenging the District’s approval of the MOU under CEQA, as well as for violations of local ordinances and state constitutional due process rights. The action named PG&E as a real party in interest. PG&E demurred to the CEQA cause of action as time-bared by both the 35-day and 180-day statute of limitations periods under Public Resources Code section 21167. The trial court sustained the demurrer.

THE COURT OF APPEAL’S DECISION

Upholding the trial court’s decision, the Court of Appeal determined that PG&E was not bound to the tolling agreement between Appellants and the District. The court concluded that PG&E was both a necessary and indispensable party in the litigation, and therefore, was entitled to assert or waive the statute of limitations defense. The court noted that CEQA does not statutorily authorize tolling agreements, which means that they are not a statutory right. Rather, tolling agreements are private agreements between parties that have no effect on parties not in privity. Citing Salmon Protection & Watershed Network v. County of Marin (2012) 205 Cal.App.4th 195 (“Salmon Protection”), the court explained that CEQA does not prohibit tolling agreements to extend the limitations period, but to be effective they must include the recipient of an approval (the project proponent), the public agency, and the would-be petitioner. Because PG&E was a necessary and indispensable party, it was not bound to the tolling agreement to which it was not a signatory.

The court further reasoned that binding an indispensable party like PG&E to a tolling agreement to which it did not consent would defeat the purpose of the limitations period in Public Resources Code section 21167 to “protect project proponents from extended delay, uncertainty and potential disruption of a project caused by a belated challenge to the validity of the project’s authorization.”

The court also rejected Appellants’ argument that the 180-day limitations period had not run because they did not have constructive notice of the project. Appellants claimed there was no constructive notice because the removal of the trees was not included in the Board’s agenda for the project nor the accompanying description of the Board’s resolution. Public Resources Code section 21167 provides that the 180-day period begins after the agency’s decision or commencement of a project. The court noted that the Supreme Court has held that a public agency’s formal decision to carry out or approve a project is deemed constructive notice for potential CEQA claims. In this case, the court determined that the MOU for funding the tree replacement was consistent with the Board’s resolution and the project as outlined in the staff report, and did not, as Appellants asserted, constitute a “substantial difference” that would not provide constructive notice. The court explained that any flaws in the project approval process do not delay the applicable limitations period where, as here, the public agency gave notice of the very approval Appellants challenged.

The court concluded that the 180-day limitations period thus began to run on March 21, 2017, when the Board made its final decision and expired on September 18, 2017, eleven days before Appellants commenced their action. Therefore, the court held that the CEQA cause of action was properly dismissed as untimely.

– Veronika S. Morrison

THIRD DISTRICT COURT OF APPEAL DISMISSES PETITIONERS’ CHALLENGE TO A MITIGATED NEGATIVE DECLARATION BECAUSE THE CLAIMS DID NOT ESTABLISH A FAIR ARGUMENT OF SIGNIFICANT ENVIRONMENTAL IMPACTS.

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In Newtown Preservation Society v. County of El Dorado (2021) 65 Cal.App.5th 771, the Third District Court of Appeal affirmed the trial court’s decision to uphold El Dorado County’s adoption of a mitigated negative declaration (MND) for a bridge replacement project. In the published portions of the opinion, the court held that Petitioners failed to establish a “fair argument” that the project would have significant environmental impacts. Instead, Petitioners raised concerns regarding existing wildfire hazards that could impact residents near the project, but did not establish that the project may significantly impact the environment by creating or exacerbating wildfire hazards.

Factual and Procedural Background

The County, in preparing the MND, determined that the bridge replacement project could interfere with emergency response or evacuation plans and—as a result—expose people or structures to risk of loss or injury. However, the County also determined that these impacts would not be significant since a temporary evacuation route would be constructed to mitigate the risk. Such a route would only be used for emergency evacuation and, regardless of whether it was in place, any evacuation or emergency orders would be executed as the El Dorado County Sheriff’s Office of Emergency Services saw fit. Additionally, the County consulted with this office as well as the El Dorado County Fire Protection District in preparing the MND and both entities were comfortable with the document’s conclusions and assessments.

The County initially refrained from discussing the temporary evacuation route in detail in its mitigated negative declaration since it was concerned this would “lead people to believe that they should follow a certain evacuation route.” But, as a result of comments raised by one of the petitioners’ counsel and others regarding the possibility of a temporary evacuation route, the County’s responses to comments elucidated its plans and evacuation procedures in greater detail. It outlined several evacuation options given numerous emergency conditions depending on whether the temporary evacuation route was constructed.

After the County adopted the MND, Petitioners filed a writ a mandate, claiming the County failed to 1) properly consider the no-project alternative and 2) “adequately address the impact of closing the bridge without committing to construction of an evacuation route.” Petitioners claimed there was sufficient evidence in the record—including letters, correspondences, and hearing comments—supporting a fair argument that the bridge replacement project would significantly impact public safety. For example, a resident who lived on Newtown Road discussed past fire damage near her home; another resident complained that the County had not determined with finality whether a temporary route would be constructed; and another expressed concern about the effects of wind in the area on fire management; an aerial firefighter argued that recent history of wildfires demonstrated the danger in the County’s temporary evacuation route plans; Ms. Nagel, one of the petitioners, discussed her extensive firefighting experience; and Ms. Nagel’s attorney argued that the County’s MND violated CEQA by deferring important emergency management analysis.

The trial court, however, found that none of the petitioners’ arguments constituted substantial evidence, especially in light of explanatory testimony and responses to comments by the County and its experts, as well as the detailed evacuation options outlined in the MND. Instead, Petitioners’ letters and comments amounted to mere complaints and fears, backed up by speculation and unsubstantiated, non-expert opinion.

The Court of Appeal’s Decision

On appeal, Petitioners argued that the trial court erred in upholding the MND since “substantial evidence supports a fair argument of potentially significant impacts on resident safety and emergency evacuation.” The court noted that evidence supporting a fair argument can be substantial even though other equally compelling evidence may exist to the contrary. Still, the court concluded that Petitioners’ “framing of the fair argument test [was] erroneous. The question is not whether substantial evidence supports a fair argument that the proposed project will have significant impacts on resident safety and emergency evacuation. . . . [T]he question is whether the project may have a significant effect on the environment.” Yet Petitioners failed to identify any potentially significant effects the project might have on the environment and instead merely raised possible increased effects the environment might have on the community as a result of poorer evacuation procedures.

Furthermore, the Court of Appeal, like the trial court, pointed out that substantial evidence must be based on relevant information and facts; or at least reasonable inferences, assumptions, or expert opinion supported by facts. Unsubstantiated opinions, arguments, or speculations generally will not do. The court noted, however, that lay opinion may be considered substantial evidence where expertise is not necessary, which was not the case with the emergency evacuation issues raised by the Petitioners. The Court of Appeal explained again that Petitioners’ cited comments and letters were “mere speculation” and simply “dire predictions by nonexperts” and that they “fail[ed] to identify any factual foundation” for their assertions. Some comments were even directly contradicted by factual evidence in the record. Nowhere did Petitioners establish that any of the individuals whose testimony was cited were experts in evacuation planning. Thus, the court concluded that Petitioners’ claims did not constitute substantial evidence supporting a fair argument that the project may have a significant impact on the environment.

– Blake C. Hyde

Fourth District Court of Appeal Upholds Denial of Anti-SLAPP Motion to Strike Malicious Prosecution Claim in CEQA Lawsuit with Respect to Defendants, but Not Their Attorneys

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In Dunning v. Johnson (2021) 64 Cal.App.5th 156, a project developer (“Cal Coast”) sued defendant Clews Horse Ranch (“the Ranch”) and its attorneys (“attorney defendants”) for malicious prosecution in response to the Ranch’s earlier lawsuit alleging that the City of San Diego violated CEQA by approving and adopting a mitigated negative declaration for Cal Coast’s project. In response, the defendants filed an anti-SLAPP motion, which the trial court denied. The Fourth District Court of Appeal affirmed the motion’s denial with respect to the Ranch, but reversed the denial with respect to the attorney defendants.

Background

In the underlying action, Clews Land and Livestock, LLC v. City of San Diego (2017) 19 Cal.App.5th 161 (“Clews”), Cal Coast sought approval from the city to build and operate a school on its property, adjacent to Ranch property. Concluding that significant environmental impacts either were not present or would be mitigated, the city did not prepare an EIR. Instead, it adopted a MND and approved the project. The Ranch argued that the project would adversely affect the surrounding environment, that it would interfere with the Ranch’s operations, and that the city’s use of a MND was improper. The attorney defendants, on behalf of Ranch, appealed the approval of the project, but failed to timely appeal the city’s adoption of the MND. The city rejected the appeal.

The Ranch then sought a writ of mandate to compel the city to abandon the project and set aside the MND, arguing that the city’s procedure for preparing and adopting the MND violated CEQA. Additionally, it challenged the city’s appeal process for environmental findings. The trial court denied recovery on both procedural and substantive grounds, and the court of appeal affirmed.

Upon the conclusion of Clews, Cal Coast brought a malicious prosecution action against the Ranch and the Ranch’s attorneys, alleging that the CEQA action had been brought for an improper purpose. Cal Coast alleged that the Ranch simply sought to prevent or delay the project and preserve the Ranch owner’s privacy to enable criminal activity on the premises. (The Ranch owner pled guilty and was sentenced to prison in 2018 for child pornography charges.) Cal Coast also argued that the attorney defendants had maintained the case in an effort to force the Project’s abandonment, hoping to avoid a legal malpractice claim or a complaint to the State Bar for their failure to timely appeal the adoption of the MND. The defendants filed an anti-SLAPP motion to strike the malicious prosecution claim. The trial court denied the anti-SLAPP motion and the defendants appealed.

The Court of Appeal’s Opinion

To defeat the anti-SLAPP motion, Cal Coast simply needed to show minimal merit in its malicious prosecution claims that the CEQA action in Clews was brought without probable cause and with malice. This court held that Cal Coast met its burden with respect to the probable cause question. However, it concluded that Cal Coast could only point to evidence of malicious action by the Ranch, and not by the attorney defendants.

The court emphasized evidence in the administrative record showing that the Ranch’s concerns about the project were rooted in its potential impacts on the Ranch specifically, rather than on the environment. The Ranch’s concerns were therefore not within the scope of CEQA. The court additionally noted that the Ranch generally did not point to substantial evidence supporting a fair argument that the project could have a significant environmental impact. Under Preserve Poway v. City of Poway (2016) 245 Cal.App.4th 560, this showing is required to establish a MND’s insufficiency. The speculation, arguments, and opinions posited by the Ranch did not constitute substantial evidence. The court therefore concluded that Cal Coast established a probability for prevailing on the question of probable cause.

The court also noted the Ranch’s aggressive and consistent efforts to oppose any use of the proposed project site, including by prior owners of the property. It thus concluded that Cal Coast introduced sufficient evidence of the Ranch’s malice to survive the anti-SLAPP motion with respect to the Ranch. However, the court determined that there was not sufficient evidence to conclude that the attorney defendants acted maliciously, as there was no indication that the attorneys were actually aware of either the Ranch’s improper motives or the untenability of the Ranch’s claim. Cal Coast’s speculation that the attorney defendants were merely acting to avoid a malpractice claim or a State Bar complaint was insufficient to support a finding that the attorney defendants acted maliciously in maintaining the CEQA claims in Clews.

– Louisa I. Rogers

SB 7 – Jobs and Economic Improvement Through Environmental Leadership Act of 2021

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On May 20, 2021, Governor Gavin Newsom signed Senate Bill (SB) 7, known as the Housing + Jobs Expansion & Extension Act. SB 7 extends the provisions of legislation enacted in 2011 (Assembly Bill 900) that created an expedited judicial review process under CEQA for large development projects that met certain criteria. AB 900 was repealed by its own terms on January 1, 2021.

SB 7 reenacts and updates AB 900 in order to “expedite the development and construction of urgently needed housing, clean energy, low carbon, and environmentally-beneficial projects, and the jobs they create.” The bill notes that numerous large projects under consideration in California have the potential to create thousands of high-skill, high-wage jobs. Many of these projects will replace old and outdated facilities with newer, cleaner, and innovative facilities that will lead the nation in environmental impact mitigation and reduction.

Thus the bill streamlines and facilitates development projects in a number of ways. First, the Governor may certify a project before the lead agency certifies a final EIR. Second, the environmental review, administrative process, and record of proceedings may be prepared concurrently. Third, the project applicant must agree to pay trial court costs if the lead agency’s certification is challenged. Fourth, to the extent feasible, judicial review of lead agency action must conclude within 270 days once commenced. Finally, the Bill extends the benefits of AB 900 to those projects that were certified by the Governor before AB 900’s expiration and by the lead agency within one year of AB 900’s expiration.

In order to be eligible for streamlined certification, a project must fall into at least one of the following categories. It must be on an infill site, certified as LEED Gold (or better), and able to achieve a 15% improvement in transportation efficiency. Or it must be a clean energy project that either generates power exclusively through wind or solar energy or manufactures equipment used in renewable energy production. Or it must be a housing project on an infill site that will dedicate at least 15% of the development to affordable and low-income housing. Although it may include mixed-use development—assuming at least two-thirds is residential—or transitional housing, no part of a certified housing project may be used for transient lodging, manufacturing, or industrial uses.

Regardless of the category it falls into, the project must meet certain criteria. First, it must result in at least $100 million in investment in California (except for housing projects, which must result in an investment of between $15 million and $100 million). It must also create high-wage and high-skill jobs that help reduce unemployment and encourage apprenticeship training. And, at a minimum, it must not lead to a net increase in greenhouse gas emissions, including from employee transportation. Finally, the project applicant must agree to monitoring and enforcement of its mitigation efforts by the lead agency.

SB 7 aims to boost California’s economic recovery by creating more and better housing and jobs, and doing so in an environmentally sustainable way. As Governor Newsom noted when he signed the legislation, “California’s recovery from the pandemic must tackle the housing shortage that threatens our economic growth and long-term prosperity. Cutting red tape to save time and remove barriers to production helps us meet the urgent need for more housing while creating good jobs and preserving important environmental review.” Indeed, AB 900 had already led to roughly twenty major clean energy and housing projects, 10,000 housing units, and thousands of high paying jobs. Proponents of SB 7 hope its passage will continue this trend.

The Governor’s press release is available here: https://www.gov.ca.gov/2021/05/20/in-san-jose-governor-newsom-signs-legislation-to-fast-track-key-housing-economic-development-projects-in-california/

– Blake C. Hyde

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