Sixth District Holds that the Approval of a Term Sheet for a Proposed Stadium Development Is Not a “Project” or “Project Approval” Requiring Prior CEQA Review

The Sixth Appellate District in Cedar Fair, L.P. v. City of Santa Clara (2011) 194 Cal.App.4th 1150 affirmed the judgment of the trial court, sustaining a demurrer to a petition for writ of mandate. The court held that City of Santa Clara and its redevelopment agency’s approval of a term sheet setting forth the basic terms of a proposed transaction to develop a stadium in Santa Clara for use by the San Francisco 49ers football team did not constitute a “project” or a “project approval” that required preparation of an environmental impact report (EIR) under the California Environmental Quality Act (CEQA).

The proposed stadium was proposed to be located on a parcel that was subject to a lease by the redevelopment agency to Cedar Fair, L.P., which used the site as a parking area for an adjacent amusement park. After the City approved the term sheet for the stadium, Cedar Fair petitioned for writ of mandate to compel the city to vacate its approval because no EIR had been prepared pursuant to CEQA prior to that approval. The City demurred to the petition. The City certified a final EIR for the stadium project a few days after Cedar Fair filed its petition.

The court of appeal affirmed the judgment of the trial court, sustaining the demurrer without leave to amend, finding that the term sheet did not constitute a “project” or a “project approval” that required preparation of an EIR under CEQA. The trial court dismissed the petition and entered judgment in favor of the City. Cedar Fair appealed, contending that under CEQA, the approval of the term sheet constituted the approval of the stadium project that had to be preceded by preparation of an EIR pursuant to the Supreme Court’s holding in Save Tara v. City of West Hollywood (2008) 45 Cal.4th 116.

In Save Tara, the City of West Hollywood had approved a preliminary public-private agreement for exploration of a proposed project without first complying with CEQA, but conditioned the city’s obligation to convey the property on satisfaction of CEQA requirements. The Supreme Court concluded that because the preliminary agreement, viewed in light of all the surrounding circumstances including the commitment of significant financial resources, committed the public agency as a practical matter to a “definite course of action” in regard to the project—which the CEQA Guidelines defines as an ‘approval’; in such a case, the simple insertion of a CEQA-compliance condition would not save the agreement from being considered an approval requiring prior environmental review.

Similarly, in this case, Cedar Fair emphasized the high level of detail in the term sheet, the large amount of money already invested by the redevelopment agency in the process of reaching an eventual final agreement, and the fact that the term sheet was put to a public vote by the city council. Thus, Cedar Fair contended, approval of the term sheet served no purpose other than to show that the city had effectively committed itself to the stadium project, which was confirmed, Cedar Fair argued, by subsequent statements made by officials, staff, and representatives of the city.

Under Save Tara, however, the critical question is “whether, as a practical matter, the agency has committed itself to the project as a whole or to any particular features, so as to effectively preclude any alternatives or mitigation measures that CEQA would otherwise require to be considered.” (Save Tara, supra, 45 Cal.4th at p. 139.) The Cedar Fair court found that, although the term sheet was extremely detailed, it expressly only bound the parties to continue negotiating in good faith. The City retained sole discretion to make decisions under the CEQA, including a decision not to proceed with the project. Further, the term sheet created no legal obligations unless the parties reached agreement based on information produced by the CEQA review process. The term sheet also made clear the intent of the parties to not create any binding contractual obligations as to stadium development or to commit any party to a particular course of action. The term sheet recognized that a no-project option was still available. Thus, the court found that commitment to continue negotiations pursuant to the term sheet was unlike the commitment in Save Tara, where West Hollywood contractually bound itself to sell land for private development conditioned on CEQA compliance.

While persons speaking on behalf of the City may have indicated that the City regarded the term sheet as a binding agreement that committed it to the proposed project, as alleged by Cedar Fair, the court concluded the term sheet could not be reasonably construed as creating any contractual commitment by the City to conditionally approve or undertake any aspect of the stadium project because its language was not reasonably susceptible to such an interpretation.