Award of Attorney’s Fees Warranted Where Plaintiff Lost on Most Claims But Achieved Primary Litigation Objective

A plaintiff challenging a city council’s interpretation of a local ballot measure was entitled to recover costs and attorney fees when successful on only one cause of action because the primary relief sought was granted. Friends of Spring Street v. Nevada City, 33 Cal.App.5th 1092 (2019).

In 1991, the Kendalls received a Conditional Use Permit to operate a bed and breakfast in a residential neighborhood. In 1994, Nevada City voters passed Measure G, which repealed the zoning code provision that allowed for B&Bs in residential zones. The Kendalls continued to operate the B&B for several years and then sold it to a couple who used the property as a private residence but continued to renew the B&B’s business license. The property was later sold to the real parties in interest, who applied for a Conditional Use Permit to resume operating the B&B. The City Council granted the Conditional Use Permit, finding that the intent of Measure G was to limit new B&Bs, not existing B&Bs.

Plaintiff challenged the Council’s decision on multiple grounds, including the claim that the Council incorrectly interpreted Measure G. The court upheld the latter claim, concluding that Measure G rendered existing B&B’s nonconforming uses and thus the owners were not entitled to resume operating the B&B as a matter of right. It rejected plaintiff’s remaining claims. The trial court also denied plaintiff’s request for costs and attorney fees, reasoning that there was no prevailing party because plaintiff prevailed on only one of five causes of action and did not enforce an important right and public interest sufficient to justify fees under Code of Civil Procedure § 1021.5 (the private attorney general doctrine).

The appellate court reversed the prevailing party determination, concluding that plaintiff achieved its primary litigation objective when the court ordered the City to set aside its determination regarding the intent and effect of Measure G. The court held that plaintiff’s failure to succeed on the other causes of action was not a sufficient reason to deny fees and costs. The court also disagreed with the trial court’s determination that plaintiff’s action had not enforced an important right and public interest, noting that correct interpretation of zoning laws is a “vital public interest” necessary to preserve the integrity of a general plan. Finally, the court rejected the City’s argument that plaintiff could not recover fees under the private attorney general doctrine because it had a personal economic interest, finding plaintiff’s personal motivation irrelevant.

Agency Inaction Is Not a CEQA Project

An agency’s failure to maintain a historic building—“demolition by neglect”—is not a “project” subject to CEQA. Lake Norconian Club Foundation v. California Department of Corrections and Rehabilitation, No. A154917  (First District Court of Appeal, Sept. 13, 2019).

The Lake Norconian Club is a former hotel that is listed on the National Register of Historic Places. The hotel building has been owned by the State of California since 1962. The building, which is next to a state prison, had been used by the Department of Corrections and Rehabilitation for administrative offices until 2002 but has been left vacant since then due to its unsafe seismic condition.

The Lake Norconian Club Foundation sued, claiming the Department’s ongoing failure to maintain the hotel building and protect it from further damage was tantamount to a decision to demolish it.

The court of appeal held that the Department’s failure to act was not a “project” subject to CEQA, even if environmental consequences might result from that inaction. The court explained that CEQA defines a “project” as an “activity” that (1) may cause direct or indirect physical change in the environment and (2) is “directly undertaken,” authorized, or supported by a public agency. Agency inaction, inherently, cannot be an “activity directly undertaken by an agency.” Treating inaction as a project would also make it difficult to apply a statute of limitations, as no particular date could be assigned to an agency’s failure to act.

Recognizing that no case has previously addressed this issue, the court also looked to NEPA—CEQA’s federal counterpart—for guidance. The court noted that federal courts have repeatedly held that an agency’s inaction is not an “action” subject to NEPA. The court recognized that a federal regulation applies NEPA to an agency’s failure to act when the agency had a mandatory duty to do so, but even if such a rule applied in the CEQA context, the Department had no mandatory duty to maintain the hotel building.

California Supreme Court Clarifies What Is a “Project” Subject to CEQA

The California Supreme Court clarified what activities are subject to CEQA in its recent decision in Union of Medical Marijuana Patients, Inc. v. City of San Diego, No. S238563, 2019 WL 3884465 (Aug. 19, 2019). First, the court held that enactment of a zoning ordinance is not necessarily a project in all circumstances. Second, the court held that when determining whether an activity is a project, a lead agency must consider whether the activity is theoretically capable of causing environmental impacts, not whether it will actually cause environmental impacts.

In 2014, the City of San Diego enacted an ordinance that regulated the establishment of medical marijuana dispensaries in the city. The city determined that the ordinance was not a project subject to CEQA. Union of Medical Marijuana Patients challenged the city’s adoption of the ordinance, arguing that it was a project subject to CEQA and that the city should have analyzed its environmental impacts. As we previously reported, the court of appeal rejected UMMP’s claims. The California Supreme Court granted UMMP’s request that it review that decision.

The first question before the Supreme Court was whether all zoning ordinances are necessarily projects subject to CEQA under section 21080 of the statute. Section 21080 states that CEQA applies to “discretionary projects” carried out or approved by a public agency, and lists examples of discretionary actions that CEQA can apply to, including enactment and amendment of zoning ordinances. UMMP argued that inclusion of zoning ordinances on this list means all zoning ordinances are necessarily “projects” that are subject to CEQA. The court disagreed, based on section 21065 of the statute, which defines a “project” as “an activity which may cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment.” A zoning ordinance is not a project subject to CEQA unless it meets this test.

The court concluded, however, that San Diego’s medical marijuana dispensary ordinance qualified as a project because it was capable, at least in theory, of causing a reasonably foreseeable indirect physical change in the environment. The court explained that when making an initial determination as to whether an activity is a project, the lead agency’s analysis should be limited to the effects that the activity is capable of causing, not the impacts that it actually will cause. Applying this standard, the court determined that the city’s ordinance—which would allow a sizable number of new retail businesses of a type not previously permitted in the city—could foreseeably result in new retail construction to accommodate the businesses, and could cause a citywide change in vehicle traffic patterns among the businesses’ customers, employees, and suppliers.

The court’s decision will likely result in agencies having to undertake an analysis of a broader range of activities under CEQA based on their potential to cause environmental impacts. As the court explained, the decision whether an activity will actually result in environmental impacts should be made in connection with either a categorical exemption determination or in an initial study, not at the outset of the process, when the lead agency determines whether the activity is subject to CEQA in the first place.

Regulation Finalizes Repeal of Obama-Era Clean Water Rule

A new final regulation issued on September 12, 2019 by the Environmental Protection Agency and the Army Corps of Engineers repealed the Obama administration’s 2015 “Clean Water Rule,” but did little to clear up longstanding confusion over the scope of federal authority and jurisdiction under the Clean Water Act. The current regulation simply repeals the 2015 rule, without any replacement, with the result that the pre-existing Clean Water Act regulations and guidance continue to apply until there is new regulatory guidance in place. For a discussion of the new final rule and the reasons for repeal of the 2015 rule, see our Update by Marc Bruner.

City Not Required to Evaluate Impacts of Loss of Rental Units from Already-Vacant Building

A lead agency was not required to evaluate the housing-related impacts of a proposed hotel in a vacant building that was formerly used for rental housing. Hollywoodians Encouraging Rental Opportunities v. City of Los Angeles, 37 Cal. App. 5th 768 (2019).

In 2009, the owner of an apartment building with 18 rental units filed an application with the City of Los Angeles to demolish the building and replace it with a 39-unit condominium building. The City Council approved a mitigated negative declaration for that project. Four years later, the building owner withdrew the building’s 18 units from rental housing pursuant to the Ellis Act, and the City approved demolition of the building. The developer was unable to obtain financing for the condominium project, however. In 2015, the owner submitted an application to the City to convert the vacant building into a 24-room boutique hotel. The City adopted an MND and approved the hotel project.

At issue in the case was whether the City should have prepared an EIR to evaluate the cumulative effect of the project and similar related projects on the loss of rent-stabilized housing units and the displacement of rent-stabilized tenants.

The court held that the baseline for the project was a vacant building, not a tenant-occupied rental property. Measured against that baseline, there was no fair argument that the project would have an adverse impact on the supply of rent-stabilized housing in the area or on displacement of tenants. The court explained that the baseline is generally the conditions at the time the lead agency commences its environmental analysis. In this case, when the City commenced its environmental analysis for the proposed hotel project in 2015, the property consisted of a vacant building that had been withdrawn from the residential rental market two years earlier independently of the hotel project.

The court further explained that there was no evidence in the record that the hotel project should have been analyzed as part of the 2009 condominium project. “The record reflects that the subject property was removed from the rental market pursuant to the Ellis Act in 2013, to enable the building to be demolished and replaced with a condominium project. After that plan failed for lack of financing, the instant Project was proposed to repurpose the property as a boutique hotel. There is nothing to suggest that the instant Project was ‘a reasonably foreseeable consequence of the initial project’ . . . or that the initial study and 2015 MND were an end run around CEQA.”

Finally, the court held that the City was not required to evaluate the cumulative impacts of the hotel project on housing and displacement, because the project would not have any individual adverse impact on the supply of rent-stabilized or displacement of tenants.

Court Decision Compounds Confusion Over Scope of Clean Water Act Jurisdiction

A decision by the U.S. District Court for the Southern District of Georgia issued on August 21, 2019, highlights the continuing confusion over the definition of “waters of the United States” under the Clean Water Act. The decision declared the Obama administration’s 2015 “Clean Water Rule” to be an impermissible construction of the statutory language and remanded the matter to the Environmental Protection Agency and Army Corps of Engineers for further rulemaking proceedings. The case is one of numerous challenges to the 2015 Rule moving through courts across the country. The result is a muddled patchwork under which the 2015 Rule has been prevented from taking effect in 27 states but applies in 22 other states and the District of Columbia. For detailed background on the current quandary, the importance of the Georgia district court’s decision and the implications for what comes next, please see our Update by Marc R. Bruner, Christian Termyn and Rachael Rutkowski.

Federal Agencies Issue Major Changes to Endangered Species Act Regulations

The U.S. Fish and Wildlife Service and National Marine Fisheries Service has issued a set of three new final rules that substantially revise regulations implementing the Endangered Species Act. The new rules change the criteria and procedures for (1) establishing protections for “threatened” species; (2) the listing and delisting of species and the designation of critical habitat; and (3) the interagency consultation process under Section 7 of the ESA, which is used to determine whether a federal action would jeopardize a listed species’ continued existence or result in an adverse modification of a listed species’ designated critical habitat. As described in our prior update, the FWS and NMFS published proposed rules on these three topics on July 25, 2018. Our complete report on the proposed changes, by Donald Baur, Marc R. Bruner,  Bradley H. Oliphant  and Christian Termyn is available here.



EPA Proposes Narrowing of Water Quality Certification Authority Under Clean Water Act

The Environmental Protection Agency has issued a lengthy proposed rule clarifying the substantive and procedural requirements for water quality certifications under Section 401 of the Clean Water Act. EPA Administrator Andrew Wheeler announced that the changes are “intended to increase the predictability and timeliness of Section 401 certification by clarifying timeframes for certification, the scope of certification review and conditions, and related certification requirements and procedures.” The proposed rule would significantly narrow the authority of states and Indian tribes when acting on Section 401 certification requests. Our complete report on the proposed changes, by Jeffrey (Jeff) L. Hunter, Marc R. Bruner and Christian Termyn is available here.

EIR’s Project Description May Present Alternative Development Options and the Agency May Approve A Variant of an Analyzed Alternative

An EIR’s project description may identify alternative development schemes proposed for a single project, and the agency may approve a modified version of the project that incorporates elements of one of the alternatives reviewed in the EIR. South of Market Community Action Network v. City and County of San Francisco (2019) 33 Cal.App.5th 321.

Plaintiffs challenged the City of San Francisco’s approval of a four-acre mixed-use development in downtown San Francisco. The EIR’s project description laid out two options for the project — an “office scheme” and a “residential scheme.” The overall gross square footage was substantially the same in both schemes, with varying mixes of office and residential uses.

While plaintiffs alleged numerous violations of CEQA, the key issue on appeal was the adequacy of the EIR’s project description. Plaintiffs asserted the EIR failed to provide an accurate, stable and finite description of the project claiming the two alternative schemes were “confusing” and hampered the public’s ability to understand what project had actually been proposed and analyzed.

The appellate court disagreed, finding that the EIR described a single project — a mixed-use development involving the retention of two historic buildings, the demolition of other buildings on the site, and the construction of four new buildings — with two options for different allocations of residential and office units. The project description did not fluctuate during the EIR process, nor, contrary to plaintiffs’ arguments, did the description present a “misleadingly small fragment of the ultimately approved project.” The description, the court concluded, was not curtailed, misleading or inconsistent; instead, “it carefully articulated two possible variations and fully disclosed the maximum possible scope of the project” and thereby “enhanced, rather than obscured, the information available to the public.”

Plaintiffs also contended the City violated CEQA because the Final EIR selected a proposed plan based on neither the office scheme nor the residential scheme, but a “revised” project that modify one of those schemes by retaining one of the buildings that would have been demolished. But the court noted that plaintiffs had failed to identify any component of the adopted project that had not been analyzed in the EIR or been subject to public comment. It pointed out that “The CEQA reporting process is not designed to freeze the ultimate proposal in the precise mold of the initial project; indeed, new and unforeseen insights may emerge during investigation, evoking revision of the original proposal.” It added that the point of requiring an EIR to evaluate alternatives was to allow consideration of options that may be less harmful to the environment. The City’s decision to incorporate  elements of one of the proposed alternatives was intended to address environmental concerns, implementing  one of the key purposes of the CEQA process – to reduce or avoid environmental impacts whenever feasible.

Plaintiffs’ numerous other CEQA claims were also rejected. Reviewing for abuse of discretion, the court held the EIR properly analyzed cumulative impacts and impacts related to traffic, wind, shadow and shade, and open space. The EIR also reflected the required “good faith effort” at disclosure in its analysis of the project’s consistency with area plans and policies.

Location Exception to CEQA’s Categorical Exemptions Applies Only to Designated Environmental Resources Affected by The Project

The location exception to CEQA’s categorical exemptions does not apply to earthquake and landslide hazard zones, as they are not “environmental resources” that would be affected by a project. Berkeley Hills Watershed Coalition v. City of Berkeley, 31 Cal.App.5th 880 (1st Dist. 2019).

The City of Berkeley approved construction of three single-family homes in the Berkeley Hills. The city found the projects exempt from CEQA under the Class 3 exemption, which applies to the “construction…of limited numbers of new, small…structures,” including “up to three single-family residences” in “urbanized areas.” (CEQA Guidelines, § 15303).

Plaintiffs Berkeley Hills Watershed Coalition and Center for Environmental Structure sued to challenge the city’s approvals claiming the exemption was barred by the “location” exception to the categorical exemptions. The location exception applies if “the project may impact on an environmental resource of hazardous or critical concern where designated, precisely mapped, and officially adopted pursuant to law by federal, state, or local agencies.” (Guidelines, § 15300.2(a)) Plaintiffs argued that, because the projects were located in an Alquist-Priolo Earthquake Fault Zone and mapped by the California Geologic Survey as a potential earthquake-induced landslide area, the projects would affect environmental resources of hazardous concern.

The superior court ruled for the city and the appellate court upheld that decision.

The court of appeal held that the location exception does not apply to earthquake or landslide hazard zones because they are not “environmental resources,” relying on the dictionary definition of the term “resource” — a “natural source of wealth or revenue,” or a “natural feature or phenomenon that enhances the quality of human life.” The Seismic Hazards Mapping Act and the Alquist-Priolo Earthquake Fault Zoning Act were not enacted to protect a sensitive environmental resource, but to protect human safety and to prevent economic loss. Further, the court noted that the purpose of CEQA is to analyze a project’s impact on the environment, not the impact of environmental conditions on the project or its residents. While the plaintiffs might have shown the environment might risk harm to the projects, they failed to show that the projects might risk harm to the environment.