The U.S. Supreme Court held that property owners do not have to comply with state administrative processes to obtain a final decision before bringing a takings claim under 42 U.S.C. § 1983 when the government’s position is clear. Pakdel v. City and County of San Francisco, 594 U.S. __ (June 28, 2021).

Petitioners were partial owners of a multi-unit residential building in San Francisco that was organized as a tenancy-in-common. When purchasing an interest in the property, they agreed to work with the other owners to convert their interests into a condominium-style ownership arrangement. The City approved the conversion on the condition that all non-resident owners, including petitioners, offer their tenants a lifetime lease. Petitioners agreed to the condition but belatedly requested that the City excuse them from executing the lifetime lease or compensate them for the lease. The City refused, and petitioners brought a suit under 42 U.S.C. § 1983 claiming an unconstitutional regulatory taking.

The District Court held that the petitioners’ claim was not ripe because they had not exhausted all remedies in state court. The Ninth Circuit affirmed, despite the holding in Knick v. Township of Scott, which removed the state exhaustion requirements previously a condition to bringing federal constitutional claims. The court reasoned that the holding in Knick did not remove the requirement that there be a “final” government decision on the matter and that the City’s decision was not “final” because petitioners’ request for exemption was untimely and improperly made.

The Supreme Court reversed, citing the “modest” nature of the finality requirement. The plaintiff need only be actually “injured by the Government’s action” and “not prematurely suing over a hypothetical harm.” For takings cases, there is a “final” decision when it is claimed that the regulation has gone “too far” and the court can determine “how far the regulation goes.” In this case there was “no question about the city’s position” regarding petitioners’ claims. In addition, contrary to the Ninth Circuit’s ruling, the petitioner need not comply with all administrative processes to obtain the final decision. Although petitioners may not have properly pursued administrative remedies, there were no other avenues for the government to change or clarify its decision, which meant that the finality requirement was fulfilled — “[a]dministrative missteps do not defeat ripeness once the government has adopted its final position.”

A developer established a probability of prevailing on its claims for malicious prosecution where the evidence showed that the neighboring owner lacked probable cause for pursuing CEQA litigation and acted with malice. Dunning v. Johnson, 64 Cal. App. 5th 156 (2021).

Clews Horse Ranch sued to challenge a decision by the City of San Diego to approve Cal Coast’s construction of a private secondary school adjacent to its commercial horse ranch and equestrian facility. Clews claimed the city’s use of a mitigated negative declaration instead of an EIR violated CEQA because the project would have significant impacts on historical resources, fire hazards, noise, and transportation and traffic. The trial court denied the petition and the court of appeal affirmed, concluding that Clews failed to show there was substantial evidence supporting a fair argument that the project may have a significant effect on the environment.

In the ensuing malicious prosecution action filed by Cal Coast against Clews and its attorneys, the defendants filed an anti-SLAPP motion contending that Cal Coast failed to make a prima facie showing that the defendants pursued the CEQA litigation without probable cause and with malice.

The court of appeal upheld the denial of the anti-SLAPP motion, finding that defendants did not have probable cause for pursuing at least one of their CEQA claims—namely that an EIR was necessary to assess the project’s noise impacts. Under CEQA, the question is whether a project will affect the environment of persons in general, not particular persons, and the only evidence in the record concerning noise levels related to the expected impact on the operation of Clews Horse Ranch. The court rejected defendants’ claim that project noise would adversely affect the surrounding community in general, finding that the cited evidence consisted of speculative and generalized warnings that did not constitute substantial evidence.

The court also found that there “clearly [was] sufficient evidence from which it can be found that Clews Horse Ranch pursued the CEQA Litigation with malice,” an essential element of a malicious prosecution claim. The evidence showed that Clews consistently and aggressively opposed any use and development on the project site. Clews harassed prior owners of the site, restricted prior owner’s access to the property, and “deployed hostile and spiteful behaviors to dissuade site owners from developing their land.” This evidence and reasonable inferences from it constituted a prima facie showing that Clews harbored similar improper motives when pursuing the CEQA litigation.

On the other hand, the evidence did not support a determination that Clews’ attorneys likewise acted with malice. Clews’ improper motives in pursuing the CEQA litigation could not be imputed to the attorneys, and the demonstrated lack of probable cause in bringing the litigation was insufficient by itself to establish malice.

The First Appellate District held that tribal sovereign immunity bars a quiet title action to establish a public easement for coastal access on property owned by an Indian tribe. Self v. Cher-Ae Heights Indian Community, 60 Cal. App. 5th 209 (2021).

The Cher-Ae Heights Indian Community of the Trinidad Rancheria is a federally recognized Indian tribe in Humboldt County, California. The Tribe purchased coastal property in fee simple absolute and applied to the federal Bureau of Indian Affairs to take the property into trust for the benefit of the Tribe. Plaintiffs, two nontribal individuals who used the property to access the beach for recreational purposes, sought to quiet title to a public easement there while the Tribe’s land-into-trust application remained pending. There was no question that once that land was placed into trust, the federal government would hold title for the benefit of the Tribe and be immune to a quiet title action.

The Tribe moved to dismiss the quiet title action for lack of subject matter jurisdiction on the basis of sovereign immunity. An Indian tribe is immune to suit in the absence of waiver or congressional abrogation of a tribe’s immunity, neither of which applied in this case. Plaintiffs instead asked the court to recognize a common law exception to sovereign immunity on the theory that, under common law, sovereigns such as states and foreign governments were not immune to property disputes under a so-called “immovable property exception.”

The court acknowledged that states and foreign sovereigns are not immune to suits regarding real property located outside of their territorial boundaries. It was not persuaded, however, that a common law exception extends to tribes, or that the court should depart from the standard practice of deferring to Congress to determine limits on tribal sovereign immunity.

For one, the immunity possessed by tribes is not coextensive with that of states. The Supreme Court has held that when one state purchases property in another, it becomes subject to that state’s laws pertaining to the property, with the transaction viewed as a private undertaking, not a sovereign one.  But the same principle does not apply to a tribe — unlike with states, the Supreme Court has not limited tribal immunity to traditional sovereign activities as distinct from private commercial ventures.

Among other rationales for its holding, the court observed that tribal land acquisition is a key feature of modern federal Indian policy, and distinguishable from state or federal land acquisition. The court also noted that the facts of this case were simply a “poor vehicle for extending the immovable property rule to tribes.” Plaintiffs claimed neither an ownership interest in the property nor injury, but instead sought to quiet title to an easement based merely on a concern the Tribe might interfere with their access at some point in the future. This concern was speculative in light of assurances the Tribe had given the state that it would preserve coastal access.

A California Court of Appeal held that the Coastal Commission and the Department of Housing and Community Development have concurrent jurisdiction over mobilehomes located in the coastal zone and that proper notice of a public hearing is sufficient to meet notice requirements for approval due to agency inaction under the Permit Streamlining Act.  Linovitz Capo Shores LLC v. California Coastal Commission, No. G058331 (4th Dist. June 25, 2021).

Appellants, who were owners of beachfront mobilehomes, obtained permits from HCD to remodel and add second stories to their structures. After renovations were completed, the Coastal Commission issued notices stating that renovation of their structures was illegal without a coastal development permit and required appellants to either remove the changes or apply for “after-the fact” authorization. Appellants applied for “after-the fact” permits, and the Coastal Commission issued public hearing notices for each application and then held individual hearings. The agency did not make any decisions on the permits following the hearings.

The court first rejected the appellants’ argument that the Coastal Commission did not have jurisdiction to require a coastal development permit in addition to an HCD permit. Although HCD has primary authority over mobilehome permitting under the California Mobilehome Parks Act, the court found that construction of the statute did not preempt the Coastal Act—there were no inherent conflicts between the development provisions of the Coastal Act and the Mobilehome Parks Act, and both statutes could apply concurrently. In addition, it was not dispositive that the Coastal Commission had declined to enforce its authority over previously permitted mobilehome parks in coastal zones.

However, the court held that the applicants did not have to undo their remodeling because their “after-the-fact” permits had been deemed approved under the Permit Streamlining Act due to the Coastal Commission’s failure to act in a timely manner. First, the court declined to overturn the trial court’s finding that appellants did not withdraw their applications due to a lack of substantial evidence to the contrary. Second, the court held that the Coastal Commission provided proper notice that met the standards for “public notice required by law.” It refused to follow a prior case (Mahon v. County of San Mateo, 139 Cal.App.4th 812 (2006)), which held that the public notice must state that the permit will deemed approved if the agency does not act within a specified period. The court disagreed with this interpretation, observing that “the plain language of section 65956(b), does not require an agency’s public notice to include a statement that the permit at issue will be deemed approved if the agency does not act on it within a specified number of days.” The Coastal Commission had provided adequate notice for the public hearing, which was sufficient to meet both statutory and constitutional notice requirements.

The Ninth Circuit Court of Appeals recently invalidated a 2016 rule that required a 30-day notice to affected state fish and wildlife agencies prior to filing a petition to list a species as threatened or endangered under the Endangered Species Act. Friends of Animals v. Haaland, 997 F.3d 1010 (9th Cir. 2021).

Section 4(b)(3) of the Endangered Species Act allows interested persons to petition the Fish and Wildlife Service or the National Marine Fisheries Service to list a species as threatened or endangered. To the maximum extent practicable, within 90 days after receiving a listing petition, the Services must “make a finding as to whether the petition presents substantial scientific or commercial information indicating that the petitioned action may be warranted.” If the Services find that listing may be warranted based on the petition, the Services must then undertake a 12-month review to determine whether listing of the species is warranted.

In 2016, the Services adopted a rule (codified at 50 CFR 424.14) requiring petitioners to provide notice to state fish and wildlife agencies in each state where the species occurs. The notice must be provided at least 30 days prior to submitting a listing petition to the Services. The preamble to the final rule explained that the rule would allow states to submit data and information to the Services during the 30-day period before a petition is filed, and the Services could then consider this state-supplied information in making the 90-day finding on the listing petition.

This case arose from a petition filed by Friends of Animals to list the Pryor Mountain wild horse population as a threatened or endangered distinct population segment. The Fish and Wildlife Service denied the petition in 2017 because the petition did not include proof that Friends of Animals had notified state fish and wildlife agencies at least 30 days prior to submitting the petition to the Fish and Wildlife Service. The U.S. District Court for the District of Montana upheld the 30-day notice rule as well as the Service’s rejection of the listing petition. Friends of Animals appealed to the Ninth Circuit.

The Ninth Circuit evaluated the 30-day notice rule under the two-step framework for “Chevron deference.” First, the court considered whether Congress directly spoke to the precise question at issue. The court found that the ESA was silent as to pre-petition procedures and notice requirements. Next, the court considered whether the agency’s interpretation of the statute was reasonable. The court held that the 30-day notice rule was not a permissible interpretation of the ESA because it was inconsistent with the statute.

The court explained that the plain language of the ESA requires the Services to make a 90-day finding based only on the contents of the listing petition. As such, it would violate the ESA for the Services to solicit and consider outside information, including information from affected states, when making a 90-day finding. The court acknowledged that the ESA permits the Services to establish requirements for the content and procedure of listing procedures. But here, the court explained, the 30-day notice rule created a procedural hurdle that frustrated the purposes of the ESA and “arbitrarily imped[ed] petitioners’ ability to submit—or the Services’ obligation to review—meritorious petitions.”

Evidence about past wildfires and the risk of future wildfires impacting residents near a proposed project does not require the lead agency to prepare an environmental impact report unless there is substantial evidence supporting a fair argument that the project may exacerbate existing wildfire hazards. Newtown Preservation Society v. County of El Dorado, No. C092069 (3rd Dist., June 16, 2021).

The case involved the replacement of a bridge over South Fork Weber Creek in El Dorado County. The county would acquire a temporary easement over a property near the existing bridge to build a temporary evacuation route during project construction. The county prepared a mitigated negative declaration for the project. The MND determined that the project’s hazards impacts would be less-than-significant. In particular, the MND concluded that the project would not impair implementation of or physically interfere with an adopted emergency response plan or emergency evacuation plan, and would not expose people or structures to a new or increased significant risk of loss, injury, or death involving wildland fires.

An organization representing local residents and the owner of the property with the temporary evacuation route filed a petition for writ of mandate, alleging that the county should have prepared an EIR, contending that substantial evidence in the form of testimony by residents and former firefighters supported a fair argument that the proposed project would have significant impacts on resident safety and emergency evacuations in the event of wildfires. The trial court ruled in favor of the county, and the petitioners appealed.

The court determined that the written and oral comments cited by petitioner did not constitute substantial evidence supporting a fair argument that the project may have a significant effect on the environment or may exacerbate existing environmental hazards:

  • Comments from residents discussing their past experiences with wildfires in the area (including difficulties evacuating during prior wildfires) and the area’s susceptibility to future wildfires related to how existing wildfire hazards might impact residents during project construction, but did not support a fair argument that the project may have a significant effect on the environment or may exacerbate existing environmental hazards.
  • Comments asserting that many residents would be trapped if a wildfire occurred during project construction lacked a factual foundation and were mere speculation. The court noted that agencies with expertise in emergencies and evacuations (the County Sheriff’s Office of Emergency Services and the County Fire Protection District) had been consulted and were comfortable with the project plans. The court explained that “lay testimony may constitute substantial evidence when the personal observations and experiences relate to and inform on the impact of the project under consideration.” Here, however, “the comments lacked factual foundation and failed to contradict the conclusions by agencies with expertise in wildfire evacuations with specific facts calling into question the underlying assumptions of their opinions as it pertained to the project’s potential environmental impacts.”
  • Comments from two aerial firefighters expressing concerns about emergency evacuations were speculative lay opinion because the petitioners did not establish that the firefighters had experience or expertise in determining, directing, or effecting ground evacuations.

The court’s opinion provides important clarification in its application of the fair argument standard to lay testimony.

 

 

The California Court of Appeal held that 2016 amendments to the San Diego City Charter did not require the City to obtain voter approval prior to entering into a lease revenue bond transaction with the Public Facilities Financing Authority of the City of San Diego.  San Diegans for Open Government v. Public Facilities Financing Authority of the City of San Diego, No. D075157 (4th Dist., April 19, 2021).

In 2016, San Diego voters approved amendments to the City Charter relating to bond issuance. One such amendment modified Section 90.1 to allow the City Council to authorize the issuance of revenue bonds by City Council vote, as opposed to voter approval, provided the bonds were not paid for from the general fund and the bonds were used to fund water facilities.

Subsequently, the City entered into a lease revenue bond transaction with the Financing Authority to fund the construction of a parking lot and other improvements in Balboa Park. Per the structure of the transaction, the City would lease the land to the Financing Authority for a nominal fee, the Financing Authority would sell bonds to fund the improvements, and the Financing Authority would lease the land and improvements back to the City. The bonds sold by the Financing Authority were secured by the City’s lease payments. For payment, the City planned to put the money generated from the parking lot into the City’s general fund and pay the lease payments from the general fund.

Following the City Council’s authorization of the transaction without voter approval, San Diegans for Open Government (“SanDOG”) brought suit challenging its validity under Section 90.1, as amended in 2016. SanDOG claimed the transaction was invalid because the City was paying for the bonds out of the general fund, the bonds were not going to be used for any of the specified water activities, and the City had not obtained voter approval.

The court held that the transaction did not violate Section 90.1 because Section 90.1 did not apply to Financing Authority-issued bonds or lease revenue bonds. The court reached its decision after evaluating the historical context of the Charter and the ballot materials provided to voters prior to the amendments’ approval. Historically, prior iterations of Section 90.1 had dealt with funding mechanisms for water facilities, and the 2016 amendments continued this trend. The use of the Financing Authority for issuance of lease revenue bonds was a well-established, distinct issue, indicating that the amendments did not cover these types of bonds.

Additionally, the ballot materials provided to voters exclusively discussed “city-issued bonds,” and did not mention the Financing Authority. The omission of any mention of the Financing Authority indicated that voters did not contemplate the Financing Authority when voting. Further, the court held that bonds issued by the Financing Authority were not under the umbrella of “city-issued bonds” because those were not sold by the City and did not require the City to pay back investors. Even though governed by members of the City Council, the Financing Authority was a separate entity from the City, in that they did not share debt or bond obligations. Thus, the court held that Section 90.1 did not apply to Financing Authority-issued bonds.

The court held that even if Section 90.1 did apply to Financing Authority-issued bonds, the transaction still would not be in violation of the Charter because the Charter did not apply to lease revenue bonds. Relying again on historical context and ballot materials, the court found that, historically, revenue bonds were not considered to include lease revenue bonds. The court further found that the description of revenue bonds in the ballot materials as “bonds that are payable from enterprise funds” did not encompass the lease revenue bonds at issue because the City was making the lease payments from its general fund and the City did not pledge its lease payments to the bonds. Thus, Section 90.1 did not apply to the lease revenue bonds in this transaction.

In short, because Section 90.1 applied to neither the Financing Authority-issued bonds nor the lease revenue bonds, the transaction was not within the scope of Section 90.1 and was valid without voter approval.

A California Court of Appeal held that longstanding use of a landowner’s property for access and parking by residents of the adjacent lot had established a prescriptive easement. Husain v. California Pacific Bank, 61 Cal.App.5th 717 (2021).

For many years the landowner’s and neighbor’s properties had been held under common ownership and used for residences. One property (the “El Camino” property) was developed with a large apartment complex and an underground parking garage, while the other property (the “Willow” property) was developed with a duplex and a surface parking lot.  Former owners had obtained local approval of a nonconforming use to allow tenants of the apartment complex to utilize off-site parking on the Willow lot.  In 2011, the former owner defaulted on its mortgages and the El Camino and Willow properties were sold to different lienholders at trustee sales, after which tenants of the El Camino apartments continued to use the Willow property driveway for access and parking consistent with past use despite the severance of ownership.  In 2017, plaintiff acquired the Willow property and shortly thereafter brought a quiet title action against the bank owner of the El Camino property, who cross-complained for a prescriptive easement.

Under state common law, a person establishes a prescriptive easement over another’s property through open, notorious, continuous and adverse use of the property for an uninterrupted period of five years.  The owner of the servient estate must have at least constructive notice of the others’ use, and such use must be made without express or implied recognition of the owner’s property rights.  At trial, plaintiff attempted to defeat a prescriptive easement finding by arguing that the residential tenants’ use was “permissive,” citing precedent that a permissive use survives a change in ownership until a new owner unequivocally repudiates the prior permissive use.

However, the Court of Appeal faulted plaintiff’s argument on dual grounds.  First, because a property owner cannot hold an easement against itself, the court found that the prescriptive period did not begin to run until 2011 when the dominant and servient estates were severed via the trustee sales.  The court also highlighted evidence in the record that the former owner characterized the El Camino owner’s use of the Willow property as a “trespass” during foreclosure proceedings in 2011.  Moreover, the court emphasized that whether or not a use of property is permissive or adverse is a question of fact for the trial court and no abuse of discretion had been shown.

Last, the Court of Appeal found equitable support from the indemnification terms of plaintiff’s purchase agreement.  When it purchased the Willow property in 2017, plaintiff signed an indemnification and hold harmless agreement that cited “potential easement issues” and identified with specificity the known past use of the Willow property by tenants of the El Camino property.  The agreement further stipulated that “buyer is on notice to conduct its own diligence and legal review of these issues.”  Accordingly, where plaintiff had actual notice of the potential easement prior to its purchase of the property and would have had the opportunity to account for the easement in negotiations of the purchase price and other recourse terms, equitable considerations reinforced the determination that a prescriptive easement had been established.

A city’s ban on short-term vacation rentals in the coastal zone constitutes “development” under the California Coastal Act. Therefore, the Coastal Commission must first approve a coastal development permit, an amendment to the city’s certified local coastal program, or an amendment waiver before such a ban can be imposed. Kracke v. City of Santa Barbara, 63 Cal. App. 5th 1089 (2021).

Until 2015, the City of Santa Barbara allowed short-term vacation rentals as long as the owner registered the unit with the city, obtained a business license, and paid transient occupancy taxes. In 2015, the City Council directed its staff to regulate short-term rentals as hotels under the city’s zoning code. Because the zoning code did not permit hotels in most residential districts, the city’s action was effectively a ban on short-term rentals in most residential areas. As a result, the number of short-term rentals in the coastal zone dropped from 114 to 6. The owner of a company that managed short-term rentals filed a petition for writ of mandate challenging the city’s new policy.

The Coastal Act requires a coastal development permit for any “development” in the coastal zone. “Development” is defined in the statute to include changes in the density or intensity of use of land and changes in the intensity of access to water. Courts have interpreted the term broadly to encompass any impediments to access, not merely physical alterations.

The court of appeal held that the city’s change in policy “necessarily” changed the intensity of use of and access to land and water in the coastal zone. Accordingly, the city was required to first obtain Coastal Commission’s approval, either through a coastal development permit, an amendment to its certified local coastal program, or an amendment waiver.

The court explained that the reduction in the number of short-term rentals in the coastal zone was inconsistent with the Coastal Act’s goal of improving the availability of lower cost accommodations along the coast. Further, the court explained, its decision was consistent with Greenfield v. Mandalay Shores Community Association, 21 Cal. App. 5th 896 (2018), in which the court of appeal held that a homeowner’s association’s ban on short-term vacation rentals was “development” under the Coastal Act because it changed the intensity of use and access to single-family residences in the coastal zone.

The court’s decision is also consistent with the Coastal Commission’s policy. In 2016, the Coastal Commission sent a guidance letter to local governments explaining its position that regulation of short-term vacation rentals constituted development under the Coastal Act. (The Coastal Commission filed an amicus brief supporting the petitioner.)

The court’s decision in this case reinforces the broad powers of the Coastal Commission over local policies that impede access to the coastal zone. This case, together with the court’s 2018 decision in Greenfield, hold that any restrictions on short-term vacation rentals in the coastal zone—whether by a private entity or a local government—are subject to the Coastal Act and must be approved by the Coastal Commission.

A court of appeal invalidated a water district’s adopted rate increases, concluding that the district failed to meet its burden under Proposition 218 of establishing that the increases did not exceed the cost of providing the water service. KCSFV I, LLC v. Florin County Water District, No. C088824 (3rd Dist., May 28, 2021).

Following a hearing, the Board of Directors of the Florin County Water District voted to increase its water rates by 50 percent. Data presented by staff at the hearing showed that revenues would exceed expenditures in each of the four years following the rate increase, culminating in a net profit of almost $1.4 million in the fourth year.

The Court of Appeal upheld plaintiffs’ challenge to the rate increase, finding that the District failed to prove that the amount of the increase did not exceed the cost of providing the water service. Under Proposition 218, revenues from water charges may not exceed either “the cost of providing the property-related service” or the “proportional cost of the service provided to [each] parcel.” Art. XIII D, § 6(b). In this case, nothing in the administrative record explained either how the net revenue the District would derive from the rate increase was related to the cost of providing the property-related service or how the water charge was proportional to the cost of providing service to each parcel. “In simple terms,” the court said, “the net revenue appears to be a profit after expenses are deducted from revenues.”

The District argued that the rate increase was justified because the District had been operating at a deficit and drawing funds from reserves to meet its obligations and therefore “opted to increase rates to allow for the rebuilding of meaningful reserves.” While generally accepting the proposition that reserves may form a component of a property-related charge, the court found nothing in the record that identified or quantified historic or projected reserves needed for the District’s services or showed that the projected net revenue was pledged for any particular purpose. Instead, the court said, “the district asks us to take an attorney’s argument as evidence, which we cannot do.”

The court also rejected the District’s argument that plaintiffs had failed to exhaust administrative remedies because they had not presented their objections and arguments at the hearing required under Proposition 218. Assuming without deciding that a Proposition 218 hearing generally constituted an administrative remedy that needed to be exhausted, the court found the requirement inapplicable here because the District had not complied with Proposition 218’s notice requirements. The court ruled that Proposition 218 required the agency proposing a rate increase “to provide ratepayers with notice of the actual amount of the rate increase pertinent to [them] to allow the ratepayer a meaningful opportunity to determine whether to consent to or oppose it.”

In this instance, the court said, the District had provided only hypothetical examples of how a ratepayer’s charges would increase over time. This “hide-the-ball approach to the amount of the rate increase” was incongruent with “the constitutional obligation imposed upon the district to calculate the amount of the charge to be imposed upon each parcel and to provide ratepayers with notice of such amount.” Because the District’s notice did not comply with the procedural requirements of Proposition 218, plaintiffs were excused from exhausting any administrative remedy that might otherwise apply.