Unlicensed Treatment Facility Operating in Violation of Local Zoning Code Not Eligible for Safe Harbor Provisions of Health and Safety Code

Operators of an unlicensed alcohol and drug treatment facility in violation of a city’s zoning ordinance could not avail themselves of the California Health and Safety Code’s safe harbor provisions. City of Dana Point v. New Method Wellness, 39 Cal. App. 5th 985 (2019).

New Methods Wellness is licensed to offer mental health and substance abuse services and residential treatment centers. New Methods housed patients in homes in residential zones in the City of Dana Point. The properties were owned and operated by a different corporate entity, NMW Beds, which imposed 24-hour supervision and provided patients with transportation to New Method’s treatment center. The City zoning ordinance allows only residential uses at each of the properties. The City filed a complaint against New Methods, seeking to abate a nuisance on the grounds that the properties were being operated as unlicensed drug treatment centers in violation of the City zoning ordinance.

Section 9.09.020 of the City’s zoning ordinance declares any non-permitted use in a residential zone a nuisance per se. This means that no proof is required, beyond the fact of the existence of the use, to establish a nuisance. The zoning ordinance enumerates the permitted uses in a residential zone and “any use not expressly allowed is prohibited.” A drug treatment facility is not listed as a permitted use. Thus, the only issue for the appellate court was whether substantial evidence supported the trial court’s finding that the properties were being operated as a part of a drug treatment facility.

However, New Methods attempted to find safe harbor under California Health & Safety Code section 11834.23, which preempts local zoning regulations. Section 11834.23 permits operators of licensed alcohol or drug abuse recovery or treatment facilities that service six or fewer persons to qualify as a residential use of the property. The court did not find this argument compelling. There was no evidence the properties housed six or fewer people. More importantly, while NMW Beds was licensed to operate in other locations in Orange County, it was not licensed to operate on the Dana Point properties.

New Methods also argued that the properties constituted “recovery houses,” which do not require a license. A recovery house is defined as “group living arrangements for adults recovering from alcoholism or drug addiction where the facility provides no care or supervision.” The court also rejected this argument because residents’ lives were highly regulated and subject to a code of conduct. Also, New Methods’ website advertised that patients would receive treatment at the properties.

New Methods also claimed that the zoning ordinance provisions violated its patients’ rights under the ADA and that the City’s abatement action constituted a taking. The court summarily rejected both arguments and concluded there was sufficient evidence to find that New Methods operation of the property was a nuisance per se and subject to an injunction.

New California Law Restricts Municipalities’ Ability to Limit Housing

California Governor Gavin Newsom has signed into law a major set of restrictions on the actions California cities and counties may take to impede housing development. Senate Bill 330  broadly aims to prevent local agencies from putting up new barriers to housing production. The legislation declares a statewide housing emergency and, on that basis, amends state law with a scheduled sunset date of January 1, 2025.

One key reform under SB 330 is its amendment of the Housing Accountability Act. The legislation establishes a new rule that housing projects statewide generally are subject only to the ordinances, policies, development standards and fees (except automatic annual adjustments) that are in effect when the developer submits a “preliminary application.” This newly-defined submission must contain certain information about the project as specified by statute. The legislation’s new protection applies to projects where at least two-thirds of square footage is designated for residential use.

SB 330 also prohibits nearly all cities in urban areas, as well as counties with respect to certain urbanized places, from taking the following actions:

  • Parcels of land where housing is an allowable use may not be downzoned, and general or specific plan land use designations may not be changed to a less intensive use as compared to what was allowed as of January 1, 2018. This provision includes reductions in height, density or floor area ratio, or other types of increased requirements. (However, cities and counties may limit a property to less intensive uses if changes in land use designations or zoning elsewhere ensure no net loss in residential capacity.)
  • Moratoriums or similar restrictions may not be imposed, with certain exceptions, on housing or mixed-use development.
  • Design standards established on or after January 1, 2020 that do not qualify as “objective” standards may not be imposed or enforced.
  • The number of housing units may not be capped, and limitations may not be set on population or how many approvals or permits will be issued for housing, except in predominantly agricultural counties.
  • Housing projects may not be approved that either fail to replace any dwelling units lost to demolition or that will require demolishing units recently occupied by low-income households or other “protected” units, unless specified criteria are met.

Finally, among several additional provisions, SB 330 prohibits cities and counties from holding more than five hearings on a proposed housing project, including any continuances, if the project complies with the applicable, objective general plan and zoning standards in effect when an application is deemed complete.

While SB 330 will limit the ability of cities and counties to restrict housing projects by deviating from established zoning and development standards, many legislators also have expressed interest in more far-reaching reform that would force local agencies to accept housing at higher densities. Any such reform will have to wait until the legislature returns next year.

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.