On July 8, 2013, the Fifth District of the California Court of Appeal issued Citizens for Ceres v. Super. Ct. of Stanislaus County (Case No. F065690 (Cal. Ct. App. 5th, July 8, 2013)) (Ceres), a perplexing opinion holding that pre-project approval communications between the agency conducting California Environmental Quality Act (CEQA) review and the project applicant are not protected by the attorney-client privilege. Ceres disagrees with California Oak Foundation v. County of Tehama (Tehama), 174 Cal.App.4th 1217 (2009), an important 2009 Third District decision that held that communications between agency and project applicant lawyers were protected under the attorney-client privilege's "common interest doctrine." The Ceres case expressly disagrees with Tehama to the extent the Third District opinion has been interpreted to be applied the attorney-client privilege prior to project approval.
We believe that Ceres is wrongly decided and presents an appellate court split of opinion. The case presents a cartoonish caricature of scheming developers and hapless lead agencies, overreaches based on the facts and mischaracterizes CEQA's informational purpose by conflating a lead agency staff's obligation to create a legally sufficient environmental impact report (EIR) with the agency's decision-maker (often elected officials) role in deciding whether to approve or disapprove a project and whether to accept, reject or modify mitigation measures included in staff-prepared (or applicant-prepared) CEQA documents.
We believe that given this appellate district split, under California rules of stare decisis, superior courts and other appellate courts must now decide which case to follow. See Auto Equity Sales, Inc. v. Superior Court, 57 Cal. 2d 450, 456 (1962) ("where there is more than one appellate court decision, and such appellate decisions are in conflict," the superior court "can and must make a choice between the conflicting decisions"). Until Ceres is depublished or overturned by the California Supreme Court, lead agencies and project proponents should be aware of its possible impact, particularly within the Fifth District, where the superior courts may be more likely to follow this decision. See McCallum v. McCallum, 190 Cal.App.3d 308, 315 (1987) (noting that notwithstanding the fact that trial courts can choose among conflicting appellate decisions, "a superior court ordinarily will follow an appellate opinion emanating from its own district even though it is not bound to do so"). Given the Ceres opinion's dubious reasoning on multiple fronts, we believe public policy supports the use of the common interest doctrine in preparing CEQA documents and that the Tehama opinion should continue to be followed.
The Common Interest Doctrine and theTehama Case
The attorney-client privilege and work product privilege is usually waived for information voluntary disclosed to a third party. Under the California Evidence Code, however, the "common interest doctrine" preserves the privilege when an attorney's discloses to a third party information reasonably necessary to accomplish the purpose for which the lawyer was consulted. The common interest doctrine typically requires that the attorney and the third party possess a common interest in a matter of joint concern.
In Tehama, the Third District addressed this issue in the CEQA context, holding that materials relating to CEQA compliance shared by the lead agency's counsel with the outside counsel were protected by the attorney-client privilege. The court reasoned that the agency's attorney disclosing advice on CEQA compliance to the project applicant's attorney in a "joint endeavor to defend the EIR in litigation can reasonably be said to constitute involvement of third persons to whom disclosure is reasonably necessary to further the purpose of the [original] legal consultation." Although certain aspects of the parties’ interests may diverge, the court concluded that the agency and the project applicant had a common interest in a matter of joint concern, and the communication was in furtherance of the purpose of the initial legal representation (i.e., producing a legally defensible CEQA document). Thus, the disclosure between attorneys was privileged.
Reliance on Tehama and the use of the common interest doctrine in preparing CEQA documents has become an established process in preparing legally sufficient CEQA documents. It allows the lead agency attorney and project applicant attorney to freely exchange information that leads to a more factually accurate and legally defensible document. It should be noted that the CEQA document prepared by staff informs, but does not control, the decision-maker's ultimate determination regarding project approval and appropriate mitigation.
Ceres Holds That Pre-Project Approval Communications Between Agency and Applicant Are Not Privileged
In the Ceres decision, the Fifth District Court of Appeal declined to limit its ruling to the specific facts of the case, and instead issued a sweeping decision that expressly disavowed Tehama as applied to all communications between an agency and the applicant made prior to project approval. In Tehama, which involved the challenge of the county's approval of an EIR for an approximately 3,000-acre-specific-plan, at issue were four documents the county claimed were subject to attorney-client privilege. Those documents were work product sent to the county by an outside law firm retained to provide CEQA advice. In Ceres, which involved the challenge of an EIR for land-use approvals necessary to build a shopping center anchored by a Wal-Mart store, more than 3,000 excluded documents were at issue. There was no correspondence with the applicant in the record, and based on the privilege log, the sender and recipient of the document were not always clear.
Where the Tehama court discouraged the superior courts from taking "a crabbed view" of the common interest doctrine, the Ceres court expressly limited that doctrine, holding that although the agency and project proponent may have a joint concern in defending an environmental document after a project is approved, prior to approval these two parties have divergent interests that do not allow for the use of the common interest doctrine. The Ceres court stated: "It is important to be clear at the outset that the common interest, if there is any, is in the creation of a legally defensible environmental document that supports the applicant’s proposal. There is no point in asking, as the city and developer in this case would have it, whether the applicant and agency have a common interest simply in the development of a legally defensible environmental document. This is because the developer has no interest in the development of an environmental document that does not support the developer’s proposal" (emphasis added). This divergent interest, theCeres court found, disqualified the parties from having a common interest.
Ceres Case Rests on Misunderstanding of CEQA and Unsupported Opinion
The Ceres approach is problematic because: (1) it conflates staff-managed CEQA document preparation with decision-making; (2) it misstates the purpose of CEQA and assumes undue influence by the project proponent, even though CEQA designates the lead agency as the document preparer for its own projects (creating an inherent conflict that the court did not consider) and the legislature has explicitly blessed the practice of applicant-prepared CEQA documents; and (3) CEQA legally mandates independent evaluation by lead agencies, so the court's assumption that lead agencies routinely fail to undertake such an evaluation is unsupported opinion undermining decades of established administrative practice.
The Ceres court incorrectly equates the common interest between the project applicant and the agency to prepare a legally sufficient EIR with agency pre-commitment to supporting the project. In so doing, the Ceres court conflates the agency's separate legal requirement to comply with CEQA with the actual project approval. Under CEQA, it is important to note that EIRs are not advocacy statements for or against a project, but rather exist to provide information to the public and the decision-maker. As allowed by the statute and guidelines, a draft environmental document may be prepared by agency staff or project applicants so long as it is reviewed by the agency and ultimately reflects the agency's independent judgment (14 CCR §15084). Under CEQA, it remains the requirement of the lead agency decision-maker to reach an independent judgment on the sufficiency of the CEQA document and ultimately determine whether to approve the project as a whole. Moreover, even if the CEQA document is "favorable" to the project and concludes that the project does not result in a significant impact, this does not equate to decision-maker support for a project. It is possible to have a legally defensible CEQA document but fail to obtain project approval.
The Ceres court opinion that privileged correspondence between the lead agency and applicant attorneys results in the loss of decision making objectivity fails to recognize that lead agencies are specifically tasked with preparing their own CEQA documents when they are also the project proponent. Under the logic of the Ceres court, when the lead agency is the proponent, no attorney-client privilege should attach, because the lead agency will lose its objectivity. Yet, the Ceres court specifically provided that in general, CEQA did not undermine the agency's attorney-client privilege. Thus, the reasoning underlying the Ceres opinion is inconsistent. The court's assumption that lead agencies objectivity is swayed by privileged communications by a party who has a goal to support the project, appears to conclude that agencies routinely fail to undertake an objective CEQA evaluation. This conclusion is unsupported opinion and represents a huge judicial overreach into established administrative agency practice.
Ceres Is Overbroad and Unduly Limits Common Interest Doctrine
The Ceres court reached an overbroad conclusion on the basis of an extreme factual situation. In Ceres, the lead agency withheld over 3,000 communications without showing that these documents were exchanges between attorneys, thereby raising doubt as to whether the privilege should attach. Instead of limiting its holding to an inquiry of the use of the doctrine in this particular instance, however, the holding in Ceres sacrifices the common interest doctrine generally for all pre-approval CEQA communications between agency and applicant attorneys. To be sure, the common interest doctrine can be abused, as it may have been in Ceres. However, certain communications with the project applicant are certainly and properly "reasonably necessary" to inform the legal sufficiency of CEQA documents, and those communications are and should be privileged, whether or not the ultimate project is approved.
As discussed above, the common interest doctrine merely requires that there be a common interest between the parties. It does not, as Ceres suggests, require that the two parties have interests that are completely, or even mostly, aligned. Indeed, as Ceres concedes, cases have recognized that the common interest doctrine may apply between parties having interests that are partially common and partly opposed. See OXY Resources California LLC v. Superior Court (2004) 115 Cal.App.4th 874, 888 (parties who oppose one another in litigation but are able to join forces on a particular issue fall under the common interest doctrine).
During the preparation of a CEQA document, a project applicant and an agency have a shared interest in supporting a legally defensible environmental document, regardless of whether the project is approved. Although there are certainly times when the interests of the two entities diverge, it is a logical error to conclude that this diversion of interests results in the parties never having a common interest. That the applicant may be concerned with the furtherance of the project, and the agency is concerned primarily with objective analysis of the project's environmental impacts, in no way precludes both entities from having another common interest of joint concern that is sufficient to meet common interest doctrine requirements and thus support a claim of privilege. It also in no way undermines the legal requirement for the agency decision-maker to independently review the CEQA document and then reach its own determination, separate from CEQA, on whether to approve the project.
Implications for Project Proponents
If followed, the Ceres case will decrease administrative efficiency and heighten the costs and burden of the CEQA process, resulting in more problematic CEQA documents and increasing the time, expense and burden of complying with CEQA.
We believe that Ceres arguably creates an unresolved split between the Third and Fifth District Courts of Appeal, so California superior courts must decide whether to follow Tehama or Ceres. Whereas Ceres relies on questionable logic and a misunderstanding of CEQA principles, Tehama reasonably interprets the shared interest in creating a legally defensible CEQA document as satisfying the common interest doctrine and supporting a claim of privilege.
Until this district split is resolved, however, project proponents should be aware that pre-project approval communications between their attorneys and lead agency lawyers may be unprotected by the attorney-client privilege from: (1) discovery during CEQA litigation, and (2) California Public Records Act requests. We encourage agencies and project applicants to adhere to careful protocols to protect this common interest privilege.