In a published decision filed September 17, 2015, the First District Court of Appeal affirmed the trial court’s judgment granting a writ of mandate and finding that a proposed land exchange agreement was not statutorily exempt from CEQA review. Defend Our Waterfront v. California State Lands Commission, et al (San Francisco Waterfront Partners II, LLC, et al) (1st Dist., Div. 4, 2015) ___ Cal.App.4th ___, 2015 WL 5450294. The underlying facts are straightforward, as is the Court’s holding interpreting CEQA’s statutory exemption that applies to “settlements of title and boundary problems by the State Lands Commission and to exchanges or leases in connection with those settlements.” (Pub. Resources Code, § 21080.11.) Perhaps more interesting, however, is the Court’s treatment (partly in dicta) of CEQA’s statutory standing and exhaustion requirements as embodied in Public Resources Code § 21177.

The case arose from the “8 Washington Street Project,” which seeks to develop San Francisco waterfront land near the Ferry Building. One parcel encompassed within the proposed development – the 23,000 square foot Seawall Lot 351 (the “property”) – is owned by the City through its Port Commission and is subject to the public trust and a statutory trust by virtue of its history as former State tide and submerged lands. Because the City views the property as no longer useful for trust purposes and as too small and irregularly configured to be developed consistently with the Port’s Waterfront Land Use Plan (WLUP), it desired to make the property available for development as part of the 8 Washington Street Project – a controversial planned waterfront development of 134 condominiums, 389 subsurface parking spots, restaurants, retail, and a tennis/swim club. To do so it determined to free the property from its public trust restrictions through a land exchange agreement with the State Lands Commission (SLC) pursuant to which the SLC would, inter alia, exercise its statutory and constitutional power to terminate the public trust interests in the property and then convey it back to the City free of trust. The City would then convey the property to the 8 Washington developer by separate agreement to allow its private development for non-trust uses.

After a noticed public hearing (the originally posted agenda for which did not mention CEQA at all), the SLC approved the land exchange agreement and filed a Notice of Exemption from CEQA stating it was statutorily exempt. Less than the statutorily required 10 days prior to the meeting, the SLC had added a hyperlink to its meeting agenda that provided access to a staff report that included a set of proposed findings including a CEQA finding that the action “is exempt from… CEQA pursuant to… [Guidelines] section 15061 as a statutorily exempt project pursuant to Public Resources Code Section 21080.11, settlement of title and boundary problems and to exchanges or leases in connection with those settlements.”

An unincorporated association formed after the SLC’s approval of the agreement timely filed a CEQA action challenging the approval and exemption. As noted above, the trial court found that the statutory exemption did not apply. Based on its interpretation of Public Resources Code § 21080.11, the Court of Appeal agreed and affirmed because the case involved no title or boundary dispute that was resolved through a settlement, only the City’s desire to remove the public trust from the property to promote the private 8 Washington development.

Despite appellants’ attempt to ascribe what it characterized as “an overbroad, ill-conceived meaning to the word ‘problems’,” the Court of Appeal found the statutory language of the exemption to be clear: it operates to exempt “‘settlements’ by the SLC of title or boundary disputes and… land exchanges or leases executed in connection with ‘those settlements.’” This interpretation was consistent with judicial recognition “that the purpose of this CEQA exemption is to promote the State’s legitimate interest in settling land disputes.” (Citing Burke v. California Coastal Com. (2008) 168 Cal.App.4th 1098, 1106, 1108.) Per the Court: “In the present case, the land exchange agreement proposed by the City is unrelated to a settlement of a dispute regarding the title or boundaries of Seawall Lot 351. Instead, the express purpose of the exchange is to remove an impediment to the development of the 8 Washington Street Project. Although that impediment is undoubtedly a “problem” for the City, it is an economic one and not one grounded on the need for the SLC to exercise authority to “settle” title and boundary disputes over filled tidelands.” Accordingly, while the SLC may well have the authority to enter the agreement, its action in doing so was not statutorily exempt from CEQA review.

Moving from this straightforward substantive aspect of the case to its perhaps more interesting procedural one, the Court of Appeal (in order to get to the merits) first spent much of its opinion discussing – and ultimately rejecting – appellants’ arguments that the action should have been barred by the petitioner group’s lack of standing and failure to exhaust administrative remedies. The Court here, too, affirmed the trial court’s ruling, which had “found that exhaustion of administrative remedies requirements imposed by CEQA do not apply in this case because there was no effective notice of a public hearing on a CEQA matter prior to the SLC ruling.” (Citing Pub. Resources Code, § 21177(e).) Highlights and implications of the First District’s opinion in this regard include:

• The Court noted that appellants “characterize [Public Resources Code § 21177] as a standing statute,” but indicated its own view that it “is actually an exhaustion of administrative remedies statute.” (Citing Citizens for Open Government v. City of Lodi (2006) 144 Cal.App.4th 865, 875, fn. 8; Tomlinson v. County of Alameda (2012) 54 Cal.4th 281, 291.) While some may view this as merely a semantic distinction, it really is not, and I think the Court’s expressed view in this regard may be too limited. My own view (and that of some other courts, as well) is that § 21177 is actually both a standing and an exhaustion statute, as its provisions contain requirements partaking of both concepts. For example, the Third District Court of Appeal has held that § 21177(b)’s requirement that a person must object to project approval orally or in writing in the administrative proceedings prior to the close of the public hearing in order to later sue under CEQA reflects the Legislature’s “intent of limiting the standing of persons who could sue under CEQA, as well as codifying without change the judicially created exhaustion doctrine.” (Tahoe Vista Concerned Citizens v. County of Placer (2000) 81 Cal.App.4th 577, 591.) Whether any of this really matters in CEQA actions (and I tend to think it does) may ultimately depend on how broadly or narrowly one defines the term “administrative remedies.” But that – as well as the subject of whether and how exhaustion is truly a “jurisdictional” requirement – could properly serve as the topic of a respectable law review article and is certainly beyond this post’s limited scope.
• Notably (and as implicitly recognized by the Court in this case), the term “person” as used in § 21177 broadly encompasses organizational petitioners and entities as well as natural persons. (See, e.g., Pub. Resources Code, § 21066 [“ ‘person’ includes any person, firm, association, organization ….”]; see also Bozung v. Local Agency Formation Com. (1975) 13 Cal.3d 263, 277, fn. 15.) Thus, all of § 21177’s requirements that apply to persons equally apply to organizations and associations.
• In summarizing § 21177’s various subdivisions, the Court stated “subdivision (a) requires a showing that someone presented the CEQA objection [i.e., the issue to be litigated] to the agency before its decision was made.” (Emph. added.) That requirement was met in this case because the attorney for the Ferry Building’s management company appeared at the SLC meeting and objected to the land exchange agreement on the ground that, inter alia, it was not statutorily exempt under § 21080.11, which was the precise ground raised in petitioner’s CEQA action.
• Section 21177(b) “requires that the petitioner must have objected to the project on some ground before the agency made its decision.” (Emph added, citing Woodward Park Homeowners Assn., Inc. v. City of Fresno (2007) 150 Cal.App.4th 683, 711 [“petitioner itself need only have raised some objection before the agency [citation]; if it has, it may then litigate any issue raised before the agency by anyone”].) It is this provision that I would characterize as more of a standing than exhaustion requirement for a number of reasons. Since a petitioner need only appear (in writing or in person at a hearing) and generally object, and need not personally exhaust on specific issues, the provision excuses a CEQA plaintiff from personal issue exhaustion – in that regard, it can “piggyback” on other participants in the administrative proceedings who have exhausted on specific issues. Moreover, in my view, this subdivision introduces a requirement that potentially requires more than would the exhaustion doctrine alone; for example, even if it is determined that an “administrative remedy” does not exist (e.g., there is no available administrative appeal from the particular challenged action taken at a public hearing) in order to gain standing to sue a CEQA plaintiff must nonetheless appear and object in some manner in the administrative proceedings prior to the close of the public hearing. (The gist of this distinction was articulated in the Tahoe Vista Concerned Citizens case cited above.) In any event, the petitioner group here satisfied § 21177’s subdivision (b) through an exception for after-formed organizations set forth in subdivision (c), discussed further below. Per the Court: “Here, although respondent was formed after the SLC decided the matter, former San Francisco Attorney Louise Renne appeared at the August 14 meeting and opposed the project on behalf of FOGG, a group that subsequently became a member of respondent.”
• The court noted that § 21177(c), of course, “potentially applies in this case because respondent was formed after the SLC issued its decision.” Subdivision (c) states: “This section does not preclude any organization formed after the approval of a project from maintaining an action [under CEQA] … if a member of that organization has complied with subdivisions (a) and (b). The grounds for noncompliance may have been presented directly by a member or by a member agreeing with or supporting the comments of another person.” (Emph. added.) The Court noted an ambiguity in subdivision (c) (which was raised by appellants, but which it did not need to resolve) stemming from the fact that “[t]o satisfy subdivision (c), respondent was required to comply with both subdivisions (a) and (b).” (Emph. added.) Appellants read subdivision (c) to modify the language of subdivision (a) in cases involving after-formed organizations such that in those cases “a party cannot rely on another party’s CEQA objections, but must establish that one of its own members raised the precise issue that it wants to raise in court.”
• While ultimately finding § 21177’s “exhaustion” requirements inapplicable to the case before it under the provisions of subdivision (e) due to the SLC’s defective public meeting notice (discussed further below), the Court elaborated on the ambiguity in subdivision (c) in an interesting bit of dicta:

“Subdivision (c) is not a model of clarity. The language requiring an after-formed organization to comply with subdivisions (a) and (b) could simply mean that the group must satisfy subdivision (a) by showing that someone raised the CEQA objection, and that it must also satisfy subdivision (b) by showing that someone from its organization objected to the project on any basis. On the other hand, appellants assert that the second sentence of subdivision (c) requires that a member of the after-formed organization must have raised, at least indirectly, the CEQA issue during the agency proceeding. Assuming for purposes of this appeal that appellants’ interpretation of subdivision (c) is correct, we nonetheless conclude that the exhaustion doctrine does not bar this court action because, as the trial court found, subdivision (e) excepts the respondent from the exhaustion of remedies requirement imposed by subdivision (a).”

• Last but not least in the statutory scheme, the subdivision the Court found dispositive of appellants’ asserted “failure-to-exhaust” defense, Section 21177(e), states: “This section does not apply to any alleged grounds for noncompliance with [CEQA]… for which there was no public hearing or other opportunity for members of the public to raise those objections orally or in writing prior to the approval of the project, or if the public agency failed to give the notice required by law.” Because CEQA does not provide a public comment period for exemptions, only the public hearing provision of subdivision (a) was applicable here, but the Court found that the hearing opportunity for potential petitioners was not properly noticed as required by subdivision (e). The SLC’s original hearing notice was timely (made available at least 10 days before the meeting as required by Gov. Code, § 11125(a)), but didn’t mention CEQA; moreover, the staff report later made available didn’t cure this notice defect in the agenda because the hyperlink to it (i) didn’t disclose that staff recommended a CEQA exemption (someone would have to access and review the report to learn a CEQA issue would be decided at the meeting), and (ii) wasn’t added to the meeting agenda until a date that was within 10 days of the meeting date, too late to satisfy the statutory requirement of 10 days advance notice.
• Finally, the Court rejected appellants’ argument that Louise Renne had actual notice that a CEQA exemption would be considered at the SLC meeting and that such notice rendered § 21177’s exhaustion requirements applicable. The Court found the evidence failed to show such actual notice but also held that, even if it did, § 21177 (e) “does not provide that actual notice satisfies CEQA’s notice requirements.” Finally, the Court rejected appellants’ waiver arguments, stating: “Even if inadequacies in the statutorily required notice could be waived, we conclude that no waiver occurred here.”

As will be apparent to readers, I find this case’s dicta regarding standing and exhaustion requirements of Public Resources Code § 21177 more significant and interesting than its statutory exemption holding. Whether one prefers to call them exhaustion requirements, standing requirements, or (as I do) a mix of both, the provisions of Public Resources Code § 21177 can provide – although they did not due to the defective hearing notice in this particular case – potent defenses to CEQA claims and actions brought by persons (including organizations) who fail to comply with them. As also illustrated here, one of those provisions – subdivision (c) – is unclear regarding the scope of issues that may be raised in court by so-called “after-formed organizations”, i.e., whether organizations falling within subdivision (c)’s exception to what I call subdivision (b)’s “appear and object” requirement may litigate all issues raised by anyone in the administrative proceedings or only those specifically raised (whether directly or indirectly) by one or more of its members. Since it didn’t need to be reached here, that important and interesting issue will have to await another case (or, perhaps, clarifying legislation) for resolution.