In a lengthy opinion filed December 20, 2017, and belatedly ordered published on January 8, 2018, the Fourth District Court of Appeal, Division 1, affirmed the trial court’s judgment denying a writ petition asserting CEQA and land use law challenges to the City of San Diego’s (“City”) approval of a small high school on previously developed, open-space designated lands adjacent to a commercial equestrian facility. Clews Land and Livestock, LLC v. City of San Diego (Jan Dunning, et al, Real Parties In Interest) (2017) ___ Cal.App.5th _____.  The opinion underscores the critical importance of correctly interpreting and scrupulously following a local lead agency’s administrative appeal procedures in order to exhaust administrative remedies and preserve CEQA claims for judicial review.  (The non-CEQA, land use law aspects of the opinion will not be analyzed here but will be covered in a subsequent blog post by my partner, Bryan Wenter.)

The Project And Surrounding Environment

The challenged project is a one-building, three-classroom, 5,340-square foot high school on a previously developed one-acre site, with a maximum of 75 students, 18 staff members, a 24-stall parking lot and associated landscaping. An historical farmhouse built around 1900, currently used as an administrative office by real party Cal Coast, along with several older outbuildings, occupy and would remain on the site, and the school’s design incorporates features to ensure compatibility with the site’s historic nature.

The site is also located in the coastal zone at the end of a 1650-foot long, 20-foot wide private access driveway (“Clews Ranch Road”) shared with an adjacent equestrian facility, the Clews Horse Ranch.  The Ranch contains a 45-stall parking lot, a club house, two or three residences, corrals, stables, a barn, riding areas for more than a hundred horses, and a dozen cattle; a riding ring abuts the project site.  Clews Ranch Road connects to Carmel Country Road, and a public parking lot at that intersection serves as a staging area for recreational bicycle and hiking trails.  Clews Ranch Road is the project site’s and Ranch’s sole vehicular access, and the project site sits on a bluff above State Route 56, a busy divided highway across which lies a developed suburban area.  The project site and Ranch are designated as “open space” under the applicable Carmel Valley Neighborhood 8 Precise Plan.

The Horse Ranch’s Opposition To The Project And City’s CEQA Review

Plaintiff and Appellant CLL, owners of the Horse Ranch, opposed the project and the related draft Mitigated Negative Declaration (“MND”) prepared by the City, contending an EIR was required to study potentially significant historical resources, fire hazard, noise, and transportation/traffic impacts, and that the project threatened the Ranch’s economic viability as a business. In addition to lay person and staff comments in the record, both CLL and Cal Coast submitted comments of fire safety consultants in support of their respective positions, and Cal Coast also presented analysis of its noise consultant in support of the draft MND.

The final MND clarified the project description by identifying project design features – fire resistant building materials, brush removal, a new water line and fire hydrant, interior sprinklers, an annually reviewed evacuation plan, and school closure on red flag warning days – that reduced the project’s potential for fire hazard impacts. The final MND also included new information from Cal Coast’s noise reports and analyses, and revised its emergency access impact conclusion from “no impact” to “less than significant impact”.  However, its ultimate material impact conclusions and mitigation measures did not change from those in the draft MND.

The City’s Administrative Process For Consideration of The Project And MND

After the Carmel Valley Community Planning Board (“CVCPB”) considered (but did not vote to support) the project, the City scheduled a public hearing on the project before a City hearing officer. City’s staff report recommended full approval of the project, including adoption of the final MND and approval of site and coastal development permits.  After hearing, the hearing officer approved the project and adopted the MND.

The San Diego Municipal Code (“SDMC”) prescribes differing procedures, described as differently numbered “processes,” for different types of development application approvals. The project here was subject to the City’s “Process Three” procedures.  The public hearing notice and an informational bulletin published by the City contained both ambiguous and patently misleading language indicating that:  (1) the hearing officer’s decision on the project was final unless appealed to the Planning Commission, in which case the Commission’s decision would be the City’s final decision; (2) Process Two and Three permit decisions are appealable to the Planning Commission and are filed with the Development Services Department, while Process Four decisions are appealable to the City Council, and are filed with the City Clerk; and (3) appeals of an MND adoption or other Environmental Determination (as distinct from the project approval decision) “may be appealed to the City Council after all other appeal rights have been exhausted.”  (Emph. added.)  Process Three and Four appeals are required to be filed within 10 business days of the original decision date.

In actual fact, the SDMC did not provide that appeals of environmental determinations in Process Three matters must await exhaustion of all other administrative appeal rights.  To the contrary, under a Code section separate from that governing Process Three appeals of a hearing officer’s project approval decisions, it provides in relevant part that any “environmental determination” on a CEQA document or exemption made by a non-elected City decisionmaker is immediately appealable to the City Council, and that any such appeal must be made within 10 business days of the decision.  (See SDMC, §§ 112.0520(a), (b); 113.0103.)

In reliance on the City’s misleading statements in the public notice and informational bulletin, CLL appealed the hearing officer’s decision to the Planning Commission, checking that box on the City’s standard appeal form and not checking the box for “Environmental Determination – Appeal to City Council.” Further, it filed the form with the City’s Development Services Department and not the City Clerk’s Office.  While it identified both CEQA and non-CEQA grounds for its appeal, City Staff advised CLL and the Planning Commission that CLL’s failure to appeal to the Council within 10 days of the hearing officer’s decision waived all CEQA and MND issues.  The City Attorney took the position at the Planning Commission hearing that had the appropriate box been checked, the appeal would have been set before the City Council and not the Commission, “that the appeal procedures are laid out in the SDMC, and [that] it would be impossible to transfer the appeal to the City Council.”

The Commission heard and ultimately voted 4-2 to deny the appeal and to grant the project permits. The City rejected as untimely CLL’s subsequent attempt to appeal the project approval and MND to the City Council.  The Coastal Commission thereafter rejected CLL’s appeal based on the project’s alleged inconsistency with the City’s Local Coastal Program (“LCP”), finding it raised no substantial issue and that the “extent and scope of the development is minor.”

Judicial Proceedings And The Court of Appeal’s Decision On the CEQA Issues

The trial court denied CLL’s writ petition on all asserted grounds, finding that CLL failed to exhaust administrative remedies by failing to properly administratively appeal the hearing officer’s environmental determination; that the City was not equitably estopped to assert an exhaustion defense; and that City’s appeal procedure did not violate CEQA. In affirming the trial court’s judgment on exhaustion grounds, and alternatively on the merits, the Court of Appeal’s opinion stated a number of significant holdings and observations, including the following:

• The exhaustion of administrative remedies doctrine bars judicial redress where a plaintiff fails to invoke or exhaust an available administrative remedy; exhaustion is a “jurisdictional prerequisite in the sense that it is not a matter of judicial discretion, but is a fundamental rule of procedure laid down by counts of last resort, followed under the doctrine of stare decisis, and binding upon all courts.’” (Quoting Citizens for Open Government v. City of Lodi (2006) 144 Cal.App.4th 865, 874; citing also Tahoe Vista Concerned Citizens v. County of Placer (2000) 81 Cal.App.4th 577, 590.)
• “[I]f the administrative proceeding [resulting in an action that aggrieves plaintiff] includes a right to appeal an allegedly improper action, a plaintiff must generally pursue that administrative appeal in order to exhaust his or her administrative remedies.” Further, per the Court: “This exhaustion requirement is separate from, and in addition to, the requirements under CEQA that (1) any grounds for noncompliance must be presented to the public agency before its decision and (2) a prospective plaintiff must object to approval of a project in order to have standing to seek judicial remedies.” (Citing Pub. Resources Code, § 21177(a),(b).)
• Whether the exhaustion doctrine applies in a particular case presents a legal question reviewed de novo, and the same was true here of appellate review of the correctness of the trial court’s interpretation of the SDMC’s applicable provisions.
• As indicated above (in the discussion of the City’s administrative processes), the SDMC’s relevant provisions provided for an administrative appeal of the hearing officer’s MND decision to the City Council and required any such appeal to be filed within 10 business days. Further, upon granting a timely appeal and directing the City’s staff and Planning Director to reconsider and to revise an environmental determination, the Council retains jurisdiction and power under the SDMC to act on both the revised environmental document and the associated project approval at a subsequent public hearing. (SDMC, § 112.0520(e), (f).) Per the Court: “[The SDMC’s] provisions establish a bifurcated appeals procedure for Process Three decisions made by a hearing officer” whereby the officer’s project decision must be appealed to the Planning Commission within 10 business days, and “any environmental determination … must simultaneously be appealed to the City Council within the same period [citation]. As a result of this bifurcation, an appeal to the Planning Commission covers only the nonenvironmental project approvals (e.g., permits), while an appeal to the City Council covers the environmental determination. If the City Council grants the appeal, however, it may consider the non-environmental approvals as well.” Because CLL only appealed the hearing officer’s decision to the Planning Commission, and did not appeal the hearing officer’s environmental determination to the Council, it did not avail itself of an available administrative appeal and therefore failed to exhaust its administrative remedies with respect to issues concerning the CEQA document.
• The Court rejected CLL’s arguments that the City’s bifurcated appeal procedures violated CEQA. The hearing officer has authority to approve the project and comply with CEQA, and is therefore the City’s decision- making body under CEQA Guidelines §§ 15025(b) and 15356. Because the hearing officer is unelected, CEQA requires the City to allow an appeal of its CEQA compliance to the lead agency’s elected decision making body (if any) (see Pub. Resources Code, § 21151(c); CEQA Guidelines, §§ 15061(e), 15074(f), 15090(b)); here, the SDMC allowed just such an appeal, and “CLL simply did not avail itself of that procedure.” Moreover, at least as they were implicated by the proceedings on the project at issue here, the City’s procedures did not improperly delegate environmental review authority by splitting that authority from project approval authority. (Citing, inter alia, California Clean Energy Committee v. City of San Jose (2013) 220 Cal.App.4th 1325, 1338, 1340, 1346; POET, LLC v. State Air Resources Bd. (2013) 218 Cal.App.4th 681, 731.)
• CLL’s fatal failure to appeal the MND to the Council was not excused by the inaccurate descriptions of the City’s appeal process in the public hearing notice and information bulletin; it was not a failure to raise a noncompliance issue under Public Resources Code § 21177, and there was no misleading project description in the public notice that misled CLL into believing there was no noncompliance issue to raise. Rather, CLL’s remedy in this circumstance, if any, was through equitable estoppel, but the trial court rejected that argument and CLL (rather inexplicably) failed to raise any claim of error in that regard on appeal.
• As an alternative ground, the Court of Appeal held the judgment rejecting CLL’s CEQA challenge must also be affirmed on the merits because CLL failed to carry its burden of citing to any substantial record evidence supporting a fair argument that the project would have any significant unmitigated effect in the areas of fire hazards, traffic and transportation, noise, recreation, and historical resources. Among the interesting aspects of this portion of the opinion was its conclusion that CLL’s fire safety expert improperly focused his analysis on existing environmental hazards not caused by the project, rather than the project’s impacts on the existing environment. (Citing California Building Industry Assn. v. Bay Area Air Quality Management Dist. (2015) 62 Cal.4th 369, 386, 388.)

As indicated above, this case serves as a good reminder that failure to exhaust administrative remedies can be a potent defense to a CEQA action, and that close attention must be paid by would-be CEQA plaintiffs to a lead agency’s sometimes complicated (and potentially confusing) administrative appeal procedures to ensure they have exhausted prior to heading to court. The relevant local law itself – i.e., the City’s applicable Code provisions as adopted by its local ordinances – should be thoroughly researched and reviewed, and challengers who rely solely on the City’s appeal forms and informational publications to determine their administrative appeal rights do so at their peril.