Sixth District Affirms Judgment Dismissing CEQA Action For Failure To Timely Join Indispensable Real Party Within Limitations Period Triggered By Filing of Second, Valid NOD; Court Rejects Plaintiff’s Arguments Based On Relation Back, Estoppel, and City’s Violation of Statute Requiring It To Mail Operative NOD

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In a published opinion filed February 9, 2021, the Sixth District Court of Appeal affirmed the trial court’s judgment dismissing a CEQA action challenging the EIR and project approvals for two development options (1.2 million square feet of light industrial, or 436,880 square foot data center/PG&E substation/728,000 square feet of light industrial) on a 64.5-acre fallow farmland site in the City of San Jose.  Organizacion Comunidad de Alviso v. City of San Jose (Microsoft Corporation, et al., Real Parties in Interest) (2021) 60 Cal.App.5th 783.  The Court of Appeal held that the trial court did not err in dismissing the action as time-barred after plaintiff OCA failed to timely join a necessary and indispensable real party in interest (Microsoft Corporation) within 30 days of the City’s filing of a second Notice of Determination (NOD) for the project.  (As full disclosure, I represented Microsoft in this action.)

The second NOD filed by the City correctly named Microsoft as the project approval applicant and recipient.  The City initially had filed an inaccurate NOD incorrectly naming the prior owners of the property and original applicants (Cilker).  A City planner had provided a copy of the earlier incorrect NOD to plaintiff OCA member Mark Espinoza promptly after his email request, but did not email or mail him a copy of the correct NOD filed a few days later.

Plaintiff apparently did not check the public record for project-related NODs filed with the County Clerk.  It filed its CEQA action naming Cilker as real parties within 30 days of the date of the first NOD.  But OCA did not file its amended petition naming Microsoft within either 30 days of the filing of the second, corrected and operative NOD, or within 30 days after Cilker’s attorneys informed it that Microsoft (not Cilker) was the correct real party.  (Cilker had sold Microsoft the project property and assigned the application rights prior to the project being approved.)  Instead, OCA filed its amended petition naming Microsoft as the real party over a month after Cilker’s communication and over 70 days after the City’s filing of the second, correct and legally operative NOD, which had provided constructive notice to the public of the correct parties to sue.

Finding Microsoft to be a necessary and indispensable party to the action challenging its project approvals, the trial court held the CEQA action was barred by CEQA’s 30-day statute of limitations (Pub. Resources Code, § 21167(c)), which was triggered by the City’s filing of the second, valid NOD.  It rejected OCA’s arguments that the statutory limitations bar could be avoided because the City did not timely mail it the second NOD (as required by statute), or by operation of the “relation back” doctrine or estoppel.

The Court of Appeal’s Opinion

In its brief opinion’s final introductory paragraph, the Court of Appeal summarized the arguments on appeal and its conclusions leading to affirmance as follows:

“Plaintiff argues on appeal that the trial court applied the incorrect statute of limitations, and alternatively that the trial court should have applied either estoppel or the relation back doctrine (Code Civ. Proc., § 474) in light of the city’s conduct.  We acknowledge that the city violated CEQA by failing to send the second NOD to Espinoza.  But the second NOD was properly filed with the county clerk, it provided constructive notice of the correct parties to sue, and plaintiff did not timely amend its petition to name Microsoft.  Our close examination of the relevant statutes leads us to the uncomfortable conclusion that dismissal of the CEQA action was not error, and we must affirm the judgment.”

Key holdings and takeaways from the Court of Appeal’s opinion include:

  • While the City did not comply with CEQA’s statutory provision requiring it to send a copy of the NOD to any person making such a request prior to the date of project approval, CEQA provides no remedy for such a violation, as the statute “itself provides that the ‘date upon which [the NOD] is mailed shall not affect’ the statute of limitations to commence a CEQA action.”
  • “The NOD is the limitations trigger under CEQA. The Supreme Court has made clear that it is the ‘responsibility of potential litigants to review these notices, and any revisions, with care.’”  (Citing Committee for Green Foothills v. Santa Clara County Bd. of Supervisors (2010) 48 Cal.4th 32, 54.)
  • “Although the city failed to send the second NOD to Espinoza, that NOD was duly filed with the County Clerk and available for review by all potential litigants before plaintiff filed its initial petition. It is not for us to legislate a remedy for the city’s violation of section 21167, subdivision (f), particularly where the remedy plaintiff seeks would conflict with express provisions of that very statute.”
  • Plaintiff’s “argument [that it lacked constructive notice under the case’s facts] is contrary to settled principles of filed notices providing constructive notice to all potential litigants.” (Citing Stockton Citizens for Sensible Planning v. City of Stockton (2010) 48 Cal.4th 481, 502.)  The Court further noted “that plaintiff appears to have had actual notice of Microsoft’s status well before the limitations period expired [since] [p]laintiff’s members participated in city council hearings at which Microsoft was identified as the property owner, and the public notice for the December hearing listed Microsoft as the owner.”
  • The “relation back” doctrine (Cod Civ. Proc., § 474) did not apply to allow plaintiff to substitute Microsoft for a fictitiously named Doe real party because that doctrine requires that “[a] plaintiff’s ignorance must be genuine and based on a lack of knowledge of the defendant’s connection with the case.” (Citing General Motors Corp. v. Superior Court (1996) 48 Cal.App.4th 580, 594.)  Here, as a matter of law, “[t]he City’s filing of the second NOD with the county clerk provided constructive notice of Microsoft’s identity precluding plaintiff’s ability to claim genuine ignorance.”  Further, as a factual matter, the Court observed there was evidence that plaintiff through its members “likely had actual notice that Microsoft was referred to as the project applicant during at least one public hearing on the project and in the public notice of the second approval hearing.”  It also learned of the second NOD from Cilker in January 2018, but failed to file its amended petition until March 2018 – “a delay longer than even the initial limitations period. Given the constructive and likely actual notice of Microsoft’s identity as the project applicant, any claim of plaintiff’s ignorance of that status is unreasonable as a matter of law.”
  • The Court rejected plaintiff’s argument that a showing of prejudice from late joinder is necessary, citing Woo v. Superior Court (1999) 75 Cal.App.4th 169, 177, for the proposition that: “[I]f the identity ignorance requirement of [Code of Civil Procedure] section 474 is not met, a new defendant may not be added after the statute of limitations has expired even if the new defendant cannot establish prejudice resulting from the delay.”
  • Plaintiff’s claim of equitable estoppel also failed; while that doctrine’s applicability is generally a question of fact, “estoppel can be denied if the asserted reliance was unreasonable as a matter of law.” (Citing Penn-Co v. Board of Supervisors (1984) 158 Cal.App.3d 1072, 1081.)  Per the Court:  “Even assuming arguendo that the city’s failure to send Espinoza the second NOD was intentional rather than inadvertent, plaintiff’s reliance on that failure would be unreasonable as a matter of law . . . . because the city’s timely filing of the second NOD with the county clerk gave constructive notice to all potential litigants of the correct parties to name in a CEQA action.”
  • The trial court’s sustaining of Microsoft’s demurrer without leave to amend was also not an abuse of its discretion. There was no “reasonable possibility” that plaintiff’s proposed amendments would cure the time-bar of CEQA’s statute of limitations due to its failure to timely sue Microsoft.  This was because, as the Court explained in the points above, “the elements of estoppel are not met here, and the city’s violation of section 21167, subdivision (f) did not affect the requirement to name Microsoft as a real party in interest before the limitations period expired.”

Conclusion and Implications

While the Court of Appeal expressed some empathy for plaintiff’s frustration at not being able to rely on the first incorrect NOD provided by the City, it nonetheless followed applicable and well established statutory and case law principles in affirming the judgment.  The law provides salutary “bright line” rules that govern this aspect of CEQA litigation and provide the certainty intended by the Legislature, i.e., the agency’s filing of a facially valid NOD is the statute of limitations trigger; the NOD provides constructive notice to the public and all potential litigants of the parties required to be sued; and potential plaintiffs have the responsibility to check the public record for and to review such notices, and any revisions to them, with care prior to filing their actions.  (Author’s Note:  Plaintiff/Appellant filed a petition for review of the Court of Appeal’s decision, which was denied by the California Supreme Court on May 26, 2021.)

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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