The California Supreme Court Has a Banner Week, Hearing Argument in Three CEQA and Land Use Cases

by Downey Brand LLP

California Supreme Court

On May 3–4, 2017, the California Supreme Court heard oral arguments in three cases with significant implications for California land use law. Below we summarize the main issue(s) argued in each matter and possible outcomes. Because many of these cases have been pending for years, the Court that originally voted to grant review has since been dramatically transformed by Governor Brown’s newest appointments, including Justices Cuéllar and Kruger. Consequently, predicting the likely outcome in any of these cases is particularly difficult.

Friends of Eel River v. North Coast Railroad Authority

On May 3, 2017, the Court heard oral arguments in Friends of Eel River v. North Coast Railroad Authority (2014) 230 Cal.App.4th 85 (appellate decision), which concerns the application of the federal preemption doctrine to State environmental review requirements. The principal question before the Court is whether the federal Interstate Commerce Commission Termination Act (“ICCTA”) preempts the application of CEQA to a state agency’s proprietary actions related to a state-owned and funded rail-line.

The underlying project involves a public-private partnership between the North Coast Railroad Authority (“NCRA”), a public entity established under the California Government Code, and the Northwestern Pacific Railroad Company (“NWPRC”). By contract, the parties agreed to allow NWPRC to use NCRA’s rail-tracks for freight rail service. Petitioners filed writ of mandate petitions challenging the project’s EIR. The First District Court of Appeal decided the matter in favor of the defendants, holding that petitioners’ CEQA claims fell within the ICCTA’s express preemption clause, and that an exception to federal preemption—the “market participant” doctrine—did not apply. This appellate decision came on the heels of a 2014 CEQA opinion published by the Third District (Town of Atherton v. California High-Speed Rail Authority), which found that the market participant doctrine operated as an exception to preemption under the circumstances of that case. With this split of authority, the California Supreme Court granted review.

At argument, the Supreme Court intensely questioned counsel for Real Party in Interest NWPRC, probing the propriety of CEQA’s preemption. The Court’s inquiries highlighted four main areas of concerns: (1) whether CEQA actually poses a preclearance hurdle in violation of the ICCTA, (2) the scope of federal preemption as it relates to a State’s right to self-govern, (3) the impact of the State’s role as a partial market participant, and (4) the remedies available in the event that CEQA is not preempted. A probing question by Chief Justice Cantil-Sakauye captures the essence of the Court’s apprehension concerning adoption of NWPRC’s position: if the federal Surface Transportation Board determines that a project is exempt from federal environmental review—which it is authorized to do under the ICCTA—and the Court adopts Defendant’s position that the ICCTA preempts CEQA, wouldn’t a project with potentially serious environmental impacts evade all environmental review? NWPRC’s counsel demonstrated otherwise, providing several examples of other potentially applicable environmental regulations and pointing out that the legal precedent strongly supports preemption. Though this response did not appear to overcome the Court’s concerns, the weight of precedent favors the Court affirming the First District’s opinion.

Lynch v. California Coastal Commission

On May 4, 2017, the Court heard oral arguments in Lynch v. California Coastal Commission (2014) 229 Cal.App.4th 658 (appellate decision), a matter that primarily centers on whether a homeowner and coastal development permit (“CDP”) permittee who objects to certain permit conditions, both in writing and orally, waives his or her right to challenge those conditions when the homeowner executes and records deed restrictions recognizing the conditions and constructs the project as approved.

The underlying project involved the replacement of a 100-foot wooden erosion control structure and a 100-foot mid-bluff wall, which protected bluff-top homes in Encinitas, California. After the homeowners applied for coastal development permits from the California Coastal Commission (“Commission”), but before the Commission acted, a severe storm caused the bluff below one petitioner’s home to collapse, destroying portions of the wooden erosion structure, mid-bluff wall, and a stairway used for private beach access. The Commission ultimately approved a permit, but allowed only the demolition and reconstruction of the seawall and the installation of up to 75 feet of mid-bluff geogrid protection. The permit included several special conditions, including: (1) a prohibition against reconstruction of the lower section of the destroyed stairway; (2) a limitation of the permit’s duration to 20 years; and (3) a requirement that the homeowners record deed restrictions running with the land, acknowledging that the homeowners elected to comply with the conditions in order to undertake the authorized development. Although the petitioners objected to the conditions during the application process and filed a writ petition challenging the conditions, the petitioners concurrently recorded the deed restrictions, obtained the permit, and constructed the project.

In the writ proceeding, the superior court issued a writ directing the Commission to remove the challenged permit conditions. The Fourth District reversed on appeal, relying on the equitable maxim, “he who takes the benefit must bear the burden.” Because the homeowners signed and recorded deed restrictions agreeing to the permit conditions and then accepted the permit’s benefit by constructing the project, the Fourth District held that they had waived their right to challenge the conditions. In so holding, the Fourth District rejected the homeowners’ invitation to create an “under protest” exception to the general rule, for permittees who submitted to conditions under protest and duress. Lastly, the Fourth District found that even if the homeowners had not waived their right to challenge, it would have found the permit conditions valid.

During oral argument, the Court appeared sympathetic to the homeowners’ predicament: challenge the permit conditions without building the sea wall and risk—during the pendency of litigation—further erosion to the bluffs underlying their homes, or accept the permit as conditioned, and build a sea wall to protect their homes. However, under the facts of this case, the Court appeared reluctant to create a new exception to the “bright-line” rule applied by the Fourth District. Namely, the Court focused on the difficulty in adjudicating a challenge to a permit condition for an already-built sea wall. Further, the Court appeared to agree with the Commission’s argument that, if the risk of erosion were truly imminent, the homeowners could have sought and received relief through the Commission’s emergency permit process. Although the Court seemed equivocal in its commitment to either side’s argument, on balance a majority of the Court seems likely to favor affirmance of the Fourth District’s judgment in favor of the Commission.

Cleveland National Forest Foundation v. San Diego Association of Governments

On May 4, 2017, the Court also heard oral arguments in Cleveland National Forest Foundation v. San Diego Association of Governments (2014) 231 Cal.App.4th 1056 (appellate decision). The sole question for review: whether an EIR for a regional transportation plan (“RTP”) prepared in compliance with the Sustainable Communities and Climate Protection Act of 2008 (“SB 375”) must include analysis of the RTP’s consistency with greenhouse gas (“GHG”) reduction goals reflected in Executive Order No. S-3-05 (the “Executive Order”). The case involves the EIR for the San Diego Association of Governments’ (“SANDAG”) RTP, known as the 2050 Regional Transportation Plan/Sustainable Communities Strategy.

SB 375 was an outgrowth of the Executive Order, which was signed in 2005 by Governor Schwarzenegger. The Executive Order established GHG reduction targets for California, specifically requiring reduction of GHG emissions to 2000 levels by 2010, to 1990 levels by 2020, and to 80 percent below 1990 levels by 2050. However, SANDAG’s EIR acknowledged that implementation of the RTP would lead to an overall increase in GHG emissions levels and did not analyze whether this increase conflicted with the Executive Order or impaired the State’s ability to meet the Executive Order’s goals. After SANDAG certified the EIR, Cleveland National Forest Foundation (“CNFF”) and others filed writ petitions challenging, among other things, the EIR’s failure to analyze the RTP’s consistency with the Executive Order.

On appeal, the Fourth District affirmed the superior court’s judgment that the EIR failed to comply with CEQA. Principally, the Fourth District held that the EIR failed to analyze the RTP’s consistency with the Executive Order’s goals, thereby giving the false appearance that the RTP furthered state climate policy, when in fact the RTP’s post-2020 emissions contravened it. In so finding, the Fourth District rejected SANDAG’s argument that it could not analyze the RTP’s consistency with the Executive Order because no statute or regulation translated the Executive Order’s goals into comparable, scientifically based emissions reduction targets. The appellate court opined that SANDAG’s EIR could have accomplished the consistency analysis through forecasting; in other words, the court claimed that although SANDAG may not know precisely the future reduction targets the RTP would be required to meet, it could forecast the theoretical reduction targets necessary for the region to meet its share of the Executive Order’s reduction goals.

At oral argument, the Court explicitly disagreed with the position advanced by the Attorney General (“AG”)—appearing as intervenor and appellant in the matter—that the EIR’s analysis of “existing conditions” was misleading, and essentially characterized the AG’s position as a disagreement with the EIR’s outcome, rather than proof of a deficiency in the EIR’s analysis. Further, Justice Liu appeared to agree with SANDAG that the science on GHG emissions in the distant future was too speculative for the EIR to have provided a meaningful analysis of the RTP’s consistency with the Executive Order. This was a sentiment shared by Justice Benke’s dissent from the Fourth District’s opinion. As Justice Benke noted, given that GHG emissions are a statewide problem encompassing a diverse array of emitters, determining SANDAG’s “fair share” entails a complex and science-based process. As such, Justice Benke urged that without a model addressing regional GHG emissions reduction targets between 2035 and 2050, SANDAG could not possibly conduct a consistency analysis for those years. This dissent, coupled with the Court’s unsympathetic questioning of the AG, lead us to believe that the Court will reverse the Fourth District and rule for SANDAG.

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