California Environmental Quality Act Does Not Require City To Complete And Consider An Environmental Impact Report Prior To Rejecting A Proposed Project

In Las Lomas Land Company v. City of Los Angeles, (— Cal.Rptr.3d —-, Cal.App. 2 Dist., September 17, 2009), the Court of Appeals held that the California Environmental Quality Act (“CEQA”) does not require a City to complete and consider an environmental impact report (“EIR”) before rejecting a project. In that case, Las Lomas Land Company (“Las Lomas”) challenged the city’s termination of its environmental review of a proposed development project and rejection of the project before the completion of a draft EIR, after Las Lomas allegedly spent millions of dollars in an effort to comply with the city’s requirements.

Facts

In November 2000, the City of Los Angeles (“City”) began its attempts to expand its boundaries to include large areas north of the City and south of Santa Clarita. The City notified Santa Clarita officials of its intent to annex the areas in 2003 and the city council approved the expansion in May 2005. Las Lomas submitted an Environmental Assessment Form to the City as a preliminary application for development of a 555-acre site in one of the areas to be annexed. The proposed project included approximately 5,800 dwelling units, 2.3 million square feet of office space, community service facilities, retail space, a hotel, and 285 acres of open space. Las Lomas prepared a draft specific plan and preliminary draft environmental studies. Las Lomas also met with various City departments in the years following the submission of its initial application. It modified its proposals, paid all funds requested by the City for environmental review, including permit fees and service fees, paid millions of dollars to prepare environmental studies and other documents, and complied with all of the City’s requirements for environmental review. Las Lomas even offered to enter into an agreement with the City in order to prepay the City’s anticipated expenses for processing the EIR.

In March 2008, the city council approved a motion for the City to (1) “cease all work” on the proposed project; (2) not process an EIR; and (3) return to Las Lomas all materials associated with the project. In response, Las Lomas filed a combined petition for writ of mandate and complaint against the City, alleging that the City had no rational basis to stop processing the project application before completing its environmental review of the proposed project. Las Lomas further alleged that, following commencement of the environmental review, the City had a mandatory duty under CEQA to complete and consider the EIR before approving or rejecting the project. Las Lomas argued that the City’s decision constituted a violation of equal protection as well as substantive and procedural due process. At the close of Las Lomas’s case, the City demurred to the complaint, arguing that CEQA applies only to projects that a public agency intends to carry out or approve and not for those projects, such as the Las Lomas project, that the City rejects. The trial court agreed.

Decision

In affirming the trial court’s decision, the Court of Appeals held that the City had no duty under CEQA to complete an EIR prior to rejecting the project. In support of this conclusion, the Court noted that although CEQA requires public agencies to consider the environmental impacts of proposed projects and to mitigate or avoid significant impacts where feasible, CEQA only applies to projects that a public agency proposes to carry out or approve, and does not apply to projects that the agency rejects or disapproves. The Court held that CEQA did not apply because the city council specifically voted to reject the Las Lomas project, concluding, “[I]f an agency at any time decides not to proceed with a project, CEQA is inapplicable from that time forward.”

The Court further concluded that the Fourteenth Amendment guarantee of procedural due process did not apply to Las Lomas’s claims. Las Lomas proposed the annexation of the site and approval of a development agreement, a specific plan, and development entitlements for the project. The Court held that the City’s decisions whether to seek to annex the site, enter into a development agreement, and adopt the proposed specific plan were discretionary decisions. As a result, Las Lomas could not assert a claim of entitlement under the Fourteenth Amendment of the Constitution to the annexation, development agreement, specific plan, and development entitlements.

In support of its Fourteenth Amendment substantive due process claims, Las Lomas alleged that: (1) City council members seeking to reject the project made misleading public statements as to the effects of the proposed project; (2) the City “changed course” by deciding not to proceed with the proposed development after expanding its sphere of influence to include much of the proposed project area; (3) the City violated CEQA by failing to complete and consider an EIR before rejecting the project; and (4) the motion by council members to reject the project was made without proper notice or an opportunity to respond. In rejecting Las Lomas’s claim, the Court held that these allegations were insufficient to establish a substantive due process violation because “[t]hese allegations, if true, did not amount to an outrageous or egregious abuse of power of constitutional dimensions.”

The Court also rejected Las Lomas’s claims brought under the California Constitution. In reaching this conclusion, the Court noted that although Las Lomas argued that state statutes set out procedures and broad standards for project approvals and other statutory benefits, Las Lomas failed to identify any statutes or statutorily conferred benefits to support its contention. Rather, Las Lomas cited language in its petition and complaint alleging that the City had a duty under CEQA to complete and consider an EIR before approving or rejecting the project. Based on its decision that no such mandatory duty existed under CEQA, the Court rejected Las Lomas’s California Constitution-based claims.

Las Lomas’s final claim alleged a violation of the equal protection clause of the Fourteenth Amendment. Las Lomas argued that a city council member’s efforts to defeat the proposed project and alleged procedural errors in connection with the city council vote established an equal protection violation because the decision to reject the project was wholly irrational. In rejecting this argument, the Court noted that the proposed project involved numerous planning and land use issues as well as public policy considerations and the exercise of discretion based on a subjective individualized determination. Thus, there were “numerous conceivable legitimate reasons why the City would choose not to expand its boundaries and facilitate growth in this particular area at the time,” apart from the offending councilmember’s claims. Thus, the Court rejected Las Lomas’s equal protection claim because, even assuming the councilmember’s claims were irrational, the City’s rejection of the project could have been based on a multitude of reasons completely separate from the councilmember’s claims.

In conclusion, the court explicitly noted, “Our conclusion that Las Lomas has failed to allege a constitutional violation does not mean that there is no remedy for a developer in similar circumstances, but only that the due process and equal protection clauses of the Fourteenth Amendment and the California Constitution afford no remedy.”

Questions

If you have any questions concerning the content of this Legal Alert, please contact the following from our office, or the attorney with whom you normally consult.

Mona Ebrahimi or Daniel O’Hanlon | 916.321.4500

Jon Goetz | 805.786.4302

Kristin Hagan | 661.864.3800