Supreme Court Says Exhaustion Requirement Applies in CEQA Exemption Suit

By Katherine J. Hart and Daniel S. Cucchi

In Tomlinson v. County of Alameda (June 14, 2012, S188161) __Cal.4th __, a developer proposed to divide two existing ‘R-1’ zoned parcels totaling 1.89 acres into 11 lots to allow for the development of single-family homes. The project was located in the community of Fairview in unincorporated Alameda County, bordering the City of Hayward. The County sent out written notices to a number of agencies, neighbors, and other interested parties, including the Appellants, indicating the County’s intent to utilize the section 15332 (Infill Development) CEQA exemption.

A couple of weeks later, the County sent out another notice for a hearing before the Planning Commission to consider the project and the section 15332 CEQA exemption. At the hearing, Appellants objected to the County’s plans to utilize the exemption, arguing that issues such as traffic and parking should undergo thorough environmental review. The Planning Commission continued the matter, but eventually held another public hearing and approved the project, determining it was categorically exempt from CEQA pursuant to the section 15332 exemption. Appellants appealed the decision to the Board of Supervisors again arguing that environmental review was necessary to address their particular concerns. No one raised the issue that the section 15332 exemption is only applicable to projects within city limits. The Board denied the appeal and Appellants filed suit.  

The Superior Court denied the claim for failure to exhaust administrative remedies, but the Court of Appeal reversed citing the analysis of exhaustion in CEQA exemption cases in Azusa Land Reclamation Co. v. Main San Gabriel Basin Watermaster (1997) 52 Cal.App.4th 1165 (Azusa). The Azusa court held that section 21177’s exhaustion requirement does not apply unless CEQA requires a public hearing, or a public hearing is held before a notice of determination is filed. Thus, the Court of Appeal held that because neither a public comment period, nor a notice of determination is required by CEQA for exempt projects, the exhaustion requirements of section 21177 does not apply to CEQA exemption cases.

The California Supreme Court reversed, reasoning that the Court of Appeals reliance on Azusa was misplaced. The Court agreed that exhaustion is inapplicable to exemption determinations under the first prong in section 21177, because no public hearing is required by CEQA preceding an agency’s exemption determination. As for the second prong, however, the Court of Appeals’ emphasis on the notice of determination language rather than the public hearing language in section 21177 was flawed. The filing of a notice of determination limits the time a lawsuit may be filed challenging an agency’s decision, but failure to timely file does not eliminate the agency’s ability to utilize a section 21177 exhaustion defense. Thus, it is the public hearing language in section 21177that is paramount and which gives rise to the exhaustion requirements. Accordingly, since the County of Alameda held noticed public hearings on the project prior to its exemption determination, the agency was entitled to assert the section 21177 exhaustion requirements as a defense.

Comment: The re-affirmation of the exhaustion doctrine illustrates the Court’s commitment to judicial efficiency, especially in these trying times of budgetary difficulties. It also reminds public agencies that they hold the key to how much litigation exposure they are willing to tolerate. While CEQA does not require a public hearing on exemption determinations, the pros and cons of choosing not to do so must be carefully evaluated. While it may be quicker to forego a public hearing process, doing so comes at a price. If an agency foregoes the public hearing process, it allows potential petitioners to craft creative arguments in opposition to a project and spring those oppositions on the County in a CEQA lawsuit. In the alternative, as in this case, agencies can elect to hold public hearings on CEQA exempt projects to allow concerns and issues to be expressed and assert the exhaustion defense thereafter for any concerns or issues not fairly and properly presented to the agency during the public hearing process.

Katherine J. Hart is Senior Counsel and Daniel S. Cucchi is a law clerk at Abbott & Kindermann, LLP. For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, LLP at (916) 456-9595.

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, LLP, or the formation of a lawyer/client relationship. Because of the changing nature of this area of the law and the importance of individual facts, readers are encouraged to seek independent counsel for advice regarding their individual legal issues.

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