Planning & Conservation League v. Department of Water Resources (2024) 98 Cal.App.5th 726

In Planning & Conservation League v. Department of Water Resources (2024) 98 Cal.App.5th 726, the Third District Court of Appeal upheld the Department of Water Resources’ (“Department”) approval of amendments to existing water supply contracts under the State Water Project (“SWP”), finding (1) the amendments complied with the California Environmental Quality Act (“CEQA”); (2) the amendments were not a covered action under the Sacramento-San Joaquin Delta Reform Act (“Delta Reform Act”); and (3) the Department had no duty to weigh the public trust interests.

In the 1960’s the Department entered into long-term contracts with government contractors for the sale, delivery or use of water made available by the SWP (“Contracts”). The Contracts contained initial terms of seventy-five years, but included a provision known as “the evergreen clause” which allows contractors to elect to continue to receive service following the expiration of the contracts. Years before expiration, contractors began to preemptively exercise the evergreen clause.

Prompted by the notices given under the evergreen clause, the Department drafted amendments which proposed extending the Contracts to 2085 and changing certain financial provisions. After determining the amendments would have no environmental impact, the Department certified a final environmental impact report, approved the amendments under CEQA, and filed a validation action to ratify the amendments.

Following the validation action multiple lawsuits were filed against the Department alleging violation of, and failure to comply with, state law. Following a merits hearing, the trial court entered judgment for the Department in all cases. Appellants timely appealed. On appeal appellants contended the amendments violated three laws: (1) CEQA; (2) the Delta Reform Act; and (3) the California public trust doctrine. The Court of Appeals addressed each of these alleged violations in turn.

The Amendments Did Not Violate CEQA

Before dealing with the appellants’ specific arguments as to how the amendments violated CEQA, the court explained that under CEQA an appellate court’s inquiry extends only to whether there was an abuse of discretion on the part of the agency. So long as an agency did not fail to proceed in a manner required by law, and its decision is supported by substantial evidence, the court will defer to the agency’s decision. This largely puts the burden on the challenger to show the court why the agency’s decision does not warrant deference.

The appellants’ contentions fall into two broad categories: (1) the Department must analyze the impact of the amendments relative to a no project alternative where the contracts were allowed to expire and utilize a baseline for environmental review where the Contracts never existed; and (2) the Department should have considered the impact of additional projects that may be funded by revenue generated through the amendments. However, each of the appellants’ CEQA claims were rejected by the court for lacking specificity or analysis as to what the appellants’ contended the department should have done, and why failure to do so was an abuse of discretion, or because there was sufficient evidence to support the department’s determinations.

The court held that CEQA did not require the Department to consider a no project alternative in which the existing contracts were allowed to expire, because it was reasonably foreseeable that the contractors would extend the terms of their contracts through the evergreen clause, and an agency is not required to examine “every conceivable variation” of the no project alternative. Likewise, the court held the Department appropriately utilized the environmental setting under the Contracts as the baseline, because under CEQA a baseline must reflect the “physical conditions existing at the time [the] environmental analysis” begins. Further, the court determined the additional projects which may be funded by revenue from the amendments were all too tenuous, uncertain, or distantly related to require analysis as part of the amendments’ environmental analysis under CEQA. To require otherwise would stretch the definition of “project” under CEQA too far. Accordingly, the court held the Department’s certification of the amendments did not violate CEQA.

The Amendments Were Not a Covered Action Under the Delta Reform Act

A state agency that proposes to undertake a “covered action” under the Delta Reform Act must prepare a written certification of consistency with the Delta Plan. The Department determined that the amendments were not a covered action, and so did not prepare a certificate of consistency. The appellants challenged this determination, but the court disagreed, explaining the Legislature’s clear intent in defining a covered action was to exempt the existing SWP. The amendments merely continued the existing state of affairs of the SWP, so the Department properly concluded the amendments were not a covered action.

The Department Had No Duty Under the Public Trust Doctrine

The appellants contended the Department violated its duty to consider the impacts on public trust interests in approving the amendments. This duty requires that before agencies approve diversions of waters held in the public trust, they consider the impact on public trust interests, including navigable waters, wildlife and recreation. The court reasoned that the Department’s water rights, or diversions, subject to the Contracts were granted by the State Water Resources Control Board in 1967 and because the amendments  did not include new diversions of water, the record supported the Department’s conclusion that the amendments do not impact a public trust resource and, therefore, no duty arose to weigh the public trust interests or consider additional protections for those interests.

Conclusion

Throughout the court’s analysis, it reasoned that the deference owed to the Department regarding its actions created a hefty burden requiring the appellants to explain with specificity why the Department violated the law. Despite the numerous theories upon which the appellants challenged the Department’s approval of the amendments, the court found that appellants failed to carry their burden and rejected many of their arguments for lack of specificity or analysis supporting their claims. Finding that appellants failed to carry their burden, the court refused to second guess the Department’s decisions, upholding validation of the amendments. 

Diane Kindermann is Owner of, Gage Marchini is an Associate Attorney, and Jack Sandage is a Law Clerk at Abbott & Kindermann, Inc.  For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, Inc. at (916) 456-9595.

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, Inc., 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.

Mojave Pistachio, LLC v. Superior Court (2024) 99 Cal.App.5th 605.

In Mojave Pistachio, LLC v. Superior Court (2024) 99 Cal.App.5th 605, the Fourth District Court of Appeal held that the “pay first, litigate later” rule applies to fees imposed by a local groundwater sustainability agency under the Sustainable Groundwater Management Act (“SGMA”). (Wat. Code, § 10720 et seq.) This is the first case to determine such issue. As a result of the court’s decision, water users must pay the outstanding amounts owed before bringing a legal challenge against a groundwater sustainability agency for imposition of the fee, even if the challenged fee allegedly violates SGMA and California water law, and even if the water users allegedly cannot afford to pay the fee. 

Legal Background

Mojave Pistachio, LLC (“Mojave”) irrigates a pistachio orchard in the Mojave Desert it owns with groundwater exclusively from the underlying Indian Wells Valley Groundwater Basin (“Basin”). Mojave currently extracts about 4,000 acre-feet of groundwater per year and anticipates growing to around 7,000 acre-feet per year as its trees mature in the next 50-60 years.

The California Legislature enacted SGMA in 2014, which requires the creation of groundwater sustainability plans to manage high priority groundwater basins. Pursuant to that legislation, the local groundwater sustainability agency, Indian Wells Valley Groundwater Authority (the “Authority”), determined that groundwater extractions from the Basin would be subject to a Basin “replenishment fee” of $2,130 per acre-foot of groundwater starting in 2021. As a result, Mojave would have to pay over $8 million annually in replenishment fees compared to paying zero government-imposed fee on the extraction of water as before. Because pistachio orchards would require more water each year as they mature, Mojave’s replenishment fees would keep increasing as well.

According to the Sustainable Yield Report, the Basin’s sustainable yield is 7,650 acre-feet per year, and the Basin is solely dependent on groundwater. The report further noted that Mojave is one of the most groundwater extractions producers in the Basin, with its estimated future extraction demands will be about 7,200 acre-feet per year, or roughly 94 percent of the Basin’s sustainable yield. Therefore, the Authority concluded that without changes to the Basin’s overdraft condition, its groundwater infrastructure will not be able to produce the needed water by 2065.

Mojave initiated a lawsuit against the Authority alleging that the Groundwater Sustainability Plan (“Plan”) “illegally deprived Mojave of its vested appurtenant overlying water rights to pump groundwater from the Basin by conditioning Mojave’s continued use of groundwater on the payment of the replenishment fee.” Mojave also alleged a taking claim on the ground that the Plan has deprived Mojave of all economically beneficial use of its water rights and pistachio trees without just compensation, which is in violation of the state and federal Constitutions.

The Authority demurred and the trial court ruled in the Authority’s favor. The court of appeal denied the requested writ relief, concluding that California’s “pay first, litigate later” rule would bar injunctive relief as to the Replenishment Fee because Mojave had not yet paid the fee it sought to invalidate. The taking claim also failed because no regulatory actions other than the fee had economic effects on the plaintiff.

The Applicability and Application of “Pay First” Rule

The Legislature enacted the SGMA for sustainable groundwater management in 2014, which intended to give local groundwater authorities the power and support to sustainably manage groundwater, as well as to create a more efficient and cost-effective groundwater adjudication process that protects water rights, ensures due process, and prevents unnecessary delay. (Wat. Code, § 10720.1.) SGMA also empowered groundwater agencies to impose fees, e.g. penalties and interest, on water users for knowingly failing to pay a fee on time and may order them to cease all groundwater extraction until the delinquent fees are paid.  If a person disagrees with fees imposed by the agency, SGMA provides that he or she “may pay” the fee “under protest and bring an action against the governing body in the superior court to recover any money that the governing body refuses to refund.” However, a person is barred from commencing a legal challenge against the agency imposing the fee before paying off the fee currently due.

Here Mojave has not paid any portion of the replenishment fees. Accordingly, any cause of action that attacks the propriety of the Replenishment Fee or attempts to impede its prompt collection cannot proceed, unless an exception to the “pay first” rule applies. However, the court did not find any recognized exceptions to the “pay first” rule apply. 1) There are no criminal penalties for failure to pay the replenishment fee. 2)  There is no due process concern from imposing the “pay first” rule because the action could proceed later once Mojave pays its balance; and 3) The Authority had conceivable basis in law or fact for assessing the replenishment fee. Therefore, the “pay first” rule must be enforced strictly here, although Mojave’s lawsuit was based on the alleged illegality of the challenged fee.

The appellate court relied on the well-established law in the context of tax disputes to reach the applicability of the “pay first” rule in litigation challenging SGMA fees and referred to the same statutory interpretation in Los Altos Golf & Country Club v. County of Santa Clara (2008) 165 Cal.App.4th 198 as support. Just as a tax dispute is a post-payment refund action and a taxpayer may not obtain adjudication of the validity of a tax which is due but not yet paid, the court further reasoned that the Legislature intended the same interpretation apply to laws with substantially similar language and section 10726.6(d) of SGMA requires a person who seeks to challenge a groundwater fee imposed under SGMA to first pay the fee before bringing an action for a refund.

In addition, the court also reasoned that not applying the rule will run contrary to what the Legislature contemplated when it enacted SGMA. It would also undermine the public policies that underlie the “pay first” rule, such as ensuring the continued provision of public services funded by taxes, or in this case, the replenishment fees.

Taking Claim Failed Because No Regulatory Actions Other Than the Fee Had Economic Effects on the User

 Mojave also alleged that the Authority, through the adoption of the Exempted Pumping Allotments and other Implementing Actions (excluding the Replenishment Fee), deprived Mojave of all economically beneficial use of its water rights and pistachio trees, and that this amounts to a physical and regulatory taking of private property without just compensation in violation of the state and federal Constitutions and section 1983 of title 42 of the United States Code. Mojave claimed that Authority took its vested overlying water right to pump native groundwater from the Basin for use on its land and made Mojave’s water available for public use by others without just compensation.

The trial court reasoned that Mojave’s claim specifically removed any reference to the Replenishment Fee, and the takings claims are instead based on the Authority’s groundwater sustainability plan, the Sustainable Yield Report, Exempted Pumping Allotments, and Transient Pool and Fallowing Program, none of which, “without reference to the Replenishment Fee, [has] an economic effect on Mojave.” As for the physical takings claims, the trial court reasoned that Mojave had not alleged it was in fact physically prevented from extracting water, and thus had not stated a claim.

The court of appeal agreed with the trial court’s analysis. The court theorized that if Mojave had paid the Replenishment Fee in compliance with the “pay first” rule, it could perhaps state a takings’ cause of action on the theory that the Replenishment Fee makes Mojave’s agricultural operations economically unviable because the fees for extracting groundwater are so high. But Mojave omitted any reference to the Replenishment Fee from its takings claims, and the only implementing action with an economic effect on Mojave is the Replenishment Fee. None of the other implementing actions physically prevent Mojave from extracting groundwater or interfere economically with Mojave’s ability to extract groundwater.

The case is also instructive in what the court did not decide. The court noted that Mojave’s claim that the Authority took its vested overlying water right to pump ground water from the Basin for use on its land (but not specifying the quality of its water right or, its priority vis-à-vis other extractors), raising the following several questions.

  • Assuming the Basin’s sustainable yield is only 7,650 acre-feet per year, how can multiple extractors each have a viable common law right to most or all that water?
  • Is using the Basin’s limited groundwater to irrigate a water-intensive crop like pistachios in the middle of the high desert a “reasonable and beneficial” use of water protected under the California Constitution, particularly considering most of those trees were planted less than 10 years ago? (See Cal. Const., art. X, § 2.)
  • Does a vested overlying right to groundwater mean a vested overlying right to free groundwater?
  • SGMA states that any judgment in an adjudication action for a basin required to have a groundwater sustainability plan must not substantially impair the ability of a groundwater sustainability agency to achieve sustainable groundwater management. (§ 10737.8.) What impact does that rule have on common law groundwater rights?

The court here did not answer such questions. Those issues are sure to arise again in future SGMA litigation.

Further Discussion and Takeaway on the Court’s Holding

It is worthy noted that although the court was aware that a rigid application of the “pay first” rule could allow local groundwater sustainability agencies to impose unreasonable fees that would be too high to certain users to afford to pay and could even eventually force them to run out of business, the court opted not to discuss the issue, and declined to create a new exemption accommodating the potential unjust and unreasonable result. The current rule places a financial burden on water users by requiring payment of any challenged fee currently due. Therefore, questions remain controversial and open to future challenges as to how to implement this rule in such a situation when a groundwater agency’s sustainability plan may act inconsistently with California water law.

Glen Hansen is Senior Counsel and Simyllina Chen is a Law Clerk at Abbott & Kindermann, Inc.  For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, Inc. at (916) 456-9595.

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, Inc., 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.

Vichy Springs Resort, Inc. v. City of Ukiah (2024) 101 Cal.App.5th 46.

In Vichy Springs Resort, Inc. v. City of Ukiah (2024) 101 Cal.App.5th 46, the First District Court of Appeal held completion of a project did not render claims against a city alleging CEQA violations moot because effective relief was still possible. Additionally, the court held that Mendocino County’s determination that it lacked jurisdiction to issue a permit did not absolve the County of potential liability for CEQA violations because that determination was subject to review.

In 2017 the City of Ukiah (“City”) issued a permit to the Ukiah Rifle and Pistol Club. Inc. (“Club”) authorizing construction of a new shooting range (“Project”) on land in an unincorporated area of Mendocino County (“County”). Vichy Springs Resort, Inc. (“Vichy”), sued the County and the City, naming the Club as the Real Party in Interest. Vichy’s petition alleged the County violated CEQA by erroneously determining it had no regulatory responsibility for the Project, thereby allowing it to go forward without review, and that the City had committed multiple CEQA violations with regards to the permitting of the Project, most notably Vichy alleged the City improperly determined the project was not subject to CEQA. Vichy did not ask the trial court to enjoin the Project while the case was pending, and during this time the Club completed construction. The County demurred, arguing Vichy failed to state a claim against it, while the Club, joined by the City, demurred, arguing Vichy’s claims were mooted by the Project’s completion. The trial court sustained the demurrers without leave to amend. Vichy subsequently filed a timely notice of appeal.

Vichy Successfully Stated a Claim Against the County

On appeal the County argued that (1) Vichy’s petition did not describe a “project” subject to CEQA within the definition of Pub. Resources Code, § 21065 because the County did not issue a permit, and (2) that CEQA only applies to project approvals, and not to government inaction. The appellate court first clarified that the definition of a “project” under Section 21065 does not require that a permit be issued, rather it requires that a proposed activity “involve[] the issuance to a person of a…permit.” Because the County did not dispute the allegation that if the Project were subject to its authority a permit would be required, it was a “project” subject to CEQA. The court then addressed the inaction argument. Vichy alleged the County’s determination that it lacked regulatory authority over the Project allowed the Project to proceed without environmental review, in direct conflict with the stated purpose of CEQA. Though the Club did not apply for a permit, doing so would have been pointless so long as the County asserted it had no regulatory authority, and so whether the County’s determination was erroneous was reviewable. Having decided that it was not the County’s inaction in not issuing a permit that Vichy challenged, but rather the County’s determination that it was not responsible for issuing a permit, the court held that Vichy successfully stated a CEQA violation claim against the County, and accordingly reversed the trial court’s judgment.

Completion of the Project did not Moot Vichy’s Claims Against the City

A claim is moot when the decision of the reviewing court cannot have any practical impact or when there is no effectual relief that can be granted. In other words, when an actual controversy existed, but because of changed circumstances ceased to exist. In deciding if a claim is moot a court must determine whether it can grant the plaintiff any effectual relief.

The Club relied on Parkford Owners for a Better Community v. County of Placer (2020) 54 Cal.App.5th 714, and Santa Monica Baykeeper v. City of Malibu (2011) 193 Cal.App.4th 1538, to support its argument that once a project is complete the claim is inherently moot, however the court found those cases to be distinguishable from this case. In both those cases the appellant argued the environmental impacts of a project could be ameliorated or mitigated, but in neither case did the appellant explain how that could be achieved following completion of the project. Unlike those cases, Vichy included specific allegations about post-completion mitigation measures in its petition, showing that effectual relief was still possible.

The Club also argued the claims should be moot because Vichy did not seek a preliminary injunction staying construction while the original litigation was pending. Though the court acknowledged it would have been preferable for Vichy to ask for temporary injunctive relief, failure to do so was not sufficient to render the claims moot. Though the Club could not be faulted for proceeding with construction once Vichy failed to seek a preliminary injunction, there was no legal basis for concluding that a petitioner’s earlier failure to seek injunctive relief makes a CEQA claim moot in situations such as this where effectual relief remains available, and so the court reversed the trial court’s judgment.

Progress of a project can impact the feasibility of mitigation measures. In some cases, failure to seek a preliminary injunction may even make it impossible for the court to grant a reasonable remedy. But so long as possible mitigation measures still exist, neither progress, nor completion of a project, inherently render a CEQA violation claim moot.

Diane Kindermann is Owner of, Gage Marchini is an Associate Attorney and Jack Sandage is a Law Clerk at Abbott & Kindermann, Inc.  For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, Inc. at (916) 456-9595.

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, Inc., 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.

Sam v. Kwan (2024) 101 Cal. App. 5th 556.

The California Court of Appeal, Second Appellate District reversed a trial court’s decision in a real estate case of breach of fiduciary duty between two partners of an LLC. The case demonstrates that the bona fide purchaser doctrine will not protect a third-party buying the property when the buyer negligently ignored the obvious disputes regarding the seller LLC’s true managing manager. The ruling also underscores the importance of conducting thorough title research in real estate transactions and the potential liability of the escrow agents and title companies involved in these transactions.

The Trial Court Erred in Granting Summary Judgment in Favor of the Board

Anthony Sam and Renee Kwan formed a limited liability company (“2013 LLC”) to buy a parking lot, but their business relationship deteriorated. In 2015, Kwan negotiated the sale of the parking lot to the Board of Fire and Police Pension Commissioners for the City of Los Angeles (“Board”) for $3.8 million, which reaped more than $2 million in profit in less than a year and a half. The Board used a law firm as outside counsel and First American Title Company (“First American”) as the title insurer and escrow agent for the real estate transaction. Sam did not share the gains from the sale. He alleged this sale was done without his knowledge, and that Kwan had “fabricated” and “forged” documents to remove him from the 2013 LLC, as well as pocketing the sale proceeds. Sam sued Kwan, her companies, First American, and the Board after discovering the sale of the parking lot. The trial court ruled in favor of the defendants on various pretrial motions, effectively denying Sam a legal remedy.

There were two versions of the operating agreement which revealed contradictory information – one named Kwan as the managing manager and the other named Sam as the manager. The two operating agreements bored the same date “October 13, 2013” and the two partners developed conflicting explanations. Kwan said it was a simple and innocent “mistake” while Sam charged Kwan forged her version by altering the names, and fraudulently created it to make it look like she had authority she did not possess. Because Kwan’s proof of consent document appeared to have several problems, and the Board’s ignorance of such suspect and closing the deal rendered inadequate diligence, the court of appeal ruled that the summary judgment in the Board’s favor was inappropriate, and a fact finder must decide who was telling the truth.

Bona Fide Purchaser Doctrine

The bona fide purchaser (“BFP”) doctrine enables a buyer to keep the purchased property if the property is bought for value and the buyer lacked knowledge or notice of another’s claim. When the buyer has actual, constructive or inquiry notice of a prior interest, however, the buyer takes the property subject to those other interests. For a buyer to claim BFP protection, he must demonstrate that he has conducted research with due diligence to see if the title of the property-to-purchase would be good. California’s quiet title laws put this duty of inquiry on buyers of real estate transactions, and they must inquire into the validity of their prospective ownership claim. Even if the buyer does not have actual notice of the prior interest, if he negligently caused the lack of knowledge, or he would have known the dispute had he done the research, he would not be able to use the BFP doctrine.

More specifically, the buyer cannot claim as a BFP if he failed to do the due diligence. In the present case, there were apparent inconsistencies in the documented deed showing who was the managing manager, however, the Board’s lawyer entirely skipped the portion of the preliminary report that stressed the need, in the case of a limited liability company, to examine the company’s operating agreement and to obtain proof the company was properly operating through its manager. The Board’s attorney also failed to review the deed of trust and the assignment of rents. This suspect claim of authority would have caused a reasonable and prudent buyer to inquire further, and it is a standard practice to review the operating agreement during an LLC involved real estate transactions. But instead of pausing to figure out the details and suspects of the disputes, the Board went ahead and closed the transaction. Therefore, it cannot be qualified as a BFP and avoided possible damage or litigation, when the managing manager got challenged in a later claim.

Fiduciary Duty Between Partners of an LLC

As a joint venturer in an LLC, each partner owes the other one a fiduciary duty, even for a non-managing member, and one of the duties included is the duty to disclose material information. Sam alleged that Kwan, as his fiduciary, was under a duty to disclose material facts that she concealed: namely, her fabrication of a false operating agreement, her sale of the property without proper approval, and her failure properly to account for the funds. Sam also adequately alleged a claim for fraud based on concealment. A claim for fraud based on concealment will lie where the defendant concealed a material fact; the defendant was under a duty to disclose the fact to the plaintiff; the defendant concealed the fact with the intent to defraud the plaintiff; the plaintiff was unaware of the fact and would have acted differently if plaintiff knew; and the concealment harmed the plaintiff. Since Sam adequately alleged harm, the trial court erroneously granted judgment on the pleadings to the LLC’s managing member on Sam’s breach of fiduciary claim and it should be reversed.

Conclusion

A third-party buying property from a manager-managed LLC does not qualify as a BFP on summary judgment if there are factual disputes regarding the identity of the LLC’s manager and the buyer acted negligently in its due diligence to discover the obvious disputes.  It is the buyer’s duty to make a reasonable inquiry regarding the identity of the LLC’s manager. The court’s holding also indicates the potential liability of escrow agents and title companies in real estate deals, although it was not the focus of the ruling of the present case.

Glen C. Hansen is Senior Counsel and Simyllina Chen is a Law Clerk at Abbott & Kindermann, Inc.  For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, Inc. at (916) 456-9595.

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, Inc., 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.

In AIDS Healthcare Foundation v. Bonta (2024) 101 Cal.App.5th 73, the Second District Court of Appeal upheld the power of local governments to override housing density caps, including caps adopted by voter initiative.

Legal Background

Under Senate Bill 10 (“SB 10”), passed in 2021, the Legislature granted counties and cities discretion on a parcel-by-parcel basis to supersede local housing density caps. This discretion was limited to particular parameters, namely that the local government could adopt an ordinance to zone a parcel for up to 10 residential units if: (1) the parcel was located in a transit-rich area or an urban infill site, (2) the parcel was not located in a fire hazard zone, and (3) the local legislative body making the increased density zoning determination did so consistent with its “obligation to affirmatively further fair housing.” For a local government to override a housing density cap that was previously instituted via local ordinance, it required a simple majority only. For a local government to override a housing density cap that was enacted by a local voter initiative, it required a two-thirds vote.

Less than one week after Governor Newsom signed SB 10, the AIDS Healthcare Foundation (“Foundation”) petitioned for a writ of mandate and sought an injunction against enforcing SB 10 and a declaration that the law is unconstitutional. The Foundation argued that SB 10’s grant of authority to override voter initiatives violated the California Constitution’s guarantee of initiative power for electors in cities and counties (Cal. Const. art. II, § 11), especially charter cities and counties (Cal. Const. art. XI, § 3(a)). The Foundation argued that local governments’ authority under SB 10 to override the will of the voters was incompatible with voters’ initiative rights and thus unconstitutional. Both the trial court and appellate court disagreed for the same reason: preemption.

The California Legislature’s Authority Preempts Local Government Action.

Like the supremacy clause of the United States Constitution, the California Constitution has a similar clause which states that cities and counties may establish their own ordinances and regulations within their local limits so long as they do not conflict with state laws (Cal. Const. art. XI, § 7). For any given city or county, simply conflicting with state laws is sufficient for the local ordinance to be invalidated. However, for charter cities and counties, the bar is slightly higher: for state law to preempt charter city or county ordinances, there must be a conflict, the “subject matter of the [state] law must be of statewide” or “regional” concern, and the state law must be “reasonably related to [the] resolution” of that concern. Despite the higher bar for charter cities and counties, state-level legislative action will still preempt charter cities’ or counties’ local ordinances if those elements are met. Moreover, despite the vast power associated with initiatives, even those are preempted by legislative action so long as the Legislature gives a “definite indication” that it intends to preempt the local initiative. Here, the Second District was tasked with determining whether SB 10 sufficiently established those elements to grant local governments authority to override voter initiative housing density caps.

SB 10 Addresses a Matter of Statewide Concern.

Unsurprisingly, the Second District found that SB 10 addresses a matter of statewide concern because SB 10 is designed to accommodate housing development and combat California’s ever-growing housing shortage. The court referenced several legislative findings relating to the significance of the issue, and it pointed out that the Legislature has spoken on the matter in previous legislative efforts, including through the Housing Element Law and Least Cost Zoning Law. Concluding that previous legislation was insufficient to solve California’s housing shortage, the court determined that SB 10 again addressed a matter of statewide concern. Despite the petitioners’ arguments that zoning is an exclusively local problem, the court referred to broader challenges with the housing shortage, such as NIMBYism and high costs of living. Taking each of these factors into consideration, the court disagreed with petitioners’ formulation and ultimately decided that SB 10 constitutes a matter of statewide concern.

SB 10 Is Likely “Reasonably Related” to Resolving the Housing Shortage.

Curiously, the Second District did not directly explain how or why SB 10 is “reasonably related” to resolving the housing shortage, apart from the general assumption that allowing increases in high density zoning will accommodate more housing in those zones. Instead, the court focused on how SB 10 grants discretion, but not a mandate, to local governments who opt to increase housing density in these zones. In response to one of many arguments about the statute’s constitutionality, the court concluded that this discretion was constitutional despite the power it afforded local governments.

The Legislature Gave a Definite Indication of its Intent to Preempt Local Initiatives with SB 10.

Finally, the court rejected petitioners’ arguments that the language of SB 10 did not meet the “clear statement” standard necessary to preempt local legislation enacted via initiative. Despite petitioners’ contentions that initiatives are so fundamental to the constitutional rights of Californians, and should never be preempted, the court found that the Legislature had the power to preempt and clearly intended to do so. Citing the language of SB 10, which included a provision granting local governments “power … notwithstanding any local restrictions … enacted by local initiative.”

For all these reasons, the Second District sided with local governments to conclude that they have the power to preempt local initiatives to zone parcels for up to 10 residential units, surpassing local housing density caps. With SB 10 upheld by the court, local governments may exercise their discretion to increase housing density locally to address the housing shortage in their communities, but they are not bound to do so.

William Abbott is Of Counsel and Kara Anderson is a Law Clerk at Abbott & Kindermann, Inc.  For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, Inc. at (916) 456-9595.

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, Inc., 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.

In Move Eden Housing v. City of Livermore (2024) 100 Cal.App.5th 263, the First District Court of Appeal held the Livermore City Council’s adoption of a resolution approving a development agreement was a legislative act subject to the referendum power.  This case is the latest iteration of a multi-year litigation battle targeting an affordable housing development proposed for downtown Livermore (See Save Livermore Downtown v. City of Livermore (2022) 87 Cal.App.5th 1116 [concerning CEQA challenges to the same project].)

Following the more-recent decision, Livermore voters will ultimately decide the fate of the project, and not the courts.

Project and Legal Background

In 2008, the City’s former redevelopment agency purchased property in Livermore.  When the State dissolved redevelopment agencies a few years later, the property was included in a long-range property management plan, which was approved by the State.  The property was then transferred to the City.  In 2018, the City and affordable housing developer Eden Housing entered into a Disposition and Development and Loan Agreement concerning the development of the property.  The 2018 Agreement stated the site would “include a public park” along with housing and other amenities.  In May 2021, the City approved land use entitlements for the project and an amendment to the 2018 development agreement (“2021 Agreement’).  In May 2022, the City adopted the resolution at issue in this case which authorized the execution of the 2021 Agreement (“2022 Agreement”). 

The 2022 Agreement stated that it superseded the 2018 Agreement, as amended in 2021.  It further stated that the City would loan to Eden Housing the $7.8 million necessary to purchase the property.  It also stated, most relevant here, that the City would pay for the construction of a public park included as part of the project and that Eden Housing would supervise construction.  Soon thereafter, Appellants began to circulate a referendum petition for the purpose of challenging the 2022 Agreement.  In July 2022, Appellants submitted to the City Clerk the referendum petition that exceeded the required number of signatures.  The City Clerk subsequently informed Appellants that, based on advice from the City Attorney, the City determined the resolution approving the 2022 Agreement “was an administrative act, not a legislative act, and not subject to referendum,” and thus, on that basis, the petition was ineligible to be proceeded as a referendum.

Appellants then commenced this action by filing a petition for writ of mandate seeking to compel the City to process the referendum petition. The trial court denied the petition on the merits, concluding the referendum was an administrative act not subject to referendum, or, in the alternative, the City acted as an administrative agent of the State in adopting it.  The First District Court of Appeal reversed as to both of the trial court’s rationales.

The 2022 Agreement was a Legislative Act Subject to Referendum

The power of referendum extends only to legislative acts, not adjudicatory or administrative acts. The First District distinguished between legislative and administrative acts in particular.  A legislative act prescribes a new plan or policy, whereas an administrative act merely pursues a plan already adopted by the legislature body.  Legislative acts are not always easy to spot. 

Here, the trial court relied on San Bruno Committee for Economic Justice v. City of San Bruno (2017) 15 Cal.App.5th 524.  There, the Court of Appeal held a resolution approving the sale of a city property to a hotel developer was an administrative act.  In that case, prior to the challenged resolution, the city had already enacted legislative policies related to the development of the hotel site.  The city council adopted a specific plan related to the project and had selected a developer to develop the site.  The planning commission had also adopted a resolution finding the sale of the property to the developer was consistent with the general plan.  In concluding the resolution that ultimately finalized the sale was not a legislative act, the Court of Appeal reasoned that the primary substantive decisions related to the development and sale had already been made, and that the resolution finalizing the sale did not contain any new legislative policies.

Here, the First District distinguished San Bruno Committee.  The Court reasoned that while the primary substantive decisions related to the housing aspects of the downtown Livermore development had been made prior to the 2022 Agreement, that was not the case for the park.  The 2021 Agreement had only stated that the City had the option to negotiate an agreement to fund the park, but it did not itself include substantive decisions regarding the park and the City’s funding of it.  Rather, it was in the 2022 Agreement that the City agreed to pay for the construction of the park, and thus, it was the 2022 Agreement that constituted the initial relevant policy determination regarding the park’s construction and funding, which was unlike the land sale resolution in San Bruno Committee that did not include new policy determinations. 

On appeal, the City framed the 2022 Agreement as a continuation of a policy decision made initially in the 2018 Agreement, where it was stated that the site would “include a public park.”  That agreement was later incorporated into the 2021 Agreement, which was subsequently approved pursuant to the 2022 Agreement.  In that regard, the City attempted to argue the 2022 Agreement was merely an administrative act that appropriated specific amounts of public funds for a project that had already been adopted.  The Court was unpersuaded, holding the resolution adopting the 2022 Agreement was a legislative act subject to referendum.

Meanwhile, the First District also concluded the trial court erred in concluding that the resolution adopting the 2022 Agreement was not subject to referendum because the City was acting as an administrative agent of the state.  The Court concluded that the Legislature in enacting the law that dissolved redevelopment agencies did not intend to preempt local discretionary policy decisions regarding municipal developments. 

The City Must Process the Referendum Petition

The Court reversed the judgment and remanded it to the trial court to issue a peremptory writ of mandate ordering the City to process the referendum petition.

William Abbott is Of Counsel and Garrett Bergthold is a Law Clerk at Abbott & Kindermann, Inc.  For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, Inc. at (916) 456-9595.

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, Inc., 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.

Reserve your seat for our annual conference taking place in March of 2024 for our In-Person and Virtual Conferences.

On March 14, 2024, Abbott & Kindermann, Inc. will present its 23rd annual In-Person Conference. March 28th or 29th, 2024 Abbott & Kindermann, Inc. will present its 23rd annual Virtual Conferences. All Conferences are for clients and colleagues interested in current land use, environmental, and real estate issues affecting commercial and residential development, agriculture, real estate transactions, easements, mining and the construction materials production industry.

A summary of 2023 case law and legislative updates includes the following hot topics:

  • CALIFORNIA WATER RIGHTS AND SUPPLY
  • WATER QUALITY
  • WETLANDS
  • AIR QUALITY & CLIMATE CHANGE
  • RENEWABLE ENERGY
  • ENDANGERED SPECIES
  • HAZARDOUS MATERIALS & REMEDIATION
  • NATIONAL ENVIRONMENTAL POLICY ACT (“NEPA”)
  • MINING, OIL AND GAS
  • STREAMBED ALTERATION AGREEMENTS
  • FOREST RESOURCES
  • CULTURAL RESOURCES PROTECTION
  • ENVIRONMENTAL ENFORCEMENT
  • GENERAL REAL ESTATE
  • COMMON INTEREST DEVELOPMENTS
  • REAL ESTATE CONTRACTS & TRANSACTIONS
  • EASEMENTS, ADVERSE POSSESSION, DEDICATIONS, & BOUNDARY DISPUTES
  • FEES, TAKINGS, AND EXACTIONS
  • CALIFORNIA ENVIRONMENTAL QUALITY ACT (“CEQA”)
  • PLANNING, DEVELOPMENT AND THE SUBDIVISION MAP ACT
  • LOCAL GOVERNMENT AND LOCAL GOVERNMENT ORGANIZATION

Abbott & Kindermann, Inc. will present its annual program virtually and in-person with a mix of conveniently available pre-recorded content and a live session component. 

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In Discovery Builders, Inc. v. City of Oakland (2023) 92 Cal.App.5th 799, the First District Court of Appeal held an agreement between a developer and the City of Oakland was unenforceable to the extent it prevented the city from imposing new impact fees in the future. The court reasoned such a provision constituted an impermissible contracting away of the city’s police power.

Between 2004 and 2005, the city approved a vesting tentative map and final tract maps for a 400-unit housing project. The city’s approval required that the developer satisfy various terms and mitigate various environmental impacts. In 2005, the city and developer entered into a separate agreement (“2005 Agreement”), which set the terms by which the developer would compensate the city for employee services and outside consultants required to satisfy the agreed-upon terms and mitigation requirements. Development of the project began soon thereafter.

In 2016, as development was continuing, the city enacted three new impact fees for development projects —an affordable housing impact fee, a transportation impact fee, and a capital improvements impact fee. In 2019, the developer filed for the last round of building permits for the project. The city assessed all three new fees against each of three requested building permits. The developer filed a petition for writ of mandate against the city, which the trial court granted. The trial court relied on Section 7 of the 2005 Agreement, which stated that the “City Fees and other monies paid and to be paid by Developer which are referred to in [the] Agreement satisfy all the Developer’s obligations for fees to the city for the Project.” The trial court held this provision reflected the city’s agreement to limit the fees applied to the project to only those identified in the 2005 Agreement and ordered the fees refunded.

The appellate court reversed the trial court’s decision. Relying on Avco Community Developers Inc. v. South Coast Regional Committee (1976) 178 Cal.3d 785, and its progeny, the court held the 2005 Agreement was invalid to the extent it prevented the city from imposing impact fees in the future, reasoning that municipalities may not contract away their usage of the police power in the future. Because the city rightfully exercised its police power in enacting the 2016 fees, any provision of the 2005 Agreement that sought to limit such a rightful usage of the city’s police power was impermissible.

The developer argued the city did not contract away its police power in the 2005 Agreement because the agreement did not impact the city’s ability to legislate, suggesting, in the words of the court, that “a city’s police power is concerned only with the power to enact laws, not the power to enforce laws.” The court disagreed, citing article XI section 7 of the California Constitution, which states that the city may “make and enforce” ordinances and regulations related to the police power. The developer also argued the city did not contract away its police power in the 2005 Agreement because the agreement did not interfere with the city’s ability to make and enforce future zoning laws on other developers. The court disagreed, citing precedent that invalidated agreements exempting a small subset of parties from laws and ordinances.

Commentary: What is interesting in Discovery Builders is the omission of any discussion of development agreements. California’s development agreement law allows developers to secure a customized vested right through the freedom of contract. (Gov. Code, § 65864-65869.5.) Development agreements can lock in laws, regulations, and fees in existence at the time of execution. Development agreements are only valid to the extent they satisfy numerous requirements created by statute. The development agreement law is best thought of as a rare exception to the ban on municipalities limiting their police power in the future. Here, an effective development agreement could have plausibly helped the developer avoid the end-stage fee increases present in this case. Other courts when faced with similar vesting arguments associated with an agreement have discussed statutory developments as the recognized exception to the Avco rule. While this court was not required to discuss statutory development agreements, the court’s silence should not be treated as a rejection of statutory development agreements as a tool.

William Abbott is Of Counsel and Garrett Bergthold is a Law Clerk at Abbott & Kindermann, Inc.  For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, Inc. at (916) 456-9595.

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, Inc., 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.

Reserve your seat for our annual conference taking place in March of 2024 for our in-person and virtual conferences.

On March 14, 2024, Abbott & Kindermann, Inc. will present its 23rd annual In-Person Conference. March 28-29, 2024 Abbott & Kindermann, Inc. will present its 23rd annual Virtual Conferences. All Conferences are for clients and colleagues interested in current land use, environmental, and real estate issues affecting commercial and residential development, agriculture, real estate transactions, easements, mining and the construction materials production industry.

A summary of 2023 case law and legislative updates includes the following hot topics:

  • CALIFORNIA WATER RIGHTS AND SUPPLY
  • WATER QUALITY
  • WETLANDS
  • AIR QUALITY
  • CLIMATE CHANGE & RENEWABLE ENERGY
  • ENDANGERED SPECIES
  • HAZARDOUS MATERIALS & REMEDIATION
  • NATIONAL ENVIRONMENTAL POLICY ACT (“NEPA”)
  • MINING, OIL AND GAS
  • STREAMBED ALTERATION AGREEMENTS
  • FOREST RESOURCES
  • CULTURAL RESOURCES PROTECTION
  • ENVIRONMENTAL ENFORCEMENT
  • GENERAL REAL ESTATE
  • COMMON INTEREST DEVELOPMENTS
  • REAL ESTATE CONTRACTS & TRANSACTIONS
  • EASEMENTS, ADVERSE POSSESSION, DEDICATIONS, & BOUNDARY DISPUTES
  • FEES, TAKINGS, AND EXACTIONS
  • CALIFORNIA ENVIRONMENTAL QUALITY ACT (“CEQA”)
  • PLANNING, DEVELOPMENT AND THE SUBDIVISION MAP ACT
  • LOCAL GOVERNMENT AND LOCAL GOVERNMENT ORGANIZATION

Details for the In-Person and Virtual Conferences will come out shortly.  We hope you can join us and we look forward to seeing you there.

In Durkin v. City and County of San Francisco (2023) 90 Cal.App.5th 643, San Francisco’s typical arduous land use approval process sets the foundation for an anti-SLAAP case with interesting ramifications for neighborly disputes.  A homeowner (“Appellant”) sought to remodel and expand a single-family home.  The Planning Department determined the project was categorically exempt from CEQA.  Neighbors appealed Planning’s determination to the Board of Supervisors (“Board”), which conditionally reversed the exemption determination, finding there was substantial evidence that the project may result in substantial adverse impacts to the historic significance of the neighboring property, which had not been adequately addressed by Planning.  Appellant submitted another application and Planning issued another categorical exemption, though Planning later revised itself and rescinded the categorical exemption.  Appellant appealed to the Board, which refused to hear the appeal.  

The City then prepared a preliminary mitigated negative declaration (“MND”) addressing the adjacent historic resources. The neighbor whose property had been the subject of the purported historic resource impacts (“Affected Neighbor”) appealed the preliminary MND.  The Planning Commission denied the appeal and adopted a final MND.  Affected Neighbor appealed to the Board, which reversed the Planning Commission’s adoption of the final MND.  The Board directed Planning to conduct further study on slope stability and potential impacts to the structural integrity of Affected Neighbors property and to analyze and apply appropriate mitigation measures.

Appellant Seeks Judicial Reprieve

At that point, Appellant had enough and filed a petition for writ of mandate against San Francisco.  The petition named Affected Neighbor as a real party in interest.  Affected Neighbor then filed an anti-SLAPP motion, contending the petition arose from his protected activity of appealing the final MND to the Board and Appellant lacked minimal merit because the Board’s decision was supported by substantial evidence.  The trial court granted the anti-SLAAP motion and awarded Affected Neighbor $219,269.25 in total fees.

The Dispute Did Not Arise from Affected Neighbor’s Protected Activity

Resolution of an anti-SLAAP motion requires two inquiries: (1) the moving defendant must make a prima facie showing that the challenged claim arises from the defendant’s constitutionally protected free speech or petition rights, and, given defendant meets its burden, (2) the burden shifts to the plaintiff to establish a probability of success on the claim.  (Baral v. Schnitt (2016) 1 Cal.5th 376, 381-382, 384.)   The anti-SLAAP law protects “allegations of protected activity that are asserted as grounds for relief.”  (Id. at p. 395, italics omitted.)  Thus, the relevant inquiry is whether the moving defendant’s conduct “forms the basis for the claim” at issue.  (Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057, 1062.) 

Here, the First Appellate District for the Court of Appeal recognized that Affected Neighbor’s relevant conduct—appealing the final MND to the Board—is petitioning activity that is generally protected under the anti-SLAAP law.  But in answering whether such conduct formed the basis of, or arose from, the causes of action at issue, the court answered no.  The court held it was various acts or omissions by the Board, not Affected Neighbor, that formed the basis of the dispute.  There were two cases of action for mandamus in the petition, which were based on the following facts:  the board failed to make factual findings in support of its decision to reverse the final mitigated negative declaration, the board’s decision was not supported by substantial evidence, and the board held more than five hearings on the project in violation of the Housing Crisis Act of 2019.  These, the court reasoned, were acts or omissions of the Board, not Affected Neighbor.  Affected Neighbor was not a defendant, he was a real party in interest, and the court held it was irrelevant that Affected Neighbor’s petitioning activity triggered the Board’s actions that formed the basis of the petition. Thus, the court held Affected Neighbor as the moving party failed to make a prima facie showing that the challenged claim arose from the defendant’s constitutionally protected free speech or petition rights and was entitled to relief under the anti-SLAAP law.

The Anti-SLAAP Motion Was Not Frivolous

Appellant contended the anti-SLAAP motion was frivolous and sanctionable.  A frivolous anti-SLAAP motion can be aimed at causing unnecessary delay or harassing a party.  Frivolous in the context of an anti-SLAAP motion “means that any reasonable attorney would agree the motion was totally devoid of merit.”  (L.A. Taxi Cooperative, Inc. v. The Independent Taxi Owners Assn. of Los Angeles (2015) 239 Cal.App.4th 918, 932.)  The court recognized the Appellants provided no evidence that the anti-SLAAP motion was filed to harass and delay.  The court held the motion was not frivolous, and thus, not sanctionable.

William Abbott is Of Counsel and Garrett Bergthold is a Law Clerk at Abbott & Kindermann, Inc.  For questions relating to this article or any other California land use, real estate, environmental and/or planning issues contact Abbott & Kindermann, Inc. at (916) 456-9595.

The information presented in this article should not be construed to be formal legal advice by Abbott & Kindermann, Inc., 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.