By Katherine J. Hart and Leslie Z. Walker

In the second time in two months, the California Supreme Court announced that once a Notice of Exemption (“NOE”) for a project is filed, the applicable statute of limitations is 35 days – regardless of the circumstances surrounding the NOE. On April 1, 2010, the Court held that a citizens’ suit challenging a project under the California Environmental Quality Act was barred by the 35-day statute of limitations contained in Public Resources Code section 21167 subdivision (d) because the City of Stockton had filed a facially valid NOE. In Stockton Citizens for Sensible Planning v. City of Stockton (2010) _____ Cal.3d___ a citizens’ group challenged the approval of a Wal-Mart Supercenter (“Project”) found to be consistent with an approved master development plan (“MDP”) and thus exempt from further review under the California Environmental Quality Act (“CEQA”). The citizens’ group claimed that because the Community Development Director (“Director”) erred in approving the project, the statute of limitations for a challenge to the Notice of Exemption (“NOE”) was the 180-day period applicable when no NOE has been filed, not the shorter 35-day period applicable when public notice has been provided by means of an NOE. (Public Resources Code, § 21167, subd. (d); CEQA Guidelines, § 15112, subdivision (d)(2). ) Reversing the decisions of both the superior and appellate courts, the Supreme Court found that flaws in the decision-making process underlying a facially valid and properly filed NOE do not prevent the NOE from triggering the 35-day period to file a lawsuit challenging the agency’s approval of a CEQA-exempt project.

Developer A.G. Spanos prepared a Master Development Plan (“MDP”) for Park West within the larger A.G. Spanos Park, in the City of Stockton. As a concession for the City’s approval of lower density development elsewhere in the larger A.G. Spanos Park, the City required a density transfer agreement obligating the construction of a minimum of 935 multifamily residential units within Park West. The City prepared an EIR for Park West and the city council certified it and approved the MDP and the density transfer agreement.

Under the terms of the MDP, the Design Review Board and Director were required to approve proposed projects within the MDP if they determined the projects were consistent with the MDP’s criteria, goals and purposes. Doucet & Associates, acting on behalf of Wal-Mart Stores, Inc. (“Wal-Mart”) subsequently proposed a 207,000 retail store to be sited in the Park West. The Director approved the Project, subject to five minor corrections, and the next day, Spanos informed the City it would not be able to construct 627 of the 935 units required by the density transfer agreement, but offered Spanos’ assurance that the company would build the additional units within 10 years at other City locations.

Two months later, the City filed an NOE for the Project, stating the Project was a retail use to be constructed in two phases, the first 138,722 square feet and the second 68,888 square feet. The NOE did not name Wal-Mart or identify the Project as a Wal-Mart Supercenter, but did indicate that the Project was consistent with the MDP, and such ministerial determination was not subject to CEQA review under Public Resources Code section 21080 subdivision (b)(1) and CEQA Guidelines section 15369. The 35-day period for challenging the NOE expired on March 23, 2004.

On July 22, 2004, the citizens group filed suit claiming the Project violated CEQA since it had not prepared an EIR to assess the environmental effects of the Wal-Mart store, and the Project deviated substantially from the MDP, which proposed high density residential development for the parcels on which the Project would be developed. The City, Spanos, Doucet & Associates, and Wal-Mart, demurred on the grounds that the suit was not commenced within 35 days of the filing of the NOE. The trial court and appellate courts rejected this statutes of limitations defense. The Supreme Court reversed, stating “we harbor no doubt, on these facts, that the 35-day limitations period . . . had expired before plaintiffs filed their lawsuit.”

The Court explained that when a properly filed NOE complies in form and content with CEQA requirements and declares the agency has taken an action that would constitute final approval of a project under a CEQA exemption, the 35-day period for challenging the validity of this asserted approval under CEQA begins to run. CEQA provides an NOE must contain a brief description of the project its location and a finding that the project is exempt from CEQA, including a citation to the statute or CEQA Guidelines on which the agency is relying, and a brief statement of reason to support the exemption. (CEQA Guidelines, § 15062 subdivision (b).) The Court explained that the NOE for the Project was adequate because it stated the Project was a retail use consistent with the MDP, was located on the Northwest Corner of Trinity Parkway and Cosumnes Drive in the City of Stockton, San Joaquin County and identified the Assessors’ Parcel Number, and stated that it is exempt under Public Resources Code section 21080 subdivision (b)(1) and Guidelines section 15369.

The Court explained Public Resources Code section 21167 subdivision (d) provides, “An action or proceeding alleging that a public agency has improperly determined that a project is not subject to this division [i.e., is exempt from CEQA] pursuant to [section 21080, subdivision (b)] . . . shall be commenced within 35 days from the date of the filing . . . of the [NOE]. . .” The court explained that a statute of limitations, “operates conclusively across-the-board” and “does so with respect to all causes of action, both those that do not have merit and also those that do.” The court explained that this interpretation aligns with CEQA’s process of establishing and emphasizing public notification of an agency’s action or decision as the event triggering the shortest applicable limitation periods for lawsuits alleging noncompliance with the statute.

Well, it’s a good thing none of you readers took the bet. As predicted a few months back when blogging the Committee for Green Foothills case, in this recent Stockton Citizens case, the Supreme Court did indeed stand by the plain language of the statute and completely ignored all the alleged flaws in the approval process and corresponding policy issues surrounding the NOE.

If there is one lesson to be learned from this case, it is that timeliness of a lawsuit should never be confused with the merits of the lawsuit. At least when it comes to CEQA.

Katherine J. Hart is a senior associate and Leslie Z. Walker is an associate 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, nor 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.