Overturning a rule announced 15 years ago, the California Supreme Court has issued a landmark decision holding that the requirement that parties first address their complaints at the agency level before litigating those issues in court applies to challenges to agency decisions regarding whether a project is exempt from the California Environmental Quality Act.  If the decision-making agency holds a hearing on the project, future litigants must make sure someone first apprised the agency of the relevant issues before they can bring those claims to court.  Tomlinson v. Cnty. of Alameda, Case No. S188161, 2012 WL 2145906 (Cal. June 14, 2012).

The issue exhaustion rule has been murky ever since a 1997 case, Azusa Land Reclamation Co. v. Main San Gabriel Basin Watermaster, 52 Cal. App. 4th 1165, stated that the requirement to first raise issues at the agency level did not apply to a challenge regarding whether a project was exempt from CEQA.  More recently, two conflicting appellate court decisions were published - one holding the issue exhaustion requirement did not apply to exemption decisions (Tomlinson), and another holding that it did (Hines v. Cal. Coastal Comm'n, 186 Cal. App. 4th 830 (2010)).

The Supreme Court made the issue seem easy.  The court explained that CEQA expressly states that a proposed project can be challenged only on grounds that "were presented to the public agency orally or in writing by any person during the public comment period...or prior to the close of the public hearing on the project before the issuance of the notice of determination."  Cal. Pub. Res. Code § 21177(a).  The court acknowledged that when an agency determines that a project is exempt from CEQA, there is no public comment period, so that aspect of the test does not apply.  But if the public agency holds a hearing on the project before deciding it is exempt from CEQA, the court ruled the statutory requirement applies.  It does not matter whether the hearing was required by law.  Nor does it matter whether the agency ultimately filed a notice of determination.

In Tomlinson, Alameda County held multiple hearings on a proposed housing project.  The County provided notice before each hearing that the project fit within the infill housing CEQA exemption.  The County also provided notice that if parties did not raise issues during the agency proceedings, they could not raise those issues in court.  The litigants appeared at the county hearings and lodged several complaints.  But no one ever argued that the project did not fit within the infill housing exemption because it was located on unincorporated county land rather than within city limits.  Nevertheless, the litigants chose to highlight this issue when challenging the County's approval in court.

The court of appeal excused the litigants' oversight, ruling that the requirement to first raise issues at the agency level does not apply to exemption decisions.  The Supreme Court disagreed, holding that the requirement to first raise issues at the agency level is a necessary prerequisite to litigation whenever the agency holds a hearing on the project before making its decision.

The California Supreme Court has not been reluctant to apply CEQA's litigation prerequisites to dismiss suits in which litigants have failed to comply with the applicable requirements.  While the court recognizes CEQA's importance, it has read the statutory prerequisites to litigation strictly, providing agencies and developers with greater certainty that issues will be resolved according to CEQA's timelines and restricted to those raised during the agency proceedings.

Read about this and other legal developments in Perkins Coie's California Land Use & Development Law Report.

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