In the published portion of an opinion filed September 12, 2016, the Fifth District Court of Appeal reversed the trial court’s order taxing costs in the amount of $44,889.71 which were claimed by prevailing real party in interest Wal-Mart in connection with preparation of the administrative record. The costs were incurred by respondent and lead agency City of Ceres when it directed its outside counsel to prepare the record in a CEQA action challenging a Wal‑Mart Supercenter project, and were reimbursed by real party Wal-Mart pursuant to an agreement with the City that required the project applicant to reimburse it for all expenses arising from legal challenges to the project. Citizens For Ceres v. City of Ceres (Wal-Mart Stores, Inc., et al., Real Parties in Interest) (2016) ___ Cal.App.5th ___, 2016 WL 4733253.

The unpublished portions of the opinion discuss why the Court affirmed the trial court’s judgment denying Citizens’ petition for writ of mandate challenging the project EIR and the City’s statement of overriding considerations under CEQA. On the merits, the Court rejected Appellant Citizens’ contentions that the EIR failed to mandate adequate mitigation measures for the project’s urban decay impacts, failed to adequately analyze and mitigate for its impacts on landfill and recycling facilities, and failed to contain adequate information correlating the project’s air pollution impacts with resulting human health effects. A lengthy unpublished concurrence by Justice Franson analyzes, in very detailed dicta, the “correlation” issue, and specifically the disclosure requirements of CEQA Guidelines § 15126.2(a) which that justice believes would have applied had the Court not upheld the EIR’s conclusion that the project’s air quality impacts were less than significant. The unpublished portions of this opinion will be of keen interest to CEQA practitioners. For example, Justice Franson’s concurrence appears to aimed directly at the California Supreme Court in connection with its consideration of another Fifth District CEQA decision addressing the adequacy of an EIR’s air quality analysis (and specifically its “correlation” of pollutant emissions to adverse known health effects), Sierra Club v. County of Fresno, Case No. 5219783 (aka the “Friant Ranch” case). But since these parts of the opinion are not published precedents that directly “make law” they will not be discussed further here.

The published portion of the opinion held that the trial court erred in applying Hayward Area Planning Assn. v. City of Hayward (2005) 128 Cal.App.4th 176 (“HAP”) to preclude a cost award to Wal-Mart for administrative record preparation. HAP held a prevailing real party developer could not recover $50,193 it paid its lawyers for preparing the administrative record where plaintiff had requested the lead agency city to prepare it and the City delegated the task to the real party without notice to or the consent of plaintiff. The HAP Court observed Public Resources Code § 21167.6 provides only three record preparation options: (1) the agency prepares it; (2) the plaintiff prepares it subject to the agency’s certification; or (3) the agency and plaintiff agree to a different procedure. It held preparation of the record by a real party is not among the permissible statutory options, and resolved a statutory ambiguity regarding whether the real party could recover record preparation costs it ultimately bore by adopting the categorical rule that “the public agency must itself incur and seek recovery of the costs of record preparation when the record is prepared under [Public Resources Code § 21167.6] subdivision (b)(1).” (Quoting HAP, supra, 128 Cal.App.4th at 185, emph. added.) HAP found this rule appropriate because the public agency had stronger incentives than a private party to minimize record preparation costs, and because the statutory scheme was undermined by City’s failures to notify plaintiff of the delegation, which deprived plaintiff of the opportunity to elect to prepare the record in the applicant’s stead.

Per the Court of Appeal:

… [W]e disagree with the limitation in [HAP] on which prevailing parties are entitled to seek an award of the cost of preparing the administrative record. [HAP] got it right when limiting awardable administrative costs to situations in which the record was prepared in a statutorily approved manner, but not when excluding real parties in interest from the set of prevailing parties to which an award can be made.

Here, an award to Wal-Mart would be consistent with HAP’s “central premise” that a cost award is permitted only when the record is prepared in one of the statutorily authorized ways. But Public Resources Code § 21167.6(b)(1) also provides “[t]he parties shall pay any reasonable costs or fees imposed for preparation of the record of proceedings in conformance with any law or rule of court[,]” and the Court of Appeal saw “nothing in section 21167.6 from which we could infer a limitation on the identity of the prevailing parties that can recover administrative record costs under Code of Civil Procedure sections 1032 and 1033.5, so long as the record has been prepared in one of the three specified ways.” In departing from the rule announced in HAP in this regard, the Court explained: “Even if Section 21167.6 reflects a cost-saving motivation, it would be beyond the usual limits of judicial interpretation to discover in this motivation an unstated prohibition on real parties in interest submitting cost bills after reimbursing public agencies for preparing the administrative record.” While Citizens argued that the policies underlying HAP’s holding supported the trial court’s order taxing costs because the City’s incentive to reduce costs was weakened by the reimbursement agreement, the Court of Appeal found the trial court’s power to reduce unreasonable costs under Public Resources Code § 21167.6(b)(1) and Code of Civil Procedure § 1033.5 sufficed to mitigate this concern.

Nor did HAP’s other rationale apply; per the Court of Appeal: “We agree with the [HAP] court’s view that section 21167.6 would require the plaintiff’s agreement before an agency could delegate record preparation to a real party, but this does not imply anything about a real party covering an agency’s costs after the record is prepared by the agency and then applying for a cost award as a prevailing party.” Rather, CCP § 1032 provides a prevailing party is “entitled” to costs “as a matter of right” except “as otherwise expressly provided by statute,” and Public Resources Code § 21167.6 does not expressly provide that a real party cannot recover costs for record preparation under the circumstances presented in this case.