CEQA Case Report: Understanding the Judicial Landscape for Development[i]

In an unpublished opinion issued September 14, 2018, Inland Oversight Comm. v. City of San Bernardino, Case No. E064836, the California Court of Appeal affirmed the trial court’s decision dismissing the Inland Oversight Committee (IOC), CREED-21, and Highland Hills Homeowners Association’s (HOA’s) (collectively, Petitioners’) appeal challenging the City of San Bernardino’s (City’s) approval of real party in interest First American Title Insurance Company’s (Developer’s) changes to a proposed development. In summary, the court determined:

  • In the CEQA context, the doctrine of res judicata applies if two actions involve the same episode of purported noncompliance.
  • Adequacy of representation for privity purposes is measured by inference, in other words, examining whether the party in the suit which is asserted to have a preclusive effect had the same interest as the party to be precluded, and whether that party had a strong motive to assert that interest.
  • The Water Code does not require a water supply assessment if a proposed development is not subject to CEQA review.

Background for Appeal

In 1982, City approved the Highland Hills Specific Plan 82-1 for a proposed residential development on a 541-acre site. The plan was later amended to allow for construction of low and moderate-income multi-family residential units in an area where single-family units had originally been planned. HOA challenged the change to the project, which resulted in a settlement agreement that was incorporated into a stipulated judgment in 1989. The settlement agreement noted that the developer had prepared a “North Plan” that provided for up to 1,730 residential dwelling units and a golf course.

In 1992, HOA, City, and the former developer agreed to an “Addendum” to the settlement agreement, which reduced the number of multi-family units permitted under the North Plan and required the developer to plant over 1,000 new trees over the golf course. In 2001, City’s Planning Commission approved a tentative tract map for the North Plan, which reduced the total number of residential units from 1,730 to 1,516. Later that year, HOA, City, and the former developer agreed to a “Second Addendum,” whereby the parties agreed that the environmental impacts of the North Plan had been adequately reviewed pursuant to CEQA, thus “no subsequent or supplemental environmental impact report is required.”

Additionally, the Second Addendum introduced a new application process to facilitate the approval of any “minor modifications” to the project. Under this process, a City director reviewed modification requests to determine whether they constituted minor modifications, which are defined as those that “result in development which is equal to or less intense from the standpoint of environmental impacts under CEQA than development pursuant to the North Plan” pursuant to a number of factors. These factors include fewer residential dwelling units, less commercial leasable space, and more efficient mitigation measures/conditions. The Second Addendum defined this process as a ministerial act.

In 2014, Developer applied for approval of modified construction plans pursuant to the Second Addendum (Modified North Plan). City hired an independent environmental consultant to evaluate the Modified North Plan according to the criteria for minor modifications under the Second Addendum. The environmental report noted that the Modified North Plan would:

  • Reduce the maximum total number of dwelling units
  • Eliminate all previously contemplated commercial uses, including the golf course
  • Substantially reduce both the total area disturbed by construction and the impact on wetlands, relative to the North Plan

The report concluded that the plan met each of the criteria for minor modifications.

City’s development director approved Developer’s application and, in June 2015, Developer and City filed a motion requesting that the trial court confirm that the proposed changes complied with the Second Addendum and that no further CEQA review was required. The trial court granted the motion in August 2015, finding that the proposed changes constituted a minor modification under the Second Addendum and did not require a supplemental or subsequent environmental impact report. In December 2017, the Court of Appeal affirmed the trial court’s order in Highland Hills Homeowners Ass’n v. City of San Bernardino (December 11, 2017, E064737) [nonpub. opn.] (Highland Hills).

Meanwhile, in 2015, Petitioners filed a petition for writ of mandate asserting that City’s approval of Developer’s proposed changes to the project as minor modifications violated CEQA and the Water Code. Petitioners alleged that:

  • The Modified North Plan required further CEQA review because of alleged new or more severe environmental impacts introduced by the changes to the project.
  • The Modified North Plan should not have been approved without a water supply assessment pursuant to Water Code section 10910 et seq.

Applying the doctrine of res judicata, the trial court found the preclusive effect of Highland Hills barred Petitioners’ CEQA claims. The trial court also held that City did not violate the Water Code and sustained without leave to amend the demurrer to the petition filed by City and Developer, dismissing the petition and entering judgment in favor of City and Developer. Petitioners timely appealed. On appeal, City and Developer moved to dismiss IOC and CREED-21’s appeals, while IOC and CREED-21 moved to strike portions of City and Developer’s motion to dismiss.

HOA’s CEQA Claim Barred by Res Judicata

First, the court held that HOA’s CEQA claim was barred by res judicata, explaining that:

  • Causes of action in two lawsuits are the same for purposes of res judicata if they involve the same primary right
  • In the CEQA context, the doctrine of res judicata does not apply if two actions involve the same general subject matter but involve distinct episodes of purported noncompliance.

The court observed that the episode of purported noncompliance at issue in HOA’s CEQA claim was the same episode already addressed in Highland Hills. In both cases, HOA contended that City violated CEQA by failing to conduct further environmental review of the Modified North Plan, instead approving the plan as a minor modification. Because HOA had already litigated the same claim in Highland Hills and lost, the court held that the doctrine of res judicata barred HOA from litigating the same claim again.

IOC and CREED-21 in Privity with HOA

Second, the court held that IOC and CREED-21 were in privity with the HOA and that the doctrine of res judicata therefore barred their CEQA claims as well. The court explained that adequacy of representation for privity purposes is measured by inference, in other words, examining whether the party in the suit that is asserted to have a preclusive effect had the same interest as the party to be precluded, and whether that party had a strong motive to assert that interest.

The court noted that:

  • Petitioners each have an interest in responsible land use and planning.
  • Petitioners asserted a position identical to HOA’s in Highland Hills, i.e., that the modifications to the North Plan are not minor, but rather have serious potential environmental impacts requiring additional CEQA review.
  • Nothing in the record suggested that HOA did not zealously litigate Highland Hills.

The court also found nothing in the record to support Petitioners’ contention that HOA represented the private interests of homeowners, while IOC and CREED-21 represented the public interest. Therefore, the court concluded that HOA adequately represented IOC and CREED-21’s interests in Highland Hills for purposes of the privity rule.

Failure to State a Claim under the Water Code

Third, the court found no error in the trial court’s determination that a water supply assessment was not required for the Modified North Plan. The court explained that the Water Code requires a water supply assessment when a proposed development is subject to CEQA and is also a project within the meaning of Water Code section 10912.

Relying on the finding from Highland Hills that the Modified North Plan was a minor modification under the Second Addendum that did not require supplemental or subsequent CEQA review, the court concluded that the preparation of a water supply assessment was not required.

Mootness of Motion to Dismiss

Fourth, the court denied as moot City and Developer’s motion to dismiss on the basis that IOC and CREED-21 are “intentionally undercapitalized shell corporations being operated by a law firm, [Petitioners’ counsel] Briggs Law Corporation, for the purpose of circumventing the fundamental procedural requirement of standing…”

Petitioners opposed City and Developer’s motion and filed a motion of their own, seeking to strike portions of the motion to dismiss. Because Petitioners’ appeal failed on the merits, the court denied the parties’ pending motions as moot.

Disposition

The Court of Appeal affirmed the trial court’s judgment and awarded respondents their costs on appeal.

  • Opinion by Justice Carol D. Codrington, with Justice Douglas P. Miller, and Justice Richard T. Fields concurring.
  • Trial Court: Superior Court of San Bernardino County, Case No. CIVDS1509296, Judge Gilbert G. Ochoa.