On June 15, 2011, the California Supreme Court ruled against a coalition of plastic bag manufacturers challenging the City of Manhattan Beach's 2008 ordinance banning plastic bags within the City's jurisdiction. (Save the Plastic Bag Coalition v. City of Manhattan Beach, 2011 DJDAR 10645)

In doing so, however, the Court issued a broad-based ruling substantially redefining corporate public interest standing to sue under the California Environmental Quality Act (CEQA) when corporate interests are either directly and adversely affected by governmental action, or where the corporation is acting as a "citizen" in the public interest. This represents a substantial sea change in the law.

Importantly, the Court's holding specifically rejects prior judicial limitations and restrictions on corporate standing to sue under CEQA. The impact of the Court's decision will substantially enhance a corporation's right to sue under CEQA when governmental action interferes with corporate interests on matters of environmental concern.

EIR Not Required for Beach City Ban on Plastic Bags

Rejecting the bag manufacturers' CEQA claims and relying on the deferential standard of review afforded to public entities under CEQA, the California Supreme Court rejected the claimed adverse "life cycle" consequences of one community's decision to eliminate plastic bags and the increased use of paper bags. The court issued a practical ruling tipping its hand to the City's determinations by holding that the City was not required under CEQA "to compare the global impacts of paper and plastic bags." It was enough for the City to reasonably conclude that its ban on plastic bags would not have a significant effect on the environment.

Based on that, the Supreme Court determined that the appellate court erred in concluding enough evidence existed to support the coalition's fair and credible argument that plastic bag ordinance might significantly affect the environment. "While some increase in the use of paper bags is foreseeable, and the production and disposal of paper products is generally associated with a variety of negative environmental impacts, no evidence suggests that paper bag use by Manhattan Beach consumers in the wake of a plastic bag ban would contribute to those impacts in any significant way." This portion of the Court's ruling represents a straightforward application of well-established judicial deference to the evidence in the record that supported the City's determination not to require an Environmental Impact Report (EIR).

Corporate Standing––A New Standard

The Court's discussion of corporate standing under CEQA is the ruling's longer-lasting and more impactful aspect of the decision. Corporate plaintiffs and petitioners face significant, longstanding challenges to maintaining CEQA lawsuits in California. Corporate petitioners seeking redress CEQA violations are often viewed by respondents and the courts as pursuing only commercial, competitive business interests unique to their business enterprise––not serving the public interest as "true" environmental crusaders. The Court's decision in Save the Plastic Bag shines a critical light on prior legal rulings in California limiting access to the courts by corporate CEQA litigants.

Corporations Can Have a "Beneficial Interest" in Environmental Causes that Overlap with Equally Important Business Objectives

A writ of mandate under CEQA must be issued upon the verified petition of a party "beneficially interested." The requirement that a petitioner be beneficially interested has been generally interpreted to mean that one may obtain the writ if that party will be detrimentally affected or aggrieved in some way by the agency's action if the court does not grant relief. The possibility of future injury is generally deemed sufficient to confer standing.

In CEQA litigation, although standing requirements are to be liberally construed, the respondents will often assert that a corporate petitioner lacks standing because it has only an economic interest, not a bona fide "beneficial interest" in the litigation within the zone of interest protected by CEQA. In support of this contention, respondents have principally relied on two well-recognized California precedents: Waste Management v. County of Alameda (2000) 79 Cal.App.4th 1223 and Regency Outdoor Advertising. v. City of West Hollywood (2007) 153 Cal.App.4th 825.

In Waste Management, the petitioner challenged certain governmental approvals granted to its competitor (Browning-Ferris) on grounds of non-compliance with CEQA. More specifically, the petitioner complained that it was required to undertake the substantial expense of an EIR for its facility (located four miles away) while Browning-Ferris was not, and identified its injury "as the extra cost it incurred and continued competitive injury due to Browning-Ferris' lower costs." The court held that the petitioner lacked standing because its commercial and competitive interests are not within the zone of interests CEQA is intended to protect. Noting that CEQA is not a fair competition statute and is not intended to foster, protect, or affect economic competition, the court reasoned that a petitioner asserting only commercial and competitive injury cannot show a direct beneficial interest in enforcement of CEQA.

Similarly, in Regency, a billboard company sought a writ of mandate to invalidate a zoning amendment requiring the removal of one of the company's tall wall signs, claiming the city failed to properly evaluate the amendment under CEQA. The court affirmed the trial court's conclusion that the billboard company lacked standing to compel CEQA review because the "amendment does not have environmental effects on Regency that are any greater than the effects it has on other businesses and property owners in the city."

In Save The Plastic Bag, the Supreme Court denounced the Waste Management decision as far too restrictive:

"The problem the Waste Management court sought to address with its sweeping limitation on corporate public interest standing was a discrete one: an attempt to use CEQA to impose regulatory burdens on a business competitor, with no demonstrable concern for protecting the environment. Such an attempt would be equally improper if launched by an individual. We disapprove Waste Management, to the extent it held that corporate parties are routinely subject to heightened scrutiny when they assert public interest standing."

The Court also rejected the City's suggestion that a plaintiff must be affected by a particular adverse environmental impact to qualify as a beneficially interested party in a CEQA suit:  

"We have never so limited the scope of the beneficial interest requirement. It is not unusual for business interests whose operations are directly affected by a government project to raise a CEQA challenge to the government’s environmental analysis. These are not citizen suits. Such parties are in fact adversely affected by governmental action and have standing in their own right to challenge that action."  

To the extent that Waste Management imposes heightened scrutiny on corporate CEQA litigants, the California Supreme Court has made clear that a corporate petitioner's environmental claim should be evaluated on the same and equal footing as an individual environmental litigant.

Corporations Can be "Citizens" Pursuing a Public Right Under CEQA

The Court also addressed the well-established exception to the "beneficial interest" rule commonly known as the "public right/public duty" exception. The exception guarantees "citizens" the opportunity to ensure that no governmental body impairs or defeats the purpose of legislation establishing a public right. As to this exception, the CEQA respondents frequently defend such claims on the ground that corporations are not "citizens."

The Court roundly rejected this assertion in the context of CEQA litigation. It held that the term "citizen" "is descriptive, not prescriptive" and it reflects an understanding that the action is undertaken to further the public interest and "is not limited to the plaintiff’s private concerns." The Court noted well that entities that are not technically "citizens" regularly bring citizen suits and that "absent compelling policy reasons to the contrary, it would seem that corporate entities should be as free as natural persons to litigate in the public interest." This pronouncement by the Court represents a very significant change in the law as it has been applied and interpreted under the Waste Management decision: "We agree with the Court of Appeal that plaintiff’s CEQA arguments were appropriate for a citizen suit. As we have noted, 'strict rules of standing that might be appropriate in other contexts have no application where broad and long-term [environmental] effects are involved.'"