In a common-sense resolution of a conflict on the issue in the courts of appeal, the California Supreme Court held in a June 14, 2012 decision that Public Resources Code § 21177(a)’s exhaustion-of-administrative-remedies requirement applies to actions challenging an agency’s determination that a project is categorically exempt from CEQA.  Tomlinson v. County of Alameda(2012) ___ Cal.4th ____, 2012 WL 2145906.  In reversing the First District Court of Appeal’s contrary decision, the Supreme Court resolved the conflict between the decisions in Azusa Land Reclamation Co. v. Main San Gabriel Watermaster (1997) 52 Cal.App.4th 1165 (holding exhaustion requirement inapplicable to categorical exemption challenges) and Hines v. California Coastal Com. (2010) 186 Cal.App.4th 830 (holding exhaustion requirement applies to categorical exemption challenges). 

Public Resources Code §21177(a) states a CEQA action may be brought only if “the alleged grounds for noncompliance with [CEQA] were presented to the public agency orally or in writing by any person during the public comment period provided by this division or prior to the close of the public hearing on the project before the issuance of the notice of determination.”  The Court of Appeal, following Azusa, reasoned that because CEQA provides no public comment period for exemption decisions, and provides for a notice of exemption–rather than a notice of determination–to be issued in such instances, the statute’s language simply did not apply. 

The Supreme Court viewed the matter differently.  It held that if a notice of determination is filed, the statute’s public hearing provision requires a project opponent to raise objections at a public hearing before its filing, but that “if no such notice is filed, the public hearing provision nonetheless applies.”  Thus, the challenger must still “exhaust its administrative remedies by presenting its objections to the project to the pertinent public agency, so long as it is given the opportunity to do so at a public hearing held before the project is approved.”  The absence of a notice of determination does not render approval based on an exemption improper, but “only extends the time within which to initiate a lawsuit[.]”  According to the high court:  “Under section 21177’s subdivision (e) the exhaustion requirement’s application is conditioned only upon the holding of public hearings to present any objections to or concerns about the proposed project, thus confirming that what matters is the opportunity for comment at such public hearings, not the filing of a notice of determination.”  The exhaustion requirement of § 21177(a) therefore applies to challenges to categorical exemption decisions “as long as the public agency gives notice of the ground for its exemption determination, and that determination is preceded by public hearings at which members of the public had the opportunity to raise any concerns or objections to the proposed project.”  The Supreme Court noted its conclusion was consistent with common law exhaustion principles, reaffirming its pronouncements that exhaustion is “a jurisdictional prerequisite to resort to the courts” which lightens the burden of overworked courts while developing a “complete record that draws on administrative expertise” thus promoting judicial efficiency and facilitating judicial review.  (To these reasons it might have added preservation of the integrity of administrative decisions.) 

The pithy, 5-page Tomlinson opinion fits with much of the Supreme Court’s recent CEQA jurisprudence, which tends to reach “common sense” results aimed at establishing bright-line procedural rules to better govern and reign in the state’s burgeoning CEQA litigation.