In a 38-page opinion filed May 4, and belatedly ordered published on May 25, 2017, the Fifth District Court of Appeal reversed a judgment dismissing a writ petition filed by three environmental groups alleging CEQA violations against the California Department of Conservation, Division of Oil, Gas and Geothermal Resources (DOGGR) in connection with its issuance of 214 individual permits for new oil wells in the long-established South Belridge Oil Field in Kern County. Association of Irritated Residents, et al. v. Department of Conservation (Aera Energy, LLC, Real Party in Interest) (5th Dist. 2017) ___ Cal.App.5th ___ (Case No. F073018). The Court reversed the Kern County Superior Court’s judgment dismissing the action after that court sustained a demurrer without leave to amend based on the asserted res judicata effect on an earlier Alameda County Superior Court judgment. The Court of Appeal held that the Alameda judgment was based on mootness and ripeness grounds, not the merits, and thus did not have res judicata effect so as to bar the Kern County action. The opinion contains extensive discussions of res judicata, collateral estoppel, mootness, ripeness and the application of these legal doctrines to the facts and issues of the case before it.
Relevant Factual and Procedural Background
In October 2012, environmental organizations including Center for Biological Diversity (CBD), Sierra Club, Earthworks and Environmental Working Group filed a complaint for declaratory and injunctive relief against DOGGR in Alameda County alleging a “pattern and practice” of CEQA noncompliance in issuing oil and gas well permits, and that this practice resulted in various adverse environmental effects. The alleged CEQA violations included claiming inapplicable exemptions and issuing “boilerplate” negative declarations, and the plaintiffs cited specific examples of such alleged violations in connection with permits issued in the preceding two years, although the complaint did not seek relief as to individual permits.
While the Alameda action was pending, S.B. 4 was enacted and signed into law; that law comprehensively addressed disclosure, scientific study and environmental review requirements for fracking and well stimulation treatments, both generally and in the context of individual permits. It directed DOGGR to prepare a comprehensive program EIR of statewide scope addressing these topics, and to adopt relevant new regulations, which ultimately were to become effective by July 1, 2015. It created new permit requirements for fracking and well stimulation treatments, separate and apart from oil and gas well drilling permits, established an interim regulatory regime until DOGGR’s new regulations became effective, and contained a provision clarifying the new law did not relieve DOGGR from complying with existing laws – including, presumably, CEQA.
Shortly after S.B. 4’s enactment, various petroleum and oil industry groups intervened as defendants in the Alameda action and successfully demurred on the ground that its claims about DOGGR’s pre-S.B. 4 “pattern and practice” were rendered irrelevant and moot by the new law. Specifically, the trial court agreed the complaint was rendered nonjusticiable, in that plaintiffs’ claims regarding DOGGR’s pre-S.B. 4 practices were moot and those regarding DOGGR’s post-S.B. 4 practices were unripe. No appeal was taken from the Alameda judgment.
Subsequently, in November 2014, Association of Irritated Residents (AIR), CBD and Sierra Club filed their writ petition in Kern County challenging the adequacy of DOGGR’s CEQA compliance with respect to its issuance of 214 individual drilling permits in the South Belridge Oil Field. DOGGR demurred on the ground that CEQA exemptions applied, and real party Aera Energy, LLC (Aera) demurred on the grounds of res judicata (based on the Alameda judgment) and alternatively, that S.B. 4’s interim statutory regime compelled approval of the permits. The trial court found that DOGGR’s demurrer presented factual issues unresolvable at the pleading stage, but ultimately sustained Aera’s res judicata demurrers without leave to amend. Appellants timely appealed the ensuing judgment of dismissal.
The Court of Appeal’s Analysis And Decision
Reviewing the operative complaint de novo to determine whether it stated facts sufficient to constitute a cause of action on any legal theory, or whether appellants demonstrated a reasonable possibility of amending to do so, the Court of Appeal reversed, holding as a matter of law that res judicata did not apply in this case. Res judicata’s three elements require that: (1) the decision in the prior proceeding is final and on the merits; (2) the present proceeding is on the same cause of action; and (3) the present proceeding’s parties are the same as or in privity with the parties in the prior proceeding. Per the Court: “Only a final judgment on the merits between the same parties or their privies and upon the same cause of action is entitled to the res judicata effect of bar or merger.” (Quoting Busick v. Workmen’s Comp. Appeals Bd. (1972) 7 Cal.3d 967, 974.) The fundamental policy behind the requirement of a final judgment on the merits is providing stability to judgments after the parties have had a fair opportunity to litigate their claims and defenses. Conversely, if the prior judgment was not one on the merits res judicata is inapplicable and does not bar a subsequent action.
The Court held that a judgment based on mootness Is not one on the merits for purposes of res judicata because — like a judgment based on laches, the statute of limitations, lack of jurisdiction, or lack of prosecution – the substance of the claim is not adjudicated and the outcome is based on procedural or technical grounds independent of the claim’s merits. Similar to unripe cases, which present no justiciable controversy in the context of a definite or concrete set of facts, moot cases are nonjusticiable, but for the different reason that time or changed circumstances have caused a once-actual controversy to cease to exist. Per the Court: “[A]n intervening change in the law that is crux of a case[,]” such as “repeal or modification of a [challenged] statute…, or subsequent legislation correcting a challenged deficiency, can render a case moot.” The hallmark of a moot case is the court’s conclusion that “there is no longer an existing controversy before it upon which effectual relief may be granted.” The Court observed: “[W]hen mootness is found, the court is saying in essence there is no ongoing justiciable controversy before it, [and] such a finding leads to a decision to dismiss the action without reaching the merits of the underlying claim.”
Applying the foregoing principles derived from its analysis of the case law to the Alameda judgment, the Court determined that the crux of that judgment was based on findings of mootness and unripeness due to the passage of S.B. 4. The intervenors’ successful motion to dismiss in that action asserted that plaintiffs’ “pattern and practice” claims were rendered irrelevant by S.B. 4’s new statutory and regulatory regime, and the trial court clearly accepted that argument as reflected in the language of its dispositive order. Because the judgment was based on justiciability concerns, not the merits, res judicata did not apply to bar the current action.
The Court discussed, but found it unnecessary to decide, appellants’ alternative argument that res judicata could not apply because the Alameda action – which dealt with an alleged prior “pattern and practice of DOGGR,” rather than its subsequent alleged violations as to individual permits – was not based on the same cause of action.
It further rejected respondents’ post-briefing motion to dismiss the appeal based on collateral estoppel grounds stemming from another now-final judgment against Sierra Club in yet another case it had brought against DOGGR. The Court concluded respondents failed to meet their burden of showing the other judgment involved the identical issue, or that there was privity between the parties. Sierra Club prosecuted the prior case on its own and – due to an acknowledged “blunder” – failed to appeal the adverse judgment. The Court reasoned that finding collateral estoppel against AIR or CBD based on the results in a case the Sierra Club failed to prosecute with “diligence and vigor” from “would unfairly deprive these other appellants from ever having an opportunity to resolve on appeal the issues raised in the present case, even though they had no input, involvement or control over what happened in the [Sierra Club’s prior] case.”
CEQA litigation not infrequently presents the opportunity to dispose of the action on technical grounds – such as the statute of limitations, laches, nonjusticiability, and the like – which do not require an adjudication of the merits. A key element of establishing that res judicata bars a subsequent action on the same claim between the same parties or their privies, however, is that the prior judgment against plaintiffs was on the merits. A judgment based on justiciability concerns – i.e., mootness or ripeness – is not a judgment on the merits. Additionally, this case illustrates that a court may be disinclined to find the requisite privity of parties based on a single overlapping party where (1) that party failed to act diligently and with vigor in the prior action so as to be an adequate representative of the parties sought to be bound in the later action, and (2) the latter parties had no “input, involvement or control” regarding the conduct of the prior litigation.