California Supreme Court Grants Review in Construction Law Case Berkeley Hillside Preservation v. City of Berkeley

Earlier this year, the Court of Appeal overturned the City of Berkeley’s approval of a 6,478-square-foot single-family home with a 3,394 square-foot garage pursuant to a categorical exemption under the California Environment Quality Act (CEQA).  On May 23, 2012, the California Supreme Court unanimously granted review of the First Appellate District’s decision in Berkeley Hillside Preservation v. City of Berkeley (Cal. App. First Dist., Div.4; February 15, 2012) (As Mod. Mar 7, 2012) 203 Cal.App.4th 656, [137 Cal.Rptr.3d 500] (Superseded By Grant Of Review).

Factual Overview

In Hillside, the appellant challenged a judgment of the Superior Court of Alameda County (California), which denied their petition for a writ of mandate to set aside respondent city’s approval of use permits to construct a large residence on respondent owners’ 29,714 square-foot lot. The trial court found that the proposed construction was categorically exempt under the California Environmental Quality Act, Pub. Resources Code §21000 et seq.

The First District Court of Appeal held that where there was substantial evidence that proposed activity might have an effect on the environment, an agency was precluded from applying a categorical exemption. The trial court erred in declining to apply the unusual circumstances exception in Cal. Code Regs. tit. 14, §15300.2, subd. (c), because appellants established a fair argument of a significant effect on the environment due to unusual circumstances. The proposed construction, which would result in a 6,478 square-foot home with an attached 3,394 square-foot, 10-car garage, was unusual because the circumstances of the project differed from the general circumstances of projects covered by the single-family residence exemption, and it was thus unusual when judged relative to the typical circumstances related to an otherwise typically exempt single-family residence. Letters submitted to the city council by a geotechnical engineer specializing in foundation engineering and construction amounted to substantial evidence of a fair argument that the proposed construction would result in significant environmental impacts. The application of a categorical exemption was thus inappropriate.

The court reversed the judgment and ordered the trial court to issue a writ of mandate directing the city to set aside the approval of use permits and its finding of a categorical exemption, and to order the preparation of an EIR.

The Court of Appeal Ruling

The appellate opinion broadened the “unusual circumstances” exception that precludes the use of a categorical exemption by essentially dismissing one step of a well-established two-part inquiry. Under this test, the court inquires whether the project presents unusual circumstances and whether there is a reasonable possibility of a significant effect on the environment due to the unusual circumstances. The appellate opinion also applied the “fair argument” standard to the agency’s determination of whether the project triggered the exceptions, furthering a long-standing division in case law on the appropriate standard of review.

The Court of Appeal’s sweeping opinion limited the efficacy of all of the categorical exemptions under CEQA by setting a limited inquiry and a lower bar for applying the exemptions. In so doing, the case undermined the purpose of categorical exemptions, which is to streamline environmental review.

The California Supreme Court’s Review

The appellate opinion, now uncitable due to the California Supreme Court’s action, has garnered a good deal of attention from both public agencies and private developers. In fact, the City of Berkeley and Real Parties’ Petition for Review received broad support through amicus letters from many stakeholders including the League of Cities, the California State Association of Counties, the Bay Area Council, the California Infill Builders Association and the California Building Industry Association.

The parties should complete briefing on the case by September 2012, however, a decision by the state’s high court is not likely for 12 to 24 months. In the meantime, the two-part inquiry remains in effect and the applicable standard of review remains divided.

Adapted in part from Monchamp and Sengupta, The State Bar of California: Lexology, California Supreme Court Grants Review of Berkeley Hillside May 29, 2012.