By a 5-2 vote, the California Supreme Court has issued a complex ruling that tends to support CEQA exemption for a large house in Berkeley Hillside Preservation v. City of Berkeley (Logan)

Monday's opinion is largely favorable to computer industry pioneer Mitch Kapor, founder of the Lotus software company, and Freada Kapor-Klein, who have been trying since 2009 to build a large house in the Berkeley hills. Their proposed single-family house and garage together would measure nearly 10,000 square feet, on a lot that is itself much larger, but that is situated on a steep slope reached by a small road. Berkeley applied two categorical exemptions from CEQA to the project: single-family and infill. Project opponents argued that the house was so big that it presented "unusual circumstances" and should be denied the safe harbor of a categorical exemption. Among other things, the issuance of the ruling will permit another CEQA "unusual circumstances" Supreme Court case to move forward.

Writing for the majority, Justice Ming Chin endorsed a "two-step" approach to the "unusual circumstances" question. Chin wrote that when a lead agency decides a project is eligible for a categorical exemption from CEQA review, it must review the record for "unusual circumstances." It held that when the agency decides if such circumstances exist, it acts as "finder of fact", so any court reviewing that determination must let it stand if there is "substantial evidence" for its validity. 

However, the majority held that once the lead agency takes the first step of finding "unusual circumstances", it must take a second step calling for an analysis more receptive to environmental and neighborhood challengers. For projects that have already been found to present "unusual circumstances", the court found the categorical exemption can be defeated by a "fair argument" that supports a reasonable possibility that significant environmental effects will result from the "unusual circumstances." It held the agency decision "is reviewed to determine whether the agency, in applying the fair argument standard, 'proceeded in [the] manner required by law'." 

Justice Goodwin Liu filed a lengthy concurrence, joined by Justice Kathryn Werdegar. Liu disputed the majority's procedural view of "unusual circumstances" and complained of "the court's novel and unnecessarily complicated approach to the standard of review." Liu's 18-page concurrence, taking positions sympathetic to appellants, debated the majority opinion point by point on what qualifies as "unusual" and why it matters. 

The majority opinion remanded the case back to the First District Court of Appeal for further consideration. In doing so it cautioned the appellate court to show appropriate deference to the city's discretion, so that it should "order preparation of an EIR only if, under the circumstances, the City would lack discretion to apply another exemption or to issue a negative declaration, mitigated or otherwise."

The court wrote: "to establish the unusual circumstances exception, it is not enough for a challenger merely to provide substantial evidence that the project may have a significant effect on the environment, because that is the inquiry CEQA requires absent an exemption... Such a showing is inadequate to overcome the Secretary's determination that the typical effects of a project within an exempt class are not significant for CEQA purposes. On the other hand, evidence that the project will have a significant effect does tend to prove that some circumstance of the project is unusual." 

The project, planned for Rose Street in Berkeley, would place a 6,478-square-foot house on a 3,394-square-foot ten-car garage, on a steeply sloped 29,714-square-foot lot. The Berkeley Zoning Adjustment Board approved the project based on the infill and single-family categorical exemptions. On appeal by objecting neighbors, the City Council approved the project in April 2010 -- over arguments that an exception existed to the categorical exemption, including analyses by an expert critic, geotechnical engineer Lawrence Karp. The trial court sided with the City Council, supporting the project. An appeal followed. In 2011 the First District Court of Appeal refused requests that it block the demolition of an existing cottage and the start of construction. 

The First District Court of Appeal gave appellants their first victory in February 2012 (the opinion has since been modified). The opinion followed one of the earliest CEQA court rulings, Wildlife Alive v. Chickering (1976) 18 Cal.3d 190, to find that "where there is substantial evidence that proposed activity may have an effect on the environment, an agency is precluded from applying a categorical exemption" (emphasis in original). It found that the rule without the need for an independent finding that an "unusual circumstance" existed because "the fact that proposed activity may have an effect on the environment is itself an unusual circumstance." The appellate court then said challengers, must only show "substantial evidence of a fair argument of a significant environmental impact".

In contrast to the appellate court ruling, Justice Chin's opinion refused to rely on Wildlife Alive, saying that case was decided before the "unusual circumstances" rule was written, the discussion cited by appellants was "hypothetical" and "summary", and its holdings were constrained by a 1993 statute, Sec. 21083.1, instructing courts not to interpret CEQA laws or guidelines to require new requirements beyond those "explicitly stated".

After a detailed history of the "fair argument" standard, the court majority wrote that its use for the second step of the analysis was supported by No Oil, Inc. v. City of Los Angeles (1974) 13 Cal.3d 68, which requires an EIR when a project "may have a significant effect on the environment." 

Both the majority and concurrence agreed in doubting the part of appellants' case based on predictions by an expert critic, geotechnical engineer Lawrence Karp. The majority rejected Karp's vivid insistence on "the probability of seismic lurching of the oversteepened side-hill fills." This was in part because the court viewed the record as showing no "side-hill fill" would be involved in the project as approved. But more fundamentally the court rejected Karp's opinion because he was predicting a consequence too many moves ahead of the current proposal.

In a phrase that Liu also quoted and accepted in his concurrence, the majority wrote: "a finding of environmental impacts must be based on the proposed project as actually approved and may not be based on unapproved activities that opponents assert will be necessary because the project, as approved, cannot be built." The majority reasoned that if further earthworks turn out to be needed, they will require further approvals whose affects can be addressed as of the new application.

Attorney Susan Brandt-Hawley, who argued the case for the plaintiffs and appellants, wrote in response to queries on this week's opinion: "On remand under the direction of the opinion we are optimistic that we will prevail on our record. In light of the concurring opinion we plan to seek rehearing since the case will set statewide precedent. Yes, we are glad the Court rejected the City's request to abandon the fair argument standard."

She wrote: "the rehearing petition will focus on the categorical exemption exception in Guideline section 15300.2(c)," referring to the core unusual-circumstances regulation: "A categorical exemption shall not be used for an activity where there is a reasonable possibility that the activity will have a significant effect on the environment due to unusual circumstances."

The court majority included two justices who are no longer on the California Supreme Court: Justice Marvin Baxter, who was authorized by a special order to remain on the case past his January retirement, and Presiding Justice Roger W. Boren of the Second District Court of Appeal, who sat as assigned justice pro tempore. Justices Mariano-Florentino Cuéllar and Leondra Kruger had not yet taken office as of the oral argument and their names do not appear on the opinions.

The high court had deferred briefing on a second "unusual circumstances" case until after its own Berkeley Hillside decision. With that ruling completed, briefing can commence on Citizens for Environmental Responsibility v. State of California ex rel. 14th District Agricultural Association. That case concerns an environmental review petition brought by opponents of resuming rodeo events at the Santa Cruz County fairgrounds. The petitioners appear to oppose rodeos in part on moral and animal-welfare grounds, but their challenge highlights an alleged risk of manure contamination to nearby Salsipuedes Creek, and to what the Third District state appellate court summarized as "proximity to residential and agricultural land, or a public safety risk of bull riding."

The Third District's opinion, issued last March, upheld a Class 23 categorical exemption for "normal operations of existing facilities for public gatherings." The opinion adopted the "two-step" approach of considering first whether unusual circumstances exist, and only then whether they result in environmental effects. It reasoned that although a rodeo had not been held at that fairgrounds for many years, other equestrian and livestock events were held there regularly, with similar likely environmental effects. It rejected a contention that the rodeo proponents' adoption of a Manure Management Plan as "in effect acknowledging potential environmental effects" sufficiently to justify full environmental review. 

Matt Dixon assisted with this report.