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CA Court Creates Split on CEQA Review Requirement, Wal-Mart Loses

The California Court of Appeal for the Fifth Appellate District rejected Wal-Mart's recent attempt to avoid environmental review of its development plan, as required under the California Environmental Quality Act (CEQA).

CEQA litigation has become a big political issue, particularly at the local level, where environmentalists, unions, developers, politicians, and many others, battle over the use of the law.


Wal-Mart has a 130,000-square-foot store in the city of Sonora that it wants to expand into a "Wal-Mart Supercenter." This Supercenter would be larger, sell groceries, and be open 24 hours a day, seven days a week.

Wal-Mart submitted an application to the city for the approvals necessary for the expansion. The city prepared an environmental impact report (EIR) on the proposed project and circulated it for public comment. The city planning commission held a public hearing on Wal-Mart's application and voted to recommend approval.

Before the city council voted on whether to certify the EIR and approve the project, James Grinnell served the city with a notice of intent to circulate an initiative petition, known as the "Walmart Initiative." The city postponed its vote on the EIR and Wal-Mart's application while it considered the initiative.

Signatures of more than 15% of the voters were obtained in support of the initiative, and were submitted and accepted by the registrar of voters.

At a public hearing held on the initiative, the city administrator and a representative of Wal-Mart both stated that the purpose of the initiative was to approve Wal-Mart's construction and operation of the Supercenter, and that it was a procedural alternative to city approval of Wal-Mart's original application and had the same effect.

At a later meeting of the city council during which it considered the initiative, a Wal-Mart representative again advised that Wal-Mart had put "the planning commission's recommendation [to approve the project] into the form of an initiative."

The city considered the courses of action open to it under California Elections Code section 9214, which provides:

"If the initiative petition is signed by not less than 15 percent of the voters of the city, or, in a city with 1,000 or less registered voters, by 25 percent of the voters or 100 voters of the city, whichever is the lesser number, and contains a request that the ordinance be submitted immediately to a vote of the people at a special election, the legislative body shall do one of the following:

(a) Adopt the ordinance, without alteration, at a regular meeting at which the certification of the petition is presented, or within 10 days after it is presented.

(b) Immediately order a special election . . . at which the ordinance, without alteration, shall be submitted to a vote of the voters of the city.

(c) Order a report pursuant to Section 9212, at the regular meeting at which the certification of the petition is presented. When the report is presented to the legislative body, the legislative body shall either adopt the ordinance within 10 days or order an election pursuant to subdivision (b)."

The city council voted to adopt the initiative as Ordinance No. 796 and to forgo the special election. The Wal-Mart expansion was therefore approved by the city even though the EIR was never certified and CEQA review was never completed.

Challenge to City's Initiative Adoption Without CEQA Environmental Review

Tuolumne Jobs & Small Business Alliance (TJSBA) brought suit claiming, among other things, that Wal-Mart and the City of Sonora could not do an end run around the environmental review requirement under CEQA. The Howard Jarvis Taxpayers Association also appeared as amicus curiae on behalf of Wal-Mart and the City of Sonora. The lower court sided with Wal-Mart and the City of Sonora and TJSBA filed for relief with the court of appeal.

Court Rejects Argument by the City of Sonora and Wal-Mart

On appeal, the city and Wal-Mart argued that CEQA compliance can be avoided when a developer's supporters gather signatures of 15 percent of the registered voters on an initiative petition to approve the development, and the lead agency chooses to forgo the election and adopt the initiative directly as an ordinance, pursuant to Elections Code section 9214.

The court disagreed.

The court noted that although it is settled that when a development project is approved by means of a ballot initiative placed on the ballot by voters and adopted by them in an election, the project is exempt from environmental review under the California Environmental Quality Act, but that is not what happened here.

"Environmental review can be avoided when the voters choose to bypass it, not when the lead agency chooses to bypass the voters."

CA Circuit Split

The court was troubled by the path taken by Wal-Mart. "Developers' strategy of obtaining project approvals without environmental review and without elections threatens both to defeat CEQA's important statutory objectives and to subvert the constitutional goals of the initiative process."

The court found persuasive the reasoning of the California Supreme Court in Friends of Sierra Madre v. City of Sierra Madre (2001) 25 Cal.4th 165, which addressed an initiative placed on the ballot by a government agency without having originated through a voter petition.

The rule the court gleaned from Friends of Sierra Madre was that: "If the initiative the voters voted on originated with a voter petition, then the project is exempt from CEQA. If the voters voted on an initiative that originated with a public agency's discretionary action and there was no voter petition, then the project is not exempt from CEQA."

Friends of Sierra Madre involved a case where an election took place. In Wal-Mart's case, there was no election, so the court had to determine how to apply the reasoning of the Friends of Sierra Madre case with the case at hand.

The court concluded that the instant case was an even more persuasive case for having the CEQA environmental review be required than that in Friends of Sierra Madre. "It is even clearer that CEQA applies when a mere 15 percent of the voters has expressed support for the initiative and the city council chooses to approve the project without an election."

The court declined to follow Native American Sacred Site & Environmental Protection Assn. v. City of San Juan Capistrano (2004) 120 Cal.App.4th 96, issued by Division Three of the Fourth District for the California Court of Appeals, thus creating a circuit split on this issue.

In Native American Sacred Site & Environmental Protection Assn., the Fourth District held that the city approval of a plan was exempt from CEQA under Public Resources Code section 21080 (b)(1), because the city's duty to adopt a qualified voter-sponsored initiative, or place it on the ballot, is ministerial and mandatory.

The court rejected this analysis outright stating "[a]lthough the duty to adopt the initiative or hold a special election certainly is mandatory under Elections Code section 9214--the statute says the city council "shall" do one or the other--the choice between the two is entirely discretionary."

The court therefore concluded that the action by the city was not ministerial in nature, and therefore not exempt from the requirements of CEQA. "[W]e hold that a lead agency is not permitted to skip CEQA review when it chooses, under Elections Code section 9214, subdivision (a), to approve a project submitted to it via voter petition instead of holding an election under Elections Code section 9214, subdivision (b)."

However, if the city council ultimately decided to hold the election, CEQA review would not be required before the voters can approve the project.

Going Forward

The court recognized that given the timing requirements under Elections Code section 9214 and the time that may be needed to complete a CEQA review, the direct-adoption by a city council option under 9214(b) will usually not be available for an initiative that would have a significant environmental impact, and an election will usually be required.

Noting that results are sometimes imperfect in reconciling different statutes and their purposes, the court concluded that the result was better than the alternative "because it avoids the anomalous consequence of allowing a small fraction of a local electorate, combined with a majority of a city council, to nullify state law under conditions in which the local electorate as a whole has not been given a voice."

The case is Tuolumne Jobs & Small Business Alliance v. The Superior Court of Tuolumne County, No. F063849.

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