Court of Appeal Holds Developer Cannot Sue City for Violations of CEQA and Constitutional Law Where City Rejects Project Before Completing EIR

In a significant published CEQA and land use decision, the Court of Appeal, Second Appellate District, rejected a developer’s challenge to the City of Los Angeles’ decision to reject the annexation and approval of a large development project without completing CEQA review.

The proposed project included 5800 dwelling units, 2.3 million square feet of office space, 250,000 square feet of community facilities, 250,000 square feet of retail space, a 300-room hotel, and 285 acres of open space. The City had spent several years preparing an EIR under CEQA before the City made a policy decision to reject the project. The developer sued the City, alleging that the City was prohibited from making this policy determination and rejecting the project until it completed the EIR. The developer also alleged claims for violation of procedural and substantive due process and equal protection under the State and Federal Constitutions and sought $100 million in damages. The trial court sustained the City’s demurrer.

The Court of Appeal affirmed the judgment in a published decision, which is significant in several respects. On the CEQA claim, the Court relied on Public Resources Code section 21080, subdivision (b)(5), in holding that CEQA applies only to projects that a public agency proposes to carry out or approve, and does not apply to projects that the agency rejects or disapproves. The Court made clear that “if an agency at any time decides not to proceed with a project, CEQA is inapplicable from that time forward.” The Court explained that requiring a public agency to prepare an EIR before rejecting a project “would impose a substantial burden on the agency, other agencies, organizations, and individuals commenting on the proposal, and the project applicant. Such a requirement would not produce any discernible environmental benefit and would not further the goal of environmental protection.” The Court also distinguished Sunset Drive Corp. v. City of Redlands (1999) 73 Cal.App.4th 215, on the grounds that the agency in that case was still considering approval of the underlying project.

The Court also clarified the limitations on a developer’s ability to assert constitutional violations in the land use context. The Court held that the developer could not state a claim for denial of procedural due process because it had no claim of entitlement to an EIR or the underlying development entitlements. The Court declined to follow Cohan v. City of Thousand Oaks (1994) 30 Cal.App.4th 547 to the extent that court held that denial of a discretionary development approval would constitute the deprivation of property for purposes of procedural due process. The Court also held that the developer did not adequately allege a substantive due process claim, because it did not allege any outrageous or egregious abuse of power.

Finally, the Court held that the developer did not adequately allege an equal protection claim. The Court cited the recent U.S. Supreme Court decision Engquist v. Oregon Dept. of Agriculture (2008) __ U.S. __ [128 S.Ct. 2146] (Engquist), which held that the class of one theory of equal protection has no application in the context of public employment decisions, which involve complex, discretionary decisionmaking. The Court of Appeal applied this rule in the land use context, holding that the proposed project presented complex urban planning and land use issues. The Court observed that the decision whether to approve such a project “ordinarily would involve numerous public policy considerations and the exercise of discretion based on a subjective, individualized determination.” Such a decision is the antithesis of the simple issue presented in other equal protection cases concerning the consistent imposition of a standard requirement.

The case is Las Lomas Land Company, LLC v. City of Los Angeles, Court of Appeal, Second Appellate District, Division Three, Case No. B213637. Amrit Kulkarni and Julia Bond of Meyers Nave represented the City of Los Angeles.