Ceqa's "unusual Circumstances Exception" in the Wake of Berkeley Hillside

• Jurisdiction: California,United States
• Citation: Vol. 25 No. 1
• Publication year: 2016
• Author: by Nicole H. Gordon and Lauren K. Chang
• topic: Environmental Law,Civil Procedure,Real Estate

CEQA's "Unusual Circumstances Exception" In the Wake of Berkeley Hillside

by Nicole H. Gordon^* and Lauren K. Chang^**

I. INTRODUCTION

In a highly anticipated decision, Berkeley Hillside Preservation v. City of Berkeley ("Berkeley Hillside"),¹ the California Supreme Court sought to resolve a long-standing question of what standard of review agencies and courts should apply when assessing whether "there is a reasonable possibility that [an] activity will have a significant effect on the environment due to unusual circumstances,"² thereby precluding use of otherwise-applicable categorical exemptions from the California Environmental Quality Act (CEQA).³ Ultimately, the Supreme Court determined two separate standards apply: the deferential "substantial evidence" test applies to the question of whether unusual circumstances exist, and the "fair argument" test applies to the question of whether unusual circumstances give rise to a reasonable possibility of a significant effect.⁴

The majority opinion, authored by Justice Chin and joined by four other justices, claims that agencies and reviewing courts should have no trouble applying these tests.⁵ Whether that is true remains to be seen. This article summarizes the Berkeley Hillside decision, discusses subsequent cases, and observes that to prevail under Berkeley Hillside, petitioners may be required to not only demonstrate that an agency's finding of no unusual circumstances is not supported by substantial evidence, but to "produce" evidence of unusual circumstances, and in some cases, to produce "more than substantial" evidence to "convincingly" demonstrate that a project will have a significant effect.

II. THE SUPREME COURT'S BERKELEY HILLSIDE DECISION

A. Summary of Facts and Procedural History

In May 2009, real parties in interest, Mitchell Kapor and Freada Kapor-Klein, applied for a conditional use permit to demolish an existing two-story house on a steep slope in a heavily wooded area in the Berkeley hills, and build a new house.⁶ The new house would be 6,478 square feet with an attached 3,394-square-foot, 10-car garage and would cover approximately 16 percent of their 29,714 square-foot-lot.⁷ In January 2010, the City of Berkeley's zoning adjustment board approved the use permit and found the project categorically exempt from CEQA under the CEQA Guidelines "Class 3" exemption⁸ for small structures, including "[o]ne single-family residence, or a second dwelling unit in a residential zone" and the "Class 32" exemption⁹ for in-fill development.

Several interested residents appealed the zoning adjustment board's decision to the City Council. They argued the categorical exemptions were not appropriate because the project's "unusual size, location, nature and scope will have significant environmental impact on its surroundings."¹⁰ The residents also asserted that the proposed home would be "one of the largest houses in Berkeley, four times the average house size in its vicinity, and situated in a canyon where the existing houses are of much smaller scale."¹¹

In support of the appeal, Lawrence Karp, an architect and geotechnical engineer, sent letters to the City and spoke at the City Council meeting. Based on his interpretation of the architectural plans and topographical survey completed for the proposed project, Karp concluded that the proposed project would have significant environmental impacts during construction and operation "due to the probability of seismic lurching of the oversteepened side-hill fills."¹² In response, Alan Kropp, the City's geotechnical engineer, refuted Karp's assessment, explaining that "the project site is in an area where an investigation is required to evaluate the potential for landslides, and that he had conducted the necessary investigation and found there is no landslide hazard" and that "in raising concerns about 'side-hill fill,' Karp had 'misread[]' the project plans."¹³ The City Council dismissed the appeal and adopted the zoning adjustment board's decision. The project opponents filed a petition for writ of mandate challenging the City's approval.

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The trial court denied the petition, concluding that "notwithstanding evidence of potentially significant environmental effects," the exception does not apply because "the proposed project does not present any unusual circumstances."¹⁴

Petitioner appealed the trial court decision, and the First District Court of Appeal reversed. In doing so, the Court of Appeal made "two distinct inquires": first whether the project presents unusual circumstances, and next, whether there is a reasonable possibility of a significant effect on the environment due to the unusual circumstances.¹⁵ The Court of Appeal acknowledged an apparent "split in authority" over whether to apply the fair argument or substantial evidence standard of review to an agency's determination that there was no reasonable possibility of a significant effect on the environment, but determined that "the question of whether a circumstance is 'unusual' within the meaning of the significant effect exception would normally be an issue of law that this court would review de novo."¹⁶ It also found that the fair argument standard is the correct standard of review for an agency's determination under Guidelines section 15300.2(c) that there is no reasonable possibility of a significant effect on the environment due to unusual circumstances.¹⁷

Applying these standards, the Court of Appeal found the unusual circumstances exception precluded the City's use of the Class 3 and 32 exemptions. It determined, as a matter of law, the project was "unusual...because the circumstances of the project differ from the general circumstances of projects covered by the single-family residence exemption, and it is thus unusual when judged relative to the typical circumstances related to an otherwise typically exempt single-family residence."¹⁸ In other words, "the fact that proposed activity may have an effect on the environment is itself an unusual circumstance, because such action would not fall 'within a class of activities that does not normally threaten the environment,' and thus should be subject to further environmental review."¹⁹

The City petitioned the California Supreme Court for review.

B. Supreme Court Decision

The key issue before the Court was whether evidence of a potentially significant impact is, by itself, enough to overcome the use of a categorical exemption. Ultimately, the court answered in the negative, finding "it is not alone enough that there is a reasonable possibility the project will have a significant environmental effect; instead, in the words of the Guideline, there must be 'a reasonable possibility that the activity will have a significant effect on the environment due to unusual circumstances.'"²⁰ The Court reasoned that rules of statutory interpretation prohibit a reading of the Guidelines section that would render the words "due to unusual circumstances" surplusage.²¹

Turning to the question of the standard of review, the Supreme Court concluded that "both prongs of [CEQA] section 21168.5's abuse of discretion standard apply on review of an agency's decision with respect to the unusual circumstances exception."²² For the first step of the inquiry, whether unusual circumstances exist, a lead agency's determination will be reviewed under the deferential substantial evidence standard.²³ The second step of the inquiry, which looks at the agency's decision of whether the unusual circumstances result in the reasonable possibility that the project will have a significant environmental impact, however, will be reviewed under the fair argument standard.²⁴ Applying this test to the lower court proceeding, the Supreme Court determined that the trial court and Court of Appeal had applied the standard incorrectly and reversed and remanded.²⁵

The Supreme Court also articulated two alternative ways project opponents could establish evidence to support the Guidelines section 15300.2(c) exception. Under the first method, "[a] party invoking the exception may establish an unusual circumstance without evidence of an environmental effect, by showing that the project has some feature that distinguishes it from others in the exempt class, such as its size or location. In such a case, to render the exception applicable, the party need only show a reasonable possibility of a significant effect due to that unusual circumstance."²⁶ Alternatively, "a party may establish an unusual circumstance with evidence that the project will have a significant environmental effect. That evidence, if convincing, necessarily also establishes 'a reasonable possibility that the activity will have a significant effect on the environment due to unusual circumstances.'"²⁷ The requisite burden of proof under these two approaches is discussed further below.

C. Justice Liu's Concurring Opinion

Justice Liu concurred with the outcome of the majority's decision, but not with what he characterized as "the court's novel and unnecessarily complicated approach to the standard of review."²⁸ Instead, "[w]hen there is a reasonable possibility that a project otherwise covered by a categorical exemption will have a significant environmental effect, it necessarily follows...