United States: California Court of Appeal Upholds Environmental Impact Report Against Challenge Based on Urban Decay Impacts

As controversy grows over "big box" retail projects, California courts have issued a number of decisions involving claims about the economic and environmental impacts of such projects. Opponents of both "big box" retail and other commercial projects often assert that such projects will create urban decay as other businesses are displaced. A recent decision by the Third District Court of Appeal demonstrates how an environmental impact report can be prepared to successfully defend against these types of urban decay claims. The decision also includes important holdings regarding remedies in California Environmental Quality Act litigation as well as the adequacy of mitigation for cumulative impacts.

In Anderson First Coalition v. City of Anderson, Third District Case No. C047605 (June 30, 2005), the court considered the environmental impact report for the Anderson Marketplace, a 26.5 acre retail center that includes a Wal-Mart Super Center (a Wal-Mart store combined with a supermarket that is open 24 hours). Project opponents submitted studies and asserted that the project would cause urban decay in the city’s central business district.

The environmental impact report evaluated this issue and concluded the project would not cause such urban decay. The EIR relied on an economic analysis that evaluated the project’s impact on other businesses, and that report concluded that the city’s downtown contains smaller stores typically serving local residents, while the Wal-Mart would be geared toward the regional market and would also attract customers who are currently shopping in other towns. The EIR also noted that an existing redevelopment district was going to use tax increment monies to revitalize downtown, and concluded that the viability of the downtown area would be most affected by such city planning and revitalization efforts, not by a regional mall.

In upholding the EIR, the Anderson court distinguished another recent urban decay case, Bakersfield Citizens for Local Control v. City of Bakersfield (2004) 124 Cal.App.4th 1884. In Bakersfield, when the project opponents submitted urban decay studies, the city responded that such impacts were economic and outside the scope of CEQA’s required environmental review. The court in Bakersfield held that, when evidence is submitted showing potential urban decay impacts, those impacts need to be evaluated at some level in the EIR. In the Anderson case, however, the city did not dismiss the submitted evidence as outside the scope of CEQA, but instead studied the claims.

Under these cases, when a lead agency is presented with credible evidence of potential environmental impacts due to possible urban decay, the agency should evaluate that issue in the EIR, and determine based on the evidence before the agency whether or not the claimed impact is significant.

The new Anderson decision and the 2004 decision in Bakersfield Citizens illustrate a fundamental principle about the preparation of environmental impact documents. In brief, when an environmental impact report evaluates issues, it is better to provide a factual basis for the EIR evaluation, rather than a legalistic basis. Reviewing courts generally defer to lead agencies on factual determinations, and are more likely to independently review legal conclusions.

Thus, when a claim is submitted about a potential environmental impact, the lead agency should evaluate the claim and provide a factual response to the issue that was raised, as the city did in the Anderson case. Under the standards of judicial review that apply in a CEQA case, when a court reviews a lead agency's factual determination, the court should uphold that factual determination as long as it is supported by substantial evidence. If an agency responds to an environmental claim with legal analysis rather than a factual response, however, a reviewing court is more likely to treat the issue as a legal question rather than a factual one, and the court is less likely to defer to and to uphold the lead agency's decision.

This does not mean that legal analysis has no place in a CEQA document; in fact, it is common to receive comments on a CEQA document that are outside the scope of the environmental impact review under CEQA. It is appropriate in certain instances to point out that a comment is based on an issue that is outside CEQA, or that a legal theory is simply incorrect. When a comment includes factual claims about a potential impact, however, the lead agency should also provide a reasoned factual determination in response to those comments, explaining the basis for its conclusions about the impact in question. An EIR that includes such factual evaluation in its analysis of impacts and in its responses to comments is more likely to survive a litigation challenge.

The Anderson case contains two additional holdings of importance to CEQA practitioners. First, the court rejected as inadequate the "fair share" mitigation set forth in the EIR for cumulative traffic impacts. The mitigation fee as adopted was less than the project’s fair share of the actual cost of a required interchange, and also was not tied to an enforceable plan providing for construction of the interchange. The court rejected claims, however, that the interchange itself was required to be included as a part of the project description, based on the fact that the project was contributing mitigation funding towards the interchange.

Finally, the Court of Appeal also confirmed the ability of trial courts, when they find a CEQA error that affects only one part of a project, to order that part of the project to be halted while the rest of the project proceeds. CEQA was amended in 1993 to emphasize that, when a court finds one part of an EIR’s analysis to be inadequate, it is appropriate to limit any order stopping the project to those specific project activities that were not adequately evaluated under CEQA. This decision confirms that such limited remedies are appropriate.

Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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