In a published opinion filed June 7, 2023, the Fifth District Court of Appeal held the trial court erred in applying California’s interrelated factors test to deny a preliminary injunction in a CEQA case. The error consisted of failing to consider harm to the public interests in informed decisionmaking and public disclosure as relevant informational harm to be weighed in evaluating the relative balance of harms likely to result from the erroneous granting or denial of the preliminary injunction. Tulare Lake Canal Company v. Stratford Public Utility District (Sandridge Partners, L.P., et al, Real Parties in Interest) (2023) 92 Cal.App.5th 380. Accordingly, the Court of Appeal reversed the order denying the preliminary injunction and remanded the matter to the trial court for reconsideration, while keeping in effect its writ of supersedeas continuing the trial court’s TRO in full force and effect.
The Project And Complete Lack of CEQA Review
The local agency action that constituted the project at issue was the Stratford Public Utility District’s (SPUD) grant of an easement for a 48-inch water pipeline to Sandridge Partners, L.P. (Sandridge) to accommodate an expansion of Sandridge’s irrigation system for its farming operations, which include the production of pomegranates, pistachios, raisins, wheat, alfalfa, and cotton. Ultimately the planned pipeline would be about 12.5 miles long, connect to a 13.5-mile water conveyance system, and (in addition to the portion traversing SPUD’s 380-foot wide strip of property) would cross lands owned by Sandridge, including land subject to a 120-foot-wide right-of-way held by plaintiff and appellant Tulare Lake Canal Company (TLCC).
TLCC is a mutual water company that operates a 60-foot wide canal within its right-of-way to deliver water to its shareholders. The contemplated pipeline would traverse and require trenching beneath and across TLCC’s canal. When TLCC and Sandridge could not come to terms on a common use agreement and Sandridge started construction, TLCC sued Stratford and others, challenging Stratford’s grant of the easement, and naming Sandridge as a real party, on the ground that Stratford had conducted no CEQA review whatsoever before granting the easement; TLCC also sued Sandridge for trespass in a separate action centering on its easement and property rights in the canal and the right-of-way lands upon which it sits. As relevant here, TLCC obtained a TRO and sought a preliminary injunction in the CEQA action; the trial court then denied the preliminary injunction and dissolved the TRO after a hearing, but the Court of Appeal granted a writ of supersedeas restoring the TRO pending its review of TLCC’s appeal of the order denying the preliminary injunction.
The Court of Appeal’s Opinion
The Court of Appeal held as a matter of law that the trial court misapplied the “interrelated factors test” in denying the preliminary injunction in the CEQA action. It noted that the general purpose of a preliminary injunction is to preserve the status quo pending a determination of the merits (Continental Baking Co. v. Katz (1968) 68 Cal.2d 512, 528), and that the question involves two interrelated factors: (1) the likelihood plaintiff will prevail on the merits, and (2) the relative balance of harms likely to result from granting or denial of the injunction. It observed that the usual judicial formulation of the test, which refers to relative interim harms to the parties, appears in several CEQA decisions, and that a rigid application of that usual description would exclude harm to the public interest from consideration, but that other CEQA decisions contain more general language omitting reference to the parties that would leave open the possibility of considering public harms in the balancing test.
Based on case law authorities cited by TLCC, and supported by its own extensive analysis of CEQA’s purposes, the Court concluded that “the balancing of the interim harms likely to result from granting or denying a preliminary injunction in a CEQA proceeding requires the consideration of harms to public interests” as part of the “relative balance of harms” relevant to the preliminary injunction inquiry. It found that CEQA’s important information disclosure requirements apply at all stages of CEQA review, including the first stage of determining whether an activity is a discretionary project subject to CEQA and, if so, whether it is exempt. It found that SPUD’s easement was a discretionary project granting an entitlement for use for CEQA purposes, that it was issued based on a record lacking any evidence that SPUD conducted a preliminary review or actually considered whether it was exempt from CEQA, and that SPUD exercised discretionary – not ministerial – authority in granting it. The Court had no problem concluding that the “whole of the project” – which was not limited to the 380-foot stretch of the pipeline across SPUD’s property – would cause a direct physical change in the environment.
Accordingly, because SPUD did not conduct a preliminary review, obtain information about the “whole of the action,” and then determine whether the project was exempt, the Court concluded “it is a near certainty that SPUD failed to comply with CEQA, and [that] TLCC will obtain a writ of mandate directing SPUD to take corrective action.” Thus, the trial court correctly concluded TLCC was likely to prevail, but erred in stating that “there was nothing in the record addressing how allowing the project to go forward pending SPUD’s CEQA review would cause the public generally to suffer harm” and in denying the injunction on that basis. To the contrary, the Court held that nothing in the record shows that SPUD obtained information about the project’s scope from Sandridge before granting the easement, and therefore “the record establishes that the public interest in an agency making an informed decision was harmed.” Per the Court, Sandridge’s request to SPUD for an easement sought an approval from a public agency that was subject to CEQA and thereby triggered lead agency SPUD’s duty to obtain the information from Sandridge that was required to evaluate the project; “SPUD’s failure to conduct a preliminary review and its failure to obtain the information essential to that review harmed the interest in informed decisionmaking.”
The Court went on to hold that such “informational harm” to the public interests in informed decisionmaking and public disclosure is a relevant harm that the trial court was required to consider in evaluating the relative balance of harms from granting or denying a preliminary injunction in a CEQA action. The Court found this legal conclusion to be “consistent with CEQA’s purposes and not seriously disputed by the parties.” It further held, in an apparent issue of first impression in published decisions, that a preliminary injunction in a CEQA case could be based solely on harms to the public interest resulting from noncompliance with CEQA’s information disclosure provisions and need not be accompanied by a showing of environmental harm, a conclusion it also found consistent with NEPA case law.
However, it declined to adopt a judicially-created presumption that such harm is automatically or usually sufficient to warrant an injunction, finding such a presumption would be inconsistent with the Legislature’s statutory determination that a violation of CEQA’s information disclosure provisions “may” be, but is not necessarily, prejudicial (see Pub. Resources Code, § 21005(a)), and that the more flexible “interrelated factors test” should be applied “on a case-by-case basis without the use of a presumption.”
Further, on the flip side, it declined to adopt a “hard-and-fast rule that harm to the public from a failure to comply with CEQA’s information disclosure provisions must be accompanied by a showing of a likely environmental harm before a preliminary injunction may be issued.” It reasoned that such a rule “should not be applied at the initial stage of CEQA review” because “it is difficult to evaluate the potential adverse environmental impacts without an accurate and complete description of the activity constituting the project” and such a rule would perversely benefit project proponents who wrongfully withhold information in violation of CEQA and thus hinder a public agency’s ability to conduct environmental review of project impacts.
In concluding, the Court held the trial court’s error constituted reversible error “because there is a reasonable probability that TLCC would have obtained a preliminary injunction in the absence of the error” – i.e., “if the harm to the public interest had been recognized [by the trial court] and included in the relative balance of harms of erroneously issuing or denying a preliminary injunction.”
Conclusion and Implications
While it didn’t act like one in this case, SPUD is a public utility district, i.e., a “local agency” that is a “public agency” (Pub. Resources Code, § 21063; CEQA Guidelines, §§ 15379, 15368) and therefore subject to CEQA. (Compare Robinson v. Superior Court of Kern County (2023) 88 Cal.App.5th 1144 [holding investor-owned public utility is not “public agency” as defined by CEQA and thus, absent any need for approval by public agency subject to CEQA, was not required to comply with CEQA when condemning maintenance/access easement for its electrical facilities]; see my 4/19/23 post on that case here.) And SPUD also clearly had discretion whether to grant the easement to Sandridge or not, and if it did, regarding whether or how to condition that grant. But its actions (and, more pertinently, omissions) in this matter seemed to indicate that it either didn’t recognize these key legal and factual elements bringing its actions within CEQA’s purview, or that it simply chose to disregard them.
In any event, this case will most likely have the greatest impact when preliminary injunctions are sought in CEQA litigation based on the same material facts involved in it – i.e., the lead agency conducts no CEQA review whatsoever, not even a preliminary review to determine if the activity constitutes a CEQA “project” or a screening for applicable exemptions if it does. In such circumstances, the factual record will most likely not have been developed to any degree that would be sufficient to evaluate the likelihood or severity of the project’s potential environmental impacts or harms, but the public harms from the CEQA violations – in terms of lack of informed decisionmaking and failure of informational disclosure – will be at their greatest.
The lessons for public agencies subject to CEQA who are considering taking any discretionary action – whether by approval of a permit, lease, easement, conveyance, or other “entitlement for use” – that would further or culminate in an activity with the potential to change the physical environment are clear: (1) be sure to obtain full information about the whole project that your discretionary action will further, enable or facilitate; and (2) be careful to comply with CEQA.
Here, one can glean from the Court’s opinion that Sandridge’s project viewed as a whole potentially had a number of significant environmental effects, including, but not limited to, damage to or interference with the operation of TLCC’s canal, addition of tailwater to a downstream canal, and adverse impacts from transporting groundwater from one basin to another out-of-County basin. The Court found that, as a lead agency, SPUD had the ability to require feasible mitigation measures as a condition of granting the easement to address such effects; additionally, it could simply have declined to grant the easement. In any event, because, per the Court, it is virtually certain that TLCC will now prevail in its CEQA action, and Sandridge’s construction of the pipeline project will now be enjoined in the meantime, it appears likely that the issues of potentially significant project impacts and feasible mitigation to address them will now be thoroughly explored assuming that Sandridge wishes to proceed with its pipeline addition.
Questions? Please contact Arthur F. Coon of Miller Starr Regalia. Miller Starr Regalia has had a well-established reputation as a leading real estate law firm for more than fifty years. For nearly all that time, the firm also has written Miller & Starr, California Real Estate 4th, a 12-volume treatise on California real estate law. “The Book” is the most widely used and judicially recognized real estate treatise in California and is cited by practicing attorneys and courts throughout the state. The firm has expertise in all real property matters, including full-service litigation and dispute resolution services, transactions, acquisitions, dispositions, leasing, financing, common interest development, construction, management, eminent domain and inverse condemnation, title insurance, environmental law and land use. For more information, visit www.msrlegal.com.