The exhaustion doctrine under the California Environmental Quality Act

Over the last 15 years, the long-established common law mandate to “exhaust administrative remedies” before filing a lawsuit challenging a public agency decision has been eroded under California Environmental Quality Act (CEQA)¹ jurisprudence. This development is largely the result of a conflation of the exhaustion requirement with the separate jurisdictional prerequisite of “standing” by courts interpreting CEQA.

The more recent trend has been toward the total abrogation of the common law exhaustion requirement in CEQA cases. The trend is problematic because it robs public agencies and project proponents of the ability to resolve disputes during the administrative process and avoid costly, time-consuming litigation. At the same time, project opponent litigants are provided an essentially free ride through the administrative process. Such litigation can delay and sometimes even kill desperately needed new housing and other types of important public and private development projects, a fact that highlights the need for the critical procedural safeguard of the exhaustion doctrine to be fully re-established under CEQA.

The exhaustion and standing doctrines, generally

The exhaustion doctrine holds that “where an administrative remedy is provided by statute, relief must be sought from the administrative body and this remedy exhausted” through a final agency decision “before the courts will act.”²

In addition to the requirement to exhaust all available statutory procedures, the exhaustion doctrine also requires the “exact” claims raised by a petitioner in litigation to have been raised before the public agency during the administrative process.³ This separate aspect of the doctrine is often referred to as “issue exhaustion.” The exhaustion requirement is jurisdictional: “[w]here a petitioner has not exhausted its administrative remedies, a trial court has no jurisdiction to decide the dispute.”⁴

The exhaustion doctrine is rooted in both the separation of powers and the fairness principles. It gives public agencies “the opportunity to receive and respond to articulated factual issues and legal theories before its actions are subjected to judicial review.”⁵ In CEQA cases involving agency approvals of private development projects, the doctrine also allows project proponents to resolve disputes and address the unique concerns of project opponents to try to avoid expensive, time-consuming litigation that can put the economic viability of the proponents’ projects at risk.

Under the standing doctrine, one “who invokes the judicial process does not have standing” if they, or those whom they properly represent, do “not have a real interest in the ultimate adjudication because the actor has neither suffered nor is about to suffer any injury of sufficient magnitude reasonably to assure that all of the relevant facts and issues will be adequately presented.”⁶ A “complaint by a party lacking standing fails to state a cause of action by the particular named plaintiff, inasmuch as the claim belongs to somebody else. A more accurately stated rationale would be that there is a defect in the parties, since the party named as plaintiff is not the real party in interest.”⁷ Like the failure to exhaust administrative remedies, a “lack of standing is a jurisdictional defect to an action that mandates dismissal.”⁸

Thus, exhaustion of administrative remedies is a procedural requirement, mandating that a challenger fully pursue all available administrative procedures and raise all issues before bringing a lawsuit against a public agency. Standing, on the other hand, relates to whether an individual plaintiff has a sufficient personal interest in the matter to be able to validly maintain a lawsuit.

The ongoing erasure of the common law exhaustion requirement under CEQA

California Public Resources Code Section 21177 of CEQA (Section 21177) provides that “an action or proceeding” shall not be brought or maintained by any person under CEQA “unless the alleged grounds for noncompliance with this division were presented to the public agency orally or in writing by any person.”⁹ An exception to the rule exists where “there was no public hearing or other opportunity for members of the public to raise those objections orally or in writing before the approval of the project, or if the public agency failed to give the notice required by law.”¹⁰ Section 21177 is silent on whether all available administrative remedies must be fully exhausted before filing a CEQA lawsuit.

Tahoe Vista clarifies standing and exhaustion requirements under CEQA

In 2000, the Third District Court of Appeal decided Tahoe Vista Concerned Citizens v. County of Placer (2000) 81 Cal.App.4th 577, 589. The case involved a lawsuit that followed an administrative appeal to the Placer County Board of Supervisors from a county planning commission decision approving a resort project. The administrative appeal did not challenge the CEQA “Negative Declaration” adopted by the planning commission in approving the project, but rather only the planning commission’s decision regarding the project’s required parking. When the petitioners later sued the county for a CEQA violation, they argued they had exhausted their administrative remedies by challenging the sufficiency of the CEQA Negative Declaration before the planning commission, therefore they did not need to formally address the issue to the Board of Supervisors under Section 21177.

The Court of Appeal noted that the 1984 statute that adopted Section 21177 into CEQA included a statement that the provision was intended “to codify the exhaustion of administrative remedies doctrine” for CEQA purposes.¹¹ The statue also stated, however, that “[it] is not the intent [of the statute] to limit or modify any exception to the doctrine of administrative remedies contained in case law.”¹² Based on a close reading of the legislative history, the Court of Appeal ultimately found that, “notwithstanding the Legislature’s expressed intent, Section 21177 is not properly speaking an exhaustion of administrative remedies statute.”¹³

In consideration of the statute as a whole in the context of well-established common law rules, the Court of Appeal found that Section 21177’s true intent was to limit CEQA standing to only those people who raised CEQA concerns before the public agency. The court found it was not the intent of the Legislature to abrogate the common law requirement for litigants to file all reasonably available administrative appeals as a necessary prerequisite to seeking relief in court in CEQA cases.¹⁴ Thus, in Tahoe Vista, the court ruled that, because the petitioners did not exhaust all administrative remedies by appealing their CEQA issue to the Board of Supervisors, their CEQA claims were barred due to a failure to exhaust administrative remedies.

City of Lodi muddles the CEQA standing and exhaustion requirements clarified by Tahoe Vista

Six years after Tahoe Vista, the Third District Court of Appeal decided Citizens for Open Government v. City of Lodi (2006) 144 Cal.App.4th 865. In City of Lodi, the Lodi City Planning Commission’s certification of a CEQA Environmental Impact Report (EIR) for a shopping center project was appealed to the Lodi City Council by one party. Another party – the ultimate petitioner in the lawsuit – did not file an administrative appeal, though it did submit a letter and show up to the City Council appeal hearing to raise objections to the EIR.

The trial court granted a motion to dismiss the petition filed by the city based on the petitioner’s “failure to exhaust administrative remedies or lack of standing” under Section 21177.¹⁵ In reversing the trial court, the Court of Appeal ruled that the petitioner had exhausted its administrative remedies and satisfied its standing requirement.

The City of Lodi court asserted without qualification that “Section 21177 codifies the doctrine of exhaustion of administrative remedies for CEQA.”¹⁶ The court brushed aside the city’s argument that, under Tahoe Vista, Section 21777 is properly considered a standing statute that does not abrogate common law exhaustion requirements. The City of Lodi court distinguished Tahoe Vista by asserting that its discussion of Section 21177 was “more appropriately viewed as an issue of standing because of the nature of [the administrative appeal] hearing.”¹⁷

Notably, “the nature of the administrative appeal hearing” in Tahoe Vista was a limited review of only the issues raised in the appeal: it was not a full de novo reconsideration of the planning commission decision. So in Tahoe Vista the CEQA issue was not exhausted because it would have had to have been raised in the administrative appeal to be considered by the City Council, but it was not.¹⁸ On the other hand, in City of Lodi, the appeal hearing was a full de novo reconsideration of the planning commission’s action where public comment was allowed and considered by the City Council, meaning the petitioner had the legal ability to be heard and was in fact heard by the City Council – the final agency decisionmaker – even though it did not file an appeal. While this distinction drawn by the City of Lodi court is substantively valid – one party did not validly raise their issues before the final agency decisionmaker and the other did – the City of Lodi court’s statement that Section 21177 has the chameleon-like quality of stating a standing rule for lawsuits following administrative appeals with a limited scope of review and an exhaustion rule for challenges following de novo administrative hearings is perplexing.

Instead, City of Lodi’s exhaustion ruling could have been justified under the well-established principle that the purpose of the doctrine is to ensure that the final agency decisionmaker can address issues and parties before litigation commences. However, the City of Lodi court undermined Tahoe Vista by explicitly holding that Section 21177 sets CEQA’s exhaustion standard and that, by meeting the standard of Section 21177, the petitioner had exhausted its administrative remedies.

Clews attempts to redraw the standing and exhaustion lines

Eleven years later, in 2017, Division One of the Fourth District Court of Appeal followed Tahoe Vista in Clews Land and Livestock v. City of San Diego (2017) 19 Cal.App.5th 161. Clews involved an administrative appeal to the San Diego City Planning Commission of a City of San Diego hearing officer decision approving a school development project. In filing its administrative appeal, the petitioner did not challenge the CEQA Mitigated Negative Declaration (MND) adopted by the hearing officer. However, the petitioner did separately attempt to appeal the MND to the City Council. Because the petitioner did not use the city’s appeal form and did not follow the city’s statutory process, the appeal was rejected. Because it was not re-filed in time, the CEQA appeal was never heard by the city. Following another appeal of the city’s project approval to the California Coastal Commission, the petitioner filed a CEQA lawsuit against the city challenging its adoption of the MND.

In upholding the dismissal of the lawsuit on exhaustion grounds, the Court of Appeal ruled that the petitioner “did not avail itself of the City's administrative appeals procedure that was available to address [his] objections to the hearing officer's adoption of the MND. [Petitioner] did not exhaust its administrative remedies regarding the MND, and it may not now bring a judicial action challenging it.”¹⁹

In so ruling, Clews stated that the “exhaustion requirement is separate from, and in addition to, the requirements under” Section 21177.²⁰ The court went on to try to parse the prior cases by stating that “[a]lthough courts have described section 21177 as ‘codif[ying] the doctrine of exhaustion of administrative remedies for CEQA’ ([City of Lodi], supra, 144 Cal.App.4th at p. 875), it does not cover every circumstance where the doctrine applies. (See Tahoe Vista, supra, 81 Cal.App.4th at p. 590.”²¹ The court ruled that “Section 21177 does not apply here, for example, where the plaintiff raises a ground for noncompliance before a public agency’s decision but does not pursue available administrative procedures to challenge that decision.”²²

Thus, as of 2017, it seemed that Section 21177 was properly understood as both creating the requirement for standing to bring a lawsuit statute and also as non-exclusive exhaustion statute, because it still appeared that adherence to the common law exhaustion requirement was required to bring a CEQA case.

Covington obliterates the common law exhaustion requirement under CEQA

In 2019, the Third District Court of Appeal decided Russel Covington, et al. v. Great Basin Unified Air Pollution Control District, et al. (2019) 43 Cal.App.5th 867. In it, the petitioner challenged permit approvals and the certification of an EIR by an air pollution control district for a geothermal power plant project. In response, the respondent air district claimed that the petitioner had failed to file available administrative appeals under state law and the district’s adopted rules.²³

The Court of Appeal rejected this argument. It did not reject it on the basis of any statutory or common law grounds upon which courts have ruled that parties can be excused from the requirement to exhaust – for example, the appeal being futile, there being no notice, no hearing, and no other reasonable opportunity to raise an objection. Rather, the court simply held that Section 21777 sets out the exhaustion requirement under CEQA, and it requires only that someone raise the alleged grounds for non-compliance with CEQA, and that such objection be raised before the final agency decision.²⁴ Thus, exhausting administrative remedies by filing a legally available administrative appeal is not required by CEQA.

This was the first time a California Court of Appeal held that Section 21177 is the sole basis of the exhaustion requirement under CEQA even where it conflicts with the common law exhaustion doctrine. It also appears to be the first time an available administrative appeal was simply not required to be pursued by the petitioner before filing a CEQA lawsuit challenging a project approval.

Conclusion

Based on recent case history, it appears that courts are becoming less amenable to enforcing the common law duty to exhaust administrative remedies in CEQA cases. Rather, courts have more recently seemed to read Section 21177 and City of Lodi as fully excusing the common law exhaustion requirement, ignoring the well-reasoned holdings of Tahoe Vista and Clews.

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