Real Estate and Land Use

New Draft CEQA Guidelines Evaluating Transportation Impacts—Level of Service No Longer Considered to Be an Environmental Impact

Author: Roger Grable

The Governor's Office of Planning and Research (OPR) was mandated by SB 743 in 2013 to revise the CEQA Guidelines to eliminate the use of Level of Service (LOS) in determining transportation impacts under CEQA. The second draft of the new CEQA Guidelines to implement SB 743 was released for public comment on January 20, 2016. OPR's draft continues to use vehicle miles travelled (VMT) as the appropriate measure of transportation impacts. In addition, the draft Guidelines include recommendations that development proposed near transit, as well as roadway rehabilitation, transit, bicycle and pedestrian projects, should be considered to have less than significant transportation impacts. One significant change from the first draft is the movement of much of the detail to a new draft Technical Advisory in order to make clear what is a requirement as opposed to a recommendation.

Traditional means of transportation mitigation, such as adding roadway capacity or building new roads, will be more heavily scrutinized because of their potential to increase VMT.

This fundamental change in evaluating transportation impacts has created a significant amount of concern both in the development industry and the environmental consulting industry. OPR continues to consider and respond to industry input and, apparently as a result of the comments, has recommended that the new procedures be optional for a two-year period in order to provide more time for agencies to adapt to the new procedures.

The obvious legislative intent behind SB 743 was to encourage infill and transit-oriented development and project design in order to address a need to improve air quality, safety and health through a reduction in vehicle miles travelled and the resultant reduction in greenhouse gases. Among the concerns that have been expressed and the questions that have been posed are the following:

  • Will LOS still be relevant with respect to other environmental impacts such as air quality and safety?
  • LOS may still be included among other development standards such as General Plans. If a project is required to implement mitigation to meet LOS requirements to achieve General Plan consistency, will the extra local capacity created by these improvements trigger additional VMT mitigation?
  • The public will still be concerned about congestion. How will decision makers respond to community opposition to increases in traffic delays that would result from the use of VMT, and not LOS, as a measure of determining impact and mitigation?
  • The use of VMT assumes that people will want to live in the type of development environment envisioned by OPR. What if this assumption proves to be incorrect? What would be the impact on the economy if there is a limited market for these projects?
  • How will VMT be determined? There appears to be a lack of available data to support a VMT analysis in many communities.
  • What is the appropriate regional context that should be considered regarding VMT impacts? OPR suggests that a project exceeding 15% below existing regional VMT per employee would be considered to be a significant transportation impact. Not all communities are the same from a regional standpoint.

These and many other technical issues will continue to be of concern. It is important for industries and businesses that may be impacted by the new Guidelines to become a part of this process by reviewing and commenting on these draft Guidelines and any future revisions that are produced. While the use of VMT is unlikely to change, input on issues such as the foregoing may significantly lessen any adverse impacts of this fundamental change of direction.

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Affiliated Companies May Be Liable for Attorneys' Fees in CEQA Challenges

Highland Springs Conference And Training Center v. City of Banning, 244 Cal. App. 4th 267 (Cal. App. 4th Dist. 2016)

Author: Robia Crisp

Why It Matters: Many real estate entities often create and use single purpose entities (SPE) to seek land use entitlements for development projects. This case addresses whether a related corporate entity should be considered an alter ego of an SPE and be liable for an award of attorneys' fees if the SPE dissolves. The Court of Appeal for the Fourth Appellate District reversed a trial court's order denying a motion to amend judgments, including a judgment awarding over $1 million in attorney fees and costs, entered four years earlier, to add a new party alleged to be the named SPE real party in interest's alter ego, as a judgment debtor. The case was remanded to the trial court to examine the relationship between the SPE real party in interest and related corporate entity and consider, among other factors, whether there was a unity of interest and ownership that would extend liability of the SPE to the other entity.

Facts: In 2006, the City of Banning (City) certified an environmental impact report (EIR) and approved related entitlements for the development of an approximately 1500-acre property known as Black Bench Ranch. In November 2006, Highland Springs Conference and Training Center and four other organizations (Plaintiffs) filed a California Environmental Quality Act (CEQA) action challenging the City's certification of the EIR and project approval. Plaintiffs named "SCC/Black Bench, LLC, dba SunCal Companies" (SCC/BB) as the only real party in interest. In April 2008, the trial court set aside and vacated the City's certification of the EIR and project approvals. SCC/BB appealed the judgment but failed to deposit record preparation costs, resulting in the court's dismissal of the appeal. In August 2008, Plaintiffs moved to recover attorney fees and costs. Neither the City nor SCC/BB opposed the motion. The court awarded $1,081,545.97 in attorney fees and costs against SCC/BB. By the end of 2008, SCC/BB lost the property in foreclosure and in 2010, SCC/BB was dissolved.

In October 2012, four years after the issuance of the attorney fees order and almost six years after the lawsuit was filed, Plaintiffs moved to add SCC Acquisitions (SCCA) to the judgments as an additional judgment debtor based on the claim that SCCA was the alter ego of SCC/BB, and should therefore be liable for paying the attorney fees and costs award. Both SCCA and SCC/BB conducted business under the names "SunCal" and "The SunCal Companies" in connection with procuring the Black Bench Property, obtaining the project approvals, and in the CEQA litigation. SCCA opposed the motion and denied that it was the alter ego of SCC/BB as the two companies were formed and run as separate entities, with separate assets and separate accounting.

The trial court denied the motion solely on the basis that Plaintiffs failed to timely file the motion by waiting four years after the judgment was entered. It concluded that Plaintiffs knew, or reasonably should have known, of the alleged alter ego relationship long before they moved to amend to include SCCA, but noted that absent the four-year delay the court would likely have granted the motion to hold SCCA liable for the fees based on the equities.

The Decision: The Court of Appeal held that the trial court erroneously denied the motion to amend the judgments to add SCCA as a judgment debtor solely on the issue of delay. More significantly, the Court of Appeal remanded the case to the trial court with instructions to examine more closely the alter ego claim. In so holding, the Court of Appeal clarified that the question of "whether plaintiffs unreasonably delayed in filing the motion to amend is irrelevant to the merits of plaintiffs' alter ego claim against SCCA. It is only relevant to whether plaintiffs' alter ego claim was barred by the equitable, affirmative defense of laches." In this case, the claim was not barred by laches because SCCA failed to present sufficient evidence that it was prejudiced by plaintiffs' delay in filing the motion, even if the delay was unreasonable.

The Court of Appeal articulated the factors that must be weighed by the trial court in deciding whether SCCA was the alter ego to SCC/BB. In so doing, the Court of Appeal also noted that alter ego is an extreme remedy and that the standards for applying alter ego principles are high as the imposition of liability on an alter ego must be exercised cautiously. In order to hold SCCA liable for the attorney fees, Plaintiffs must show by a preponderance of the evidence that:

(1) the added parties controlled and were virtually represented in the underlying proceeding,

(2) a unity of interest and ownership exists such that the entity and its owners no longer have separate personalities, and

(3) treating the acts as those of the entity alone will produce an inequitable result. Factors relevant to finding a unity of interest and ownership include commingling of funds/assets, identical equitable ownership, use of the same offices/employees, disregard of corporate formalities, identical directors/officers, use of one entity as a "shell," and inadequate capitalization of the original judgment debtor.

Practice Pointers

  • Alter ego liability is an equitable remedy that does not have a statute of limitations and can be brought at any time after judgment through a motion to amend under Code of Civil Procedure Section 187.
  • When conducting business through an SPE, related corporate entities must be careful to avoid creating a unity of interest that could extend liability to the alter ego if the SPE were dissolved. For example, only the SPE should be named in applications, correspondence and as a party to improvement agreements.

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