Simply stated: “[a] collateral attack is not a substitute for an appeal” reasoned the Second Appellate District Court in Bowman v. California Coastal Commission (2nd Dist., Div. 6, 03/18/2014, B243015) ___Cal.App.2nd___, 2014).  This is a case where the Coastal Commission and environmental groups found common ground challenging a coastal development permit issued by the County of San Luis Obispo.  The case reiterates the importance of exhausting remedies during – not after – permit approval proceedings.  However, the rationale for the decision—collateral estoppel—because of the issuance of a prior coastal development permit at the same location for a similar project was unusual.  Perhaps too unusual, as the court on April 15, 2014 granted a rehearing on its own motion and indicated it contemplated further briefing.

The facts are straightforward.  Walton Emmick owned approximately 400 acres in the County with nearly one mile of shoreline along noncontiguous parcels.  In 2002, Emmick applied for a coastal development permit (CDP) from the County to rehabilitate a residence on the land, install a septic system, and connect to an existing water well.  In 2003, Emmick died, and the SDS Family Trust succeeded to the property.  SDS started construction without the CDP, in reliance on local building permits.  In 2004, the County issued an after-the-fact CDP and conditioned it upon SDS’s offer to dedicate a lateral easement for public access along the shorefront portion of the property.  SDS did not appeal.  Instead, nine months later, SDS applied for a second CDP requesting, among other things, that the County remove the lateral easement condition.  The County approved the second CDP and removed the easement requirement.  The Sierra Club, Surfrider Foundation, and two coastal commissioners appealed the County decision to the Coastal Commission, which upheld the validity of the easement from the first CDP.  SDS sued and lost at the trial court level.

The appellate court quickly established the ground rules stating “[w]here an administrative tribunal has rendered a quasi-judicial decision that could be challenged by administrative mandamus . . . a party’s failure to pursue that remedy will give rise to collateral estoppel.”  In other words, an applicant must exhaust all of its remedies during the administrative process or else it will be barred from later challenges.  Here, SDS’s fate was set when it failed to appeal the easement condition in the first CDP.

In defending the second CDP, SDS argued that (a) the first CDP had expired; (b) they had not accepted its conditions; and (c) they could “walk away” from the first CDP because they were dissatisfied with the conditions.  SDS also argued that the access easement condition constituted an unlawful exaction of its property under Nollan v. California Coastal Commission (1987) 483 U.S. 825 and Dolan v. City of Tigard (1994) 512 U.S. 374, because the condition was not roughly proportional to the burden the project placed on the public interest.  All of these arguments fell flat.  Instead, the court held that a party is bound by the conditions of a permit that has been the subject of a quasi‑judicial proceeding, even if the decision is erroneous, when that party fails to challenge the permit and accepts its benefits—in this case partial completion of construction under the first CDP.

The message of the decision is clear: if you are dissatisfied with conditions imposed by an agency, then must appeal the matter before accepting the benefits of the permits.   This is well‑established in California, even if the condition is arguably unconstitutional.  SDS might have been in a stronger position to eliminate the lateral public access condition if it had not already commenced construction before receiving the first CDP, which it maintained while claiming they had walked away from the approval.  The second CDP application was clearly another bite at the same apple, i.e., after-the-fact approval of existing construction, because SDS had failed to attack the lateral access condition in the first CDP under Nollan and Dolan.

California courts have held for more than 20 years that applicants cannot accept the benefits of a permit without challenging its burdens.  It is therefore critical that applicants challenge unfavorable conditions when they are imposed.  SDS followed a risky approach, that ultimately failed.  Unfortunately, the Bowman court applied the court-based concept of “collateral estoppel” to the facts of the case, rather than established administrative law.  This is likely to confuse situations where applicants legitimately “walk away” from an unacceptable permit and allow it to expire on its own terms without commencing construction.  “Collateral estoppel” would prevent applicants, or even later purchasers, from applying for a new permit in response to changes in the law, even if applicable legal precedent or local regulations changed in the interim.  While the result in Bowmanwas predictable under prior decisions, the court’s reasoning was not.

On April 15, 2014, the court granted a rehearing on its own motion and contemplates further briefing. It will be interesting to see whether the court will decide that its extension of administrative law to incorporate concepts of “collateral estoppel” may have been both unnecessary and unwise. This post will be supplemented as necessary based on the further action by the court.