In Fudge v. City of Laguna (G055711), published on February 13, 2019, the Fourth District Court of Appeal joined the First and Sixth Districts by reaffirming the need for a litigant to wait for the California Coastal Commission’s (“Commission”) determination on the appeal of a coastal development permit (“CDP”) prior to initiating litigation.

The key takeaway here is that a local agency’s California Environmental Quality Act (“CEQA”) determination in cases where a CDP has been appealed is not final for purposes of adjudication if the Commission has not ruled on the appeal. While the exhaustion of administrative remedies doctrine is well established, this decision is unique in that it applies the doctrine even where a judicial challenge alleges only CEQA violations, providing insight into the relationship between CEQA and the Coastal Act. Moreover, this decision also addresses the extent to which the Commission’s standard of review is de novo.

Background:

Real party-in-interest Hany Dimitry applied to the City of Laguna Beach (“City”) for a CDP to demolish a decrepit 1930s-era residence on his property. Dimitry’s neighbor, Mark Fudge, opposed the CDP application, alleging the existing structure had historical significance and that any replacement would negatively impact view corridors. Dimitry was successful in obtaining CDP approval from the City Council. Not to be deterred, Fudge then took a two-step opposition approach by appealing the CDP to the Commission in June 2017 and, a month later, filing a petition for writ of mandate in superior court alleging City had also violated CEQA.

Coastal Act section 30621(a) requires that appeals of CDP determinations be reviewed de novo by the Commission. In August 2017, the Commission accepted the appeal, finding that the City’s approval of the CDP raised substantial issues concerning the CDP’s compliance with both the Coastal Act and the City’s own local coastal program (“LCP”). While the Commission’s ultimate determination on the merits of the appeal was still pending, the trial court dismissed the CEQA action as moot. Relying on two appellate decisions, Kaczorowski v. Mendocino County Bd. of Supervisors (2001) 88 Cal.App.4th 564 and McAllister v. County of Monterey (2007) 147 Cal.App.4th 253, the trial court held that the Commission’s review of a CDP under the authority of the Coastal Act is the “functional equivalent” of the final step in the CEQA administrative process, and, therefore, concluded there was no relief available to petitioner Fudge in the CEQA action. In short, an applicant’s CEQA claims in cases where a CDP has been appealed are not ripe for judicial review until the Commission has made a final determination on the appeal.

Fudge appealed the ruling, arguing the Commission’s review would not be truly de novo, as required by Coastal Act section 30621(a). Instead, he reasoned his CEQA claims were ripe for judicial review because the Commission’s hearing on the appeal would not be a true de novo proceeding. Under 1937 California Supreme Court precedent, set in Collier & Wallis, Ltd. v. Astor (1937) 9 Cal.2d 202 (“Collier”), a de novo hearing must be in the form of a trial “in the same manner” as the underlying proceeding. Fudge argued it was inequitable for the Commission to review issuance of the CDP for compliance with the Coastal Act, when the City had followed different procedures to comply with CEQA when originally issuing the CDP. Because the Commission’s decision on the CDP appeal would fall short of nullifying the entirety of the City’s CDP approval, i.e., compliance with CEQA, Fudge reasoned he was entitled to challenge that part of the City’s decision in court while his CDP appeal was pending.

Holding:

In affirming the trial court’s decision, the Court of Appeal determined that, when it comes to a local agency’s decision on a CDP, the state Legislature is not bound by Collier’s finding regarding the common law nature of de novo hearings.  “Fudge’s mistake lies in his belief the Legislature was bound by the Collier court’s observation about de novo hearings being conducted in ‘the same manner’ as the original. We must disagree. It’s the other way around.”  The court noted that, as plainly expressed in Public Resources Code section 21080.5,[1] the Legislature constructed a system in which appeals to the Commission would be heard de novo under the Coastal Act even though the original decision included determinations under CEQA.

The court also cited Buchwald v. Katz (1972) 8 Cal.3d 493, which omitted the requirement that a de novo review be conducted “in the same manner” as the underlying proceeding while still maintaining the principle that de novo review nullifies the lower agency’s decision. Additionally, the court relied on the fact the Legislature passed the Coastal Act four years after the Buchwald decision. Given this, the court reasoned that the subsequently enacted Section 30621, providing for the Commission’s de novo review, expresses the Legislature’s intent that Commission review should supersede a local agency’s decision even if the proceedings were not conducted “in the same manner.”

As the court explained, the Coastal Act delegates permitting authority to local agencies tasked with implementing the Coastal Act via an LCP, like the City. This authority is expressly subject to appeals to the Commission, which must be accepted unless there is no substantial issue with Coastal Act and LCP compliance.  While there is not an “exact fit” between CEQA procedures a local agency must abide by during the administrative permitting process and Commission appeal procedures, the Legislature provided for such inter-agency appeals, and, more specifically, CEQA expressly recognizes that under Public Resources Code section 21174 the Coastal Act takes precedence over CEQA in the event of inconsistency.

The court further observed that Coastal Act section 30625’s provision of an appeal of CDP decisions to the Commission affords an administrative remedy, and the general doctrine of exhaustion of administrative remedies was applicable.

In a somewhat ironic twist, during the pendency of this litigation, the Commission approved Dimitry’s request to demolish his house. The City then issued the relevant permits to allow the demolition, and the house was subsequently razed.

[1] Public Resource Code section 21080.5 allows (a) the state Secretary of Resources to certify the regulatory program, such as occurred with the Commission in 1979, of a state agency requiring submission of environmental information, and (b) such information to be submitted in lieu of an environmental impact report that might otherwise be required by CEQA.