Daily Development for Friday, November 18, 2005 by: Patrick A. Randolph, Jr. Elmer F. Pierson Professor of Law UMKC School of Law Of Counsel: Blackwell Sanders Peper Martin Kansas City, Missouri dirt@umkc.edu ENVIRONMENTAL LAW; ENVIRONMENTAL IMPACT; RETAIL DEVELOPMENT: California courts wrestle with question of environmental impact of supercenter. Maintain Our Desert Environment v. Town of Apple Valley, 124 Cal. App. 4th 430, 15 Cal. Rptr. 3d 322 (2004); Bakersfield Citizens for Local Control v. City of Bakersfield, 22 Cal. Rptr. 3d 203 (Cal. App. 2004) As some readers are aware, a major political battle is being waged in some parts of America between Wal Mart and a group of political interests, including community activists and union groups, who are hostile to Wal Mart essentially because its business practices have been so effective that they have had massive social consequences. The motives for the "antis" range from traffic concerns and other environmental impacts to concerns about wages and benefits, impact on competing stores and, for that matter competing development, contribution to urban sprawl when Wal Mart abandons a location and no other retailer can afford to occupy the deserted space, etc. etc. California has one of the most involved land use processes in the nation, with a requirement for an elaborate environmental impact report layered upon any major land use decision. Recently, the "antis" have attempted to use the environmental impact report process to delay or otherwise hinder Wal Mart from locating facilities in various California neighborhoods. The two above cited cases are the latest appellate reports stemming from this continuing gunfight. The first case, Maintain Our Desert Environment (yes - the felicitously named Apple Valley is indeed a desert community), dealt with a land use request to construct a 1.2 million square foot distribution center. The local planning authorities identified the project as having potentially significant environmental impact, commissioned a study and a report and, when all was said and done, approved the project after considering the report. Shortly thereafter, plaintiffs, joined by the California Attorney General, sued to set aside the approval because the environmental report was flawed in that it did not identify that the likely user of the distribution center was Wal Mart. The issue was joined as to whether the identity of a tenant of such a distribution center was a central factor to be considered in the preparation of an environmental impact statement. The plaintiff argued that Wal Mart's identity should have been disclosed in the report and in notices concerning the hearing on the report. The city concluded that this was not required, and the court of appeals here agreed. "So long as the proct is approved, [the California Environmental Quality Act] has no concern about who uses it. If CEQA compliance required the identification of the project end user, a new EIR would need to be considered every time property was sold or a different tenant moved into a building, regardless of the use to which the property was to be put." The plaintiffs argued that, by disguising the identity of Wal Mart, many avid opponents of Wal Mart projects were not given the opportunity to protest at the hearings. But the court concluded that any basis for opposing the project related to the fact that Wal Mart was a tenant would entirely speculative and inadmissable in court. "The crux of the issue is that the project itself, and therefore its environmental impact, is identical regardless of who will operate it. The only possible reasons for the public to object to accepting Wal Mart but not a competitor under these circumstances have noting whatsoever to do with the aims and purposes of CEQA." The court acknowledged that identity of an end user might be relevant if it had an unsatisfactory environmental record elsewhere in the country. But plaintiffs here had not tried to justify their opposition to Wal Mart by reference to Wal Mart's environmental history. The plaintiffs also argued that it might be important to name the end use because the community deserves to know whether the applicant end user will have the wherewithal to deal with environmental issues as they come up. The court ridiculed that notion, pointing out that land use decisions ought not to be made on the basis of relative wealth. The sweep of the Maintain Our Desert Environment case is limited somewhat by the Bakersfield case, decided a few months later. Bakersfield made plain that, whatever might be the case with a distribution center, it certainly is appropriate to identify the end user of a project if the proposal is for a "supercenter." The court defined a "supercenter" as the combination of a traditional Wal Mart discount store with a full-size grocery store. The opinion is somewhat vague as to whether a "supercenter" in the view of the court is always a Wal Mart, or whether some other operator could be viewed as a "supercenter" operator if it combined discount and grocery operations. Although the court was very careful to indicate that the economic battles Wal Mart has with unions is not relevant to the environmental impacts addressed in an EIR, it concludes that other impacts considerations of the impact of a "supercenter" store operation make it vital that the EIR identify the proposed o! perato rs of the center. California courts ought not to approve EIR's for shopping centers with "stealth" supercenter. In Bakersfield, there were proposals for two regional shopping centers, only about 3.6 miles apart. One developer did list the future tenants, including a Wal Mart supercenter, the other did not identify any tenants, stating that no tenants had as yet been selected. In fact the developers of the other center also were negotiating with Wal Mart to locate a supercenter there. (Two such centers 3.6 miles apart??? Golly.) The planning authorities concluded that both proposed projects posed a risk of significant adverse environmental impacts, and ordered EIRs. Both EIR's identified significant adverse impacts, but the agencies found the impacts to be within an acceptable range and approved each project. Opponents then challenged both EIR's in court, seeking an injunction halting construction. By the time of the lawsuit, the fact that Wal Mart had a supercenter going into both locations was known, and the court found the EIR's deficient in that one did not identify the Wal Mart proposal and that neither took into account the impact of a combination of two supercenters so close together, which the court suggested could contribute to "urban decay." This decay would result, the court concluded, both from the closing of a nearby Wal Mart to be replaced by a supercenter and the impact on other "general retail businesses" in the area. The court decertified the EIR's. It refused to enjoy all con! struct ion on the two regional shopping centers, but did enjoin construction of the supercenters at both locations. The appeals court started off the discussion with a general disclaimer, which strikes the editor as somewhat unusual for a court at this level, so he has quoted it below: "At the outset, it is necessary to explicitly reject certain philosophical and sociological beliefs that some of the parties have vigorously expressed. For the record, we do not endorse BCLC's elitist premise that so-called "big box" retailers are undesirable in a community and are inherently inferior to smaller merchants, nor do we affirm its view that Wal-Mart, Inc. (Wal-Mart), is a destructive force that threatens the viability of local communities. Wal-Mart is not a named party in these actions and we rebuff [plaintiff's] transparent attempt to demonize this corporation. We do not know whether Wal-Mart's entry into a geographic region or expansion of operations within a region is desirable for local communities. Similarly, we do not know whether Wal-Mart is a "good" or a "bad" employer. We offer no comment on Wal-Mart's alleged miserly compensation and benefit package because [plaintiff] did not link the asserted low wages and absence of affordable health insurance cover! age to direct or indirect adverse environmental consequences. Likewise, we will not dignify with extended comment [defendant's] complaint that [plaintiff] is just a "front" for a grocery worker's union whose disgruntled members feel threatened by nonunionized Wal-Mart's entry into the grocery business. As will be explained, [plaintiff] has standing to pursue this litigation and it exhausted its administrative remedies. This is sufficient. We do not know whether Wal-Mart adversely affects the strength of organized labor and we have not considered this question. In sum, we have no underlying ideological agenda and have strictly adhered to the accepted principle that the judicial system has a narrow role in land use battles that are fought through CEQA actions. "The only role for this court in reviewing an EIR is to ensure that the public and responsible officials are adequately informed ' "of the environmental consequences of their decisions before they are made." ' " We then come to the elaborate tap dance by which the court, having denied an interest in Wal Mart's economic and social impacts, then reached the conclusion that indeed economic such issues are environmental issues and need to be evaluated. The court first states that the EIR process requires the identification of "both primary (direct) and 'reasonably foreseeable' secondary (indirect) consequences be considered in determining the significance of a project's environmental effect." Further, the court noted that state guidelines for the CEQA state that "the economic or social effects of proposed projects are outside the Act's purview." But then the court winds round again: "[I]f the forecasted economic or social effects of a proposed project directly or indirectly will lead to adverse physical changes in the environment, then CEQA requires disclosure and analysis of these resulting physical impacts." The court cited prior California cases, included some of its own decisions, supporting the conclusion that closure of competing businesses as a consequence of competition from a new business brought in by a real estate development project was an "adverse environmental" effect, at least if the competing businesses were not likely to be replaced by other businesses. The only interruption in the steady drumbeat of cases moving toward judicial economic policy making through EIR's was a case in which a court refused to require analysis of the impact of a Border's book store on existing local bookstores, since it appeared that if the local bookstores closed down, other retail businesses could take their place. The planning agencies, of course, had taken into account the question of whether the proposed new centers would lead to "environmental impacts," including "urban decay," and concluded that it should approve the projects anyway. But the court states that the studies did not give reasons for those conclusions, and did not specifically address the combined impact of the two new shopping centers so close together. Further, of course, the studies did not address the impact of two Wal Mart supercenters because one of the reports didn't identify Wal Mart or even the existence of a second supercenter. In the final analysis, the court really didn't even need the existence of the supercenters. It concluded that the EIR analysis was indequate because the discussion of urban decay did not specifically address a number of issues raised by the opponents of the projects - relating both to business closures and the shut down of old Wal Mart facilities, which rarely are repopulated by other businesses. "The responses in the EIR's to these and other comments do not meaningfully address the issue of urban decay. [One of the EIR's] states that vacant buildings 'are part of the evolutionary change of the retail environment.' It then asserts that further analysis is outside th scope of CEQA because economic and social effects are not considered environmental effects under CEQA. . . . [The other report] is similarly incomplete. Ignoring the question of urban decay or deterioration, it simply replies that 'blight' is a legal term that does not apply. It also asserts that vacancy rates and business closures are purely economic impacts and therefore outside of CEQA. Finally, it states that a survey of vacant buildings ad been prepared and this survey demonstrated that 'retailers entering or leaving the market, relocations, re-leasing to new tenants or conversions to other uses is a normal part of a dynamic market." The court gets increasingly critical of the EIR process as the opinion goes on. In response to the report's conclusion that the old Wal Mart space "can" be relet to other tenants, the court states that this is not a statement that the space "will" be relet. In the end, although the court stated that "we do not quarrel" with the Apple Valley decision, indeed it is difficult to see how this court would have reached the same result, even had the case not involved a retail operator. The kinds of analysis used in this case could certainly have been mustered in opposition to a Wal Mart operation in Apple Valley had the fact of Wal Mart's identity been known. A great deal of the evidence analyzed here is extremely specific anecdotal accounts of Wal Mart's massive impact nationwide. It is virtually a revesal of Charley Brown's old statement about General Motors. Here, the opponents are pretty much saying that Wal Mart is too big and too powerful and "what's good for Wal Mart is bad for America." The court then moved away from specific economic analysis and began talking about air and water quality impacts of the two major projects. In the end, in a few paragraphs, it bolstered its anti-Wal Mart decision with other broader conclusions supporting the decertification of the reports, so that it really is difficult to know what role the Wal Mart discussion had in that decertification at all, a tactic which certainly will influence the ability of the defendants to appeal, and will leave in the books the extensive discussion of why EIR's have to be economic planning documents. Upon remand, the defendants pay all the legal costs (of course) and the reports are to be decertified, and the trial court must evaluate whether to enjoy all construction *and retail operations* at both centers pending the final preparation of the report. Comment 1: For decades in California, environmental interests have played the "paper game" against targeted projects" with great success. With a cooperative court, and the vast array of available environmental commentators and experts, it is no great feat to muster a case that any given environmental analysis failed to adequately account for why this or that impact was not fully considered. Note that, once everything is in fact fully considered, the public agency most often would be permitted to go ahead with the project anyway, as it did here. But the environmental interests never have to reach the point of challenging the validity of the public decision - where they'd likely lose. Instead, they simply have to show that the process of decision was flawed because the report was flawed. It is not an adequate answer that the public agency wouldn't give a damn anyway. It has to jump through the hoops. Courts have been quite willing - given the proper cause - to contin! ue to erect hoops, and, incidentally - to impose all the costs of the hoop building directly on the proponents. California has had a booming real estate economy for all this time, and apparently has been able to sustain the wealth redistribution resulting from this process. There is some question as to whether this can continue. Comment 2: One can make an argument that the environmental "externalities" of land use decisions often are lost on public officials who are looking at positive economic and social benefits to their community presented by a new development project, and thus a rationale exists for requiring such officials to study hard a careful scientific analysis of these impacts before opting for the "quick buck." But can the same policy analysis support the expansion of the EIR process into economic and social issues themselves? Here, one would assume that elected officials in fact are fully focussed on these issues, both written and unwritten, proven and hypothetical, and have made the proper balance. Is there the same argument for empowering project opponents with the enormously powerful delaying tool that CEQA provides to those with more traditional environmental concerns? One suspects that the California legislature ultimately will have to evaluate this question anew, and give the courts clearer instruction as to the proper scope of these reports, because it is clear that current courts are running a long way with the ball the legislature has handed to them. Comment 3: Of course, it can always be argued that local officials are stupid blundering chamber of commerce types who respond only to economic and political power considerations and have far less judgment as to the economic and social issues presented by new development than that possessed by nonprofit "public interest" groups and their lawyers and financial supporters. If this is the case, however, is the remedy for such a state of affairs lie with the legislature or the courts. Or does it lie with the people? If elected officials make corrupt or stupid decisions - turn the rascals out!! The fundamental question presented by cases of this type is whether economic or social policy will be made by the courts or the people. The answer is not always as easy as it sounds. Constitutional issues belong to the courts, of course, and environmentalists have managed to raise their agenda virtually to Constitutional status, at least in California. But how big can this bandwagon get? At some point, we must trust our future to our political process, for better or worse. Items reported here and in the ABA publications are for general information purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters. The same is true of all commentary provided by contributors to the DIRT list. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA. 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