The City of Los Angeles had no obligation under the California Environmental Quality Act to complete an environmental impact report for a project that it had rejected, the Second District Court of Appeal has ruled.
The court dismissed all arguments put forward by the developer of the 555-acre Las Lomas project at the junction of Interstate 5 and Highway 14. "[I]f an agency at any time decides not to proceed with a project," the court said, "CEQA is inapplicable from that time forward."
Six years ago, developer Dan Palmer Jr. proposed 5,800 residential units, 2.3 million square feet of office space, retail space, community facilities and a hotel on the site in unincorporated Los Angeles County. About half the site would remain undeveloped. Palmer filed a preliminary application, specific plan and other entitlements with the City of Los Angeles to annex the county property. The adjacent City of Santa Clarita also tried to gain control of the site (see CP&DR Local Watch, January 2004), but Los Angeles had the advantage of already being in the process of expanding its sphere of influence in the area. In late 2006, the Los Angeles Local Agency Formation Commission approved Los Angeles' quest to include a portion of the Las Lomas site in the city's sphere – an early step toward annexation.
A year later, Palmer signed a contract with Los Angeles to pre-pay the city's expected expenses for reviewing the project's EIR and associated applications. The developer followed up with a "master land-use permit application" for a slightly scaled down and retooled project. In December 2007, the city's Planning Department notified Palmer that his application was incomplete because it was missing the EIR. (In Los Angeles, project proponents typically prepare environmental documents for review by the city.)
Throughout, Councilman Greig Smith questioned the project. Although city attorneys said the city was legally required to process the Las Lomas EIR and specific plan, Smith presented a resolution ordering the city to cease work on the application and EIR and to return all  materials to Palmer. The City Council approved the resolution by a 10-5 vote in March 2008.
Palmer's Las Lomas Land Company, LLC, which reportedly had spent millions of dollars on planning and environmental analysis, sued the city. Las Lomas contended the city had a duty under CEQA to complete the environmental review. The company further argued that the city's midstream rejection of the project violated due process and equal protection provisions in the United States and California constitutions. The company asked the court to order the city to complete the EIR and pay more than $100 million in damages. Los Angeles County Superior Court Judge David Yaffe dismissed all the claims in January of this year.
On appeal, Las Lomas contended that a section of CEQA – Public Resources Code § 21061 – requires a public agency to complete and certify an EIR before approving or rejecting a project. The company also cited CEQA Guidelines § 15270, which permits a city to reject quickly a project based on a preliminary screening without an environmental review, but which is silent on midstream project denials.
The court ruled that neither the statute nor the guidelines required Los Angeles to complete the Las Lomas EIR before denying the application.
"CEQA applies only to projects that a public agency proposes to carry out or approve, and does not apply to projects that the agency rejects or disapproves," Justice Walter Croskey wrote for the court. "A public agency need not prepare an EIR for a project that it rejects.
"To require a public agency to prepare and circulate a draft EIR, and prepare a final EIR including responses to comments, before rejecting a project would impose a substantial burden on the agency, other agencies, organizations, and individuals commenting on the proposal, and the project applicant," Croskey continued, "Such a requirement would not produce an discernible environmental benefit and would not further the goal of environmental protection."
On the constitutional issues, the court stated that due process applies only when a landowner "has a legitimate claim of entitlement to the approval." Wrote Croskey, "The city's decisions whether to seek to annex the site, enter into a development agreement, and adopt the proposed specific plan were discretionary decisions. Las Lomas can assert no claim of entitlement to the annexation, development agreement, specific plan, and development entitlements that it seeks. The city's denial of those benefits and decision not to proceed with the project therefore was not a deprivation of property for purposes of procedural due process under the Fourteenth Amendment."
In addition, the court ruled that the state's due process protection extends only to "property interests or benefits that are conferred by statute." Because the city had no mandatory duty under CEQA,  Las Lomas's argument failed.
The court weighed the equal protection claims using the "rational basis test," which, the court acknowledged, "is extremely deferential and does not allow inquiry into the wisdom of government action." In denying the claims, the court stated, "There are numerous conceivable legitimate reasons why the city would choose not to expand its boundaries and facilitate growth in this particular area at the time."
Finally, the Third District refused to let Las Lomas amend its lawsuit based on different legal theories.

The Case:
Las Lomas Land Co., LLC v. City of Los Angeles, No. B213637. 2009 DJDAR 13813. Filed September 17, 2009.
The Lawyers:
For Las Lomas: Carlyle Hall Jr., Akin, Gump, Strauss Hauer & Feld, (310) 728-3242.
For the city: Amrit Kulkarni, Meyers, Nave, Riback, Silver & Wilson, (510) 808-2000.