Litigation abuse is all too familiar to those engaged in the herculean task of getting new development approved in California. See, for instance, Jennifer Hernandez’s 2022 report for the Center for Jobs & the Economy, titled “Anti-Housing CEQA Lawsuits Filed in 2020 Challenge Nearly 50% of California’s 100,000 Annual Housing Production” and blogged on here. Or a 2022 case out of the First District, Tiburon Open Space Committee v. County of Marin (2022) 78 Cal.App.5th 700 (blogged on here), in which the court lamented the fact that CEQA can “be manipulated to be a formidable tool of obstruction” and concluded with the rather dire observation that “[s]omething is very wrong with this picture.”
With the Legislature seemingly incapable of undertaking significant CEQA reform (see Art Coon’s thoughts on the topic here – still relevant and trenchant seven years later), it is perhaps not surprising that some frustrated parties have sought recourse in the courts. In 2019 a developer in Los Angeles filed a federal action under RICO, the Racketeer Influenced and Corrupt Organizations Act (18 U.S.C. § 1962 et seq.), against parties it alleged had filed multiple CEQA lawsuits against its projects with no other aim but extortion. That lawsuit was the subject of a previous blog post here. Five years later, the glimmer of hope for a federal court remedy that suit offered has been mostly extinguished by the Ninth Circuit in an opinion filed last month, Relevant Group, LLC v. Nourmand (9th Cir. 2024) — F.4th —-. In light of that decision, the dream of holding bad faith CEQA petitioners to account remains only that, at least for now.
Factual and Procedural Background Leading to the Court’s Opinion
For a detailed recitation of the allegations in the litigation, see our prior summary here. To put it succinctly, a developer in Los Angeles alleged that a litigant who had challenged four of its projects under CEQA had done so for improper purposes, in effect using CEQA to extort settlement payments rather than provide any actual environmental review or protection. Amongst the allegations were that one defendant had said to the plaintiff, “You know the drill. It’s going to take a check to make this go away.” (Slip opn., p. 29.) The original complaint included an allegation that the plaintiff had in fact had to cut such a check to the tune of $5.5 million.
At the time the lawsuit was filed, two of the CEQA cases had been settled (presumably for the aforementioned $5.5 million), one was resolved with the project back before the public agency, and the other had been dismissed at the administrative stage when the defendant learned the plaintiff was no longer involved in the project. That only four cases were at issue in the case turned out to be a crucial point for the analysis as will be addressed below.
The case came before the Ninth Circuit after a somewhat convoluted history in the district court below, where one judge had denied the defendants’ motions to dismiss and for summary judgment, whereas a new judge sua sponte revisited the summary judgment issue and granted it for the defendants. The plaintiff then appealed.
The fundamental hurdle that the plaintiff had to overcome was that its lawsuit was based on the defendants’ petitioning activities, which are protected under the First Amendment to the Constitution as recognized under the so-called “Noerr-Pennington doctrine.” “The Noerr-Pennington doctrine ‘is a rule of statutory construction that requires courts to construe statutes to avoid burdening conduct that implicates the protections of the Petition Clause of the First Amendment.’” (Slip opn., p. 14, quoting United States v. Koziol (9th Cir. 2021) 993 F.3d 1160, 1171.) Under Noerr-Pennington, those who engage in petitioning conduct (i.e., filing lawsuits) are subject to a broad immunity from statutory liability (including, as in this case, liability under RICO) for that conduct. It was this immunity that formed the basis of the trial court’s grant of summary judgment to the defendants.
There is an exception to the Noerr-Pennington doctrine for “sham” litigation. There are three types of sham litigation to which the doctrine does not apply: “first, where the lawsuit is objectively baseless and the defendant’s motive in bringing it was unlawful” (known as the “PREI framework”); “second, where the conduct involves a series of lawsuits ‘brought pursuant to a policy of starting legal proceedings without regard to the merits’ and for an unlawful purpose” (known as the “POSCO framework”); “and third, if the allegedly unlawful conduct ‘consists of making intentional misrepresentations to the court, litigation can be deemed a sham if “a party’s knowing fraud upon, or its intentional misrepresentations to, the court deprive the litigation of its legitimacy.”’” (Slip opn., p. 15, quoting USS–POSCO Indus. v. Contra Costa Cnty Bldg. & Constr. Trades Council (9th Cir. 1994) 31 F.3d 800, 810–11 & Sosa v. DIRECTV, Inc. (9th Cir. 2006) 437 F.3d 923, 930.)
The heart of the Ninth Circuit’s analysis was whether the PREI or POSCO framework applied. The plaintiff argued that its claims fell within the POSCO framework because it could impose liability where the defendant acted without regard to the merits of the litigation it filed – i.e., the case could have some quantum of merit and still allow for RICO liability. PREI, on the other hand, required the defendants’ prior litigation to have been “objectively baseless,” a much harder standard to meet, particularly in the case of CEQA.
The Ninth Circuit concluded that the PREI framework applied. The POSCO framework had arisen in a case where the defendants had filed twenty-nine lawsuits, whereas the Ninth Circuit had previously recognized that PREI applied to single suits “or a small number of such suits.” (Slip opn., p. 18, quoting Freeman v. Lasky, Haas & Cohler (9th Cir. 2005) 410 F.3d 1180, 1184.) Because only four lawsuits were at issue in the case, the court held that the PREI framework determined whether the defendants’ CEQA suits could be construed as sham litigation. While the plaintiff argued that the underlying administrative processes and appeals could be considered separate actions for purposes of the POSCO framework, the court concluded that only lawsuits count as “proceedings” under that analysis.
Because the PREI framework applied, the court turned to the question of whether the defendants’ lawsuits were “objectively baseless.” Under CEQA’s very liberal standards, they were not. The fact that the plaintiff had settled two of the cases showed that they were not objectively baseless, particularly insofar as they included project mitigation and modification features. The defendants had prevailed in state court in one of the other CEQA cases, and the court affirmed the trial court’s finding that the last challenge was not objectively baseless. Because the plaintiff could not satisfy the first prong of the PREI framework, its complaint was subject to dismissal under Noerr-Pennington, and the Ninth Circuit affirmed the judgment accordingly.
Conclusion and Takeaways
As regular readers of this blog will necessarily understand, the combination of the breadth of CEQA’s scope along with the narrow nooks and crannies of its procedural and substantive requirements makes it easy to bring CEQA claims that are at least colorable. As the Ninth Circuit noted, “CEQA creates a ‘low threshold’ for success.” (Slip opn., p. 28, quoting Georgetown Pres. Society v. County of El Dorado (2018) 30 Cal.App.5th 358, 371.) The ordinary protections for patently meritless or abusive litigation – abuse of process, malicious prosecution, etc. – are thus of extremely limited utility in the context of a CEQA case as extant case law demonstrates. (See, e.g., Oren Royal Oaks Venture v. Greenberg, Bernhard, Weiss & Karma, Inc. (1986) 42 Cal.3d 1157; Asia Investment Co. v. Borowski (1982) 133 Cal.App.3d 832.) There are, of course, exceptions (see, for instance, our post on a case permitting a malicious prosecution action to proceed against a noted CEQA petitioner attorney here, but their rarity tends to prove the rule.
Which brings us back to the chimera of CEQA reform. The Ninth Circuit panel explicitly noted that the plaintiff’s real remedy is with the California Legislature, not the courts: “But if Relevant is concerned about the CEQA process being abused (as many persons and entities have claimed has occurred since its enactment), its recourse is to bring this to the attention of the state legislature and the governor, not to try to squash the process altogether in federal court.” (Slip opn., p. 28.) The truth of that statement glosses over the near-impossibility of that task, at least for the foreseeable future. In other words, to paraphrase a popular slogan of unknown origin, the CEQA litigation will continue until morale improves.
