Security National Guaranty, Inc. v. California Coastal Commission (January 25, 2008, A114647)  ___ Cal. App.4th ___

The First Appellate District held that the California Coastal Commission does not have the authority to designate property an "environmentally sensitive habitat area" (ESHA) where a certified Local Coastal Program (LCP) is in place, and the LCP has neither designated the property as an ESHA, nor contains language anticipating later designation of the property as an ESHA through administrative action.  The decision stands to protect developers and local governments by recognizing the LCP as a bulwark against the uncertainty created by potential ESHA determinations rendered by the Coastal Commission in the appeals process.

In the case, the Coastal Commission had, on appeal, denied a CDP for a mixed-use development on oceanfront property, citing both a failure to meet LCP requirements regarding water supply and that the project site was an ESHA. The developer filed a petition for writ of administrative mandamus, as well as claims for inverse condemnation, breach of contract, and estoppel.  The breach of contract and estoppel claims involved a Memorandum of Understanding signed by the City, the Redevelopment Agency, the Monterey Peninsula Regional Park District, and the State Department of Parks and Recreations.  Both the trial court and the First Appellate District quickly disposed of these two claims, pointing out that the Coastal Commission had not been a party to the Memorandum of Understanding, and therefore could not be bound by the contract.  The stickier question was whether the Coastal Commission had exceeded its authority in denying the coastal development permit by declaring that the project site was an ESHA.  The First Appellate District noted that the trial court had largely ducked the issue by focusing on the water supply aspect of the analysis in holding for the Coastal Commission, but in reversing the trial court, the First Appellate District focused squarely on the Coastal Commission’s ESHA designation.

The court first looked past Coastal Commission’s argument that the developer had not exhausted its remedies.  The Coastal Commission had argued that there was no "final" decision on how much, if anything, the developer could build, and therefore the court should not review the claim.  The court believed this argument missed the point entirely; the Coastal Commission had made a "final" decision regarding the ESHA designation.

The court then turned to the Coastal Act and the scope of review powers granted to the Coastal Commission after a local coastal program had been certified.  Citing to the Coastal Act, the court confirmed that the LCP stands as the standard of review in Coastal Commission appeals, and that the developer was "entitled to have its development proposal judged by the standards of the certified LCP in effect at the time of its application."  By designating the project site an ESHA "the Commission imposed additional standards not found in Sand City’s LCP."  Such a designation would constitute an "amendment" to the LCP, which is a power reserved to local governments.  The court pointed to a specific provision in the City’s LCP, which had expressly stated there were no ESHAs in the area seaward of Highway 1 where the project was located.  In pointing to this provision, the court underlined a critical distinction: the language of the LCP at issue in the case had left no room to argue that future ESHA determinations over the property were left outstanding.

Thus, Security National Guaranty is distinguishable from two recent decisions from the Second District Court of Appeal, LT-WR, L.L.C. v. California Coastal Commission (2007) 152 Cal.App.4th 770 and Douda v. California Coastal Commission (February 6, 2008, B188210) ___ Cal.App.4th ___.  In these cases, the court allowed the Commission to designate portions of the properties as ESHAs, despite the presence of a Commission-certified land use plan (one necessary part of an LCP) that did not designate any ESHAs on the properties.  The courts allowed the Commission to proceed because there was no certified LCP covering the properties that barred future designation of ESHAs, and the certified land use plan for the properties provided for the additional designation of ESHAs in unspecified areas through a biotic review process or other means.

It appears the lessons of this series of cases are: (1) the Commission retains broad authority to designate and regulate impacts to ESHAs, limited only through certified LCPs; (2) to avoid the uncertainty of potential future ESHA designations within their boundaries, local jurisdictions should seek certified LCPs whenever possible; and (3) the regulated community should work with local jurisdictions to craft LCPs that permit future ESHA designation only by amendment to the LCP, rather than through administrative procedures.

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