Firms turning to environmental law to combat rivals
To halt a competing project near USC, Conquest Student Housing turned to a legal weapon that one of its co-owners allegedly compared to a crude bomb: cheap and destructive.
Conquest owned 17 buildings that rented to USC students. When the developer Urban Partners proposed erecting a new complex to house 1,600 students, Conquest sued under California’s landmark environmental law.
It then filed similar challenges to unrelated Urban Partners projects elsewhere in the state. Conquest withdrew its challenges only after Urban Partners filed a federal racketeering lawsuit.
The legal tussle was possible because California is one of three states that require private projects to comply with its own environmental law. That measure, the California Environmental Quality Act, is credited with helping preserve swaths of the Sierra Nevada, Mojave Desert and coastline. But as state politicians scramble to assure voters they are trying to create jobs, they have turned on the 40-year-old law and the cottage industry of litigation it has spawned.
“These are the laws that allow a solo bird-watcher to protect an endangered animal, but they’re being used by a sophisticated real estate entity to kneecap the competition,” said Dan Rosenfeld, the principal at Urban Partners who handled the University Gateway development.
The law requires project developers to go through a lengthy, public process detailing environmental effects and how they will be mitigated. The findings can be challenged in court by virtually any local party.
Though there are other ways to derail projects through litigation, CEQA challenges have become notorious. In September, Gov. Jerry Brown signed a law to allow a football stadium proposed for downtown Los Angeles to avoid drawn-out CEQA litigation. He signed a second bill that would allow an unspecified number of other major projects to gain the same treatment. With less fanfare, he signed a bill last month that would ease the requirements for some urban projects that otherwise meet planning standards.
At a ceremony in downtown Los Angeles for the stadium bill, Brown, who as mayor of Oakland unsuccessfully tried to get that city’s downtown exempted from CEQA, thundered: “There are too many damn regulations.”
Environmental groups, which argue that the law has been a net benefit to California’s economy, are alarmed by the drift. “People in Sacramento, the elected — at least most of them — have bought into the meme that CEQA is a job killer,” said David Pettit, a senior attorney with the Natural Resources Defense Council. “We are going to see more inroads on CEQA.”
Business groups, which have yearned for decades to revise the law, are pessimistic. They argue that modifications to CEQA have been too narrow. Democrats who control the Legislature are unlikely to move more aggressively because they are too beholden to environmental groups and unions, which sometimes use CEQA for leverage in contract fights, business leaders contend.
Allan Zaremberg, president of the California Chamber of Commerce, said the exceptions so far seem to benefit only politically connected players such as Anschutz Entertainment Group, which is developing the Los Angeles stadium.
“Some people may say, ‘What do I need to do to be a part of that?’” Zaremberg said. “‘Do I need to be a bigger player in the legislative process?’”
Brown’s administration is drafting rules that would determine which projects could qualify for fast-tracked review.
“We’re making a genuine attempt to get CEQA more streamlined,” said Ken Alex, director of the governor’s Office of Planning and Research.
CEQA dates from 1970, when then-Gov. Ronald Reagan signed a law creating a process of public review and environmental mitigation for all state-funded projects. The law’s application was significantly broadened after activists sued under CEQA to block a privately funded condominium project in the Sierra. The California Supreme Court’s ruling in 1972 that CEQA applied to private projects that required action by a public body — like a zoning change or a variance — was later codified by the Legislature.
Other states followed California’s lead in drafting state environmental laws. But only New York and Washington extended the their laws’ reach to private development, and Washington’s is far less stringent, said Daniel R. Mandelker, a law professor at Washington University in St. Louis.
In the ensuing decades, CEQA lawsuits have been used to spare houses in South Los Angeles from demolition for the Century Freeway, block a golf course in a canyon full of bighorn sheep near Palm Springs and ensure better traffic mitigation at the Hollywood and Highland project. It also has become a weapon in battles between rival developers or builders and labor unions.
In Glendale, the owners of the Glendale Galleria mall filed a CEQA lawsuit against a proposed new mall, losing the litigation but delaying the project by several months. In Sacramento, a union trying to organize workers at Sutter General Hospital filed a CEQA lawsuit to hamstring the hospital’s $500-million expansion. One coalition of labor groups that advocates for environmental improvements in projects has drawn criticism because it also seeks agreements that developers employ union members.
Less than 1% of all projects in the state face CEQA lawsuits, according to the Public Policy Institute of California, but developers say they spend millions “bulletproofing” their environmental documents to fend off a challenge.
“The assertion of environmental claims for economically motivated reasons is a big part of CEQA practice,” said Michael Zischke, a San Francisco land use attorney.
Environmental advocates say the focus on why groups use CEQA is misplaced. “You shouldn’t really be looking at motivations of petitioners,” said Doug Carstens, an environmental lawyer in Santa Monica who often files CEQA complaints. “Even if it’s a solely economically motivated actor, if they’re promoting transparency, good government, why not?”
Carstens said he thinks CEQA was a boon for California’s economy. “Who wants to come to a state where the beaches are degraded and the traffic is gridlocked?” he said. “Do we want a race to the bottom? Do we want to become like one of those other states people run away from when they’re coming to California?”
Rosenfeld, who left Urban Partners to work for Los Angeles County Supervisor Mark Ridley-Thomas, agrees that good environmental laws are good for business and development. But his experience working on the University Gateway project convinced him that CEQA litigation should be reined in.
Conquest challenged the Gateway project, contending it did not include enough parking spots. It then began to challenge other Urban Partnership projects in downtown Los Angeles, Sun Valley and Glendale. It also sued to stop a project in a Seattle suburb under Washington’s less stringent CEQA-style law.
In papers filed with the racketeering lawsuit, Urban Partners alleged that a Conquest official warned another competitor that “we should think of him and Conquest like ‘Al Qaeda,’ adding that it does not cost a lot to build a ‘bomb’ and cause extensive damage to a development project, and that it only takes a single person to cause serious harm to real estate projects using CEQA.”
Conquest officials did not return a call for comment or respond to multiple emails. Jack Rubens, the Los Angeles attorney who handled only the initial complaint against the Gateway project for Conquest, said: “We had very solid grounds for filing that lawsuit.”
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