Existence and Scope of the Common Interest Privilege Before and After Ceres

Existence and Scope of the Common Interest Privilege Before and After Ceres Wednesday, May 7, 2014 General Session; 1:00 2:45 p.m. Sarah E. Owsowitz, Best Best & Krieger League of California Cities 2014 Spring Conference Renaissance Esmeralda, Indian Wells

Notes: League of California Cities 2014 Spring Conference Renaissance Esmeralda, Indian Wells

California League of Cities : 2014 City Attorney Department Meeting Existence and Scope of the Common Interest Privilege Before and After Ceres Sarah E. Owsowitz Of Counsel, Best Best & Krieger LLP I. INTRODUCTION There has been a lot of discussion in municipal circles about the impact of Citizens for Ceres v. Superior Court (City of Ceres) (2013) 217 Cal.App.4th 889 on the nature of communications between a private project applicant and a city during that city s environmental review of the application in compliance with the California Environmental Quality Act (CEQA) 1. The Ceres decision held, without exception, that preapproval communications between a city attorney and an applicant s attorney can never be subject to common interest privilege and thus withheld from inclusion in a CEQA administrative record. But, while the Ceres decision may lend support to some cities current practices or persuade others to changes their policies regarding city/applicant communications, the decision did not settle the law regarding the use of the common interest privilege by cities and private project applicants to protect communications relating to CEQA review prior to project approvals. Indeed, it often seems as though there are as many variations in the relationship between a city and a private project applicant as there are cities in the State. While CEQA and the Government Code establish parameters regarding what information can be requested by a city when conducting environmental review, what can be disclosed by a city, or even what can be withheld by a city, case law and common practice drive a great deal of the decisions that go into city policies as to how to prepare, consider, retain and process information during the environmental review process. The following overview of how information flows between cities and applicants and how that information can and cannot be used in CEQA litigation provides just a snapshot of the ever-evolving structures governing communications between cities and applicants, concluding with a discussion of whether we stand in a post-ceres world. 1 Public Resources Code 21000 et seq.

II. CEQA REVIEW PROCESS A. What Information May A City Request From An Applicant? 1. Cities have broad authority to request information from Applicants, but there are limitations on what information they may disclose to the public. One reason why project applicants and cities should be particularly concerned about the privileged (or unprivileged) nature of certain communications during the CEQA process is because, when acting as a lead agency for a project, a lead agency may require that a project applicant submit virtually any information the city requests in order to facilitate preparation of the initial study. (CEQA Guidelines 2 15063(e).) Public Resource Code section 21160, provides, in relevant part: Whenever any person applies to any public agency for a lease, permit, license, certificate, or other entitlement for use, the public agency may require that person to submit data and information which may be necessary to enable the public agency to determine whether the proposed project may have a significant effect on the environment or to prepare an environmental impact report The Supreme Court, in Sierra Club v. State Bd. of Forestry (1994) 7 Cal.4th 1215, 1228, construed Public Resources Code section 21160 to provide public agencies with broad authority to demand information the agency believes is necessary to determine whether an impact is significant, even if that information is not required or generally authorized for collection by the agency s rules. Further, if trade secrets are necessary for an agency to conduct environmental review of a project, the applicant must submit such information to the agency. A trade secret generally includes: any formula, plan, pattern, process, tool, mechanism, compound, procedure, production data, or compilation of information which is not patented, which is known only to certain individuals within a commercial concern who are using it to fabricate, produce, or compound an article of trade or a service having commercial value and which gives its user an opportunity to obtain a business advantage over competitors who do not know or use it. 2 California Code of Regulations Title 14, Chapter 3

(Gov. Code 6254.7(d).) However, an agency cannot include the trade secrets in the environmental document it circulates to the public, or otherwise disclose them. (Public Res. Code 21160; CEQA Guideline 15120(d).) B. How May A City Prepare A CEQA Document? The preparation of CEQA documents and supporting studies by outside consultants further muddies the water when considering what communications by applicants about the preparation of a project s environmental review document may or may not be privileged. Although Public Resource Code section 21082(a) requires a lead agency to prepare an environmental impact report (EIR), subsection (b) authorizes a lead agency to include outside information in the EIR. In addition, the Guidelines and the cases interpreting these provisions permit preparation of an EIR by the applicant or the applicants consultant, provided that the document reflects the independent judgment of the agency. (Friends of La Vina v. County of Los Angeles (1991) 232 Cal.App.3d 1446, overturned on other grounds [ The [cases on EIR preparation] consistently confirm that the preparation requirements of CEQA ( 21082.1, 21151) and the Guidelines turn not on some artificial litmus test of who wrote the words, but rather upon whether the agency sufficiently exercised independent judgment over the environmental analysis and exposition that constitute the EIR ].) In Eureka Citizens for Responsible Gov t v. City of Eureka (2007) 147 Cal.App.4th 357, 369 the Court of Appeal again upheld the adequacy of an EIR, even though it was prepared by the project applicant. In that case, the applicant s attorney prepared the initial draft EIR, and that draft was peer-reviewed by city staff, as well as by an independent consultant retained by the city. The Court of Appeal observed that it is common for applicants to prepare EIRs, and held that the city council s finding that the city reviewed and critiqued the document and applied its independent review and judgment to the applicant s work product was supported by substantial evidence. Accordingly, cities may allow an applicant to hire outside experts to prepare environmental studies and to provide those studies to the City. (See, e.g., Schaeffer Land Trust v. San Jose City Council (1989) 215 Cal.App.3d 612, 623; Perley v. Board of Supervisors (1982) 137 Cal.App.3d 424, 429.) The City and County of San Francisco, for instance, has established

pools of qualified consultants with expertise in the preparation of environmental impact, transportation, historical resources, and archeological resources documents. It publishes a list of pre-qualified consultants that applicants may choose from and hire to prepare studies and environmental documents that are then submitted to the City for review. Applicants may also provide expert reports to a city to address concerns raised in comments on an environmental document. (See, e.g., Schenck v. County of Sonoma (2011) 198 Cal.App.4th 949.) Because of the practice of allowing private applicants to prepare draft environmental documents, even assuming the absence of a common interest privilege between applicant and the city, it would seem that applicant communications with the consultant that are intended to shape the environmental review document and/or address questions of legal adequacy may not be considered to be within a city s possession and therefore may not be subject to disclosure under Ceres. C. When Do CEQA Documents Become Public Records? 1. Cities may determine that certain draft documents and notes are not public records. One area in which questions regarding the status of the common interest privilege regularly arise is when considering the disclosure under the California Public Records Act (Government Code 6250 et seq., (CPRA)) of applicant comments to cities on early drafts of CEQA documents. There is no case law addressing the question of whether the CPRA applies to internal or administrative drafts of CEQA documents. 3 Most documents qualify as public records, but the CPRA does exempt preliminary drafts, notes, or interagency or intra-agency memoranda from disclosure if they will not be retained in the normal course of business and if the public interest in withholding the document outweighs the interest in disclosure. (Gov t Code 6254(a).) While, generally, this exemption should be narrowly construed, a city could decide to withhold early drafts of an environmental document (including any that a private applicant had submitted comments on) on the basis that 1) confusion would result from the release of multiple versions of the same documents and 2) the document will be subject to statutorily required public review once the city determines, in its expert opinion, that the 3 CEQA only briefly addresses the topic when the Guidelines require that agencies retain comments on EIRs and negative declarations as public records. (CEQA Guidelines 15208.)

environmental document is ready for circulation. Additionally, while CEQA does not specify whether preliminary or administrative drafts of CEQA documents are public records, some cities have relied on Public Resource Code section 21167.6(e)(10), which requires drafts of EIRs and other environmental documents that are circulated to the public to be included as part of the administrative record of an agency s decision if litigation is filed, in order to withhold uncirculated documents from disclosure under the CPRA. They have taken the position that draft environmental documents that have not been circulated to the public are not public records subject to disclosure under the CPRA. 2. Certain archeological Native American sites information is never public record. Two provisions of the CPRA specifically apply to the CEQA process. First, archeological records and records of Native American historic, cultural, and sacred sites that are listed or eligible for listing on the California Register of Historical Resources are protected from disclosure under the CPRA. (Public Res. Code 5097.9, 5097.993 [Native American site records]; Gov t Code 6254(r), 6254.10 [archeological records].) Further, the CEQA Guidelines provide that information about the location of such sites should not be disclosed in an EIR. (CEQA Guidelines 15120(d).) Thus, even if a city determines that it is necessary to collect this information (from the applicant or from other sources) to prepare an adequate environmental review document, such information cannot be disclosed under the CPRA. Also, it is appropriate for an EIR to include a more generalized description of archeological resources and Native American sites that may be affected by a project, such as a description of the types of resources, rather than their particular location. (See e.g. Clover Valley Found. v. City of Rocklin (2011) 197 Cal.App.4th 200, 219.) 3. Computer mapping systems are not public records. Computer mapping systems, which are often used in compiling information for use in environmental documents, are not public records subject to disclosure under the CPRA. (Gov t Code 6254.9(a)-(b).) In Sierra Club v. Superior Court (County of Orange) (2013) 57 Cal.App.4th 157, however, the Supreme Court unanimously ruled that the geographic information system (GIS) database maintained by Orange County constituted a public record

subject to disclosure to the Sierra Club. The Court found nothing in the text, statutory context, or legislative history of the term computer mapping system that allows [the Court] to say that the Legislature clearly sought to exclude GIS-formatted parcel data from the definition of public record when it can be disclosed without any accompanying software. (Id. at p. 176.) This holding suggests that where data cannot be disclosed without accompanying software, as may be the case with certain scientific studies employed to prepare environmental review documents, such software and data would not be subject to disclosure, whether prepared by the city or prepared by the applicant and given to the city. III. CEQA LITIGATION Under Public Resources Code section 21167.6(e), the record of proceedings in a CEQA lawsuit must include, but is not limited to, the following: All project application materials; All staff reports and related documents relating to action on the project, CEQA review, CEQA findings, or overriding considerations adopted by the agency; Any transcripts or minutes of meetings in which the decision-making body considered the project or the CEQA review; Any transcripts or minutes of proceedings before advisory bodies, if those transcripts or minutes were presented to the decision-making body; All notices issued by the agency related to CEQA compliance and project approval; All written comments on the CEQA documents, including responses to the notice of preparation; All written evidence or correspondence submitted to or transferred from the agency with respect to the project s CEQA compliance; Any proposed decisions or findings submitted to the decision-making body by its staff or by others; The documentation of the final decision, including the EIR, negative declaration, or mitigated negative declaration, as well as all documents relied on in the agency s CEQA findings or statement of overriding considerations Any other written materials relevant to compliance with CEQA or the agency s

decision on the merits, including (1) the initial study, (2) any draft CEQA documents released for public review, (3) any studies or other documents relied on in environmental documents for the project that were made publicly available or that are included in an agency s files on the project, and (4) all internal staff communications relating to the project or its compliance with CEQA; and The full written record before any inferior decision-making body whose decision was appealed to a superior administrative decision-making body. This is not an exhaustive list, and agencies may add more to the record than required by CEQA. A. Whose Documents Comprise The CEQA Record? 1. City Documents As discussed above, administrative drafts of EIRs, EIR working papers, draft staff reports, and similar preliminary documents that preceded the documents circulated for public review or submitted to the decision-making body are not treated as part of the record of the agency s proceedings. (Public Res. Code 21167.6(e)(10).) However, as also noted above, reports and studies prepared for a project and relied on in an environmental document for a project are part of the record if they were made available to the public during the public review period, or are included in the agency s files on the project. Further, internal staff communications relevant to the agency s compliance with CEQA or its decision on the merits of a project are also part of the record under Public Resources Code section 21167.6(e)(10). If audio recordings of meetings by the decision-making body are available, the recordings must be included in the record if no written transcript of the proceedings has been prepared. (Consolidated Irrig. Dist. v. Superior Court (2012) 205 Cal.App. 4th 697, 717.) Finally, when prior CEQA documents have been prepared by an agency for the same project that is evaluated in a later EIR, those earlier CEQA documents should be included in the record. (County of Orange v. Superior Court (2003) 113 Cal.App. 4th 1, 9.) Similarly, when a project is approved but does not go forward, and substantially the same project is reapproved, the administrative record of the first approval should be included in the record for the second approval. (Mejia v. City of Los Angeles (2005) 130 Cal.App.4th 322.)

2. Consultant And Sub-Consultant Documents In Consolidated Irrigation District v. Superior Court (2012) 205 Cal.App.4th 697, the Court of Appeal clarified that information must be in the actual or constructive possession of an agency for it to be in the public agency s files and thereby to qualify for inclusion in the record under Public Resources Code section 21167.6(e)(10). In Consolidated Irrigation District a petitioner sought copies of files from a city that were prepared by subconsultants to the city s primary environmental contractor on a project. The petitioner argued that subcontractor files should be included as part of the contractor s files, which the contract between the city and its primary contractor stated the city owned. The Court of Appeal found that possession could be either actual or constructive, noting that a finding of constructive possession would require that the city had the direct or indirect right to control the records. While the Court found that the contract between the city and its primary contractor explicitly gave the city control over the contractor s work product, it did not reference subconsultant s work product. Therefore, it held that the city did not have constructive possession of those files and, as such, they were not disclosable through the CPRA, nor were they part of the record Public Resources Code section 21167.6(e)(10) s provisions stating that copies of studies or other documents relied upon in any [EIR] prepared for the project and either made available to the public during the public review period or included in the... public agency s files on the project... Similar to its analysis under the CPRA, the Court interpreted the CEQA provides regarding in the public agency s files to mean in the possession of the public agency. The Court found, again, because the city did not have constructive possession of the subconsultant s files, the records were not in the agency s files and, therefore, not part of the record. This suggests that, when a lead agency allows an applicant to hire outside consultants to prepare some or all of an environmental document, then it will be terms of the applicant s agreement with the city regarding the consultant s work that will dictate whether comments sent to the consultant by the applicant concerning the document would be excluded from the record and not disclosable under the CPRA. 3. Documents Submitted By The Public Certainly, all documents submitted by the public as to a project undergoing

environmental review are part of the administrative record for that project. However, with regard to whether documents that are only referenced in comment letters (whether from the applicant or other members of the public) constitute written evidence that has been submitted to a public agency, the Court in Consolidated Irrigation District v. Superior Court, supra, 205 Cal.App.4th at 703 held that submitted to means making information readily available to the agency, thus, it is sufficient for a submitting party to reference documents previously provided to the agency for another project, or to reference a document with a specific web page address. Also note that in Citizens for Responsible Equitable Environmental Development v. City of San Diego (2011) 196 Cal.App.4th 515, the Court of Appeal found that petitioner failed to exhaust its administrative remedies on the issue of greenhouse gas emissions and their relation to climate change under Public Resources Code section 21177 when it submitted thousands of pages of unorganized data on a DVD to the city right before the project approval hearing. If the submission of unorganized data on a DVD does not constitute exhaustion of administrative remedies, this seems to suggest that such a DVD would also not properly be included in the administrative record for a CEQA lawsuit (or, perhaps, at least, that the contents of the DVD would not need to be printed out for inclusion in the record.) Finally, because the record is limited to evidence that was before the city and does not include other evidence outside that record (Porterville Citizens for Responsible Hillside Dev. v. City of Porterville (2007) 157 Cal.App.4th 885, 890) documents submitted by the public (which includes the applicant) after the approval of the project are not part of the record. 4. Documents Submitted By The Applicant In California Oak Foundation v. County of Tehama (2009) 174 Cal.App.4th 1217, the lead case concerning common interest privilege prior to Ceres, the Court of Appeal held that counsel for a lead agency could share documents with an applicant s counsel without waiving the attorney-client privilege and work product protection under the general rule that there is no waiver of a privilege when privileged documents are shared with a third party whose involvement is reasonably necessary to further the purpose of an attorney s work for a client. The California Oak Foundation Court evaluated attorney privilege issues with respect to the contents of the administrative record under Public Resources Code section 21167.6 and held that

such documents were not required to be included in the record. Specifically, it stated that disclosing advice to a codefendant in the subsequent joint endeavor to defend the EIR in litigation can reasonably be said to constitute involvement of third persons to whom disclosure is reasonably necessary to further the purpose of the [original] legal consultation. (California Oak Foundation, supra at 174 Cal.App.4th at pp. 1222-1223.) California Oak Foundation also held that the legislature s enactment of section 21167.6 did not, by implication, abrogate the attorney-client privilege. In summer of 2013, the Fifth District Court of Appeal issued its decision in Citizens for Ceres v. Superior Court of Stanislaus County (City of Ceres) (2013) 217 Cal.App.4th 889. The case concerned a CEQA lawsuit challenging approvals by the City of Ceres for a Walmart store. The challenger, Citizens for Ceres, argued that the City and the developer should not be able to assert attorney-client privilege or the attorney-work product doctrine to exclude from the administrative record documents reflecting communications between the developer and the City. The Ceres Court held that the common-interest doctrine... does not protect otherwise privileged communications disclosed by the developer to the city or by the city to the developer prior to approval of the project. (Id. at 898) It opined [i]t is important to be clear at the outset that the common interest, if there is any, is in the creation of a legally defensible environmental document that supports the applicant's proposal. There is no point in asking, as the city and developer in this case would have it, whether the applicant and agency have a common interest simply in the development of a legally defensible environmental document. This is because the developer has no interest in the development of an environmental document that does not support the developer's proposal. (Id. at 917.) Thus the Court reasoned that when environmental review is in progress, the interests of the lead agency and a project applicant are fundamentally divergent. (Id at 898.) As such, it held that the applicant and agency cannot be considered to be advancing any shared interest when they share legal advice at the preapproval stage. (Id.) The Ceres Court discussed California Oak Foundation, stating that [t]he city and the developer argue that the [California Oak Foundation] court s remarks imply that it intended to refer to all privileged communications between the agency and applicant, not just those taking place after project approval. They say the statement that the agency s purposes include producing a legally sufficient EIR mean the court must have been addressing communications

relating to the production of a legally compliant EIR, not just defending an already approved EIR. If so, we disagree for the reasons [] and decline to follow. (California Oak at 921.) To date there has only been one decision discussing the Ceres ruling, Seahaus La Jolla Owners Association, v. Superior Court (2014) 224 Cal. App. 4th 754. The case does not concern CEQA, nor does it rely on the holding in Ceres, only citing to the decision s general statement of the common interest doctrine. However, in a footnote, the Seahaus La Jolla Court notes that questions that have been raised regarding the legal reasoning in Ceres, stating, that the court s application of [the common interest doctrine] has been criticized by commentators. (Seahaus La Jolla at 771, fn 6.) The criticism referred to by the Seahaus La Jolla Court is found in Miller & Starr s treatise, California Real Estate and concerns the Ceres Court s assertion that a developer can never has an interest in the development of a legally defensible environmental document, only in one the supports the project under review. (9 Miller & Starr, Cal. Real Estate (2013 2014 supp.) 25A:6, pp. 100 101) Miller & Starr comments: [w]hether the Fifth District's across-the-board view of project developers' motives and novel view of EIRs as advocacy rather than informational documents will be subjected to and survive further legal scrutiny remains to be seen. (Id.) Given these two decisions, there is now, arguably, a split in authority between Ceres and California Oak Foundation. Unfortunately, unlike the federal court system, where intermediate appellate court decisions are binding only on the trial courts embraced within the circuit issuing the opinion, there is no such geographical boundary to decisions of the California Court of Appeal. Thus, for example, a judge in the Riverside County Superior Court (within the Fourth District Court of Appeal) is required to follow published precedent from any of the other five districts of the Court of Appeal, under the theory that there is only one California Court of Appeal, albeit administratively divided into Districts. (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal. 2d 450, 455 [ where there is more than one appellate court decision, and such appellate decisions are in conflict, the superior court can and must make a choice between the conflicting decisions ].) However, other courts have observed that, in reality, a superior court ordinarily will follow an appellate opinion emanating from its own district even though it is not bound to do so. (McCallum v. McCallum (1987) 190 Cal. App. 3d 308, 315.)

Going forward, a court reviewing city s decision to withhold, under the common interest doctrine, a communication between the agency and developer s attorneys that was made prior to the agency s approval of a project will likely require disclosure of that communication if it follows Ceres, rather than California Oak Foundation. A court could also order disclosure of such communications outside the context of the administrative record prepared for CEQA litigation, such as pursuant to CPRA request or discovery. Examples of types of communication that a court could order a public agency to disclose include e-mails between a public agency and a developer discussing how to respond to comments on an EIR and disagreements between the agency and the developer as to what CEQA requires. It could also include administrative draft EIRs containing comments from the developer. As a conservative practice cities should assume that any recorded communications between the city s attorney and the developer s attorney prior to the issuance of a project approval are public. A city can decide to continue to rely on the California Oak Foundation decision and assert the common interest doctrine to protect such communications but, if that decision is challenged, a court could require the disclosure of these communications under Ceres. As an alternative to written communications with the developer during the approval process, public agencies (and their attorneys) might wish to consider in-person meetings or telephone calls when communicating issues of high-sensitivity to a developer (and the developer s attorney). Because common interest privilege is just that the decision of two parties to announce that they have a common interest to which they wish to extend their individual attorney-client privilege the Ceres decision will ultimately likely impact only a limited number of communications. The status of the law is unchanged for those cities that did not, in the past, agree with an applicant to assert to a common interest privilege with regard to pre-approval communications. The split of authority between Ceres and California Oak Foundation means that cities that have, in the past, agreed to assert a common interest privilege with regard to preapproval communications may well decide to continue to do so under California Oak Foundation especially if the applicant indemnifies the city for any legal costs association with defending that position. This leaves us with just those cities that were never fully comfortable with asserting the common interest privilege and are considering whether or not to announce a

specific policy with regard to pre-approval communication with applicants in light Ceres. For those cities discretion may be the better part of valor and they may begin to take the position that the common interest privilege does not attach to pre-approval communications.

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