Third District Affirms CEQA And Attorneys' Fees Judgments In Favor Of Department Of Water Resources In Monterey Agreement And Amendment Litigation ...
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Third District Affirms CEQA And Attorneys’ Fees Judgments
In Favor Of Department Of Water Resources In Monterey
Agreement And Amendment Litigation
By Arthur F. Coon & Matthew C. Henderson on September 28, 2021
Against the backdrop of another severe drought, water supply and impact issues continue to be points of
contention for water agencies, water users, conservation groups, and the state. And, of course, litigation
over water is not limited to water rights and usage, but extends to related environmental review under
CEQA. On September 22, 2021, the Third District Court of Appeal issued a published opinion in Central
Delta Water Agency v. Department of Water Resources (2021) __ Cal.App.5th __, disposing of several
consolidated cases and analyzing operation of the state’s massive State Water Project (SWP) through a
CEQA lens. While the case does not break any new legal ground, it applies well-recognized CEQA
principles to a lengthy and complex fact pattern involving multiple rounds of lengthy litigation, settlement,
and EIR preparation.
Background: Litigation 25 Years in the Making
As noted, the case involves three consolidated appeals against the Department of Water Resources
(“DWR”) relating to 1990s era changes to the operation of the SWP and Central Valley Water Project,
which together comprise California’s primary plumbing system; the opinion affirmed the judgments in
favor of DWR in each case. As background, the SWP by itself delivers water to about 25 million residents
and 750,000 acres of farmland on an annual basis. The SWP is operated by DWR, which delivers water
to regional and local distributors known as “contractors” via long term contracts. Those contracts include
“Table A,” showing maximum amounts of available water depending on conditions; Article 18, which
addresses how water shortages will be dealt with; and Article 21, which addresses short-term water
surpluses.
Historically, a variety of factors, including demand in excess of Table A amounts and failure to complete
all anticipated SWP facilities, led to DWR being unable to deliver all of the water promised in Table A
amounts to the contractors. This problem was exacerbated by drought in the early 1990s, which led to
1reduced water deliveries under Article 18 while contractors were still obligated to make substantial
payments to DWR.
This situation gave rise to disputes between DWR and SWP contractors, which led to mediation in 1994.
That mediation culminated in an agreement and amendments to the long term contracts. (Because the
mediation had taken place in Monterey, the relevant contractual documents were known as the “Monterey
Agreement” and “Monterey Amendment.”) The Monterey Amendment also set up the transfer of a
groundwater bank in Kern County, the Kern Water Bank, from DWR to local Kern County agencies,
including the Kern County Water Agency, via the “KFE Transfer Agreement.”
Two SWP contractors prepared an EIR for the Monterey Agreement, which DWR certified in 1995.
Several plaintiffs sued over the adequacy of the Monterey Agreement EIR, including the Planning and
Conservation League. That litigation culminated in Planning & Conservation League v. Department of
Water Resources (2000) 83 Cal.App.4th 892, in which the court of appeal held that the Monterey
Agreement EIR was invalid because it had not been prepared by DWR as the lead agency, and because
it did not address Article 18 as the no project alternative. The court also held that the reverse validation
challenge to the Monterey Agreement and KFE Transfer Agreement was not defective for failure to name
and serve indispensable parties.
That decision set the stage for yet more settlement discussions between the parties, which gave rise to
an agreement for DWR to prepare another EIR as lead agency and for the Kern Water Bank Authority to
retain title to the Kern Water Bank. The new EIR was known as the “Monterey Plus EIR” because it
included the Monterey Amendment, KFE Transfer Agreement, and terms of the new settlement
agreement.
DWR released the draft Monterey Plus EIR in 2007. The EIR analyzed four no-project alternatives, three
of which analyzed impacts without the Monterey Amendment, and the fourth of which analyzed impacts
from the amendment absent the terms of the new settlement agreement. DWR certified the new EIR on
February 1, 2010.
The Monterey Plus EIR sparked three new lawsuits. Central Delta Water Agency sued under CEQA,
claiming that the EIR did not adequately describe the project or its impacts, did not properly analyze
alternatives and mitigation measures, did not adequately respond to comments, was not circulated
properly, that DWR’s findings were not supported by substantial evidence, and that DWR did not provide
a proper notice of determination. Center for Biological Diversity (“CBD”) and other petitioners sued for
additional CEQA violations and to have the Kern Water Bank returned to DWR. Finally, two Kern County
water districts also sued under CEQA on the basis that the Monterey Plus EIR did not properly analyze
whether the Kern Water Bank adversely affected nearby groundwater wells and water banks.
The trial court issued a writ on the CEQA claims in 2014, holding that the Monterey Plus EIR had not
adequately analyzed the impact of the Kern Water Bank on future groundwater and water quality issues.
DWR prepared a revised EIR in conformity with the court’s ruling, issuing a draft Revised EIR in April
2016 that analyzed impacts from the Kern Water Bank’s operations. DWR certified the Revised EIR in
September of 2016 and filed a return to the 2014 writ. This triggered the filing of a new petition, which
was decided along with challenges to the return. In 2017 the trial court rejected these challenges,
discharging the 2014 writ and denying the new petition. The consolidated appeals resulted.
2The Court Of Appeal’s Instant Decision
CEQA Claims
Perhaps unsurprisingly, this lengthy procedural history was not the end of the parties’ disputes. The 2016
Revised EIR gave rise to yet another round of litigation entailing three separate lawsuits against DWR.
In one of these challenges, the Central Delta Water Agency (“Central Delta”) argued that the Monterey
Plus EIR improperly assumed the operation of the SWP under the effects of contract amendments and a
settlement agreement whose effects the EIR was intended to analyze. Framed challenge to the “project
decision,” this claim essentially argued DWR could not lawfully assume continued operation of the SWP
under the contract modifications and settlement, and that the contracts at issue had to be considered
invalid until the completion of CEQA review. However, the trial court noted that the circumstances of the
case were unusual in that the Monterey Plus EIR was the result of a settlement agreement to analyze
contractual modifications already agreed upon. While conceding this was “a less than ideal way to
conduct CEQA review,” the trial court had upheld DWR’s analysis. The Court of Appeal affirmed, noting
that under Public Resources Code § 21168.9 the trial court had the discretion to leave the contracts in
place while CEQA review was undertaken; under “the unique procedural and factual circumstances
surrounding the litigation,” the Court found the trial court’s reasoning to be sound and affirmed on this
ground.
This argument related to the next one the Court addressed, i.e., that the Monterey Plus EIR had
improperly failed to analyze a “no project” alternative under which the contractual amendments were not
operative. The trial court had held that because the project’s primary objective was the negotiated
compromise of claims relating to the prior operation of the SWP, a “no project” alternative would, by
definition, fail to meet this objective. Still, DWR analyzed no fewer than four (4) “no project” alternatives,
two of which implemented one of the contested contractual provisions, one which eliminated it, and one of
which implemented the entire suite of contract amendments. Central Delta claimed that the analysis was
deficient because it failed to take into account another complementary provision, but the trial court and
Court of Appeal disagreed, noting this was a matter of differing contract interpretations. And while the
EIR should have included the elimination of the complementary contract provision (which should have
been analyzed under a no project alternative), that omission was not prejudicial because DWR conducted
an analysis of that scenario in response to comments prior to EIR certification, thereby satisfying CEQA’s
public disclosure mandate.
Finally, Central Delta argued that the trial court’s limited writ directing further environmental review with
respect to the Kern Water Bank, but leaving the approved contract modifications and settlements in place,
was erroneous. The Court of Appeal affirmed the trial court’s rejection of this argument as well, holding
that under Public Resources Code § 21168.9(a), the trial court had the discretion to leave project
approvals in place during the pendency of a return to the writ. The Court’s endorsement of use of a
limited writ remedy is consistent with what the authors consider to be the well-reasoned majority view on
this issue, but in tension with the Fifth District’s contrary view, as recently expressed in Sierra Club v.
County of Fresno (2020) 57 Cal.App.5th 979, blogged about here.
Also at issue were CEQA claims made by the Center for Food Safety. The first of these was another
procedural argument to the effect that an earlier appeal in a challenge to the Monterey Plus EIR stayed
Food Safety’s challenge to the Revised EIR as both challenges involved similar or overlapping claims.
Because the two cases wound up being consolidated, the Court of Appeal ruled this challenge moot.
Food Safety also challenged the Revised EIR on the grounds that it did not adequately analyze the
impact of the Kern Water Bank on the conversion from annual crops (i.e., those planted and harvested
3yearly, such as cotton or alfalfa) to permanent crops (those planted once and then harvested annually
when ripe, such as fruit and nuts). Food Safety argued that such a conversion “hardened” water demand,
because permanent crops, by definition, cannot be fallow during drought years. However, the trial court
noted, and the Court of Appeal agreed, that such “hardening” is not an environmental impact under
CEQA, that this phenomenon was occurring with or without the project, and that substantial evidence
supported the conclusion that this trend did not result in any significant impact from SWP contractors
requesting more water than they otherwise would have.
Timeliness of Attorneys’ Fees Claim
Experienced CEQA litigators well know that a successful writ petition will almost invariably be followed by
a motion for attorneys’ fees under Code of Civil Procedure section 1021.5. Such was the case in this
litigation, as petitioner CBD filed a motion for fees under the statute after prevailing in the trial court. The
trial court denied that motion as untimely and the Court of Appeal affirmed.
Rule 3.1702(b)(1) of the California Rules of Court requires a CCP § 1021.5 fee motion to be brought
within the time period for filing a notice of appeal under rules 8.104 and 8.108. While CBD had prevailed
under its CEQA claim, the trial court ruled, and the Court of Appeal affirmed, that CBD’s action was a
reverse validation action which triggered the 30 day appeal period provided by the validation statute
(Code Civ. Proc., § 870(b)), and that CBD’s motion made outside that period was therefore untimely.
Appellate practitioners should take note that where a validation action or other claim with a statutorily-
reduced time to appeal is joined with other causes of action, the shortened appellate period will control,
even as to a fee motion based on a separate claim.
Another interesting aspect of this issue is raised only by implication. In the factual background portion of
its opinion, the Court mentions that CBD entered into a stipulation with DWR extending the time to file the
fee motion. However, it also mentions that the stipulation did not include the real parties in interest. The
result implies that the stipulation was ineffective absent the consent of the real parties to the extension;
this issue is analogous to the statute of limitations tolling issue recently addressed by the First District in
Save Lafayette Trees v. East Bay Regional Park Dist. (2021) 66 Cal.App.5th 251 (and blogged on here).
Other Claims And Issues
The Central Delta decision also touches on a host of issues that are related to, but independent of, the
CEQA claims. For instance, the court analyzed the timing of a reverse validation action, holding that the
subsequent settlement agreements ratified rather than replaced the original contract modifications,
making any subsequent reverse validation action untimely given that the contracts were approved in the
1990s. Similarly, the Kern Water Bank parties argued that Central Delta’s arguments were barred by res
judicata because of an earlier lawsuit involving the CVP and SWP approvals; the Court of Appeal rejected
that argument and held that the necessary privity with the prior litigation’s plaintiff was lacking because
that plaintiff had abandoned its position as a public interest representative by failing to contest the
discharge of the writ in the prior litigation.
Conclusion and Implications
Central Delta is complex in its procedural history, yet relatively straightforward in its CEQA implications.
The issues it deals with are fact-dependent and nuanced, and are worth scrutiny for agencies and
practitioners grappling with complex multi-party CEQA litigation and/or CEQA review that unfolds in
multiple iterations over time due to ongoing litigation. Given the critical and contentious nature of water
supply and related CEQA review issues in California, more litigation in this area is inevitable.
4Questions? Please contact Arthur F. Coon of Miller Starr Regalia. Miller Starr Regalia has had a well-
established reputation as a leading real estate law firm for more than fifty years. For nearly all that time,
the firm also has written Miller & Starr, California Real Estate 4th, a 12-volume treatise on California real
estate law. “The Book” is the most widely used and judicially recognized real estate treatise in California
and is cited by practicing attorneys and courts throughout the state. The firm has expertise in all real
property matters, including full-service litigation and dispute resolution services, transactions,
acquisitions, dispositions, leasing, financing, common interest development, construction, management,
eminent domain and inverse condemnation, title insurance, environmental law and land use. For more
information, visit www.msrlegal.com.
www.ceqadevelopments.com
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