ALBION RIVER WATERSHED PROTECTION ASSOCIATION v. GEORGIA PACIFIC CORPORATION

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Court of Appeal, First District, Division 5, California.

ALBION RIVER WATERSHED PROTECTION ASSOCIATION et al., Petitioners, v. MENDOCINO COUNTY SUPERIOR COURT of MENDOCINO COUNTY, Respondent; GEORGIA–PACIFIC CORPORATION, et al., Real Parties in Interest.

No. A060923.

Decided: July 29, 1993

Paul V. Carroll, Menlo Park, for petitioner Albion River etc. No appearance for respondent. Jared G. Carter, Cindee F. Mayfield, Rawles, Hinkle, Carter, Behnke & Oglesby, Ukiah, for real party Georgia–Pacific Corp. Ronald A. Zumbrun, Robin L. Rivett, Jennifer M. Deming, Pacific Legal Foundation, Sacramento, Alson R. Kemp, Walter R. Allan, Michael F. La Bianca, William L. Marchant, Pillsbury, Madison & Sutro, San Francisco, amici curiae in support of real party.

In this case we hold that California courts have the power to issue nominal injunction bonds in environmental litigation.

Petitioner Albion River Watershed Protection Association is also the petitioner below in a mandate proceeding pending in respondent court, challenging the approval of a timber harvest plan (THP).   In the trial court, petitioner successfully obtained a preliminary injunction against timber harvesting;  however, respondent court declined petitioner's request to impose only a nominal injunction bond.   Respondent court expressed its uncertainty regarding whether nominal bonding was permitted under California law.   Petitioner seeks a writ of mandate to compel the setting of a nominal bond.   Because the question of nominal bonding in environmental litigation is one of first impression and statewide importance, we issued the alternative writ of mandate to review the issue.   Having heard oral argument, we conclude that California trial courts have the power to set nominal bonds in environmental cases.

PROCEDURAL BACKGROUND AND FACTS

The THP at issue was submitted by real party in interest Georgia–Pacific Corporation (G–P), and approved by real party California Department of Forestry and Fire Protection (Forestry).   The THP proposes the logging of a 144–acre stand of 80– to 90–year–old redwoods as well as other conifers such as Douglas fir and hemlock, located in the Salmon Creek watershed.

Petitioner's mandate petition below alleged that Forestry approved the THP in violation of various provisions of the California Environmental Quality Act (CEQA) (Pub.Resources Code, § 21000 et seq.) and the Forest Practice Act (Pub.Resources Code, § 4511 et seq.).   One of petitioner's objections to the approval involved the Forestry Director's “official response” to public comment.   The public comment on the proposed THP included concerns about erosion.   Notwithstanding CEQA's requirement that the official response include specific, empirical responses to significant environmental objections (Environmental Protection Information Center, Inc. v. Johnson (1985) 170 Cal.App.3d 604, 628, 216 Cal.Rptr. 502), the official response fails to even mention, much less discuss, an enforcement action taken against G–P by the Regional Water Quality Control Board regarding erosion damage on the THP site.

At the hearing on the preliminary injunction respondent court found that the enforcement action “raised an extremely significant environmental point with respect to the issue of cumulative impacts” of logging on the water quality of Salmon Creek.   The court concluded that by failing to respond to this significant point in his response, “the Director did not proceed in the manner required by law in that he failed to discharge his duty to consider and to articulate his consideration of the environmental question raised” about erosion damage to the creek.   The court further concluded that “it's likely that on this point [petitioner] will prevail on the merits” and that “there will be irreparable harm” to petitioner should logging commence before trial.

The court granted the preliminary injunction, but conditioned it on the posting of a $10,000 bond.   The court refused a request for a nominal bond, acknowledging the federal rule favoring nominal bonding in environmental cases, but expressing uncertainty that nominal bonds were permitted in California.   G–P asked for a $100,000 bond, arguing the preliminary injunction would cause it to suffer substantial financial harm.   The timber operator hired by G–P, a helicopter logging company, had already incurred $20,000 in preparation for the logging operation.   G–P asserted that if logging was delayed in court it would lose over $2 million in lumber sales at the current lumber prices.  (It was not clear, however, how much of that amount would be recouped by eventual timber sales should petitioner's legal challenge ultimately fail.)   G–P also stated that it anticipated a layoff of twenty-five workers at one of its mills for a period of one month to six weeks.

Respondent court assessed G–P's statement of financial harm and agreed that under the circumstances, and in “the normal run of cases,” $100,000 was “low.”   Considering “the public purpose served by the lawsuit,” however, plus petitioner's “financial ability ․ to post a bond,” the court imposed a bond in the amount of $10,000.   It is unclear whether the court would have imposed a nominal bond had it felt it had the power to do so.

This petition followed.

DISCUSSION

Code of Civil Procedure section 529 governs injunction bonding, and provides that when an injunction is granted “the court ․ must require an undertaking on the part of the applicant to the effect that the applicant will pay to the party enjoined such damages, not exceeding an amount to be specified, as the party may sustain by reason of the injunction, if the court finally decides that the applicant was not entitled to the injunction.”   (Emphasis added.) 1  G–P contends this provision is mandatory, and is in turn governed by the Bond and Undertaking Law of 1982 (§ 995.010 et seq.), which relieves a litigant of the mandatory bond requirement only in cases of indigency.   Because neither petitioner nor its members made a showing of indigency, G–P contends that the trial court had no power to impose a nominal bond.

Petitioner nevertheless maintains that a substantial bond should not be required of litigants seeking to enforce environmental protections.   Such litigants, while not indigent, may nevertheless be impecunious and perhaps nonprofit public interest organizations, and thus be unable to afford a substantial bond.   Without the ability of a trial court to impose nominal bonding, petitioner argues, such litigants would be effectively precluded from obtaining injunctive relief to preserve the environmental status quo pending the resolution of their legal challenges.

Petitioner refers to a number of federal decisions which have consistently held or assumed that only a nominal injunction bond should be imposed in environmental litigation, even where an enjoined defendant may suffer substantial economic loss as a result of the injunction.  (See, e.g., People ex rel. Van De Kamp v. Tahoe Regional Plan (9th Cir.1985) 766 F.2d 1319;  Friends of the Earth, Inc. v. Brinegar (9th Cir.1975) 518 F.2d 322;  Natural Resources Defense Council, Inc. v. Morton (D.D.C.1971) 337 F.Supp. 167, affd. on other grounds (D.C.Cir.1972) 458 F.2d 827;  Sierra Club v. Froehlke (S.D.Tex.1973) 359 F.Supp. 1289, revd. on other grounds sub nom., Sierra Club v. Callaway (5th Cir.1974) 499 F.2d 982;  State of Ala. ex rel. Baxley v. Corps of Engineers (N.D.Ala.1976) 411 F.Supp. 1261;  see also Henson & Gray, Injunction Bonding in Environmental Litigation (1979) 19 Santa Clara L.Rev. 541 [hereafter “Henson”].)

The federal authority is based on a perception that where a court is inclined to grant a plaintiff an injunction against environmental damage, the public interest in preserving the environment pending a hearing on the merits is more significant than the defendant's economic interest.   In other words, the damage to the environment, often irreversible, may be greater than the damage to the pocketbook.  (People ex rel. Van De Kamp v. Tahoe Regional Plan, supra, 766 F.2d at pp. 1325–1326;  Natural Resources Defense Council, Inc. v. Morton, supra, 337 F.Supp. at p. 169;  Henson, supra, 19 Santa Clara L.Rev., at p. 569.)

Where the plaintiff has established a probability of success on the merits and has persuaded a trial court to grant injunctive relief, the federal courts conclude that to require a plaintiff in all cases to post a substantial bond could severely impair legitimate environmental challenges, particularly from relatively impecunious plaintiffs.   Any bond other than a nominal one could “effectively deny access to judicial review” or “close the courthouse door in public interest litigation by imposing a burdensome security requirement on plaintiffs who otherwise have standing” to raise an environmental challenge.  (People ex rel. Van De Kamp v. Tahoe Regional Plan, supra, 766 F.2d at p. 1325;  State of Ala. ex rel. Baxley v. Corps of Engineers, supra, 411 F.Supp. at p. 1276.)   The federal courts have justified injunctions against multimillion-dollar projects on nominal bonds as low as $100 or even $1.   One commentary concludes that substantial bonds would discourage legitimate environmental actions brought by public interest groups and thus increase environmental degradation.  (Henson, supra, 19 Santa Clara L.Rev., at pp. 562–565.)

The federal rule favoring nominal injunction bonding in environmental litigation is a sound one.   We conclude nothing in the pertinent statutes forbids application of the rule in California state courts.

G–P argues that the language of section 529 is mandatory and precludes the exercise of a trial court's discretion to set a nominal bond.   G–P further argues that the 1982 bond law provides only one exception to the requirement sufficient to cover the projected economic harm to the defendant—those cases in which the plaintiff obtaining the injunction is indigent.   Indeed, G–P contends that should we rule in favor of nominal bonding in the environmental context, we would be in effect legislating a second exception to the statutory requirement of a substantial bond.

G–P views the bond statutes too narrowly and overlooks the trial court's common law power to waive even a “mandatory” bond in appropriate cases.   Several years before the enactment of the 1982 bond law, the California Supreme Court ruled that section 529's apparent mandatory language allowed for some discretion.   In Conover v. Hall (1974) 11 Cal.3d 842, 114 Cal.Rptr. 642, 523 P.2d 682, the court ruled that the statute did not defeat the court's “common law discretion” to waive the requirement of an injunction bond in the case of an indigent litigant.  (Id. at pp. 850–853, 114 Cal.Rptr. 642, 523 P.2d 682.) 2  The indigency exemption provision of the 1982 bond law was simply an admission of the validity of the common law.   The provision “codifies the common law authority of the courts.   See, e.g., Conover v. Hall [citation].”  (Recommendation Relating to Statutory Bonds and Undertakings (Dec.1981) 16 Cal.Law Revision Com.Rep. (1982) p. 518 [com. to § 995.240].)   The California Law Revision Commission further noted that the new bond provisions “are not exclusive, but are supplemented by the general provisions governing all bonds and undertakings, both common-law and statutory.”  (Id. at p. 513 [com. to § 995.020].)

Both section 529 and the 1982 bond law permit a common law waiver of an injunction bond.   One basis for such a waiver, recognized at common law in Conover, was indigency;  another is the need for nominal bonding in appropriate cases to preserve the environmental status quo between preliminary injunction and trial.   For the salutary reasons expressed in the federal decisions, nominal bonding serves a legitimate public purpose.   In many cases it may be essential to further the Legislature's goal of enforcement of CEQA by private persons and organizations, many of whom lack the financial wherewithal to post a substantial undertaking.  “[S]pecial precautions to ensure access to the courts must be taken where Congress has provided for private enforcement of a statute,” i.e., the National Environmental Policy Act (NEPA).  (People ex rel. Van De Kamp v. Tahoe Regional Plan, supra, 766 F.2d at pp. 1325–1326;  Friends of the Earth, Inc. v. Brinegar, supra, 518 F.2d at p. 323.)   CEQA is closely patterned after its federal counterpart, NEPA, and the federal courts' reasoning is every bit as compelling on the state level.  (See Henson, supra, 19 Santa Clara L.Rev., at p. 564.)

Without the mechanism of nominal bonding many legitimate environmental challenges may be rendered hollow by the mere lack of funds.   Substantial, perhaps irremediable, harm to the environment may ensue because a sincere litigant with a meritorious claim—who has already persuaded a trial court to issue a preliminary injunction—does not happen to command sufficient fiscal resources to post a substantial bond.   The specter of environmental degradation, absent from typical civil litigation, invokes the common law power of the courts to allow nominal injunction bonds.

G–P contends that nominal environmental bonds are inconsistent with one of the Supreme Court's latest CEQA decisions, Laurel Heights Improvement Assn. v. Regents of University of California (1988) 47 Cal.3d 376, 253 Cal.Rptr. 426, 764 P.2d 278.  Laurel Heights did not discuss injunction bonding;  it merely held that “traditional equitable principles” governed the decision whether to issue an injunction in CEQA cases.  (Id., at pp. 422–424, 253 Cal.Rptr. 426, 764 P.2d 278.)   Under these principles, and consistent with federal law, a mere violation of CEQA which does not result in present environmental damage would not necessarily require an injunction.  (Id. at p. 424, 253 Cal.Rptr. 426, 764 P.2d 278;  see Amoco Production Co. v. Gambell (1987) 480 U.S. 531, 107 S.Ct. 1396, 94 L.Ed.2d 542 [mere violation of NEPA does not necessitate injunction];  Weinberger v. Romero–Barcelo (1982) 456 U.S. 305, 102 S.Ct. 1798, 72 L.Ed.2d 91 [same].)

G–P also contends that the rationale of the federal nominal bonding cases applies only to preliminary injunctions against public agencies, and not private parties involved in private projects subject to CEQA.   No such public-private distinction, however, emerges from the federal cases.   While one decision, Natural Resources Defense Council, Inc. v. Morton, supra, 337 F.Supp. at page 169, does include the comment that “it would be a mistake to treat a revenue loss to the government the same as pecuniary loss to a private party,” the exact meaning of the comment is unclear.   Instead of a suggestion that private project holders should not be subjected to nominal bonds, the comment could simply draw the distinction between environmental cases—usually involving government projects—and the “pecuniary loss” suffered by a “private party” in a typical nonenvironmental action.   The rationale of the federal nominal bonding decisions is not that the enjoined defendant draws from the public fisc rather than the private purse;  the rationale is the necessity of preserving the status quo pending hearing on the merits, in light of the irreversible damage to the environment.   This rationale applies equally to public and to private projects.

We do not suggest that nominal bonding should be the rule in environmental cases.   We hold only that California courts have the power to impose nominal bonds, and should take into account the policies justifying such bonds whenever environmental damage is threatened by an injunction made meaningless by a plaintiff's inability to raise a substantial sum for a bond.

Of course, an enjoined defendant's economic interest is often substantial and should never be lightly disregarded.   We are satisfied, however, that the adoption of the federal rule would not be unfair to defendants.   Since a preliminary injunction may only issue after the trial court has found the plaintiff likely to prevail on the merits, defendants need not fear a nominal bond in a frivolous lawsuit or one brought from an excess of zeal but with insubstantial legal grounds.   Furthermore, it must be remembered that nominal bonding may be required to ensure court access for prima facie meritorious environmental lawsuits;  that purpose may supersede a defendant's economic loss during the pendency of the injunction.

We are not unmindful that CEQA litigation may tie up a project to the substantial financial detriment of its proponent.   We hold only that California trial courts have the power in environmental litigation to impose a nominal injunction bond, and should employ that power with due consideration to the justifications for nominal bonding.   Such factors include, but are not necessarily limited to, the merits of the litigation, the plaintiff's ability to post a bond, the reasonable projected financial losses of the defendant, and the hardship to the parties affected by the injunction.   Clearly, a significant factor will be whether the plaintiff possesses sufficient assets to post a substantial bond.

DISPOSITION

Let a peremptory writ of mandate issue commanding respondent superior court to reconsider its refusal to impose a nominal injunction bond, in light of the views expressed in this opinion.   Petitioner shall recover costs of this writ proceeding.

FOOTNOTES

1.   All further statutory references are to the Code of Civil Procedure.

2.   Conover thus undermines G–P's reliance on ABBA Rubber Co. v. Seaquist (1991) 235 Cal.App.3d 1, 286 Cal.Rptr. 518, which in any case merely recites the general rule that substantial bonds are required under section 529.  ABBA Rubber was neither an indigency nor an environmental case.

HANING, Associate Justice.

PETERSON, P.J., and KING, J., concur.