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Court of Appeal:
UC Regents’ New Hospital Exempted From Zoning Rules
Opinion Says Sovereign Immunity Bars Local Regulation Because Purposes Include Governmental Activity
By Kimber Cooley, Staff Writer
Div. Three of the First District Court of Appeal has held that sovereign immunity exempts the Regents of the University of California from compliance with local building and zoning requirements as to a plan to build a new San Francisco hospital because one of the motivations for the project is the governmental purpose of promoting education for medical students.
The court found that allegations that the university’s proprietary interests also motivated the project does not undermine immunity.
Justice Victor Rodríguez wrote the opinion, filed Thursday. It directs issuance of a peremptory writ of mandate ordering the San Francisco Superior Court to vacate the order of Judge Charles Haines overruling a demurrer to a complaint filed by the Parnassus Neighborhood Coalition and to issue a new order sustaining it.
Acting Presiding Justice Carin T. Fujisaki and Justice Ioana Petrou joined in the opinion.
The coalition is a group of property owners residing near the proposed site, that sued to enjoin the proposed hospital, alleging that the facility would exceed building and bulk restrictions and create a “threatened nuisance per se.”
Rodríguez acknowledged that an order overruling a demurrer is not immediately appealable but said writ review was appropriate in the case, writing:
“Whether the Regents are entitled to sovereign immunity from local building and zoning regulations when building the New Hospital presents a significant constitutional issue….And resolution of this issue in the Regents’ favor will result in a final disposition as to the Coalition’s complaint….”
Injunctive Relief Sought
The “Regents of the University of California” is a corporation governed by the 26-member Board of Regents. The University of California at San Francisco (“USF”), part of the state university system, is a medical complex, research center and medical school.
In 2014, the board approved a long-term development plan that anticipated the construction of a smaller hospital to provide clinical services to advance UCSF’s academic mission.
In 2021, the regents set aside the plans for the smaller facility and approved the construction of the nearly 900,000-square-foot hospital at issue in the case (referred to in the opinion as the “New Hospital”), citing more beds for patients and a significant increase in the campus hospital capacity.
Responding to the regents’ demurrer, the coalition contended that the proposed project is not motivated exclusively by its educational needs as it would also promote the continued expansion of UCSF’s proprietary activities as a healthcare provider, noting that the university’s revenue doubled from 2015 to 2021. The neighborhood group argued that the existence of other incentives undermines immunity.
Haines concluded that the regents’ immunity hinged on a question of fact—whether the proposed construction constituted a governmental or proprietary activity—and, as such, could not be resolved by demurrer.
Public Trust
Art. IX, §9 of the California Constitution vests in the Regents of the University of California as a “full powers of organization and government” subject to limited oversight by the Legislature and “the legal title and the management and disposition” of university property. Given this status, Rodríguez pointed out that the corporation enjoys immunity from local regulation absent state waiver or consent.
However, he noted that state entities are not beyond the reach of all local law, saying:
“Exemption from local regulation is appropriate when the entity is operating in a governmental capacity….On the other hand, municipal regulation of an entity’s activities may be authorized in situations where its conduct bears no relation to its governmental functions….[C]ourts have…concluded the Regents are not entitled to sovereign immunity where they acted in a capacity no different from a private university or individual.”
Turning to the allegations in the complaint and the powers afforded to the university under the California Constitution, he wrote:
“The Coalition does not and cannot allege that construction of the New Hospital has no relation to the Regents’ governmental functions of providing medical education and other educational purposes….The Regents have vast power regarding UCSF’s property administration, such as taking and holding ‘without restriction, all real and personal property for the benefit of the university or incidentally to its conduct.’”
Sole Purpose Argument
Rejecting the argument that the government function at stake must be the sole purpose behind the construction in order for immunity to attach, Rodríguez remarked:
“The Regents operate UCSF…which provides medical education. UCSF has an academic mission that includes providing clinical services….We are not confronted with a situation where the governmental function at issue is trivial or peripheral when compared with the proprietary function, and we need not address whether such an instance would lead to the same result.”
Unpersuaded by the coalition’s argument that the Regents were not entitled to immunity as governmental actors where the proposal “promotes UCSF’s continued expansion of its proprietary activities” and competes with private healthcare in the area, he said:
“[T]he Coalition fails to cite any authority for its assertion that by providing healthcare, the Regents, through UCSF, are acting in a purely proprietary capacity not entitled to immunity.”
Size of Facility
The jurist pointed out that “[t]he Coalition concedes UCSF provides clinical services and that the construction of a hospital—albeit a smaller one than the New Hospital—at Parnassus would advance the Regents’ ‘educational mission.’”
Finding the concession to be “fatal,” he opined:
“Even though the proposed New Hospital may be larger and produce greater revenue, it still has a relation to the Regents’ governmental functions and is thus entitled to immunity….
“Indeed, the Regents determined a larger hospital was necessary to expand access to accommodate increasing patient demand and UCSF’s survival.”
Rodríguez continued:
“[T]hat the New Hospital may increase UCSF’s revenue—and consequently that of the Regents—does not constrain the Regents’ state sovereignty.”
Question of Fact
Disagreeing with the contention that the issue of immunity presents a question of fact unsuitable for resolution on demurrer, Rodríguez said:
“The Coalition admits the ‘operation of clinical healthcare facilities’ ‘necessary for teaching new medical professionals falls within’ the Regents’ educational purpose. Indeed, it alleged the originally planned 2014 hospital would satisfy UCSF’s need to provide clinical services that advance its academic mission. The only reasonable inference to be drawn from these allegations is that the New Hospital — which would also provide clinical services—similarly advances UCSF’s educational mission, even if it also does more.”
Under these facts, he concluded:
“These undisputed facts are fatal as a matter of law to the Coalition’s nuisance claim under the sovereign immunity cases…—the New Hospital serves the Regents’ broad education purposes, and they are entitled to immunity from the relevant City planning code provisions at issue here.”
He also “reject[ed] the Coalition’s request for leave to amend its complaint to establish facts that UCSF operates its healthcare services as a business enterprise entirely separate and distinct from its educational institution,” saying “there is no reasonable probability the complaint can be cured by amendment.”
The case is Regents of the University of California v. Superior Court (Parnassus Neighborhood Coalition), A169318.
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