The case involving Walmart's plan to transform its Sonora store into a grocery-selling "Supercenter" is headed to the California Supreme Court.
The court will decide whether the City of Sonora can exempt the mega-retailer from state environmental requirements.
The petition for review was granted on Feb. 15, after an October appellate court ruling was challenged.
The Fifth District Court of Appeal ruled that the city cannot exempt the store from environmental review under the California Environmental Quality Act without voter approval, overturning a Tuolumne County Superior Court ruling.
The expansion is being challenged by a group known as the "Tuolumne Jobs and Small Business Alliance."
The city early on had prepared an initial environmental impact report after Walmart submitted its expansion application, and circulated it for public comment.
Then, in June 2010, Sonora resident James Grinnell circulated an initiative petition, written by Walmart representatives, to exempt the retailer from the review.
Grinnell collected valid signatures from 541 of the city's 2,489 registered voters - more than the 15 percent required.
The City Council four months later decided to forgo a special election, saying it would cost the city $7,000, and adopted the initiative as Ordinance No. 796.
The state Elections Code allows the council to adopt an initiative instead of holding an election, but it must be done within 10 days of certifying the signatures. The period is extended to 40 days if the council opts to order a report.
The appellate court said the council could have satisfied both the California Environmental Quality Act requirements and Elections Code because it had already prepared an environmental impact report and was prepared to vote on it before the initiative petition was certified.
The case had been set for trial earlier last year, but was suspended pending the appellate court's decision.
Walmart hopes to expand its Sanguinetti Road store by 30,000 square feet, creating a "Supercenter" that would sell groceries and operate 24 hours per day.
Supporters say the expansion would bring in more job opportunities and sales tax revenue.
Opponents point out that many groceries are exempt from sales and use tax in California. They also argue that the expansion would kill local businesses and destroy union-wage jobs at area grocery stores.