Malaga Cnty. Water Dist. v. State Water Res. Control Bd.

58 Cal.App.5th 447

272 Cal.Rptr.3d 548

MALAGA COUNTY WATER DISTRICT, Plaintiff and Appellant,

v.STATE WATER RESOURCES CONTROL BOARD et al., Defendants and Respondents.

F075868

Court of Appeal, Fifth District, California.

Filed December 10, 2020

Costanzo & Associates and Neal E. Costanzo, Fresno, for Plaintiff and Appellant.

Xavier Becerra, Attorney General, Robert W. Byrne, Assistant Attorney General, Eric M. Katz and Adam L. Levitan, Deputy Attorneys General, for Defendants and Respondents.

HILL, P.J.

This is one of several cases before this court involving disputes between the Malaga County Water District (Malaga) and the agencies involved in issuing and enforcing the permits necessary for Malaga to operate its waste treatment facility. In this case, the Central Valley Regional Water Quality Control Board (Water Quality Board) imposed penalties totaling $78,000¹ on Malaga for violating the water discharge requirements of its permit. Through an administrative writ review, Malaga contends these penalties were inappropriately imposed for several reasons. For the reasons set forth below, we agree with Malaga that laches is a proper defense in administrative sanctions proceedings, and that the Water Quality Board utilized a void underground regulation when it issued the "Hearing Procedure for Administrative Civil Liability Complaint R5-2013-0527" (Hearing Procedure) in this case. (Some capitalization omitted.) The first issue may only affect some of the penalties imposed by the Water Quality Board while the second may require a full rehearing. The trial court previously concluded that laches was not a defense and the Hearing Procedure was not an underground regulation. We therefore reverse the trial court's order and remand the matter to the trial court to determine whether a writ should issue based on one or both of Malaga's right to present a laches defense and the Water Quality Board's use of a void underground regulation via the Hearing Procedure. In all other respects, we affirm the trial court's order.

FACTUAL AND PROCEDURAL BACKGROUND

This case follows a determination by the Water Quality Board that Malaga had violated certain wastewater discharge requirements and an accompanying $78,000 total penalty. The formal administrative proceedings began on May 1, 2013, with the filing of an administrative civil liability complaint (complaint). Attached to the complaint was a list summarizing the purported violations, created by Water Quality Board staff members, reflecting several violations occurring between 2007 and 2011.

These violations were initially identified to Malaga through a July 8, 2010 notice of violation and a subsequent November 5, 2010 revised notice of violation. A new notice of violation and draft record of violations issued December 9, 2011, identifying alleged violations occurring between March 14, 2008, and October 30, 2011. The complaint also stated that Malaga had additional violations between February 1, 2004, and March 13, 2008, that were subject to mandatory minimum penalties. Malaga contends that it responded to each of the notices of violation at issue in this case, but that its responses did not lead to further dialog. It also notes that early violations occurring between 2008 and 2010 were purportedly addressed and suspended prior to these notices, provided Malaga completed certain compliance projects.

At some point prior to the administrative hearing, Malaga was provided with the Hearing Procedure that would be utilized. Malaga claims the document was not timely provided, being received by Malaga on May 6, 2013, and counsel on May 16, 2013, despite having deadlines of May 10, 2013, for objections. The document further limited the time to present to 30 minutes for each side and stated that all evidence other than witness testimony, all witness lists, and all legal and technical arguments must be submitted in advance of the hearing to the Prosecution Team or the Advisory Team.

Malaga objected to the Hearing Procedure. Responses to these objections suggested the Hearing Procedure was adopted in 2012 by the chairman of Water Quality Board, but that various deadlines may have been set by the Prosecution Team based on formulas provided by the Water Quality Board. A senior counsel on the Advisory Team, David Coupe, provided an email that summarized prior rulings by the chairman stating the procedures were appropriate.

Malaga also objected to the Prosecution Team submitting any evidence in the case, claiming it was irrelevant because the proceedings were barred by laches. Coupe's email summarized a ruling that the evidence was not irrelevant under the statutory scheme, but it also modified the Hearing Procedure to allow for an additional 10 minutes per side to argue the laches issue.

The administrative hearing occurred on July 25, 2013. At that hearing, Malaga raised objections to Coupe's opinions and the Hearing Procedure. These objections were overruled by the Chairman of the Water Quality Board, Dr. Karl Longley. Malaga also objected to several filings and a prior State Water Resources Control Board (State Water Board) decision in an unrelated case that was submitted for review.

These objections were also overruled.

With respect to the evidence presented, the Prosecution Team primarily relied upon Lonnie Wass. Wass provided a summary of the known violations compiled by Water Quality Board staff from Malaga's self-monitoring reports, provided his opinion on why certain violations required imposition of mandatory minimum penalties, and explained why the total violation penalty recommendation was $78,000. Malaga made objections to the testimony, which were overruled by Chairman Longley. A later motion to strike Wass's testimony was also overruled by Chairman Longley.

Malaga then cross-examined Wass on his testimony. Wass confirmed that he could not identify specific documents supporting his summary but was relying on staff efforts to compile the violations from Malaga's self-monitoring reports. As Malaga's cross-examination continued, the Prosecution Team raised objections. These were generally, but not universally, sustained by Chairman Longley, a point Malaga contends affected its opportunity to cross-examine the witness.

Malaga's president, Charles Garabedian, testified on behalf of the company. He testified that due to the delay in proceedings, Malaga had lost the ability to determine who had caused the effluent violations and therefore could not shift the cost of the penalties to the polluter. He further testified that the proposed penalty was around 15 percent of Malaga's budget, and that Malaga could not afford to pay such a penalty. Malaga claims that it was precluded from presenting additional evidence about its claimed inability to pay, in part because the Water Quality Board voted to approve an opinion Coupe provided that a laches defense was not valid.

The Water Quality Board ultimately imposed the recommended $78,000 penalty without granting any of the relief options available when penalties are issued to rural wastewater treatment facilities serving small communities. The order entered parroted the language of the complaint, with additional language rejecting the laches claim. Malaga petitioned the State Water Board for review of this order. This petition was dismissed by the executive director of the State Water Board for failing "to raise substantial issues that are appropriate for review by the State Water [ ] Board." Malaga then filed a petition for writ of administrative mandamus pursuant to Code of Civil Procedure section 1094.5. The trial court concluded that laches was not a defense to the assertions brought by the Water Quality Board, and otherwise concluded no substantive or procedural errors arose in the proceedings. This appeal timely followed.

DISCUSSION

Malaga's brief identifies three main contentions and includes several subparts, some of which are well defined and some of which are not. At the highest level, Malaga first contends the trial court wrongly concluded that laches is not a defense in the underlying administrative proceedings. Further, Malaga argues that laches should arise after a one-year delay in prosecution, and, under that period, all claims brought against Malaga were improper. Next, Malaga contends the Water Quality Board violated the Administrative Procedure Act (APA; Gov. Code, § 11340 et seq. ) in multiple ways, with the result being that Malaga did not receive a fair trial. Finally, Malaga contends that only hearsay evidence was used to support the Water Quality Board's conclusion. Malaga argues that relying on hearsay evidence in this context is improper and precludes the Water Quality Board from finding any violations.

Standard of Review

Decisions made by the Water Quality Board or the State Water Board may be reviewed by way of a writ of mandate. ( Wat. Code, § 13330, subds. (a), (b).)² These writ proceedings are governed by Code of Civil Procedure section 1094.5. ( Wat. Code, § 13330, subd. (e).) In such proceedings, the trial court's review "shall extend to the questions whether the respondent has proceeded without, or in excess of, jurisdiction; whether there was a fair trial; and whether there was any prejudicial abuse of discretion." ( Code Civ. Proc., § 1094.5, subd. (b).) An abuse of discretion can occur three different ways: (1) "the respondent has not proceeded in the manner required by law," (2) the "decision is not supported by the findings," or (3) "the findings are not supported by the evidence." (Ibid. )

The primary issue in this appeal is Malaga's contention that the Water Quality Board and trial court wrongly determined, as a matter of law, that laches is not a defense to the administrative proceedings at issue. As this determination is purely legal in nature, we utilize a de novo review. (See Hoag Memorial Hospital Presbyterian v. Kent (2019) 36 Cal.App.5th 413, 421, 248 Cal.Rptr.3d 486 [" ‘If a question of law is presented, we...