Judge James C. Chalfant, Case Number: 23STCP04362, Date: 2024-03-21 Tentative Ruling

Respondent Commission on State Mandates (“Commission”) and Real Party-in-Interest Department of Finance (“Finance”) demur to the First Amended Petition (“FAP”) filed by Petitioner County of Los Angeles (“County”).

The court has read and considered the moving papers, oppositions, and replies, and renders the following tentative decision.

Petitioner County filed the Petition on November 30, 2023. The operative pleading is the FAP, filed December 15, 2023, alleging erroneous application of law under (1) Penal Code sections 188 and 189, (2) Penal Code section 1170.95, and (3) the California Constitution (“Cal. Const.”) and Government Code (“Govt. Code”) section 17556(g). The FAP alleges in pertinent part as follows.

Under Cal. Const. art. XIII.B, section 6 (“art. XIII.B, section 6”), when the Legislature or a state agency mandates a new program or higher level of service on any local government, the State shall provide a subvention of funds to reimburse that local government for the costs of that program or higher level of service. FAP, ¶5. Art. XIII.B section 6(a)(2) creates an exception when legislation defines a new crime or changes an existing definition of a crime. FAP, ¶6.

In 2018, the Legislature enacted SB 1437, effective January 1, 2019. FAP, ¶7. SB 1437 amended Penal Code sections 188 and 189 to limit accomplice liability under the felony-murder rule to the actual killer and those who either (1) aided and abetted with the intent to kill or (2) were a major participant in the underlying felony and acted with reckless indifference to human life. FAP, ¶¶ 7-8. This limitation does not apply when the defendant knew or reasonably should have known the victim was a peace officer engaged in the performance of his duties. FAP, ¶8.

SB 1437 also enacted Penal Code section 1170.95 which requires district attorneys and public defenders to participate in post-conviction proceedings in which convicted individuals could petition a court to vacate their conviction based on Penal Code sections 188 and 189 and be resentenced on remaining counts. FAP, ¶9.

On December 31, 2019, the County filed a Commission Test Claim (“Test Claim”) to seek reimbursement for obligations incurred under SB 1437 and the post-conviction proceedings required thereunder. FAP, ¶10. The County asserted that the District Attorney’s Office expended $1,592,000 in the 2018-2019 fiscal year and $1,295,000 in the 2019-2020 fiscal year in SB 147 proceedings. FAP, Ex. A (Decision (“Dec.”), p. 17). The Public Defender’s office expended $206,000 in the 2018-2019 fiscal year and $471,000 in the 2019-2020 fiscal year. Dec., p. 17.

Finance filed comments on the Test Claim as part of proceedings. Dec., pp. 3, 19. Finance argued that SB 1437 is subject to Govt. Code section 17556(g)’s exclusion of “crimes and infractions” because it changed the application of and penalty for the felony murder rule. Dec., p. 19. This meant that SB 1437 did not impose costs mandated by the State. Dec., p. 19.

On December 4, 2020, the Commission issued a decision (“Decision”) finding that Penal Code sections 188 and 189 did not impose any requirements on local governments. FAP, ¶¶ 11-12. The Decision found that new Penal Code section 11790.95 added a new program or higher level of service which imposed new requirements on county district attorneys and public defenders. Dec., p. 3. However, under Govt. Code section 17556(g), the State was exempt from reimbursement costs arising from a statute that eliminates a crime or infraction. FAP, ¶13, Dec., p. 3. SB 1437 eliminated the crime of murder under the felony-murder rule and the “natural and probable causes doctrine.” FAP, ¶14, Dec., p. 3. The defendant instead must be either the actual killer, someone with intent to kill, or a major participant in the underlying felony who was acting with reckless indifferent to human life. FAP, ¶14, Dec., p. 3. The elimination of a crime meant that any costs incurred were not mandated by the State within the meaning of Govt. Code section 17556(g). Dec., p. 3. The Decision was served on all parties on December 9, 2020. Dec., p. 1.

The Decision was wrong because the amendments to Penal Code sections 188 and 189 did not eliminate the crime of first-degree murder. FAP, ¶18(a). SB 1437 just modified the elements and conduct required for a conviction thereunder. FAP, ¶¶ 18(a)-(b). The felony-murder rule and natural and probable consequences doctrine are theories defining what constitutes a crime, not a crime itself. FAP, ¶18(c). The Decision did not eliminate the crimes of first-degree murder or the “felony” underlying the felony-murder rule. FAP, ¶18(d).

The Decision also was wrong whether Govt. Code section 17556(g) precludes reimbursement under Penal Code section 1170.95. FAP, ¶¶ 21-22. The obligation to require post-conviction proceedings is separate from the amendments to Penal Code sections 188 and 189. FAP, ¶22(a). The legislative analysis for SB 1437 acknowledged that requiring the participation of district attorneys and public defenders in this process imposes a state-mandated local program. FAP, ¶22(b). To the extent that Govt. Code section 17556(g) applies, it only does so for the portion of a statute directly relating to the enforcement of the crime or infraction, not Penal Code section 1170.95’s addition of a post-conviction proceeding. FAP, ¶22(c).

Even if arguendo Govt. Code section 17556(g) applies, it unconstitutionally precludes reimbursement of costs to which the County is entitled under art. XIII.B, section 6. FAP, ¶¶ 26(a), (f). That constitutional provision entitles a local government to reimbursement when the Legislature mandates a new program or higher level of service, but legislation defining a new crime or “changing an existing definition of a crime” is exempt. FAP, ¶26(b). Govt. Code section 17556(g) exempts reimbursement for costs arising when a statute “eliminated a crime” or “changed the penalty” for the crime. FAP, ¶26(c). These two terms do not mean the same thing as “changing an existing definition of a crime.” FAP, ¶26(d). The Legislature exceeded its authority by enacting Govt. Code section 17556(g) to exempt costs beyond those exempt under Cal. Const. Art. XIII.B section 6. FAP, ¶26(e).

The County seeks a writ of mandate compelling the Commission to set aside the Decision and issue a new decision finding that SB 1437 imposes reimbursable costs. The County also seeks an award of attorney’s fees and costs. FAP Prayer for Relief, ¶¶ 1-2.

On December 15, 2023, the County filed the FAP and served the Commission by electronic mail.

A demurrer tests the legal sufficiency of the pleading alone and will be sustained where the pleading is defective on its face.

Where pleadings are defective, a party may raise the defect by way of a demurrer or motion to strike or by motion for judgment on the pleadings. CCP §430.30(a); Coyne v. Krempels, (1950) 36 Cal.2d 257. The party against whom a complaint or cross-complaint has been filed may object by demurrer or answer to the pleading. CCP §430.10. A demurrer is timely filed within the 30-day period after service of the complaint. CCP § 430.40; Skrbina v. Fleming Companies, (1996) 45 Cal.App.4th 1353, 1364.

A demurrer may be asserted on any one or more of the following grounds: (a) The court has no jurisdiction of the subject of the cause of action alleged in the pleading; (b) The person who filed the pleading does not have legal capacity to sue; (c) There is another action pending between the same parties on the same cause of action; (d) There is a defect or misjoinder of parties; (e) The pleading does not state facts sufficient to constitute a cause of action; (f) The pleading is uncertain (“uncertain” includes ambiguous and unintelligible); (g) In an action founded upon a contract, it cannot be ascertained from the pleading whether the contract is written, is oral, or is implied by conduct; (h) No certificate was filed as required by CCP §411.35 or (i) by §411.36. CCP §430.10. Accordingly, a demurrer tests the sufficiency of a pleading, and the grounds for a demurrer must appear on the face of the pleading or from judicially noticeable matters. CCP §430.30(a); Blank v. Kirwan, (“Blank”) (1985) 39 Cal.3d 311, 318. The face of the pleading includes attachments and incorporations by reference (Frantz v. Blackwell, (1987) 189 Cal.App.3d 91, 94); it does not include inadmissible hearsay. Day v. Sharp, (1975) 50 Cal.App.3d 904, 914.

The sole issue on demurrer for failure to state a cause of action is whether the facts pleaded, if true, would entitle the plaintiff to relief. Garcetti v. Superior Court, (1996) 49 Cal.App.4th 1533, 1547; Limandri v. Judkins, (1997) 52 Cal.App.4th 326, 339. The question of plaintiff’s ability to prove the allegations of the complaint or the possible difficulty in making such proof does not concern the reviewing court. Quelimane Co. v. Stewart Title Guaranty Co., (1998) 19 Cal.4th 26, 47. The ultimate facts alleged in the complaint must be deemed true, as well as all facts that may be implied or inferred from those expressly alleged. Marshall v. Gibson, Dunn & Crutcher, (1995) 37 Cal.App.4th 1397, 1403. Nevertheless, this rule does not apply to allegations expressing mere conclusions of law, or allegations contradicted by the exhibits to the complaint or by matters of which judicial notice may be taken. Vance v. Villa Park Mobilehome Estates, (“Vance”) (1995) 36 Cal.App.4th 698, 709.

For all demurrers filed after January 1, 2016, the demurring party must meet and confer in person or by telephone with the party who filed the pleading for the purpose of determining whether an agreement can be reached that would resolve the objections to be raised in the demurrer. CCP §430.31(a). As part of the meet and confer process, the demurring party must identify all of the specific causes of action that it believes are subject to demurrer and provide legal support for the claimed deficiencies. CCP §430.31(a)(1). The party who filed the pleading must in turn provide legal support for its position that the pleading is legally sufficient or, in the alternative, how the complaint, cross-complaint, or answer could be amended to cure any legal insufficiency. Id. The demurring party is responsible for filing and serving a declaration that the meet and confer requirement has been met. CCP §430.31(a)(3).

“[A] demurrer based on a statute of limitations will not lie where the action may be, but is not necessarily, barred. [Citation.] In order for the bar of the statute of limitations to be raised by demurrer, the defect must clearly and affirmatively appear on the face of the complaint; it is not enough that the complaint shows that the action may be barred.” State ex rel. Metz v. CCC Information Services, Inc., (2007) 149 Cal.App.4th 402, 413.

Respondent Commission and Real Party Finance separately demur to the FAP based on the County’s failure to timely name the Finance as Real Party.[2]

Art. XIII.B, section 6 provides that, when the Legislature or a state agency mandates a new program or higher level of service on any local government, the state shall provide a subvention of funds to reimburse that local government for the costs of that program or higher level of service.

The Commission is a quasi-judicial body which acts to resolve disputes that arise between the state and local agencies under art. XIII.B, section 6. Govt. Code §17500. It is the state agency charged with determining the existence of a state mandate and whether a local government is entitled to a subvention of funds for that mandate. Govt. Code §17551. The Commission is composed of seven members: the Controller, the Treasurer, the Director of Finance (“Finance Director”), the Director of the Office of Planning and Research, a public member with experience in public finance, and two members among specific groups who are appointed by the Governor and approved by the Senate. Govt. Code §17525(a).

Finance has general powers of supervision over all matters concerning the financial and business policies of the state. Govt. Code §13070. It is the primary agency responsible for administration of the state’s finances, fiscal policy, and conservation of state funds. Redevelopment Agency v. Commission on State Mandates, (“Redevelopment Agency”) (1996) 43 Cal. App. 4th 1188, 1197. Finance is authorized to institute proceedings deemed proper to conserve the rights and interests of the state. Govt. Code §13070.

The Commission shall hear any claim by a local agency that it is entitled to be reimbursed by the state for costs mandated by the state as required by art. XIII.B, section 6. Govt. Code §17551. The Commission procedure for test claims must provide for presentation of evidence by the claimant, Finance, any other affected department or agency, and any other interested person. Govt. Code §17553(a)(1). A “test claim” is the first claim filed with the Commission that a particular statute or executive order imposes costs mandated by the state. Govt. Code §17521. A “party to a test claim” includes the test claimant, Finance, and other affected state agencies. Title 2, California Code of Regulations (“2 CCR”) §11181.2(l)(1).

The effective date of the Commission’s decision is the date it is first mailed or served. 2 CCR §1187.11(a). Within 30 days of a decision, the Commission must provide notice of its decision to Finance, the appropriate Senate and Assembly policy and fiscal committees, the Legislative Analyst, and the Controller. Govt. Code §17555(a).

A claimant or the state may commence an administrative mandamus proceeding to set aside a Commission decision for lack of substantial evidence. Govt. Code §17559(b).

In a mandamus action, the application shall be accompanied by proof of service of it upon the respondent and the real party-in-interest named in such application. CCP §1107. A real party-in-interest is any person or entity whose interest will be directly affected by the proceeding. Redevelopment Agency, supra, 43 Cal. App. 4th at 1197. This includes an entity in whose favor the act complained of operates. Id.

The Commission notes that Finance was a party to the County’s administrative test claim. The Commission was required to give proper notice of claims to Finance along with any other affected state agency. Govt. Code §§ 17553(a)(1), 17555; 2 CCR §1181.2(l)(1). Moreover, either the County or Finance could have sought judicial review of the Commission’s Decision. Govt. Code §17559. As a result, Finance should have been named by the County as a real party-in-interest in this administrative mandamus action. Yet, the County failed to name and serve Finance in the Petition until the FAP was filed on December 9, 2023. Comm. Dem. at 6.

The County disputes that Finance should be a Real Party-in-Interest. Opp.[3] at 9, n. 4. The County argues that Finance is identified as a party, not a real party-in-interest, in Govt. Code section 17553(a), which concerns the Commission’s test claim procedure. It is entitled to receive notice of Commission decisions pursuant to Govt. Code section 17559(a), but again is not identified as a real party-in-interest. Finally, it is a party to a test claim under 2 CCR section 1181.2(1)(l), but again not a real party-in-interest. The County notes that, although the cited statutes and regulations identify several other entities as interested parties, the Commission does not argue that they are real parties-in-interest. Opp. at 8.

This argument is spurious. The parties to an administrative proceeding almost categorically are entitled to participate in a judicial administrative mandamus action reviewing that decision. The fact that Finance was a party to the test claim case shows that its interest will be directly affected by the County’s mandamus proceeding and therefore is a real party-in-interest.

The effective date of the Commission’s decision is the date it is first mailed or served. 2 CCR §1187.11(a). The Decision was served on December 9, 2020. Dec., p. 1. The County filed the Petition on November 30, 2023, naming the Commission as Respondent but not naming any “Does” or Finance as Respondents or Real Parties-in-Interest. An action upon a liability created by statute, other than a penalty or forfeiture, has a three-year statute of limitations. CCP §338(a). The FAP added Finance as Real Party-in-Interest six days after the three-year statute of limitations passed.

To avoid the limitation passage, the County asserts that its December 9, 2023 addition of Finance as Real Party-in-Interest in the FAP relates back to the November 30, 2023 filing of the Petition, making it timely. Opp. at 6.

When the plaintiff is ignorant of the name of a defendant, he must state that in the complaint and, when his true name is discovered, the pleading must be amended accordingly. CCP §474. Such an amendment relates back to the commencement of the action for statute of limitations purposes. See Smeltzley v. Nicholson Mfg. Co., (1977) 18 Cal.3d 932, 935. An amended complaint relates back to the timely filed complaint and avoids passage of the statute of limitations if it rests on the same general set of facts and same injuries as the original complaint. Barrington v. A.H. Robins Co., (1985) 39 Cal.App.3d 146, 151. The requirements for relation back are mandatory, including that the original complaint must name Doe defendants, allege that the plaintiff is ignorant of the true name and capacity of each Doe defendant, and allege a valid cause of action against the Doe. See Eghtesad v. State Farm General Insurance Co., (2020) 51 Cal.App.5^th 406, 415.

The County did not include any Doe defendants in the Petition and cannot rely on the relation back doctrine for Finance as Real Party-in-Interest. See Kerr-McGee Chemical Corp. v. Superior Court, (1984) 160 Cal.App.3d 594, 599.

The County relies on Cloud v. Northrop Grumman Corp. (“Cloud”) (1998), 67 Cal. App. 4th 995. Opp. at 6.

In Cloud, 998-99, a plaintiff who initially had standing to sue her former employer for wrongful termination and sexual harassment lost standing when she Chapter 7 bankruptcy and the bankruptcy trustee held her claim as the real party-in-interest. The plaintiff did not know these claims were legally related to her bankruptcy petition. Id. at 999-1000. She was later advised that she could amend her bankruptcy filings to schedule her claim against her employer. Id. at 1000. The trial court granted a motion for judgment on the pleadings without leave to amend based on her lack of standing. Id.

The appellate court held that the trial court should have granted leave to amend the complaint to either substitute in the bankruptcy trustee as real party-in-interest or to obtain the trustee’s abandonment of the claim. Id. The court cited Garrison v. Board of Directors (1995) 36 Cal. App. 4th 1670, 1678, for the legal proposition that when suit is brought by a plaintiff without a right to sue, although the complaint fails to state a cause of action in the plaintiff, an amended complaint by the right party restates the identical cause of action and is freely allowed. Id. at 1004-05. Cloud cited Klopstock v. Superior Court, (“Klopstock”) (1941), 17 Cal. 2d 13, 19-22, as holding that if the facts of the cause of action against the defendant would not be “wholly different” after amendment, a complaint filed by a party without standing may be amended to substitute in the plaintiff as real party-in-interest. Id. at 1005.

In Klopstock, supra, 17 Cal. 2d at 16, the California Supreme Court considered an amendment substituting the newly appointed administratrix of the estate as plaintiff. The court rejected the argument that this substitution was an entirely new suit and cause of action, therefore exceeding the proper scope of an amendment. 17 Cal.3d at 16. The amendment simply substituted the real party-in-interest in place of a party who lacked standing. Id. at 21. Whether an amendment introduced a wholly new cause of action does not depend on technical considerations or ancient formulae, but on whether a defendant would need to answer a wholly different legal liability or obligation from that originally stated. Id. at 20. Despite the amendment at issue, the defendant was still fully apprised of the relevant facts as of the original complaint. Id. at 21. This was consistent with case law allowing amendments substituting a real party-in-interest for the original plaintiff to relate back to the original complaint. Id. at 21-22.

The recent case of River’s Side at Washington Square Homeowner’s Assn. v. Superior Court, (2023) 88 Cal.App.5^th 1209, explained that Klopstock, Cloud, and other similar cases have made clear that a named plaintiff’s lack of standing at the beginning of an action is not necessarily fatal to continuing the action. Id. at 1239. CCP section 473(a)(1) permits amendment of a pleading by correcting the name of a party and must be liberally construed to permit such an amendment. Id. “Courts have permitted plaintiffs who have been determined to lack standing, or who have lost standing after the complaint was filed, to substitute as plaintiffs the true real parties in interest.” Brankik v. Downey Savings & Loan Assn., (2006) 39 Cal.4^th 235, 243. Id. at 1240. An amendment that changes nothing other than the identity of the plaintiff would clearly pass the modern “same general set of facts” test for relation back. Id. (permitting amendment of plaintiff to the assignee of homeowners’ members).

As the demurring parties note, this case law on relation back for plaintiffs is inapposite. Comm. Reply at 4; Dept. Dem. at 10. The amendment of a complaint to substitute a plaintiff so long as it rests on the same general set of facts and refers to the same accident or injuries differs from an amendment to add a defendant, if only because there is no pleading mechanism recognized in case law to allege Doe plaintiffs. The issue here is whether an amendment adding a real party-in-interest relates back to the original petition. It does not because, unlike the doctrine concerning amendment to add a real party-in-interest plaintiff, a real party-in-interest defendant has no prior notice of the action. As the Commission argues, allowing an amendment to relate back when adding a new adverse party prejudicially subjects that new party to liability or, in this case, an adverse decision. Comm. Reply at 4.[4]

The County argues that this distinction ignores the general policy that courts should liberally grant leave to amend a petition as to dispose of a case on its merits. Cloud, supra, 67 Cal. App. 4th at 1007. Opp. at 6. That liberal policy is not unfettered by reasonable requirements. Woo v. Superior Court, (1999) 75 Cal. App. 4th 169, 176. The failure to provide an adverse real party-in-interest with timely notice is unreasonable while substitution of a plaintiff is not.

The County argues that Finance received notice of the Petition because the Finance Director is a member of the Commission. Opp. at 5. Even if the Finance Director had actual knowledge of the Petition, the addition of Finance as Real Party would not relate back for statute of limitations purposes because it must be based on allegations of a Doe defendant in the original Petition. Additionally. the constitutional guarantee of due process requires more than actual notice conforming to the statutory requirements; there must be service of process conferring personal jurisdiction. Ursino v. Superior Court, (1974) 39 Cal. App. 3d 611, 617. Comm. Reply at 5. The County never named or served Finance until the FAP and the County cannot relate back its addition of Finance as a Real Party. The action is untimely as to Finance and its demurrer is sustained.

CCP section 389(a) defines the persons who should be joined if possible, known as “necessary parties.” A party is necessary if (1) in his absence complete relief cannot be accorded among those already parties or (2) he claims an interest relating to the subject of the action and is so situated that the disposition of the action in his absence may (i) as a practical matter impair or impede his ability to protect that interest or (ii) leave any of the persons already parties subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations by reason of his claimed interest. CCP §389(a). A determination that a party is necessary is a predicate for the determination whether the party is also indispensable. County of Imperial v. Superior Court, (“Imperial”) (2007) 152 Cal.App.4th 13, 26.

As stated, Finance has general powers of supervision over all matters concerning the financial and business policies of the state. Govt. Code §13070. It is the primary agency responsible for administration of the state’s finances, fiscal policy, and conservation of state funds. Redevelopment Agency, supra, 43 Cal. App. 4th at 1197. It is authorized to institute proceedings deemed proper to conserve the rights and interests of the State. Govt. Code §13070. Finance participates in and presents evidence as a party in a test claim before the Commission. Govt. Code §17553(a)(1); 2 CCR §11181.2(l)(1). It further is entitled to notice of the Commission’s decision and was entitled to seek review of the Commission’s Decision. Govt. Code §17559.

The Commission argues that Finance argues is a necessary party to the County’s action to vacate the Decision, which held the State does not need to reimburse local governments for expenses incurred under SB 1437. Comm. Dem. at 12. The fact that Finance is a proper Real Party means that it qualifies as a necessary party, and the County does not dispute its necessary party status.

CCP section 389(b) provides: “If a person as described in paragraph (1) or (2) of subdivision (a) cannot be made a party, the court shall determine whether in equity and good conscience the action should proceed among the parties before it, or should be dismissed without prejudice, the absent person being thus regarded as indispensable. The factors to be considered by the court include: (1) to what extent a judgment rendered in the person’s absence might be prejudicial to him or those already parties; (2) the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; (3) whether a judgment rendered in the person’s absence will be adequate; (4) whether the plaintiff or cross-complainant will have an adequate remedy if the action is dismissed for nonjoinder.”

Failure to join an indispensable party is not a jurisdictional defect in the fundamental sense of jurisdiction. The court has the power to render a decision as to the parties before it in the absence of an indispensable party. It is for reasons of equity and convenience only that a court will not proceed with a case where it determines that an indispensable party is absent and cannot be joined. Save Our Bay, Inc. v. San Diego Unified Port District, (“Save Our Bay”) (1996) 42 Cal.App.4th 686, 693.

The controlling test for whether a necessary party is also indispensable under CCP section 389(b) is whether “the plaintiff seeks some type of affirmative relief which, if granted, would injure or affect the interest of a third person not joined. Save Our Bay, supra, 42 Cal.App.4th at 692. In other words, a third party is indispensable if his or her rights must necessarily be affected by the judgment. Id. Each of the four factors in subdivision (b) must be considered, but “no factor is determinative or necessarily more persuasive than another.” Imperial, supra, 152 Cal.App. 4th at 35.

The parties debate the import of Redevelopment Agency, supra, 43 Cal. App. 4th at 1197, in which the court addressed Finance’s attempt to intervene in an administrative mandamus case filed by a local agency against the Commission for denial of subvention from state funds of housing costs incurred by the agency. Id. at 1192. After reviewing the statutory scheme for state mandate determinations, the court held that Finance was a real party-in-interest whose joinder in the action against the Commission was indispensable under CCP section 389(a). Id. at 1197. In light of Finance’s right to notice and participation in the Commission’s administrative proceeding and its duty to supervise the financial policies of the state, the subvention of funds to the petitioner would “certainly injure or affect the interests of [Finance].” Id. It should have been named as a real part-in-interest and was an indispensable party under CCP section 389(a). Id.

The County distinguishes Redevelopment Agency as a case concerning intervention under CCP section 387(a), not whether Finance was an indispensable party under CCP section 389(a). While Redevelopment Agency stated in passing that Finance was indispensable to the action, its analysis focused on whether Finance was a necessary party under CCP section 389(a), not whether it was indispensable under CCP section 389(b). Opp. at 14.

The court agrees that Redevelopment Agency is factually distinguishable as addressing intervention under CCP section 387(a) and that its analysis of Finance’s indispensable party status focused on whether it was a necessary party without addressing the CCP section 389(b) factors. However, courts have noted that mandatory intervention and indispensable party have virtually the same criteria. Carlsbad Police Officers Assn. v. City of Carlsbad (“Carlsbad”) (2020), 49 Cal. App. 5th 135, 148.

In any event, the court agrees with Redevelopment Agency that Finance is an indispensable party to the County’s action against the Commission.

The first factor in CCP section 389(b) is the extent to which a judgment rendered in Finance’s absence might be prejudicial to it or those already parties. Obviously, a judgment reversing the Commission’s Decision would prejudice Finance’s interests as steward of the state’s finances. See Finance Reply at 7.

The County argues that there would be no prejudice to the Finance if the court proceeded without it because the Commission and Finance have a unity of interest and Commission will protect that interest. Finance is an agency of the state and so is the Commission.[5] While the Commission is charged with considering both the state’s and the County’s concerns, it adopted Finance’s legal position that reimbursement should be denied to the County “because SB 1437 is subject to Government Code §17556(g), ‘the crimes and infractions’ exclusion…Accordingly…SB 1437 does not impose costs mandated by the state.” FAP, Ex. A, p. 19. As a result, the Commission is defending Finance’s position in this case. Because the Commission is defending Finance’s position, there is not just a unity of interest, but an identical unity of interest. Opp. at 10-11.

The County cites Save Berkeley’s Neighborhoods v. Regents of University of California (“Neighborhoods”), 70 Cal.App.5th 705, 722, as holding that, even when parties’ motivations differ, they can have sufficiently aligned interests such that the absent party’s rights necessarily will not be affected or impaired by the judgment or proceeding. Opp. at 11.

Neighborhoods was a CEQA action where the Regents approved a new development, certified a supplemental environmental impact report, and identified the developers in its notice of determination. 70 Cal.App.5th at 711-12. The petitioner named the Regents as a respondent in a petition for a writ of mandate but did not add the developers as real parties-in-interest until after the statute of limitations had passed. Id. at 712. The developers demurred that they were necessary and indispensable parties, arguing that, while the Regents’ interest was to add academic space and housing, their interests were to develop, build, manage, and operate the project. Id. at 721.

The appellate court conceded that developers of property are often indispensable parties in CEQA actions. Id. It also conceded that the Regents and the developers had different motivations for development. Id. at 722. However, they had a strong unity of interest. Id. Like the developers, the Regents had an interest in the project’s timely completion to both support the Goldman School of Public Policy and address housing concerns. Id. The Regents and the developers also would manage different parts of the completed project, with the Regents regaining full ownership after the project debt was repaid. Id. The court therefore could not say that the trial court abused its discretion in finding that the developers were not indispensable parties. Id. at 724.

The County also relies on Deltakeeper v. Oakdale Irrigation Dist., (“Deltakeeper”) (2001) 94 Cal.App.4th 1092. Opp. at 11.

In Deltakeeper, CEQA compliance was a precondition to enforcement of a water transfer agreement and the court considered the adequacy of an environmental impact report (“EIR”). Id. at 1102. Three named defendants sought to uphold the EIR to satisfy the precondition and obtain the benefits of the water transfer agreement. Id. The respondents argued that a fourth unnamed party did not have the same interests as the other three because it did not have the same rights under the agreement. Id. The court held that the fourth party wanted the EIR validated as a precondition to the agreement, and its interests for the CEQA action were still aligned with the other three. Id. at 1102-03. The fact that they had different interests in the transfer of water under the agreement did not mean they had different interests in the CEQA litigation. Id. at 1103.

In general, the Commission has different interests than Finance. The Commission is a quasi-adjudicative body whose interests lie in upholding its decision and reasoning, protecting its procedural handling of the matter, and supporting the proper interpretation of its promulgating authority. It is not directly affected by a judgment in favor of the County and merely faces the prospect of the burden of a new hearing if ordered by the court. Govt. Code §17559(b). Finance’s interests lie in protecting the Commission’s decision on the mandate issue at hand. They are not the same. See Finance Reply at 7-8.

The court agrees with the County that when the Commission adopts the claimant’s position in its decision and decides to defend the administrative mandamus action as respondent, the Commission is generally aligned with the winning party below. This general alignment does not make a unity of interests, however. The Commission seeks to defend its Decision in its capacity as the issuing adjudicatory body. Finance’s interest is in protecting the state’s financial and budgetary matters. See Redevelopment Agency, supra, 43 Cal. App. 4th at 1192, 1195. The Commission has no interest in protecting the state’s budget or in distributing funds to local agencies. The Commission’s and Finance’s differing roles mean that, while they both would defend the Commission’s decision, they cannot be expected to defend it in the same way. As Finance argues, it has no power to control the Commission’s litigation strategy. Finance Reply at 11.

The Commission correctly notes that the unity of interests in the cited cases was stronger than here. Comm. Reply at 7-8. In Neighborhoods, supra, 70 Cal.App.5th at 722, both the Regents and the developers had an interest in the prompt completion of the new structures, which they would both own. In Deltakeeper, supra, 94 Cal.App.4th at 1102-03, the parties all wanted to defend the EIR so that the contract remained enforceable, even if their rights under that contract would then differ. The parties did not have completely different roles such that they may defend the case differently.

While the interests of the Commission and Finance are generally aligned in defending this matter, Finance may suffer prejudice if the case were to proceed without it because it cannot rely on the Commission to take the same approach as it would. Moreover, a court decision in the County’s favor would invoke Finance’s right to a collateral attack, which could prove procedurally difficult. See post.

The second factor in CCP section 389(b) considers whether protective provisions in the judgment can ameliorate or eradicate prejudice to Finance.

The County argues that Finance can participate in future Commission proceedings if this court reverses and remands the Decision, thereby minimizing any prejudice. Opp. at 13.

This would be true only if the court remanded for further Commission proceedings. As the Finance notes, it would have no participation if the court grants the County’s claim that costs incurred under SB 1437 are reimbursable. Finance Reply at 9. The Commission further explains that the court’s decision whether there is a reimbursable state-mandated program at issue in this case is purely a question of law for which there is no prospect of remand. Comm. Reply at 8, n. 2.

There are no protective measures to mitigate the prejudice Finance would face if this action were to proceed without it.

The third factor in CCP section 389(b)(3) requires the court to consider whether a judgment entered in the absence of Finance would be adequate. “The test for determining the ability to protect an absent party’s interest is whether existing and absent parties’ interests are sufficiently aligned that the absent party’s right necessarily will not be affected or impaired by the judgment or proceeding.” See also Imperial, 152 Cal.App.4th at 38.

The County asserts that the court’s decision in Finance’s absence will be adequate because it will only answer a straightforward question whether Govt. Code section 17556(g) bars reimbursement for costs incurred under SB 1437. Finance can still argue why the court should say it does, just as it did before the Commission. Opp. at 13.

The County glosses over the manner in which Finance would make that argument. As both demurrers argue, an indispensable party is not bound by a judgment in an action in which he was not joined. Save Our Bay, supra, 42 Cal. App. 4th at 693. Any decision is therefore inadequate because it is subject to later collateral attack by the non-joined indispensable party, free from issue of claim preclusion. Id. If this case proceeded without it, Finance could challenge the court’s mandamus decision via a new lawsuit. Comm. Dem. at 10; Finance Dem. at 15.

The County responds that this risk is absent because proceedings before the Commission are the exclusive means for determining the state’s obligations under art. XIII.B, section 6. Govt. Code §§ 17550, 17552. If the Finance is dissatisfied with the court’s decision, it can seek review after remand to the Commission. Opp. at 14.

The County’s argument proves the inadequacy of a judgment without Finance and underscores the prejudice to it. As discussed ante, there will not be a remand to the Commission for further proceedings. Because Finance would not be bound by any judgment, it would have the right to challenge the decision collaterally. The manner in which Finance could do so is unclear, but the right remains, and it could lead to two inconsistent decisions by two different courts. Comm. Reply at 9.

The fourth factor in CCP section 389(b)(3) is whether the plaintiff or cross-complainant will have an adequate remedy if the action is dismissed for nonjoinder.

The County argues that it will not have an alternative remedy because this action is the only way it can contest the Decision. Opp. at 14.

This is correct. However, as the replies note, the lack of an available remedy is an unavoidable result in any case where an indispensable party is not joined and the limitations period has run. Save Our Bay, supra, 42 Cal. App. 4th at 699. Comm. Reply a 10; Dept. Reply at 12. The County had three years to bring this action against all necessary and indispensable parties. CCP §338(a). Its failure to do so is a situation of its own making, and the County cannot now rely on it as a reason to avoid dismissal.

Based on the four factors in CCP section 389(b), Finance is an indispensable party to this action and the Commission’s demurrer is be sustained.

If a demurrer is sustained, the court may grant leave to amend the pleading upon any terms as may be just and shall fix the time within which the amendment or amended pleading shall be filed. CCP §472a(c). It is an abuse of discretion to grant a motion for judgment on the pleadings without leave to amend if there is any reasonable possibility that the plaintiff can state a good cause of action. Dudley, supra, 90 Cal. App. 4th at 260.

The County asks for leave to amend so it can add allegations why Finance is not an indispensable party, including the fact that the Commission fully represents the Finance’s interests before this court, both are state agencies, and the state’s interests will not be prejudiced by Finance’s absence. Opp. at 15.

These are conclusions of law, not allegations of fact that the court would accept as true if added to the FAP. See Vance, supra, 36 Cal.App.4th at 709. They also are the same legal arguments the County made in opposition to the demurrers. The County fails to identify specific facts that could lead the court to a different conclusion if added to the FAP and leave to amend is denied.

The demurrers to the Petition are sustained without leave to amend. An OSC re: dismissal is set for April 4, 2024 at 9:30 a.m.

[1] In opposition to the Commission’s demurrer, the County submits a declaration from Howard Gest, Esq. (“Gest”) attaching emails between the Commission and the County as exhibits. Gest Decl., Exs. A-B. These communications concern whether the County would add Finance as a real party-in-interest to the Petition. Gest Decl., ¶¶ 3-6, Exs. A-B. Aside from meet-and-confer efforts, the only evidence admissible on demurrer are the pleadings themselves and judicially noticeable matters. CCP §430.30(a); Blank, supra, 39 Cal.3d at 318. The emails are irrelevant and have not been considered.

[2] The moving parties have satisfied the requirement to meet and confer. After the County served the Commission with the FAP, it agreed to extend the deadline for a demurrer to January 29, 2024. Barich Decl., ¶3. On January 17, 2024, Finance gave the County notice of its intent to demur to the FAP. Brudigam Decl., ¶3. Finance and the County met and conferred on January 23 but could not resolve the issues in the agreement. Brudigam Decl., ¶5. The Commission also met and conferred with the County via telephone on the same date, but those efforts also failed. Barich Decl., ¶4.

[3] The County’s oppositions are similar but not identical. For convenience, the court will cite only the County’s opposition to the Commission’s demur.

[4] Finance correctly notes that there is a distinction between a “real party-in-interest” plaintiff discussed in this case law and Finance. Finance Reply at 5. A “real party-in-interest” is “any person or entity whose interest will be directly affected by the proceeding”, which is “usually the other party to the lawsuit or proceeding to be challenged”. Connerly v. State Personnel Board, (2006) 37 Cal.4^th 1169, 1178. It may also be “’the person or entity in whose favor the acts complained of [operate]’, ‘anyone having a direct interest in the result’”, or “’the real adverse party...in whose favor the act complained of has been done.’” Id. When the cases such as Cloud and Klopstock refer to a real party-in-interest plaintiff, they are referring to a new plaintiff whose interest will be directly affected by the proceeding. In administrative mandamus, however, the real party-in-interest refers to the other party to the administrative proceeding to be challenged.

[5] This “its all one state” argument was disposed of by Redevelopment Agency, supra, 43 Cal.App.4^th at 1194-95, 1198. See also Finance Reply at 8-9.