Judge Lee W. Tsao, Case Number: 22STCP03204, Date: 2023-08-24 Tentative Ruling

Judge: Lee W. Tsao, Case: 22STCP03204, Date: 2023-08-24 Tentative Ruling

Case Number: 22STCP03204 Hearing Date: August 24, 2023 Dept: C

STATE COMPENSATION INSURANCE FUND v. RICARDO LARA IN HIS CAPACITY AS INSURANCE COMMISSIONER OF THE STATE OF CALIFORNIA

CASE NO.: 22STCP03204

HEARING: 08/24/23

#10

Petitioner STATE COMPENSATION INSURANCE FUND’s First Amended Petition for a Peremptory Writ of Mandate is DENIED.

Opposing Party to give Notice.

After being audited by Petitioner STATE COMPENSATION INSURANCE FUND (“Petitioner” or “State Fund”), the real party in interest, Dynamic Joe Construction, Inc. (“Dynamic Joe”) filed an administrative appeal with the Administrative Hearing Bureau of the California Department of Insurance (“CDI”). The two issues on appeal were: (1) whether State Fund erred in categorizing certain Dynamic Joe Workers as employees rather than independent contractors; and (2) if Dynamic Joe’s workers were determined to be employees, whether State Fund miscalculated their renumeration for premium purposes.

Petitioner State Fund seeks judicial review of the April 29, 2022 Decision and Order Adopting Proposed Decision (the “Dynamic Joe Order”) issued by the Department of Insurance Administrative Hearing Bureau in the matter captioned; IN the Matter of the Appeal of Dynamic Joe Construction, Inc., FILE: AHB-WCA-20-09 (the “CDI Appeal”) pursuant to CCP §1094.5. State Fund objects to two findings: (1) the ALJ found that $87,533 of materials charges did not constitute payroll or renumeration under the USRP Part V, Section 3, Rule 1 and ordered State Fund to exclude those expenses from payroll or renumeration without any documentary evidence to support this finding; and (2) State Fund objects to the inclusion in the Order of ambiguous language and dicta that is unsupported both factually and legally. “State Fund hereby requests that this Court: (a) reverse the ALJ’s holding on $87,533 of materials charges and enter an order stating that said expenses may not be excluded from payroll and renumeration; and either (b) issue an order striking the ambiguous and unnecessary language from the Order or, (c) alternatively, order the current California Insurance Commissioner, Ricardo Lara (‘Respondent’ or ‘Commissioner Lara’), to strike limited portions of the Dynamic Joe Order, or (d) as a second alternative, issue an order de novo without the ambiguous language….” (First Am. Petition ¶3 and Prayer for Relief).

In Opposition, Respondent argues that State Fund’s “attempt to utilize a writ petition to strike language it finds objectionable from a non-precedential administrative decision falls outside the scope of inquiry of Code of Civil Procedure section 1094.5, subdivision (b) and should be denied.” (Opp. 5:10-12.)

Standard of Review

CCP §1094.5(a) states, in pertinent part, that “[w]here the writ is issued for the purpose of inquiring into the validity of any final administrative order or decision made as the result of a proceeding in which by law a hearing is required to be given evidence is required to be taken, and discretion in the determination of facts is vested in the inferior tribunal, corporation, board, or officer, the case shall be heard by the court sitting without a jury.”

Under CCP §1094.5(b), the pertinent issues are: whether the respondent has proceeded without jurisdiction, whether there was a fair trial, and whether there was a prejudicial abuse of discretion. An abuse of discretion is established if the respondent has not proceeded in the manner required by law, the decision is not supported by the findings, or the findings are not supported by the evidence. (CCP §1094.5(b).)

“Where it is claimed that the findings are not supported by the evidence, in cases in which the court is authorized by law to exercise its independent judgment on the evidence, abuse of discretion is established if the court determines that the findings are not supported by the weight of evidence. In all other cases, abuse of discretion is established if the court determines that the findings are not supported by substantial evidence in light of the whole record.” (CCP §1094.5(c).)

An agency is presumed to have regularly performed its official duties. (Cal. Ev. Code §664.) Therefore, the Petitioner seeking administrative mandamus has the burden of proof. (Steele v. Los Angeles County Civil Service Commission (1958) 166 Cal.App.2d 129, 137.; Afford v. Pierno (1972) 27 Cal.App.3d 682, 691.)

Where the case deals with a vested, fundamental right, the court is directed to exercise its independent judgment on the evidence. (Bixby v. Pierno (1971) 4 Cal.3d 130, 143.) However, if a fundamental right is not involved, the court applies the substantial evidence test. (Antelope Valley Press v. Poizner (2008) 162 Cal.App.4th 839, 850.) “Even though the fundamental vested right determination is made on a case-by-case basis, as a general rule, when a case involves or affects purely economic interests, courts are far less likely to find a right to be of the fundamental vested character.” (Id.)

Here, the issue to be determined only affects the amount in which the Dynamic Joe must pay in insurance premiums. It is purely an economic matter affecting “the cost of doing business.” “Administrative decisions which result in… increasing the cost of doing business… are considered impacts on economic interests, rather than on fundamental vested rights.” (E.W.A.P., Inc. v. City of Los Angeles (1997) 56 Cal.App.4th 310, 325.; Antelope Valley v. Poizner, supra, 162 Cal.App.4th at 850.)

The substantial evidence standard applies here.

Under the substantial evidence test, the petitioner has the burden of demonstrating the agency’s findings are not supported by substantial evidence in light of the whole record. (Young v. Gannon (2002) 97 Cal.App.4th 209, 225.) Substantial evidence is relevant evidence that a reasonable mind might accept as adequate to support a conclusion (California Youth Authority v. State Personnel Bd. (2002) 104 Cal.App.4th 575, 584-585), or evidence of ponderable legal significance which is reasonable in nature, credible and of solid value. (Mohilef v. Janovici (1996) 51 Cal.App.4th 267, 305, n. 28.)

Issue 1 – Whether $87,533 of Materials Charges Should be Excluded From Dynamic Joe’s Renumeration.

State Fund petitions this Court to reverse the ALJ’s finding that $87,533 of materials charges were properly excluded from Dynamic Joe’s payroll or renumeration because the Dynamic Joe Order “wrongly relied solely on hearsay and no other documentary evidence….” (Opening Brief 11:7-9.)

In Opposition, Respondent argues that the consideration of administrative hearsay is permissible under Gov. Code §11513.

Gov. Code §11513(c) states that administrative hearings “need not be conducted according to technical rules relating to evidence and witnesses…. Any relevant evidence shall be admitted if it is the sort of evidence on which reasonable persons are accustomed to rely in the conduct of serious affairs, regardless of the existence of any common law or statutory rule which might make improper the admission the evidence over objection in civil actions.” Further, while hearsay evidence alone cannot support a funding, it may be used for the purpose of supplementing or explaining other evidence. (Gov. Code §11513(d).)

Here, the ALJ relied upon documentary evidence in the form of service contracts and invoices to supplement the testimony of Joe Garcia (President of Dynamic Joe). Mr. Garcia testified he had seen the documents before and paid the amounts listed on the invoices and contracts. This testimony is sufficient to admit the documents under Gov. Code §11513. State Fund’s challenge to Mr. Garcia’s testimony goes to the weight of the evidence, not its admissibility. Moreover, although the ALJ found Mr. Garcia not credible in other parts of his testimony, the ALJ did not question Mr. Garcia’s testimony on this issue. A fact finder is entitled to make such distinctions. CACI 107 (Witnesses) states in relevant part: “if you think the witness did not tell the truth about some things but told the truth about others, you may accept the part you think is true and ignore the rest.”

Accordingly, the court finds that substantial evidence supports the ALJ’s findings.

The Petition is DENIED as to this issue.

Issue 2 – Whether this Court Should Strike the “Erroneous” Dicta in the Dynamic Joe Order

State Fund petitions this Court to “strike the erroneous dicta in Respondent’s Order as it is unsupported by the evidence, the law, and Respondent’s findings.” (Opening Brief 15:14-15.) State Fund argues that “[t]he language at issue is true dicta—unnecessary to the Order—but also contrary to the evidence, and law, and the ALJ’s findings in the Order.” (Opening Brief 15:19-21.) Importantly, State Fund maintains that the inclusion of the dicta at issue constitutes a “clear abuse of discretion.” The language at issue is as follows:

“Respondent nevertheless argues that it was contractually entitled to provide necessary payroll records. Specifically, Respondent references its standard policy terms, which provide in part, ‘If you [the insured] do not have payroll records for [persons engaged in work that could make Respondent liable under the policy], the contract price for their services and materials may be used as the premium basis.’ Respondent’s argument is unpersuasive. Respondent may not contractually override its statutory obligation to adhere to the USRP. Where, as here, an insured demonstrates that certain payments do not constitute payroll under the USRP, the insurer may not treat those payments as payroll for premium purposes, irrespective of policy language to the contrary.”

(First Am. Pet. ¶10, Ex. A., p. 8.) State Fund argues that it did not attempt to contractually override its statutory obligation to adhere to the USRP, nor does its policy violate any provision of the USRP. (First Am. Petition ¶13.)

In Opposition, Respondent argues that State Fund’s petition falls outside of the scope of inquiry for administrative mandamus under CCP §1094.5; that the ALJ’s dicta does not constitute a prejudicial abuse of discretion; and that State Fund has no substantial right at issue and will not suffer any substantial damage if the writ is denied.

“The inquiry in such a case 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. Abuse of discretion is established if the respondent has not proceeded in the manner required by law, the order or decision is not supported by the findings, or the findings are not supported by the evidence.” (CCP §1094.5(b).)

Petitioner has not demonstrated a prejudicial abuse of discretion. The validity of State Fund’s policy contract was not fully litigated. The ALJ did not make a finding that State Fund’s policy contract was invalidated, or that State Fund failed to adhere to the USRP (Uniform Statistical Rating Plan) when calculating premiums. Petitioner acknowledges that any prejudice it may suffer is speculative: “The bottom line is that we do not know the extent of the possible harm to State Fund if the erroneous dicta is left in place…” (Opening Brief 18:7-8.) A writ of mandate “will not issue where it would be of no benefit to the petitioner or to enforce a mere abstract right unattended by any substantial benefit or where the petitioner’s rights are otherwise amply protected or where the petitioner as the party purportedly beneficially interested is not aggrieved by the administrative order or decision in question. [Internal Citations Omitted.]” (Grant v. Bd. of Medical Examiners (1965) 232 Cal.App.2d 280, 274.)

The Petition is DENIED as to this issue.

Request for Statement of Decision

On July 31, 2023, Petitioner STATE COMPENSATION INSURANCE FUND lodged a Request for Statement of Decision. Petitioner’s Request for a Statement of Decision is DENIED because no trial of a question of fact is involved in the adjudication of the instant Petition. (CCP §632; CRC Rule 3.1590.) If a trial court exercises independent judgment on the evidence, a statement of decision detailing the court’s findings is required if requested. (Angelier v. State Bd. of Pharmacy (1997) 58 Cal.App.4th 592, 599.) However, if the trial court is reviewing an agency’s decision for substantial evidence, factual findings in a statement of decision are not required because the court is not deciding questions of fact but is reviewing an agency’s findings, and whether substantial evidence supports the lower tribunal’s findings is considered a question of law. (Friends of Lake Arrowhead v. Bd. of Supervisors of San Bernardino County (1974) 38 Cal.App.3d 497, 518.) If the case presents solely questions of law, no statement of decision is required. (Enterprise Ins. Co. v. Mulleague (1987) 196 Cal.App.3d 528, 539; Young v. California Fish & Game Comm’n (2018) 24 Cal.App.5th 1178, 1192.) This Court’s findings and reasoning are contained in the Tentative Order.