Judge: Mary H. Strobel, Case: 22STCP02434, Date: 2023-04-06 Tentative Ruling

Case Number: 22STCP02434    Hearing Date: April 6, 2023    Dept: 82

            Petitioner Richard Baltas (“Petitioner” or “Baltas”) moves for leave to file a first amended petition against Respondent California Horse Racing Board (“Respondent” or “Board” or “CHRB”). 

Judicial Notice

Petitioner’s Request for Judicial Notice (“RJN”) Exhibit 4 – Granted.

Procedural History

            On June 29, 2022, Petitioner filed a verified petition for writ of mandate pursuant to CCP sections 1085 and 1094.5.  Petitioner is a licensed trainer of thoroughbred racehorses.  The petition alleges that “[o]n or about June 21, 2022, CHRB issued a complaint against Petitioner alleging certain regulatory violations for the untimely administration of feed supplements to his horses.”  (Pet. ¶ 4.)  On June 28, 2022, the Board of Stewards (“Stewards”) allegedly rejected Petitioner’s entry of two horses to a race at Los Alamitos, citing the underlying complaint.   (Id. ¶¶ 7-8.)  Petitioner alleges on information and belief that “Stewards intend to deny entry to any and all of Petitioner’s horses without a hearing.”  (Id. ¶ 9.)  Petitioner seeks a writ compelling CHRB and Stewards, among other things, “to set aside the denials of entry occurring heretofore until such time as a hearing on the denials has taken place and the matter decided.”  (Prayer ¶ 1.)

            On July 1, 2022, the court denied Petitioner’s ex parte application for a stay, finding it would be against the public interest.  The court set an OSC re: preliminary injunction for July 28, 2022.  On July 5, 2022, Petitioner took the OSC off calendar.

            On July 29, 2022, Respondent answered the petition.

            On January 18, 2023, Petitioner filed this motion for leave to amend.  The court has received Respondent’s opposition and Petitioner’s reply.

            A trial setting conference is also set for April 6, 2023.

Analysis

Leave to amend at any time is liberally allowed in the interests of justice and in the absence of prejudice to another party, even up to the time of trial.  (Code Civ. Proc., §§ 473(a)(1) & 576; Magpali v. Farmers Group, Inc. (1996) 48 Cal.App.4th 471, 487.)  “[T]he trial court has wide discretion in allowing the amendment of any pleading.” (Record v. Reason (1999) 73 Cal.App.4th 472, 486.) 

“[It] is a rare case in which ‘a court will be justified in refusing a party leave to amend his pleadings so that he may properly present his case. [Citations.] If the motion to amend is timely made and the granting of the motion will not prejudice the opposing party, it is error to refuse permission to amend and where the refusal also results in a party being deprived of the right to assert a meritorious cause of action or a meritorious defense.”  (Morgan v. Sup. Ct. (1959) 172 Cal.App.2d 527, 530.)

“If the proposed amendment fails to state a cause of action, it is proper to deny leave to amend.”  (Foxborough v. Van Atta (1994) 26 Cal.App.4th 217, 230.)  However, “even if the proposed legal theory is a novel one, ‘the preferable practice would be to permit the amendment and allow the parties to test its legal sufficiency by demurrer, motion for judgment on the pleadings or other appropriate proceedings.’”  (Kittredge Sports Co. v. Sup.Ct. (1989) 213 Cal.App.3d 1045, 1048.)

            A motion to amend a pleading before trial must be accompanied by a separate declaration that must specify (1) the effect of the amendment; (2) why the amendment is necessary and proper; (3) when the facts giving rise to the amended allegations were discovered; and (4) the reasons why the request for amendment was not made earlier.  (CRC Rule 3.1324(b).)  The motion must also include a copy of the proposed amendment or amended pleading, and must show specifically, by page, paragraph, and line number, what changes were made.  (Rule 3.1324(a).) 

Compliance with Rule 3.1324; and Effect of Proposed Amendment

The motion sufficiently complies with Rule 3.1324.  Specifically, the Stewards decision of December 2, 2022, summarized below and in the proposed FAP, gave rise to the proposed amendments.  (See Mot. 2, 4-6; Haney Decl. ¶¶ 3-6 and Exh. 1 and 2.)  As shown in the motion and attached exhibits, the proposed FAP adds numerous allegations to the petition, including the following:

“On information and belief, the Board of Stewards is controlled by and will do whatever the CHRB tells them to do. In this case, the CHRB has a vendetta against Baltas because Baltas has exercised his First Amendment Rights in stating that the condition of the track at Santa Anita Park is a contributing cause of the recent significant number of horse deaths at Santa Anita Park. and has acted with intent or reckless disregard in denying Baltas his constitutional rights.”  (Mot. Exh. 1 and 2 ¶ 4.)

Before June 21, 2022, CHRB executive director “Chaney told [Petitioner’s then attorney] Vienna, before any hearing on the CHRB changes, that Baltas would receive a one year suspension for the allegations in the CHRB Complaint, which is the exact penalty Baltas received, along with a $10,000 fine, after a ‘so called’ warning by the Board.”  (Id. ¶¶ 31-32.)

“As a result, of the CHRB's conduct, Baltas could not enter any horses at California racetracks from May 8, 2022 through the present date, thereby costing him many hundreds of thousands of dollars, and Baltas now stands to lose many millions of dollars in damages in an amount to be determined at jury trial for lost earnings, the loss of clients who entrusted their horses training to him, and an irrevocable damage to his reputation.”  (Id. ¶ 33.)

“The draconian punishment imposed by Chaney, and later followed by the Board, is substantially greater than any prior punishment imposed by the CHRB and its Agents, particularly in  light of the fact that not a single one of Baltas' horses in this matter tested positive for a prohibited substance.”  (Id. ¶ 34.)

“CHRB Rule 1887(a), as implemented by the CHRB agents, is unconstitutional as applied in that it violates Baltas' rights to due process of the law as guaranteed by Article I, Section VII of the California Constitution, and the Fourteenth Amendment of the United States Constitution. Defendants essentially require a trainer to insure 24-hour video surveillance over every horse he trains as a precondition to utilizing the CHRB Rule 1888 defense against strict liability.”  (Id. ¶ 47.)

“The Board [of Stewards] conducted a hearing on the Complaint on 9/14/22, 10/11/22, 10/18/22, and 10/19/22. The Board members serve at the pleasure of the CHRB and, on information and belief, simply ‘rubber stamped’ the discipline the CHRB decides to impose and, in this case, had decided before the hearing. During the hearing, evidence was introduced that prior to the hearing or any presentation of evidence, Chaney told to Baltas' former attorney that Baltas would receive a one year suspension, which is the exact same discipline imposed by the Board. Despite Chaney's obvious role in manipulating the outcome of the hearing, the Board acted at the direction of Chaney and the CHRB, and quashed the subpoena served on Chaney, who feared having to testify to his role in controlling the outcome of the hearing. On December 2, 2022, the Board [of Stewards] announced its ‘decision’ rubber stamping Chaney's preordained result.”  (Id. ¶ 53.)

Petitioner contends that the Stewards’ December 2, 2022, decision imposed excessive punishment and was “invalid” for various reasons.  (Id. ¶¶ 54-62.)

            Petitioner seeks a writ of mandate directing CHRB and the Stewards “to set aside the suspension of Baltas license or, in the alternative, to give him credit for time served during first, the de facto suspension, and second, the suspension imposed by the Board of Stewards at the direction of the CHRB.”  (Prayer ¶ 1.)

The Proposed Amendment is Timely and There is No Prejudice to Respondent

            The petition was filed in June 29, 2022, and no trial date has been set.  In opposition, Respondent does not identify any prejudice from leave to amend being granted at this time.  As a general rule, “absent a showing of prejudice to the adverse party, the rule of great liberality in allowing amendment of pleadings will prevail.”  (Board of Trustees v. Superior Court (2007) 149 Cal.App.4th 1154, 1163.) 

Exhaustion of Administrative Remedies and Exceptions to Exhaustion Requirement

Respondent contends that Petitioner’s proposed FAP does not state a cause of action because Petitioner has not exhausted his administrative remedies before CHRB and has not pleaded an excuse from exhaustion.  (Oppo. 11-14.)

Exhaustion of administrative remedies is “a jurisdictional prerequisite to judicial review.”  (Cal. Water Impact Network v. Newhall County Water Dist. (2008) 161 Cal.App.4^th 1464, 1489.)  “Before seeking judicial review a party must show that he has made a full presentation to the administrative agency upon all issues of the case and at all prescribed stages of the administrative proceedings.”  (Edgren v. Regents of University of California (1984) 158 Cal.App.3d 515, 520 [emphasis added].)  “A party must proceed through the full administrative process ‘to a final decision on the merits.’”  (Alta Loma School Dist. v. San Bernardino County Com. On School District Reorganization (1981) 124 Cal.App.3d 542, 554.)  “The exhaustion doctrine operates as a defense to litigation commenced by persons who have been aggrieved by action but who have failed to exhaust the administrative remedy available to them.”  (Los Globos Corp. v. City of Los Angeles (2017) 17 Cal.App.5th 627, 633.) 

There are exceptions to the exhaustion requirement, including “when the subject of the controversy lies outside the administrative agency's jurisdiction, when pursuit of an administrative remedy would result in irreparable harm, when the administrative agency cannot grant an adequate remedy, and when the aggrieved party can positively state what the administrative agency's decision in his particular case would be.”  (Edgren, supra, 158 Cal.App.3d at 520 [citations omitted].)  “The lack of jurisdiction exception contemplates situations in which the agency lacks authority, statutory or otherwise, to resolve the underlying dispute between the parties.”  (Id. at 521.) 

            Here, in the proposed FAP, Petitioner admitted he has not exhausted all of his administrative remedies before CHRB.  (Mot. Exh. 1 and 2 at ¶¶ 54-69.)   Petitioner alleges that he should be excused from the exhaustion requirement for several reasons, including: (1) the penalty imposed by Stewards is “excessive” and “should Baltas prevail at a CHRB sponsored hearing, there is no adequate remedy or mechanism for him to either recover damages or institute injunctive relief under his administrative remedies” (Id. ¶ 54.a); (2) “CHRB has already inflicted irreparable harm against Baltas, who has now lost seven months pay and can not get injunctive relief from the Board of Stewards disciplinary hearing” (Id. ¶ 54.b); (3) “Baltas raises the issue that the CHRB is enforcing l887(a) in an unconstitutional manner by not requiring a finding of the existence of a prohibited substance in the blood and urine of a horse” (Id. ¶ 54.d); and (4) “Any attempt by Baltas in pursuing the administrative would be futile as it is well known in the industry that CHRB and its Agents dictate the results of hearings to the Board of Stewards who preside over administrative hearing at the request and pleasure of the CHRB” (Id. ¶ 54.e.)  (Ibid.) 

Respondent contends that the court should decide, on a motion for leave to amend, that Petitioner has not stated a cause of action.  However, generally that argument is better decided on a demurrer or motion for judgment on the pleadings.  Further, the following standard would apply in a ruling on demurrer.  The allegations in the petition must be liberally construed in favor of Petitioner on demurrer.  (Mobil Oil Corp. v Exxon Corp. (1986) 177 Cal.App.3d 942, 947.)  A demurrer accepts as true “all material facts properly pleaded and matters subject to judicial notice, but not deductions, contentions, or conclusions of law or fact.” (Stonehouse Homes LLC v. City of Sierra Madre (2008) 167 Cal. App. 4th 531, 538.)  “A demurrer must dispose of an entire cause of action to be sustained.”  (Poizner v. Fremont General Corp. (2007) 148 Cal.App.4th 97, 119.)

The court concludes that Petitioner has pleaded plausible excuses from the exhaustion doctrine and some facts in support.  The court does not decide whether these allegations state a cause of action, only that they should be tested by demurrer or other proceedings.

Further, Petitioner also alleges that CHRB and its agents have implemented Rule 1887(a) in an unconstitutional manner.  (Id. ¶¶ 47-48.)  Petitioner alleges that “neither the CHRB or the Board have the authority or power to find the CHRB rules unconstitutional.”  (Id. ¶ 67a.)  While the court does not decide the jurisdictional question for this motion, Respondent does not show, by citation to authority, that CHRB necessarily has the jurisdiction to decide a constitutional challenges.  (Oppo. 13:21-25.)  The exhaustion requirement does not apply if “the agency is given no jurisdiction to make a judicial determination of the type involved.”  (McAllister v. County of Monterey (2007) 147 Cal.App.4th 253, 276.) 

Given the liberal standard that applies, Petitioner may be able to survive a demurrer challenge with respect to these allegations.  Further, even if a demurrer was successful, Petitioner could be granted leave to amend.  In such circumstances, “‘the preferable practice [is] to permit the amendment and allow the parties to test its legal sufficiency by demurrer, motion for judgment on the pleadings or other appropriate proceedings.’”  (Kittredge Sports Co. v. Sup.Ct. (1989) 213 Cal.App.3d 1045, 1048.)

March 20, 2023, Notice of Non-Adoption of Proposed Decision

            In reply, Petitioner indicates that on March 20, 2023, CHRB issued a Notice of Decision Not To Adopt Proposed Decision and Order Directing Preparation of Record.  (Baisch Decl. ¶ 5, Exh. 4.)  The CHRB’s order states:

By vote of the Board, the Proposed Decision was rejected, and the Board will itself decide the Matter upon the record, including the transcript, under provisions of Government Code section 11517, subdivision (c)(2)(E). Further, the Board ordered preparation of the complete administrative record, including a transcript of all proceedings before the Hearing Officers. After review of the complete record and any further argument submitted on behalf of the parties, the Board will issue a decision in the Matter.

Pursuant to Government Code section 11517, subdivision (c)(2)(E)(ii), the parties may submit further argument to the Board. Any further argument submitted on behalf of the parties shall be in writing. The Board specifically requests additional briefing from both parties on whether a retroactive commencement of the suspension to September 14, 2022 is appropriate, Any written argument shall be filed with the Board within thirty (30) calendar days of the date that the Board provides notice that the administrative record of this matter has been filed with the Board. 

(Ibid.)

            Petitioner contends in reply that this March 20, 2023, decision “is final because it affirmed the one-year suspension and $10,000 fine.”  (Reply 7:28.)  This statement seems inconsistent with the CHRB order, quoted above, which states that Board ordered preparation of the administrative record and will decide the matter itself “upon the record.” 

Nonetheless, Respondent may argue failure to exhaust based on the March 20, 2023 order in a subsequent proceeding as above discussed. 

Conclusion

            The motion is GRANTED.