Judge Mitchell L. Beckloff, Case 21STCP02927 2023-02-15 Tentative Ruling

Judge: Mitchell L. Beckloff, Case: 21STCP02927, Date: 2023-02-15 Tentative Ruling

Petitioner, Allenco Energy, Inc., filed its second amended petition and unverified complaint on September 14, 2022.[1] The petition alleges ten causes of action: (1) writ of mandate; (2) declaratory relief; (3) breach of contract; (4) breach of the implied covenant of good faith and fair dealing; (5) intentional interference with contract; (6) intentional interference with prospective economic advantage; (7) negligent interference with prospective economic advantage; (8) inverse condemnation; (9) unfair competition; and (10) unjust enrichment.[2]

Respondent, Udak-Joe Ntuk, in his official capacity as State Oil and Gas Supervisor for the Department of Conservation Geologic Energy Management Division, demurrers to the first and second causes of action in the petition.[3]

Real Party in Interest, Roman Catholic Archbishop of Los Angeles, a corporation sole, demurrers to the second cause of action in the petition.

Real Party in Interest, the City of Los Angeles, demurrers to the first[4] and second causes of action in the petition.

Respondent’s demurrer to the first cause of action is sustained without leave to amend. Respondent’s demurrer to the second cause of action is sustained in part.

The court grants its own motion to strike certain requested relief related to Petitioner’s writ claim.

The demurrers of the City and the Archbishop to the second cause of action are stayed pending transfer (with all other non-writ claims) to Department 1 for reassignment to an independent calendar court.

The Archbishop notes Petitioner’s submission of evidence (the Declaration of Mary L. Petke) is improper evidence outside of the petition not properly considered on demurrer. The court agrees. The Archbishop’s objection to the declaration is sustained. (The court need not therefore rule on Respondent’s specific objections to material within the declaration.)

Similarly, the Declaration of Abdulmageed Abdulrahman submitted by Respondent may not be considered by the court on demurrer.

Petitioner formerly operated an oil and gas production facility in the University Park community of the City starting in September 2009, pursuant to an assignment of leases with the Archbishop, which owns the property. (SAP ¶¶ 1-3, 59.) The facility is comprised of 21 oil and gas production wells. (SAP ¶ 1.) Three of the 21 wells extend into property owned by the City (the City Wells). The City Wells are subjected to a separate lease with the City which was assigned to Petitioner in 2009. (SAP ¶ 2.) Two of the three City Wells were considered the highest producing wells between February 2011 and December 2013. (SAP ¶ 66.) Petitioner operated the facility for four years until November 2013 when the surrounding community raised odor and health concerns, prompting a response from regulators and public officials. (SAP ¶¶ 3, 67-68, 70.)

In 2019, the City advised Petitioner the assigned lease had expired in 2014 because of Petitioner’s inactivity. (SAP ¶¶ 13, 84-85.) Consequently, Petitioner claims the City’s lease termination frustrated the purpose its lease with the Archbishop by making it impossible and financially infeasible for Petitioner to operate the facility. (SAP ¶ 6, 88-89.) Petitioner therefore alleges its leases with the City and the Archbishop were terminated simultaneously, and it is not the current operator of the facility, as defined by Public Resources Code section 3009. (SAP ¶¶ 7-10, 98-99.) Instead, according to Petitioner, the Archbishop and the City are the facility’s de facto operators pursuant to Public Resources Code section 3016. (SAP ¶¶ 9-10, 93-94, 134.) Petitioner contends it became a “captive holdover tenant” because both the Archbishop and the City refuse to comply with their obligations as owners/operators of the facility. (SAP ¶ 93-100.)

On April 14, 2021, Petitioner informed the Archbishop, the City and Respondent of its intention to abandon the facility and cease any further maintenance of it. (SAP ¶ 13.) A dispute ensued concerning responsibility for the facility. (SAP ¶¶ 13, 17-29.) To date, Respondent treats Petitioner as the facility’s current operator requiring Petitioner to maintain the facility and abide by inspection demands. (SAP ¶¶ 20-27, 99.)

Petitioner’s first cause of action seeks a writ of mandate. Petitioner alleges “[b]ased on Public Resources Code section 3106, [Respondent] has a ministerial duty to identify the operator of the Facility and on-site wells by reference to Public Resources Code section 3009.” (SAP ¶ 112.) Petitioner explains Public Resources Code section 2009 defines the term “operator” “to mean ‘a person who, by virtue of ownership, or under the authority of a lease or any other agreement, has the right to drill, operate, maintain, or control a well or production facility.’ ” (SAP ¶ 112.)

Petitioner also alleges section 3201 imposes a ministerial duty upon Respondent to “[acknowledge] the transfer of the Facility and wells to the Archdiocese and the City upon receipt of the Transfer Forms and the other written notifications provide by both [Respondent] and the [Petitioner].” (SAP ¶ 136.)

Finally, Petitioner alleges Respondent has a ministerial duty pursuant to Public Resources Code section 3237 “to determine whether the Archdiocese and the City have deserted the Facility and wells . . . .” (SAP ¶ 146.)

Petitioner’s second cause of action for declaratory relief generally seeks “a declaration of the parties’ respective rights and obligations vis-à-vis the Facility and on-site wells.” (SAP ¶ 176.)

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. (Code Civil Proc., § 430.30, subd. (a); Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “We assume the truth of the allegations in the complaint, but do not assume the truth of contentions, deductions, or conclusions of law.” (California Logistics, Inc. v. State (2008) 161 Cal.App.4th 242, 247.)

A demurrer may be sustained without leave to amend when there is no reasonable possibility that the defect can be cured by amendment. (Blank v. Kirwan, supra, 39 Cal.3d at 318.) Indeed, where the facts are not in dispute and the nature of the plaintiff's claim is clear, but no liability exists under substantive law and no amendment would change the result, an order sustaining a demurrer without leave to amend is proper. (City of Ceres v. City of Modesto (1969) 274 Cal. App. 2d 545, 554.) The burden is on the plaintiff to show how the complaint might be amended to cure the pleading’s defect. (Association of Community Organizations for Reform Now v. Department of Industrial Relations (1995) 41 Cal.App.4th 298, 302.)

Peitioner alleges Supervisor had mandatory, ministerial, and nondiscretionary duties under Public Resources Code sections 3106/3009, 3201/3202, and 3237. Respondent contends the statutes relied upon by Petitioner do not state a cause of action for traditional mandate.

Traditional mandate under Code of Civil Procedure section 1085 is generally used to review an agency’s ministerial acts, quasi-legislative acts, and quasi-judicial decisions which do not meet the requirements for review under Code of Civil Procedure section 1094.5. (Bunnett v. Regents of University of California (1995) 35 Cal.App.4th 843, 848; Carrancho v. California Air Resources Board (2003) 111 Cal.App.4th 1255, 1264-1265.)

“may be issued by any court to any . . . board . . . to compel the performance of an act which the law specially enjoins, as a duty resulting from an office, trust, or station, or to compel the admission of a party to the use and enjoyment of a right or office to which the party is entitled, and from which the party is unlawfully precluded by such inferior tribunal, corporation, board, or person.” (Code Civ. Proc., § 1085, subd. (a).)

“To obtain a writ of mandate under Code of Civil Procedure section 1085, the petitioner has the burden of proving a clear, present, and usually ministerial duty on the part of the respondent, and a clear, present, and beneficial right in the petitioner for the performance of that duty.” (Marquez v. State Dept. of Health Care Services (2015) 240 Cal.App.4th 87, 103.)

“lost any right to operate the Facility and on-site wells upon termination of its assigned lease agreements with the Archdiocese and the City in November 2014. Consequently, responsibility for the Facility and on-site wells reverted at that time to the Archdiocese, which owns the property on which the Facility and wells are located. Similarly, responsibility for the City Wells reverted at that time to the City to the extent those wells extend into and within City-owned property. Based on the foregoing, the Archdiocese and the City became the de facto operators of the Facility and/or their respective wells in November 2014. These facts are consistent with Public Resources Code section 3009, which defines ‘operator’ to mean ‘a person whom by virtue of ownership, or under authority of a lease or any other agreement, has the right to drill, operate, maintain, or control a well or production facility.’ ” (SAP ¶ 93.)

Based on the termination of the leases, Petitioner contends Respondent had a ministerial duty under Public Resources Code section 3106 “to identify the operator of the Facility and on-site wells by reference to Public Resources Code section 3009, which defines the term ‘operator’ to mean ‘a person who, by virtue of ownership, or under the authority of a lease or any other agreement, has the right to drill, operate, maintain, or control a well or production facility.’ ” (SAP ¶ 112.)

Public Resources Code section 3106 obligates Respondent to “supervise the drilling, operation, maintenance, and abandonment of wells . . . so as to prevent, as far as possible, damage to life, health, property, and natural resources . . . .” (Pub. Resources Code, § 3106, subd. (a).) Public Resources Code section 3106 also obligates Respondent to “supervise” well activities “so as to permit the owners and operators of wells to utilize all methods and practices known to the oil industry for the purpose of increasing the ultimate recovery of underground hydrocarbons and which, in the opinion of the supervisor, are suitable for this purpose in each proposed case.” (Id. at subd. (b).) Section 3106 further requires the Supervisor to “administer this division so as to encourage the wise development of oil and gas resources.” (Id. at subd. (c).) The statute, however, does not prescribe a course of conduct Respondent must take to supervise.

Petitioner argues the Legislature imposed a mandatory, ministerial and nondiscretionary duty on Respondent by its use of the word “shall” in Public Resources Code section 3106. Petitioner relies on Lazan v. County of Riverside (2006) 140 Cal.App.4th 453, 460 for support—“The word ‘shall’ indicates a mandatory or ministerial duty.”[6] Petitioner contends “[b]y using the word ‘shall,’ the statute imposes a non-discretionary, ministerial duty on [Respondent] to supervise operations at the Facility.” (Opposition 11:2-3.)

Petitioner asserts in order for Respondent to perform his alleged mandatory, ministerial duty to supervise oil and gas operations, Public Resources Code section 3009 imposes a concomitant ministerial duty upon Respondent to identify the operator of a facility as necessary to comply with his general duty of supervision.[7] Petitioner argues: “[Respondent] cannot fulfill that mandatory duty unless and until he first identifies the ‘operator’ of the Facility and wells that is subject to his supervision by applying the statutory definition of that term in section 3009.”[8] (Opposition 12:4-6.)

The court finds Public Resources Code section 3106 imposes no ministerial, mandatory nondiscretionary duty on Respondent. As argued by Respondent, Public Resources Code 3106 requires Respondent to supervise oil and gas production within the state. How Respondent performs that duty, however, is discretionary. That is, Respondent’s position requires him to make judgments about how he supervises oil and gas production in the state—the Legislature has not imposed duties (i.e., a course of conduct) on Respondent about how Respondent carries out that obligation to supervise. (See Schwartz v. Poizner (2010) 187 Cal.App.4th 592, 596.)[9]

That the Legislature has not prescribed the manner of supervision (i.e., a course of conduct) precludes relief to Petitioner in traditional mandate. There is simply no ministerial duty. (Carrancho v. California Air Resources Board, supra, 111 Cal.App.4th at 1267. [“A ministerial act is an act that a public officer is required to perform in a prescribed manner in obedience to the mandate of legal authority and without regard to his own judgment or opinion concerning such act's propriety or impropriety, when a given state of facts exists. . . .' [Citations.] Thus, ‘[w]here a statute or ordinance clearly defines the specific duties or course of conduct that a governing body must take, that course of conduct becomes mandatory and eliminates any element of discretion.’ ”] [emphasis in original].)

Accordingly, Petitioner has identified no authority requiring Respondent to determine whether Petitioner is an “operator” as defined by Public Resources Code section 3106. Therefore, Petitioner is not entitled to a traditional writ of mandate.

The petition also alleges Petitioner “had not received any notification pursuant to Public Resources Code sections 3201 and 3202 that [Petitioner] is no longer the operator of the Facility and on-site wells.” (SAP ¶¶ 14, 136.) Petitioner argues “[b]ased on the plain text of [Public Resources Code] section 3201(a), [Respondent] has a mandatory, ministerial duty to acknowledge in writing the transfer of the Facility and wells to the Archdiocese and City.” (Opposition 13:8-9.)

“The operator of a well or production facility shall notify the supervisor or the district deputy, in writing, in the form that the supervisor or the district deputy may direct, of the sale, assignment, transfer, conveyance, exchange, or other disposition of the well or production facility by the operator of the well or production facility as soon as is reasonably possible, but in no event later than the date that the sale, assignment, transfer, conveyance, exchange, or other disposition becomes final. The operator shall not be relieved of responsibility for the well or production facility until the supervisor or the district deputy acknowledges the sale, assignment, transfer, conveyance, exchange, or other disposition, in writing, and the person acquiring the well or production facility is in compliance with Section 3202.” (Emphasis added.)

“A person who acquires the right to operate a well or production facility, whether by purchase, transfer, assignment, conveyance, exchange, or other disposition, shall, as soon as it is reasonably possible, but not later than the date when the acquisition of the well or production facility becomes final, notify the supervisor or the district deputy, in writing, of the person's operation. The acquisition of a well or production facility shall not be recognized as complete by the supervisor or the district deputy until the new operator provides all of the following material: . . . .”

Petitioner’s support for traditional mandate through Public Resources Code sections 3201 and 3202 fails. Even assuming (for the purposes of this demurrer) Public Resources section 3201 imposes a mandatory, ministerial duty on Respondent, the petition does not allege the required predicate acts have occurred such that Respondent’s duty is triggered. In fact, Petitioner’s factual allegations demonstrate Respondent has no duty to act under Public Resources Code section 3201, subdivision (a) as interpreted by Petitioner: It is “impossible for [Petitioner] to provide” the notification under Public Resources Code section 3201, subdivision (a) to Respondent because “[Petitioner] never affirmatively sold, assigned, transferred, conveyed, exchanged, or otherwise disposed of the Facility or any of the on-site wells.” (SAP ¶ 17.) Petitioner further alleges it has no obligation to provide any notice to Respondent under Public Resources Code section 3201, subdivision (a). (SAP ¶ 17.)

As Petitioner admits it has not given the notice required under Public Resources Code section 3201, subdivision (a), Respondent’s purported duty to relieve Petitioner of responsibility for the oil and gas production facility cannot arise because Petitioner (admittedly) has not provided Respondent with any notice of “sale, assignment, transfer, conveyance, exchange, or other disposition of the well or production facility . . . .” (Pub. Resources Code, § 3201, subd. (a).) Importantly, Public Resources Code section 3201, subdivision (a) expressly provides an operator “shall not be relieved of responsibility for the well or production facility” until Respondent acknowledges the sale and “the person acquiring the well or production facility is in compliance with Section 3202.” Given neither contingency has occurred, the operator cannot be relieved of responsibility for the wells and facility.

Finally, Petitioner alleges Respondent has a mandatory, ministerial duty under Public Resources Code section 3237 “to determine whether the Archdiocese and the City have deserted the Facility and wells . . . .” (SAP ¶ 146.) Petitioner argues “section 3237(a)(1) states [Respondent] ‘shall determine’ whether a well or production facility is deserted.” (Opposition 14:14-15.)

“The supervisor or district deputy may order the plugging and abandonment of a well or the decommissioning of a production facility that has been deserted whether or not any damage is occurring or threatened by reason of that deserted well or production facility. The supervisor or district deputy shall determine from credible evidence whether a well or production facility is deserted.”

Under Public Resources Code section 3237, subdivision (a)(3), a rebuttable presumption of desertion arises if “an operator fails to designate an agent as required by Section 3200”[11] (Pub. Resources Code, § 3237, subd. (a)(3)(D)), or “a person who is to acquire a well or production facility that is subject to a purchase, transfer, assignment, conveyance, exchange, or other disposition fails to comply with Section 3202.” (Pub. Resources Code, § 3237, subd. (a)(3)(E).)

Petitioner argues Respondent has a mandatory, ministerial duty to determine whether the Archbishop and City have deserted the production facility and wells based on their failures to comply with Public Resources Code sections 3200 and 3202. That is, there is a presumption the facility has been abandoned, and Respondent must make that determination.

Petitioner misconstrues Public Resources Code section 3237, subdivision (a)(1). Petitioner’s position the statute requires Respondent to determine whether a well has been abandoned or a facility deserted is not supported by the plain language of the statute. Both sentences of the statute must be read and considered together. The first sentence of the statute vests discretion in Respondent to determine whether a well or facility has been deserted for purposes of plugging and abandoning a well and/or decommissioning a deserted facility. Where Respondent elects to determine—in the context of whether to plug and abandon a well or decommissioning a facility—whether a well is abandoned or a facility is deserted, Respondent “shall” base his fact finding on credible evidence. While there is a mandatory, nondiscretionary duty in the statute, it is to rely on credible evidence.

Petitioner’s inability to demonstrate a mandatory, ministerial and nondiscretionary duty on Respondent arising from statute does not necessarily preclude writ relief. Petitioner also alleges it is entitled to a traditional writ of mandate based on allegations Respondent has abused his discretion. (SAP ¶ 147.) Petitioner contends Respondent has acted in an arbitrary and capricious manner because he continues to treat Petitioner as the “current operator responsible for day-to-day management of the Facility and on-site wells . . . .” (SAP ¶¶ 148, 152.)

To establish a claim for a traditional writ of mandate based on an abuse of discretion, Petitioner must allege facts demonstrating Respondent acted “arbitrarily, beyond the bounds of reason or in derogation of the applicable legal standards.” (Ochoa v. Anaheim City School Dist. (2017) 11 Cal.App.5th 209, 223 n. 3.)

Under Public Resources Code section 3009, an operator “means a person who, by virtue of ownership, or under the authority of a lease or any other agreement, has the right to drill, operate, maintain, or control a well or production facility.”

Petitioner has alleged it maintains and controls the facility. (SAP ¶¶ 11 [“compelled to remain on site at the Facility, as a captive holdover tenant and caretaking Good Samaritan”], 12 [Petitioner “made substantial capital improvements to the Facility and its equipment” to “maintain the Facility”], 13 [Petitioner “would cease maintain the Facility effective immediately”], 26 [Respondent “commended [Petitioner] for remaining on site to maintain the Facility and wells in a safe condition”], 27 [Petitioner “intends to leave the site”] and 33 [“unfairly compelling [Petitioner] to maintain the Facility in a safe and compliant condition”].) Thus, while Petitioner contends the City or the Archbishop is contractually responsible for maintaining the production facility, based on the facts as alleged by Petitioner, Respondent’s position Petitioner is an operator of the production facility pursuant to Public Resources Code section 3009 is grounded in fact and not arbitrary or capricious. Petitioner’s allegations support Respondent’s position Petitioner is an operator of the production facility.[12]

Finally, Respondent’s treatment of Petitioner as an operator is not arbitrary and capricious where there is no dispute Petitioner historically operated the production facility and the requirements of Public Resources Code sections 3101 an 3102 have not been met. Under such conditions, Respondent has no authority to relieve Petitioner of responsibility for the production facility and wells.

As Petitioner has not identified a failure by Respondent to comply with a ministerial, nondiscretionary, mandatory duty, Petitioner has failed to state a claim for a traditional writ of mandate. Petitioner has also not sufficiently alleged Respondent abused his discretion in treating Petitioner as the operator of the facility. Petitioner has also not demonstrated it is reasonably likely it can amend to state a claim for a traditional writ of mandate as to Respondent. Accordingly, the court finds the demurrer should be sustained without leave to amend as to the first cause of action and Respondent.

Petitioner concedes its second cause of action for declaratory relief is derivative of its first cause of action. (SAP n. 7.) It appears to the court the second cause of action is not so limited.

The court finds the declarations sought at paragraph 172 (k) and (o) are fully derivative of Petitioner’s first cause of action. The demurrer is properly sustained without leave to amend as to those counts within the cause of action.

The court recognizes relief requested by Petitioner related to the second cause of action at paragraphs 262 (o) and 263 (b) and (g) concerning Respondent’s duty should be struck as having been fully resolved by Respondent’s demurrer. On its own motion, the court will strike the items in Petitioner’s prayer for relief.

The City “demurs to the First Cause of Action based on the grounds that it does not state facts sufficient to constitute a cause of action against the City to the extent that this First Cause of Action relates to, supports, or forms the basis of the Second Cause of Action wherein the City is a named party.” (City Notice 2:19-22.)

The City argues Petitioner’s claim the City is an operator of the production facility is legally unsupported. The City argues Public Resources Code section 3016 prohibits joint liability under the circumstances here generally referencing the provisions in the lease between Petitioner and the City.

The court has determined Petitioner has failed to state a claim for a traditional writ of mandate against Respondent.

Whether the City has acquired operator rights and responsibilities “by virtue of ownership” (SAP ¶ 167) is independent of and untethered to Petitioner’s writ claim; it stands alone. As the issue is not tied to Petitioner’s writ claim, the court finds resolution of the issue is more properly determined with the balance of Petitioner’s civil claims the court previously stayed.

Thus, the City’s demurrer to the second cause of action is stayed pending reassignment to an independent calendar court. Resolution of the first cause of action for a traditional writ of mandate does not completely resolve the second cause of action in the City’s favor.

The Archbishop demurrers to the second cause of action for declaratory relief. The Archbishop recognizes certain declarations and/or injunctive relief sought are not derivative of Petitioner’s first cause of action or not applicable to the Archbishop. (Demurrer 4:17-5:21.) Other claims (asserted to be derivative) remain for substantive resolution despite the court’s ruling on Respondent’s demurrer. (Claims D-(g), D-(j), D-(l), D-(m), D-(n), I-(a), I-(c), I-(d) and I-(f).) As with the City’s demurrer, resolution of those substantive claims that are independent of and untethered to Petitioner’s writ claim is properly determined upon reassignment to an independent calendar court.

Based on the foregoing, Respondent’s demurrer to the first cause of action is sustained without leave to amend. Respondent’s demurrer to the second cause of action is sustained as to counts alleged in paragraph 172 (k) and (o).

The court on its own motion strikes Petitioner’s prayer for relief at paragraphs 262 (o) and 263 (b) and (g).

The demurrers of the City and Archbishop are not considered further pending reassignment to an independent calendar court. The City and Archbishop may renew their demurrers to the second cause of action (as well as any others) upon reassignment.

The matter is transferred to Department 1 for reassignment to an independent calendar court.

[1] For ease, the court refers herein to the second amended petition and unverified complaint as the petition.

[2] All causes of action except for the first and second have been stayed by the court.

[3] “Respondent is now acting State Oil and Gas Supervisor Gabe Tiffany, successor in interest to prior respondent and State Oil and Gas Supervisor, Uduak-Joe-Ntuk.” (Reply 2, n. 1.)

[4] The City is not named in the first cause of action.

[5] In reply, the Archbishop contends Petitioner untimely filed its opposition thereby violating California Rule of Court, Rule 3.1113, subdivision (d).

[6] As Respondent notes, in Lazan v. County of Riverside, supra, 140 Cal.App.4th at 460, the “statute at issue . . . requires the public officer, upon a prescribed contingency (an employee is believed to be disabled), to do a prescribed act (apply for disability retirement).” (Reply 3:23-25.)

[7] Respondent characterizes Petitioner’s request for a traditional writ of mandate as an attempt to impose a duty on him “to adjudicate [Petitioner’s] legal disputes with the Archdiocese and the City.” (Reply 3:4-5.)

[8] As noted by Respondent, even assuming it had a duty under Public Resources Code section 3009 to identify an operator of a facility, Petitioner’s allegations demonstrate Respondent has done so. (SAP ¶¶ 14, 28. [“Despite the fact that [Petitioner] has no legal right to operate the Facility and on-site wells, [Respondent] continues to treat [Petitioner] as the current operator of the Facility and wells.”) (See Reply 4:11-20.)

[9] In Schwartz v. Poizner, supra, 187 Cal.App.4th at 592, Insurance Code sections 12921 and 12926 did not support a claim for traditional mandate even though the statutes instructed the Insurance Commissioner “shall” take enforcement action against certain insurer misconduct. (Id.) The Court explained the Insurance Commissioner's enforcement acts are not ministerial because other provisions of the Insurance Code vest the Insurance Commissioner with discretion as to the remedies sought. (Id. at 597.)

[10] The statute places duties upon a person who “acquires the right to operate a well or production facility, . . . .” The statute instructs Respondent may not recognize acquisition of the facility

[11] Public Resources Code section 3200 requires the owner or operator of a well or production facility to designate an agent to receive service of notices and orders.

[12] Petitioner initiated this action on September 3, 2021. Facts occurring on or after September 15, 2022 do not inform on whether Petitioner has stated a cause of action based on facts occurring on or before September 3, 2021. Resolution of disputed facts is not permitted on demurrer.