Judge: Stephen I. Goorvitch, Case: 23STCP03578, Date: 2024-04-24 Tentative Ruling

Case Number: 23STCP03578    Hearing Date: April 24, 2024    Dept: 82

Cemex, Inc.                                                                Case No. 23STCP03578

v.                                                                     Date/Time: April 24, 2024, at 9:30 a.m.

                                                                                    Courthouse: Stanley Mosk Courthouse

State Water Resource Control Board                     Department: 82

                                                                                    Judge: Stephen I. Goorvitch

[Tentative] Order Overruling Demurrer

INTRODUCTION

            Petitioner Cemex, Inc. (“Petitioner”) filed this petition for writ of mandate under Water Code section 1126 and Code of Civil Procedure sections 1085 and 1094.5 against the State Water Resources Control Board (“Respondent” or the “Board”).  In 1991, Petitioner’s predecessor-in-interest filed an application to appropriate water for its Soledad Canyon Project, which was a proposal to develop a sand and gravel mine on an approximately 500-acre site in the unincorporated Soledad Canyon area of Los Angeles County.  The Board issued a notice of Petitioner’s application on May 7, 1993, which triggered the 40-day protest period.  On June 1, 2023, the Board sent a letter to Petitioner stating that it intends to re-notice the application, triggering a new 40-day protest period.  Petitioner submitted a timely petition for reconsideration of this decision, and the Board dismissed the petition on procedural grounds.  Petitioner filed the instant petition challenging the Board’s decision to re-notice the application and dismiss its petition for reconsideration of that decision.  Now, the Board demurs, arguing that these are not final decision and thus not ripe for review.  The court overrules the demurrer.

SUMMARY OF PETITION

            Petitioner is a construction and building materials producer.  (Petition for Writ of Mandate (“Pet.”) ¶ 7.)  In June 1991, Petitioner filed a water rights application with Respondent “which proposed the diversion of water from the Santa Clara River for mining and industrial uses, and sought 0.95 cubic feet per second, not to exceed 322 acre-feet per annum.”  (Id. ¶ 24.)  On May 7, 1993, Respondent deemed the application complete and issued a public notice, which triggered a public protest period mandated by the Water Code.  (Id. ¶ 25.)  During the protest period, ten protests were filed with the Board.  (Ibid.)  One was rejected by the Board for late filing.  (Ibid.)  According to the petition, Petitioner “has since worked to resolve outstanding protests and perfect its water rights application. Such efforts have included the dismissal or voluntary withdrawal of all but four pending protests, which have remained consistent since 2006.”  (Id. ¶ 27.)

            Petitioner alleges that the original protest period closed in 1993, and the City of Santa Clarita (“City”) did not file a protest during that period.  (Id. ¶ 2; see also Id. ¶¶ 17-23.)  In 2004 and 2016, Respondent rejected requests of City to re-notice the application, noting that Petitioner had not requested an increase in the amount of water for the project and the circumstances surrounding the application remained unchanged.  (Id. ¶¶ 28-34.) 

According to the petition, the circumstances surrounding Petitioner’s application remain unchanged. (Id. ¶ 34.)  Nevertheless, on June 1, 2023, the Board’s Executive Director sent a letter to counsel for Petitioner stating that, “I have decided the application will be re-noticed.” (the “June 2023 Letter” or “Re-Notice Decision”). (Id., ¶ 35, Exh. 3.)  The Executive Director explained this decision, as follows:

The application was originally noticed on May 7,1993 and a decision on the application has been delayed for nearly thirty years. Since that time, the circumstances of affected downstream water users or other interested persons have changed. For example, many of the entities that have filed protests against the application no longer exist due to changes in property ownership and other factors. In addition, multiple entities which did not file protests in response to the 1993 notice have contacted the Division to request that the application be re-noticed so that they have an opportunity to file a protest and participate in the proceedings related to the application. For these reasons, I have determined that the record does not reflect up-to-date circumstances and re-noticing of the application is necessary. (Cal. Code Regs., tit. 23, § 684, subd. (b).)[1]

(Ibid.)

The Petition alleges that the June 2023 Letter adopts the substance of proposed Assembly Bill 1631 (2023), “effectively creating a de facto Board policy, without undergoing appropriate rule making procedures, that would justify re-noticing long-pending applications without meeting the actual regulation requirements adopted by the Board in 23 Cal. Code Regs. § 684(b).”  (Id. ¶ 36.)  The petition alleges that the Executive Director copied the coauthors of AB 1631 when she issued the June 2023 Letter. (Id., ¶ 36.)

PROCEDURAL HISTORY

            On June 28, 2023, Petitioner submitted a timely petition for reconsideration of the June 2023 Letter.  (Id. ¶ 43, Exh. B.)  On August 30, 2023, Respondent dismissed the petition on procedural grounds, specifically that the June 2023 Letter “does not constitute a final water right decision or order” (the “Dismissal”).  (Id. ¶¶ 48-50 and Exh. 5.)

            On September 29, 2023, Petitioner filed the instant petition asserting two causes of action.  The first cause of action challenges the Re-Notice Decision.  The second cause of action challenges the Dismissal.  Petitioner contends that Board’s decisions were arbitrary, capricious, and entirely lacking in evidentiary support; did not include sufficient findings to satisfy the Topanga decision; were based on findings not supported by the evidence; deprived Petitioner due process and would cause Petitioner irreparable harm; and/or were contrary to law.   (Id. ¶¶ 54-79.)  

            On January 10, 2024, Respondent filed a demurrer, arguing that the petition is not ripe because neither decision was a final decision subject to judicial review.  Petitioner filed an opposition on March 6, 2024, and Respondent filed a reply brief on April 10, 2024.

LEGAL STANDARD

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 tests the pleadings alone and not the evidence or other extrinsic matters.”  (Hahn v. Mirda (2007) 147 Cal.App.4th 740, 747.)  The allegations in the petition must be liberally construed in favor of Petitioner on demurrer.  (See Mobil Oil Corp. v Exxon Corp. (1986) 177 Cal.App.3d 942, 947.)  “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.)

DISCUSSION

            A.        The First Cause of Action: The Re-Notice Decision

            Respondent demurs to the first cause of action—the Executive Director’s decision to re-notice Petitioner’s application—arguing that it is not a final decision ripe for review.  Respondent argues that this petition is governed by Code of Civil Procedure section 1094.5, which authorizes writ relief for “a final administrative order or decision.”  (Code Civ. Proc. § 1094.5(a).)  By contrast, Petitioner argues that this petition is governed by Code of Civil Procedure section 1085, which authorizes writ relief for “an act which the law specially enjoins.”  (Code Civ. Proc. § 1085(a).)  “[S]ection 1094.5 does not preclude a broader challenge to agency conduct or procedures alleged to breach the agency’s statutory obligations …. It is not inconsistent to award relief under both sections 1094.5 and 1085 of the Code of Civil Procedure.”  (Conlan v. Bonta (2002) 102 Cal.App.4th 745, 752.)  The court need not resolve this issue at this stage, however,  because Respondent does not demonstrate that the petition is unripe under section 1094.5(a).

“‘[A] basic prerequisite to judicial review of administrative acts is the existence of a ripe controversy.’ (Pacific Legal Foundation v. California Coastal Com. (1982) 33 Cal.3d 158, 169, 188 Cal.Rptr. 104, 655 P.2d 306.)  The ripeness doctrine is based upon the recognition that judicial decisions are best made in the context of an actual set of facts so that the issues will be framed with sufficient definiteness to enable the court to make a decree finally disposing of the controversy. (Id. at p. 170, 188 Cal.Rptr. 104, 655 P.2d 306.) ‘The controversy must be definite and concrete, touching the legal relations of parties having adverse legal interests. [Citation.] It must be a real and substantial controversy admitting of specific relief through a decree of a conclusive character, as distinguished from an opinion advising what the law would be upon a hypothetical state of facts.’ (Id. at pp. 170–171, 188 Cal.Rptr. 104, 655 P.2d 306.) ‘A controversy is ‘ripe’ when it has reached, but has not passed, the point that the facts have sufficiently congealed to permit an intelligent and useful decision to be made’.”  (Santa Teresa Citizen Action Group v. City of San Jose (2003) 114 Cal.App.4th 689, 708.) 

Respondent relies on Water Code section 1126, which states, in pertinent part, as follows: “(b) Any party aggrieved by any decision or order may, not later than 30 days from the date of final action by the board, file a petition for a writ of mandate for review of the decision or order. Except in cases where the decision or order is issued under authority delegated to an officer or employee of the board, reconsideration before the board is not an administrative remedy that is required to be exhausted before filing a petition for writ of mandate…. (c)  Section 1094.5 of the Code of Civil Procedure shall govern judicial proceedings under this section….” (Water Code § 1126(a), (b), emphasis added.)  This language—“aggrieved by any decision or order”—is broad. “Consistent with the ripeness doctrine, section 1126, subdivision (b) applies to “[a]ny party aggrieved by any decision or order....’ (Italics added.)  In other words, where an agency applies regulations to a party’s injury, a sufficient controversy exists to satisfy the ripeness requirement.”  (Phelps v, State Water Resources Control Board (2007) 157 Cal.App.4th 89, 103, citing Coral Construction, Inc. v. City and County of San Francisco (2004) 116 Cal.App.4th 6, 26.) 

Here, the petition alleges that the Board’s decision to re-notice Petitioner’s application is a “final decision.”  (Pet. ¶ 70.)  In support of that allegation, the June 2023 Letter states that the Executive Director has determined that the application “will be re-noticed.”  The Executive Director did not identify any procedure for administrative appeal of this Re-Notice Decision.  The Executive Director also identified the specific reasons she “determined that the record does not reflect up-to-date circumstances and re-noticing of the application is necessary.  (Cal. Code Regs., tit. 23, § 684, subd. (b).)”  (Pet. Exh. 3.)  Thus, it appears from the petition that there is a “final decision” and “the facts have sufficiently congealed to permit an intelligent and useful decision to be made’.”  (Santa Teresa, supra, 114 Cal.App.4th at 708.)  Further, Petitioner alleges how the Re-Notice Decision could cause further delay to an application that has been pending for more than 30 years and cause Petitioner irreparable harm.  (Pet. ¶ 62.)  Because the Executive Director allegedly applied a regulation (23 Cal. Code Reg. § 684(b)) to Petitioner’s injury, “a sufficient controversy exists to satisfy the ripeness requirement.”  (Phelps, supra, 157 Cal.App.4th at 98-99.) 

Respondent argues that Water Code section 1126 authorizes judicial review of a “final action” of the Board, and section 1094.5 addresses the validity of a “final administrative order.” (Dem. 13.)  “‘A decision attains the requisite administrative finality when the agency has exhausted its jurisdiction and possesses ‘no further power to reconsider or rehear the claim.’ Finality may be defined either expressly in the statutes governing the administrative process or it may be determined from the framework in the statutory scheme…. Until a public agency makes a ‘final’ decision, the matter is not ripe for judicial review.”  (Cal. Water Impact Network v. Newhall County Water Dist. (2008) 161 Cal.App.4th 1464, 1482.)  “The doctrine of exhaustion of administrative remedies is a closely related concept to finality.  The policy reasons behind the two doctrines are similar.  The exhaustion doctrine precludes review of an intermediate or interlocutory action of an administrative agency.”  (Id. at 1489.)

Respondent argues that Petitioner must wait until it issues a final decision on the water rights application to seek judicial review.  (Dem. 13-14.)  Respondent does not cite any statute or regulation governing water rights applications that clearly supports that assertion.  Respondent cites section 685 of the pertinent regulations, which states that “[i]ssuance of a notice of application shall not be construed as a final determination that the application is complete in all details.”  (23 Cal. Code Reg. § 685.)  Section 685 does not state that Respondent’s decision to re-notice an application is only final after the Respondent reviews the water rights application.  Respondent also has not cited a statute or regulation stating that there is any administrative appeal to exhaust to challenge a decision to re-notice an application under section 684(b).    

Finally, Respondent does not demonstrate that the petition necessarily fails to state cause of action.  Generally, “the exhaustion doctrine precludes review of an intermediate or interlocutory action of an administrative agency.”  (Alta Loma School Dist. v. San Bernardino County Com. On School District Reorganization (1981) 124 Cal.App.3d 542, 554.)  However, there are exceptions to the exhaustion requirement, including “when pursuit of an administrative remedy would result in irreparable harm.”  (Edgren v. Regents of University of California (1984) 158 Cal.App.3d 515, 520.)  Here, Petitioner filed its water rights application in June 1991, and Respondent deemed the application complete in May 1993.  (Pet. ¶¶ 24, 25.)  Thus, the complete application has been pending before Respondent for more than 30 years.  Petitioner also alleges that it “has since worked to resolve outstanding protests and perfect its water rights application” and “[s]uch efforts have included the dismissal or voluntary withdrawal of all but four pending protests, which have remained consistent since 2006.”  (Id. ¶ 27.)  Petitioner then alleges that the Re-Notice Decision will cause Petitioner irreparable harm: “The Board’s Decision to Re-Notice, if implemented, will allow parties who missed the statutory deadline to file protests, to now file new protests, thus forcing CEMEX to respond as required by the Water Code, perform new analysis, expend significant resources, and further delay CEMEX’s ability to obtain necessary approvals for its Soledad Canyon Project.” (Id. ¶ 62.)  Respondent does not address these allegations in the petition or show that they are insufficient to plead an exception to the exhaustion doctrine based on irreparable harm. 

Given that Petitioner’s water rights application has been pending for more than 30 years, there is a reasonable inference that the re-noticed application could also require a lengthy protest and review period.  Petitioner also alleges that Respondent issued the Re-Notice Decision “despite there being no changes in circumstances since the Board’s prior 2004 and 2016 decisions, and despite CEMEX making no changes to the Application.”  (Pet. ¶ 35.)  The court must accept the truth of these allegations for purposes of demurrer.  In light of these allegations concerning irreparable harm to Petitioner, the court is not persuaded by Respondent’s contention, at the pleading stage, that the Re-Notice Decision is immune from judicial review until after Respondent makes a final decision on the re-noticed application and associated protests.  Respondent may further develop its ripeness argument in the briefing for the writ trial.

B.        The Second Cause of Action: The Dismissal of the Petition for Reconsideration

In the second cause of action, Petitioner alleges that Respondent failed to proceed as required by law when it dismissed the petition for reconsideration on the grounds that the Re-Notice Decision was not a final decision subject to judicial review.  (Pet. ¶¶ 67-79.)  Respondent contends that the second cause of action fails because Respondent has no obligation to entertain petitions for reconsideration and that its dismissal of the petition is not subject to judicial review.  (Dem. 15-20.) 

            Pursuant to Water Code section 1122, “[t]he board may order a reconsideration of all or part of a decision or order on the board's own motion or on the filing of a petition of any interested person or entity.”  The regulations provide that any person interested in an application “may petition the board for reconsideration of the matter upon any of the following causes: (a) Irregularity in the proceedings, or any ruling, or abuse of discretion, by which the person was prevented from having a fair hearing; (b) The decision or order is not supported by substantial evidence; (c) There is relevant evidence which, in the exercise of reasonable diligence, could not have been produced; (d) Error in law.”  (23 Cal. Code Reg. § 768.)  Respondent “may: (1) Refuse to reconsider the decision or order if the petition fails to raise substantial issues related to the causes for reconsideration set out in Section 768….”  (23 Cal. Code Reg. § 770(a).) 

            Respondent acknowledges that “courts have not squarely addressed whether the State Water Board must entertain petitions for reconsideration in the water rights context under Water Code section 1122.”  (Dem. 16.)  Interpreting Water Code section 13320, the Court of Appeal has held that “a discretionary decision by the State Board as to whether to review a regional board's decision imposing administrative penalties is not subject to judicial review.”  (Johnson v. State Water Res. Control Bd. (2004) 123 Cal.App.4th 1107, 1113.)  Further, the Court of Appeal has held that “the state board retains unreviewable discretion to determine what issues are ‘substantial’ and whether they are ‘appropriate for review.’”  (People ex rel. Cal. Regional Water Quality Control Board v. Barry (1987) 194 Cal.App.3d 158, 176.)

Here, Petitioner does not challenge a decision by Respondent to deny reconsideration on the grounds that the petition did not raise a “substantial” issue.  Rather, Petitioner contends that Respondent’s dismissal of the petition—on the grounds there was no final decision or order—was “contrary to law” because the Re-Notice Decision was final and subject to reconsideration.  (Pet. ¶¶ 67-79.)  Thus, in effect, Petitioner contends that Respondent did not even exercise discretion on the petition.  Further, as discussed above, Petitioner alleges that it will suffer irreparable harm if the application is re-noticed and the protest procedure is restarted after the current application has been pending for more than 30 years. 

Given the allegations of the petition, Petitioner has a colorable argument that mandamus could issue if Respondent erroneously refused to exercise its discretion on the petition for reconsideration.  (See AIDS Healthcare Foundation v. Los Angeles County Dept. of Public Health (2011) 197 Cal.App.4th 693, 700 [“Mandamus does not lie to compel a public agency to exercise discretionary powers in a particular manner, only to compel it to exercise its discretion in some manner.”].)  In the demurrer, Respondent does not cite any published appellate decision holding that an agency’s refusal even to entertain a petition for reconsideration and exercise its discretion, on legally erroneous grounds, cannot be reviewed by mandate.  Respondent may further develop its position in the briefing for the writ trial.

CONCLUSION AND ORDER

            Based upon the foregoing, the court overrules the demurrer to the first and second causes of action.  Respondent’s counsel shall provide notice and file proof of service with the court.