Judge: William D. Claster, Case: 21-01187589, Date: 2022-12-21 Tentative Ruling
DEMURRER AND MOTION TO STRIKE MOJAVE PISTACHIOS’ THIRD AMENDED PETITION
Defendant Indian Wells Valley Groundwater Authority has filed two challenges to the third amended petition (“3AP”) of Plaintiffs Mojave Pistachios, LLC et al. (collectively, “Mojave”). The Court rules as follows:
The Authority’s request for judicial notice is GRANTED. Mojave’s objections to the Keigwin Declaration are OVERRULED.
GROUNDS FOR DEMURRER RULING
I. Fifth Cause of Action (Annual Pumping Allocation)
Authority Ordinance No. 03-20 (RJN, Ex. F) is the “Replenishment Fee” ordinance. With the exception of federal and “de minimis” users (who are wholly excepted from the ordinance), the ordinance charges all groundwater extractors a Replenishment Fee of $2,130 per acre foot. It also gives some (but not all) groundwater extractors an exempted allotment not subject to the fee. For example, the City of Ridgecrest can pump 373 acre feet of water before it has to pay the Replenishment Fee. Mojave refers to these allotments as “Annual Pumping Allocations.” Mojave is not one of the extractors that received an Annual Pumping Allocation. It seeks a writ of mandate setting aside the Annual Pumping Allocations.
Mojave has never paid the Replenishment Fee despite being subject to it. In minute orders dated May 25, 2021 and August 5, 2021, Judge Nakamura twice held that Mojave’s previous challenge to the Replenishment Fee was barred by the “pay first, litigate later” rule. The Authority contends the demurrer to this cause of action is simply a disguised challenge to the Replenishment Fee itself, meaning it’s still barred by the “pay first, litigate later” rule. The Court agrees.
It appears from the face of Ordinance No. 03-20 that the purpose of the Annual Pumping Allocations is enable calculation of the Replenishment Fee that a groundwater extractor owes. Mojave, which doesn’t have an allocation, is required to pay $2,130 per acre foot from the first drop pumped. Ridgecrest only pays if it exceeds 373 acre feet. The Court does not see how the Annual Pumping Allocations cause Mojave any harm other than requiring it to pay a larger Replenishment Fee than extractors who received allocations. This means a challenge to the Annual Pumping Allocations is effectively a challenge to the Replenishment Fee itself, which is barred by the “pay first, litigate later” rule.
Mojave contends the Annual Pumping Allocations constitute improper determinations of water rights. The Court disagrees for two reasons. First, Ordinance No. 03-20 was adopted as part of a groundwater management plan under SGMA. Nothing in the text of the ordinance purports to determine water rights. All the Annual Pumping Allocations do is affect the calculation of certain extractors’ Replenishment Fee.
Second, per Water Code § 10720.5(b), “Nothing in [the SGMA], or in any groundwater management plan adopted pursuant to [the SGMA], determines or alters surface water rights or groundwater rights under common law or any provision of law that determines or grants surface water rights.” Mojave contends the Annual Pumping Allocations, adopted pursuant to the Authority’s GSP, violate this statute by altering water rights. The Court believes Mojave misreads the statute. It doesn’t say groundwater management plans cannot alter water rights, in the sense that altering water rights would be a violation. It says groundwater management plans do not alter water rights.
Finally, Mojave argues one or more exceptions to the “pay first, litigate later” rule apply. Judge Nakamura has twice held “pay first, litigate later” applicable to challenges to the Replenishment Fee. The Court will not revisit that holding today. The demurrer to the fifth cause of action is sustained.
II. Ninth Through Eleventh Causes of Action (Takings Claims)
A. Waiver of Arguments
Mojave argues the Authority has waived certain of its takings arguments by failing to make them in demurrers to earlier petitions when those arguments could have been made. In support of this argument, it cites CCP § 430.41(b), which provides: “A party demurring to a pleading that has been amended after a demurrer to an earlier version of the pleading was sustained shall not demur to any portion of the amended complaint, cross-complaint, or answer on grounds that could have been raised by demurrer to the earlier version of the complaint, cross-complaint, or answer.” Specifically, Mojave contends the Authority could have raised these arguments in its demurrer to the first amended petition, but failed to do so.
Mojave confuses the Authority’s arguments in support of its demurrer with the Authority’s grounds for demurrer. The grounds for demurrer are defined by statute at CCP § 430.10. The Authority demurred to the takings claims (causes of action 14-16 in the FAP) based on CCP § 430.10(a) and (e). (ROA 176, at p. 3.) The Authority now demurs to the takings claims (causes of action 9-11 in the 3AP) based on CCP § 430.10(e). The Authority raised failure to state facts sufficient to constitute a cause of action in both demurrers, so the waiver rule of CCP § 430.41(b) is inapplicable.
B. Merits
Again, “Nothing in [the SGMA], or in any groundwater management plan adopted pursuant to [the SGMA], determines or alters surface water rights or groundwater rights under common law or any provision of law that determines or grants surface water rights.” (Wat. Code § 10720.5(b).) In these takings claims, Mojave contends that the Authority’s GSP, supporting documents, and certain implementing actions have worked a taking of its water rights. As the Court understands the SGMA, they do not. Nothing in the GSP determines or alters groundwater rights because the SGMA says the GSP, etc. do not determine or alter groundwater rights. Indeed, as the Authority points out, the Court will determine groundwater rights in a separate action, No. 2021-01187275.
As to the regulatory takings claims (9th and 10th COAs), courts apply a three-factor test that considers “(1) the economic effect [of the regulation] on the landowner; (2) the extent of the regulation’s interference with investment-backed expectations; and (3) the character of the governmental action.” (Avenida San Juan Partnership v. City of San Clemente (2011) 201 Cal.App.4th 1256, 1272.) As far as the Court can tell, nothing challenged in these causes of action actually has an economic effect on Mojave. The economic effect is a result of the Replenishment Fee, which allegedly would require Mojave to pay over $12 million a year in fees to pump water at current levels. The 3AP specifically removed numerous references to the Replenishment Fee, including from the takings claims. (See ROA 447, ¶ 8 [explaining changes in proposed 3AP].) It appears the actions complained of are not alleged, without reference to the Replenishment Fee, to have an economic effect on Mojave.
As to the physical takings claim (11th COA), it does not appear Mojave alleges it is physically prevented from extracting water. To be sure, Mojave argues the GSP and associated implementing actions have “the effect” of “mak[ing] Mojave’s share of the Basin native yield physically unavailable for Mojave’s use.” (Opposition at p. 18.) But the mechanism for this effect is unexplained. How does the GSP and associated actions, which by law do not alter property rights, have the effect of making water physically unavailable for Mojave? Absent from the 3AP is any allegation that Mojave has in fact been physically prevented from extracting water.
III. Leave to Amend
This is Mojave’s fourth pleading. The Court does not see how the above defects can be remedied, and Mojave does not request leave to amend in its opposition papers. Leave to amend is therefore denied.
GROUNDS FOR MOTION TO STRIKE RULING
The Authority seeks to strike two sets of allegations: those pertaining to the Annual Pumping Allocation and those pertaining to a reverse validation challenge to actions taken to implement the GSP.
I. Annual Pumping Allocation
In light of the foregoing demurrer ruling, it appears to the Court that the motion to strike the allegations about the Annual Pumping Allocation are largely moot. Even if not, it appears to the Court that the allegations provide context for Mojave’s other claims, although they cannot themselves be a basis for liability.
The Court is also concerned by the breadth of the Authority’s argument, because it appears the Authority contends every reference to “actions” in the 3AP, whether defined (e.g., “Implementing Actions”) or not, is flawed by the explicit or implicit inclusion of the Annual Pumping Allocation as an “action.” This is a bridge too far. For example, at page 16 of its memorandum, the Authority asks to strike all references to “actions taken in reliance on or in furtherance of the GSP,” simply because the Annual Pumping Allocation is one such action. What authority is there for striking the reference to all “actions” when only one action is challenged by this motion, and the remainder are not?
That said, insofar as the Annual Pumping Allocations are a basis for the CEQA claim, the Court will strike them. For the reasons discussed above in connection with the demurrer, challenges to the Annual Pumping Allocations are properly considered challenges to the Replenishment Fee. As a result, this portion of the CEQA claim, like previous causes of action rejected by Judge Nakamura, “at base, seek[s] to challenge and impede [the Authority]’s collection of the Replenishment Fee.” (ROA 207, p. 3.) The “pay first, litigate later” rule applies, whether those challenges are cast as CEQA claims, traditional writ of mandate claims, etc. Accordingly, that portion of the CEQA challenge based on the Annual Pumping Allocation is struck. (See PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, 1682-1683 [“We conclude that when a substantive defect is clear from the face of a complaint . . . a defendant may attack that portion of the cause of action by filing a motion to strike.”].)
II. Reverse Validation Challenge to “Actions”
The validation statutes (CCP § 860 et seq.) “apply to a matter when ‘any other law’ authorizes their application.” (Golden Gate Hill Development Co., Inc. v. County of Alameda (2015) 242 Cal.App.4th 760, 766.) Under the SGMA, “[a] groundwater sustainability agency that adopts a groundwater sustainability plan may file an action to determine the validity of the plan pursuant to” the validation statutes. (Wat. Code § 10726.6(a).) By extension, reverse validation actions are also permitted to challenge groundwater sustainability plans. (CCP § 863)
Mojave’s eighth cause of action is a reverse validation challenge to the GSP. It seeks to invalidate the GSP itself, as well as “any actions taken in reliance on or in furtherance of the invalid GSP.” (3AP, ¶ 450.)
The Authority challenges this language because the SGMA only allows a reverse validation challenge to a GSP, not to actions taken pursuant to a GSP. In opposition, Mojave points out that if the GSP is invalid, then any actions taken to implement it necessarily lack legal foundation. So construed, the Court does not see why the allegations are subject to being struck. The Court agrees that implementing actions, unlike a GSP, can’t be directly challenged under the validation statutes. But the Court does not understand Mojave to be mounting a direct challenge to the implementing actions, only to the GSP they implement.
DEMURRER AND MOTION TO STRIKE SEARLES VALLEY MINERALS’ FIRST AMENDED PETITION
Defendant Indian Wells Valley Groundwater Authority has filed two challenges to the first amended petition (“1AP”) of Plaintiff Searles Valley Minerals, Inc. The Court rules as follows:
The Authority’s request for judicial notice is GRANTED.
GROUNDS FOR DEMURRER RULING
Similar to Mojave’s takings claims, a prior version of these takings claims expressly relied on the Replenishment Fee, which Searles has never paid. On August 5, 2021, Judge Nakamura sustained the Authority’s demurrer to the takings claims as violating the “pay first, litigate later” rule. The 1AP now alleges that two sets of actions constitute a taking of Searles’ water rights: (1) plans and reports developed to manage Basin groundwater, and (2) the Extraction Fee, a $105 per acre foot charge (separate from the Replenishment Fee) that Searles has been paying under protest.
Once again, as with Mojave, “Nothing in [the SGMA], or in any groundwater management plan adopted pursuant to [the SGMA], determines or alters surface water rights or groundwater rights under common law or any provision of law that determines or grants surface water rights.” (Wat. Code § 10720.5(b).) Insofar as Searles contends the actions complained of actually determine or alter water rights, those rights will be determined by the Court in the companion action.
I. Third and Fourth Causes of Action (Regulatory Takings)
Unlike Mojave, Searles challenges the Extraction Fee of $105 per acre foot, which it’s been paying under protest. To determine whether a regulatory taking has occurred, courts apply a three-factor test that considers “(1) the economic effect [of the regulation] on the landowner; (2) the extent of the regulation’s interference with investment-backed expectations; and (3) the character of the governmental action.” (Avenida San Juan Partnership v. City of San Clemente (2011) 201 Cal.App.4th 1256, 1272.) Searles alleges the Extraction Fee either deprives it of all economically valuable use of its groundwater rights or makes it economically infeasible to continue its planned business operations. (1AP, ¶¶ 121, 126.) This is enough to state a regulatory taking claim for demurrer purposes.
The Authority contends this allegation is conclusory and not supported by ultimate facts. The Court disagrees. Searles alleges it has paid the fee, and it alleges the fee either deprives it of all economically valuable use of its groundwater rights or makes it economically infeasible to continue its planned business operations. This is sufficient at the pleading stage. The Authority complains that Searles “fails to specifically allege how the Extraction Fee is confiscatory” (Memo. at p. 17), but specifics are not required at this time. The Authority will, of course, be free to seek summary judgment or adjudication of these claims if the evidence shows it’s undisputed that Searles has not suffered the economic effects complained of.
II. Fifth Cause of Action (Physical Taking)
As with Mojave, the Court does not see how Searles has been physically prevented from pumping groundwater. For the same reasons discussed in connection with the demurrer to Mojave’s physical taking claim, the demurrer is sustained. Because the Court does not see how it is possible to plead a physical taking of Searles’ groundwater rights, the demurrer is sustained without leave to amend.
GROUNDS FOR MOTION TO STRIKE RULING
The Authority seeks to strike four sets of allegations.
I. Waiver/Untimely Motion
Before reaching the Authority’s arguments, Searles contends the Authority’s motion is untimely or has been waived because the Authority could have, but did not, file a motion to strike in connection with its demurrer to the original petition. The Court disagrees. Unlike CCP § 430.41(b), which bars a second demurrer on grounds that could have been advanced in a first demurrer, Searles identifies no authority that prevents the filing of a motion to strike portions of an amended complaint when no motion was filed with respect to the original complaint.
II. Replenishment Fee
Judge Nakamura sustained the Authority’s demurrer to Searles’ claims seeking to invalidate the Replenishment Fee on “pay first, litigate later” grounds. But he overruled the demurrer to the first cause of action (a writ of mandate challenging the GSP, various reports, the Extraction Fee, and the Replenishment Fee) because a demurrer doesn’t lie to a portion of a cause of action. Because the Authority didn’t file a motion to strike portions of the original petition, Searles filed a 1AP that kept the first cause of action fully intact. This includes references to the Replenishment Fee, even though that challenge is barred.
Per page 11 of its opening memorandum, the Authority seeks to strike ¶¶ 79-91, 101-104, and 115-122 because they are improper challenges to the Replenishment Fee. The Court agrees that under PH II, Inc. v. Superior Court (1995) 33 Cal.App.4th 1680, ¶¶ 101-104 (charging allegations in the writ of mandate claim that seeks to set aside the Replenishment Fee) are barred by the “pay first, litigate later” rule and should be struck. Similarly, ¶¶ 79-91 (background allegations that explain how the Replenishment Fee is illegal) have no apparent relevance other than support for the barred challenge, so they should be struck as irrelevant.
But ¶¶ 115-122 (the charging allegations for the total regulatory taking claim) don’t mention the Replenishment Fee at all. The Court sees no reason to strike them, so this portion of the motion is denied.
III. Sustainable Yield Report and Engineer Report
The Authority contends allegations and claims about the Sustainable Yield Report and Engineer Report are concealed challenges to the Replenishment Fee and thus should be barred as well.
This is not apparent to the Court from the face of the 1AP. True, the Sustainable Yield Report and Engineer Report support the Replenishment Fee, but they were (allegedly) improperly adopted for reasons having nothing to do with the illegality of the Replenishment Fee (e.g., failure to take into account Searles’ comments).
The Authority also argues the Sustainable Yield Report and Engineer Report don’t give rise to writ relief because the reports don’t require Searles to do anything, nor do they strip it of rights. But as Searles points out in opposition, the SGMA states, “Except as otherwise provided in this section, actions by a groundwater sustainability agency are subject to judicial review pursuant to Section 1085 of the Code of Civil Procedure.” (Wat. Code, § 10726.6(e).) The Authority’s adoption of the reports doesn’t appear to fit within the exceptions (such as adoption of a GSP or challenges to fees), so presumably writ review is appropriate under the SGMA.
In reply, the Authority points out that regardless of the SGMA, CCP § 1085 requires a writ petitioner to have a beneficial interest in the agency performing its duty. It argues Searles has not alleged such an interest with respect to the reports, so they can’t be challenged by writ petition.
Upon review of the briefs and the parties’ arguments, the Court believes the Authority is using a motion to strike improperly on this point. As PH II recognized when holding that a motion to strike might lie to a portion of a cause of action that fails on its face, “such use of the motion to strike should be cautious and sparing. We have no intention of creating a procedural ‘line item veto’ for the civil defendant.” (PH II, 33 Cal.App.4th at p. 1683.) It appears to the Court that the request to strike allegations about the reports is the sort of “line item veto” motion that is to be avoided. On that basis, the motion is denied.
IV. Declaration of Groundwater Rights
Searles devotes a considerable portion of the 1AP to arguing that it has water rights senior to the Navy’s. It contends a live controversy exists between Searles and the Authority about the extent of Searles’ rights, in that the Authority denies the full extent of Searles’ claimed rights.
As the Authority points out, the Court cannot declare the extent of Searles’ groundwater rights compared to all other rightsholders in this action, particularly vis-à-vis the Navy (which isn’t a party to this action and would have to waive its sovereign immunity in any event). Nevertheless, Searles seeks “a judicial declaration that Searles Valley Minerals’ groundwater rights to pump and use Basin water are prior and paramount to any other Basin groundwater user or claimant.” (1AP ¶ 113.)
The priority of groundwater rights will be determined in the companion action. The request for a declaration of groundwater rights, and the supporting factual allegations (1AP ¶ 110-113), are improper and will be stricken.
V. Altering of Groundwater Rights
For reasons discussed in the ruling on the challenges to Mojave’s 3AP, the Court agrees that under the SGMA, no action the Authority takes vis-à-vis the GSP alters any property rights Searles may have in groundwater. But the Court does not understand why this means allegations that the Authority has altered Searles’ rights need to be struck. This appears to the Court to be another improper “line item veto” request, and as such is denied. Furthermore, specifically as regards ¶ 125, the Court has overruled the demurrer to this cause of action in reliance on the very language the Authority seeks to strike.