CALIFORNIA BUILDING INDUSTRY ASSOCIATION v. STATE WATER RESOURCES CONTROL BOARD

Appellant’s Opening Brief on the Merits

Cal.September 22, 2015

SUPREME COURT PILED Case No. 8226753 SEP 22 2015 In the Supreme Court Frank A. VicGuire Clerk of the State of California Deputy7 ~\ CRC ' \8.25(b)/ Nl CALIFORNIA BUILDING INDUSTRY ASSOCIATION, a California nonprofit corporation, Petitioner, vs. STATE WATER RESOURCES CONTROL BOARD,etal., Respondents. PETITIONER’S OPENING BRIEF After a Decision by the First Appellate District, Division Two Court of Appeal Case No. A137680 On Appeal from the Superior Court, City & County of San Francisco Superior Court Case No. CGC-11-516510 Honorable Curtis E.A. Karnow, Judge Presiding RUTAN & TUCKER, LLP David P. Lanferman (SBN 71593) Five Palo Alto Square 3000 El Camino Real, Suite 200 Palo Alto, CA 94306-9814 Telephone: 650-320-1500 dlanferman@rutan.com ATTORNEYS FOR PETITIONER CALIFORNIA BUILDING INDUSTRY ASSOCIATION Case No. 8226753 In the Supreme Court of the State of California CALIFORNIA BUILDING INDUSTRY ASSOCIATION, a California nonprofit corporation, Petitioner, vs. STATE WATER RESOURCES CONTROL BOARD,etal., Respondents. PETITIONER’S OPENING BRIEF After a Decision by the First Appellate District, Division Two Court of Appeal Case No. A137680 On Appeal from the Superior Court, City & County of San Francisco Superior Court Case No. CGC-11-516510 Honorable Curtis E.A. Karnow, Judge Presiding RUTAN & TUCKER, LLP David P. Lanferman (SBN 71593) Five Palo Alto Square 3000 El Camino Real, Suite 200 Palo Alto, CA 94306-9814 Telephone: 650-320-1500 dlanferman@rutan.com ATTORNEYS FOR PETITIONER CALIFORNIA BUILDING INDUSTRY ASSOCIATION 2644/030584-0002 8714397.2 a09/21/15 - TABLE OF CONTENTS Page ISSUES PRESENTED.............0008secseeceseesecseccseessecscesseeceeseeaeeeatersesseeseaness 1 INTRODUCTION.wvcesssssssssssssecccsssuecssstseceseesnnnnesessssssnnneessesesssnesenssssnesessees 2 STATEMENT OF THECASE .......:cccssceseseesseesessssessesecessaeeeeenseessnerseseeeeenes 4 A. The Constitutional Contexts...cece ceesseeesreeneeeeesa4 B. Statutory Context ...cccccccseseeeseeeseeesseeseseetenesseenses 7 C. Factual Background -— The Board Revealed That Its Storm Water Fees Are Far In Excess of the Costs of That Regulatory Program uo... ccessseeesesreeenseneeeeeereeteeasenes 9 D. The Board Improperly Purported to Approve The New Schedule of Fees in September 2011 veccescecssesseseeneesneeeseeeeeeeeeeeeees 11 E. Summary of Superior Court Proceedings................ 15 F, Summary ofAppellate Court Proceedings ecessevsussssuscecsecsaeecsueeseesseenseasencessoseeseseseauesnnenssenesssenaee 16 STANDARD OF REVIEW ccsssssssvsctustsssesesesetssesssnsessnnScenes 19 ARGUMENT.....cccccccsccsssccesssssecsessrescecsseesscsecesessarsusereessseseseagesnersassesnesnges 20 I. VALID “REGULATORY FEES” MUST NOT EXCEED THE REASONABLECOST OF THE PARTICULAR REGULATORY ACTIVITY FOR WHICH THE FEES ARE OSTENSIBLY IMPOSED......cccccssccescccssseceseeeseeseceseesseeeesesseseeeeesnessnsessanenses 20 Il. AFTER PROPOSITION 26, IT IS CLEAR THAT THE GOVERNMENT HAS THE BURDEN OF PROVING THE VALIDITY OF ITS PURPORTED “REGULATORYFEES”........ceeeeeee 24 A. The Court of Appeal Erroneously Shifted the Board’s Burden of Proof to the Petitioner ........ccccccccescesecccneceeresssseesssneenesesseseteeseeeees 24 2644/030584-0002 . 8714397.2 a09/21/15 -1- EtS) oO B. Proposition 26 Made It CLEAR That the Burden ofProofIs On the Government To Demonstrate the Validity of Purported “RECS”. cecessccessssecsrecsnsecseecesscessecessusscesesareesseseeseesensaas 25 C, The Court of Appeal Erroneously Disregarded The Impact ofProposition 26 On Shifting the Burden of Proof to the Board, and On the Changed Definitionsof “Fees” and “Taxes” .......cesscssccssscssssssceseeseseeseecseeeens 26 I. AREGULATORYFEE IS INVALID UNLESS THE GOVERNMENT DEMONSTRATES THAT THE AMOUNT OF THEFEE DOES NOT EXCEED THE REASONABLE COSTS TO THE GOVERNMENT OF CONDUCTING THE REGULATORY ACTIVITY FOR WHICH THE FEE IS CHARGED 1.0.0... eceeteeetesteeeneeeeeees 28 A. The Board Failed to Comply With Constitutional Requirements............cccesseseesseeeeeenes 28 B. The Board Failed to Demonstrate ’ Compliance With Statutory Requirements Of the Water Code .......cccccccecccsssssseccccessseeessteeesetsaes 29 1. Violation of Water Code Section 13260(A)(1) oo.eeeereecesseesseeseesesseeeeeteeeseeeentes 30 2. Violation of Water Code Section 13260(d)(1)(C).....eeececeesseescesseseeseeeeessreseens 30 3, Violation of Water Code Section 13 260(£)(1)...ecececceeecseesseeesceseeeseeesaesseseeeneens 31 2644/030584-0002 . 8714397.2 a09/21/15 -ll- IV. A REGULATORYFEEIS INVALID UNLESS THE GOVERNMENT DEMONSTRATES THAT THE COSTS OF THE REGULATORY ACTIVITY FOR WHICH THE FEE IS CHARGED ARE ALLOCATED TO THE FEE PAYOR IN AN MANNERASSURING THAT THE FEE BEARS A_ FAIR’ AND REASONABLE RELATIONSHIP TO THE PAYOR’S BURDENS ON OR BENEFITS FROM THE REGULATORYACTIVITY......ccce A. No Evidence That The Fees Fairly Allocate the Board’s Costs of Storm Water Permit Regulatory Activity ............0. B. The “Fees” Were Actually Disguised TAXES” .occcccsescccccenspeecsscesesssceceeescceneecessenaneanees THE BOARD’S PURPORTED APPROVAL OF THE SCHEDULE OF FEES WAS REQUIRED TO COMPLY WITH WATER CODE SECTION 183 (“A MAJORITY OF ALL MEMBERS OF THE BOARD”) BUT IT FAILED TO COMPLY WITH THAT REQUIREMENT..ecsessssessssssssssssssscosssescsessenesceesnsnennee evesees 32 seereee 32 secsneee 33 seosees 34 CONCLUSION......ccccccssccescesseeseeersecesseeeesesseseeenesseessneesaeestaesesseoneeseeseonsoes 38 2644/030584-0002 87143972 a09/21/15 -iii- TABLE OF AUTHORITIES Page(s) CASES Apartment Assn. ofLos Angeles County v. City ofLos Angeles (2001) 24 Cal.4™ 830... .ssssssseseeseereseeeenensenenteneennees esseesesseees 5 Barratt American, Inc. v City ofRancho Cucamonga (2005) 37 Cal.4th 685 ...ccccccccsccssccssccsssceccsesseecesseessscsecesesesseesaessesensnesnestanenanens 31 California Ass’n ofProfessional Scientists v. Dept. ofFish & Game (2000) 79 Cal.App.4© 935 ...ccccssssssscscsesesssssssrenseesessnenssenseeeteeenersnneisetenseerseeeey 22 California Farm Bureau Fed’n. v. State Water Resources Control Board (2011) 51 Cal.Ath 421 icc cccescccsscccsssscecesseessscensoesseeeeeseeeesseneessesesrsenseeneas passim Capistrano Taxpayers Ass'n. v. City ofSan Juan Capistrano (2015) 235 Cal.App.4th 1493icecessssesssseseeeseeneecessersseeseesesneenseeres 23, 27, 29 County ofPlumas v. Wheeler (1906) 149 Cal. 758 ..ccccccccscscsscssesecenccseesscescesessssssscsaeeseesseeeeneesaesaeeersserey 2, 21, 29 County ofSonoma v. Superior Court (2009) 173 Cal.App.4® 322 ...ccecscssesssssssesessessssesesesesesesenensseneerererescsnsnsaterass 36-37 Estate ofClaeyssens v. State ofCalifornia (2008) 161 Cal.App.4th 465... cccsccssseesesesseenseeseeneneressessssssesesnseseesesensesessens 34 Kelsoe v. State Water Resources Control Bd. (2007) 153 Cal.App.4!569 ....cccssecessesscsssesssessssscsssscseesseseneneensnsensareanenneneareneaes 20 Lee Schmeer,et al., v. County ofLos Angeles (2013) 213 Cal.App.4th 1310.ccccesesecseeeseeeseeeeneneeseseserssnenseenseensesseeeesens 5 Marina County Water District v. State Water Resources Control Bd. (1984) 163 Cal.App.3d 132.0... cssesescsssssesessessseenessenensecesenssneessseneeesersresnensseeees 36 Morning Star Co. v. Board ofEqualization (2011) 201 Cal.App.4th 737, 750-753 ..cccsssssssecereeceeerenesseretssessereseressesseseeenes 34 2644/030584-0002 : 8714397.2 a09/21/15 -1V- Page(s) Northwest Energetic Services v. California Franchise Tax Bd. (2008) 159 Cal.App.4th 841 oececssscssscsseserseneerssesseenessesneeeesseseesisesssenees 32, 34 Pennell v. City ofSan Jose (1986) AD Cal.3d 365 v.ccccccsccccsscsssecsscsscssecsecsessnesseseessseseeseesseseasseeesneesensees 2, 21, 29 San Diego Gas & Electric Co. v. San Diego County Air Pollution Control Dist. (1988) 203 Cal.App.3d 1132... essssssssetsesseseeeesseeeseserseneerenecserseesseneeensees 27 Schmeer v. County ofLos Angeles (2013) 213 Cal.App.4th at pp. 1322... cessseesseseeseceeeeeeererecseeensessseetessenes 5, 26 Silicon Valley Taxpayers Ass'n v. Santa Clara County Open Space Authority (2008) AA Cal.4 431 cccccccsesscssseessseecssesececsecseeessceeessussecsessessssessaeessensenenees 5,19 Sinclair Paint Co. v. Board ofEqualization (1997) 15 Cal.4th 866.........cccecccecsescesossessreseesseessesaeenes 3, 20, 22, 24, 27-28, 34 Southern California Edison Co. v. Public Utilities Com. (2014) 227 Cal.App.4th 172....ccccsscsssssesscssssessescsesessescsenesesssneserenesssesseasnents 26-27 Weisblat v. City ofSan Diego (2001) 176 Cal.App.4h 1022.00... cesssessssesssessereeseeseesesessenecsecensastenesnenesesseneens 32 Western States Petroleum Ass’n v. Board of Equalization (2013) 57 Cal4th 401 vcccccccccscccssesscssecseseecsecerssseessecsarseseessecensssesseseesseseaeeonees 26 STATUTES Civil Code, SCCUION 12 ..cccccccececeseccecscccceeccccccccncceeccceceeecsvsvscetscaeecessuesesescccunaeesssecessenees 36 Code of Civi Procedure., SECCION 15 ...cccccssccesesccecsssssccccesccscesseececeecssssececeeseeeesesesanesceessseeesensesaeeeeess 36 2644/030584-0002 8714397.2 a09/21/15 -V- Page(s) Government Code, SCCtION 11346(€) ....ccceccecesceeerseeeserstsesessesesseeecsressecneesreecseastessssseesseneneees 15 SECTION 11347.3 .eeceeccccccsccssscccssnectcesesseeersseeeesesesseasecensesesseneseessneeeeesnaneess 15 SOCHION 11350(d) ..e.ecceecseceecrectssssseseseseesesseeeneseressesseacssreceetsesssssseseatenseaes 15 SECTION 25005 .....ceeecscccccsesssseccessecsscessseeesseaeecessssscacsensatsesensesesseaeeerssneeeeees 36 Health and Safety Code SECHION 25205.6 ....ccecsescccsescscesssessceseeceeecseceeesseeesrsneescseesasesseneeseaeeensenerenes 34 Water Code SECTION 175 veccceccccecessesccccceesseceessscesseecseeeccesensesecessenseseneeeessuenesenaneressegaasegs 7 SOCTION LB] Le iieeeeccecccecceccceeeeceseneeeseeeeee