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E-D Coat, Inc. v. E. Bay Mun. Util. Dist.

COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION FOUR
Sep 14, 2018
A145236 (Cal. Ct. App. Sep. 14, 2018)

Opinion

A145236

09-14-2018

E-D COAT, INC., Plaintiff and Appellant, v. EAST BAY MUNICIPAL UTILITY DISTRICT, Defendant and Respondent.


NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Alameda County Super. Ct. No. RG14721560)

After monitoring its industrial wastewater for years, East Bay Municipal Utility District (EBMUD) revoked the wastewater discharge permit of appellant E-D Coat, Inc. (E-D Coat) in June 2012, and later denied E-D Coat a zero wastewater discharge permit, because EBMUD's sewer water testing showed E-D Coat was discharging zinc-contaminated wastewater into Oakland's sewer system. E-D Coat denied that allegation and produced evidence that it had changed its metal plating process to use recycled water and no longer discharged any wastewater into the sewers. The administrative hearings became largely a battle of experts, and E-D Coat lost. It then filed a petition for writ of administrative mandate in superior court (Code Civ. Proc., § 1094.5), but its petition was denied.

Statutory references are to the Code of Civil Procedure, unless otherwise indicated.

E-D Coat now seeks to reverse the permit revocation by critiquing EBMUD's method of collecting sample sewer water for testing, by claiming the trial court did not exercise its independent judgment in performing its review, and by complaining of evidence improperly excluded. None of these attacks convinces us that legal error was committed, and we affirm the judgment.

I. BACKGROUND

A. EBMUD's Regulatory Oversight of Wastewater Discharge

EBMUD owns and operates the East Bay's Main Wastewater Treatment Plant near the eastern end of the Bay Bridge. There, EBMUD treats all wastewater discharged within its service area before it flows into the San Francisco Bay. It regulates all industrial wastewater dischargers within its service area through an industrial wastewater discharge permitting system.

EBMUD is charged with ensuring the industrial operations that discharge into EBMUD's system comply with applicable water quality protection requirements. Many of these requirements are set forth in wastewater discharge permits issued by EBMUD to industrial dischargers like E-D Coat. The requirements are designed to prevent industrial wastewater from disrupting operation of the treatment plant or otherwise interfering with its ability to protect the San Francisco Bay from pollutants.

Among the water quality protection requirements EBMUD must enforce are federal Environmental Protection Agency (EPA) pretreatment requirements, under which an industrial discharger must pretreat its industrial process wastewater so that it meets federal limits for metals and toxins before it is discharged to the sewer. One of EBMUD's responsibilities is to develop and enforce a local wastewater pretreatment program, which EBMUD does through its Wastewater Control Ordinance No. 311 (Ordinance).

EBMUD's Ordinance governs the discharge of wastewater into the EBMUD system and imposes prohibitions and requirements for such discharges. For example, an industrial facility is prohibited from bypassing its on-site pretreatment equipment and may only discharge wastewater to a community sewer at an authorized discharge location. The Ordinance also lists the "local limits" for pollutants in wastewater discharge, which are similar to the federal limits. Under federal law, whichever standard is more stringent governs. The local limit for zinc, for example, is 5 mg/L, but the more stringent federal limit of 4.2 mg/L would govern.

The Ordinance requires all industrial facilities discharging to EBMUD's treatment plant, including E-D Coat, to have a valid wastewater discharge permit and adhere to the terms of that permit. The Ordinance also contains an explicit provision for permit termination: "The Director [of Wastewater] may terminate any wastewater discharge permit for violation of the terms and conditions of the permit or the provisions of this Ordinance."

EBMUD's Director of Wastewater (Director) oversees EBMUD's wastewater control program and the administration and enforcement of the Ordinance. Among the Director's enforcement tools are "Director's Orders," which may require a discharger to take a variety of actions to remediate conditions causing discharge violations. A discharger's failure to take the actions required in a Director's Order constitutes a violation of the Ordinance, and thus, a basis for permit termination.

B. Overview of the Dispute

Prior to October 2012, E-D Coat had operated a metal plating business in Oakland for more than 75 years, with its main facility located within one city block bounded by Third and Fourth Streets on two sides and by Brush and Castro Streets on the other two. A smaller second facility is located across Fourth Street. E-D Coat's chief operating officer is Lisa Rossi, who took over the business from her father in about 2001 or 2002, and who was chiefly involved in dealing with EBMUD through the transactions in dispute. A house also owned by the Rossi family is located next to the smaller facility on Fourth Street.

E-D Coat's metal plating process required large quantities of fresh water, and the company discharged a large amount of wastewater. In 2008, E-D Coat reported that it discharged 12,341 gallons of process wastewater per day and received from EBMUD approximately the same amount (12,300 gallons) of incoming water. As part of its oversight of such discharge, EBMUD had issued E-D Coat a permit to discharge wastewater through its "Side Sewer No. 3," which emptied into the Third Street sewer and made its way to the treatment plant. This was the only discharge point authorized by EBMUD.

EBMUD turned off E-D Coat's water supply in November 2010 due to nonpayment. EBMUD then revoked E-D Coat's wastewater discharge permit in June 2012 based on evidence that E-D Coat had discharged wastewater containing excessive levels of zinc to an unauthorized location along the Fourth Street sewer in Oakland, near Fourth and Castro Streets. EBMUD was convinced that E-D Coat had an unauthorized source of water and was continuing to dump contaminated wastewater into the sewer.

But according to testimony presented by E-D Coat, when EBMUD revoked its wastewater permit, E-D Coat had already long since ceased discharging any wastewater into the sewer system. By April 2011, it had converted its operation to one that used recycled rain water in processing, so the company no longer needed either a source of water or a place to discharge wastewater. E-D Coat therefore submitted an application for a zero wastewater discharge permit on November 1, 2012. The Director's Decision dated February 28, 2013, found that E-D Coat did not demonstrate it had the ability to operate as a zero wastewater discharger and denied the permit.

E-D Coat pursued administrative appeals of its permit revocation to no avail. After EBMUD's general manager upheld the revocation of E-D Coat's permit and the Director denied it a zero discharge permit, E-D Coat took its case to the superior court by way of a petition for writ of administrative mandate. (§ 1094.5) When the trial judge denied the petition, E-D Coat appealed to this court.

On appeal, as in earlier proceedings, E-D Coat denies it was dumping wastewater into the Fourth Street sewer in 2011 and 2012. It criticizes EBMUD's water sampling method as rendering its water testing results virtually worthless. It claims the flawed method is responsible for the excessive levels of zinc measured in the sewer water. EBMUD's sampling technique involved testing water from a depression at the bottom of a manhole on Fourth and Castro Streets. E-D Coat claims this resulted in large amounts of residual sediment from the divot in the sewer being mixed in with the water in sampling tubes, artificially inflating the levels of zinc revealed in the water samples.

E-D Coat admits this sediment had been deposited in the sewer line by its own operations over the decades, but insists the elevated level of zinc reflected in EBMUD's sewer-water samples was the result of deposits of sludge that may have dated to E-D Coat's operations stretching back as far as the 1960's. It was not, E-D Coat claims, the result of current wastewater discharge. The company insists it was using recycled water, even though it produced a lower quality product, to be able to remain in operation without having to deal with EBMUD. E-D Coat suggests we should give significantly reduced weight to EBMUD's test results and greater weight to the testimony of E-D Coat's officers and experts.

Ultimately, E-D Coat identifies three specific findings by the superior court that were purportedly infected with error: (1) E-D Coat was discharging wastewater into the Fourth Street sewer in the period April 2011 to May 2012; (2) E-D Coat was out of compliance with Director's Order No. 09-01; and (3) E-D Coat was not operating as a zero wastewater discharger. E-D Coat also urges as error the superior court's refusal to augment the record with evidence that was contained in the administrative record but had not been admitted during administrative hearings following the permit revocation.

E-D Coat also claims that penalties and charges imposed for excessive levels of metals in its discharge should be reversed. Due to our disposition of the other issues on appeal, we find it unnecessary to address that issue separately. There was sufficient evidence of Ordinance violations under Director's Order 09-01.

C. E-D Coat's History of Wastewater Discharge Violations

EBMUD is allowed—perhaps required—by both state and federal law to consider a facility's history of regulatory violations when determining the appropriate level of enforcement against a facility. Since 1993, E-D Coat has been continuously under a cease and desist order for repeated violations of federal discharge limits for zinc and cyanide. Between 1993 and 2000 alone, EBMUD cited E-D Coat for 97 separate violations. In 2002, E-D Coat and its senior officials were convicted of felonies for violating the federal Clean Water Act and had to pay a $215,000 criminal fine, plus an additional $385,000 to settle civil charges brought by the U.S. Department of Justice and the EPA. In the years since the felony convictions, E-D Coat has continued to violate regulatory discharge limits and the terms of its permit, leading first to a 2009 Director's Order 09-01 (discussed below), and ultimately to the permit termination in 2012.

D. EBMUD's Discovery of Unauthorized Discharges Beginning in 2008

EBMUD's decision to revoke E-D Coat's permit followed a lengthy investigation to determine the source of continued elevated levels of contaminants, especially zinc, found in the community sewer adjacent to E-D Coat's facilities. Starting in 2008, monitoring and testing by EBMUD revealed that E-D Coat's wastewater was intentionally re-routed to bypass its on-site pretreatment process and was discharged directly into the community sewer. The wastewater discharged contained levels of metals in excess of limits mandated by E-D Coat's permit, EPA regulations, and EBMUD's governing Ordinance.

Based on its findings, EBMUD issued Director's Order 09-01 in September 2009, requiring E-D Coat to implement a series of specific remedial actions at its facilities to prevent future illegal discharges, which included mapping out its on-site "rat's nest" of a plumbing system and disconnecting any unauthorized discharge lines, with the analysis and work to be performed by licensed professionals. Before the work was completed, E-D Coat had stopped paying its EBMUD bills. It also failed to implement the renovation of its plumbing system; by its own admission, E-D Coat "gave up" on complying with the terms of Director's Order 09-01.

In November 2010, EBMUD terminated water service to E-D Coat's main operations site due to nonpayment, and in July 2011, it terminated water service to E-D Coat's smaller facility, across the street from the main plant. E-D Coat had one legal line for industrial discharge, known as Side Sewer No. 3, which connected with the sewer on Third Street, not on Fourth Street where the elevated levels of zinc were detected. The parties agree E-D Coat was not discharging to Side Sewer No. 3 in April 2011. Hence, as of mid-2011, E-D Coat had no authorized water source for its facilities and an unused side sewer to Third Street.

After EBMUD shut off its water supply to its main facility, E-D Coat claims it began using recycled water to operate its business. It collected rain water and used it in its rinse process. The water was then treated and reused. The process was implemented in April 2011, after E-D Coat admittedly used a neighbor's water and water from its second facility across Fourth Street for a few months after EBMUD shut off its water. Then, when warned by EBMUD that such use was illegal, E-D Coat purportedly began recycling rain water through a process that did not involve any discharge of wastewater into the sewers. In October 2012, E-D Coat reported to EBMUD it had plugged its discharge lines, except those leading from the bathrooms, and was not discharging industrial wastewater at all. The only lines it used were those leading from the bathrooms to the sewer line.

E. Revocation of E-D Coat's Wastewater Discharge Permit

Despite E-D Coat's assertions about its recycling process, EBMUD's investigation suggested E-D Coat had resumed discharging wastewater into the Fourth Street sewer in April 2011. EBMUD's monitoring and testing revealed illegal levels of metals in the sewer, which it concluded were traceable to E-D Coat. The chemical composition of the water tested from the sewer was consistent with the chemical composition of the water in E-D Coat's electroplating process tanks, thus lending credence to EBMUD's inference that E-D Coat was illegally discharging contaminated wastewater at unauthorized locations into the sewer system. Based on these findings, between April 8, 2011, and May 31, 2012, EBMUD issued E-D Coat seven separate notices of violation, citing both (1) E-D Coat's failure to comply with Director's Order 09-01, and (2) E-D Coat's illicit wastewater discharges to unauthorized locations and with metal concentrations exceeding regulatory limits.

E-D Coat responds by acknowledging the sludge in the sewer was caused by its own operation in years gone by. Hence, the chemical composition would be expected to be similar to the water in its processing tanks. Despite E-D Coat's alternative explanation, the evidence of discharge beginning in April 2011 and continuing to May 2012, led EBMUD to terminate E-D Coat's discharge permit on June 4, 2012. On June 23, 2012, E-D Coat applied for a new wastewater discharge permit and requested reconsideration of the permit termination.

E-D Coat's application for a new wastewater discharge permit was required under the Ordinance. On October 4, 2012, EBMUD denied the new permit application on both procedural and substantive grounds. In the notice of the denial, EBMUD also reminded E-D Coat that the June 4, 2012 decision to revoke the permit was in effect and ordered E-D Coat to immediately cease all operations.

F. The Administrative Appeals

E-D Coat pursued two levels of administrative remedies unsuccessfully. The first, before EBMUD's Director, David Williams, resulted in the Director's February 28, 2013 decision to uphold the permit termination. E-D Coat then appealed to EBMUD's general manager. The general manager provided E-D Coat with a second hearing before Lester Levy, a hearing officer from JAMS arbitration and mediation service. On December 13, 2013, Levy again ruled in EBMUD's favor, upholding the permit revocation.

G. The Petition in Superior Court

E-D Coat then filed a petition for writ of administrative mandate (§ 1094.5) in superior court on April 15, 2014, seeking to reverse the result of these hearings. After reviewing the same record that was presented to hearing officer Levy, Judge Evelio Grillo denied E-D Coat's petition on March 11, 2015, and affirmed the decision of EBMUD, concluding: "The weight of the evidence supports EBMUD's findings that [E-D Coat] was operating in violation of [Director's] Order 09-01 and that [E-D Coat] was discharging water through the 4th Street sewer." The court also denied E-D Coat's motion to augment the record, as discussed in part II.E., below.

II. DISCUSSION

Though this case is factually complex, legally it is relatively simple. E-D Coat's briefing is essentially a rehash of its own evidence presented in the administrative hearings, urging that we reach a different result. Few cases are cited in the briefs, and E-D Coat's primary claim of legal error is its contention that Judge Grillo failed to apply the independent judgment appropriate to the case. For the most part, however, E-D Coat simply reargues the merits of its position and the strength of its own evidence in asking us to reverse, while virtually ignoring the body of evidence submitted by EBMUD. Applying the substantial evidence standard of review, as we must, we find no basis to overturn the judge's ruling, and we affirm.

"[I]f, as defendants here contend, 'some particular issue of fact is not sustained, they are required to set forth in their brief all the material evidence on the point and not merely their own evidence. Unless this is done the error is deemed to be waived.' " (Foreman & Clark, supra, 3 Cal.3d at p. 881, italics omitted; accord, State Water Resources Control Bd. Cases (2006) 136 Cal.App.4th 674, 749.) For this reason alone, we would be justified in treating E-D Coat's arguments as forfeited, for its briefs are entirely one-sided. We nevertheless proceed to the merits.

A. Standard of Review

Because E-D Coat had a fundamental vested right in its wastewater discharge permit, and the actions taken by EBMUD put E-D Coat out of business, the parties agree the trial court was called upon to make an independent judgment as to whether the weight of the evidence supported EBMUD's action. (Amerco Real Estate Co. v. City of West Sacramento (2014) 224 Cal.App.4th 778, 782-786; San Diego Unified School Dist. v. Commission on Professional Competence (2013) 214 Cal.App.4th 1120, 1140-1142 (San Diego Unified); Goat Hill Tavern v. City of Costa Mesa (1992) 6 Cal.App.4th 1519, 1525-1531 (Goat Hill Tavern).)

On appeal, however, a trial court's findings of fact as to this evidence will be upheld if supported by substantial evidence. (San Diego Unified, supra, 214 Cal.App.4th at p. 1141; Goat Hill Tavern, supra, 6 Cal.App.4th at p. 1525.) Thus, the trial court's power is expansive and ours is restricted. Under the substantial evidence standard, E-D Coat, as the appellant, has the burden of demonstrating there is no substantial evidence in support of the trial court's findings. (See generally, Lake v. Reed (1997) 16 Cal.4th 448, 456-457; Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 881 (Foreman & Clark).) This is a deferential standard. " 'When a finding of fact is attacked on the ground that there is not any substantial evidence to sustain it, the power of an appellate court begins and ends with the determination as to whether there is any substantial evidence contradicted or uncontradicted which will support the finding of fact.' " (Ibid.)

B. There Is No Basis for E-D Coat's Argument that the Trial Court Did Not Apply its "Independent Judgment" in Ruling on the Petition

E-D Coat tries to get around this deferential standard by claiming the court below did not exercise its independent judgment on the evidence. (Cf. Fukuda v. City of Angels (1999) 20 Cal.4th 805, 824 [case remanded where trial court improperly placed the burden of proof on the wrong party].) On the contrary, in reviewing the administrative record, Judge Grillo properly recited, both in writing and orally, that an independent review standard applied. (E.g., Foreman & Clark, supra, 3 Cal.3d at p. 881.) But E-D Coat urges us to ignore the judge's statement of which standard he was applying, arguing instead that Judge Grillo in fact ceded his independent review function, "disregarded" E-D Coat's evidence, and deferred unquestioningly to the decision previously made by hearing officer Levy. Lacking the ability to peer into the judge's mind, we must take him at his word that he applied his independent judgment to the evidence presented, and we see nothing in the record to suggest otherwise. We cannot accept E-D Coat's speculative characterization of the trial court's decision-making process.

C. Substantial Evidence Supported the Trial Court's Wastewater Discharge Finding

EBMUD's measured levels of zinc in the sewer water on Fourth Street, together with its officers', employees', and experts' testimony and reports, provided substantial evidence to support the trial court's finding that E-D Coat was discharging wastewater into the Fourth Street sewer. There is no merit to E-D Coat's contrary assertion.

By April 2011, E-D Coat stopped discharging to Side Sewer No. 3, after EBMUD disconnected its water for nonpayment. Also in April 2011, EBMUD began regularly sampling the wastewater at Fourth and Castro Streets. Of the 793 wastewater samples from that location between April 2011 and October 2012, 461 samples (58 percent) exceeded the federal limit for zinc. 611 of the samples (77 percent) had at least one metal that exceeded 10 times the average concentration from just one block upstream at Fifth and Castro Streets, where E-D Coat could not discharge. Some of these samples were also far above the regulatory limit—a September 2012 sample, for example, contained more than 15 times the allowable zinc. On average, the upstream wastewater at Fifth and Castro Streets (where E-D Coat could not discharge) had zinc concentrations 35 times lower than the Fourth and Castro samples (0.18 mg/L vs. 6.3 mg/L).

In June 2012, EBMUD also began monitoring the amount of flow in the Fourth Street sewer, which revealed a wide range of flow, from 950 gallons per day to no flow. This quantity and variability of the Fourth Street sewer flow was consistent with illicit discharge, and EBMUD stopped detecting flow when E-D Coat reported it had plugged its laterals to the Fourth Street sewer in October 2012.

During a surprise multi-agency inspection on March 1, 2012, EBMUD videotaped the199-foot Fourth Street sewer at issue. This video revealed a large amount of liquid in the sewer generally, foam indicating active discharge at a connection to E-D Coat (called Side Sewer No. 2), and a high level of liquid at another pipe that connected to E-D Coat (called Side Sewer No. 1). At this time, E-D Coat had no authorized water source. Eight months later, E-D Coat also videotaped the Fourth Street sewer line on November 9, 2012—after E-D Coat had stopped operating. E-D Coat's video revealed significantly less wastewater and no foam or active discharge. The videos are consistent with EBMUD's readings of sewer water composition. After E-D Coat stopped operating in late 2012, zinc concentrations in the collected wastewater decreased by 34 percent to 57 percent.

E-D Coat suggested there could have been other dischargers to the Fourth Street sewer that were responsible for these high metal readings. But, as EBMUD's evidence shows: (1) E-D Coat is the only source of non-domestic wastewater discharges (i.e., industrial wastewater) that is connected to the sewer flowing to Fourth and Castro; (2) March 2012 videotaped footage showed that the only lateral connections to the Fourth Street sewer were from E-D Coat, an empty lot, and a house owned by E-D Coat's owners; (3) E-D Coat is the only potential source of metals in the vicinity of Fourth and Castro Streets; and (4) the profile of metals found in E-D Coat's processing tanks mirrored those found in the Fourth and Castro Street samples.

E-D Coat criticizes EBMUD's sampling technique, claiming EBMUD switched sampling methods around the same time it began to register elevated zinc levels in the Fourth Street sewer. We interpret E-D Coat's criticism of EBMUD's sampling method as a contention that the EBMUD samples were not "substantial evidence" of an unlawful discharge by E-D Coat. Substantial evidence must be " ' "reasonable, credible, and of solid value." ' " (People v. Clark (2011) 52 Cal.4th 856, 942-943.) EBMUD's water testing evidence, as explained and confirmed by expert witness, engineer John Schubert, met that standard.

Historically, according to E-D Coat, EBMUD had sampled E-D Coat's discharges by testing water taken directly from the point at which the plant discharged its bathroom wastewater into the Fourth Street sewer. Sometime in 2011, E-D Coat submits, EBMUD changed its procedure and began sampling water vacuumed from the bottom of a manhole at Fourth and Castro Streets. E-D Coat presented evidence that, because there is a depression at the bottom of the manhole, sediment collects there and commingles with spillover water from the Castro Street main sewer line, resulting in EBMUD's detection of a higher zinc content in the Fourth Street line. E-D Coat claims the sediment that had collected in the depression at the bottom of the manhole contained years of accumulated sludge, which was collected in EBMUD's test tubes along with the sewer water. EBMUD did not filter the sediment out of the water samples, resulting in the solids in the sediment dissolving into the water sample and dramatically raising the zinc levels recorded by EBMUD.

These criticisms by E-D Coat were aired in the administrative hearings and again in the trial court, but Judge Grillo, weighing the evidence, found the weight of the evidence favored EBMUD. EBMUD disputes E-D Coat's claim that its sampling technique is faulty, denying that it changed its monitoring method in 2011. Counsel for EBMUD at oral argument before Judge Grillo explained that, due to the impracticality of inserting a sampling tube directly into the Fourth Street sewer laterals, EBMUD's sampling location in the "depression" had never changed.

EBMUD says it used the same sampling method consistently throughout 2008 to 2012, during the entire period in question, and the location from which it extracted samples "never changed." E-D Coat's factual account rests on Rossi's testimony that EBMUD told her in past years, prior to 2011, there had been direct discharge monitoring at E-D Coat's lateral connection. In February 2011, E-D Coat hired a company called Subtronic to examine EBMUD's testing apparatus, and Subtronic informed ED-Coat how the samples were being collected. This is weak evidence that EBMUD changed its sewer water collection technique, pitted against direct testimony presented by EBMUD that the sampling location did not change.

Judge Grillo ultimately determined that the weight of the evidence—some of it generated by EBMUD's testing—"demonstrates that [E-D Coat] was discharging wastewater at the 4th Street sewer." Either the judge did not believe EBMUD's testing method had changed, or else he believed the testing results remained valid despite the change. E-D Coat's arguments about the validity of EBMUD's testing method do not make EBMUD's evidence disappear, nor is the persuasive value of E-D Coat's evidence so overwhelming as to eliminate all confidence in EBMUD's showing. EBMUD presented evidence that readings from the Fourth Street sewer showed excessive levels of zinc during the April 2011 to May 2012 timeframe. It presented evidence that the uptick in zinc detected was being discharged from E-D Coat's plant.

EBMUD also presented expert testimony supporting the methodology used. Dr. Larry Russell, an expert in water chemistry and industrial wastewater management with over 30 years of experience working with industrial electroplating facilities, prepared a report for the record and testified to hearing officer Levy that EBMUD's data was reliable and supported the determination that E-D Coat discharged into the Fourth Street sewer. He explained that a relatively small discharge stream into the Fourth Street sewer contributed a substantial amount of the heavy metals, including zinc, being measured by EBMUD. The data, Dr. Russell testified, strongly suggested there was only one source discharging the heavy metals.

As Dr. Russell wrote, "The data—even ED Coating's [sic] own data—prove that . . . [r]esidual solids could not have caused the high metals in the [Fourth and Castro] samples for at least the following reasons: [1] . . . . [B]ecause of the small concentration of the metals in the sludge, it would have required a virtual mountain of sludge to be deposited in the 4th Street sewer line. . . . [I]t would have taken 2,772 pounds of sludge just to produce the amount of Zinc found in one week's worth of wastewater discharged from the 4th St. sewer in 2012. [2] E-D Coat's 'residual solids' theory is contrary to the realities of water chemistry. Zinc and other similar metals do not simply transform from a solid state. . . to a liquid state . . . . Changing solid Zinc into a soluble form in liquid requires acidification. . . which does not occur in sewer lines like the one on 4th Street. [3] Historical samples disprove the 'residual sediment' theory. Wastewater samples taken from the exact same location between December 2008 and March 2011 revealed dramatically less Zinc than in the 2012 samples. . . . If decades-old sediment in the 4th St. sewer line had caused the high zinc values in 2012 . . . then there would have been similarly high values between December 2008 and March 2011. But there were no such high values during this earlier period. . . . " (Italics omitted.)

EBMUD's supervising wastewater control inspector, Florencio Gonzalez, further repudiated the theory that years' worth of sediment caused the high readings because, among other things, the variation in zinc readings in the wastewater samples would not be expected if the zinc readings were from solids sloughing off. And Gonzalez emphasized that E-D Coat had been prohibited from discharging industrial wastewater into the Fourth Street sewer for at least 15 years. It was allowed to discharge bathroom water only. Gonzalez would expect the bathroom discharges and other sewer water to have washed the sediment away in the ensuing years.

If decades-old solids had been in the Fourth Street sewer and caused the high metal readings between April 2011 and October 2012, one would expect there to have been similarly high metal readings in earlier years, but there were not. Gonzalez presented evidence of historical wastewater samples from Fourth and Castro Streets. Of 33 wastewater samples taken between December 2008 and March 2011, 31 samples (94 percent) contained zinc concentrations below the federal limit, and 23 of the samples (70 percent) had less than 1 mg/L of zinc.

After reviewing a lengthy record covering what EBMUD calls E-D Coat's "legacy sediments" theory, Judge Grillo rejected that theory, finding it significant that "metal concentrations dropped sharply after [E-D Coat] stopped operations." Unless we were to totally disregard all of EBMUD's evidence, we would be hard-pressed to say there is no substantial evidence supporting the trial court's finding. We are unprepared to say there is only one reasonable interpretation of the evidence such that we would be justified in declaring EBMUD's evidence insubstantial. Substantial evidence supported the trial court's finding.

D. Substantial Evidence Supported the Trial Court's Finding that E-D Coat Violated Director's Order 09-01

The same evidence that supported Judge Grillo's finding that E-D Coat was actively discharging wastewater into Oakland's sewers, also supported the finding that E-D Coat violated Director's Order 09-01. One of the conditions of the order was that E-D Coat must cease discharging untreated wastewater into the sewer. Another was that E-D Coat must retrofit its operations with approved plumbing, which it admits it never did. These violations alone justified the court's finding that the order was violated.

More specifically, Director's Order 09-01 unambiguously required E-D Coat to submit to EBMUD for approval a Draft Plan of Work prepared by a licensed engineer stating a specified plan for identifying all connections between E-D Coat's facilities and the adjacent sewers, particularly those that bypassed the on-site pretreatment system. Once the draft plan of work was approved by EBMUD, E-D Coat was to retain a licensed engineer to implement the plan and prepare a Field Investigation Report for approval by EBMUD. The licensed engineer was also to prepare for approval by EBMUD a Construction Plan of Work identifying all of the remedial measures necessary to eliminate any unauthorized connections found between E-D Coat and the sewers. The Construction Plan of Work was to be implemented by a licensed contractor, who was to prepare a Final Report describing the work done, providing updated schematics and the certification of a licensed engineer that all unauthorized connections had been sealed. As EBMUD explained to Judge Grillo, the requirement that all reports be prepared by a licensed engineer was instated so E-D Coat could provide EBMUD with third-party "accountability."

EBMUD contends E-D Coat has failed entirely to comply with Director's Order 09-01. Bennett Horenstein, an EBMUD witness in the hearings before hearing officer Levy, testified that between the date of Director's Order 09-01 (September 2009) and the close of the Director's hearing on February 21, 2013, E-D Coat did not complete any of the specific requirements of Director's Order 09-01. Indeed, during the November 30, 2012 hearing—more than three years after the issuance of Director's Order 09-01—Lisa Rossi told the Director: "I don't have a problem with doing the Director's Order. . . . It wasn't until the hearing we had on October 11th[, 2012] when I found out. . . what I need to be looking for was. . . a civil engineer. . . . Then, I might have been able to get this done back then instead of where we are today." E-D Coat also said in a March 29, 2013 letter to the general manager that E-D Coat was "prepared to" comply with Director's Order 09-01. Under cross-examination on September 27, 2013, Rossi again testified: "And quite frankly, I gave up. I gave up." Rossi also made a statement before Judge Grillo at oral argument on the petition, stating that after "trying" to comply with Director's Order 09-01, she "gave up." Rossi's excuses were rejected by hearing officer Levy, who found that Rossi had "conceded" that E-D Coat had not completed the requirements of Order 09-01 and who "did not find. . . credible" Rossi's contention that she believed she did not need to comply with Director's Order 09-01.

Hearing officer Levy ruled E-D Coat had not completed "any" of the enumerated steps required by Director's Order 09-01. Judge Grillo agreed: "The weight of the evidence demonstrates that [E-D Coat] failed to comply with [Director's] Order 09-01. [E-D Coat] did not map every pipe and line to the sewer as was required. [E-D Coat] did not retain a licensed professional engineer to design and implement a plan to pretreat discharge water and ensure that all discharged waste water flowed to the 3rd Street sewer. [E-D Coat's] CEO Lisa Rossi testified alternatively that she misunderstood the requirements and that she ultimately gave up on efforts at compliance. . . . [E-D Coat] never submitted the draft plan of work, a field investigation report, a construction plan of work, or a final report," all of which were required by Director's Order 09-01.

Nevertheless, E-D Coat claims it "substantially complied" with Director's Order 09-01. E-D Coat addresses only the final requirements of Director's Order 09-01. It claims that it plugged all lines through which industrial wastewater could be discharged into the sewer system, thereby accomplishing what EBMUD required of it. This argument ignores the very purpose of Director's Order 09-01, which was to compel E-D Coat to provide EBMUD with the assurances of a third-party licensed engineer that the piping in E-D Coat's 75-year old facility would not and could not allow unauthorized discharges to the sewer. Yet, so far as we can tell, no third-party engineer was involved in overseeing the line-plugging process.

In any case, E-D Coat fails to cite any legal authority that "substantial compliance" would meet its obligations under an administrative order. It essentially argues it did not need to provide a Final Report to EBMUD because it sealed all connections to the sewer. Drawings and an operations manual it had submitted to EBMUD in 2008, E-D Coat argues, should have sufficed to meet the requirements of the 2009 Director's Order 09-01. Even assuming the court would be bound to accept the adequacy of "substantial compliance" in this context, the demonstrated failings by E-D Coat to comply with Director's Order 09-01 were sufficient to sustain a finding of noncompliance. And a finding of noncompliance, in turn, was sufficient to justify EBMUD's termination of E-D Coat's permit.

E. Substantial Evidence Supported the Trial Court's Finding that E-D Coat Was Not Operating as a Zero Wastewater Discharger

E-D Coat challenges a third of the court's findings, namely that it was not operating as a zero wastewater discharger. Rossi testified that, after having its water supply turned off, E-D Coat had converted to a different method of rinsing its products using recycled water instead of fresh water from EBMUD. Rossi also testified she retained an independent water recycling company, Rochester Midland Corporation (RMC), which specialized in installing and operating wastewater recycling systems, to evaluate E-D Coat's use of recycled water. RMC's representative purportedly told Rossi that while E-D Coat's recycling system was "not great," it worked; he sampled the water on site and was able to "adjust minimal amount of chemicals and actually make the water very clean and useable." Thereafter, RMC prepared a proposal to improve E-D Coat's wastewater recycling system. Ole Nordhavn, E-D Coat's former wastewater manager, confirmed Rossi's testimony and described how E-D Coat was able to continue operations using recycled water and producing no wastewater. E-D Coat argues that because of this factual evidence showing it had ceased discharging wastewater into the Fourth Street sewer, it should have secured a reversal of the wastewater permit revocation, or else should have been awarded a permit as a zero wastewater discharger.

We disagree, applying the substantial evidence standard of review. EBMUD presented evidence tending to rebut E-D Coat's claim that it was operating its plant using rain water alone. EBMUD retained John Schubert, a professional engineer with 35 years of wastewater industry experience, to help investigate E-D Coat's claims. Schubert inspected E-D Coat's facility on March 1, 2012, interviewed E-D Coat's operators, analyzed data from its process tanks, and produced two reports. His analysis revealed the following: (1) Wastewater containing large concentrations of metals was removed from E-D Coat's rinse tanks. Schubert estimated 6,600 gallons of wastewater were being removed from the rinse tanks each week. (2) Fresh water was being added to these tanks at least once a month, with an estimated 9,000 gallons of fresh water per week being added. (3) There was insufficient rainfall available for collection at E-D Coat's facilities to provide for even half of the evaporative losses from E-D Coat's production line; twice the rainfall currently collected would be required just to keep up with evaporative losses. (4) E-D Coat's claim about the amount of rainwater it collected was wrong, primarily because it "double counted" the roof area near the wastewater treatment facility. Nordhavn, E-D Coat's former employee, claimed all of the rainwater falling on the roof was collected, but Schubert actually observed water from the roof flowing down a drainpipe and out to the street. (5) There are no zero liquid discharge systems in place at E-D Coat. E-D Coat did not have any of the specialized equipment used to create a zero liquid discharge facility, such as those used in reverse osmosis or an ion exchange. What limited and insufficient equipment was on-site—including a sand filter—was inoperable at the time of inspection. Meanwhile, a house owned by the Rossi family, located on Fourth Street next to E-D Coat's smaller facility, recorded water use of 12 gallons per day in March and April 2012, 154 gallons per day in May, and 362 gallons for June and July. And, in March 2012, for example, EBMUD discovered an illicit unmetered tap to EBMUD's water main with a hose running to E-D Coat's facility.

EBMUD also presented evidence showing the illegal discharge in the sewer system was consistent with the chemical composition of the water in E-D Coat's processing tanks. In addition, if sediment were to blame for the high readings of zinc, then it would be hard to explain why historical readings from years gone by would not have registered at the same high level. Instead, between December 2008 and March 2011, 94 percent of the samples collected contained zinc concentrations below the federal limit, and 70 percent had less than 1 mg/L of zinc, lending credence to EBMUD's conclusion that E-D Coat was continuing to discharge wastewater into the sewer. We cannot call Schubert's opinion testimony insubstantial, and we cannot agree that EBMUD's evidence was insufficient to support the court's finding that the weight of the evidence supported the Director's decision.

Judge Grillo wrote, "The evidence shows that [E-D Coat] used a significant amount of water before the water was discontinued and that [E-D Coat] did not have the water recycling and reuse facilities to function as a zero liquid discharge facility." Judge Grillo evidently credited EBMUD's evidence and did not credit E-D Coat's testimony. Where, as here, either conclusion would be reasonable, we are not at liberty to substitute our inferences for Judge Grillo's, even assuming we disagreed with him. There was substantial evidence supporting Judge Grillo's finding, and that ends our inquiry.

F. The Court Did Not Abuse Its Discretion in Refusing to Augment the Record

As a final line of attack, E-D Coat argues the trial court improperly denied its motion to augment the record with evidence created February 28, 2013, April 17, 2013, April 19, 2013, and May 8, 2013, regarding laboratory testing of materials found in the Fourth Street sewer in 2013. The evidence consisted of laboratory data and reports provided by E-D Coat's experts based upon sampling they conducted on February 28, 2013, suggesting the contamination in the sewer line was from sewer sediment/sludge that was already in the sewer line, and not from E-D Coat's current operations. The documents with which E-D Coat sought to augment the record were: (1) A "Supplemental Response to Staff Report dated January 22, 2013," submitted by E-D Coat's attorney on or about February 28, 2013, with attachments; (2) Videotapes of the sewer lines on February 28, 2013, taken by E-D Coat's contractor, Subtronic, and the summary reports of inspections and smoke tests conducted April 17, 2013 and April 19, 2013; (3) Subtronic's letter report regarding the results of the videotape inspection. This evidence supported E-D Coat's assertion that there was no viable connection between E-D Coat's pipes and the Fourth Street sewer line; (4) Laboratory data and reports dated February 22, 2013, provided by Subtronic based upon the sampling conducted on February 14, 2013, confirming that the contamination in the sewer line was from sewer sediment in the sewer line and not from E-D Coat's operations.

This evidence was part of the administrative record and E-D Coat produced the evidence prior to and at the September 2013 hearing and made an offer of proof, but hearing officer Levy did not consider the evidence and made no ruling as to its admissibility. E-D Coat claims the exclusion of this evidence deprived it of crucial evidence and of a fair trial. The record had been closed by the Director on February 21, 2013, and E-D Coat's request to keep the record open to consider its additional evidence from February 21, 2013 forward was denied in the Director's decision on February 28, 2013. ~(AR 11)~ E-D Coat then attempted to admit the evidence in the hearing on its appeal to the general manager before hearing officer Levy, but he refused to consider it because it had not been admitted at the hearing before the Director. E-D Coat's appeal challenges the decision by hearing officer Levy to exclude the evidence and the superior court's decision to deny its motion to augment the record under section 1094.5, subdivision (e).

As Judge Grillo found, "Hearing Officer Levy excluded evidence regarding conditions after the close of the Director's hearing on 2/21/13. . . . The limitation on evidence was appropriate because the Hearing Officer was reviewing the Director's decision and therefore reasonably limited the hearing to information that could have been presented to the Director. In addition, the hearing concerned [E-D Coat's] conduct in 2011 and 2012, so [E-D Coat's] actions or the state of the sewers in 2013 was of limited relevance. (Evid. Code [§] 352.)" Both findings were amply supported by the record.

The general rule is that a writ of mandate hearing is conducted solely on the record of the administrative hearing. (Pomona Valley Hospital Medical Center v. Superior Court (1997) 55 Cal.App.4th 93, 101 (Pomona Valley).) Nevertheless, E-D Coat suggests this case demands different treatment because E-D Coat attempted to have the evidence considered in the administrative hearings, and the documents in question did appear in the administrative record. We fail to see why that makes a difference.

Section 1094.5 provides two exceptions, allowing augmentation of the administrative record: "Where the court finds that there is relevant evidence that, in the exercise of reasonable diligence, could not have been produced or that was improperly excluded at the hearing before respondent, it may enter judgment as provided in subdivision (f) remanding the case to be reconsidered in the light of that evidence; or, in cases in which the court is authorized by law to exercise its independent judgment on the evidence, the court may admit the evidence at the hearing on the writ without remanding the case." (§ 1094.5, subd. (e).) Section 1094.5 requires the court to confine itself to the record that was before the hearing officer at the administrative level unless one of those conditions is met or the evidence shows "agency misconduct." (Saraswati v. County of San Diego (2011) 202 Cal.App.4th 917, 930 (Saraswati); see generally, Evans v. City of San Jose (2005) 128 Cal.App.4th 1123, 1143-1144; Nightlife Partners, Ltd. v. City of Beverly Hills (2003) 108 Cal.App.4th 81, 88-90.)

The first exception—that the evidence could not, in the exercise of reasonable diligence, have been produced before the close of evidence at the Director's review—does not apply here. First, this exception applies to "evidence [that] existed before the agency made its decision." (Saraswati, supra, 202 Cal.App.4th at p. 930.) The fact that the evidence was included in the administrative record is not of much significance if it was not part of what the decisionmaker considered when the decision was made. Most of the evidence E-D Coat seeks to have admitted did not exist before the Director made his decision. We are aware of no reason why E-D Coat could not have acquired and produced this evidence earlier in this long-running dispute. Nor does the evidence in question bear on agency misconduct. Thus, E-D Coat's only argument for augmentation is that the evidence was "improperly excluded" at the administrative hearings.

Ordinarily the decision to permit augmentation rests within the sound discretion of the trial court and we will not disturb its decision absent a manifest abuse of discretion. (Pomona Valley, supra, 55 Cal.App.4th at p. 101.) E-D Coat suggests we must take a less deferential approach here because the trial court applied an incorrect and over-deferential standard—namely, the abuse of discretion standard—when it considered whether certain evidence in the administrative record had been "improperly excluded" by the hearing officer. E-D Coat insists section 1094.5, subdivision (c) required the trial court to independently review the hearing officer's evidentiary determinations, as well as his substantive determinations.

Section 1094.5 does not itself answer the question of what standard the trial court should apply in determining whether evidence was "improperly excluded" at the administrative hearing. E-D Coat proposes the trial court must exercise "independent" review of the evidentiary point by reference to section 1094.5, subdivision (c). But that subdivision applies to the court's review of the factual findings at the administrative hearing and makes no express—or even tangential—reference to applying the independent review standard to evidentiary rulings. To the extent the issue has been resolved by judicial decision, it appears the abuse of discretion standard would apply. "Determination of the question of whether one of the exceptions [identified in section 1094.5] applies is within the discretion of the trial court, and the exercise of that discretion will not be disturbed unless it is manifestly abused." (Pomona Valley, supra, 55 Cal.App.4th at p. 101.)

Evidentiary rulings, by their nature, require an exercise of discretion in considering application of the rules to the facts in the dynamic setting of a trial. "In ruling on the admissibility of evidence, the trial court is vested with broad discretion." (In re Cole C. (2009) 174 Cal.App.4th 900, 911.) Hearing officers in administrative hearings must be given the same leeway. E-D Coat, by reference to a different subdivision of section 1094.5, would have the trial court accord less deference to evidentiary rulings by a hearing officer at an administrative hearing than we would accord to the evidentiary rulings of a trial court. It has not put forth a policy rationale to support such an outcome. We think this suggestion is unwise and unrealistic, as well as unsupported by the authority cited.

And finally, even if the augmentation had been granted, we doubt it would have changed Judge Grillo's conclusion. EBMUD's evidence and arguments evidently appealed more persuasively to his mind, and it is not reasonably probable this would have changed based on an interpretation of water sampling results obtained by E-D Coat's expert in 2013, which post-dated the period that undergirded EBMUD's decision to revoke E-D Coat's wastewater permit.

III. DISPOSITION

The judgment is affirmed. EBMUD shall recover its costs.

/s/_________

Streeter, Acting P.J. We concur: /s/_________
Reardon, J. /s/_________
Smith, J.

Judge of the Superior Court of California, City and County of San Francisco, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution. --------


Summaries of

E-D Coat, Inc. v. E. Bay Mun. Util. Dist.

COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION FOUR
Sep 14, 2018
A145236 (Cal. Ct. App. Sep. 14, 2018)
Case details for

E-D Coat, Inc. v. E. Bay Mun. Util. Dist.

Case Details

Full title:E-D COAT, INC., Plaintiff and Appellant, v. EAST BAY MUNICIPAL UTILITY…

Court:COURT OF APPEAL OF THE STATE OF CALIFORNIA FIRST APPELLATE DISTRICT DIVISION FOUR

Date published: Sep 14, 2018

Citations

A145236 (Cal. Ct. App. Sep. 14, 2018)