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TWC Storage, LLC v. State Water Resources Control Board

June 3, 2010

TWC STORAGE, LLC, PLAINTIFF AND APPELLANT,
v.
STATE WATER RESOURCES CONTROL BOARD ET AL., DEFENDANTS AND RESPONDENTS.



(Santa Clara County Super. Ct. No. CV078148) Trial Court: Santa Clara County Superior Court Trial Judge: Honorable Marcel Poche.

The opinion of the court was delivered by: Mihara, J.

CERTIFIED FOR PARTIAL PUBLICATION*fn1

Appellant TWC Storage, LLC (TWC) challenges the superior court's denial of its petition for a writ of administrative mandate. TWC's petition challenged the imposition of a $25,000 fine on it by respondent Regional Water Quality Control Board for the San Francisco Bay Region (the Regional Board). The fine was based on a chemical spill on TWC's property that infiltrated the groundwater. TWC claims that the Regional Board abused its discretion in imposing the fine because neither the law nor the facts supported the imposition of the fine. TWC also contends that it was deprived of due process and a fair hearing at the administrative hearing before the Regional Board. In the published portion of our opinion, we conclude that the Regional Board properly applied the relevant statutes. In the remainder of our opinion, we reject TWC's challenges to the conduct of the administrative hearing.

I. Factual Background

In 2004, TWC purchased real property (the property) which had been used in the 1970s and 1980s for semiconductor manufacturing. In 1987, the 3.28-acre property was identified as a "Superfund" site due to the presence of volatile organic chemicals (VOCs) in the soil and groundwater. The property has been unoccupied since 1991. A two-story building on the property was next to a play yard at a daycare center for children which was operated on an adjacent property.

TWC wished to demolish the two-story building on the property. Two transformers were attached to that building. The transformers were not hidden. TWC hired a general contractor, Qualogy Construction, Inc. (QCI), to handle the demolition. TWC told QCI that all known hazardous materials had been removed from the site.*fn2 QCI hired a demolition subcontractor, Campanella Corporation (Campanella), to demolish the building.

On the morning of Friday, July 15, 2005, a Campanella equipment operator was demolishing the "utility area" where the transformers were attached to the building on the property. The transformers were located approximately 30 feet from the daycare center's play yard. It is a "standard and common practice to check for and drain liquids out of transformers prior to demolition or dismantling." The transformers had not been checked or drained. Using an excavator, the equipment operator removed and damaged one of the transformers. A liquid began spilling out of the damaged transformer.

The exterior of the damaged transformer was clearly labeled "PERCLENE FILLED" in large stenciled letters. Perclene is the "commercial name" for perchloroethylene (PCE). PCE is a "highly toxic contaminant." The equipment operator placed the damaged transformer on top of a "soils pile" to drain. He subsequently moved the damaged transformer to another area to "fully drain out/dry out." QCI was informed of the spill within an hour or two of its occurrence. QCI immediately monitored the area, detected high levels of VOCs, and instructed its crews to vacate the area.

TWC was notified of the spill at 11:05 a.m. on July 15, about an hour or two after the spill. By that afternoon, TWC was aware that at least 50 gallons of PCE had spilled from the damaged transformer, and TWC had been advised to notify "the US EPA" (the United States Environmental Protection Agency) immediately. TWC did not immediately notify any governmental agency. TWC did contact an environmental clean-up company, and some clean-up commenced two days later on July 17.

Sunnyvale Public Safety Officer Ron Staricha visited the property on the morning of July 19 as part of his routine monitoring of the demolition to ensure that it was in compliance with the demolition permit's dust control measure. Staricha noticed drums on the property labeled as "hazardous waste" that had not been present five days earlier when Staricha had last visited the property. QCI's president, who was present on the property, informed Staricha of the PCE spill. When Staricha asked why the City of Sunnyvale had not been notified of the spill, QCI's president asserted that TWC had notified "OES [Office of Emergency Services] and USEPA" on July 18. Staricha subsequently discovered that TWC's telephone notifications were made after Staricha arrived on the property on July 19. No governmental agency had been notified of the spill prior to Staricha's July 19 visit to the property.*fn3

TWC thereafter engaged in investigation and clean-up efforts to address the effects of the spill. Nevertheless, an October 2005 sampling of the groundwater at the property detected a very high level of PCE close to the location of the transformer spill. The PCE level detected at that time was 12,000 micrograms per liter. In contrast, the PCE level had not exceeded 24 micrograms per liter over the previous decade.*fn4

II. Procedural Background

In January 2006, the Regional Board issued a complaint for administrative civil liability against TWC for violations of Water Code sections 13264, 13265, subdivision (c), and 13350, subdivision (b)(1). The complaint alleged that TWC had violated the Water Code by discharging PCE "into waters of the State" beginning on July 15, 2005 without filing a report of waste discharge (ROWD). The complaint sought imposition of a $40,000 fine on TWC.

At the hearing before the Regional Board, TWC presented a witness who testified that it was "virtually unheard of" for a transformer to contain PCE. This witness also asserted that "Perclene" is "not readily recognized by anybody" as referring to PCE, and he claimed that the "PERCLENE FILLED" marking on the transformer was "faint."

In May 2006, the Regional Board issued an order imposing a $25,000 fine on TWC. The Regional Board found that TWC had violated both Water Code section 13264 and Water Code section 13350, subdivision (b)(1). The Regional Board made factual findings that TWC had damaged the transformer, initiating a PCE spill that infiltrated a groundwater aquifer, and left the transformer leaking PCE for four days before notifying OES of the spill. The Regional Board's order incorporated the staff report by reference.

In June 2006, TWC petitioned the State Water Resources Control Board (the State Board) for review of the Regional Board's order. The State Board dismissed this petition in December 2006. In January 2007, TWC filed a petition for a writ of administrative mandate in the superior court. TWC argued to the superior court that the Regional Board's decision was an abuse of discretion because the Regional Board had (1) improperly applied the relevant statutes, (2) violated TWC's right to due process at the hearing, and (3) failed to provide TWC with a fair hearing because the "legal instructions" to the Board were erroneous. TWC's petition was tried to the court. In June 2008, the court issued a judgment denying the petition.*fn5 TWC filed a timely notice of appeal.

III. Discussion

TWC raises three categories of issues on appeal. It claims that (1) the Regional Board improperly applied the relevant statutes, (2) the conduct of the hearing before the Regional Board violated due process, and (3) the "instructions" given to the Regional Board by its legal advisor were prejudicially erroneous.

The first question is what standard of review we apply to the superior court's decision. Judicial review of the Regional Board's decision by the superior court "extend[ed] to the questions whether the respondent ha[d] proceeded without, or in excess of jurisdiction; whether there was a fair trial; and whether there was any prejudicial abuse of discretion. Abuse of discretion is established if the respondent has not proceeded in the manner required by law, the order or decision is not supported by the findings, or the findings are not supported by the evidence." (Code Civ. Proc., § 1094.5, subd. (b).) "Where it is claimed that the findings are not supported by the evidence, in cases in which the court is authorized by law to exercise its independent judgment on the evidence, abuse of discretion is established if the [superior] court determines that the findings are not supported by the weight of the evidence." (Code Civ. Proc., § 1094.5, subd. (c).) In this case, the superior court was authorized by law to exercise its independent judgment on the evidence. (Wat. Code, § 13330, subd. (d).)

On appeal, we review the superior court's decision that the Regional Board's findings are supported by the weight of the evidence under the substantial evidence standard of review. (JKH Enterprises, Inc. v. Department of Industrial Relations (2006) 142 Cal.App.4th 1046, 1058.) We exercise independent review on the question of whether the Regional Board provided TWC with a fair hearing. (Rosenblit v. Superior Court (1991) 231 Cal.App.3d 1434, 1442.)

A. Regional Board's Application of Statutes

The Regional Board found that TWC had violated both Water Code section 13264 and Water Code section 13350, subdivision (b). TWC claims that the record lacks substantial evidence to support the Regional Board's findings.

1. Water Code Section 13350, Subdivision (b) Violation

TWC argues that there is no evidence that TWC "caused or permitted" the PCE discharge into the groundwater in violation of Water Code section 13350, subdivision (b). "Any person who, without regard to intent or negligence, causes or permits any hazardous substance to be discharged in or on any of the waters of the state, except in accordance with waste discharge requirements or other provisions of this division, shall be strictly liable civilly . . . [¶] . . . ."*fn6 (Wat. Code, § 13350, subd. (b), italics added.)

TWC relies heavily on City of Modesto Redevelopment Agency v. Superior Court (2004) 119 Cal.App.4th 28 (Modesto) to support its claim that Water Code section 13350 does not apply to a party who "take[s] no active role in the activities leading up to the discharge." Modesto does not support this proposition.

The issue in Modesto was whether the defendants, none of whom were landowners, were "responsible parties" under Water Code section 13304, subdivision (a). (Modesto, supra, 119 Cal.App.4th at p. 35.) Water Code section 13304, subdivision (a) provides that a person is responsible for cleanup and abatement if the person "causes or permits" a discharge that "creates, or threatens to create, a condition of pollution or nuisance." (Wat. Code, § 13304, subd. (a); Modesto, at p. 35.) In Modesto, the First District Court of Appeal's interpretation of this statutory language was guided by its prior decision in Leslie Salt Co. v. San Francisco Bay Conservation Etc. Com. (1984) 153 Cal.App.3d 605 (Leslie Salt).

In Leslie Salt, the court construed a statute which allowed a cease and desist order to be issued to any person who had " 'undertaken' " to " 'place[] fill' " without the requisite permit. (Leslie Salt, supra, 153 Cal.App.3d at p. 612.) In Leslie Salt, the defendant, who was the landowner, focused on the word " 'undertaken' " and contended that the statute did not apply to anyone "other than the one who actually placed the fill." (Leslie Salt, at p. 612.) The First District held in Leslie Salt that the statute applied to "landowners regardless whether they actually placed the fill or know its origin." (Leslie Salt, at p. 617.) "[L]iability and the duty to take affirmative action flow not from the landowner's active responsibility for a condition of his land that ...


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