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Equilon Enterprises v. State Board of Equalization

October 29, 2010

EQUILON ENTERPRISES, PLAINTIFF AND APPELLANT,
v.
STATE BOARD OF EQUILIZATION ET AL., DEFENDANTS AND RESPONDENTS;
NATIONAL PAINT & COATINGS ASSOCIATION, INC. INTERVENOR AND RESPONDENT.



APPEAL from a judgment of the Superior Court of Sacramento County, Judy Holzer Hersher, Judge. Affirmed. (Super. Ct. No. 05AS02406).

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

CERTIFIED FOR PUBLICATION

In this tax refund case, plaintiff Equilon Enterprises, LLC, doing business as Shell Oil Products US sought a refund of $3,910,359.10 it paid for the year 2002 pursuant to regulations promulgated under the Childhood Lead Poisoning Prevention Act of 1991, on the theory (among others) that the amount was an unconstitutional tax under section 3 of Proposition 13 (Cal. Const., art. XIII A, § 3). The trial court entered judgment against Shell and in favor of defendants State Board of Equalization (the board) and State Department of Health Services (now the California Department of Public Health) (the department), concluding the fee Shell paid was a legitimate regulatory fee and not a tax.

On appeal, Shell contends the fee imposed on the gasoline industry under the department's regulations, which require the industry to bear approximately 85 percent of the costs of the childhood lead poisoning prevention program (lead program),*fn1 is an unconstitutional tax because it does not bear a reasonable relationship to the industry's responsibility for cases of childhood lead poisoning in California. According to Shell, the paint industry is mainly responsible for childhood lead poisoning but is allocated only 15 percent of the lead program's costs, and other industries "likely" responsible for childhood lead poisoning pay no lead program fee at all.

The lynchpin of Shell's argument is that for the fee to be constitutional, it must be proportional to the gasoline industry's responsibility for cases of childhood lead poisoning, rather than proportional to the industry's responsibility for environmental lead contamination. We disagree. A regulatory fee is not an unconstitutional tax under Proposition 13 if there is a reasonable basis in the record for the manner in which the fee is allocated among those responsible for paying it. Here, there was a reasonable basis for the department to allocate the lead program fee in the manner it did, based on the gasoline industry's responsibility for contaminating the environment with lead. The department was not obligated to allocate the fee based on responsibility only for those specific instances in which exposure to environmental lead contamination has actually resulted in childhood lead poisoning.

Because we reject this argument, as well as Shell's other two arguments, we will affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

Proper understanding of the issues in this case requires a detailed summary of the legislation underlying the fee regulations Shell has challenged. Accordingly, we begin by summarizing the legislation relating to the prevention of childhood lead poisoning, then we review the fee regulations, and then we turn to Shell's lawsuit.

A. The 1986 Act

In 1986, the Legislature first enacted the Childhood Lead Poisoning Prevention Act (now codified as Health & Saf. Code, § 124125 et seq.) (the 1986 Act).*fn2 (Stats. 1986, ch. 481, § 2, pp. 1794-1796.) In doing so, the Legislature found and declared "that childhood lead exposure represents the most significant childhood environmental health problem in the state today; that too little is known about the prevalence, long-term health care costs, severity, and location of these problems in California; that it is well known that the environment is widely contaminated with lead; that excessive lead exposure causes acute and chronic damage to a child's renal system, red blood cells, and developing brain and nervous system; that at least one in every 25 children in the nation has an elevated blood lead level; and that the cost to society of neglecting this problem may be enormous." (§ 124125.)

The Legislature further found and declared "that knowledge about where and to what extent harmful childhood lead exposures are occurring in the state could lead to the prevention of these exposures, and to the betterment of the health of California's future citizens." (§ 124125.)

In enacting the 1986 Act, the Legislature's stated intent was "to establish a state Childhood Lead Poisoning Prevention Program within the Department to accomplish all the following: (a) [t]o compile information concerning the prevalence, causes, and geographic occurrence of high childhood blood lead levels[;] [¶] (b) [t]o identify and target areas of the state where childhood lead exposures are especially significant[;] [¶] [and] (c) [t]o analyze information collected pursuant to this article and, where indicated, design and implement a program of medical follow-up and environmental abatement and follow-up that will reduce the incidence of excessive childhood lead exposures in California." (§ 124125.)

Consistent with this intent, the 1986 Act directed the department to gather information about "each detected case of a blood level greater than 25 micrograms of lead per deciliter of human blood," "identify target areas in which to conduct a childhood lead screening program," "complete [the] screening program" "[b]y October 1, 1988," and "submit a report" "[o]n January 1, 1989" "describing the results of the screening program, the significance of the results, and the department's recommendations for further actions, where indicated." (Stats. 1986, ch. 481, § 2, p. 1795.) The Legislature appropriated $175,000 to provide first-year funding to implement the lead program and stated its intent that future funding for the program would be appropriated through the annual budget process. (Id., § 3, at pp. 1795-1796.)

B. The 1989 Act

The department apparently complied with the directive to submit a report on its activities under the lead program at the beginning of 1989, because later that year the Legislature enacted further legislation relating to the program (§§ 124150, 124160, 124165) (the 1989 Act).*fn3 (Stats. 1989, ch. 1455.) The Legislature found and declared that the information the department had gathered and the screening program had "confirmed and supported" the Legislature's findings in the 1986 Act relating to childhood lead exposure and had resulted in additional findings that "[v]ery few children are currently tested for elevated blood lead levels in California"; "[a]additional blood lead screening needs to be done to identify children at high risk of lead poisoning"; "[b]ased on emerging information about the severe deleterious affects of low levels of lead on children's health, the lead danger level is expected to be lowered from 25 to 15 micrograms of lead per deciliter of human blood"; and "[l]ead poisoning poses a serious health threat for significant numbers of California children." (Stats. 1989, ch. 1455, § 1, pp. 6491-6492; see also § 124150.)

Based on these findings, the Legislature mandated that the department "direct the Childhood Lead Poisoning Prevention Program to implement a program to identify and conduct medical follow-up of high-risk children, and to establish procedures for environmental abatement and follow-up designed to reduce the incidence of excessive childhood lead exposures in California." (§ 124160.) These activities were to be completed by January 1, 1993. (Ibid.) After that date, the department, through the lead program, was to "continue to take steps that it determines are necessary to reduce the incidence of excessive childhood lead exposure in California." (§ 124165.)

The Legislature appropriated $140,000 to provide funding through June 30, 1990, and stated its intent "that the existing base funding for the Childhood Lead Poisoning Prevention Program shall be maintained, and that future additional funding to carry out the activities specified in [the 1989 Act) shall be appropriated through the annual budget process, commencing with the 1990-91 fiscal year budget." (Stats. 1989, ch. 1455, § 4, p. 6493.) Governor Deukmejian, however, deleted the appropriation because he determined it was "not necessary to put additional pressure on taxpayer funds for programs that fall beyond the priorities currently provided" and it would be "more appropriate to consider funding the provisions of this bill during the budget process," at which time "the relative merits of th[e] program [could be reviewed] in comparison to all other funding projects." (Id., at p. 6491.)

C. The 1991 Act

In 1991, the Legislature enacted the Childhood Lead Poisoning Prevention Act of 1991 (§ 105275 et seq.) (the 1991 Act).*fn4 (Stats. 1991, ch. 799, § 3, pp. 3559-3563.) In doing so, the Legislature noted that the department had "recently reported to the Legislature its findings and recommendations for the prevention of childhood lead poisoning in California." (Id., § 1, at p. 3558.) The department's findings included the following:

"(1) Because of differences in metabolism and excretion of lead, children are more vulnerable to lead toxicity than adults.

"(2) Exposure to even low levels of lead can result in brain damage and behavior problems that seriously impair a child's performance in school.

"(3) Severe lead poisoning can result in cerebral palsy, mental retardation, and loss of muscle control.

"(4) Ingestion of lead-contaminated dust and soil, lead-based paint chips, and water contaminated by lead solder in older plumbing continue to be sources of severe lead poisoning in children.

"(5) Lead in soil and dust is primarily derived from automobile exhaust from leaded gasoline, industrial emissions, and lead paint.

"(6) Although leaded gasoline use is declining, a large number of motor vehicles continue to use leaded gasoline. In addition, lead deposited in the environment from past ...


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