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Daniels Sharpsmart, Inc. v. Smith

United States District Court, E.D. California

June 13, 2017

KAREN SMITH, in her official capacity as Director of the California Department of Public Health,, Defendants.




         Plaintiff Daniels Sharpsmart, Inc. (“Daniels”) brings this case under 42 U.S.C. § 1983 and 28 U.S.C. §§ 2201, 2202, alleging, among other things, that Defendants[1] violated the Commerce Clause of the United States Constitution, art. I, § 8, clause 3, through their extraterritorial enforcement of California's Medical Waste Management Act (“the MWMA”), Cal. Health & Safety Code §§ 117600 et seq. Daniels now seeks a preliminary injunction to enjoin Defendants' allegedly unlawful enforcement of the MWMA. Doc. 11. Defendants move to dismiss on a number of grounds. Doc. 12.

         For the following reasons, Defendants' motion to dismiss is DENIED, and Daniels's motion for a preliminary injunction is GRANTED.


         The facts of this case are few, straightforward, and undisputed. Daniels provides services for the transport and treatment of biohazardous medical waste. Doc. 1, Complaint (“Compl.”), ¶ 8. The MWMA requires, among other things, that medical waste generated in California must be treated by either incineration at a permitted facility or by another means approved by the California Department of Public Health (“the Department”). Id. ¶ 9. Because there were no facilities in California that complied with the MWMA, “Daniels transported its biohazardous medical wastes for treatment at facilities outside of California, ” including at facilities in Kentucky and Indiana. Id. ¶¶ 10-14. “Nothing in the MWMA indicates that its incineration requirement was intended to apply to waste treated outside of California.” Id. ¶ 9.

         In November 2014, the Department inspected Daniels's Fresno facility and, shortly afterward, Hilton sent a letter, copying Dabney, stating that Daniels had violated the MWMA (specifically, Cal. Health and Safety Code §§ 118215(a) and 118222) by treating its waste in Indiana and Kentucky facilities that used disposal methods that the MWMA did not authorize, that is, by means other than incineration. Id. ¶ 11; Doc. 11-2, Declaration of Daniel Kennedy (“Kennedy Decl.”), ¶¶ 27-28. The letter further stated that Daniels was in “noncompliance” with California law. Id. ¶ 19. “Daniels responded that the Department could not dictate the method of waste treatment outside of California. Defendant Dabney stated her disagreement in an email to Daniels copied to Defendant Hilton.” Compl. ¶ 12; Kennedy Decl. ¶ 18.

         In April 2015, the Department performed another inspection of Daniels's Fresno facility. Id. ¶ 13. Shortly afterward, Hilton sent another letter, copying Dabney, stating that Daniels use of facilities in Indiana and Kentucky that disposed its waste by means other than incineration violated the MWMA. Id. ¶ 13; Kennedy Decl. ¶ 20; Doc. 11-6 at 5 (Hilton letter stating “[n]one of [Daniels's] waste shipped to Indiana was treated in compliance with California law”); id. (Hilton letter stating waste transported to other states “cannot be treated by steam sterilization or microwave technology” under Cal. Health & Safety Code § 118222).

         In August 2015, the Department issued a “Notice of Violation” (“NOV”) to Daniels, signed by Pilorin. Compl. ¶ 14; Kennedy Decl. ¶ 21. “The NOV imposed a $567, 000 penalty against Daniels for using methods other than incineration to treat biohazardous medical wastes outside of California.” Compl. ¶ 14; Kennedy Decl. ¶ 21; see also Doc. 11-7 at 11-12 (NOV stating fine was imposed, in part, because Daniels used facilities in Kentucky and Indiana without “incineration treatment units” in violation of the MWMA on 567 occasions). Daniels appealed the penalty with the Department's Office of Administrative Hearings and Appeals (“OAHA”). Compl. ¶ 19; see also Doc. 19 at 13 n.4. To avoid further penalties, however, Daniels now transports its medical wastes to incinerators at other states, “at a significantly higher cost.” Compl. ¶ 15.

         In response to Defendants' actions, Daniels brought this case. Daniels asserts two causes of action against Defendants. The first claim, brought under § 1983, asserts that Defendants violated the Commerce Clause. Id. at 5. Daniels alleges “nothing in the MWMA indicates that its incineration requirement was intended to apply to waste treated outside of California, ” and asserts that Defendants' applying the requirement to Daniels's out-of-state impermissibly regulates “commerce occurring wholly outside the borders of California.” Id. ¶ 18.[2] The claim seeks an injunction against Smith, in her official capacity as Director of the Department, enjoining the Department from using or threatening to use the MWMA to force Daniels to incinerate its waste transported to out-of-state facilities, and requests monetary damages from Hilton, Dabney, and Pilorin, who are sued in their personal capacities. Id. ¶¶ 16-26.[3]

         Daniels's second claim, brought under 28 U.S.C. §§ 2201 and 2202 and asserted against Smith only, seeks a judicial declaration that “Smith may not enforce California's Medical Waste Management Act (specially including those provisions requiring incineration of certain medical waste) with respect to wastes treated outside of California.” Id. ¶ 31. Plaintiff now moves for a preliminary injunction that would enjoin “the Department from compelling Daniels to incinerate the medical wastes it transports outside of California.” Doc. 11-1 at 20.[4]

         The OAHA proceedings remain pending. See Doc. 12-3, Exs. B and C. On March 17, 2017, three days before filing this case, Daniels moved for judgment in the OAHA proceedings. In doing so, Daniels argued that (1) the MWMA does not require or permit extraterritorial application and (2) even if it did, Defendants' applying the MWMA to Daniels's waste that was disposed in other states violates the dormant Commerce Clause. See Doc. 12-3 at 22. Daniels seeks only “judgment on the merits in favor of Daniels and against the Department.” Id. at 31.

         Defendants move to dismiss on the grounds that (1) the Court lacks jurisdiction because this case does not present a federal question; (2) Daniels fails to state a claim; (3) Defendants have qualified immunity from Daniels's claims; and (4) the Court should abstain from considering Daniels's claims under the Younger[5], Burford[6], Pullman[7], and Colorado River[8] abstention doctrines. See Doc. 12-2 at 2. Daniels opposes on all grounds.


         A. Rule 12(b)(6)

         A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) is a challenge to the sufficiency of the allegations set forth in the complaint. A 12(b)(6) dismissal is proper where there is either a “lack of a cognizable legal theory” or “the absence of sufficient facts alleged under a cognizable legal theory.” Balisteri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990). In considering a motion to dismiss for failure to state a claim, the court generally accepts as true the allegations in the complaint, construes the pleading in the light most favorable to the party opposing the motion, and resolves all doubts in the pleader's favor. Lazy Y. Ranch LTD v. Behrens, 546 F.3d 580, 588 (9th Cir. 2008).

         To survive a 12(b)(6) motion to dismiss, the plaintiff must, in accordance with Rule 8, allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A claim has facial plausibility when the Plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “The plausibility standard is not akin to a ‘probability requirement, ' but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. (quoting Twombly, 550 U.S. at 556). “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a Plaintiff's obligation to provide the ‘grounds' of his ‘entitlement to relief' requires more than labels and conclusions.” Twombly, 550 U.S. at 555 (internal citations omitted). Thus, “bare assertions . . . amount[ing] to nothing more than a ‘formulaic recitation of the elements' . . . are not entitled to be assumed true.” Iqbal, 556 U.S. at 681. “[T]o be entitled to the presumption of truth, allegations in a complaint . . . must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). In practice, “a complaint . . . must contain either direct or inferential allegations respecting all the material elements necessary to sustain recovery under some viable legal theory.” Twombly, 550 U.S. at 562.

         B. Preliminary injunction

         To secure injunctive relief prior to a full adjudication on the merits, a plaintiff must show “that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.” Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20 (2008). Injunctive relief is “an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief.” Id. at 22. The Ninth Circuit follows a “sliding scale” approach to preliminary injunctions. See Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1131 (9th Cir. 2011). “Under this approach, the elements of the preliminary injunction test are balanced, so that a stronger showing of one element may offset a weaker showing of another.” Id. at 1131-32. For example, if the moving party is unable to establish a likelihood of success on the merits, preliminary injunctive relief may still proper if the party can show that (1) there are at least “serious questions” going to the merits; (2) the balance of the hardships tips “sharply” in its favor; and (3) the other factors listed in Winter (i.e., irreparable harm and in the public interest) are satisfied. Id. at 1135.


         The Court first addresses Defendants' motion to dismiss because it challenges the Court's jurisdiction and, if granted, would moot Daniels's preliminary injunction motion.[9]

         A. The Court has jurisdiction

         As a preliminary matter, Defendants argue Daniels's complaint does not raise a federal question-the only basis for the Court's jurisdiction-because it “really seeks a determination of whether the MWMA incineration requirement was intended by the legislature to apply to waste treated outside of California, ” which will require the Court “to rely exclusively on state law.” Doc. 12-2 at 16.

         Frankly, this argument makes no sense. Daniels's first cause of action, brought under § 1983, a federal statute, alleges that Defendants violated the Commerce Clause, and seeks a judicial determination as to whether Defendants did, in fact, violate the Clause. Daniels alleges Defendants, who are California officials, attempted to enforce the MWMA against Daniels for conduct that occurred entirely outside of California. It is difficult to conceive how this does not raise a federal question. The Court has federal question jurisdiction over this case.

         B. The Court should not abstain from deciding this case

         1. Younger abstention

         “Younger [abstention] is an exception to the usual rule that federal courts should exercise the jurisdiction conferred on them by statute.” Gartrell Constr., Inc. v. Aubry, 940 F.2d 437, 441 (9th Cir. 1991). A guiding principle underlying the doctrine is “comity, that is, a proper respect for state functions” by the federal courts. Younger, 401 U.S. at 44. The doctrine thus applies when “(1) there are ongoing state judicial proceedings, (2) the proceedings implicate important state interests, and (3) there is an adequate opportunity in the state proceedings to raise federal questions.” Id.

         Daniels challenges only whether the second factor is present here. See Doc. 18 at 15. Daniels acknowledges that the OAHA administrative proceedings may implicate California's exercise of its valid police powers and that this generally would be sufficient for Younger abstention, see Doc. 18 at 15, but argues that the State's interest must yield to the overriding federal interests inherent in cases, such as this one, alleging a Commerce Clause violation. See id.

         Daniels relies heavily on the Fourth Circuit's decision Harper v. Pub. Serv. Comm'n of W.Va., 396 F.3d 348, 356-57 (4th Cir. 2005), in which the court held that a state's interests underpinning a state statute, however valid, can “seldom” outweigh the federal government's interests if the ...

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