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California Building Industry Association v. State Water Resources Control Board

Supreme Court of California

May 7, 2018


          Superior Court San Francisco County No. CGC-11-516510, Ct.App. 1/2 A137680. Curtis E. A. Karnow Judge.

          Rutan & Tucker and David P. Lanferman for Plaintiff and Appellant.

          Somach Simmons & Dunn, Theresa A. Dunham and Daniel Kelly for The California Dairy Campaign, The Milk Producers Council and Western United Dairymen as Amici Curiae on behalf of Plaintiff and Appellant.

          Kamala D. Harris and Xavier Becerra, Attorneys General, Paul D. Gifford, Robert W. Byrne and Diane Spencer Shaw, Assistant Attorneys General, Gavin G. McGabe, Molly K. Mosley, Robert E. Asperger and Tiffany Yee, Deputy Attorneys General, for Defendant and Respondent.

          CORRIGAN, J.

         Here, we address three questions: (1) whether a two-member vote by the State Water Resources Control Board (Board), approving a permit fee schedule under Water Code[1] section 13260, effectively adopted the fee schedule; (2) whether the Board violated requirements of subdivision (d)(1)(B) or (f)(1) of section 13260 in setting the permit fees; and (3) whether the Board's adoption of the fee schedule violated constitutional restrictions on regulatory fees under article XIII A of the California Constitution. We hold that the fee schedule was properly adopted and violated neither the statutes nor the state Constitution. We affirm the judgment of the Court of Appeal, which reached the same conclusions.

         I. BACKGROUND

         Under California law, primary responsibility for the coordination and control of water quality belongs to the Board and nine regional water quality control boards. (§ 13001; see also City of Burbank v. State Water Resources Control Bd. (2005) 35 Cal.4th 613, 619.) The Board establishes statewide policy, while the regional boards adopt water quality control plans and issue permits governing the discharge of waste.[2] (Department of Finance v. Commission on State Mandates (2016) 1 Cal.5th 749, 755-756.)

         To finance the permit programs, the Legislature authorized the imposition of a fee for issuance of a permit. (§ 13260, subd. (d)(1)(A).) The Board establishes the fee schedule (§ 13260, subds. (d)(1)(A), (f)(1)), [3] and must set “total revenue collected... through annual fees... at an amount equal to the revenue levels set forth in the Budget Act for this activity.” (§ 13260, subd. (f)(1).) The total amount of annual fees is limited to an “amount necessary to recover costs incurred in connection with the issuance, administration, reviewing, monitoring, and enforcement” of waste discharge permits. (§ 13260, subd. (d)(1)(B).) All fees are deposited in the Waste Discharge Permit Fund (Permit Fund). Upon appropriation by the Legislature, the Board may expend Permit Fund money solely for the purpose of carrying out the Porter-Cologne Water Quality Control Act (§ 13000 et seq.). (§ 13260, subd. (d)(2)(A).)

         On September 19, 2011, the Board met to adopt the fee schedule for fiscal year 2011-12. Staff reported on the balance of the Permit Fund and on the recently enacted Budget Act for fiscal year 2011-12. The balance of the Permit Fund at the beginning of fiscal year 2010-11 had been $6.6 million. The Board had collected a total of $74.5 million in permit fees, plus $618, 000 in other revenue. It had incurred $73.3 million in combined program costs, producing an ending Permit Fund balance of $8.4 million. In the Budget Act, the Legislature appropriated $103 million from the Permit Fund to support the Board's activities. Of that amount, the staff determined the Board would have to recover $100.7 million from fee revenues. The fee schedule established for fiscal year 2010-11 would produce only $73.7 million, approximately $27 million short of the amount required to eliminate the projected deficit and meet budgetary expenditures. The staff proposed several fee schedules for the Board to consider.

         By statute, the Board has five members. (§ 175.) At the time of the September 2011 meeting, two of those seats were vacant. Of the three members who were present at the meeting, two voted to approve one of the proposed schedules. The third member abstained. Based on that vote, the Board adopted emergency regulations retroactively revising the fee schedule as of July 1, 2011.

         In December 2011, plaintiff California Building Industry Association challenged the Board's approval of the fee schedule, claiming the schedule: (1) was not approved by the required number of Board members; (2) violated the requirements of section 13260, subdivisions (d)(1)(B) and (f)(1); and (3) violated constitutional restrictions on regulatory fees.[4] Plaintiff sought declaratory and injunctive relief, and a writ of mandate directing the Board to adopt a new fee schedule. The trial court rejected all of plaintiff's challenges and entered judgment for the Board. The Court of Appeal affirmed in a split decision.


         Plaintiff's challenges are both procedural and substantive.

         A. Procedural Challenge

         Plaintiff urges the fee schedule was not approved by the necessary number of Board members because only two members voted for its adoption. Plaintiff argues the Water Code requires three affirmative votes for the Board to take any final action. It contends the Water Code supplants the general rule regarding the number of votes required for action by a collective body. Those arguments fail.

         The “almost universally accepted common-law rule is [that]... in the absence of a contrary statutory provision, a majority of a quorum constituted of a simple majority of a collective body is empowered to act for the body.” (FTC v. Flotill Products (1967) 389 U.S. 179, 183; accord People v. Harrington (1883) 63 Cal. 257, 259-260.) Under this rule, “a legislative body of five members adopts a motion if three members are present, two vote in favor, and one votes against.” (66 Ops.Cal.Atty.Gen. 336 (1983).)

         The general rule applies absent a contrary statute. There are two relevant Water Code provisions. Section 181 provides that “[t]hree members of the [Board] shall constitute a quorum for the purpose of transacting any business of the board.”[5] (§ 181.) Section 181's quorum threshold was satisfied. Plaintiff does not argue otherwise, but relies on section 183, which authorizes the Board to hold hearings and conduct investigations to carry out its authority. A hearing or investigation may be conducted by any authorized member, “but any final action of the board shall be taken by a majority of all the members of the board, at a meeting duly called and held.” (§ 183, italics added.)[6]

         Plaintiff argues that, under section 183, any “final action” of the Board, including the adoption of a fee schedule, requires approval by three members. The Board raises two counterarguments. First, that the statute's requirement only applies when the Board has delegated its hearing or investigation powers to a single member. Second, even when section 183 applies, it only demands that three members participate in the Board's decision, as happened here.

         The Court of Appeal split on this question. The majority held that section 183's requirement applies only when the Board delegates “authority to one member to conduct a hearing or meeting.” There was no delegation of authority here; therefore, the only constraint on the Board's action was the quorum threshold in section 181, which was satisfied. The majority also reasoned that, “unlike other statutes that expressly conflict with the common law rule..., [section 183] does not alter the common law quorum rule set forth in section 181.”

         The dissent disagreed, relying primarily on an item of legislative history from a 1969 bill that amended section 183. (Assem. Bill. No. 412 (1969 Reg. Sess.) § 1.) That legislation added the word “all” to the statute's second sentence, so that it read that a final action must “be taken by a majority of all the members of the board.” (Stats. 1969, ch. 800, § 1, p. 1617, italics added.) The bill's legislative history includes a letter by Senator Gordon Cologne to the Lieutenant Governor, Ed Reinecke. Embedded within that letter is an internal senate committee report discussing the intent of the amendment. The quoted report states: “The present law is ambiguous as to whether final action by the state board always requires a majority consisting of three members of the five-man state board, or whether the majority required is only that of the ‘members of the board (present) at a meeting duly called and held.' In the latter case three members could constitute a quorum, and the vote of two members would constitute a majority of the members at the meeting. An amendment has been made to this section to remove the ambiguity by requiring that final board action shall always require the concurrence of a majority of all the members of the board, not merely a majority of a quorum.” (3 Sen. J. (1969 Reg. Sess.) p. 5154.) The dissent concluded that the letter and the report were “virtually conclusive proof” that section 183 was intended to override the general rule and section 181 when the Board takes any final action, including the adoption of a fee schedule. The dissent concluded in error.

         We review questions of statutory construction de novo. Our primary task “in interpreting a statute is to determine the Legislature's intent, giving effect to the law's purpose. [Citation.] We consider first the words of a statute, as the most reliable indicator of legislative intent. [Citation.]” (Tuolumne Jobs & Small Business Alliance v. Superior Court (2014) 59 Cal.4th 1029, 1037.) We construe the statute's words in context, harmonizing statutory provisions to avoid absurd results. (John v. Superior Court (2016) 63 Cal.4th 91, 96.) If the statutory text is susceptible to more than one reasonable construction, we may consider extrinsic aids such as legislative history to facilitate our interpretative analysis. (Flour Corp. v. Superior Court (2015) 61 Cal.4th 1175, 1198.)

         With those principles in mind, we agree with the majority below. Section 183's requirement that a final action “be taken by a majority of all the members of the board” only applies when the Board has authorized a single member to conduct a hearing or investigation under section 183. This conclusion is rooted in the language and structure of section 183 when read in the context of section 181 and other provisions of the Water Code.

         To understand the mechanics of this scheme, it is helpful to begin with section 181, which provides that three members of the Board constitute a quorum for the purpose of transacting any Board business. The Water Code does not define the phrase “transacting any business, ” but the applicable regulations provide illumination. The Board's business includes: holding public meetings (Cal. Code Regs., tit. 23, § 647 et seq.); holding adjudicative proceedings and issuing decisions (Cal. Code Regs., tit. 23, § 648 et seq.); conducting rulemaking and informational proceedings (Cal. Code Regs., tit. 23, § 649 et seq.); and adopting, amending, and repealing rules and regulations (ibid.). For each of these functions, section 181 establishes a quorum threshold which is consistent with the common law rule. Section 183 contains a limited exception to the quorum requirement for a specific Board function. It permits the Board to authorize a single member to conduct a hearing or an investigation, and gives that member all the powers granted to the Board, but it requires that “any final action... shall be taken by a majority of all the members of the board.” (§ 183.)

         Read together, the plain language and structure of the two sections support the conclusion that section 183's final action requirement only applies when the Board has delegated its hearing or investigation powers to a single member. By its own terms, section 183 relates only to the Board's power to hold hearings and conduct investigations. It does not mention the Board's other functions. Its final action requirement must be read in that context. In addition, as the majority below correctly noted, the use of the conjunction “but” in section 183 links the phrase containing the final action requirement to the phrase that refers to a hearing conducted by a single member. The majority below also correctly noted that there would be no need for a final action to be taken at a subsequent meeting, as section 183 requires, except when “fewer than a quorum participated in the first ...

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