Case Name: Recycling Specialists, Inc. v. Department of Resources Recycling and Recovery, et al.
Case No.: 2017-CV-316090

Demurrer and Motion to Strike to the Amended Petition for Writ of Mandate by Respondent and Defendant Department of Resources Recycling and Recovery

Factual and Procedural Background

This is a petition for writ of mandate involving certification of a recycling center. Respondent and defendant Department of Resources Recycling and Recovery (“CALRECYCLE”) is an arm of the executive branch of the State of California that oversees the state’s waste management, recycling, and waste programs. (See Amended Petition [“AP”] at ¶ 11.) In 2010, the Legislature established CALRECYCLE to oversee recycling programs in California, including the certification of processing facilities. (Id. at ¶ 4.) Petitioner and plaintiff Recycling Specialists, Inc. (“RSI”) has been certified as a recycling center by CALRECYCLE and its predecessor since 1988. (Id. at ¶ 17.) RSI’s principal place of business is located at 1720 Old Bayshore Highway in San Jose, California. (Id. at ¶ 10.)

On August 6, 2016, RSI applied to become a certified processing facility. (See AP at ¶ 20, Exhibit G.) On April 25, 2017, CALRECYCLE denied RSI’s application on the following two grounds: (1) two separate non-RSI entities, American Metal Group, Inc. (“AMG”) and Antique & Salvage Liquidators, Inc. (“ASL”), pled guilty to workers compensation fraud in 2012; and (2) a 2001 audit of another separate entity, American Metal & Iron, Inc. (“AMI”), revealed that AMI had been overpaid $1,505,505.22 by CALRECYCLE’s predecessor, and AMI subsequently defaulted on a settlement agreement where it agreed to repay most of this amount. (Id. at ¶ 21, Exhibit H.) The logic behind the denial is that because AMG, ASL, and AMI were controlled by Howard Misle (“Misle”), RSI’s majority owner, and RSI cannot demonstrate that it will operate in accordance with the Beverage Container Recycling and Litter Reduction Act, Pub. Res. Code, § 14500 et seq. and its regulations. (Id. at ¶ 22.)

RSI claims CALRECYCLE’s denial of its application was unlawful and an abuse of discretion. (See AP at ¶ 22.) For example, under Business and Professions Code section 480, CALRECYCLE is not permitted to deny an application without first finding a substantial nexus between a conviction and the “qualifications, functions, or duties of the business or profession for which the license was issued.” (Id. at ¶ 23.) RSI alleges CALRECYCLE never found a substantial nexus between AMG and ASL’s convictions, on the one hand, and RSI’s qualifications, on the other. (Ibid.) Also, to the extent CALRECYCLE intended to rely on the convictions of non-applicants as a basis for denial, RSI claims it should have, at a minimum, adopted the necessary rules and regulations required by Business and Professions Code section 481. (Id. at ¶ 24.) Finally, even if CALRECYCLE published the necessary rules and AMG and ASL’s convictions constitute a substantial nexus to RSI’s qualifications, RSI asserts CALRECYCLE was required to consider their rehabilitation and failed to do so. (Id. at ¶ 25.)

RSI filed a timely request for a hearing on the application denial pursuant to Title 14, section 2130 of the California Code of Regulations. (See AP at Exhibit J.) The hearing, conducted on July 10, 2017, addressed the issue of whether RSI’s application for certification to operate a processing facility should be sustained, modified, or reversed. (Ibid.) Following the presentation of testimony and evidence, CALRECYCLE issued its Decision and Order sustaining denial of the application on July 21, 2017. (Id. at ¶ 31, Exhibit J.)

On December 15, 2017, RSI filed the operative AP against CALRECYCLE and respondent and defendant Scott Smithline (“Smithline”) setting forth causes of action for: (1) Petition for Writ of Mandate – Code of Civil Procedure § 1085; and (2) Petition for Writ of Mandate – Code of Civil Procedure § 1094.5. The petition seeks to compel CALRECYCLE to (1) set aside its July 21, 2017 Decision and Order; (2) grant RSI’s application for a processor’s certification; and (3) pass the rules and regulations required by Business and Professions Code sections 481 and 482. (See AP at ¶ 1.)

Currently before the Court are CALRECYCLE’s demurrer and motion to strike to the AP. Both sides submitted requests for judicial notice in conjunction with the motions. RSI filed written oppositions. CALRECYCLE filed reply papers.

Demurrer to the AP

CALRECYCLE demurs to the first cause of action on the ground that it fails to state a valid claim. (Code Civ. Proc., § 430.10, subd. (e).) Specifically, CALRECYCLE argues that Business and Professions Code sections 481 and 482 do not apply to its review or regulation of processing facility certifications and thus are irrelevant to this action.

CALRECYCLE’s Request for Judicial Notice

In support, CALRECYCLE requests judicial notice of the following documents from the legislative history of Senate Bill 1349: (1) the 1972 Senate Bill No. 1349 as amended on July 21, 1972; (2) the Senate Committee on Business and Professions Analysis of SB 1349; (3) the Assembly Committee on Commerce and Public Utilities Analysis on SB 1349; and (4) the Enrolled Bill Memorandum for SB 1349. (See Declaration of Kara Weiland at Exhibit A.) In addition, CALRECYCLE requests judicial notice of documents from the legislative history of Senate Bill 1767 which include: (1) the California Legislative Counsel’s Digest; (2) the Legislative Analyst’s Office report of SB 1767; and (3) the Governor’s Office of Legal Affairs Enrolled Bill Report. (Id. at Exhibit B.)

“Judicial notice is the recognition and acceptance by the court, for use by the trier of fact or by the court, of the existence of a matter of law or fact that is relevant to an issue in the action without requiring formal proof of the matter.” (Poseidon Development, Inc. v. Woodland Lane Estates, LLC (2007) 152 Cal.App.4th 1106, 1117.) Legislative history is a proper subject of judicial notice. (See In re Greg F. (2012) 55 Cal.4th 393, 409, fn. 2 [California Supreme Court took judicial notice of legislative history of statutes from Welfare and Institutions Code]; see also Kaufman & Broad Communities, Inc. v. Performance Plastering, Inc. (2005) 133 Cal.App.4th 26, 31-37 [discussing categories of documents that constitute cognizable legislative history for purposes of judicial notice].) However, for reasons stated below, the Court declines to take judicial notice of these legislative history documents as they are not material to resolving issues raised on this demurrer. (See Gbur v. Cohen (1979) 93 Cal.App.3d 296, 301 (Gbur) [judicial notice is confined to those matters which are relevant to the issue at hand].)

Consequently, CALRECYCLE’s request for judicial notice is DENIED.

RSI’s Request for Judicial Notice

In opposition, RSI requests judicial notice of a printout from CALRECYCLE’s website which provides links to various California Codes, including the Business and Professions Code. (See RSI’s Request for Judicial Notice at Exhibit A.) RSI however fails to explain how this printout is relevant to resolving issues raised by the demurrer. (See Gbur, supra, 93 Cal.App.3d at p. 301 [judicial notice is confined to those matters which are relevant to the issue at hand].)

Accordingly, RSI’s request for judicial notice is DENIED.

Legal Standard

In reviewing the sufficiency of a complaint against a general demurer, we are guided by long settled rules. ‘We treat the demurrer as admitting all material facts properly pleaded, but not contentions, deductions or conclusions of fact or law. We also consider matters which may be judicially noticed.’” (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) “A demurrer tests only the legal sufficiency of the pleading. It admits the truth of all material factual allegations in the complaint; the question of plaintiff’s ability to prove these allegations, or the possible difficulty in making such proof does not concern the reviewing court.” (Committee on Children’s Television, Inc. v. General Foods Corp. (1983) 35 Cal.3d 197, 213–214.)

“The reviewing court gives the complaint a reasonable interpretation, and treats the demurrer as admitting all material facts properly pleaded. The court does not, however, assume the truth of contentions, deductions or conclusions of law. … [I]t is error for a trial court to sustain a demurrer when the plaintiff has stated a cause of action under any possible legal theory. And it is an abuse of discretion to sustain a demurrer without leave to amend if the plaintiff shows there is a reasonable possibility any defect identified by the defendant can be cured by amendment.” (Gregory v. Albertson’s, Inc. (2002) 104 Cal.App.4th 845, 850.)

First Cause of Action: Petition for Writ of Mandate – Code of Civil Procedure § 1085

In a petition for writ of mandate brought pursuant to Code of Civil Procedure section 1085, the petitioner bears the burden of pleading and proving the facts on which the claim for relief is based. (California Correctional Peace Officers Assn. v. State Personnel Bd. (1995) 10 Cal.4th 1133, 1153.)

The first cause of action arises under Business and Professions Code sections 481 and 482. (See AP at ¶¶ 32-37.) RSI alleges that section 481 requires CALRECYCLE to promulgate rules and regulations to aid it, when considering the denial, suspension, or revocation of a license, to determine whether a crime or act is substantially related to the qualifications, functions, or duties of the business it regulates. (Id. at ¶ 33.) Similarly, section 482 requires CALRECYCLE to promulgate rules and regulations to evaluate the rehabilitation of a person when considering the denial, suspension, or revocation of a license. (Id. at ¶ 34.) RSI claims CALRECYCLE was under a clear, present, and mandatory duty to comply with Business and Professions Code sections 481 and 482. (Id. at ¶ 35.) By failing to promulgate the required rules and regulations, CALRECYCLE allegedly violated its mandatory ministerial duty. (Ibid.)

CALRECYCLE argues Business and Professions Code sections 481 and 482 do not apply to its review or regulation of processing facility certifications. Instead, CALRECYCLE asserts such procedures are set forth in the Public Resources Code and accompanying regulations. For purposes of demurrer, the Court must examine the statutory language of Business and Professions Code sections 481 and 482 to determine whether a cause of action can be stated against defendant and respondent CALRECYCLE.

Our fundamental task in construing a statute is to ascertain the intent of the lawmakers so as to effectuate the purpose of the statute. (Torres v. Automobile Club of So. California (1997) 15 Cal.4th 771, 777.) We begin by examining the statutory language, giving the words their usual and ordinary meaning. (People v. Lawrence (2000) 24 Cal.4th 219, 230.) If there is no ambiguity, then we presume the lawmakers meant what they said, and the plain meaning of the language governs. (Id. at pp. 230-231; People v. Coronado (1995) 12 Cal.4th 145, 151 (Coronado).) If, however, the statutory terms are ambiguous, then we may resort to extrinsic sources, including the ostensible objects to be achieved and the legislative history. (Coronado, supra, 12 Cal.4th at p. 151.) In such circumstances, we “ ‘select the construction that comports most closely with the apparent intent of the Legislature, with a view to promoting rather than defeating the general purpose of the statute, and avoid an interpretation that would lead to absurd consequences.’ [Citation.]” (Ibid.; see Escobedo v. Estate of Snider (1997) 14 Cal.4th 1214, 1223.)

Business and Professions Code section 481 provides: “Each board under the provisions of this code shall develop criteria to aid it, when considering the denial, suspension or revocation of a license, to determine whether a crime or act is substantially related to the qualifications, functions, or duties of the business or profession it regulates.” (Bus. & Prof. Code, § 481.) Section 482 states, “[e]ach board under the provisions of this code shall develop criteria to evaluate the rehabilitation of a person when: (a) Considering the denial of a license by the board under Section 480; or (b) Considering suspension or revocation of a license under Section 490. Each board shall take into account all competent evidence of rehabilitation furnished by the applicant or licensee.” (Bus. & Prof. Code, § 482.)

CALRECYCLE first argues the plain language of these sections do not apply to its regulation of processing facilities or its review of applications for processing certifications. Instead, CALRECYCLE contends these statutes pertain only to licenses issued by agencies in the Department of Consumer Affairs (“DCA”), which is under a separate agency, the Business, Consumer Services, and Housing Agency. (See Bus. & Prof. Code, § 100.) However, as pointed out in opposition, there is nothing in the plain language of these sections which limit their scope to licenses issued by the DCA. (See OPP at pp. 5-6.) As explained in opposition, both statutes utilize the term “board” which is defined by the code as “bureau,” “commission,” “committee,” “department,” “division,” “examining committee,” “program,” and “agency.” (Bus. & Prof. Code, § 22.) By contrast, the Legislature created a completely separate definition under the code for “department” which specifically refers to the DCA. (Bus. & Prof. Code, § 23.) Thus, had the Legislature intended for sections 481 and 482 to be limited by the DCA, it could have easily done so by replacing “board” with “department.” (See Doe v. City of Los Angeles (2007) 42 Cal.4th 531, 545 [“[I]n construing this, or any statute, we may not broaden or narrow the scope of the provision by reading into it language that does not appear in it or reading out of it language that does.”].) That is not the state of the law today and thus no such limitation exists.

CALRECYCLE however persuasively argues that its authority to review, issue, and process facility certifications does not arise from the Business and Professions Code. Rather, such authority is vested in the Public Resources Code and related regulations. The Legislature specifically directed CALRECYCLE to administer the California Beverage Container Recycling and Litter Reduction Act (“Recycling Act”). (See Pub. Resources Code, § 14530.) In doing so, the Legislature created a set of guidelines for CALRECYCLE to certify processors which are set forth in Public Resources Code section 14539. For example, subdivision (a)(1) of that section states “[t]he department shall certify processors pursuant to this section.” (Pub. Resources Code, § 14539, subd. (a)(1).) In addition, “[t]he department shall review whether an application for certification or renewal is complete within 30 working days of receipt, including compliance with subdivision (c). If the department deems an application complete, the department shall approve or deny the application no later than 60 calendar days after the date when the application was deemed complete.” (Pub. Resources Code, § 14539, subd. (a)(2).) CALRECYCLE further cites to regulations which provide criteria it uses when reviewing applications for certification. On that point, California Code of Regulations, title 14, section 2030, subdivision (e) states:

“In determining whether the operator is likely to operate in accordance with these regulations, the Division shall review the certification history of the operator and other individuals identified in the application as responsible for the recycling center, processing facility, dropoff or collection program, or community service program operation.”

Taken together, the Public Resources Code and regulations provide the framework for CALRECYCLE to administer its certification process. Neither the Public Resources Code nor the regulations require CALRECYCLE to look at the Business and Professions Code with respect to regulating processing centers or certifying such centers. To the extent that RSI argues that CALRECYCLE constitutes a “board” under sections 481 and 482, the Court finds the more specific provisions set forth in the Public Resources Code govern over the more general in the Business and Professions Code. (See Schachter v. Citigroup, Inc. (2005) 126 Cal.App.4th 726, 738, citing People v. Tanner (1979) 24 Cal.3d 514, 521 [“A specific provision relating to a particular subject will govern a general provision, even though the general provision standing alone would be broad enough to include the subject to which the specific provision relates.”]; see also Cross v. Super. Ct. (2017) 11 Cal.App.5th 305, 322 [“a specific statute prevails over a statute that is more general”].) In other words, the specific provisions of the Recycling Act more clearly define the certification process over the general licensing language found in Business and Professions Code sections 481 and 482.

Finally, separate and apart from the Recycling Act and Business and Professions Code sections 481 and 482, RSI in opposition argues that CALRECYCLE’s denial violates procedural due process under the California Constitution. (See OPP at pp. 12-15; see also People v. Ramirez (1979) 25 Cal.3d 260, 269 [factors for court to consider with respect to due process].) This argument is improper as RSI has not alleged any claim for violation of procedural due process. Nor has RSI requested leave to amend to add such a claim to this action.

Accordingly, the demurrer to the first cause of action is SUSTAINED WITH 10 DAYS’ LEAVE TO AMEND for failure to state a claim. (See City of Stockton v. Super. Ct. (2007) 42 Cal.4th 730, 747 [where plaintiff has not had opportunity to amend complaint in response to demurrer, “leave to amend is liberally allowed as a matter of fairness unless the complaint shows on its face that it is incapable of amendment”].)

Motion to Strike Portions of the AP

CALRECYCLE moves to strike the following portions of the AP: (1) extra-record allegations and exhibits on matters outside of the administrative record; (2) allegations requesting relief contrary to Code of Civil Procedure section 1094.5, subdivision (f); (3) allegations related to the first cause of action; and (4) allegations regarding respondent and defendant Smithline.

CALRECYCLE’s Request for Judicial Notice

CALRECYCLE requests judicial notice of the records contained in the Administrative Record that were certified and lodged with the Court. CALRECYCLE has submitted an index of the documents incorporated as part of the Administrative Record. (See Notice of Errata to CALRECYCLE’s Request for Judicial Notice.) The Court may take judicial notice of the existence of such documents under Evidence Code section 452, subdivision (d) as they constitute court records. There is no opposition to the request. Finally, the request appears reasonably relevant to issues raised on the motion to strike.

Consequently, the request for judicial notice is GRANTED.

Legal Standard

A court may strike out any irrelevant, false, or improper matter asserted in a pleading. (Code Civ. Proc., § 436, subd. (a).) A court may also strike out all or any part of a pleading not filed in conformity with the laws of the State of California. (Code Civ. Proc., § 436, subd. (b).) The grounds for a motion to strike shall appear on the face of the challenged pleading or from any matter of which the court is required to take judicial notice. (Code Civ. Proc., § 437, subd. (a).)

Extra-Record Allegations and Exhibits

CALRECYCLE moves to strike the following allegations and exhibits from the AP: (1) Page 2, line 15 [“See AB 341 Report to Legislature, p. 1, attached hereto as Exh. A.”]; (2) Page 2, lines 16-20; (3) Page 2, line 21 through Page 3, line 4; (4) paragraph 7 in its entirety; and (5) Exhibits A, B, C, D, E, and F in their entirety.

CALRECYCLE argues that these allegations and exhibits constitute extra-record material that are outside the Administrative Record and thus beyond the scope of this litigation. In support, CALRECYCLE relies on Code of Civil Procedure section 1094.5 which is the subject of the second cause of action in the AP. With respect to such claims, court have generally found that “[w]hen an agency’s quasi-judicial determination is reviewed by administrative mandamus, judicial review is generally limited to the evidence in the record of the agency proceedings.” (Friends of the Old Trees v. Department of Forestry & Fire Protection (1997) 52 Cal.App.4th 1383, 1390; Code Civ. Proc., § 1094.5, subd. (c).) This is known as the closed record rule. Conversely, if the action challenges a ministerial or informal administrative action and the facts are in dispute, extra-record evidence may be necessary for adequate review “because there is often little or no administrative record in such cases.” (Western States Petroleum Assn. v. Super. Ct. (1995) 9 Cal.4th 559, 575 (Western States).) This is known as the open record rule.

The California Supreme Court however has indicated at least one exception where extra-record evidence may be admissible in an administrative mandamus proceeding. Such extra-record evidence may be admissible where (1) the evidence in question existed before the agency made its decision, and (2) it was not possible in the exercise of reasonable diligence to present this evidence to the agency before the decision was made so that it could be considered and included in the administrative record. (Western States, supra, 9 Cal.4th at p. 578.) At the same time, the Supreme Court held that “extra-record evidence can never be admitted merely to contradict the evidence the administrative agency relied on in making a quasi-legislative decision or to raise a question regarding the wisdom of that decision.” (Id. at p. 579.)

In opposition, RSI urges the Court to adopt the open record rule as this is a petition for traditional mandamus under Code of Civil Procedure section 1085. This argument however lacks merit as the Court, for reasons stated above, has sustained the demurrer to the first cause of action for relief under Code of Civil Procedure section 1085. Therefore, any extra-record allegations and exhibits included in the AP would be irrelevant and improper to the second cause of action for administrative mandamus unless an exception to the closed record rule applies. RSI does not identify any such exception in its opposition and thus the extra-record allegations and exhibits are hereby stricken.

Therefore, the motion to strike the extra-record allegations and exhibits is GRANTED WITH 10 DAYS’ LEAVE TO AMEND.

Allegations Requesting Relief Contrary to Code of Civil Procedure Section 1094.5, Subdivision (f)

CALRECYCLE moves to strike the allegation on page 4, line 4 which provides “(2) grant its Application” as it violates Code of Civil Procedure section 1094.5, subdivision (f). That section states:

“The court shall enter judgment either commanding respondent to set aside the order or decision, or denying the writ. Where the judgment commands that the order or decision be set aside, it may order the reconsideration of the case in light of the court’s opinion and judgment and may order respondent to take such further action as is specially enjoined upon it by law, but the judgment shall not limit or control in any way the discretion legally vested in the respondent.”

(Code Civ. Proc., § 1094.5, subd. (f).)

CALRECYCLE claims this allegation is improper as it limits or controls its discretion with respect to RSI’s certification application. As the opposition points out, such an argument ignores other parts of the AP, specifically the prayer for relief with respect to the second cause of action. In the prayer, RSI requests a peremptory writ to set aside the Decision and Order so that CALRECYCLE will reconsider the case in light of the Court’s opinion and judgment and take such further action as is specially enjoined upon it by law. (See Prayer for Relief as to the Second Cause of Action.) The prayer for relief thus sufficiently complies with the language set forth in Code of Civil Procedure section 1094.5, subdivision (f).

Accordingly, the motion to strike the allegation on page 4, line 4 is DENIED.

Allegations Related to the First Cause of Action

CALRECYCLE also moves to strike the first cause of action and the following allegations in the AP relating to that claim: (1) page 6, lines 1-28 [Heading B, Paragraphs 23 and 24 in their entirety, and all of Paragraph 25 except the last sentence]; (2) page 9, line 4 through page 10, line 5 [Paragraph 39, subparts (a) through (h), inclusive in their entirety]; and (3) Page 11, lines 1-2 [“As to the First Cause of Action: A peremptory writ of mandate ordering CALRECYCLE to comply with Business & Professions Code §§ 481 and 482.”].)

As stated above, the Court has sustained the demurrer to the first cause of action on the ground that it fails to state a claim. Thus, the motion to strike the first cause of cause of action is MOOT. The remaining allegations constitute facts alleged in support of the first cause of action. RSI does not provide any opposition to the motion to strike these allegations. Therefore, the motion to strike allegations related to the first cause of action is GRANTED WITH 10 DAYS’ LEAVE TO AMEND.

Allegations Regarding Respondent and Defendant Smithline

Finally, CALRECYCLE argues that allegations regarding respondent and defendant Smithline should be stricken as he was dismissed as a party on December 29, 2017. Those allegations are set forth in the AP at page 1, line 25 [“Scott Smithline”] and page 4, lines 13-14 [“Respondent Scott Smithline is the current Director of CALRECYCLE and is named herein at all times in his official capacity as such.”]. CALRECYCLE does not provide any affirmative evidence showing that Smithline has been dismissed from the case. The Court however in reviewing its own records confirms that counsel for RSI dismissed Smithline from the case without prejudice on December 29, 2017. In addition, RSI does not oppose the motion to strike allegations related to Smithline.

Accordingly, the motion to strike allegations regarding respondent and defendant Smithline is GRANTED WITHOUT LEAVE TO AMEND.

The Court will prepare the order.