Santa Clarita Org. for Planning v. Abercrombie

• Decision Date: 10 September 2015
• Docket Number: B256976
• Citation: 192 Cal.Rptr.3d 469,240 Cal.App.4th 300
• Court: California Court of Appeals Court of Appeals
• Parties: SANTA CLARITA ORGANIZATION FOR PLANNING AND THE ENVIRONMENT (SCOPE), Plaintiff and Appellant, v. Keith ABERCROMBIE, Defendant and Respondent.

240 Cal.App.4th 300

192 Cal.Rptr.3d 469

SANTA CLARITA ORGANIZATION FOR PLANNING AND THE ENVIRONMENT (SCOPE), Plaintiff and Appellant,

v.Keith ABERCROMBIE, Defendant and Respondent.

B256976

Court of Appeal, Second District, Division 2, California.

Filed September 10, 2015

As Modified September 22, 2015

Review Denied November 18, 2015

Advocates for the Environment, Dean Wallraff, for Plaintiff and Appellant.

Richards Watson & Gershon, James L. Markman, Brea, T. Peter Pierce, Patrick D. Skahan, Los Angeles, for Defendant and Respondent.

HOFFSTADT, J.

The Castaic Lake Water Agency (Agency) acquired the Valencia Water Company (Valencia) through its power of eminent domain. Petitioner Santa Clarita Organization for Planning and the Environment (SCOPE) sued, claiming, among other things, that the acquisition was void under Government Code section 1090¹ and the Political Reform Act of 1974 (PRA) (§ 81000 et seq.) because one of the Agency's ten10 directors--respondent Keith Abercrombie (Abercrombie)--was Valencia's general manager at the time the acquisition was being negotiated. The trial court rejected SCOPE's conflict of interest claims on the pleadings, concluding that the Agency's enabling legislation (Stats. 1986, ch. 832, § 5, p. 2843, Deering's Ann. Wat.--Uncod. Acts (2008 ed.) Act 130, § 15.2, subd. (d) , p. 202 (Act))² authorized a Valencia employee like Abercrombie to serve on the Agency's board of directors once his status as an employee was disclosed; this provision, the trial court reasoned, excepted Abercrombie from the conflict of interest statutes--expressly from section 1090 and implicitly from the PRA.

This appeal presents three questions: (1) does the express exception to section 1090 in the Agency's enabling legislation apply to a contract to acquire a water company; (2) does the express exception to section 1090 also implicitly repeal (and thereby amend) the PRA's applicability to such an acquisition; and (3) did the Legislature comply with the special requirements set forth in section 81012 for amending the PRA, which was originally enacted by voter initiative? We conclude that the answer to all three questions is "yes," and affirm the trial court's dismissal of SCOPE's conflict of interest claim.

FACTS AND PROCEDURAL HISTORY

Because we are reviewing the trial court's grant of judgment on the pleadings, the facts set forth below are drawn from the operative petition and complaint, and other judicially noticed facts. ( People ex rel. Harris v. Pac Anchor Transp., Inc. (2014) 59 Cal.4th 772, 777, 174 Cal.Rptr.3d 626, 329 P.3d 180 ( Pac Anchor ).)

The Agency is a legislatively created public agency. (Stats. 1986, ch. 832, § 5, p. 2843, Deering's Ann. Wat.--Uncod. Acts (2008 ed.) Act 130, §§ 1, 2, p. 188.) Its primary function is to supply water, as a wholesaler, to the three retail water distributors--called "purveyors"--within the geographical boundaries of the upper Santa Clarita Valley. Those distributors are Newhall County Water District, the Santa Clarita Water Division of the Agency, and Valencia. (Id., §§ 1, 2, 4.8, 15, pp. 188, 191.) The Agency can also directly supply water as a retailer in a subset of its territory. (Id., § 15, subd. (a), p. 197; Klajic v. Castaic Lake Water Agency (2004) 121 Cal.App.4th 5, 15, 16 Cal.Rptr.3d 746.)

The Agency is governed by a 10-member board of directors, seven of whom are elected and three of whom are appointed. (Stats. 1986, ch. 832, § 5, p. 2843, Deering's Ann. Wat.--Uncod. Acts (2008 ed.) Act 130, §§ 5.1, 5.3, pp. 192, 194.) Each of the three purveyors the Agency regulates is to nominate one of the appointed directors, and that nominee "may be a shareholder, director, officer, agent or employee of the nominating purveyor." (Id., § 5.1, subd. (a)(3), p. 192.) Valencia nominated Abercrombie to the Agency's board in 2010, and disclosed that he was then serving as Valencia's general manager.

In December 2012, the Agency's board of directors, by a nine-to-one vote, adopted a resolution authorizing the Agency to file an eminent domain lawsuit to acquire all of Valencia's common stock from Newhall Land and Farming Company, the owner of Valencia's stock at the time. Abercrombie did not participate in this vote, as he had resigned from the board approximately two weeks earlier. However, prior to resigning, Abercrombie participated in the "planning, preliminary discussions, negotiation and compromises" leading up to the acquisition. The Agency filed its eminent domain action the day after adopting the resolution, and within a week filed a settlement providing that the Agency would acquire Valencia's stock for $73.8 million. The trial court in the condemnation action accepted the settlement and entered judgment.

In early 2013, SCOPE sued to set aside the Agency's acquisition of Valencia. SCOPE is a nonprofit group "concerned with the protection of the environment and the quality of life in the Santa Clarita Valley." In the operative first amended verified petition for writ of mandate and complaint, SCOPE sought injunctive and declaratory relief on five grounds: (1) inverse validation (under Code of Civil Proc. § 863 ); (2) a writ of mandate (under Code of Civil Proc. § 1085 ) on the ground that the Agency's board acted illegally and beyond its authority; (3) violation of the California Environmental Quality Act (under Pub. Resources Code § 21000 et seq. ); (4) illegal expenditure of taxpayer funds (under Code of Civ. Proc. § 526a ); and (5) conflict of interest (under § 1090 and the PRA).

Abercrombie and the Agency moved for judgment on the pleadings as to the conflict of interest claim. The trial court granted the motion. The court ruled that section 1090's prohibition on a public official's "financial[ ] interest[ ] in any contract made by [him] in [his] official capacity" provided no basis to set aside the Agency's acquisition of Valencia because Deering's section 15.2, subdivision (d), of the Agency's enabling legislation expressly provided that an appointed director's financial interest in its purveyor did "not constitute a violation of Section 1090" or otherwise render the affected contract "void." (§ 15.2, subd. (d).) The court further noted that the PRA's mandate that a public official not "make" or "participate in making ... governmental decision[s] in which he knows ... he has a financial interest" (§ 87100) also provided no basis to void the acquisition. The court reasoned that (1) section 87100 must be read "in pari materia" with section 1090 because both statutes "address conflicts of interest in the context of public officials carrying out their official duties," and (2) the Legislature's decision in section 15.2, subdivision (d) to except the Agency's appointed directors from conflict of interest liability under the more specific provisions of section 1090 would be nullified if section 87100's more general prohibitions were applied, such that the Legislature must have intended section 15.2, subdivision (d), to authorize an appointed director's participation in Agency contract-making under both section 1090 and the PRA. The court entered judgment for Abercrombie on this claim, the sole claim in which he was named.

SCOPE timely appealed.

DISCUSSION

Jurisdiction

As a threshold matter, Abercrombie argues that we must dismiss SCOPE's appeal because SCOPE's conflict of interest claim is, in actuality, an "inverse validation" claim under Code of Civil Procedure section 863 and because SCOPE did not comply with the shortened window for filing a notice of appeal that applies when appealing such claims. To evaluate this argument, we must "determine if the underlying [claim or action] was, in fact," a claim or action subject to the so-called "validation statutes." ( Kaatz v. City of Seaside (2006) 143 Cal.App.4th 13, 27, 49 Cal.Rptr.3d 95 ( Kaatz ); California Commerce Casino, Inc. v. Schwarzenegger (2007) 146 Cal.App.4th 1406, 1418-1419, 53 Cal.Rptr.3d 626 ( California Commerce Casino ).) This is a question of law we review de novo. (E.g., Castaneda v. Superior Court (2015) 237 Cal.App.4th 1434, 1443, 188 Cal.Rptr.3d 889.)

Code of Civil Procedure sections 860 through 870.5 set forth a procedure by which a public agency (in a so-called "validation" claim or action) or anyone else (in a so-called "inverse validation" or "reverse validation" claim or action) can file an in rem action to obtain an expedited but definitive ruling regarding the validity (or invalidity) of the public agency's action. ( Code Civ. Proc., § 860 et seq. ; Planning & Conservation League v. Department of Water Resources (1998) 17 Cal.4th 264, 266, 70 Cal.Rptr.2d 635, 949 P.2d 488 ( Planning & Conservation League ) [noting that validation proceedings are "a set of accelerated in rem procedures for determining the validity of certain bonds, assessments and other agreements entered into by public agencies"]; Kaatz, supra, 143 Cal.App.4th at p. 19, 49 Cal.Rptr.3d 95 ). If the validation statutes apply, the validation (or inverse validation) complaint must be filed within 60 days of the act to be challenged ( Code Civ. Proc., §§ 860 [validation claims or actions], 863 [inverse validation claims or actions] ); notice of the claim must be served on "all interested parties ... by publication" (id., § 861); the claim or action must be given preference over other civil actions (id., § 867); any appeal of the trial court's ruling must be noticed within 30 days of the notice of entry of judgment (id., § 870, subd. (b)); and the judgment, if not appealed or once affirmed on appeal, "is forever binding and conclusive ... against the agency and against all other persons" (id., § 870, subd. (a)).

Whether the special procedures of the validation statutes apply in the first place is the trickier question. "The validation statutes ... do not specify the matters to which they apply." ( California Commerce Casino, supra, 146 Cal.App.4th at p. 1423, 53 Cal.Rptr.3d 626 ; Planning & Conservation League, supra, 17...