640 Tenth, LP v. Newsom

• Citation: 78 Cal.App.5th 840,294 Cal.Rptr.3d 123
• Decision Date: 13 May 2022
• Docket Number: D079339
• Parties: 640 TENTH, LP et al., Plaintiffs and Appellants, v. Gavin NEWSOM, as Governor, etc. et al., Defendants and Respondents.
• Court: California Court of Appeals

78 Cal.App.5th 840

294 Cal.Rptr.3d 123

640 TENTH, LP et al., Plaintiffs and Appellants,

v.Gavin NEWSOM, as Governor, etc. et al., Defendants and Respondents.

D079339

Court of Appeal, Fourth District, Division 1, California.

Filed May 13, 2022

As Modified on Denial of Rehearing June 9, 2022

Certified for Partial Publication.^*

Prometheus Civic Law, Matthew Sean Harrison; Wilson Elser Moskowitz Edelman & Dicker and Bruno Katz, San Diego, for Plaintiffs and Appellants.

Rob Bonta, Attorney General, Mark R. Beckington, Jeffrey T. Fisher and Alan D. Romero, Deputy Attorneys General, for Defendants and Respondents Gavin Newsom, Rob Bonta and Tomas J. Aragon.

Lonnie J. Eldridge, County Counsel, Joshua M. Heinlein, Deputy County Counsel; Paul, Plevin, Sullivan & Connaughton and Jeffrey P. Michalowski for Defendants and Respondents County of San Diego and Wilma J. Wooten.

DATO, J.

This putative class action against California (state) and San Diego County (county) officials challenges Governor Gavin Newsom's emergency orders and related public health directives restricting business operations during the COVID-19 pandemic. The plaintiffs, owners of affected restaurants and gyms (Owners), primarily contend the orders are procedurally invalid because they were adopted without complying with the Administrative Procedure Act (APA) ( Gov. Code,¹ § 11340 et seq. ). Owners further maintain that the business restrictions are substantively invalid because they effected a taking without compensation, violating the Fifth Amendment to the United States Constitution. Rejecting these claims, the superior court sustained demurrers to the third amended complaint (Complaint) without leave to amend and dismissed the action.

We fully appreciate that the adverse effects of the present pandemic have not fallen equally on all segments of society, and that some small business owners are among those who have borne an especially heavy burden. As we recently noted, "Businesses have closed or drastically curtailed their operations. Employees have lost their jobs and their livelihoods." ( Midway Venture LLC v. County of San Diego (2021) 60 Cal.App.5th 58, 66, 274 Cal.Rptr.3d 383.) Still, Owners' procedural attack on the emergency orders fails because, for several reasons, the APA does not apply to the public health orders at issue here. And Owners' substantive challenge to the orders as an uncompensated "taking" under the Fifth Amendment suffers a similar fate. A mandated-but-temporary business closure to deal with a public health emergency is not sufficiently akin to a governmental appropriation of private property for a public use so as to require compensation.

In short, while we sympathize with the position some Owners find themselves in and the significant financial losses they allege, the unambiguous terms of the Emergency Services Act (Emergency Act) ( § 8550 et seq. ) and controlling United States Supreme Court regulatory takings caselaw require that the judgment be affirmed.

FACTUAL AND PROCEDURAL BACKGROUND²

A. The Governor's Emergency Orders

In response to the COVID-19 pandemic, Governor Newsom declared a state of emergency in California on March 4, 2020.³ About two weeks later he issued Executive Order N-33-20, colloquially referred to as the "stay-at-home order." Among other restrictions, it prohibited restaurants from providing both indoor and outdoor dining.⁴

Restaurants, gyms, and other businesses deemed nonessential remained closed until May 4, when the Governor issued Executive Order N-60-20. It allowed reopening in phases as determined by the Department of Public Health (Health Department). Restaurants and gyms in San Diego County were allowed to reopen in May and June respectively.

After a July surge of infections, the Health Department issued the "Guidance on Closure of Sectors in Response to COVID-19" (Guidance). It prohibited indoor dining in 29 counties, including San Diego.

The Blueprint for a Safer Economy (Blueprint) followed in late August. Replacing the previous staged reopening plan, it created a color-coded tiered system, updated weekly, that assigned each county a color (purple, red, orange, or yellow) based on its assessed risk level for COVID-19 transmission and imposed corresponding restrictions for different business sectors. For restaurants, indoor dining in "purple" counties was prohibited. Those in "red" counties were limited to operating at 25 percent capacity and prohibited from seating more than 100 people. Restaurants in "orange" counties were prohibited from operating at more than 50 percent capacity and could not seat more than 200 people. Those in "yellow" counties were limited to 50 percent capacity. The Blueprint was rescinded by Executive Order N-07-21 in June 2021.

B. The Litigation

In April 2021, 640 Tenth, LP, O'Frank, LLC, Fit Athletic Club-San Diego, LLC, and Crossfit East Village Corporation filed a third amended complaint (Complaint) against Gavin Newsom in his capacity as Governor of California and other state officials (collectively, state defendants),⁵ as well as the county and Wilma J. Wooten, in her official capacity as Public Health Officer.

Owners sued on behalf of themselves and three classes consisting of: all (1) restaurants and (2) gyms in the County; and (3) California businesses "whose operations or activities are misclassified or other improperly [sic ] subject to a complete or total shutdown order(s), under the authority of the Blueprint ...." (Underscore omitted.)

The Complaint alleges six causes of action:

• Declaratory Judgment—alleging that the state defendants exceeded statutory authority in implementing the Blueprint and associated orders and directives; or alternatively, caused a regulatory taking.

• Injunctive Relief—seeking to restrain defendants from enforcing the Blueprint, Guidance and associated orders.

• Orders Exceed Statutory Authority—alleging the business shut-down orders "are ultra vires and exceed [the Governor's] statutory authority."⁶

• Equal Protection—claiming the Blueprint, orders, and restrictions are based on arbitrary classifications that are not rationally related to promoting public health.

• Inverse Condemnation—alleging the Blueprint and related orders effected a taking of property without compensation.

• Writ of Mandate—claiming the defendants failed to comply with a ministerial duty to comply with the APA.

After conducting a hearing, the superior court sustained demurrers without leave to amend. We independently review the resulting judgment. ( Anselmo v. Grossmont-Cuyamaca Community College District (2018) 25 Cal.App.5th 948, 951, 236 Cal.Rptr.3d 282 ( Anselmo ).)⁷

DISCUSSION

A. The Governor's Orders and Public Health Directives Issued Under the Emergency Act Are Not Subject to The APA

1. The Emergency Act and The APA

The Emergency Act empowers the Governor to proclaim a state of emergency when conditions of "extreme peril" caused by, among other things, an "epidemic" are "likely to be beyond the control of the services, personnel, equipment, and facilities of any single county, city and county, or city ...." ( § 8558, subd. (b).) In those circumstances, the Governor has "complete authority over all agencies of the state government and the right to exercise within the area designated all police power vested in the state ... to effectuate the purposes of [the Emergency Act]." ( § 8627.) Police power includes "the power to legislate." ( Newsom v. Superior Court (2021) 63 Cal.App.5th 1099, 1113, 278 Cal.Rptr.3d 397.) Thus, under the Emergency Act the Governor may "make, amend and rescind orders and regulations" which "shall have the force and effect of law" and take effect immediately. ( § 8567, subd. (a).)

The APA establishes procedures for state agencies to adopt regulations.⁸ For instance, an agency must (1) give the public notice of its proposed regulatory action ( § 11346.4 ); (2) issue a complete text of the proposed regulation with a statement of the reasons for it ( § 11346.2, subds. (a) & (b) ); (3) give interested parties an opportunity to comment on the proposed regulation ( § 11346.8 ); (4) respond in writing to public comments ( § 11346.9, subd. (a)(3) ); and (5) forward a file of all materials on which the agency relied to the Office of Administrative Law ( §§ 11342.550, 11347.3, subd. (c) ), which reviews the regulation for, among other things, consistency with the law, clarity, and necessity ( § 11349.1 ).

The purposes of the APA process are to provide notice to persons affected by a regulation and give them a voice in its creation. ( Tidewater Marine Western, Inc. v. Bradshaw (1996) 14 Cal.4th 557, 568, 59 Cal.Rptr.2d 186, 927 P.2d 296.) The procedure also ensures the agency does not adopt rules only it knows about. ( Kings Rehab. Ctr., Inc. v. Premo (1999) 69 Cal.App.4th 215, 217, 81 Cal.Rptr.2d 406.) Regulations subject to the APA, but adopted not in compliance with it, are invalid. ( Morning Star Co. v. State Bd. of Equalization (2006) 38 Cal.4th 324, 333, 42 Cal.Rptr.3d 47, 132 P.3d 249.)

Determining whether the Governor's exercise of police power under the Emergency Act is subject to APA is first and foremost a matter of statutory interpretation. " ‘We start with the statute's words, which are the most reliable indicator of legislative intent.’ [Citation.] ‘ "We interpret relevant terms in light of their ordinary meaning, while also taking account of any related provisions and the overall structure of the statutory scheme to determine what interpretation best advances the Legislature's underlying purpose." ’ [Citations.] ‘If we find the statutory language ambiguous or subject to more than one interpretation, we may look to extrinsic aids, including legislative history or purpose to inform our views.’ " ( In re A.N. (2020) 9 Cal.5th 343, 351–352, 262 Cal.Rptr.3d 132, 462 P.3d 974.)

Under section 8571, the Governor's emergency powers include authority to "suspend any regulatory statute ... where the Governor determines and declares that strict...