Aquafarm v. State Dept. of Health Services
| Decision Date | 13 September 2000 |
| Docket Number | No. D033817.,D033817. |
| Citation | 83 Cal.App.4th 809,100 Cal.Rptr.2d 87 |
| Court | California Court of Appeals Court of Appeals |
| Parties | CARLSBAD AQUAFARM, INC., Plaintiff and Respondent, v. STATE DEPARTMENT OF HEALTH SERVICES, Defendant and Appellant. |
Kristin G. Hogue, Supervising Deputy Attorney General and William A. Buess, Deputy Attorney General, for Defendant and Appellant.
Law Offices of Jeffrey S. Young, Jeffrey S. Young, Santa Barbara, and Thomas Daniel Piatt for Plaintiff and Respondent.
Carlsbad Aquafarm, Inc. (Aquafarm) sued the State Department of Health Services (Department), alleging Department violated Aquafarm's due process rights by refusing to provide notice or a hearing before it failed to recertify Aquafarm to a list of approved interstate shellfish sellers. The jury found Aquafarm proved the due process violation, and awarded it damages of $290,000. Department appeals, asserting an argument it repeatedly made below: Aquafarm is not entitled to recover monetary damages based solely on the state constitution's due process provision. (Cal. Const., art. I, § 7.) For the reasons explained below, we agree and reverse.
Under well-settled appellate rules, we state the facts in the light most favorable to Aquafarm.
Aquafarm harvests mussels for commercial sale at its facilities at Agua Hedionda Lagoon in Carlsbad. Because of bacteria levels in the lagoon, Aquafarm must specially clean the mussels in a process known as "depuration." During depuration, the mussels are placed in tanks and held under sterilized running seawater to purge the bacteria.
Aquafarm sells its mussels to California and out-of-state customers. Two different regulatory systems govern each type of sale.
First, the California Legislature has enacted a comprehensive statutory scheme to protect public health by establishing uniform sanitation standards for shellfish intended for human consumption. (Health and Saf.Code,1 § 112150 et seq.) Under this scheme, a shellfish operator may not sell its product within the state unless it obtains a certificate issued by Department, known as a "Shellfish Handling Marketing Certificate" (referred to here as an "Intrastate Certificate"). (§ 112170, subd. (b).) An operator such as Aquafarm must also obtain a permit known as a "Mussel Depuration Process," which sets forth the operator's required depuration procedures. Section 112180, subdivision (e), provides that "[n]o revocation, suspension ... or withdrawal of any certificate is lawful unless, prior to the institution of [Department proceedings, the [Department gave notice by mail, to the certificate holder, of facts or conduct that warrants the intended action, and the certificate holder was given an opportunity to show compliance with all lawful requirements for the retention of the certificate ...."
To sell its product outside California, a shellfish operator is additionally subject to a national certification program. This program is administered by a nationwide committee composed of industry representatives, state regulatory officials, and federal Food and Drug Administration (FDA) officials. The committee publishes standards, known as the National Shellfish Sanitation Program (NSSP). Each state is responsible for determining whether its shellfish operators are complying with NSSP standards. To do this, the state must complete an FDA form 3038, certifying that the particular shellfish operator is complying with NSSP standards. The state then sends this form to the FDA. The FDA in turn publishes a monthly list of approved operators, known as the "Interstate List." An operator that is not identified on the Interstate List is essentially barred from selling its shellfish in another state.
Aquafarm began its mussel harvesting and depuration business in approximately 1991. After inspecting Aquafarm's facilities, Department completed a Form 3038, and sent the form to the FDA. The FDA added Aquafarm to the Interstate List. Department also issued an Intrastate Certificate to Aquafarm, and approved Aquafarm's Mussel Depuration Process.
After these initial certifications, routine inspections uncovered some minor problems with record keeping and compliance with depuration procedures. Aquafarm worked with the state regulators to address these deficiencies. Department continued to issue Aquafarm its annual Intrastate Certificates, and to regularly certify Aquafarm's compliance with NSSP standards by completing a Form 3038. During this time, Aquafarm continued to be on the Interstate List, and a majority of its business was with out-of-state customers.
In January 1995, Department held an informal office hearing to resolve some of the continuing disputed issues regarding Aquafarm's depuration procedures.
In April 1995, Aquafarm sought to amend its Mussel Depuration Process to permit it to better comply with NSSP standards. Department denied the request, and in response to Aquafarm's inquiry, stated that Aquafarm could appeal under the Administrative Procedure Act procedures. (Gov.Code, § 11500 et seq.) Although Aquafarm initiated this appeals process, Department did not file the appropriate papers or schedule a hearing for a substantial period of time.
One year later, on March 6, 1996, Department conducted an annual certification inspection and found Aquafarm was violating NSSP standards. Based on that inspection, Department decided to reissue an Intrastate Certificate, but not to complete a Form 3038. Because FDA did not receive the Form 3038 in March 1996, it removed Aquafarm from the Interstate List beginning in April 1996. Although Aquafarm initially continued to ship mussels to out-of-state customers, these customers soon refused to receive the product because of "pressure" from regulators in their states.
Department first notified Aquafarm of its determination not to complete a Form 3038 on April 4, 1996. Department denied Aquafarm's request for a hearing on the matter. Department officials took the position that Aquafarm had no statutory or due process rights to a hearing with respect to the Form 3038 certification.
During the next several months, Department reinspected Aquafarm, but repeatedly found Aquafarm was not complying with NSSP standards and therefore refused to issue a Form 3038.
In October 1996, Department took action to revoke Aquafarm's Intrastate Certificate. Under the governing Administrative Procedures Act sections, the Attorney General filed an accusation and statement of issues against Aquafarm, which triggered procedures leading to a hearing on the merits of the intended revocation. (Gov.Code, § 11503.) During this time, Aquafarm was permitted to continue selling its product within California.
In June 1997, 14 months after it was removed from the Interstate List, Aquafarm filed a superior court complaint against Department and several Department employees, seeking to recover the profits it would have earned from out-of-state customers if it had continued to be on the Interstate List. As amended, the complaint alleged three causes of action: (1) violation of Aquafarm's state constitutional due process rights; (2) intentional interference with prospective economic advantage; and (3) violation of section 112180, subdivision (e).
In response to defendants' demurrer, Aquafarm conceded its intentional interference claim was without merit "based on [Civil Code] section 47 and Delia Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal.4th 376 [45 Cal.Rptr.2d 436, 902 P.2d 740]." The court thus sustained the demurrer on this claim, but overruled the demurrer with respect to Aquafarm's due process and statutory claims.
Meanwhile, the administrative hearing procedures relating to the Intrastate Certificate continued. Ultimately, in August 1997, Department and Aquafarm reached a settlement, resulting in Department making several concessions with respect to the validity of Aquafarm's operating procedures. After the settlement, Department completed a Form 3038, and sent the form to the FDA. In November 1997, Aquafarm was reinstated to the Interstate List.
In March 1998, Department moved for summary judgment on the two remaining claims in the superior court action (state constitution due process claim and section 112180 claim). The court granted summary judgment on the statutory claim, ruling that section 112180 does not create a private right of action for money damages. But the court denied summary judgment on the due process claim, finding "there are triable issues of material fact concerning whether plaintiff had any alternative avenues for remedy ...."
The trial date was set for March 26, 1999. On January 26, 1999, Aquafarm moved to amend its complaint to add a federal civil rights claim. (42 U.S.C. § 1983.) Aquafarm submitted its counsel's declaration, stating that in preparing for a September 1998 motion, he "learned" that attorney fees are available to prevailing parties under federal law for state due process violations, and the court should therefore permit Aquafarm to "add a federal due process violation cause of action ... [which] ... essentially mirrors the state due process claim ...." Department opposed the motion, arguing the claim was barred by the one-year limitations period and the added claim would inject new issues, such as punitive damages, prejudicing defendants. The court denied Aquafarm's request to amend the complaint, finding it was untimely. Aquafarm then dismissed its claims against the individual defendants.
At trial, the only claim presented to the jury was Aquafarm's state constitution due process claim against Department. Aquafarm argued that Department violated its due process rights by...
To continue reading
Request your trial