Morning Star Co. v. State Bd. of Equalization

• Citation: 9 Cal.Rptr.3d 600,115 Cal.App.4th 799
• Decision Date: 09 February 2004
• Docket Number: No. C033758.,C033758.
• Court: California Court of Appeals
• Parties: MORNING STAR COMPANY, Plaintiff and Appellant, v. STATE BOARD OF EQUALIZATION, et al., Defendants and Respondents.

9 Cal.Rptr.3d 600

115 Cal.App.4th 799

MORNING STAR COMPANY, Plaintiff and Appellant, v. STATE BOARD OF EQUALIZATION, et al., Defendants and Respondents.

No. C033758.

Court of Appeal, Third District.

February 9, 2004.

Review Granted April 28, 2004.

Law Office of Brian C. Leighton and Brian C. Leighton, Clovis; Richard Todd Luoma for Plaintiff and Appellant.

Bill Lockyer, Attorney General, Timothy G. Laddish, Assistant Attorney General, Lawrence K. Keethe, Amy J. Winn and Molly K. Mosley, Deputy Attorneys General, for Defendants and Respondents.

BLEASE, J.

Plaintiff Morning Star Company (Morning Star) appeals from the judgment that denied it a refund of the environmental fees imposed on it by the State Board of Equalization (SBE) to fund the costs of the removal and disposition of hazardous material as required by federal law. (Health & Saf.Code, § 25205.6 et seq.)¹

The fees are paid by corporations engaging in business activities covered under a "schedule of [Standard Industrial Classification] codes" (SIC codes) which the Department of Toxic Substances Control (DTSC) must provide the SBE for business activities it determines involve the generation, storage or use of hazardous material. The SIC codes classify businesses by the type of economic activity conducted and cover the entire range of economic activities. The SBE collects a fee from each corporation at a rate based on the number of employees, if 50 or more.

"Hazardous material" is defined as any substance which poses a potential hazard to human health or the environment if spilled, disposed or otherwise released into the workplace or environment and includes "hazardous waste" and substances classified and listed under other environmental statutes and regulations. (§ 25501, subds. (o), (p), (q) and (s).)

The DTSC provided SBE with all of the SIC codes covered by section 25205.6 on the view that all of the covered business activities involve the use of common products that contain hazardous material, such as computer monitors and fluorescent light bulbs.

Morning Star is a California corporation that supplies workers for the tomato processing industry. A hazardous material fee was paid to the SBE on its behalf for the years 1993 to 1996. It filed a claim for refund with the SBE that was denied. It filed this action seeking to overturn the SBE determination and to obtain a declaration that DTSC's decision to submit all of the SIC codes to SBE violated the Administrative Procedure Act (Gov.Code, § 11340 et seq; hereafter APA) and the federal and state constitutions.²

The parties brought cross-motions for summary judgment. The defendants asserted 56 statements of undisputed fact, including that fluorescent light bulbs and cathode ray tubes contain hazardous material. Morning Star objected to three of them on the ground the Morning Star Packing Company, a subsidiary, was not a corporation but did not deny it was a corporation within the SIC codes which cover business activities that generate, store or use hazardous material. Morning Star did not object to deposition testimony that virtually all California corporations use hazardous material.

The trial court entered judgment in favor of defendants. This appeal followed.

We will affirm the judgment on the ground the DTSC's factual assumption, made incident to its enforcement of section 25205.6, that business activities within all of the SIC codes involve the use of hazardous material is not a regulation subject to the APA. We also decide the DTSC decision does not violate the federal and state constitutions.

I FACTUAL AND PROCEDURAL BACKGROUND

A. Statutory Framework

Section 25205.6 is the state's financial response to the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 under which "the state is obligated to pay specified costs of removal and remedial actions carried out pursuant" to the Act. (§ 25205.6, subd. (f).) The fees must be deposited in a Toxic Substances Control Account to pay the costs of disposing of and remediating the effects of hazardous waste. (§ 25173.6, subd. (b).)

The Legislature enacted section 25205.6 in 1989 and amended it numerous times, most recently in 2001.³ It currently provides in pertinent part:

"(a) On or before November 1 of each year, the department [DTSC] shall provide the board [SBE] with a schedule of [SIC] codes that consists of the types of corporations that use, generate, store, or conduct activities in this state related to hazardous materials, as defined in Section 25501, including, but not limited to, hazardous waste."

A "SIC Code" is "the identification number assigned by the Standard Industrial Classification Code to specific types of businesses." (§ 25501, subd. (u).)⁴ It is a system for classifying businesses by the type of economic activity conducted and is intended to cover the entire field of economic activities. SIC codes classify businesses in major groups by a two-digit SIC Code, industry groups by a three-digit SIC code, or industries by a four-digit SIC code, depending on the level of detail most appropriate. (U.S. Office of Management and Budget, Standard Industrial Classification Manual (1987) p. 28) (SIC Manual); (National Mining Assn. v. United States Environmental Protection Agency (D.C.Cir.1995) 59 F.3d 1351, 1355, fn. 6.) Section 25205.6 contains only one exception to the inclusion of corporations within the SIC codes, nonprofit residential care facilities. (Subd. (g).)

A corporation covered by a SIC code sent by the DTSC to the SBE must pay an annual fee measured by the number of its employees, if 50 or more. (§ 25205.6, subd. (b).) The fee ranges from $200 for corporations with 50 to 75 employees to $9,500 for corporations with more than 1,000 employees. (Ibid.) The purpose of the fee is to raise revenue to pay the "costs of removal and remedial actions" involving hazardous waste required by the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (40 U.S.C. § 9601 et seq). (§ 25205.6, subd. (f).)

Section 25205.6, subdivision (a) applies to any SIC code which "consists of the types of corporations that use, generate, store, or conduct activities in this state related to hazardous materials...."⁵ The term "generate" is used throughout the toxic law to apply to the production of hazardous waste. It applies to generators of large amounts of hazardous waste and to generators of small amounts of waste, including "[r]esidential households which generate household hazardous waste...." (§ 25218.) In the regulations implementing the definition of hazardous waste "generate" means to produce hazardous waste whether or not the generator knows its hazardous nature. California Code of Regulations, title 22, sections 66260.10 and 66273.9 define "`Generator' or `Producer' [as] any person, by site, whose act or process produces hazardous waste...." (See also § 66261.10, subd. (a)(1)(B), (a)(2)(A) & (B), fn. 8, italics added.)

The definition of "hazardous materials" is taken from the statutes which regulate the handling and disposal of hazardous substances, including hazardous waste (§ 25500 et seq.), and refers to:

"any material that, because of its quantity, concentration, or physical or chemical characteristics, poses a significant present or potential hazard to human health and safety or to the environment if released into the workplace or the environment. `Hazardous materials' include, but are not limited to, hazardous substances, hazardous waste, and any material which a handler or the administering agency has a reasonable basis for believing that it would be injurious to the health and safety of persons or harmful to the environment if released into the workplace or the environment." (§ 25501, subd. (o).)

The term "Release" is broadly defined as "any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing into the environment, unless permitted or authorized by a regulatory agency." (§ 25501, subd. (s).) Thus, a hazardous material is any substance which poses a potential hazard to human health or the environment if released by accident or other manner into the workplace or environment.⁶

This general definition is augmented by the categorical inclusion of "hazardous substances [and] hazardous waste" (§ 25501, subd. (o)), and by the incorporation of substances identified under other environmental statutes and regulations. They include "hazardous substance," as "listed pursuant to Title 49 of the Code of Federal Regulations" (§ 25501, subd. (p)(3)), "hazardous waste," as listed pursuant to sections 25115, 25117 and 25316 (subd. (g)), and substances for which a producer must file a Material Safety Data Sheet (MSDS) (Lab.Code, §§ 6374, 6380; Cal.Code Regs., tit. 8, § 339) pursuant to the Hazardous Substances Information and Training Act (Lab.Code, § 6360 et seq.).⁷

In particular, "hazardous waste" is defined by the DTSC pursuant to its regulatory authority under sections 25117 and 25141. (§§ 25501, subd. (q), 25117, subd. (a)(2), 25141; Cal.Code of Regs., tit. 22, § 66261.1 et seq.) Section 66261.10, adopted in 1991, defines hazardous waste in principal part as a waste that "pose[s] a substantial present or potential hazard to human health or the environment when it is improperly treated, stored, transported, disposed of or otherwise managed...." (Cal.Code Regs., tit. 22, § 66261.10, subd. (a)(1)(B), (a)(2)(B).)⁸ "`Waste' means any discarded material of any form...." (§ 66261.2, subd. (a); Health & Saf.Code, § 25124.)⁹

There are numerous other provisions of law which apply the hazardous waste definitions to common substances including section 25215.1 (lead acid batteries), enacted in 1988, and section 25218.1 (household hazardous waste), enacted in 1993. Since 2002 the curbside collection of fluorescent light tubes four feet or greater in length has been prohibited. (§ 25218.5, subd. (d)(5).)

The...