SPX Corporation v. Dorais, C041863 (Cal. App. 11/13/2003)

• Decision Date: 13 November 2003
• Docket Number: C041863.
• Citation: SPX Corporation v. Dorais, C041863 (Cal. App. 11/13/2003) (Cal. App. 2003)
• Court: California Court of Appeals
• Parties: SPX CORPORATION, Plaintiff and Appellant, v. PATRICK DORAIS, as Acting Chief, etc., et al., Defendants and Respondents.

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Unpublished Opinion

SPX CORPORATION, Plaintiff and Appellant, v. PATRICK DORAIS, as Acting Chief, etc., et al., Defendants and Respondents.

C041863.

Court of Appeals of California, Third District.

Filed November 13, 2003.

Appeal from Super. Ct. No. 02CS00297.

KOLKEY, J.

The Bureau of Automotive Repair (BAR), the defendant here, successfully petitioned to decertify the smog check equipment known as "BAR-97," which is manufactured by SPX Corporation (SPX), on the ground that SPX had failed to furnish a software update within the six-month period mandated by Health and Safety Code section 44036, subdivision (f)(1).¹ SPX sought a writ of administrative mandamus to challenge the administrative law judge's decision in BAR's favor. (Code Civ. Proc., § 1094.5.) But the superior court, applying the substantial evidence test, denied the writ. (Id., § 1094.5, subd. (c).)

SPX appeals and contends, among other things, that the superior court should have used the independent judgment test, which requires the court to weigh the evidence.

We agree and shall reverse: If an administrative decision substantially affects a fundamental vested right, the trial court must review the administrative decision exercising its independent judgment. (Bixby v. Pierno (1971) 4 Cal.3d 130, 143.) Here, SPX has a fundamental vested right in maintaining the certification that it received for its BAR-97 smog check equipment. Courts have recognized that fundamental vested rights include the right to continue operating an established business in which a person has made a substantial investment. (Goat Hill Tavern v. City of Costa Mesa (1992) 6 Cal.App.4th 1519, 1529 (Goat Hill)). SPX's certification would appear to so qualify here. SPX's certification took four years and over 20,000 hours of engineering time to achieve, and the certified equipment is used by approximately 1,500 smog check stations — about 25 percent of such facilities in California. Once decertified, SPX could not sell its BAR-97 equipment in California, and no smog check station could use it. (§ 44036, subd. (b).) The loss of such a certification, in which a significant investment has been made, "is too important . . . to relegate . . . to . . . administrative extinction" by a body lacking judicial power, but instead requires the careful judicial scrutiny that the independent judgment test affords. (Bixby v. Pierno, supra, 4 Cal.3d at p. 144.)

FACTUAL AND PROCEDURAL BACKGROUND

I. General Background

BAR is the state agency responsible for developing and administering an inspection program that reduces motor vehicle emissions. (§§ 44001.5, 44002.)

Vehicles are tested at privately operated smog check stations, which are authorized to issue certificates of compliance with emission standards. (§§ 44010, 44012, 44013, 44015.) These licensed smog check stations must use testing equipment certified by BAR, including a test analyzer system. (§ 44036, subd. (b).) BAR adopts and revises the standards for certification and decertification of the testing equipment. (Ibid.)

The first test analyzer system, referred to as BAR-74, was certified in 1974.² A series of analyzers followed (e.g., BAR-80, BAR-84, BAR-90), culminating in BAR-97 — the test analyzer system at issue here. Each system became more complex and sophisticated in order to meet the increasingly stringent state and federal emission reduction standards. (§§ 44000, 44001.)

II. BAR-97

BAR-97 equipment is used to perform an enhanced smog check in urbanized areas of the state where air quality standards have not been attained. (§ 44003, subd. (b).) However, BAR-90 continues to be used elsewhere in California.

Whereas BAR-90 analyzers test emissions while the vehicle is in idle, BAR-97 equipment includes a treadmill-like device that allows simulation of driving conditions in order to test emissions. BAR-97 equipment also includes various sensors that measure the exhaust of the vehicle and the integrity of the vehicle's emission control system. And the BAR-97 equipment contains a modem that connects to a BAR database, referred to as the "VID," in order to transmit and receive information.

The certification process to produce the BAR-97 analyzer system began in 1995 when BAR developed draft specifications for the equipment and provided them to interested manufacturers. Initially, manufacturers were required to submit financial information to BAR to demonstrate that they had the necessary resources to perform the work, including a minimum net worth of $1,000,000 and a service network. (§ 44036.1.) Once BAR agreed that these requirements were met, BAR met with the manufacturers to review the equipment specifications and to determine which criteria necessitated a modification of existing equipment. This specification review continued until most manufacturers believed that they could develop the equipment.

After the specification review, the manufacturers had to build prototype equipment and go through a lengthy testing process to show that the various components of the equipment could meet the specifications, including those for the "gas bench" and the dynamometer (i.e., treadmill-like device).

III. SPX's Certification

SPX is one of four manufacturers of BAR-97 analyzer systems certified by BAR.

SPX built the prototype equipment and submitted extensive test data to BAR to show that the equipment could meet its specifications. SPX then submitted the prototype to BAR, where the engineering staff performed a series of tests. SPX employees worked with BAR staff on the test series.

In mid-1997, SPX's BAR-97 equipment was granted a "component approval that verified that the gas bench met the accuracy requirements of the BAR-97 specification." Soon thereafter, the dynamometer received component approval.

In February 1998, BAR granted full certification to SPX that all components in the software performed as an integrated system in accordance with the BAR-97 specifications. Indeed, SPX became the first manufacturer to receive component and full system approval. SPX had devoted an estimated 20,000 hours of employee time in engineering the BAR-97 equipment to obtain the certification.

SPX's BAR-97 certification permitted SPX to sell its BAR-97 analyzer system in California. As a result, approximately 1,500 smog check stations use SPX's BAR-97 equipment, which is in excess of 25 percent of the total number of stations statewide. The price paid by smog check stations for the equipment ranges from $30,000 to $40,000.

SPX's certification document states that "BAR Certification is the final certification issued to a complete EIS [(Emissions Inspection System)] that has been found to be in full compliance with the BAR-97 Specification." However, because the federal government was pressing BAR, under the threat of sanctions, to promptly implement the program, completion of certain items was deferred to July 1998.³ Accordingly, the certification document provides that it "shall expire on July 1, 1998[,] when the deferred items in the BAR-97 Specifications are approved and installed." The BAR-97 certification also contemplated that periodic updates would be required during its term. The certification document states: "If modifications are made after this approval, SPX must submit the changes along with appropriate test data to the bureau prior to the release/sale of the updated equipment."

As a condition of the BAR-97 certification, SPX also signed BAR's "Manufacturer Assurance Agreement." The agreement was meant to assure BAR that future software and hardware updates would be certified, installed, and maintained in accordance with BAR's specifications and implementation requirements. In the agreement, SPX acknowledged that software updates would be necessary and would be installed by the dates specified by BAR.

Both the BAR-97 certification document and the Manufacturer Assurance Agreement also set forth sanctions that could be imposed if SPX failed to comply with their requirements. The certification cautioned that failure to comply with BAR-97 specifications and the conditions of the Manufacturer Assurance Agreement could result in decertification of future installations or sales, or in full decertification for serious uncorrected problems. The Manufacturer Assurance Agreement also noted that section 44036 provided for the assessment of penalties not to exceed $1,000 per day for failure to furnish or install software updates as specified.⁴

IV. The Addenda

Updates to the BAR-97 specifications were made by a series of addenda issued by BAR, some before and some after the BAR-97 certification. Addenda 1, 2, 3, and 4 were issued prior to certification. Addendum 5, issued in May 1998, originally contained deferred items from the original BAR-97 specification as well as some new items. But since the manufacturers had agreed that there would be no charge to smog check stations for the deferred items, BAR issued in August 1998 a new version of Addendum 5 and Addendum 6, which separated the deferred items from the new items, for which SPX could charge.

None of the manufacturers met the deadline for Addendum 5, or Addenda 5 and 6 combined; therefore, BAR set new deadlines. Then, at the manufacturers' suggestion, to avoid two installations in the analyzers in use, Addenda 5 and 6 were combined into Addendum 7, which also added new specifications.

BAR then made a series of revisions to Addendum 7, specifying additional items and setting new deadlines for manufacturers to provide and install the update. Specifically, BAR initially issued Addendum 7 in November 1998 (after the supposed expiration of the SPX certification), with a deadline of June 1999 for manufacturers to provide the update. That deadline passed without BAR receiving updated software from any manufacturer. BAR thereafter sent a letter to manufacturers setting a new series of deadlines, with a final deadline of April 2000. In November 1999, BAR issued a new Addendum 7...