State Water Res. Control Bd. v. Baldwin & Sons, Inc.
| Decision Date | 16 January 2020 |
| Docket Number | D075617 |
| Citation | 45 Cal.App.5th 40,258 Cal.Rptr.3d 425 |
| Court | California Court of Appeals Court of Appeals |
| Parties | STATE WATER RESOURCES CONTROL BOARD, Plaintiff and Respondent, v. BALDWIN & SONS, INC. et al., Defendants and Appellants. |
Gatzke Dillon & Ballance and Stephen F. Tee for Defendants and Appellants.
Xavier Becerra, Attorney General, Robert W. Byrne, Assistant Attorney General, Michael P. Cayaban and Kathryn M. Megli, Deputy Attorneys General for Plaintiff and Respondent.
Baldwin & Sons, Inc.; Baldwin & Sons, LLC; Sunranch Capital Partners, LLC; USA Portola Properties, LLC; Sunrise Pacific Construction; USA Portola East, LLC; USA Portola West, LLC; and SRC-PH Investments, LLC (collectively, Appellants) appeal from an order compelling compliance with investigative (or administrative) subpoenas issued by the State Water Resources Control Board (State Board).
Appellants were involved (or believed to be involved) in the construction of a large-scale development in the Portola Hills Community in Lake Forest, California. The State Board initiated an investigation into alleged violations of the federal Clean Water Act ( 33 U.S.C. § 1251 et seq. ) and California's Porter-Cologne Water Quality Control Act ( Wat. Code, § 13000 et seq. ) occurring during construction activities. In connection with its investigation, the State Board issued subpoenas seeking Appellants' financial records. When Appellants refused to produce the requested financial records, the State Board sought a court order compelling compliance with the subpoenas. With the exception of tax returns (which are not at issue in this appeal), the trial court concluded that the information sought was relevant to the State Board's investigation and subject to disclosure pursuant to the investigative subpoenas. The court issued an order compelling Appellants to comply with the subpoenas. The court also issued a protective order to provide additional protection from public disclosure beyond what is provided by Government Code section 11183, which makes it a misdemeanor for any public officer to "divulge any information or evidence acquired" through the issuance of investigative subpoenas. ( Gov. Code, § 11183.)
Appellants raise three contentions on appeal: (1) their financial records are not reasonably relevant to the State Board's investigation; (2) compelling production of their financial records violates their right to privacy; and (3) the protective order does not adequately protect against disclosure of their private financial information to third parties. We reject these claims and affirm the challenged order compelling production of the Appellants' financial records subject to a protective order.
California's Porter-Cologne Water Quality Control Act establishes a statewide program for water quality control. Nine regional boards, overseen by the State Board, administer the program in their respective regions. ( Wat. Code, §§ 13140, 13200, 13201, 13240.) The Portola project, involving development of the Portola Hills community in Lake Forest, California, is within the jurisdiction of the California Regional Water Quality Control Board, San Diego Region (Regional Board).
In 2016, the Regional Board issued notices of violation to Sunranch Capital Partners LLC, USA Portola Properties, LLC, and "Baldwin & Sons." Sunranch Capital Partners LLC and USA Portola Properties, LLC signed the Construction General Permit covering the project,1 and are therefore considered permittees with certain permit compliance obligations, but Appellants state that Baldwin & Sons, LLC was not an owner, contractor, or permittee in relation to the project.2
The notices of violation identify alleged Construction General Permit violations, which in turn constitute violations of federal and state water quality laws. The alleged violations include failure to mitigate and prevent harmful environmental discharges and failure to implement best management practices to minimize and prevent discharges of sediment, stormwater runoff, and erosion. These failures were alleged to have adversely impacted neighboring Aliso Creek, Serrano Canyon Creek, and tributaries to the creeks.
The State Board initiated an investigation into the Portola construction project to determine if an administrative civil liability (ACL) complaint against responsible entities was warranted. ( Wat. Code, § 13385, subd. (c).) In June 2016, the State Board served its initial subpoenas in the investigation, which resulted in the production of thousands of pages of documents related to the project and other construction activities. The initial subpoenas were directed to Sunranch Capital Partners, LLC and USA Portola Properties, LLC, the two entities who signed the notices of intent to be covered by the Construction General Permit.
According to the State Board, the responding parties "failed to provide a clear understanding of the relationship between and among other entities who appeared to be involved in the [p]roject." The Regional Board obtained documents from another source, however, "that indicated a relationship existed" between the responding entities and "other entities who appeared to be paying for [p]roject-related expenses" including Baldwin & Sons, Inc., Sunrise Pacific Construction, and SRC-PH Investments, LLC. When the State Board obtained information which it contends "reveal[ed] other entities and individuals were involved in [p]ermit compliance at the [p]roject, including having control and authority over environmental decisions," the State Board issued additional subpoenas to the other entities involved in this appeal, which the State Board believes are associated with or connected to the project.
The challenged subpoenas seek financial documents detailing the entities' interrelationship, financial documents related to the entities' corporate management, documents related to the development project including lease agreements and project operations, and documents related to the financial ability of responsible entities to pay any administrative civil liability imposed during enforcement proceedings. Subpoenaed documents include income tax filings, loan agreements, bank and financial statements, and economic reports and sales projections related to the development project. The requests are limited as to time (January 1, 2012 or later).3
Appellants refused to comply with the subpoenas, claiming the requested financial documents (1) were protected from disclosure by common law and constitutional rights to privacy, and (2) were not reasonably relevant to the investigation, thus constituting an unreasonable search and seizure. After seven months of discussions regarding the scope of disclosure and a potential confidentiality agreement, the parties were not able to reach an agreement and Appellants continued to refuse to produce the requested financial documents.
The State Board filed a petition for an order compelling compliance with the subpoenas pursuant to Government Code section 11187,4 which Appellants opposed. The State Board argued that the investigation was within the scope of its authority and the subpoenas were properly issued and served. The State Board further argued that the subpoenas sought information reasonably relevant to its investigation, including information necessary to assist the State Board in preparing an ACL complaint.
With one exception, the trial court granted the State Board's request to compel production of the subpoenaed records (hereinafter, "Financial Documents").5 The trial court reasoned that the State Board was authorized to conduct the investigation, the demands made in the subpoenas were not too indefinite, and the Financial Documents were reasonably relevant to the State Board's investigation. The trial court also directed entry of a protective order, pursuant to which the State Board agreed not to include any protected material in the administrative record (unless Appellants submit these materials on their own), and further agreed protected material would not be subject to public records act or litigation requests for disclosure. With the protective order in place, the trial court directed Appellants to produce responsive Financial Documents.6 This appeal followed.7
"A complex federal and state regulatory scheme promulgated under the federal Clean Water Act and the Porter-Cologne [Water Quality Control] Act governs the quality of our waters." ( California Sportfishing Protection Alliance v. State Water Resources Control Bd. (2008) 160 Cal.App.4th 1625, 1637, 73 Cal.Rptr.3d 560.) The Clean Water Act was enacted "to restore and maintain the chemical, physical, and biological integrity of the Nation's waters." ( 33 U.S.C. § 1251(a).) Similarly, the Porter-Cologne Water Quality Control Act is designed "to attain the highest water quality which is reasonable, considering all demands being made and to be made on [state] water and the total values involved, beneficial and detrimental, economic and social, tangible and intangible." ( Wat. Code, § 13000.)
The Clean Water Act prohibits the discharge of pollutants into navigable waters of the United States without proper authorization ( 33 U.S.C. § 1311(a) ), such as through a permit issued under the National Pollutant Discharge Elimination System (NPDES). ( 33 U.S.C. § 1342 ; 40 C.F.R.§§ 122.1 - 122.64.) A NPDES permit is required for stormwater discharges associated with qualifying construction activities.8
The United States Environmental Protection Agency (EPA) has delegated to the State Board the authority to issue NPDES permits. ( 33 U.S.C. § 1342(b) ; 54 Fed. Reg. 40664, 40665 (Oct. 3, 1989) ; Wat. Code, § 13160 []; see City of Brentwood v. Central Valley Regional Water Quality Control Bd. (2004) 123 Cal.App.4th 714, 723, 20 Cal.Rptr.3d 322 [...
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