APPELLANT’S OPENING BRIEF Gallegos v PL

APPELLANT’S OPENING BRIEF
CASE NO. A112028
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT, DIVISION THREE
THE PEOPLE OF THE STATE OF
CALIFORNIA,
Appellant and Plaintiff,
vs.
PACIFIC LUMBER COMPANY, ET
AL,
Respondent and Defendant.
Case No. A112028
(Humboldt Superior Court
No. DR030070)
APPELLANT'S OPENING BRIEF
The Honorable Richard L. Freeborn
PAUL V. GALLEGOS, State Bar #161408
District Attorney
Humboldt County
825 Fifth Street
Fourth Floor
Eureka, California 95501
Telephone: (707) 445-7411
Facsimile: (707) 445-7416
E-Mail: pgallegos@co.humboldt.ca.us
Attorneys for Appellant and Plaintiff
THE PEOPLE OF THE STATE OF
CALIFORNIA
APPELLANT’S OPENING BRIEF
CASE NO. A112028
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CERTIFICATE OF INTERESTED ENTITIES OR PERSONS
There are no interested entities or persons to list in this Certificate
per California Rules of Court, Rule 14.5(d)(3).
Interested entities or persons are listed below:
Name of Interested Entity or Person Nature of Interest
1.
2.
3.
4.
Please attach additional sheets with person or entity information if
necessary.
Dated: November 8, 2006
PAUL V. GALLEGOS
District Attorney,
Humboldt County
By:
PAUL V. GALLEGOS
Printed Name: P aul V. Gallegos
District Attorney
Address: 8 25 Fifth Street
4th Floor
Eureka, California 95501
State Bar # S tate Bar No. 161408
Party Represented: T he People of the State of California
APPELLANT’S OPENING BRIEF
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TABLE OF CONTENTS
CERTIFICATE OF INTERESTED ENTITIES OR PERSONS................... i
TABLE OF AUTHORITIES ....................................................................... iii
INTRODUCTION ........................................................................................ 1
STATEMENT OF FACTS AND CASE ...................................................... 1
STANDARD OF REVIEW.......................................................................... 3
SUMMARY OF ARGUMENT .................................................................... 3
LEGAL DISCUSSION................................................................................. 4
I. CIVIL CODE SECTION 47(b) DOES NOT PRECLUDE
THE PEOPLE'S UCL LAWSUIT BECAUSE THE PEOPLE
WERE NOT A PARTY TO THE CEQA PROCESS........................ 4
II. THE NOERR-PENNINGTON DOCTRINE IS NOT A
DEFENSE IN THE PEOPLE'S UCL LAWSUIT AGAINST
PL. ...................................................................................................... 5
A. THE NOERR-PENNINGTON DOCTRINE
PROTECTS LOBBYING, NOT MATERIAL
MISREPRESENTATIONS IN AN
ADJUDICATORY PROCEEDING
B. GIVING FALSE INFORMATION TO AN
ADJUDICATIVE ADMINISTRATIVE AGENCY
FOR THE PURPOSE OF DECEIVING THEM IN
THEIR ADJUDICATIVE ROLE IS NOT
LOBBYING, IT IS FRAUD
C. NOERR-PENNINGTON IS NOT A DEFENSE
WHEN THE UCL LAWSUIT IS BROUGHT BY
THE GOVERNMENT ACTING TO ENFORCE
ITS LAWS
III. THE ALLEGATIONS IN THE PEOPLE'S COMPLAINT
WERE THAT PL'S MATERIAL MISREPRESENTATIONS
UNDERMINDED THE ENTIRE CEQA PROCEEDINGS
AND THE COURT HAD NO LEGAL AUTHORITY TO
DECIDE OTHERWISE................................................................... 17
IV. THE UCL APPLIES TO BOTH SINGLE AND MULTIPLE
TRANSACTIONS. .......................................................................... 26
CONCLUSION........................................................................................... 28
CERTIFICATE OF COMPLIANCE.......................................................... 29
APPELLANT’S OPENING BRIEF
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TABLE OF AUTHORITIES
State Cases
American Products Co., Inc. v. Law Offices of Geller, Stewart, Foley, LLP
(2005) 134 Cal.App.4th 1332.................................................................... 4
Committee on Children's Television, Inc. v. General Foods Corp.
(1983) 35 Cal.3d 197............................................................................ 3,17
Hewlett v. Squaw Valley Ski Corp.
(1997) 54 Cal.App.4th 499...................................................................... 27
Kasky v. Nike.
(2002) 27 Cal.4th 939................................................................................ 8
Kashiam v. Harriman
(2002) 98 Cal.App.4th 892........................................................................ 4
People v. Pacific Land Research Co.
(1977) 20 Cal.3d 10................................................................................ 15
Rubin v. Green
(1993) 4 Cal.4th 1187................................................................................. 4
Silberg v. Anderson.
(1990) 50 Cal.3d 205................................................................................. 3
Stopp Youth Addiction, Inc. v. Lucky Stores, Inc.
(1998) 17 Cal.4th 553.............................................................................. 27
United Farm Workers of America v. Dutra Farms
(2000) 83 Cal.App.4th 1146.................................................................... 27
Federal Cases
Amarel v. Connell
(9th Cir. 1996) 102 F.Supp.3d 1494 ......................................................... 6
California Motor Transp. Co. v. Trucking Unlimited,
(1972) 404 U.S. 508 ................................................................... 6,11,16,17
Columbia Steel Casting v. Portland General Electric Co.
(9th Cir. 1996) 111 F.3d 1427................................................................... 8
Eastern RR Presidents Conference v. Noerr Motor Freight Inc.
(1961) 365 U.S. 127 .................................................................................. 5
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Federal Prescription Serv., Inc. v. American Pharmaceutical Ass'n
(D.C. Cir. 1987) 663 F.2d 253 ................................................................ 12
George R. Whitten, Jr. v. Paddock Pool Builders, Inc.
(1st Cir. 1996) 424 F.2d 25 ............................................................ 9,10,11
Kottle v. Northwest kidney Centers
(9th Cir. 1998) 146 F.3d 1056................................................................ 12
Liberty Lake Investments, Inc. v. Magnuson
(9th Cir. 1993) 12 F.3d 155................................................................ 12,13
Nobelpharma AB v. Implant Innovations, Inc..
(Fed. Cir. 1998) 141 F.3d 1059............................................................... 12
United Mine Workers v. Pennington
(1965) 381 U.S. 657 .................................................................................. 5
Whelan v. Adell
(D.C. Cir 1995) 48 F.3d 1247 ................................................................. 12
Woods Exploration & Producing Co., Inc. v. Aluminum Co. of America
(5th Cir. 1971) 438 F.2d 1286................................................................... 7
State Statutes & Codes
Business and Professions Code
§ 17200......................................................................................... 1,4,26,27
§ 17204.................................................................................................... 15
Civil Code
§ 47..................................................................................................... 1, 2,4
Proposition 64 …………………………………………………………… 15
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INTRODUCTION
In this case, the trial court ruled that the People’s Business &
Professions Code § 17200 (“UCL”) lawsuit for fraud against Pacific
Lumber Company, et al. (“PL”), seeking civil penalties and restitution, was
immune from prosecution under Civil Code § 47’s litigation privilege and
the “Noerr-Pennington doctrine.” The trial court also determined, contrary
to the allegations in the complaint, that PL’s misrepresentations did not
undermine the administrative agency’s decision; and, contrary to law, that
the UCL is not applicable to single transactions and the complaint alleges a
single transaction.
None of these conclusions are correct. Specifically: (i) the litigation
privilege does not apply to the People’s UCL lawsuit because the People
were not a party to the underlying CEQA process; (ii) the Noerr-
Pennington doctrine is not applicable to this case because PL wasn’t
lobbying government - they were applying for a timber harvest permit; and
the lawsuit is a law enforcement action of the People of the State of
California, not an individual or a non-government entity; (iii) the
allegations in the complaint that PL’s material misrepresentations
undermined the entire proceeding is a factual issue that cannot be resolved
by demurrer; and (iv) by law, the UCL applies to a single act of fraud.
STATEMENT OF FACTS AND CASE
The People bring this Business & Professions Code § 17200
(“UCL”) lawsuit against Pacific Lumber Company, et al. (“PL”), seeking
civil penalties and restitution. The People allege that PL intentionally
misrepresented crucial facts in an adjudicative administrative procedure
governed by the California Environmental Quality Act (“CEQA”), resulting
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in the circumvention of a critical step in the CEQA process: recirculation of
the Environmental Impact Report (“EIR”) for public comment. As a result,
PL was permitted to log more timber than it otherwise would have been
allowed. The increased harvest rate resulted in increased landslides, water
pollution, sedimentation, and impairment of northern California watersheds
and fisheries that threaten the health and safety of residents and public
infrastructure. PL benefited and continues to benefit from its deceit.
PL has thrice demurred to People’s successive complaints, and the
matter is now at issue following the trial court’s order sustaining PL’s
demurrer to the Second Amended Complaint. [CT 614-615.]
The basis for the trial court’s ruling are that: (1) Civil Code § 47’s
litigation privilege bars this lawsuit; [CT 595-602]; (2) the “Noerr-
Pennington doctrine” protecting the rights to lobby or petition the
government bars this lawsuit; [CT 605, 610]; (3) PL’s misrepresentations
did not undermine the agency decision; [CT 609-611]; and (4) the UCL is
directed at ongoing wrongful conduct, not single transactions, and the
complaint alleges a single transaction. [CT 611-612.]
The trial court’s conclusions are incorrect. First, the litigation
privilege does not apply to the People’s UCL lawsuit because the People
were not a party to the underlying CEQA process. Second, the Noerr-
Pennington doctrine is not a defense to the People’s UCL lawsuit because
(i) PL’s conduct amounted to fraud against the People of the State of
California - not lobbying; and (ii) the lawsuit is a law enforcement action
designed to protect the public. Third, the court’s failure to accept the
allegations in the complaint, to wit: PL’s material misrepresentations
undermined the entire proceeding, as true when ruling on the demurrer as is
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required by law was an abuse of the court’s authority. Fourth, it is well
settled law that UCL applies to a single act of fraud.
STANDARD OF REVIEW
A demurrer tests only the legal sufficiency of a pleading. Committee
on Children’s Television, Inc. v. General Foods Corporation (1983) 35
Cal.3d 197, 213-214. In reviewing a judgment of dismissal pursuant to a
demurrer, the Court must assume the truth of all properly pleaded material
allegations of the complaint. Silberg v. Anderson (1990) 50 Cal.3d 205,
210.
SUMMARY OF ARGUMENT
The trial court’s ruling is contrary to the law, public policy and the
facts alleged in the complaint. Specifically: (i) the People were not a party
to the underlying CEQA process so the litigation privilege does not apply to
this lawsuit; (ii) the People’s UCL lawsuit against PL is a law enforcement
action of the People of the State of California and PL wasn’t lobbying
government - they were applying for a timber harvest permit, so the Noerr-
Pennington doctrine does not apply to this lawsuit either; (iii) the
allegations in the complaint were that PL’s material misrepresentations
undermined the entire proceeding and the court had no authority to decide
otherwise; and (iv) the UCL applies to a single act of fraud.
Therefore, this Court should overrule the trial court’s order in its
entirety.
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LEGAL DISCUSSION
I.
A. CIVIL CODE SECTION 47(b) DOES NOT PRECLUDE
THE PEOPLE’S UCL LAWSUIT BECAUSE THE
PEOPLE WERE NOT A PARTY TO THE CEQA
PROCESS.
The trial court ruled that the People’s Business and Professions
Code § 17200 lawsuit against PL is barred by Civil Code § 47(b)’s
litigation privilege. The People’s lawsuit alleges that PL committed fraud
in an adjudicatory administrative CEQA process. The People were not a
party to that action. Therefore, PL’s fraud is not protected by the litigation
privilege.
Specifically, in Rubin v. Green (1993) 4 Cal.4th 1187, the Supreme
Court ruled that the litigation privilege does not preclude lawsuits under
Business and Professions Code § 17200 by non-party litigants. This ruling
was followed in Kashian v. Harriman (2002) 98 Cal.App.4th 892, (Where
fraud occurred in litigation to which the plaintiff was not a party, the
plaintiff could sue for redress from fraud and the litigation privilege would
not protect the defendant); and in American Products Co., Inc. v. Law
Offices of Geller, Stewart and Foley, LLP (2005) 134 Cal.App.4th 1332,
(The litigation privilege is not a defense in an unfair competition action if
the plaintiff was not a party to the earlier litigation in which the allegedly
privileged conduct occurred.)
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II.
THE NOERR-PENNINGTON DOCTRINE IS NOT A DEFENSE IN
THE PEOPLE’S UCL LAWSUIT AGAINST PL.
A.
THE NOERR-PENNINGTON DOCTRINE PROTECTS LOBBYING,
NOT MATERIAL MISREPRESENTATIONS IN AN
ADJUDICATORY PROCEEDING.
For the Petition Clause of the First Amendment to the United States
Constitution, (U.S. Const. amend. I, cl. 6.) to be a meaningful protection of
the democratic process, citizens must be immune from some forms of
liability for their efforts to persuade government officials to adopt policy or
perform their functions in a certain way. Accordingly, in Eastern RR
Presidents Conference v. Noerr Motor Freight, Inc., (1961) 365 U.S. 127,
the Court rejected antitrust liability stemming from an aggressive lobbying
campaign by railroads to persuade states to adopt legislation that would
severely limit competition from truckers. The Court explained, "in
a representative democracy such as this . . . the whole concept of
representation depends upon the ability of the people to make their wishes
known to their representatives," Id. at 137, therefore, the Sherman Act does
not apply to the railroads' advocacy of legislative action, i.e., lobbying,
even if there is an anticompetitive intent. Id. at 138.
The Noerr-Pennington doctrine, which evolved out of the Noerr
decision and its progeny, has been found to apply to activities aimed at the
executive and judicial branches of government and to administrative
agencies. United Mine Workers v. Pennington, (1965) 381 U.S. 657, 669-
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70, 14 L. Ed. 2d 626, 85 S. Ct. 1585 (1965) (executive); California Motor
Transp. Co. v. Trucking Unlimited, (1972) 404 U.S. 508, 510, 30 L. Ed. 2d
642, 92 S. Ct. 609 (judicial and administrative agencies). The Court
explained that " the right to petition extends to all departments of the
Government," and therefore, "the same philosophy governs the approach of
citizens or groups of them to administrative agencies (which are both
creatures of the legislature, and arms of the executive) and to courts, the
third branch of Government." California Motor Transp., 404 U.S. at 612-
13. Noerr-Pennington has also been applied to both state and federal
antitrust claims that allege anticompetitive activity in the form of lobbying
before any branch of either federal or state government. Amarel v. Connell,
(9th Cir. 1996) 102 F.3d 1494, 1524.
B.
GIVING FALSE INFORMATION TO AN ADJUDICATIVE
ADMINISTRATIVE AGENCY FOR THE PURPOSE OF
DECEIVING THEM IN THEIR ADJUDICATIVE ROLE IS NOT
LOBBYING, IT IS FRAUD.
As indicated above, the Noerr-Pennington doctrine protects
lobbying. However, the process of providing information to an
administrative agency charged with a regulatory fact-finding procedure,
much like obtaining a building permit or other permits from administrative
agencies, is not lobbying.
Specifically, PL was not seeking a change in existing rules of law or
policy. Rather, PL sought a decision that would allow them to harvest
enough timber to provide them a certain flow of income. Because they
thought accurate information about the environmental impact of their
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desired harvest rate would cause the administrative agency charged with
issuing a harvest rate permit to deny their requested harvest rate, they gave
the administrative agency false information about the environmental impact
of that desired harvest. The above conduct is fraud, not lobbying.
As stated by the Federal Court in Woods Exploration & Producing
Co., Inc. v. Aluminum Co. of America (5th Cir. 1971) 438 F.2d 1286:
Basic to Noerr is a belief that regulation of competition by the
political process is legitimate and not proscribed by the Sherman
Act, an enactment which is itself a political decision. For the
political process to be effective there must be freedom of access,
regardless of motive, to ensure the ‘right of the people to inform
their representatives in government of their desires with respect to
the passage or enforcement of laws.’ [citations omitted.] Where
these political considerations are absent the Noerr doctrine is
inapplicable. [citations omitted.] The policies of the Sherman Act
should not be sacrificed simply because defendants employ
governmental processes to accomplish anti-competitive purposes.
Otherwise, with governmental activities abounding about us,
government could engineer many to antitrust havens. We think that
the doctrine should not be extended unless the factors upon which
Noerr rested are present and require the same result. In Trucking
Unlimited v. California Motor Transport Co., [citations omitted], the
Ninth Circuit refused to immunize under Noerr a scheme whereby
trucking companies conspired to oppose before state and federal
regulatory commissions all applications by competitors for the
issuance, transfer, or registration of operating rights. Characterizing
the licensing procedure as adjudicative, the court felt that the
defendants were not seeking to influence a policymaking function;
rather they were attempting to undermine a well-defined policy with
regard to licensing operators by blocking and discouraging access to
the governmental agencies. Similarly, in the instant case there has
been no attempt by defendants through the filing of false
nominations to influence the policies of the Railroad Commission.
The germination of the allowable formula was political in the Noerr
sense, and thus participation in those rule-making proceedings would
have been protected. But the formula's subsequent implementation
is apolitical. Once the rule is promulgated, defendants may not
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plead immunity in their attempt to undermine its efficacy for anticompetitive
purposes.
Id. at 1296-1297
The Woods case, supra, is interesting in its factual resemblance to
the case at bar. In Woods the defendant, a natural gas producer, was not
seeking to influence a policymaking function, rather they misrepresented
the volume of gas they expected to market from their wells to the governing
state agency to reduce the production allowables. In the Peoples case
against PL, PL was not trying to persuade the administrative agency
charged with fact-finding and issuing a harvest permit to change the rules
associated with the fact-finding process or the issuance of a harvest permit.
Rather, PL was trying to obtain a permit to harvest an amount of timber that
would result in a desired profit. Because PL thought that accurate
information about the environmental impact of their desired harvest rate
would result in their not being able to obtain a permit that would allow
them to harvest timber at a rate that would give them their desired profit,
they gave the agency false information about the anticipated environmental
impact of their desired harvest rate.
In Woods, like PL in this case, the defendant sought to protect their
misrepresentations by invoking Noerr-Pennington doctrine. However, in
Woods, the Court rejected that attempt distinguishing attempts to invoke
policy-making powers of agencies and attempts to misrepresent the facts to
get a favorable permit. See also: Kasky v. Nike, (2002) 27 Cal.4th 939, 969
(“[W] hen a corporation, to maintain and increase its sales and profits,
makes public statements defending labor practices and working conditions
at factories where its products are made, those public statements are
commercial speech that may be regulated to prevent consumer deception.”);
Columbia Steel Casting v. Portland General Electric Co. (9th Cir. 1996)
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111 F. 3d 1427, 1446 ("Applying to an administrative agency for approval
of an anticompetitive contract is not lobbying within the meaning of the
Noerr-Pennington doctrine.").)
In George R. Whitten, Jr., Inc. v. Paddock Pool Builders, Inc. (1st
Cir. 1970) 424 F.2d 25, the First Circuit discussed the difference, for
purposes of applying Noerr-Pennington doctrine between political
lobbying, which is protected, and self-serving attempts to market one’s
wares, which is not. In Whitten, for purposes of summary judgment, the
defendant manufacturer of swimming pool hardware admitted to “that it
had combined with dealers and others to effect the use of its specifications
in the public swimming pool industry, that its specifications were so drawn
that only it could comply, and that its purpose was to eliminate
competition.” Id. at 27. The defendant further admitted that such conduct
could violate the Sherman Anti-Trust Act, but claimed Noerr-Pennington
immunity. Id. The District Court granted summary judgment but the
Appeals Court reversed, pointing out that the defendant’s attempts to better
its market position was not political lobbying protected by Noerr
Pennington.
Analyzing Noerr, the Court said:
The key to this decision, in our opinion, is the Court's heavy
emphasis on the political nature of the railroad's activities and its
repeated reference to the ‘passage or enforcement of laws.’ The
entire thrust of Noerr is aimed at insuring uninhibited access to
government policy makers. A pluralistic society moves by many
motives. The hope, supported by history, is that permitting every
interest to be heard will produce a tolerable amalgam responsive to
the needs of a given time. But the efforts of an industry leader to
impose his product specifications by guile, falsity, and threats on a
harried architect hired by a local school board hardly rise to the
dignity of an effort to influence the passage or enforcement of laws.
By ‘enforcement of laws’ we understand some significant policy
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determination in the application of a statute, not a technical decision
about the best kind of weld to use in a swimming pool gutter. Noerr
alone, then, does not support Paddock's position.
The Court further said:
The state legislatures, by enacting statutes requiring public
bidding, have decreed that government purchases will be made
according to strictly economic criteria. Paddock [defendant] is free
to seek legislative change in this basic policy, but until such change
is secured, Paddock's dealings with officials who administer the bid
statutes should be subject to the same limitations as its dealings with
private consumers. Indeed, to hold otherwise might impair the
effectiveness of competitive bidding. [Citation omitted.] We
conclude, therefore, that the immunity for efforts to influence public
officials in the enforcement of laws does not extend to efforts to sell
products to public officials acting under competitive bidding
statutes.
This conclusion does not, in our view, encroach on the
freedom of speech and right to petition protected by the First
Amendment. The First Amendment does not provide the same
degree of protection to purely commercial activity that it does to
attempts at political persuasion. [Citations omitted] Moreover, the
First Amendment does not prevent government from adopting
reasonable rules for regulating the conduct of those who seek its
favor. [Citations omitted.] Finally, Paddock's right to tout its wares
to government agencies, unlike the right to seek legislation involved
in Noerr, is purely a creature of statute and must be exercised within
the confines of bidding procedures designed to insure the maximum
possible competition for the government's expenditures. In the light
of these considerations, we see no constitutional objection to
requiring that Paddock observe the same limitations in dealing with
the government as it would in dealing with private consumers.”
Whitten 424 F. 2d at 33-34.
The court further observed that Noerr protects only attempts to
influence political rule making. “Noerr stressed the importance of free
access to public officials vested with significant policy-making discretion.
We doubt whether the Court, without expressing additional rationale,
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would have extended the Noerr umbrella to public officials engaged in
purely commercial dealings when the case turned on other issues.” (Id. at
33.)
In this case, the CEQA process was an adjudicatory administrative
process where the administrative agency was charged with gathering
information for making a cost-benefit analysis of harvesting timber and for
determining what level of mitigation was necessary to minimize the
negative environmental impact of that logging. PL was not claiming that
such cost-benefit analysis should not be done or that there should be some
change in the CEQA process. Rather, they were using the CEQA process
to provide false information about the impact of their desired logging so
they could harvest more timber than they otherwise would have been able
to and would have to do less mitigation of the environmental harm caused
by that logging under the pretense of complying with the law. In essence,
PL deprived the agency of necessary information to do appropriate costbenefit
analysis as they were obligated to do on behalf of the People of the
State of California.
However broad the First Amendment right to petition may be, it
cannot be stretched to cover petitions based on known falsehoods.
“Misrepresentations, condoned in the political arena, are not immunized
when used in the adjudicatory process.” California Motor Transport v.
Trucking Unlimited (1972) 404 U.S. 508, 513. “Attempts to influence
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governmental action through overtly corrupt conduct, such as bribes (in any
context) and misrepresentations (in the adjudicatory process), are not
normal and legitimate exercises of the right to petition, and activities of this
sort have been held beyond the protection of Noerr.” Federal Prescription
Serv., Inc. v. American Pharmaceutical Ass’n. (D.C. Cir. 1981) 663 F.2d
253, 263. “We see no reason to believe that the right to petition includes a
right to file deliberately false complaints.” Whelan v. Abell (D.C. Cir.
1995) 48 F.3d 1247, 1255. “Neither Noerr-Pennington nor the First
Amendment protects the conduct plaintiffs have alleged--namely, knowing
misrepresentations to state securities administrators and a federal court.”
Whelan v. Abell (D.C. Cir. 1995) 48 F.3d 1247, 1249. The Noerr-
Pennington doctrine does not provide immunity for a party where there is
“proof that a party’s knowing fraud upon, or its intentional
misrepresentations to, the court deprive the [prior] litigation of its
legitimacy. Liberty Lake Investments, Inc., v. Magnuson, (9th Cir. 1993) 12
F.3d 155, 159. “A fraudulent omission can be just as reprehensible as a
fraudulent misrepresentation.” Nobelpharma AB v. Implant Innovations,
Inc., (Fed. Cir. 1998) 141 F.3d 1059, (No Noerr-Pennington doctrine
immunity for party that fraudulently obtained patent.)
The trial court’s reliance on Kottle v. Northwest Kidney Centers (9th
Cir. 1998) 146 F.3d 1056, in rendering its decision is also misplaced.
Specifically, Kottle dealt with an entirely different situation. In Kottle the
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entity providing false information to the adjudicative administrative agency
was not a party to the adjudicative process. Rather, they were the
established dialysis clinic that wanted to prevent Doctor Kottle from getting
a permit to open another facility so he would not take away their market
domination. The entrenched clinic lied about factual data relevant to the
need for and effects of the proposed facility. The agency relied on that
information in their decision to not issue the permit and Doctor Kottle sued
the entrenched clinic. The holding in Kottle would have been entirely
different if Doctor Kottle had providing false information to obtain his
permit as PL did in the Peoples case. Specifically, he would be facing
either a criminal prosecution or a UCL case brought against him by the
local prosecutor.
Finally, the Noerr-Pennington doctrine is not a defense if a party's
knowing fraud upon, or its intentional misrepresentations to, the judicial
proceeding or adjudicative administrative proceeding that the party is
before deprives the proceeding of its legitimacy rendering it a “sham”
proceeding. Liberty Lake Inv., Inc. v. Magnuson, (9th Cir. 1993) 12 F.3d
155, 158. The People’s complaint alleged that PL’s knowing
misrepresentations to the administrative agency charged with regulating
their timber harvesting deprived the adjudicatory process of its legitimacy
by preventing a meaningful initial EIR review and then mandatory
recirculation of the EIR because of the significance of the new information
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which showed a concordant, rather than a contradictory, relationship,
between the Bear and Jordan Reviews. This rendered the proceeding a
“sham” and, once again, the Noerr-Pennington doctrine is not a defense to
the People’s UCL lawsuit against PL.
C.
NOERR-PENNINGTON IS NOT A DEFENSE WHEN THE UCL
LAWSUIT IS BROUGHT BY THE GOVERNMENT ACTING TO
ENFORCE ITS LAWS.
The most interesting and most important issue raised by the trial
court’s ruling is whether the Noerr-Pennington doctrine precludes a civil
law enforcement action brought by a District Attorney to protect the People
of the State of California from fraud committed upon them. This is an issue
of first impression that has the potential for profound social and legal
significance.
The People assert that the Noerr-Pennington doctrine does not
preclude UCL lawsuits brought by the Attorney General, district attorneys,
county counsels and city attorneys under their public protection authority.
Further, the People challenge PL to provide a case that holds that it does
preclude either a criminal or civil law enforcement action brought by a
District Attorney against a person or persons for knowing material
misrepresentations to an administrative agency engaged in an adjudicative
administrative proceeding involving the person or persons providing that
false information.
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A civil action brought by a governmental entity under UCL “is
fundamentally a law enforcement action designed to protect the public.”
People v. Pacific Land Research Co., (1977) 141 Cal.3d. 10, 17. The
Supreme Court’s finding in People v. Pacific Land Research was reiterated
in the most recent amendment to 17204, made by the passage of
Proposition 64 in 2004 by the California electorate. The initiative’s finding
and declaration of purpose provided that “[I]t is the intent of California
voters in enacting this act that only the California Attorney General and
local public officials be authorized to file and prosecute actions on behalf
of the general public.” (Initiative Measure (Prop. 64) § 1(f), emphasis
added.) The initiative further declared that “[I]t is the intent of California
voters in enacting this act that the Attorney General, district attorneys,
county counsels, and city attorneys maintain their public protection
authority and capability under the unfair competition laws.” Id. at § 1(g),
emphasis added. This stated purpose is in accord with the long history of
the UCL. (See, e.g,, People v. Centr-O-Mart (1950) 214 P.2d 378, 380
(The Attorney General could pursue actions under the predecessor statute to
enforce the State’s interest in public welfare.))
The People’s lawsuit against PL is legislatively authorized to protect
the public from fraudulent and harmful business practices. It is a legitimate
assertion of the government’s police or regulatory power and one of the
methods a District Attorney has to fulfill the obligation of enforcing
APPELLENT’S OPENING BRIEF
CASE NO. A112028
16
California laws and regulations that affect the health, welfare and safety of
the People of the State of California. Therefore, providing PL immunity
from the People’s lawsuit against them for fraud under the circumstances in
this case is absurd. Such a ruling not only encourages misrepresentation
and deceit in every situation where governmental agencies are tasked with
regulating activities - it rewards it. If this logic is applied to building
permits, air emissions regulations, water quality regulations, and every
other activity that government regulates for the purpose of protecting the
public and the court will have completely eviscerated government’s ability
to protect its citizenry. This outcome simply cannot be the law if the law is
just.
Each of the cases PL cited in support of their position that the Noerr-
Pennington doctrine precluded the People’s lawsuit was brought by a
private party against a competitor. In each instance, one party wished to
show that a business competitor had transgressed the permissible limits on
trying to persuade a governmental agency to grant favors or advantages.
The difference between a lawsuit between competitors, and one brought by
the People as part of their police and regulatory power is profound.
Worth noting is that the court in California Motor Transport v.
Trucking Unlimited (1972) 404 U.S. 508, finding the Noerr-Pennington
doctrine was inapplicable in an administrative context, observed that it has
never been thought unconstitutional to make a course of conduct illegal
APPELLENT’S OPENING BRIEF
CASE NO. A112028
17
simply because the conduct was wholly or partly carried out by means of
language. California Motor Transport v. Trucking Unlimited, supra, 404
U.S. at 613 “Such an expansive interpretation of the constitutional
guaranties of speech and press would make it practically impossible ever to
enforce laws against agreements in restraint of trade as well as many other
agreements and conspiracies deemed injurious to society.” Id.
Applied to the instant case, turning the right to petition government
into a right to lie in an adjudicative administrative hearing makes it
impossible for a regulating agency to fulfill its responsibility of regulating.
In the context of logging on steep, unstable slopes in watersheds containing
people, their homes and community infrastructures, such an expansion
leaves those people and their communities wholly unprotected and without
any ability to remedy harms inflicted upon them by unconstrained logging.
III.
THE ALLEGATIONS IN THE PEOPLE’S COMPLAINT WERE
THAT PL’S MATERIAL MISREPRESENTATIONS
UNDERMINDED THE ENTIRE CEQA PROCEEDINGS AND THE
COURT HAD NO LEGAL AUTHORITY TO DECIDE
OTHERWISE.
A demurrer tests only the legal sufficiency of a pleading. Committee
on Children’s Television, Inc. v. General Foods Corporation (1983) 35
Cal.3d 197, 213-214.)
The trial court states that the misrepresentation could have no effect
on the proceeding because the allegedly false report and the corrected
report were both filed after the November 16, 1998 cutoff date and
APPELLENT’S OPENING BRIEF
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18
therefore CDF was not obliged to consider them. (TC order p 21.) Further
the trial court states that we have not explained how CDF initially arrived at
a lower allowable timber harvest figure than PL was later able to obtain,
even without the corrected report. (TC order p 22.) In the trial court’s view
of the allegations, because CDF originally adopted a long-term sustained
yield plan (LTSY) known as SYP alternative 25a, and only changed that
plan pursuant to PL’s later persuasive efforts, we have not shown that the
cause of the increased allowance was the fraud. (TC order p 20.)
This oversimplified summary of our allegations is both incorrect and
speculative. Specifically, the People alleged that the Jordan creek data –
which PL falsified and then hid from regulators and the public so as to
conceal its importance – critically undermined the validity of studies made
in other watersheds about the effects of logging on steep slopes, and the
effectiveness of the HCP mitigations in reducing hazardous logging. Had
the Jordan Creek data been available to CDF early in the process, as it
should have been, PL would have had no credible defense against the
constraints necessarily imposed by the conclusions of the Bear Creek
Report, and CDF would have had no credible rationale for even the initial
rate of logging in 25a, which was lower than PL finally obtained. The
People argued that even 25a was unsupportable, since 25a presumed and
relied upon the accuracy of False Jordan report to overcome the constraints
of the Bear Creek conclusions.
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CASE NO. A112028
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The People maintain that the Corrected Jordan, insofar as it
corroborated the findings in the Bear Creek report, would have required
CDF to approve a rate of logging lower, not higher than 25a. Therefore, PL
could never have persuaded the agency to allow as much logging as it did.
The trial court also impugned the allegations because the Water
Quality agency required the Bear and Jordan reviews, as though compelled
evidence, irrespective of its origin, were not to be considered in this
process. Such is not the case; substantive evidence in a quasi-judicial
administrative process such as this is considered because it bears on
adjudicatory facts. In any event, the surveys were in fact ordered by Water
Quality in conjunction with CDF and other state regulatory agencies,
including DFG, a signatory to the HWA, a fact misunderstood by Judge
Freeborn because he prematurely and improperly considered it at the
demurrer stage without the benefit of a fact-finding process.
Judge Freeborn’s similar reliance on dates of submission is marred
by his confusion flowing from the inherently inadequate factual airing in a
demurrer.
The People alleged the importance of the Jordan Creek data and
expect to present witnesses who will testify that the outcome of the
proceeding would have been entirely different had the fraud not occurred.
The trial court went well beyond its role in reviewing a demurrer when it
APPELLENT’S OPENING BRIEF
CASE NO. A112028
20
decided that the Jordan creek data, because of the timing of events, could
have had no effect on the outcome.
Had there been only the Correct Jordan survey demonstrating
concordance between Bear and Jordan with respect to the predicted
incidence of landslides pursuant to PL’s proposed HCP/SYP, even the
logging rate approved in 25a would have been untenable, since 25a was
approved reliant on False Jordan.
As it played out, the entire proceeding was undermined and made
nugatory by this fraud because the fact of False Jordan followed by
Corrected Jordan made recirculation of the EIR for further review by the
public and the agencies, mandatory, had Correct Jordan been submitted
properly. Significant new information requires recirculation under CEQA.
Correct Jordan is obviously significant in this context, because it affirmed
the acknowledged significance of Bear - that PL’s proposed HCP/SYP
would violate water law, and constitute a nuisance, both untenable and
unlawful outcomes.
We recapitulate some of the crucial facts from our allegations.
When Dr. Leslie Reid reviewed the PL Sediment Source Survey
(SSI) for Bear Creek in May, 1998, at the request of the EPA and
NCRWQCB, she found a 9.6 fold increase in landsliding rates from
hillslopes selectively logged under modern forest practice rules, as
compared to partially recovered lands logged prior to the Forest Practice
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21
Rules. At the request of the NCRWQCB, Dr. Reid prepared a calculation
of a cutting rate for the Bear Creek watershed that would result in
attainment of Basin Plan objectives, including recovery of the watershed.
Assuming HCP/SYP protections to be entirely effective and sufficient to
avoid any increase in landslides over the naturally occurring background
rate, and disregarding the differences between old growth forest stands and
logged lands un-reentered for >15 years, Dr. Reid concluded that 1.5% of
the watershed could be logged annually. This rate did not take into account
logging-related hydrologic alterations, which would further limit the rate of
harvest significantly. She emphasized that the logging would have to be
“dispersed through time in any given watershed.”
Dr. Reid’s final observations in her review of the SSI for Bear Creek
sounded a death knell for PL’s desired harvest rates, dependent as they
were on maximizing the allowable harvest of mass wasting areas of
concern: “It should be noted that soils and bedrock similar to those of Bear
Creek watershed are also found through much of the North Fork Mattole
watershed and neighboring watersheds along the west valley wall of the
Eel; similar soil types are found in parts of the Freshwater Creek and Elk
River watersheds. Information and conclusions drawn from the Bear creek
watershed are thus potentially relevant through a large area.”
Rather than conduct the SSI of the neighboring (to Bear) small
watershed of Jordan Creek as scheduled, PL/PWA evaluated NFER instead,
APPELLENT’S OPENING BRIEF
CASE NO. A112028
22
and released the NFER SSI. It was reviewed by Dr. Reid and Frank
Reichmuth of NCRWQCB. Internal inconsistencies in data prevented a
final review, but a 13.1-13.6 fold increase in mass wasting from harvesting
under modern Forest Practice Rules (FPRs) was found, similar to the Bear
Creek SSI. “As it stands, it does not appear that the [mass wasting
avoidance] strategy will be capable of avoiding the kinds of failures
documented in the Bear Creek report. The strategy depends on site-level
inspections by a geologist.
The problem for PL was that the concepts and approach from Dr.
Reid’s Bear Creek Review and calculations would be generalized to other
watersheds. These findings were submitted as comments to the Draft
Environmental Impact Statement/DEIReport (DEIS/EIR) for the HCP/SYP,
and unless somehow discredited or otherwise neutralized, they would
undermine the basis for PL’s SYP harvest rate projections. In order to
attack the generalizations from Dr. Reid’s review, PL/PWA submitted a
“draft” Jordan Creek SSI demonstrating the opposite findings from that of
Bear Creek.
What happened next is best explained in an excerpt from Dr. Reid’s
review of a geologist’s report for a PL THP in the North Fork Mattole:
“The second new contribution to understanding of landslide distribution
came with the long-awaited release of the PWA report on landslide
distribution in Jordan Creek watershed (PWA 1999), located immediately
APPELLENT’S OPENING BRIEF
CASE NO. A112028
23
north of Bear Creek watershed. This event, however, was marked by
considerable confusion, because the actual contents of the report were
found to directly contradict the results that had been quoted earlier by PWA
(1998), Dr. D. Opalach (1998) of Pacific Lumber Company, and USFWS
and CDF (1999). Between 10 November 1998 and 29 January 1999, the
results were said to demonstrate that in Jordan Creek, most recent
landslides were associated with older logging, and that recently logged
slopes showed comparatively low rates of landslides. This “result” was the
primary piece of evidence used to assert that results of the Bear Creek
report could not be employed to inform management decisions in nearby
areas with similar geology, topography, land-use history, and climate: if a
neighboring watershed shows the opposite pattern as Bear Creek, then it is
clear that results cannot be generalized.
“When the report was finally released, however, it became clear that
the actual results of the study showed a pattern very similar to that
measured in Bear Creek: “In Jordan Creek, 60% of the landslides and 77%
of the landslide sediment delivery came from 50% of the watershed which
had been harvested within the last 15 years” (PWA 1999, p 27.) In other
words, rates of landslide sediment delivery from recently logged lands in
Jordan Creek watershed are 3.3 times higher than those from partially
recovered forest (calculated as the ratio between (0.77/0.50) and
(0.23/0.50).) Clearly, results in Jordan Creek support those from Bear
APPELLENT’S OPENING BRIEF
CASE NO. A112028
24
Creek, removing the argument that had been used to prevent Bear Creek
results from being used to inform management decisions on similar lands
nearby.” (Review of “Response to review comments of the Upper Allwardt
Creek THP” by Dr. Leslie Reid, 6/7/00.)
“Draft Jordan Creek SSI” was released for this 5000-acre watershed,
and no corrected version replaced it until it was too late.
The People further alleged that the entire proceeding was
undermined and made nugatory by this fraud because, had the corrected
Jordan Creek data been provided in a timely manner, the case would have
been recirculated to the public for further input and a meaningful review, in
light of the accurate data. The review that did take place was irrevocably
tainted by the false data. The corrected data was uniquely important in this
case because it undermined the key evidence upon which CDF relied to
refute the implications of the Bear creek conclusions that PL’s proposed
HCP/SYP inadequately mitigated the adverse environmental consequences
of PL’s proposed rate of logging.
The People alleged that the CDF would have recirculated the EIR
had it been aware of the false Jordan Creek data, because not only was that
data misleading as to the effect of logging in the Jordan Creek watershed,
but also it undermined the generality of conclusions about steep slope
logging in all the relevant watersheds. This false data was the weightiest
data showing no pernicious landslide effects from logging in steep terrain,
APPELLENT’S OPENING BRIEF
CASE NO. A112028
25
and therefore served to undermine the correctness of data from all other
watersheds. It was therefore supremely important data with the potential to
precipitate wholly different decisions as to circulation of the EIR and final
formulation of appropriate THP’s.
These are the facts the People plead; their truth cannot be
demonstrated without a trial. These allegations are clearly sufficient to
demonstrate how important that corrected data was to a valid procedure and
a correct result. For purposes of a demurrer, the allegations were enough to
demonstrate both extrinsic fraud and the sham nature of the tainted
proceeding.
Worth noting is that the trial court order is based on matters which
the court stated were beyond the record. The trial judge said: “While not
directly mentioned in the pleadings, one must consider the inception of the
CEQA process in this case. The Headwaters Agreement was not some
covert, dark of night, operation instigated solely by PALCO. It was a wellpublicized
coming together of a number of interested parties with a wide
divergence of interests in politics, business, ecology, flood control, revenue,
employment, and other factors. The process was open to one and all, and
the 80,000 page administrative record mentioned in EPIC, supra, attests to
the extent to which many contributed to the record. This complex and
extensive proceedings [sic] was not some fabrication of PALCO initiated as
APPELLENT’S OPENING BRIEF
CASE NO. A112028
26
a ‘sham’ to take advantage of others.” (Trial Court Order, pp. 18-19,
emphasis added).
The trial court erred in deciding this issue on the pleadings because
factual issues are unsuitable for demurrer resolution. We further submit
that the trial judge was not yet in a position to appreciate the significance of
PL’s misrepresentations, because we have not had an opportunity to build
the factual context in which these misrepresentations were made. That is
why the law wisely provides that facts are not to be tried on demurrer.
IV.
THE UCL APPLIES TO SINGLE OR TO MULTIPLE
TRANSACTIONS
The trial court stated that the UCL requires a “practice,” that is
ongoing wrongful conduct, envisioning more than a single transaction
citing Hewlett v. Squaw Valley Ski Corp. (1997) 54 Cal.App.4th 499. [Trial
Court Order pp. 22-23] Hewlett has not been valid law since 1992 when
the Legislature amended § 17200 to provide that "unfair competition shall
mean and include any unlawful, unfair or fraudulent business act or
practice. . . ." Business and Professions Code § 17200. That change has
also been reflected in court decisions.
“In response to the California Supreme Court's 1988
ruling that a "business practice" under Business and
Professions Code section 17200 must encompass more than a
single transaction [see State of California ex rel. Van De
Kamp v. Texaco, Inc. (1988) 46 Cal. 3d 1147, 1169-1170],
APPELLENT’S OPENING BRIEF
CASE NO. A112028
27
the Legislature amended the statute in 1992 to provide that
‘unfair competition shall mean and include any unlawful,
unfair or fraudulent business act or practice. . . .’ (§ 17200,
italics added.) The California Supreme Court has interpreted
the 1992 amendment as overruling that part of Van De Kamp
that interpreted the statute to require more than a single ‘act.’
(Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17
Cal. 4th 553.) Accordingly, under the current version of the
statute, even a single act may create liability. (Klein v. Earth
Elements, Inc. (1997) 59 Cal. App. 4th 965, 968, fn. 3;
Podolsky v. First Healthcare Corp. (1996) 50 Cal. App. 4th
632, 653.)
“Although appellants cite Hewlett v. Squaw Valley Ski
Corp. (1997) 54 Cal. App. 4th 499, it is not controlling. This
is because Hewlett involved a suit filed in 1989, and the
Hewlett court therefore applied the statute as it read then,
rather than as amended in 1992. (Id. at pp. 514, 518.).”
(United Farm Workers of America v. Dutra Farms (2000) 83
Cal. App. 4th 1146, 1163-1164.)
The trial court is plainly wrong in dismissing this case on the ground
that the UCL requires more than a single transaction.
APPELLENT’S OPENING BRIEF
CASE NO. A112028
28
More importantly, the complaint at issue alleged a fraudulent course
of conduct. Specifically, it alleges that PL manufactured false data,
submitted it to the adjudicatory administrative agency, sent a correction of
the false data to the wrong individual in a manner that ensured it would not
be read in time to influence the decision, and now profits by its fraud by
logging in excess of safe and allowable limits, inflicting continuous harm
on the watersheds of Humboldt County.
CONCLUSION
The trial court’s ruling is contrary to the law, public policy and the
facts alleged in the complaint. Specifically: (i) the People were not a party
to the underlying CEQA process so the litigation privilege does not apply to
this lawsuit; (ii) the People’s UCL lawsuit against PL is a law enforcement
action of the People of the State of California and PL wasn’t lobbying
government - they were applying for a timber harvest permit, so the Noerr-
Pennington doctrine does not apply to this lawsuit either; (iii) the
allegations in the complaint were that PL’s material misrepresentations
undermined the entire proceeding and the court had no authority to decide
otherwise; and (iv) the UCL applies to single act and multiple acts of fraud.
Therefore, this Court should overrule the trial court’s order in its
entirety.
Dated: November 27, 2006 PAUL V. GALLEGOS
District Attorney,
Humboldt County
By:
PAUL V. GALLEGOS
Attorneys for Appellant and Plaintiff
THE PEOPLE OF THE STATE OF
CALIFORNIA
APPELLENT’S OPENING BRIEF
CASE NO. A112028
29
CERTIFICATE OF COMPLIANCE
I hereby certify that this brief has been prepared using
proportionately double-spaced 13 point Times New Roman typeface.
According to the "Word Count" feature in my Microsoft Word for
Windows software, this brief contains 8,033 words up to and including the
signature lines that follow the brief's conclusion.
I declare under penalty of perjury that this Certificate of Compliance
is true and correct and that this declaration was executed on November 9,
2006.
PAUL V. GALLEGOS
District Attorney
Humboldt County
By:
PAUL V. GALLEGOS
District Attorney
Attorneys for Appellant and Plaintiff
THE PEOPLE OF THE STATE OF
CALIFORNIA
APPELLENT’S OPENING BRIEF
CASE NO. A112028
1
PROOF OF SERVICE
I, Jennifer Strona, declare as follows:
I am a citizen of the United States, over the age of eighteen years
and not a party to the above-entitled action. I am employed at the District
Attorney’s Office of Humboldt County, 825 Fifth Street, Fourth Flooer,
Eureka, , CA 95501.
On November 9, 2006, I served the following document(s):
APPELLANT'S OPENING BRIEF
on the following persons at the locations specified:
Edgar B. Washburn, Esq.
MORRISON & FOERSTER, LLP
425 Market Street
San Francisco, CA 94105-2482
Hon. Richard L. Freeborn
Humboldt County Superior Court
Eureka, CA 95501
(1 copy) Hand Delivery
John A. Behnke, Esq.
CARTER, BEHNKE, OGLESBY &
BACIK
169 Mason Street, Suite 300
Ukiah, CA 95482
California Supreme Court
350 McAllister Street
San Francisco, CA 94102
(5 copies)
in the manner indicated below:
BY UNITED STATES MAIL: Following ordinary business practices, I sealed
true and correct copies of the above documents in addressed envelope(s) and placed them
at my workplace for collection and mailing with the United States Postal Service. I am
readily familiar with the practices of the San Francisco City Attorney's Office for
collecting and processing mail. In the ordinary course of business, the sealed envelope(s)
that I placed for collection would be deposited, postage prepaid, with the United States
Postal Service that same day.
BY PERSONAL SERVICE: I sealed true and correct copies of the above
documents in addressed envelope(s) and caused such envelope(s) to be delivered by hand
at the above locations by a professional messenger service. A declaration from the
messenger who made the delivery is attached or will be filed separately
with the court.
I declare under penalty of perjury pursuant to the laws of the State of
California that the foregoing is true and correct.
Executed November 9, 2006, at San Francisco, California.
Jennifer Strona