POINTS AND AUTHORITIES IN OPPOSITION TO DEMURRER Gallegos v PL

POINTS AND AUTHORITIES IN OPPOSITION TO DEMURRER Case No. DR 030070 Date: July 28, 2003
PAUL V. GALLEGOS, SBN 161408
District Attorney of Humboldt County
TIMOTHY O. STOEN, SBN 37272
Assistant District Attorney
NANDOR VADAS, SBN 103577
Deputy District Attorney
825 Fifth Street, 4th Floor
Eureka, CA 95501
707-445-7416
Attorneys for Plaintiff
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF HUMBOLDT
____________________________________
)
THE PEOPLE OF THE STATE OF ) Case No. DR 030070
CALIFORNIA, )
) PEOPLE'S MEMORANDUM OF
Plaintiff, ) POINTS AND AUTHORITIES IN
) OPPOSITION TO DEMURRER
vs. )
)
THE PACIFIC LUMBER COMPANY; ) Date: July 28, 2003
SCOTIA PACIFIC HOLDING ) Time: 4:00 p.m.
COMPANY, SALMON CREEK ) Dept: 3
CORPORATION, and DOES 1 through 10, ) Judge: Honorable Christopher Wilson
)
Defendants. )
)
____________________________________)
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TABLE OF CONTENTS
Page
I. INTRODUCTION 1
II. STATEMENT OF THE CASE 1
III. DEFENDANT'S CONTENTIONS 2
IV. PEOPLE'S RESPONSE 3
V. STATEMENT OF FACTS 3
VI. STATUTORY AND REGULATORY FRAMEWORK 5
VII. ARGUMENT 6
A. THE STANDARD FOR RULING ON A DEMURRER IS LIBERAL
CONSTRUCTION 6
B. THE FIRST AMENDED COMPLAINT IS NOT TIME-BARRED 7
1. The Causes of Action Accrued When the Appreciable Harm
Was Suffered, Beginning February 23, 1999. 7
2. The Provisions of CEQA Neither Bar Nor Govern this Action. 9
C. NONE OF THE CLAIMS ARE BASED ON PRIVILEGED
COMMUNICATIONS 10
1. The Noerr-Pennington Doctrine Does Not Apply to this Case
Because the Defendant Did Not Petition or Lobby the
Government, Violated a Statute, and Denied the Public
Access to an Administrative Agency. 11
2. The Litigation Privilege of Civil Code Section 47 Does Not
Apply. 18
D. THE COMPLAINT IS JURISDICTIONALLY SUFFICIENT 21
1. Plaintiff Did Not Fail to Exhaust Administrative Remedies. 21
2. There is No Failure to Join Because Complete Relief Can Be
Rendered Against the Defendant Alone. 22
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3. Under B&P 17203 a District Attorney Has Authority to Obtain
Restitution in a UCL Action on Behalf of Victims Both
Known and Unknown. 24
E. THE ALLEGED CONDUCT IS AN UNFAIR BUSINESS PRACTICE 25
1. The Seventh Cause of Action is for a Fraudulent Business
Practice, Not a Breach of Contract. 25
2. The Defendant's Acts Constituted a Business Practice Subject
to the Provisions of the Unfair Competition Law. 26
3. A Fraudulent Business Practice Under the UCL Includes
Scientific Assertions that Are Capable of Being Shown
to Be False in Court. 27
VIII. CONCLUSION 29
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TABLE OF AUTHORITIES
Page
CASES
Ascherman v. Natanson (1972) 23 Cal.App.3d 861 ............................................... 19
Bank of the West v. Superior Court (Industrial Indemnity
Co.) (1992) 2 Cal.4th 1254 ..................................................................................... 26
Blank v. Kirwan (1985) 39 Cal.3d 311 ................................................................... 1, 16
Blankenheim v. E.F. Hutton & Co. (1990) 217 Cal.App.3d 1463 .......................... 5
California Motor Transport Co. v. Trucking Unlimited, et al.,
(1972) 404 U.S. 508 [30 L.Ed.2d 642] ................................................................... 12, 13,
................................................................................................................................ 14
Chen-Cheng Wang ex rel. United States v. FMC Corp.
(9th Cir. 1992) 975 F.2d 1412 ................................................................................ 28
Citizens Ass’n for Sensible Development of Bishop
Area v. County of Inyo (1985) 172 Cal.App.3d 151 ............................................... 22
City of Columbia v. Omni Outdoor Advertising, Inc.
(1991) 499 U.S. 365 [113 L.Ed.2d 382] ................................................................. 17
Consumer Cause, Inc. v. Smilecare (2001) 91 Cal.App.4th 454 ............................ 27
Consumer Justice Center v. Trimedica International, Inc.
(2003) 107 Cal.App.4th 595 ................................................................................... 27
Cortez v. Purolator Air Filtration Products Company
(2000) 23 Cal.4th 163 ............................................................................................. 9, 10
County of San Joaquin v. State Water Resources Control
Board (1997) 54 Cal.App.4th 1144 ........................................................................ 22, 23
Davies v. Krasna (1975) 14 Cal.3d 502.................................................................. 8
Dawvendewa v. Salt River Project Agric. Improvement
& Power Dist. (9th Cir.) 276 F.3d 1150 ................................................................. 23
Day v. Sharp (1975) 50 Cal.App.3d 904 ................................................................ 1
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Eastern R.R. Presidents Conf. v. Noerr Motor Freight, Inc.
(1961) 365 U.S. 12 [5 L.Ed.2d 464] ....................................................................... 11
Endangered Habitats League, Inc. v. State Water Resources
Control Board, et al. (1997) 63 Cal.App.4th 227................................................... 21
Farmers Ins. Exch. v. Superior Court (1992) 2 Cal.4th 377 .................................. 5
Garrison v. State of Louisiana (1964) 379 U.S. 64 [13 L.Ed.2d 125].................... 1
Giboney v. Empire Storage & Ice Co. (1949) 336 U.S. 490
[93 L.Ed.2d 834] ..................................................................................................... 13, 18
Gressley v. Williams (1961) 193 Cal.App.2d 636................................................... 6
Ion Equip. Corp. v. Nelson (1980) 110 Cal.App.3d 868 ........................................ 1
Kaczorowski v. Mendocino County Bd. Of Supervisors
(2001) 88 Cal.App.4th 564 ..................................................................................... 23
Karapetian v. Carolan (1948) 83 Cal.App.2d 344 ................................................. 23
Kasky v. Nike, Inc., et al. (2002) 27 Cal.4th 939 .................................................... 11
Keru Investments, Inc. v. Cube Co. (1998) 63 Cal.App.4th 1412........................... 8
Kimmel v. Goland (1990) 51 Cal.3d 202 ................................................................ 19
Korea Supply Co. v. Lockheed Martin Corp.
(2003) 29 Cal.4th 1134 ........................................................................................... 25
Kraus v. Trinity Mgmt. Serv., Inc. (2000) 23 Cal.4th 116 ...................................... 25
Lake Madrone Water District v. State Water Resources
Control Board (1989) 209 Cal.App.3d 163............................................................ 15
Ludwig v. Superior Court (1995) 37 Cal.App.4th 8 ............................................... 12, 16
People v. Casa Blanca Convalescent Homes, Inc.
(1984) 159 Cal.App.3d 509 .................................................................................... 5
People v. McKale (1979) 25 Cal.3d 626................................................................. 26, 27
People v. Sims (1982) 32 Cal.3d 468...................................................................... 20
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People v. Thomas Shelton Powers, M.D., Inc.
(1992) 2 Cal.App.4th 330 ....................................................................................... 24
Pettus v. Cole (1996) 49 Cal.App.4th 402.............................................................. 19
Professional Real Estate Investors, Inc. v. Columbia
Pictures Industries, Inc. (1993) 508 U.S. 49 [123 L.Ed.2d 611]............................ 17
Rubin v. Green (1993) 4 Cal.4th 1187.................................................................... 19
Saunders v. Superior Court (Cal. Reporting Alliance, et al.)
(1994) 27 Cal.App.4th 832 ..................................................................................... 5
Schlegel v. Bebour (1988) 841 F.2d 937................................................................. 19
Silberg v. Anderson (1990) 50 Cal.3d 205.............................................................. 18
South Bay Chevrolet v. General Motors Acceptance Corp.
(1999) 72 Cal.App.4th 861 ..................................................................................... 26
State Farm Fire & Cas. Co. v. Superior Court (1996)
45 Cal.App.4th 1093............................................................................................... 5
Stevens v. Sup. Ct. (API Auto Ins. Services) (1999)
75 Cal.App.4th 594................................................................................................. 6
Stutz Motor Car of America v. Reebok It’l, Ltd.
(C.D. Cal. 1995) 909 F.Supp. 1353 ........................................................................ 8
United Mine Workers v. Pennington (1965) 381 U.S. 657
[14 L.Ed.2d 626] ..................................................................................................... 11
United States ex rel. Milam v. Regents of the Univ. of Cal.
(1995 U.S. Dist.) 912 F.Supp. 868.......................................................................... 28
Walton v. Guinn (1986) 187 Cal.App.3d 1354 ....................................................... 7
Wise v. Pacific Gas and Electric Company (1999)
77 Cal.App.4th 287................................................................................................. 26
Zastrow v. Zastrow (1976) 61 Cal.App.3d 710 ...................................................... 17
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STATUTES
Business & Professions Code
Section 17200....................................................................................................... 5
Section 17203....................................................................................................... 24
Sections 17200 – 17210....................................................................................... 5
Section 17208....................................................................................................... 7, 9, 10
Civil Code
Section 47............................................................................................................. 10
Section 47(b)........................................................................................................ 18, 19,
................................................................................................................................ 20
Section 1709......................................................................................................... 14
Section 1710, subd. 3........................................................................................... 14
Code of Civil Procedure
Section 12a........................................................................................................... 7
Section 389(a) ...................................................................................................... 22
Section 452........................................................................................................... 6
Government Code
Section 6700......................................................................................................... 7
OTHER
California Code of Regulations
Title 14, § 1034(w) .............................................................................................. 6
Title 14, § 1034(x)(10)......................................................................................... 6
Title 14, § 1091.1................................................................................................. 6
Title 14, § 1091.2................................................................................................. 6
Title 14, § 1091.4.5.............................................................................................. 5
Title 14, § 1091.5................................................................................................. 6
Title 14, § 1091.6................................................................................................. 6
Public Resources Code
Section 4511, et seq. ............................................................................................ 10
Section 4601......................................................................................................... 15
Section 21000, et seq. .......................................................................................... 10
Section 21167....................................................................................................... 10
Section 21177....................................................................................................... 21
Water Code
Section 13267(b).................................................................................................. 15,
Section 13268....................................................................................................... 15
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I. INTRODUCTION
This case against Defendant Pacific Lumber Company1 is one of calculated falsehood at
odds with the premises of democratic government.
"The use of the known lie as a tool is at once at odds with the
premises of democratic government and with the orderly manner in
which economic, social, or political change is to be effected.
Calculated falsehood falls into that class of utterances which 'are
no essential part of any exposition of ideas, and are of such slight
social value as a step to truth that any benefit that may be derived
from them is clearly out-weighed by the social interest in order and
morality. . . . '"
(Garrison v. State of Louisiana (1964) 13 L.Ed.2d 125, 379 U.S. 64, 75.)
II. STATEMENT OF THE CASE
On Monday, February 24, 2003, Plaintiff, the People of the State of California, filed its
original complaint against Pacific Lumber under Section 17200 of the Business and Professions
Code, known as the Unfair Competition Law ("UCL"), pertaining to the Headwaters Forest
Project. On May 27, 2003, Plaintiff filed a First Amended Complaint (“FAC”) alleging seven
causes of action, and seeking civil penalties, injunctive relief, and restitution. On June 9, 2003,
Pacific Lumber filed its demurrer to the First Amended Complaint.2
1 The Pacific Lumber Company, Scotia Pacific Holding Company, and Salmon Creek Corporation
(collectively referred to herein as "the Defendant").
2 A demurrer can be used only to challenge defects that appear on the face of the pleading, or from
matters outside the pleading that are judicially noticeable. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318.) No
other extrinsic evidence can be considered. (Ion Equip. Corp. v. Nelson (1980) 110 Cal.App.3d 868, 881.)
Judicial notice of court records and files is limited to matters that are indisputably true; the court cannot
accept as true the contents of pleadings or exhibits just because they are part of the court record; such
documents are inadmissible hearsay. (Day v. Sharp (1975) 50 Cal.App.3d 904, 905.) The Defendant
makes three improper allegations, including a personal attack, on the very first page of its Memorandum
of Points and Authorities ("Def. P & A"), regarding matters totally outside of the face of the complaint and
totally impermissible for judicial notice. The Court is respectfully requested to disregard these improper
allegations.
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The causes of action in the First Amended Complaint, all violations of Business and
Professions Code Section 17200, are as follows: First Cause of Action: Knowing or grossly
negligent submission of false information to government decision makers;
Second Cause of Action: Not notifying government of corrected information after
submitting false information;
Third Cause of Action: Failing to correct government's material reliance on false
information when certifying the final Environmental Impact Report;
Fourth Cause of Action: Failing to correct government's material reliance on false
information when approving "Long Term Sustained Yield" projection, SYP Alternative 25;
Fifth Cause of Action: Failing to correct government's material reliance on false
information when approving the Habitat Conservation Plan and Incidental Take Permit;
Sixth Cause of Action: Violating Forest Practice Rules by submitting Timber Harvest
Plans and harvesting timber based upon a fraudulent Sustained Yield Plan and fraudulent Habitat
Conservation Plan;
Seventh Cause of Action: Taking $300 million dollars from escrow in contravention of
implied condition that all escrow documents were untainted by fraud and express condition
requiring delivery of approved Sustained Yield Plan.
III. DEFENDANT’S CONTENTIONS
In its demurrer, Defendant makes four arguments: (1) that each cause of action is timebarred;
(2) that the complaint infringes upon privileged communications; (3) that there is a
jurisdictional deficiency; and (4) that the alleged conduct is not an unfair business practice.
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IV. PEOPLE’S RESPONSE
The seven causes of actions in this claim are within the applicable statute of limitations.
There is no privilege for the fraudulent acts of the Defendant for which the People of the State of
California properly seek redress. There is no jurisdictional deficiency. The Defendant’s
fraudulent acts are in violation of the California Unfair Competition Law.
V. STATEMENT OF FACTS
The factual background of this case, as set forth in the First Amended Complaint, is as
follows:
On September 28, 1996, four parties -- Pacific Lumber; Maxxam Corporation, by Charles
E. Hurwitz; The United States Department of the Interior; and The California Resources Agency
-- signed the Headwaters Agreement whereby, subject to certain conditions, Pacific Lumber
would sell to the public 4500 acres of its timberlands, commonly referred to as the "Headwaters
Forest," and would exchange additional property, for a federal and state combined consideration
of $300 million, an amount subsequently increased. (FAC ¶ 23.) Under the terms of this
agreement Pacific Lumber, was required to prepare and submit to the State of California a
Sustained Yield Plan ("SYP") for its "resulting Pacific Lumber Timber property" (approximately
211,700 acres) that was "consistent with applicable and legal requirements." An additional
requirement was the submission of a Habitat Conservation Plan. (Ibid.)
Between August 1998 and November 18, 1998, the Defendant devised a scheme to
conceal required landslide information from the government and the public. This was done in
order to maximize timber harvesting rates under its proposed sustained yield plan so as to pay off
timber bonds (FAC ¶¶ 27-28.)
The North Coast Regional Water Quality Control Board ("Water Quality Board") ordered
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the Defendant to submit reports on various watersheds, including Bear Creek and Jordan Creek.
(FAC ¶ 25.) In response, on November 18, 1998, Pacific Lumber submitted materially false
landslide information to the government:
"[W]e discovered harvest and landslide associations
that directly and dramatically contradicted those
encountered in Bear Creek."
"In Jordan Creek, 85 percent of the recent landslides
had occurred on the older harvested area, and
only 15% on the recently harvested area."
(FAC ¶ 29.)
From January 22, 1999 until February 23, 1999, the Defendant intentionally concealed the
correct information from the Director of the California Department of Forestry (CDF). This
prevented the Director from complying with his legal duty to circulate the corrected information
to the public. (FAC ¶¶ 29-32.)
From February 23, 1999 through March 1, 1999, the Defendant failed to correct the
material reliance by the government and the public on Pacific Lumber's false information when
approving, respectively, the Final EIR, the Sustained Yield Plan Alternative 25 (authorizing 40
million more board feet per year than the previously approved alternative), and the Habitat
Conservation Plan. (FAC ¶¶ 33-37.)
From March 1, 1999 to the present time, the Defendant submitted timber harvest plans
and proceeded to harvest timber based upon a fraudulent sustained yield and habitat conservation
plan. (FAC ¶¶ 70-73.)
From March 1, 1999 to the present time, the Defendant took and appropriated $300
million dollars from escrow in contravention of (a) an implied condition that all escrow
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documents were untainted by fraud, and (b) an express condition requiring delivery of a CDFapproved
sustained yield plan. (FAC ¶¶ 74-80.)
VI. STATUTORY AND REGULATORY FRAMEWORK
The People of the State of California seek civil penalties, injunctive relief, and restitution
for Pacific Lumber's violation of the California Unfair Competition Law, Business & Professions
Code sections 17200 through 17210. This law makes it illegal for any person, including a
corporation, to engage in unfair competition, which is defined by section 17200 as "any unlawful,
unfair or fraudulent business act or practice . . . ."
An unlawful business act arises from the violation of any law, whether federal, state, or
local, when committed pursuant to business activity. (Farmers Ins. Exch. v. Superior Court
(1992) 2 Cal.4th 377, 383; State Farm Fire & Cas. Co. v. Superior Court (1996) 45 Cal.App.4th
1093, 1102-1103,) A fraudulent business act "only requires a showing members of the public are
'likely to be deceived,'" compared to a showing of all the elements of common law fraud.
(Saunders v. Superior Court (1994) 27 Cal.App.4th 832, 839.) Negligent misrepresentations are
included in the definition of fraud. (Blankenheim v. E.F. Hutton & Co. (1990) 217 Cal.App.3d
1463, 1473.) An unfair business practice occurs when "it offends an established public policy or
when the practice is immoral, unethical, oppressive, unscrupulous or substantially injurious to
consumers." (People v. Casa Blanca Convalescent Homes, Inc. (1984) 159 Cal.App.3d 509, 530.)
The Forest Practice Rules authorize a Sustained Yield Plan's findings on environmental
watershed impacts to substitute for findings which would otherwise be required in a Timber
Harvest Plan ("THP"). Thus, this requires that such findings be based, at a minimum, on correct
landslide data affecting sediment delivery. First, the Sustained Yield Plan is effective for ten
years (Title 14 Cal. Code of Regs.§ 1091.4.5 ), and is officially deemed "a means for addressing
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…cumulative effects analysis which includes issues of fish and wildlife and watershed impacts
on a large landscape basis." (Title 14 Cal. Code of Regs.§ 1091.1) Second, and most
significantly, the THP "may rely upon" the Sustained Yield Plan as to environmental watershed
impacts. (Title 14 Cal. Code of Regs.§1091.2.)
California Code of Regulations specifically requires the Sustained Yield Plan to address
various fish and wildlife issues including "the potential individual or cumulative effect of timber
operations." Additionally, it requires that the Sustained Yield Plan" shall discuss and include
feasible measures planned to avoid or mitigate potentially significant adverse environmental
effects on such fish and wildlife." (Title 14 Cal. Code of Regs.§ 1091.5, emphasis added.)
Finally, a Sustained Yield Plan is specifically required to address various watershed issues,
including feasible measures planned to mitigate or avoid significant adverse impacts. (Title 14
Cal. Code of Regs.§ 1091.6.)
The THP itself, in the absence of a Sustained Yield Plan, is required to provide environmental
impact information, e.g., "the presence and protection of non-listed species which may be
significantly impacted by the timber operations" (Title 14 Cal. Code of Regs.§ 1034(w)) and the
"location of known unstable areas and slides" (Title 14 Cal. Code of Regs. § 1034(x)(10).)
VII. ARGUMENT
A. THE STANDARD FOR RULING ON A DEMURRER IS LIBERAL
CONSTRUCTION.
Code of Civil Procedure, Section 452 sets forth the legal standard for ruling on a
demurrer -- liberal construction with a view to substantial justice between the parties. (See
Stevens v. Sup. Ct. (API Auto Ins. Services) (1999) 75 Cal.App.4th 594, 601.) As stated in
Gressley v. Williams (1961) 193 Cal.App.2d 636, 639, "The court must, in every stage of an
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action, disregard any defect in the pleadings which does not affect the substantial rights of the
parties. . . . All that is necessary as against a general demurrer is to plead facts entitling the
plaintiff to some relief.”
B. THE FIRST AMENDED COMPLAINT IS NOT TIME-BARRED.
The Defendant’s first argument is that the first amended complaint is time-barred either
under UCL's four-year statute of limitations or under CEQA. As will be shown, both of these
arguments are specious.
1. The Causes Of Action Accrued When The Appreciable Harm Was
Suffered, Beginning February 23, 1999.
The UCL provides that any action to enforce any cause of action thereunder "shall be
commenced within four years after the cause of action accrued." (Bus. & Prof. Code, Section
17208.) Since the time of filing of an original complaint is deemed to be the date of
commencement of the actions for purposes of a statute of limitations (Walton v. Guinn (1986)
187 Cal.App.3d 1354, 1360 the action must, in this case, be deemed to have commenced on the
date of filing of the original complaint, i.e., February 24, 2003.1
The California Supreme Court defines the date an action has accrued to be the date of
infliction of appreciable and actual harm, as distinguished from the date of breach of duty:
"[I]n Budd v. Nixen (1971) 6 Cal.3d 195 . . . , we held that the
limitations period on plaintiff's legal malpractice action did not
begin until plaintiff had suffered 'appreciable harm.' (Id. at p.
200.) 'The mere breach of . . . duty,' we said, 'causing only nominal
damages, speculative harm, or the threat of future harm--not yet
1 Code of Civil Procedure § 12a provides that if the last day for performance of an act is a holiday (defined
by Gov. Code § 6700, to include "every Sunday"), that period is extended to include the next day which is
not a holiday. Since four-years from February 23, 1999 (the earliest date of accrual for all causes of
action) occurred on a Sunday, the filing of this action on Monday, February 24, 2003, fell within the fouryear
UCL limitations period.
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realized' normally 'does not suffice to create a cause of action
. . . .'")
(Davies v. Krasna (1975) 14 Cal.3d 502, 513 emphasis added.)
Here, the Defendant cites a state court of appeal case and a federal district court case,
both of which in fact work against Pacific Lumber. In Keru Investments, Inc. v. Cube Co., Inc.
(1998) 63 Cal.App.4th 1412 the holder of a deed of trust and the subsequent owner of an apartment
building brought an action for negligent construction against the contractor hired by a prior
owner to do seismic retrofit construction work. The Court of Appeal approved Davies and held
that the more fundamental problem of plaintiffs' claim of nonaccrual was that the building itself
sustained the damage . . . prior to the transfer of ownership. (Id. at p. 1423) Thus, the Court of
Appeal in Keru followed the holding in Davies that appreciable damage is the accrual test.
In the federal case of Stutz Motor Car of America v. Reebok Int'l, Ltd., 909 F.Supp. 1353,
1363 (C.D.Cal. 1995), the plaintiff alleged that the defendant misappropriated and began
application and use of plaintiff's secret on or about May 1986. In ruling that plaintiff's UCL
action had accrued as of four years from that date, the federal court relied on two facts: (1) "this
act clearly would have injured plaintiff's business"; and (2) the "alleged wrong (misappropriation
of the air bladder) was a single, irrevocable wrong as opposed to a series of multiple
wrongs." (Id. at pp. 1363-1364, emphasis added).
Neither of these findings in Stutz supports the position of the Defendant. First, the
Defendant’s act of submission of false data in November 1998 would not "clearly have injured"
the public at that time, because if CDF Sacramento had received the corrected information, it had
both the right and the duty to recirculate the EIR as late as February 23, 1999. The corrected
information would have totally prevented any injury. Second, in order for the Defendant’s
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submission of false data to have caused damage, it was necessarily part of a series of multiple
wrongs, i.e., of an act of fraudulent concealment of corrective data for every day from January
22, 1999 through February 23, 1999. Finally, the appreciable harm suffered was on the day, after
March 1, 1999, that the harvest of timber exceeded 136.6 million board-feet. (FAC ¶ 72.)
Based on the foregoing authorities, Plaintiff's first cause of action must be deemed not to
have accrued prior to February 23, 1999, the first day of appreciable damage and the last day that
the alleged particular harm could have been avoided. Since the remaining causes of action are
based on the failure to notify or to correct reliance upon the false data, those causes also must be
deemed to have accrued on the last day that the alleged particular harm could have been avoided
by notification. For the second and third causes of action that date is February 23, 1999. For the
fourth and fifth causes of action that date is March 1, 1999. And for the sixth and seventh causes
of action that date is the most recent day in the year 2003.
2. The Provisions of CEQA Neither Bar Nor Govern This Action.
Business and Professions Code section 17208 is cumulative to and supercedes the statute
of limitations of all other statutes. (Cortez v. Purolator Air Filtration Products Company (2000)
23 Cal.4th 163, 179.)
In Cortez, a former employee brought UCL action for failure to pay overtime under a
section of the Labor Code after the statute of limitations for that section had run. The Court of
Appeal held that the UCL's 4-year limitations provision of Business and Professions Code
section 17208 superceded the Labor Code's statute of limitations. The Court left no doubt of this
in their holding:
"Section 17208 is clear. It provides that 'any action to enforce any
cause of action under this chapter shall be commenced within four
years after the cause of action accrued.' (Italics added.) We
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recognize that any business act or practice that violates the Labor
Code through failure to pay wages is, by definition (§ 17200), an
unfair business practice. It follows that an action to recover
wages that might be barred if brought pursuant to Labor Code
section 21194 still may be pursued as a UCL action seeking
restitution pursuant to section 17203 if the failure to pay
constitutes a business practice. Nonetheless, the language of
section 17208 admits of no exceptions. Any action on any UCL
cause of action is subject to the four-year period of limitations
created by that section."
(Id. at pp. 178-179, bold emphasis added.)
From Cortez's "no-exceptions" construction of Section 17208 -- that "any" action on
"any" UCL cause of action is subject to the four-year period of limitations -- it necessarily
follows that the UCL statute supercedes the limitations provisions in the California
Environmental Quality Act ("CEQA") (Public Resources Code sections 21000 et seq.) and the
Z'berg-Nejedly Forest Practice Act ("FPA") (Public Resources Code sections 4511 et seq.).
In addition, the Defendant’s contention that the 30-day and 180-day limitations provision
of the CEQA statute, Public Resources Code section 21167, prevails over the UCL is
undermined by the very terms of that provision, which is limited to "[a]ny action or proceeding to
attack, review, set aside, void, or annul the . . . acts or decisions of a public agency." These terms
show that Section 21167 is inapplicable to this lawsuit, which does not seek to undo the project
and is not against a public agency.
For the foregoing reasons, Pacific Lumber's CEQA limitations defense is specious.
C. NONE OF THE CLAIMS ARE BASED ON PRIVILEGED
COMMUNICATIONS.
The Defendant’s second argument is that the first amended complaint is based on
privileged communications and therefore barred either under "the Noerr-Pennington doctrine" or
under the litigation privilege of Civil Code section 47. Neither of these arguments succeed.
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Moreover, the pernicious implications of the Defendant’s position on Noerr-Pennington are
staggering, being tantamount to a "right to lie" to government, which, if accepted, would have the
radical, practical effect of making it practically impossible to enforce any law. 1
1. The Noerr-Pennington Doctrine Does Not Apply to This Case Because
the Defendant Did Not Petition or Lobby the Government, Violated a
Statute, and Denied the Public Access to an Administrative Agency.
Defendant would have this Court adopt an unprecedented and sweeping position – that
“any conduct involving government action” is immunized by the Noerr-Pennington doctrine.
(Def. P & A p. 14.) Needless to say, Noerr-Pennington does not stand for this proposition, and
when frankly examined, the doctrine’s safeguards do not apply to the Defendant’s acts.
Based on protections afforded by the First Amendment and fears about the threat of
liability chilling political speech, the Noerr-Pennington doctrine was first recognized in two
Supreme Court cases (Eastern R.R. Presidents Conf. v. Noerr Motor Freight, Inc. (1961) 5
L.Ed2d 464, 365 U.S. 12 and United Mine Workers v. Pennington (1965) 14 L.Ed.2d 626, 381
U.S. 657) holding federal antitrust laws inapplicable to private parties who attempt to influence
governmental action – even where the petitioning has anticompetitive effects.
As a threshold matter, the Defendant’s selective invocation of Noerr-Pennington fails
because the Defendant’s conduct amounted to neither lobbying nor petitioning activities. Despite
the Defendant’s best efforts to transmute their conduct to fit the doctrine, the Defendant was an
applicant attempting to secure a benefit from the government – namely a permit to log its
landholdings pursuant to regulations promulgated under state and federal environmental laws.
1 Even when the integrity of government in a free society is not implicated, corporations engaged in
commerce have no right to lie to anyone. (See Kasky v. Nike, Inc., et al., 27 Cal.4th 939, 969 ("[W]e
conclude that when a corporation, to maintain and increase its sales and profits, makes public statements
defending labor practices and working conditions at factories which where its products are made, those
public statement are commercial speech that may be regulated to prevent consumer deception.").)
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They were not “lobbying” or “petitioning” state and federal agency officials when they applied
for the approval of a Sustained Yield Plan and Habitat Conservation Plan.
Unlike the facts of this case, every case advanced by the Defendant in support of its
position involves a government actor fashioning policy, legislation or a court decision in
response to a defendant’s request to do so. For instance in Ludwig v. Superior Court (1995) 37
Cal.App.4th 8, 21, the developer used surrogates to derail a rival’s city approved project. As a
matter of common sense, the meanings to be given lobbying and petitioning are those aligned
with the First Amendment policy behind the Noerr-Pennington doctrine, i.e., "lobbying" as an
attempt to influence policy, and "petitioning" as an attempt to "redress grievances, neither of
which could possibly apply in the case at bar.
Herein, the government regulators – CDF and the Department of Fish and Game – were
not determining policy, the scope of legislation, or acting in a judicial capacity. They were
ensuring compliance with procedures based, in part, on information supplied by the Defendant.
As it turns out, the information was fraudulently provided by the Defendant.
In addition to this threshold consideration, there is a "bright line" test to show whether the
doctrine immunizes a defendant. The Noerr-Pennington doctrine requires a defendant meet the
qualifying condition of (1) not violating a valid statute; and (2) not meet the "sham exception"
disqualifying condition, which includes denying access to administrative agencies and courts.
(California Motor Transport v. Trucking Unlimited (1972) 30 L.Ed2d 642, 647-648, 404 U.S.
508, 512-513 [finding the Noerr-Pennington doctrine inapplicable in an administrative context,
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and remanding the case for trial despite defendant's contentions its First Amendment rights were
violated].)
Confirming a "no violation of statute" qualifying condition, the California Motor
Transport Court said:
"It is well settled that First Amendment rights are not
immunized from regulation when they are used as an integral part
of conduct which violates a valid statute. [Citations.]"
(California Motor Transport Co. v. Trucking Unlimited et al, supra, 30 L.Ed2d at p. 648,
emphasis added.)
The social policy behind this "no violation of statute" requirement is that any alternative
would make it impossible to enforce any law. This point is pointedly made by California Motor
Transport itself, for it incorporated the following quote, wholesale, from the case of Giboney v.
Empire Storage & Ice Co. (1949) 93 L.Ed2d 834, 843-844, 336 U.S. 490, 502, which, although
rendered in sustaining an injunction against picketing in violation of a statute banning secondary
boycotts, necessarily applies to society's right to enforce any law:
"It is true that the agreements and course of conduct here were as in
most instances brought about through speaking or writing. But it
has never been deemed an abridgment of freedom of speech or
press to make a course of conduct illegal merely because the
conduct was in part initiated, or carried out by means of
language, either spoken, written, or printed. . . . 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."
(California Motor Transport Co., supra, 30 L.Ed2d at p. 648, emphasis added.)
And confirming "no denial of access" being a sham-exception disqualifying condition, the
Supreme Court held:
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"More critical are other allegations . . . which elaborate on the
'sham' theory by stating that the power, strategy, and resources of
the petitioners were used to harass and deter respondents in their
use of administrative and judicial proceedings so as to deny them
'free and unlimited access' to those tribunals. . . . It is alleged that
petitioners ‘instituted the proceedings and actions . . . with or
without probable cause, and regardless of the merits of the cases.’
The nature of the views pressed does not, of course, determine
whether First Amendment rights may be invoked; but they may
bear upon a purpose to deprive the competitors of meaningful
access to the administrative agencies and courts. . . and thus
fall within the exception to Noerr."
(Id. at pp. 642, 647, emphasis added.)
Applying California Motor Transport to our case, it is clear that there could not be a
stronger case against Noerr-Pennington applicability because the allegations in the complaint
show that the Defendant fails to meet the qualifying condition, and fails to avoid the
disqualifying condition.
In regards to the qualifying condition of violating a valid statute, the complaint shows the
Defendant actually violated four statutes. The first statutory violation occurred when the
Defendant concealed the corrected Jordan Creek data from CDF Sacramento after providing the
false data published by CDF Sacramento. In doing so the Defendant, violated Civil Code section
1710, subd. 3 1 (FAC § 43), prohibited by section 1709. As a second statutory violation, the
complaint shows that the Defendant, in submitting false information (FAC § 29), was responding
to an "order by Water Quality for . . . sediment source inventories and the reports" (FAC ¶ 25), an
1 "A deceit . . . is . . . the suppression of a fact, by one . . . who gives information of other facts which are
likely to mislead for want of communication of that fact." (Civil Code sec. 1710(3).) "One who willfully
deceives another with intent to induce him to alter his position to his injury or risk, is liable for any damage
which he thereby suffers." (Civil. Code sec. 1709.)
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order which is authorized by Water Code section 13267(b);1 the falsification of any responsive
report is a criminal wrong under Water Code section 13268. Third, the complaint shows that the
Defendant, in submitting Timber Harvest Plans and commencing timber harvesting without a
valid Sustained Yield Plan, violated three Forest Practice Rules (FAC ¶ 71), a criminal violation
under Public Resources Code section 4601.
Fourth, the complaint shows that the Defendant, in fraudulently submitting false information
to Water Quality, violated Penal Code, Section 115 (a) ("Every person who knowingly
. . . offers any false . . . instrument to be . . . filed . . . in any public office within this state, which
instrument, if genuine, might be filed . . . under any law of this state . . . is guilty of a felony.")
The Defendant additionally falls before the "no-denial-of-access" sham-exception
disqualifying condition. The complaint shows that the Defendant had both the purpose and result
of denying the access of the public to the CDF recirculation process. It alleges that Pacific
Lumber "conceived a tactic to conceal" the corrected Jordan Creek report "from the legally
designated CDF office in Sacramento," which would have been required to recirculate the final
EIS/EIR "to the public, with the addition of the correct Jordan Creek data, and an opportunity
would have been required to be given to all of them to submit 'comments' on the correct Jordan
Creek data." (FAC ¶¶ 31-32.) And, it alleges that Pacific Lumber succeeded in this purpose to
deny the public access. (FAC ¶ 51.)
One might ask how the Defendant handles the U.S. Supreme Court's dispositive case of
California Motor Transport. The answer is by ignoring the dictates of the U.S. Supreme Court
1 Water Code sec. 13267(b) authorizes a regional water quality control board to require that any person
proposing to discharge wastes furnish "such technical or monitoring program reports as the board may
specify." Waste includes sediment. (Lake Madrone Water District v. State Water Resources Control Board
(1989) 209 Cal.App.3d 163, 169.)
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much less citing the case. The Defendant then proceeds down this path even further by (1)
totally failing to mention the qualifying condition for the Noerr-Pennington doctrine; and (2)
concentrates and distorts the sham-exception disqualifying condition.
The Defendant ignores the qualifying condition and cites two California cases as
precedent in support of its contention of Noerr-Pennington applicability. However, neither of
those involved violation of a statute.
The first case, Ludwig v. Superior Court, supra, 37 Cal.App.4th 8, arose from a city's
lawsuit against a developer for interference with contractual relations in making environmental
objection to plaintiff's efforts to attract a mall, the developer defendant's attempts to influence
government (a) involved no alleged violation of a statute, and (b) involved no alleged denial of
access to any agency of government.
The second case, Blank v. Kirwin (1985) 39 Cal.3d 311, dealt with a lawsuit by an
unsuccessful applicant for a license to operate a poker club alleging a conspiracy to legalize and
monopolize the operation of poker clubs by zoning restrictions and by the denial of a license.
The defendant’s attempts to influence government in that case (a) involved no violation of any
statute because plaintiff's claimed violation of the Cartwright Act was found to be untenable;1 (b)
involved solely "political" lobbying in the form of influencing zoning; and (c) involved no
alleged denial of access to any agency of government.
Pursuant to its "sham exception" distortion, the Defendant argues that the language of two
other Supreme Court cases is solely "political" lobbying in the form of influencing zoning and
1 The Blank court stated, "[D]efendant's efforts, as we have concluded, cannot violate the Cartwright Act."
(Id. at p. 329.)
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involved no alleged denial of access to any agency of government.
First, the Defendant cites City of Columbia v. Omni Outdoor Advertising, Inc. (1991) 113
L.Ed 2d 382, 399, 499 U.S. 365, 382, for the proposition that it is not a sham situation if the
defendant genuinely seeks to achieve his governmental result even though through improper
means. However, in that case, there was no allegation that any parties were denied access to the
city council.
Second, the Defendant cites Professional Real Estate Investors, Inc. v. Columbia Picture
Industries, Inc. (1993) 123 L.Ed 2d 611, 630, 508 U.S. 49, 60, fn 5, in support of the proposition
that a successful petition or lawsuit is by definition a reasonable effort at petitioning for redress
and therefore not a sham. Once again, there was no allegation in that case that any parties were
denied access to the courts in the course of their litigation.
In both of these U.S. Supreme Court cases the rulings of no-sham presumed no denial of
access to the government agency involved, whether legislative body or court system. However, in
our case, the Defendant is alleged to have denied the public access to the CDF recirculation
process by fraudulent concealment of the corrective Jordan Creek data. The Defendant’s genuine
seeking of a favorable result, and its successful obtaining of a favorable result should not be
deemed, by any person with a sense of fundamental fairness, to not be a "sham." The Defendant’s
success in obtaining a Sustained Yield Plan was a success based on extrinsic fraud,1 something
no U.S. Supreme Court would ever countenance as anything but for what it is -- cheating and a
sham.
1 Extrinsic fraud is the deprivation of a "fair opportunity fully to submit [one's] case." (Zastrow v. Zastrow
(1976) 61 Cal.App.3d 710, 716.)
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For the foregoing reasons, the Defendant cannot avail itself of Noerr-Pennington as a bar
to this litigation.
2. The Litigation Privilege of Civil Code Section 47 Does Not Apply.
The principal purpose of the litigation privilege of Civil Code section 47(b) is to the
protect litigants and witnesses from derivative court actions based on bias or false evidence that
arises during trial:
"The principal purpose of section 47(2) is to afford litigants and
witnesses [citation] the utmost freedom of access to the courts
without fear for being harassed subsequently by derivative tort
actions. . . . . Finally, in immunizing participants from liability for
torts arising from communications made during judicial
proceedings, the law places upon litigants the burden of
exposing during trial the bias of witnesses and the falsity of
evidence, thereby enhancing the finality of judgments and avoiding
an unending roundelay of litigation, an evil far worse than an
occasional unfair result [citations]."
(Silberg v. Anderson (1990) 50 Cal.3d 205, 213-214, emphasis added.)
In order to invoke Civil Code section 47(b), a defendant must show that the privilege
applies to "any communication" made in judicial or quasi-judicial proceedings. The California
Supreme Court in Silberg said, “The usual formulation is that the privilege applies to any
communication (1) made in judicial or quasi-judicial proceedings; (2) by litigants or other
participants authorized by law; (3) to achieve the objects of the litigation; and (4) that have some
connection or logical relation to the action." (Id. at p. 212.) Here, the Defendant cannot get past
even the first of these requirements.
A quasi-judicial proceeding is one requiring hearings based on the presentation of
evidentiary facts and decision of the issue by the application of rules of law to the ascertained
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facts. (Ascherman v. Natanson (1972) 23 Cal.App.3d 861, 866 discussing hearings and
evidentiary facts; cited with approval, Pettus v. Cole (1996) 49 Cal.App.4th 402, 437.)
The foregoing authorities are enough to demolish the Defendant’s attempt to invoke Civil
Code section 47(b) as to all of Plaintiff's causes of action. Defendants do not and cannot provide
authority or basis for the proposition that the CEQA process is adjudicatory. In the same manner
that the court in Schlegel v. Bebout, 841 F.2d 937, 944 (9th Cir. 1988) determined that an
administrative body did not enjoy immunity because their actions “were not done in order to
prepare for an adversarial proceeding, but rather were done to ensure compliance with their
procedures. . . . Their actions are not quasi-judicial in nature because they are regulatory, not
adversarial,” the CEQA process is regulatory and does not include such safeguards as the power
to issue subpoenas, liability for perjury, and the applicability of the rules of evidence.
As for the second through seventh causes of action, all are based on the Defendant’s
concealment of information from any and all proceedings, and hence could not possibly involve
any quasi-judicial proceeding.1 And a for the first cause of action, it is based on the Defendant’s
1 Even if the Defendant’s act of concealing information had pertained to a quasi-judicial proceeding, Civil
Code § 47(b) could not possibly apply for the following two reasons:
First, all six of these causes of action are based on Pacific Lumber's conduct in failing to transmit
the final Jordan Creek report to CDF Sacramento, there being no allegation this Jordan Creek
communication was defective; conduct is clearly unprotected by Civil Code § 47(b). (Kimmel v. Goland
(1990) 51 Cal.3d 202 (holding that the litigation privilege of section 47(b) was inapplicable to the
unconsented recording (and subsequent transcription) of telephone conversations); accord, Rubin v.
Green (1993) 4 Cal.4th 1187, 1195 (referring to the Kimmel facts as "noncommunicative conduct").
Second, these six causes of action are based on extrinsic fraud, to wit, Pacific Lumber's
fraudulent concealment so as to prevent the Director of CDF from recirculating the EIR with the corrective
Jordan Creek information "to the public" for the purpose of depriving the public of their legal right to "make
their case" as to the bearing of this new information on the amount of harvesting to be allowed under
Pacific Lumber's proposed sustained yield plan; extrinsic fraud is specifically excluded from Civil Code §
47(b). (Silberg v. Anderson, supra, 50 Cal.3d at p. 214 emphasis added ("To allow a litigant to attack the
integrity of evidence after the proceedings have concluded, except in the most narrowly circumscribed
situations, such as extrinsic fraud, would impermissibly burden, if not inundate, our justice system.").
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false report provided during an investigation by the Water Quality Board, which is authorized to
demand such a report under Water Code section 13267(b). Therefore, the act of providing this
false report occurred during an investigation. It did not occur during any proceeding involving a
hearing or evidence or witnesses. Hence, Civil Code section 47(b) cannot possibly apply to the
first cause of action.1
The Defendant engages in much fulminating to bring our case within the four-part test of
Silberg, supra. Nowhere however--not even once--does the Defendant provide this court with
any authority that any of the three regulatory regimes implicated by the complaint are deemed
quasi-judicial. The Defendant does not cite a single case showing that section 47(b) is applicable
to the CEQA regime. Nor does the Defendant cite a single case showing section 47(b) is
applicable to a regional water quality control board's investigation regime. Finally, the Defendant
fails to cite a single case that shows section 47(b) is applicable to the Z'berg-Nejedly Forest
Practice Act regime.2
For the foregoing reasons, the Defendant’s reliance on the litigation privilege of Civil
Code Section 47(b) defense fails.
1 In People v. Sims (1982) 32 Cal.3d 468, 480, the Court held, in the analogous situation of whether the
findings of an administrative agency are the result of a judicial like-adversary proceeding for purposes of
collateral estoppel, that the characteristics to look for included the following: (1) testimony submitted under
oath, (2) the right of a party to examine and cross-examine witnesses, (3) a referee available to subpoena
witnesses, and (4) the maintaining of a verbatim record. Not one of theses characteristics were part of the
CDF proceeding or any other administrative agency involved in our case against Pacific Lumber.
2 The untenability of the Defendant’s contention that this lawsuit involves a quasi-judicial proceeding is
further shown by the following: A computer search on Westlaw based on inputting "Civil Code" & "47(b)" &
"Public Resources Code" (which contains CEQA and the Forest Practices Act) for the "California Official
Reports" data base yields no hits. A similar search based on inputting "Civil Code" & "(47(b)" & "CEQA"
yields no hits. And a similar search based on inputting "Civil Code" & "47(b)" & "Water Code" yields no
hits.
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D. THE COMPLAINT IS JURISDICTIONALLY SUFFICIENT.
The Defendant’s third main argument is that the first amended complaint is jurisdictionally
flawed for three reasons: (1) for failure to exhaust CEQA's administrative remedies; (2)
for failure to name state and federal agencies as indispensable parties; and (3) for failure of
standing regarding the breach of escrow instructions. None of these arguments have merit.
1. Plaintiff Did Not Fail to Exhaust Administrative Remedies.
Section 21177 of CEQA, which the Legislature has stated was designed to codify the
exhaustion of remedies doctrine (Endangered Habitats League, Inc. v. State Water Resources
Control Board et al. (1997) 63 Cal.App.4th 227, 238 [holding that CEQA's exhaustion of
remedies requirement was not applicable because the government "provided no opportunity to be
heard on the question of a 'second tier' EIR review], specifically provides that it does not apply to
situations where the public had no opportunity to raise objections:
"(e) This section does not apply to any alleged grounds for
noncompliance with this division for which there was no public
hearing or other opportunity for members of the public to raise
those objections orally or in writing prior to the approval of the
project, or if the public agency failed to give the notice required by
law."
(Public Resources Code, Section 21177, emphasis added.)
The complaint shows that the Defendant submitted false information on November 18,
1998 for Final EIR inclusion (FAC ¶ 29); that the Final EIR was published including that false
information (FAC ¶ 50), and that the corrective information was significant new information
(FAC ¶ 48) although known by the Defendant on January 22, 1999 (FAC ¶ 30), was concealed
from CDF Sacramento through certification of the Final EIR on February 23, 1999 (FAC ¶ 50).
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This caused the Director of CDF to fail in his duty to recirculate the EIR with the added
information (FAC ¶ 51), and thus deprived the public of a fair opportunity to comment on the
recirculated Final EIS/EIR. (FAC ¶ 51.)
Since the complaint shows the public had no opportunity to even know the November 18,
1998 information was false prior to EIR certification and that this false information remained in
the administrative record (FAC ¶ 37), the public was clearly deprived of an opportunity to raise
any objections.
For the foregoing reasons, the Defendant cannot claim the People have failed to exhaust
other remedies.
2. There is No Failure to Join Because Complete Relief Can be Rendered
Against the Defendant Alone.
Code of Civil Procedure section 389(a) provides that a person must be joined in an action
if “(1) in his absence complete relief cannot be accorded among those already parties, or (2) he
claims an interest relating to the subject of the action and is so situated that the disposition of the
action in his absence may. . . impair or impede his ability to protect his interest, or . . . leave any
of the persons already parties subject to . . . inconsistent obligations.” (Ibid.) The determination
of whether a defendant should be joined under this section is based on non-jurisdictional
practical considerations of "equity and . . . good conscience." (County of San Joaquin v. State
Water Resources Control Bd. (1997) 54 Cal.App.4th 1144, 1151-1153.) In government permit
cases, an absent party may not be considered indispensable where parties already before the court
adequately represent the absent party's ability to protect his or her interests. (Citizens Ass'n for
Sensible Development of Bishop Area v. County of Inyo (1985) 172 Cal.App.3d 151, 161.)
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Here, the complaint seeks civil penalties, restitution, and injunctive relief which can be
completely rendered against the Defendant alone. There is absolutely no need for any
government agency to be joined in order for this court (1) to assess a civil penalty against the
Defendant alone; (2) to order the Defendant not to reduce by 40 million board its annual timber
harvesting, or (3) to order the Defendant to write out a check to the State of California and the
United States for the amount of judgment rendered.
The cases cited by the Defendant are inapplicable. In the case of County of San Joaquin v.
State Water Resources Control Board, supra, at p. 1147, the plaintiff sought relief which would
"undoubtedly injure" the U.S. agency, a situation totally unlike the case at bar. Here, the relief
sought provides restitution to the government for fraudulent failure of partial consideration. The
case of Kaczorowski v. Mendocino County Bd. of Supervisors (2001) 88 Cal.App.4th 564, 569-
570, is also inapplicable because its plaintiff was seeking to set aside a project governed by
CEQA. Here the Plaintiff is not trying to set aside the Headwaters Forest project or the EIR.
The Defendant cites Dawvendewa v. Salt River Project Agric. Improvement & Power
Dist., 276 F.3d 1150 (9th Cir.) for the proposition that a party to an action is an indispensable
party to an action "seeking to attack or invalidate the contract." Dawavendewa is irrelevant for
two reasons. First, unlike our case, Dawavendewa involved an attempt to invalidate the contract
(a lease requiring preferential hiring of Navajos). In the instant case the action seeks to affirm the
contract by seeking restitution based on fraudulent inducement. 1 In the case at bar, nowhere in
1 It is a familiar rule that where a defendant makes a promise without intending to perform, and later fails
or refuses to perform, he is guilty of the tort of fraud as well as breach of contract, remedies which a
plaintiff may elect between. (See, e.g., Karapetian v. Carolan (1948) 83 Cal.App.2d 344, 346.)
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the complaint is there a request for return of the entire $300 million consideration. Second, the
court in Dawavendewa based its reasoning on three factors, none of which are present here.1
For the foregoing reasons, the argument of indispensable parties is inapplicable here.
3. Under B&P 17203 a District Attorney Has Authority to Obtain Restitution
in a UCL Action on Behalf of Victims Both Known and Unknown.
Business and Professions Code section 17203 provides that a court may make such orders
or judgments "as may be necessary to restore to any person in interest any money or property
. . . which may have been acquired by means of such unfair competition." This section has been
construed to give a District Attorney authority to seek restitution on behalf of victims not yet
known nor represented. (People v. Thomas Shelton Powers, M.D., Inc. (1992) 2 Cal.App.4th 330
[holding the trial court had power, in a District Attorney-filed case, to order disgorgement of a
developer defendant's profits and restitution].) In Powers the court said,
"Given that the wrongdoer should not retain the profits, the
question is to determine to whom the profits should go. Where it
is possible to refund a direct victim, the victim will obtain that
refund. Where it is not possible, the theory of fluid recovery
permits an award of the funds to an interested third party. The
cases did not turn on the ability to name specific persons as
victims, but on the equities of preventing the defendant from
benefiting from the illegal transaction and of reversing the harm of
the wrongful act to the greatest extent possible. We see no reason
to reach a different result here."
(Id. at p. 343, emphasis added.)
1 These three factors were: (1) that complete relief could not be accorded, shown by plaintiff's being
unable, without defendant's involvement, to obtain the employment he sought (unlike our case where the
U.S. and State of California merely have to accept the money ordered by this Court); (2) the defendant's
legally protected interest would be impaired (unlike the U.S. or State of California's interests in our case,
for they get to save more trees and get money back without any affirmative obligation to act), and (3) there
was a substantial risk of inconsistent or multiple obligations by virtue of defendants' legally protected
interests, which in no way exists in our case.
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Once again, the Defendant fails to cite the Powers case despite the fact it is directly on
point. Here, just as in Powers, the District Attorney representing the People is the plaintiff.
The Defendant does cite two court of appeal cases and two Supreme Court cases.
However, none of those cases has a District Attorney as the plaintiff. These cases are irrelevant.
Finally, the two Supreme Court cases do not support the Defendant’s position.1
The Defendant is accused of fraudulently misappropriating $300 million from the United
States, on behalf of itself and the State of California. (FAC ¶¶ 38, 75, 78, 79.) Restitution
obtained for these parties for the Defendant’s fraudulent inducement provides the Plaintiff with
standing to bring this action.
D. THE ALLEGED CONDUCT IS AN UNFAIR BUSINESS PRACTICE.
The Defendant argues, fourthly, that the alleged conduct in the complaint is not an unfair
business practice in that (1) in the seventh cause of action does not allege a breach by Pacific
Lumber of the Headwaters Escrow Instruction; (2) Pacific Lumber's petitioning activity is not a
business practice; and (3) a scientific falsity cannot be fraud. All of these arguments are specious.
1. The Seventh Cause of Action is for a Fraudulent Business Practice,
Not a Breach of Contract.
1 In the first, Kraus v. Trinity Mgmt. Serv., Inc. (2000) 23 Cal.4th 116, the court defined an order for
"restitution" as one "compelling a UCL defendant to return money obtained through an unfair business
practice to those persons in interest from whom the property was taken," (Id. at 126-127, emphasis
added).
The second case cited by Pacific Lumber is Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th
1134), which by its own terms (1) applies only to an individual private action, and (2) applies only to
"nonrestitutionary disgorgement" (Id. at p. 1148, FN 6 (Our discussion in this case is limited to individual
private actions brought under the UCL."); Id. at p. 1152, emphasis added ("We hold that
nonrestitutionary disgorgement of profits is not an available remedy in an individual action under the
UCL.")
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A fraudulent business practice under Business and Professions Code section 17200 only
requires a showing members of the public are likely to be deceived. (Bank of the West v.
Superior Court (Industrial Indemnity Co.) (1992) 2 Cal.4th 1254, 1266 ("In drafting the act
[UCL] the Legislature deliberately traded the attributes of tort law for speed and administrative
simplicity."); Saunders v. Superior Court (Cal. Reporting Alliance et al.) 27 Cal.App.4th 832,
839 (" 'Fraudulent,' as used in the statute, . . . only requires a showing members of the public 'are
likely to be deceived.'"); South Bay Chevrolet v. General Motors Acceptance Corp. (1999) 72
Cal.App.4th 861, 877.)
The seventh cause of action in the complaint alleges the Defendant violated a "duty to not
take" the $300 million (FAC ¶ 76) as a result of noncompliance with an escrow condition (Ibid.)
induced (FAC ¶ 24) by fraud prior to (FAC ¶¶ 74, 60-62) the February 28, 1999 date of escrow
instructions (FAC ¶ 75), which was obviously "likely to mislead the members of the public." The
members of the public are the citizens of the United States and the State of California, which
paid the $300 million. The seventh cause of action is thus not for rescission or breach of contract,
but for a fraudulent business practice. Contrary to the assertions of the Defendant, there is no
breach of contract defense applicable here.
2. The Defendant’s Acts Constituted a Business Practice Subject to the
Provisions of the Unfair Competition Law.
An unlawful business practice under Business and Professions Code section 17200 is
"anything that can properly be called a business practice and that at the same time is forbidden by
law." (People v. McKale (1979) 25 Cal.3d 626, 632.) It includes misrepresentations made to
government. (See Wise v. Pacific Gas and Electric Company (1999) 77 Cal.App.4th 287, 292
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[impliedly approving as actionable under the UCL "misrepresentations, misleading statements
and acts of concealment made to" the PUC].)
The only case cited by the Defendant in support of its "no business practice argument" is
Blank v. Kirwin, supra, 39 Cal. 3d 311, 329 where the specific wrongful activity alleged was a
conspiracy to influence government action toward the legalization of poker clubs. Even regarding
that activity, the Blank Court issued a qualification: "But even if it could" [be called a business
practice], plaintiff does not and cannot effectively state that it is forbidden by law." (Ibid.)
The conduct by the Defendant is a business practice and falls under the provisions of the
Unfair Competition Law.
3. A Fraudulent Business Practice Under the UCL Includes Scientific
Assertions That are Capable of Being Shown to be False in Court.
A fraudulent business practice under Business and Professions Code section 17200,
includes "scientific" assertions that are capable of being shown to be false in court (People v.
McKale, supra, 25 Cal.3d at 632, emphasis added (Actionable is "anything that can properly be
called a business practice and that at the same time is forbidden by law"); Consumer Justice
Center v. Trimedica International, Inc. (2003) 107 Cal.App.4th 595 [impliedly approving as
actionable under the UCL an allegation that it was "false" (Id. at p. 599) for the defendant to have
claimed that the Grobust pill is "safe" and "effective" as a breast enlarger (Id. at p. 605)]; and
Consumer Cause, Inc. v. Smilecare (2001) 91 Cal.App.4th 454, [impliedly approving as
actionable under the UCL the scientific issue of whether, in the case of amalgam dental fillings
containing mercury, there is "no observable effect assuming exposure at 1,000 times the level in
question for substances know to the state to cause reproductive toxicity" (Id. at pp. 472-473)].)
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In support of its argument that a scientific falsity cannot be fraud,1 the Defendant cites
two federal cases under the False Claims Act. In Chen-Cheng Wang ex rel United States v. FMC
Corp. 975 F.2d 1412, 1421 (9th Cir. 1992), the court indicated that common failings of engineers
are not actionable under the False Claims Act. The False Claims Act requires "knowing
presentation of what is known to be false." Examples of the nature of those claims in Chen-
Cheng Wang were "an allegedly faulty calculation" and an "engineer’s very low level of
understanding” (Id. at p. 1420.) Thus, the claims in Chen-Cheng Wang were inherently
unamenable to showing a lie. However, in the present case, a statement that "only 15%" of
landslides occurred on "recently harvested areas" is easily susceptible of being shown to be
intentionally or recklessly false.
In the second case cited, United States v. Regents of the Univ. of Cal. (912 F. Supp. 868,
888), the court cited Wang in dicta, but its holding was that there was a lack of proof: "In any
event, Milam's claim that Tofilon's practices deviated from scientific norms are unsupported by
any expert testimony." (Id. at p. 886.) This implies, of course, that expert testimony could have
saved the day and that the scientific issues were justiciable.
In conclusion, since it is obvious that the information provided by the Defendant can
easily be determined to be true or false in court (far more easily than whether a pill is "safe" or
"effective" as a breast enlarger, and far more easily than whether there is "an observable effect"
physiologically from dental mercury "assuming exposure at 1,000 times"), the Defendant’s
argument that a scientific falsity cannot be fraud is meritless.
1 The Defendant , while making this argument, appears to be conceding the fact that a scientific falsity can
be unlawful and can be unfair, for it fails to mention that throughout the complaint it is alleged that
providing and concealing false information as to Jordan Creek landslides was, in addition to being a
"fraudulent" business practice, also an "unlawful" business practice and an "unfair" business practice.
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VII. CONCLUSION
Based on the foregoing Points, Authorities, and Argument, the Defendant’s demurrer
should be overruled.
Dated: July 16, 2003
Respectfully submitted,
Paul V. Gallegos
District Attorney, County of Humboldt
By: _________________________________
Timothy O. Stoen
Assistant District Attorney
Attorneys for Plaintiff