Best Energy Solutions etc. v. State Air Resources Bd. CA5 ( 2022 )

Filed 5/27/22 Best Energy Solutions etc. v. State Air Resources Bd. CA5
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
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IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIFTH APPELLATE DISTRICT
BEST ENERGY SOLUTIONS &
TECHNOLOGY CORP., F082207
Plaintiff and Respondent, (Super. Ct. No. BCV-20-102198)
v.
OPINION
STATE AIR RESOURCES BOARD,
Defendant and Appellant.
APPEAL from an order of the Superior Court of Kern County. David R. Lampe,
Judge.
Rob Bonta, Attorney General, Matthew Rodriquez, Acting Attorney General,
Robert W. Byrne, Assistant Attorney General, Gary E. Tavetian, Gwynne B. Hunter,
Ross H. Hirsch, Theodore A. McCombs, Deputy Attorneys General, for Defendant and
Appellant.
Larson, Stephen S. Larson, Steve E. Bedsoe, and Andrew J. Bedigian for Plaintiff
and Respondent.
-ooOoo-
Plaintiff Best Energy Solutions & Technology Corp. (Best Energy) filed a
complaint against the State Air Resources Board (ARB) seeking a declaratory judgment
stating it had complied with California’s alternative diesel fuel regulation in obtaining
certification of a biodiesel additive called BC-EC1c. ARB responded by filing an anti-
SLAPP motion pursuant to Code of Civil Procedure section 425.16.1 ARB contends the
declaratory relief action arose from protected activity and Best Energy failed to establish
a reasonable probability it would prevail on its claim.
The trial court denied the motion. Based on our independent review of the record,
we agree with the trial court and conclude Best Energy’s declaratory relief action did not
arise from activity “in furtherance of [ARB’s] right of petition or free speech.”
(§ 425.16, subd. (b)(1).)
We therefore affirm the order.
FACTS
In December 2014, ARB released documents to the public that included “newly
proposed regulations addressing alternative diesel fuels.” (POET, LLC v. State Air
Resources Bd. (2017) 12 Cal.App.5th 52, 66.) The alternative diesel fuels regulations
(ADF Regulation or ADF Reg.) are set forth in sections 2293 through 2293.9 and
appendix 1 of subarticle 2, “In-use Requirements for Pollutant Emissions Control,” of
title 13 to the California Code of Regulations. (POET, LLC, at p. 66, fn. 11.) The ADF
Regulation’s “purpose is ‘to establish a comprehensive, multi-stage process governing
the commercialization of alternative diesel fuels (ADF) in California.’ ” (Ibid.) In POET,
LLC, this court concluded that the ADF Regulation was not tainted by ARB’s violation of
the California Environmental Quality Act (CEQA; Pub. Resources Code, § 21000 et seq.)
in connection with its 2015 adoption of a low carbon fuel standards regulation. (POET,
LLC, supra, at p. 93.)
1 A “SLAPP” is a strategic lawsuit against public participation and a special motion
to strike under section 425.16 is referred to as an anti-SLAPP motion. (Bonni v. St.
Joseph Health System (2021) 11 Cal.5th 995, 1007, fn. 1 (Bonni).) Unlabeled statutory
references are to the Code of Civil Procedure.
2.
“Biodiesel” is a type of alternative diesel fuel recognized by the ADF Regulation.
(ADF Reg., § 2293.2, subd. (a)(2).) It is derived from vegetable oils or animal fats.
(Ibid.) Biodiesel can reduce greenhouse gas emissions but potentially can increase
oxides of nitrogen (NOx) emissions, a smog precursor associated with health and
environmental harm. As a result, the ADF Regulation provides that certain biodiesel
blends may be sold commercially only if NOx control mechanisms are applied. (ADF
Reg., § 2293.5, subd. (c).)
Best Energy is a research and development company and a supplier, producer and
distributor of (1) petroleum additives and fuels and (2) engine and petrochemical
technologies. Its founder and president is George Sturges. In connection with
developing a biodiesel additive called BC-EC1c, Best Energy began communicating with
ARB about certification in October 2017.
After discussions, Best Energy requested approval and certification of the BC-
EC1c as an emissions equivalent additive under appendix 1 of the ADF Regulation.
Southwest Research Institute (SwRI) prepared the initial test protocol and submitted it to
ARB in February 2018. SwRI submitted the final test protocol on March 7, 2018.
ARB’s staff found the final submission complete and approved it on April 11, 2018.
Later in April, SwRI began testing BC-EC1c using the approved protocol. After the
testing was complete, SwRI prepared a final report and, in May 2018, submitted it to
ARB.
On June 5, 2018, ARB issued Executive Order G-714-ADF05 certifying BC-EC1c
at a treat rate of 100 parts per million. The executive order stated in part:
“The candidate fuel was properly tested in accordance with Appendix
1(a)(2)(F) of the ADF regulation. The candidate fuel emissions tests
showed NOx emissions were equivalent and a particulate matter emissions
reduction of 18 percent compared to the reference fuel (ARB diesel). The
candidate fuel emissions satisfied all of the requirements under Appendix 1
(a)(2)(G) of the ADF regulation.
3.
“NOW, THEREFORE, (IT IS ORDERED AND RESOLVED) that the
additive BC-EC1c is approved and certified pursuant to Appendix 1
(a)(2)(H) of the ADF regulation as an emissions equivalent additive for use
with biodiesel blends B20 and below or for use with biodiesel blendstock
when applied in accordance with [the conditions specified in this executive
order].” (Boldface and underlining omitted.)
The executive order also stated ARB reserved the right to review the order and the
certification to assure the certified fuel met the standard and procedures of the ADF
Regulation.
The day after the executive order was issued, California Fueling, LLC questioned
the legitimacy of the testing of Best Energy’s additive, claiming that it had insider
information about a problem in the chain of custody of the additive tested. Andrew V.
Jablon of RPB, LLP, acting on behalf of its client California Fueling, LLC, sent ARB a
September 6, 2018, letter expressing concerns about the certification of Best Energy’s
additive. Best Energy describes California Fueling, LLC as its only market competitor.
ARB initiated an investigation into the concerns raised. Its investigation sought to
verify whether the test fuels used to conduct the certification testing of Best Energy’s
additive were the same fuels represented in the test protocol that ARB’s staff had
approved. The investigation resulted in ARB’s staff recommending ARB conclude that
(1) the same fuels had been used and (2) Executive Order G-714-ADF05 was valid and
would remain in effect.
On October 16, 2018, an attorney from ARB’s legal office sent Jablon a letter
describing the actions taken by ARB to follow up on the concerns raised. The letter
stated: “Staff’s investigation uncovered no evidence of deficiencies in adherence to chain
of custody requirements or any other part of the executive order approval process. Staff
confirmed that the evidence continues to support the conclusion that the certification fully
met the requirements of the ADF regulation.” As a result, the letter “concluded that the
evidence does not support any modification to that Executive Order … or other further
action related to that order.”
4.
ARB’s October 16, 2018 letter also stated that Jablon’s “letter contains several
factual inaccuracies that your other subsequent communications continue to repeat and
expand upon.” The letter then explained those inaccuracies. For example, a concern
expressed by a member of ARB’s staff about a typographical error in the executive order
had been described by Jablon as a concern about the chain of custody.
Also on October 16, 2018, ARB sent Best Energy’s president an e-mail stating
ARB’s investigation had been completed and found nothing that would change the
executive order issued for Best Energy’s additive. That e-mail, however, did not close
ARB’s inquiry into certified biodiesel additives.
In late 2018 or early 2019, ARB contracted with the Center for Environmental
Research and Technology at University of California, Riverside (CE-CERT) to conduct
emissions testing of the additives of Best Energy and its competitor, California Fueling,
LLC. The stated objectives of the project were to (1) confirm the two additives met
existing regulatory requirements for certification, (2) broadly examine the efficacy of
additives in reducing NOx emissions from diesel blends containing 20 percent biodiesel,
and (3) determine whether ARB’s existing certification requirements ensured NOx
mitigation with biodiesel additive packages.
When Best Energy learned of the CE-CERT testing, it told ARB its view that the
new tests could not confirm or replicate the prior results for many reasons, including the
new tests would necessarily use different fuels, with different physical properties, from
different geographical sources, and produced with different manufacturing processes. 2 In
addition, Best Energy was doubtful that a laboratory with no track record of testing
alternative diesel fuels could confirm the testing performed by SwRI.
2 For instance, Best Energy alleges that the testing performed by SwRI used a
reference diesel fuel with a cetane number of 49 and the testing performed by CE-ERT
used a cleaner burning diesel fuel with a cetane number of 53.
5.
On March 29, 2019, ARB issued an amended order, Executive Order G-714-
ADF05A, modifying the certified treat rate for BC-EC1c to 20 parts per million, which
corrected a clerical error that had resulted in the original certification at 100 parts per
million.
On October 31, 2019, the results of the CE-CERT testing were released. ARB’s
letter to Best Energy’s president attached a summary of the testing results and stated the
testing showed Best Energy’s “certified additive, BC-EC1c, failed to effectively mitigate
to the regulatory standard.” The letter concluded by stating that, “in addition to sending
you this letter and sending similarly situated applicants for other certified additives
similar letters, I have asked [ARB’s] staff to issue a public product alert to notify
interested stakeholders that we are working to develop appropriate action to address
issues with potential ineffectiveness of these additives.”
The October 31, 2019 product alert stated, among other things, that the ARB
certified NOx mitigation additives could continue to be used to comply with the ADF
Regulation’s NOx mitigation requirements. It also advised that, to provide regulated
parties with time to transition to other compliance strategies, any changes to existing
certifications would not be effective before January 1, 2020.
In February 2020, ARB issued an administrative subpoena duces tecum to Best
Energy in connection with an investigation into whether Best Energy complied with the
ADF Regulation and, more broadly, why BC-EC1c was shown effective in the
certification testing yet failed to mitigate NOx emissions in the CE-ERT testing. A
declaration of an ARB investigator stated that, to further the investigation, it was
necessary to review Best Energy’s records related to BC-EC1c.
PROCEEDINGS
In September 2020, Best Energy filed a complaint for declaratory relief against
ARB. The complaint alleged an actual controversy had arisen between Best Energy and
ARB concerning their respective rights and duties with respect to the executive orders
6.
ARB issued for BC-EC1c. The complaint alleged that Best Energy “complied with the
ADF Regulation in obtaining the Executive Order, and asks this Court to declare as
such.” The prayer for relief requested “a declaration, pursuant to Code of Civil
Procedure § 1060, that Best [Energy] complied with the ADF Regulation in obtaining its
certification for BC-EC1c.” No other relief, such as damages or an injunction, was
requested.
To demonstrate the existence an actual controversy, the complaint alleged that
ARB (1) launched an investigation against Best Energy to determine whether Best
Energy complied with the ADF Regulation, (2) contracted with CE-CERT to conduct
emissions tests, (3) released the results of the testing in the October 31, 2019 product
alert, and (4) could potentially issue a notice of violation, decertify the additive, or both.
The complaint also alleged the investigation was initiated in bad faith and without good
cause and the investigation was likely “to distract from [ARB’s] failure to draft and
implement an ADF Regulation consistent with the stated purpose and goals of the ADF
Regulation.”
ARB responded to the complaint by filing an anti-SLAPP motion. In December
2020, after an opposition and reply were filed, the trial court held a hearing on the
motion. At the start of the hearing, the court announced its tentative ruling to deny the
motion and stated the gravamen of the case did not relate to protected activity,
statements, or communications of ARB’s staff and, instead, sought an adjudication
related to ARB’s investigation and to its interpretation of its regulations. The court then
heard argument from counsel and took the matter under submission.
After the hearing, the trial court denied ARB’s anti-SLAPP motion. The court’s
signed order stated that “the gravamen of the case is a challenge to the lawfulness of
[ARB’s] administrative actions, not any claim of right arising from [ARB’s] protected
activity.” ARB filed a timely appeal.
7.
In May 2022, ARB filed a notice of related case stating it had filed an enforcement
complaint against Best Energy and its principal, George Sturges, in the Sacramento
County Superior Court. The existence of an enforcement action does not affect the
merits of this appeal.
DISCUSSION
I. BASIC PRINCIPLES
Section 425.16 provides an expedited procedure for dismissing lawsuits filed
primarily to inhibit the valid exercise of the constitutionally protected rights of speech or
petition. (§ 425.16, subd. (a).) Subdivision (b)(1) of section 425.16 provides:
“A cause of action against a person arising from any act of that
person in furtherance of the person’s right of petition or free speech under
the United States Constitution or the California Constitution in connection
with a public issue shall be subject to a special motion to strike, unless the
court determines that the plaintiff has established that there is a probability
that the plaintiff will prevail on the claim.”
This provision creates a “two-step inquiry” for resolving anti-SLAPP motions.
(Flatley v. Mauro (2006) 39 Cal.4th 299, 317.) “First, the defendant must establish that
the challenged claim arises from activity protected by section 425.16. [Citation.] If the
defendant makes the required showing, the burden shifts to the plaintiff to demonstrate
the merit of the claim by establishing a probability of success.” (Baral v. Schnitt (2016) 1
Cal.5th 376, 384 (Baral).) Alternatively, if the defendant fails to demonstrate that any of
the challenged claims for relief arise from protected activity, the court properly denies the
motion to strike without addressing the probability of success (the second step). (City of
Cotati v. Cashman (2002) 29 Cal.4th 69, 80-81 (Cashman); Verceles v. Los Angeles
United School Dist. (2021) 63 Cal.App.5th 776, 784.)
Appellate courts review de novo the grant or denial of an anti-SLAPP motion.
(Park v. Board of Trustees of California State University (2017) 2 Cal.5th 1057, 1067
(Park).) Under this standard of review, appellate courts “exercise independent judgment
in determining whether, based on our own review of the record, the challenged claims
8.
arise from protected activity.” (Ibid.) Appellate courts also may consider affidavits
addressing the facts upon which liability is based. (§ 425.16, subd. (b)(2).)
II. CLAIM ARISING FROM PROTECTED ACTIVITY
The trial court determined Best Energy’s claim for declaratory relief did not arise
from ARB’s protected activity. ARB contends the court erred in making this
determination. As explained below, the trial court properly concluded Best Energy’s
claim did not arise from protected speech or petitioning activity.
“A claim arises from protected activity when that activity underlies or forms the
basis for the claim.” (Park, supra, 2 Cal.5th at pp. 1062-1063; Bonni, supra, 11 Cal.5th
at p. 1009.) “The defendant’s first-step burden is to identify the activity each challenged
claim rests on and demonstrate that that activity is protected by the anti-SLAPP statute.
A ‘claim may be struck only if the speech or petitioning activity itself is the wrong
complained of, and not just evidence of liability or a step leading to some different act for
which liability is asserted.’ ” (Wilson v. Cable News Network, Inc. (2019) 7 Cal.5th 871,
884, original italics.)
An anti-SLAPP motion need not challenge an entire cause of action as pleaded in
the complaint. (Bonni, supra, 11 Cal.5th at p. 1010; Baral, supra, 1 Cal.5th at p. 382.)
Instead, “courts should analyze each claim for relief—each act or set of acts supplying a
basis for relief, of which there may be several in a single pleaded cause of action—to
determine whether the acts are protected and, if so, whether the claim they give rise to
has the requisite degree of merit to survive the motion.” (Bonni, at p. 1010; see Baral, at
p. 395.) Stated another way, to determine if a particular claim arises from protected
activity, “courts should consider the elements of the challenged claim and what actions
by the defendant supply those elements and consequently form the basis for liability.”
(Park, supra, 2 Cal.5th at p. 1063.)
9.
A. Protected Activity
In this appeal, before considering “each act or set of action supplying a basis for
relief” (Bonni, supra, 11 Cal.5th at p. 1010), we consider the acts ARB contends are
protected activity. A “defendant’s burden is to identify what acts each challenged claim
rests on and to show how those acts are protected under a statutorily defined category of
protected activity.” (Id. at p. 1009.) Those categories are set forth in subdivision (e) of
section 425.16, which states:
“As used in this section, ‘act in furtherance of a person’s right of
petition or free speech under the United States or California Constitution in
connection with a public issue’ includes: (1) any written or oral statement
or writing made before a legislative, executive, or judicial proceeding, or
any other official proceeding authorized by law, (2) any written or oral
statement or writing made in connection with an issue under consideration
or review by a legislative, executive, or judicial body, or any other official
proceeding authorized by law, (3) any written or oral statement or writing
made in a place open to the public or a public forum in connection with an
issue of public interest, or (4) any other conduct in furtherance of the
exercise of the constitutional right of petition or the constitutional right of
free speech in connection with a public issue or an issue of public interest.”
(Italics added.)
These statutory categories were designed to “provide objective guidelines that lend
themselves to adjudication on pretrial motion.” (City of Montebello v. Vasquez (2016) 1
Cal.5th 409, 422.) A moving party can meet its burden by demonstrating that the act or
set of acts underlying the plaintiff’s claim for relief fits one of the categories in section
425.16, subdivision (e). (Navellier v. Sletten (2002) 29 Cal.4th 82, 88.)
ARB contends its investigation into Best Energy’s additive and the release of the
October 31, 2019 product alert are protected activities. We conclude the product alert is
a “written … statement … made in connection with an issue under consideration or
review by [an] executive … body” and, therefore, qualifies as a protected activity under
subdivision (e)(2) of section 425.16. We also conclude ARB was authorized by law to
conduct its internal investigation and further conclude the investigation and statements
made during the course of the investigation qualify as protected activities. Best Energy’s
10.
counsel essentially conceded these conclusions at oral argument. (See Guarino v. County
of Siskiyou (2018) 21 Cal.App.5th 1170, 1181 [county’s internal investigation into
plaintiff’s wrongdoing was an official proceeding authorized by law and any statements
made before or in connection with that investigation arose from protected activity].)
B. Acts Providing the Basis for the Claim for Relief
Having identified the activities ARB contends are protected by section 425.16, we
next examine “each act or set of acts supplying a basis for relief.” (Bonni, supra, 11
Cal.5th at p. 1010.) The identification of Best Energy’s claims for relief is relatively
straightforward because there is only one, narrowly drawn claim for relief in its
complaint. The prayer for relief seeks “a declaration … that Best [Energy] complied with
the ADF Regulation in obtaining its certification for BC-EC1c” and nothing more.
The activity that provides the basis for the declaratory relief is summarized by the
allegation that Best Energy “complied with all the requirements of the ADF Regulation.”
Thus, the allegations focus on Best Energy’s activities—not ARB’s. Best Energy
provided a more specific description of its compliance activities by alleging it (1)
regularly checked in with ARB during the certification process to ensure that the fuels
and protocol it used in its certification testing fully complied with applicable regulations;
(2) submitted all necessary information regarding the chain of custody and physical
properties of the fuels used in testing; (3) received ARB approval for its test protocol,
including its fuel sources, fuel quality results, emissions test procedures, quality
assurance procedures, additive composition, and additive treat rates; (4) submitted its test
schedule for ARB’s review and approval one week in advance of testing; and (5)
undertook the testing only after receiving ARB’s approval of the test schedule. In short,
the allegations that form the basis for relief are that Best Energy did everything right in
accordance with the ADF Regulation, not that ARB did anything wrong.
Best Energy’s complaint also included allegations designed to satisfy section
1060’s requirement that an “actual controversy” exists between the parties. To show an
11.
actual controversy existed, Best Energy alleged that ARB launched an investigation into
whether Best Energy complied with the ADF Regulation; ARB did not follow its own
regulation in conducting the investigation; ARB issued a product alert on October 31,
2019; and ARB potentially could issue a notice of violation, decertify the additive, or
both. Earlier we concluded that ARB’s investigation and the issuance of the product alert
qualified as protected activity. Here, we must resolve whether those protected acts
“supply the basis for” the claim for declaratory relief. (Bonni, supra, 11 Cal.5th at p.
1010.)
We reject ARB’s argument that its protected investigation and issuance of a
product alert provide the basis for Best Energy’s claim for declaratory relief. Best
Energy can prove its claim and obtain a declaration that it complied with the ADF
Regulation without addressing ARB’s investigation or the product alert. ARB’s
investigation and issuance of the product alert occurred after Best Energy had completed
the certification process. As a result, ARB’s postcertification activity in conducting that
investigation and in issuing the product alert is not the basis for Best Energy’s claim for a
declaratory judgment stating that its precertification actions complied with the ADF
Regulation.
We recognize the complaint includes allegations about ARB’s postcertification
protected activity to show the existence of an “actual controversy.” (§ 1060) The legal
question presented is whether that activity is part of the “grounds for relief.” (Baral,
supra, 1 Cal.5th at p. 395.) This question can be restated as whether ARB’s protected
activity supplies an element of the claim for declaratory relief. (Park, supra, 2 Cal.5th at
p. 1063.) To resolve this issue, we turn to Cashman, supra, 29 Cal.4th 69, a case in
which an anti-SLAPP motion was brought to strike a claim for declaratory relief.
In Cashman, the owners of mobilehome parks had filed a federal lawsuit against
the city challenging its rent stabilization ordinance. (Cashman, supra, 29 Cal.4th at p.
71.) Subsequently, the city filed a complaint a state court action containing a cause of
12.
action for declaratory relief. (Id. at p. 72.) The complaint alleged an actual controversy
had arisen between the city and the owners relative to their respective rights and duties
under the rent stabilization ordinance. (Ibid.) The city requested a judgment “ ‘declaring
the respective rights and duties of the parties under the ordinance in question and that the
ordinance is constitutional, valid, and enforceable.’ ” (Ibid.) The owners responded to
the state court action by filing an anti-SLAPP motion. (Ibid.) The trial court granted the
motion and the appellate court reversed. (Id. at p. 73.) The Supreme Court affirmed the
reversal, concluding the city’s cause of action for declaratory relief arose out of the
challenged ordinance rather than from the owners’ federal lawsuit, which was a protected
petitioning activity. (Id. at pp. 80–81.)
In Cashman, the Supreme Court addressed the question of “[w]hat activity or facts
underlie the City’s cause of action for declaratory relief.” (Cashman, supra, 29 Cal.4th at
p. 79.) The court recognized that the “ ‘basis of declaratory relief is the existence of an
actual, present controversy over a proper subject.’ ” (Ibid.) The owners argued the only
basis for alleging an actual controversy existed was the fact they had filed a federal
lawsuit, an act protected by the anti-SLAPP statute. (Ibid.) The city countered this
argument by asserting “that Owners’ federal court action informed City of the existence
of an actual controversy justifying declaratory relief, not that Owners’ federal action,
itself, constituted that controversy.” (Ibid.) The Supreme Court agreed with the city’s
argument and concluded the actual controversy was the constitutionality of the ordinance
and that controversy was a proper subject for declaratory relief. (Ibid.)
In the present case, we conclude ARB’s investigation and its product alert (like the
owners’ federal lawsuit in Cashman) informed Best Energy of the existence of an actual
controversy, but neither the investigation nor the product alert themselves constitute the
controversy. This is not a lawsuit where Best Energy seeks to impose liability on ARB or
its employees for statements made, or acts done, during the course of ARB’s
investigation. For instance, Best Energy is not claiming damages because the product
13.
alert was defamatory or wrongfully interfered with a prospective business advantage.
(Cf. Guarino v. County of Siskiyou, supra, 21 Cal.App.5th at p. 1182 [Guarino attempted
to impose liability on individual members of the county’s board of supervisors for votes
related to investigation into complaints Guarino had created a hostile work environment
for county employees].) Instead, the controversy is limited to whether Best Energy
complied with the ADF Regulation. Consequently, just as Cashman concluded the city’s
declaratory relief action regarding the constitutionality of the city’s ordinance did not
arise from the owners’ federal lawsuit, we conclude Best Energy’s declaratory relief
action regarding its compliance with the ADF Regulation did not arise from ARB’s
investigation or product alert.3
Consequently, the trial court correctly denied the anti-SLAPP motion on the
ground that Best Energy’s claim for declaratory relief was not based on an act in
furtherance of ARB’s right of petition or free speech.
DISPOSITION
The order denying ARB’s anti-SLAPP motion is affirmed. Respondent shall
recover its costs on appeal.
FRANSON, J.
WE CONCUR:
DETJEN, ACTING P. J.
MEEHAN, J.
3 We note that Best Energy’s declaratory relief action may have been in response to
ARB’s investigation and product alert, but our Supreme Court has determined the phrase
“arising from” in section 425.16, subdivision (b)(1) does not mean “in response to.”
(Cashman, supra, 29 Cal.4th at p. 77.)
14.