DocketNumber： No. E060392
Citation Numbers： 239 Cal. App. 4th 983
Judges： King
Filed Date： 7/23/2015
Status： Precedential
Modified Date： 1/12/2022
I. INTRODUCTION
Plaintiffs Alamo Recycling, LLC (Alamo), and Chino Valley Recycling, LLC (Chino), operate “recycling center[s]” where beverage containers sold in California may be redeemed for their “California Redemption Value.” In this action, plaintiffs sued defendant Anheuser Busch InBev Worldwide, Inc., and other companies that sell or distribute beverage containers in California (the Beverage Companies or defendants).
The gravamen of the complaint is that defendants knowingly and “falsely” label beverage containers sold both inside and outside California with “CA CRV,” “California Redemption Value,” or similar labels when, in fact, under California law, only containers purchased inside California may be redeemed in California. The complaint alleges that containers sold outside California are transported into California and redeemed at recycling centers like those operated by plaintiffs, and this exposes plaintiffs to state regulatory fines and penalties, risks rendering the “California Beverage Recycling Fund” insolvent, and thereby risks the economic viability of plaintiffs’ recycling businesses.
Based on this allegation, the complaint alleges common law tort claims against defendants for fraud, negligent misrepresentation, strict products liability, interference with prospective economic advantage and business relations, and breach of express warranty. As remedies, plaintiffs seek to permanently enjoin defendants from selling beverage containers in California
II. BACKGROUND
A. Statutory and Regulatory Background: The California Beverage Container Recycling and Litter Reduction Act
California is one of 10 states that seeks to promote recycling through a beverage container redemption program. The California Beverage Container Recycling and Litter Reduction Act (the Recycling Act or Act) (Pub. Resources Code, § 14500 et seq.) establishes a comprehensive program “to encourage increased, and more convenient, beverage container redemption opportunities for all consumers.” (Id., § 14501, subd. (a).) One of the stated purposes of the Act is “to create and maintain a marketplace where it is profitable to establish sufficient recycling centers and . . . enhance the profitability of recycling centers . . . .” (Id., § 14501, subd. (f).)
The Act covers beer, wine coolers, carbonated water, soft drinks, and coffee and tea drinks sold in aluminum, glass, plastic, or bimetal containers. (Pub. Resources Code, § 14504.) The Act encourages recycling the containers “through a program of financial incentives” (Californians Against Waste v. Department of Conservation (2002) 104 Cal.App.4th 317, 319 [127 Cal.Rptr.2d 905], citing Pub. Resources Code, § 14501) designed “to balance the competing interests of the varied participants in the beverage container and recycling industries” (Shamsian v. Department of Conservation (2006) 136 Cal.App.4th 621, 627 [39 Cal.Rptr.3d 62]).
All beverage containers covered by the Act and sold in California are assigned a redemption value. (Pub. Resources Code, § 14560.) The Act requires that manufacturers label each such container offered for sale in California with one of five markings — “ ‘CA Redemption Value,’ ” “ ‘California Redemption Value,’ ” “ ‘CA Cash Refund,’ ” “ ‘California Cash Refund,’ ” or “ ‘CA CRV,’ ” by “either printing or embossing the beverage container or by securely affixing a clear and prominent stamp, label, or other device to the beverage container.” Id., § 14561, subd. (a); see id., § 14560.)
The Act authorizes California’s Department of Resources Recycling and Recovery (the Department) to promulgate regulations prescribing more precise labeling requirements for beverage containers. (Pub. Resources Code,
The Act requires beverage distributors to make “redemption payment[s]” to the Department for each covered beverage container sold to retailers in California. (Pub. Resources Code, § 14560, subd. (a)(1).) The beverage distributors’ payments are deposited into the California Beverage Container Recycling Fund. (See id., § 14580.) Thus, the cost of the redemption payments is borne by the beverage distributors. To encourage recycling, the Act requires that consumers be paid a prescribed refund value (commonly, 5 cents per container) when they return and redeem empty beverage containers at retail establishments or recycling centers certified by the Department. (Id., §§ 14538, 14570-14575.1; see Cal. Code Regs., tit. 14, § 2500.) Certified recycling centers may then sell the redeemed beverage containers to a certified “[processor” who recycles them. (Pub. Resources Code, § 14518.) The processor pays the recycling center the refund value of the beverage container, plus a designated amount for administrative and processing costs. (Id., § 14573.5, subd. (a).) The Department, in turn, pays the processor the refund value, plus another designated amount for administrative and processing costs for each container it obtains from a recycling center. (Id., § 14573, subd. (a).) This tiered payment scheme ensures that the beverage distributors’ initial funding provides economic incentives to recycle throughout the chain from consumers to retailers, recycling centers, and ultimately processors.
The Act confines its operation to covered activities within the State of California and only to the extent permitted by federal law. (See Pub. Resources Code, §§ 14529, 14529.7, 14501.5.) The Act “is applicable uniformly throughout the state” of California and “occupies the whole field of regulation of recycling-related refund values, redemption payments, deposits, and similar fees relating to beverage containers . . . .” (Id., § 14529.) Neither the Act nor its implementing regulations prohibit out-of-state beverage containers from being labeled with “California Redemption Value,” or the redemption value for any other state. The regulations recognize that containers “imported into this State” may be “labeled with the message required in Section 14561 of the Act,” e.g., CA CRV, but provide that such containers “are not eligible for any refund value payments.” (Cal. Code Regs., tit. 14, § 2501, subd. (f) [“Certified recycling centers shall not receive, accept, or take delivery from any source material that the certified recycling center knows, or should know, was imported into this State, whether labeled with the message required in Section 14561 of the Act or not.” (italics added)].)
Chapter 8.5 of the Act (Pub. Resources Code, §§ 14595-14599) comprehensively addresses the central issue in plaintiffs’ complaint: fraudulent attempts to redeem beverage containers in California that — though properly marked California redemption value — are ineligible for redemption in California either because they were sold out of state or because they are otherwise ineligible under the Act. The Legislature specifically noted the risk that some persons would attempt to redeem “beverage container material imported from out of state” or that was otherwise ineligible. (Id., § 14595.) The Act provides that it is “the intent of the Legislature that no refund value or other recycling program payments be paid to any person for this [ineligible] material” and that “any person participating in conduct intended to defraud the state’s beverage container recycling program shall be held accountable for that conduct.” (Ibid.)
Among other things, the Act prohibits any person from paying, claiming, or receiving any refund or other fee for “[b]everage container material that the person knew, or should have known, was imported from out of state.” (Pub. Resources Code, § 14595.5, subd. (a)(1).) Nor may any person, with intent to defraud, “[r]edeem or attempt to redeem an out-of-state container,” “[b]ring an out-of-state container ... to the marketplace for redemption,” or “[r]eceive, store, transport, distribute, or otherwise facilitate or aid in the redemption of a[n] . . . out-of-state container.” (Id., § 14595.5, subd. (a)(2).)
The Act and related regulations task certified recycling centers, such as plaintiffs, with monitoring redemptions for refund eligibility and fraud, including through stringent reporting and inspection requirements. (Pub. Resources Code, § 14596.) Recycling centers are required to “inspect each load of containers, subject to the Act, delivered to the recycling center, for which refund value is claimed, to determine whether the load is eligible for any refund value and, if so, to determine whether the load is segregated or commingled” with out-of-state (or otherwise ineligible) containers. (Cal. Code Regs., tit. 14, § 2501, subd. (a).)
The Act defines an “ ‘[o]ut-of-state container’ ” as “a used beverage container or used beverage container component that is not subject to [Public Resources Code] Section 14560 [(assigning redemption values)], and that is brought into this state.” (Pub. Resources Code, § 14515.1.) In 2012, the Act was amended to impose additional requirements to deter would-be importers of out-of-state containers (see id., § 14596), and to grant emergency power to the Department to augment inspection and reporting requirements for recycling centers and other entities (see, e.g., Cal. Code Regs., tit. 14, §§ 2831, subd. (b) [inspection requirements], 2835, subd. (c) [reporting requirements]). In emergency regulations, CalRecycle noted that, “[although imported empty beverage containers often contain the CRV message, they do not qualify for CRV because they were not sold in California.” (CalRecycle, Emergency Regs., Imported Empty Beverage Container Material, Finding of Emergency, Informative Digest, p. 1 <http://www.calrecycle.ca.gov/laws/rulemaking/ archive/2014/Imports/RuleDocs/Emergency.pdf> [as of July 23, 2015].)
B. The Allegations of Plaintiffs’ Complaint for Damages and Injunctive Relief
The complaint alleges a total of seven common law tort causes of action against the Beverage Companies, namely (1) fraud; (2) negligent misrepresentation; (3) strict products liability for defective design; (4) strict products liability for failure to warn; (5) breach of express warranty; (6) intentional interference with prospective economic relations; and (7) negligent interference with prospective economic advantage.
Plaintiffs seek special, general, punitive, and exemplary damages “apportioned by the market share of each defendant.” Plaintiffs also seek a permanent injunction prohibiting defendants “from selling and/or distributing beverages within[] the [S]tate of California, until such time as said defendants
Plaintiffs further allege that the Beverage Companies “mislabeled” the containers they sold outside of California “because they were aware that these beverage containers would be purchased by California residents crossing state lines with the intent to avoid the deposit and would be then transported across the border to the [S]tate of California, consumed and then redeemed at recycling facilities, such as Alamo and Chino.” Plaintiffs cite an alleged incident, “on or about January of 2011,” when plaintiffs paid California redemption value for illegally imported out-of-state beverage containers. Plaintiffs do not name any of the individuals who transported or redeemed any out-of-state containers in California, nor do they contend the Beverage Companies are among, or in conspiracy with, those who illegally attempted to redeem such out-of-state containers. Instead, plaintiffs allege the Beverage Companies “knew or should have known” that such illegal redemption activities would be undertaken by unnamed third party actors.
The complaint alleges that plaintiffs Alamo and Chino were the subject of recent enforcement actions by CalRecycle: “Alamo received an accusation from CalRecycle alleging among other things, Alamo’s receipt and payment of redemption value for used beverage containers originating from outside the State of California.” According to CalRecycle, in January 2011, Alamo “facilitated” the redemption of out-of-state containers that originated in Phoenix, Arizona, which resulted in “the arrest and criminal conviction of eight of the individuals involved in the recycling fraud.” CalRecycle also noted that, over a three-weelc period that same month, “there were at least 19 occasions when [Alamo] purchased more than 500 pounds of aluminum beverage containers from an individual, operation or entity in a single day,” in violation of Department regulations. “Based on the volume and frequency of the loads being delivered,” CalRecycle charged, Alamo “knew, or should have known, that this material was far in excess of what could be anticipated from consumer transactions and that they were purchasing ineligible material.” As a result, CalRecycle revoked Alamo’s certification to operate two recycling centers and also imposed civil penalties and restitution.
At defendants’ request, the trial court took judicial notice that, in February 2013, plaintiffs entered into separate settlement agreements with the Department, resolving the Department’s administrative charges against plaintiffs. Under the terms of the settlement agreements, Alamo’s recycling center certificate became probationary for a minimum of five years and Chino’s revoked recycling center certificate was reinstated as probationary for a minimum of five years. As restitution, each plaintiff agreed to pay $62,500 to the California Beverage Container Recycling Fund.
C. The Demurrer and the Trial Court’s Ruling
Defendants jointly demurred to the complaint on the grounds (1) it failed to state a cause of action (general demurrer), and (2) its allegations were ambiguous, unintelligible, and uncertain. (Code Civ. Proc., § 430.10, subds. (e), (f).) In support of their general demurrer, defendants argued that the “dormant” commerce clause of the federal Constitution “precludes the use of state law to regulate out-of-state beverage marketing and sales, as [p]laintiffs attempt to do through their Complaint.... Moreover, California’s presumption against extraterritoriality categorically precludes [pjlaintiffs’ claims.”
Following a hearing, the court overruled the demurrer on uncertainty grounds, noting in its minute order that the “Complaint is not so uncertain that defendants cannot understand what is being alleged against them.” The court sustained the general demurrer, however, after concluding plaintiffs’ claims, or the relief plaintiffs were seeking by their complaint, was precluded by the dormant commerce clause of the federal Constitution. Accordingly, the court dismissed the complaint and entered judgment in favor of defendants. This appeal followed.
III. DISCUSSION
A. Standard of Review on Demurrer
A general demurrer tests the legal sufficiency of a complaint by claiming it fails to state a cause of action based on defects appearing on its face or from matters subject to judicial notice. (Blank v. Kirwan (1985) 39 Cal.3d 311, 318 [216 Cal.Rptr. 718, 703 P.2d 58]; County of Fresno v. Shelton (1998) 66 Cal.App.4th 996, 1008-1009 [78 Cal.Rptr.2d 272].) In other words, a general demurrer “ ‘searches the complaint for all defects going to the existence of a cause of action and places at issue the legal merits of the action on assumed facts.’ ” (Melton v. Boustred (2010) 183 Cal.App.4th 521, 528 [107 Cal.Rptr.3d 481].) On appeal, we are not bound by the trial court’s determination but independently review the complaint to determine whether it states a cause of action under any legal theory. (Banis Restaurant Design, Inc. v. Serrano (2005) 134 Cal.App.4th 1035, 1038-1039 [36 Cal.Rptr.3d 532].)
B. The Parties’ Claims on Appeal
Plaintiffs point out that, “[a]t its core, this case is about [defendants] knowingly and negligently selling a product [i.e., ‘falsely’ labeled beverage containers] that [defendants] know will be brought into California and cause injury to the people, businesses, and taxpayers of California.” More specifically, plaintiffs argue that, because no one can tell the difference between beverage containers purchased inside and outside California when all such containers are labeled “CA CRV” or similarly, defendants’ “mislabeling” of the out-of-state containers exposes plaintiffs to fines and penalties under the Act, risks the insolvency of the California Beverage Container Recycling Fund, and thereby risks the economic viability of plaintiffs’ recycling businesses. Defendants argue, as they did in the trial court, that the damages and injunctive relief plaintiffs seek by their complaint are barred by the “dormant” commerce clause of the federal Constitution. For the reasons we explain, we agree.
C. Analysis
“The Commerce Clause empowers Congress ‘[t]o regulate Commerce . . . among the several States.’ ” (McBurney v. Young (2013) 569 U.S. _[185 L.Ed.2d 758, 133 S.Ct. 1709, 1719] (McBurney); see U.S. Const., art. I, § 8, cl. 3.) The commerce clause reflects “ ‘the Constitution’s special concern both with the maintenance of a national economic union unfettered by state-imposed limitations on interstate commerce and with the autonomy of the individual States within their respective spheres.’ ” (Hebert v. Los Angeles Raiders, Ltd. (1991) 23 Cal.App.4th 414, 422 [29 Cal.Rptr.2d 540], quoting Healy v. Beer Institute (1989) 491 U.S. 324, 335-336 [105 L.Ed.2d 275, 109 S.Ct. 2491] (Healy).) Though the commerce clause imposes no express constraints “on ‘the several States,’ ” the United States Supreme Court has long inferred that the clause imposes implicit limitations on state power, and these limitations are embodied in a judge-made doctrine known as the “negative” or “dormant” commerce clause. (McBurney, supra, 569 U.S. at p._[133 S.Ct at p. 1719].)
More broadly, the high court in Healy explained that, taken together, its dormant commerce clause cases “stand at a minimum” for the three propositions. (Healy, supra, 491 U.S. at p. 336.) First, a state law violates the commerce clause if it applies to commerce that takes place wholly outside of the state’s borders, regardless of whether the commerce has effects within the state. (Id. at p. 336, citing Edgar v. MITE Corp. (1982) 457 U.S. 624, 642-643 [73 L.Ed.2d 269, 102 S.Ct. 2629].) Second, a state law that “directly controls” commerce occurring wholly outside the state’s borders is invalid regardless of whether the law’s extraterritorial reach was intentional. (Healy, supra, at p. 336, citing Brown-Forman Distillers v. N. Y Liquor Auth. (1986) 476 U.S. 573, 579 [90 L.Ed.2d 552, 106 S.Ct. 2080] [A statute that “directly regulates or discriminates against interstate commerce ... is virtually per se invalid under the Commerce Clause . . . .”].) Third, “the practical effect of the statute must be evaluated not only by considering the consequences of the statute itself, but also by considering how the challenged statute may interact with the legitimate regulatory regimes of other States and what effect would arise if not one, but many or every, State adopted similar legislation. Generally speaking, the Commerce Clause protects against inconsistent legislation arising from the projection of one state regulatory regime into the jurisdiction of another State. [Citation.]” (Healy, supra, at pp. 336-337.)
As plaintiffs point out, the third proposition is of concern when the statute has an incidental rather than a direct impact on interstate commerce. (See Healy, supra, 491 U.S. at pp. 336-337.) As the high court explained in a case predating Healy, “[although the criteria for determining the validity of state statutes affecting interstate commerce have been variously stated, the general rule that emerges can be phrased as follows: Where the statute regulates even-handedly to effectuate a legitimate local public interest, and its effects on interstate commerce are only incidental, it will be upheld unless the burden imposed on such commerce is clearly excessive in relation to the
Here we are not concerned with the validity of a state statute under the dormant commerce clause doctrine. As plaintiffs point out, they are not suing defendants under the Act, and nothing in the Act or its implementing regulations prohibits defendants from placing “CA CRV” or similar marks on beverage containers they sell both inside and outside of California. But the relief plaintiffs seek by their complaint would require the superior court to (1) enjoin defendants from placing “CA CRV” or similar marks on all beverage containers they sell outside of California, and (2) require defendants to pay money damages to plaintiffs as a result of defendants’ sales, outside California, of beverage containers bearing “CA CRV” or similar marks.
There is no practical difference between the extraterritorial consequences of a state statute, and a court’s issuance of an injunction or a damages award, because an injunction or damages award judgment may impermissibly burden interstate commerce as much as a state statute. “State power may be exercised as much by a jury’s [or judge’s] application of a state rule of law in a civil lawsuit as by a statute.” (BMW of North America, Inc. v. Gore (1996) 517 U.S. 559, 572, fn. 17 [134 L.Ed.2d 809, 116 S.Ct. 1589]; see New York Times Co. v. Sullivan (1964) 376 U.S. 254, 265 [11 L.Ed.2d 686, 84 S.Ct. 710] [“The test is not the form in which state power has been applied but, whatever the form, whether such power has in fact been exercised.”]; San Diego Unions v. Garmon (1959) 359 U.S. 236, 247 [3 L.Ed.2d 775, 79 S.Ct. 773] [“[Regulation can be as effectively exerted through an award of damages as through some form of preventative relief.”].) Thus, “a statute or regulation is not necessary for asserting a dormant Commerce Clause claim . . . .” (Ileto v. Glock Inc. (9th Cir. 2003) 349 F.3d 1191, 1217; see Kurns v. Railroad Friction Products Corp. (2012) 565 U.S. _[182 L.Ed.2d 116, 132 S.Ct. 1261, 1269] [federal law may preempt “state common-law duties and standards of care”]; Haynes v. AMTRAK (C.D.Cal. 2006) 423 F.Supp.2d 1073, 1083-1084 [negligence claim for damages based on California common law preempted by commerce clause].) As defendants put it, it makes no difference whether they are “punished for marketing California-compliant [i.e., Act-compliant] products outside California through a specific statute ... or through generally applicable tort liability. . . .”
Here, we conclude that the relief plaintiffs seek by their complaint — an injunction prohibiting defendants from placing “CA CRV” or similar marks on beverage containers sold outside California, and damages resulting from defendants’ sales of beverage containers marked “CA CRV” or
In American Beverage Assn. v. Snyder (6th Cir. 2013) 735 F.3d 362, the Sixth Circuit Court of Appeals held that a Michigan law prohibiting the sale outside Michigan of beverage containers bearing the Michigan redemption marking “impermissibly regulate[d] interstate commerce by controlling conduct beyond the State of Michigan.” (Id. at p. 376.) The court explained that the Michigan statute “not only require[d] beverage companies to package a product unique to Michigan but also allow [ed] Michigan to dictate where the product [could] be sold” (ibid.), and none of the nine other states with beverage container deposit laws similarly attempted to “burden the beverage industry” by requiring state-specific packaging (id. at p. 375, fn. 6). The court recognized the “potential destruction of the national common market through the adoption of state-exclusive product laws” that would result if a state could prohibit the sale of state-compliant packaged goods in other states. (Id. at p. 376.)
In International Bottled Water Association v. Paterson, supra, 2009 U.S.Dist. Lexis 71551, the federal district court for the Southern District of New York preliminarily, then permanently, enjoined a New York law prohibiting the sale outside New York of beverage containers bearing New York redemption markings. In its August 13, 2009, opinion addressing a proposed modification of its May 23, 2009, preliminary injunction, the district court observed that the parties did not dispute, and the court agreed, that the New York statute violated the dormant commerce clause doctrine.
Similarly here, plaintiffs’ effort to use California tort law to prohibit defendants from selling in other states beverage containers that bear California redemption markings is invalid under the dormant commerce clause doctrine. As defendants point out, in seeking such an injunction and damages, plaintiffs “are wielding California tort law as a cudgel to punish (and thus prohibit) [defendants’] sale of the same products outside of California that are sold within it. That has the obvious practical effect of dictating to the Beverage Companies how their labels read in the other 49 States. Such cross-border commercial compulsion is precisely the type of extraterritorial effect that the Commerce Clause forbids.” Indeed, if every state precluded out-of-state sales of their own “state-compliant” beverage containers- — • whether by statute, regulation, or judicial decision — defendants would be forced to manufacture and distribute 50 different types of containers in 50 different markets.
In sum, as defendants argued in the trial court, “the question at the end of the day is simply whether [plaintiffs can hold [defendants liable under
IV. DISPOSITION
The judgment of dismissal is affirmed. Defendants shall recover their costs on appeal. (Cal. Rule of Court, rule 8.278.)
Ramirez, P. J., and Hollenhorst, J., concurred.
Defendants and respondents include Anheuser-Busch InBev Worldwide, Inc., AnheuserBusch, LLC, The Coca-Cola Company, Coca-Cola Refreshments USA, Inc., Nestle Holdings, Inc., Nestle Waters North America, Inc., Nestle Waters North America Holdings, Inc., Nestle USA, Inc., Cott Beverages, Inc., Pepsico, Inc., PepsiCo Sales, Inc., Pepsi-Cola Advertising and Marketing, Inc., Pepsi-Cola Management and Administrative Services, Inc., Pepsi-Cola Sales and Distribution, Inc., Pepsi-Cola Technical Operations, Inc., Pepsi-Cola National Marketing, LLC, Dr Pepper Snapple Group, Inc., Dr Pepper/Seven Up, Inc., Dr Pepper/7-Up Bottling Company of the West, Snapple Beverage Corp., Constellation Brands, Inc., Constellation Brands U.S. Operations, Inc., Crown Imports, LLC, MillerCoors LLC, and Pabst Brewing Company. Before the trial court sustained the Beverage Companies’ general demurrer, plaintiffs dismissed their complaint, without prejudice, against Molson Coors Brewing Company, Molson Coors International, LP, Coors Brewing Company, and Miller Brewing Company.
At defendants’ request, the trial court took judicial notice of the following exhibits: (1) a first amended accusation filed by the Department against plaintiff Alamo on March 19, 2012; (2) a letter sent by the Department on May 17, 2012, to plaintiff Chino, terminating Chino’s probationary certificate to operate a recycling center; (3) the stipulated settlement agreement and final agency decision filed by plaintiff Alamo and the Department on February 23, 2013; (4) the stipulated settlement agreement and final agency decision filed by plaintiff Chino and the Department on February 23, 2013; (5) the Department’s official statement of guidance on