Applying a seminal decision on due process hearing requirements, Mathews v. Eldridge, 424 U.S. 319 (1976), the court ruled that plaintiff Marilyn Van Horn (“Plaintiff’) could state a cause of action for violation of due process, and reversed in part the lower court’s decision to sustain DTSC’s demurrer without leave to amend.
Section 25365.6 of the Carpenter-Presley-Tanner Hazardous Substance Account Act (“HSAA”) permits DTSC to impose liens on real property owned by responsible parties for costs incurred by DTSC in connection with environmental removal and remedial actions. The HSAA, however, requires that DTSC follow adequate due process when imposing such liens. To effectuate section 25365.6 of the HSAA, DTSC established a “Lien Placement Policy and Procedure” (“Lien Policy”) which authorizes lien placement if a hearing officer determines that the lien is consistent with five statutory elements. These five statutory elements examine whether:
- the property owner was sent notice of liability by mail;
- the property is owned by a person who is liable to DTSC for costs related to the property;
- the property was subject to or affected by a removal or remedial action;
- DTSC has incurred costs with respect to an action under the HSAA or CERCLA; and
- the record contains any other information which is sufficient to show that the lien notice should not be filed.
Plaintiff owned a multi-parcel 64-acre property, which included an 11-acre portion containing arsenopyrite mine tailings. In 1998, DTSC constructed a fence around the property and posted a lien for $245,306.64. In 2007, DTSC made an “imminent or substantial endangerment assessment” concerning the property. After twice inspecting the property, DTSC advised Plaintiff in 2011 that it intended to increase its lien from $245,306.64 to $833,368.19 and notified Plaintiff of her right to a hearing.
Plaintiff requested a hearing on the following issues: (1) the propriety of the lien increase; (2) the amount of the lien increase; (3) the properties to be covered by the proposed lien; and (4) the information obtained by DTSC justifying the work it performed. In response, the hearing officer found that the lien increase was consistent with the five elements set forth in the Lien Policy, but indicated that the hearing was not intended to, and did not, take into account issues raised by Plaintiff outside of the five elements.
In holding that the implementation of the Lien Policy violated due process, the court applied the threefold due process inquiry set forth in Mathews v. Eldridge. That inquiry requires a court to balance: (1) the private interest affected by an official action; (2) the risk of an erroneous deprivation and the probable value of additional safeguards; and (3) the government’s interest.
In applying Mathews, the court found private property interests were significantly affected by DTSC’s Lien Policy, noting potential clouding of title, impaired alienability of property, tainted credit ratings, and financing problems. The court also found a high risk of erroneous deprivation, and significant value of additional safeguards. In analyzing the government’s interest, the court found that providing the impacted landowner a meaningful opportunity to dispute the lien was not unduly burdensome in either fiscal or administrative terms.
Based on the Mathews inquiry, the court concluded that DTSC’s procedure violated due process by failing to allow the affected landowner to dispute: (1) the amount of the lien or the lien increase; (2) the extent of the property burdened by the lien or the lien increase; and (3) the characterization of the landowner as a responsible party rather than an innocent landowner. As a result, the court reversed the judgment of dismissal and directed the trial court to issue a writ of mandate requiring DTSC to remove the lien increase, and/or hold a hearing at which Plaintiff would be allowed to challenge the amount of the lien increase and the properties subjected to the lien.
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Interestingly, the court noted that a similar lien provision in CERCLA was found unconstitutional in Reardon v. United States, 947 F.2d 1509, 1518 (1st Cir. 1991). Thus, this case, like Reardon, reflects the willingness of courts to reject hearing procedures established by environmental regulatory agencies that do not adequately protect the private property rights of owners.
For more information, contact Stephen C. Lewis at (415) 228-5480 or scl@bcltlaw.com, or Sherry E. Jackman at (415) 228-5412, or sej@bcltlaw.com.
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