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DISTRICT UPDATES

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SPORTS PAGE: Dodgers (Kershaw) @ Padres (Lauer) 7:10pm

 

 

Today's Nooner:

  • Friday Musical Interlude - (as we get ready for another Friday Pod recording, I'm thinking of the pod with John Laird) This was before the new pod redundancies and we lost the intro music. His song of choice was The Band's "The Weight" which just sounds appropriate as this week comes to an end "Take a load off, Fanny..." While there's been debate over the meaning of the song over the years, it just seems right as this evening's Sabbath nears.
  • Ninth Circuit rules that the Dynamex v. Superior Court "ABC" test can be applied retroactively
  • More on SDG&E v. PUC  - takings/inverse condemnation
  • Budget matters
  • #CAKEDAY

FRIDAY MUSICAL INTERLUDE: A car commercial on playing "Dreams" by The Cranberries just played during one of the late shows I play during early morning writing. Before we dive into the cray-cray legal-politics-policy cauldron, let's get a little artsy-fartsy.

It reminded me of a podcast I was listening to after writing yesterday as I walked to the Capital Mall Farmers Market. If you've never heard the podcast Song Exploder, the podcast founded by Hrishikesh Hirway (founder and co-host of The West Wing Weekly) and currently hosted by Thao Nguyen of the folk rock Thao & the Get Down Stay Down, this will be a great introduction to a pod to get your head out of politics and policy. (Side note, check out "We the Common," the song inspired by Thao's work with the California Coalition of Women Prisoners...if you get Ira Glass in your video, you're folk-rockin' it.)

If you're around my age, The Cranberries was peak college music, particularly Dreams, Linger, and Zombie. We all have songs that bring us right back to specific moments, particularly college. What I didn't know was what happened to the band even while the familiar songs would pop up on commercials and 90s radio. They continued on and off and released an acoustic album in 2017 and planned a tour. However, that familiar voice of lead singer Dolores O'Riordan was not ready to tour for "medical reasons associated with a back problem." 

In fact, she was was dying of alcoholism and drowned in a hotel on January 15, 2018.

Back to Song Exploder. The podcast takes one song and with a songwriter, breaks down exactly how it was put together, including who wrote what and with instrument-specific tracks and versions. I have intended to listen to more expisodes but "to-do" list of podcasts is never-ending. In particular, R.E.M.'s "Try Not To Breathe," Fleetwood Mac's "Go Your Own Way," Yo-Yo Ma on Bach's Cello Suite 1, Lorde "Sober," and plenty more. They are generally short, 15-30 minutes, so perfect for that walk or folding laundry. I'll be listening to one as I walk to Gibran's to record the pod this afternoon.

Since initially writing this graf early this morning, I listened to the R.E.M. episode. OMG, that may be the best thing I've ever listened to. Michael Stipe talking about his dying grandmother...very emotional song. If you like R.E.M., listen to it this weekend.

On the latest episode, Thao talks to lead guitarist and songwriter Noel Hogan who had been collaborating with O'Riodan on a forthcoming song called "All Over Now." It was about domestic abuse, although has so much more meaning now. Hogan worked with her partner to get a hard drive with her ongoing work on the song and the band completed it featuring O'Riordan's vocals. 

It's a great song. Without O'Riordan, the band released a video for the song that's animated. If you The Cranberries' music hit you at a similar time in life as it did me, the pod and the song may evoke a few tears. You can listen to the album on your stream of your choice and if you roll traditionally, they have it in vinyl.

Alexa, play "All Over Now" by The Cranberries, and let's get started...

 

 

Today's a good day to pitch for Nooner Premium. I know many of you subscribe for election year analysis and I appreciate that. But lots of election-year Premium folks have dropped off I can't sustainably continue to pull 12-hour days doing legal research and analysis like I've been doing with only 7.5% of 8,752 active readers paying for a subscription. If you like what you are reading, you can subscribe or chip in as little as $5 here. ("monthly subscription" is not recurring--only the $4.99/month one is) I really hate nagging! 

 

Okay...I know I got in to legal geekery yesterday and will again today, but these are two of the hottest issues before the Legislature--wildfire liability and the fight over categorization of independent contractors, particularly in light of the "gig economy." When Gibran and I sit down this afternoon, his job will be to get me to make it as understandable as possible. We'll have several other topics (currently too many) for the pod that will drop on Sunday.

DYNAMEX RETROACTIVITY: As if we needed another big legal issue to digest this week after the SDG&E v. PUC case (more below), but we do. Yesterday, a three-judge panel of the Ninth Circuit Court of Appeals issued a ruling in Vazquez v. Jan-Pro that finds that the ruling of the Supreme Court of California in Dynamex v. Superior Court that California's Labor Code requires a stricter "ABC" test in determining when a person may be considered an independent contractor applies retroactively.

Now, you're likely wondering how the Ninth Circuit, a federal court, has jumped in to the Dynamex debate. It's actually an interesting story. What did you do on your Thursday night? Thankfully, the Giants/Dodgers series was over so I time-warped 20 years to law school and hit the books.

Jan-Pro is an international three-tier franchisor janitorial company. "Three-tier" refers that Jan-Pro is a franchisor that licenses other franchisors on a regional basis. Those franchisors then sell franchisees that perform the actual janitorial services. In 2008, a federal putative class action was filed in the federal District Court of Massachusetts by plaintiffs from Massachusetts and Pennsylvania arguing that the third-tier franchisee was actually an employee of first-tier Jan-Pro. The plaintiffs argued that the international company set up the elaborate three-tier system to avoid paying federal overtime and complying with state labor and wage laws. By the end of 2008, three California plaintiffs had joined the class.

Early in the case, the California plaintiffs were split off and sent to the Southern District of California because of the complexity of state laws. The cases in the First District were dismissed, although not on substantive grounds. But, the California case continued and the Southern District of California issued a summary judgment under the previously used Borello test as the judgment was before the April 30, 2018 Dynamex ruling. Borello involved "right to control" of the person performing the work, with eleven additional factors that could be considered that evolved under wage orders issued by the Department of Industrial Relations beyond the Labor Code.

The plaintiffs in the Southern District appealed the summary judgment decision before the Dynamex decision on the summary judgment under the Borello standard. Following Dynamex, the Ninth Circuit asked the parties to brief under the new standard for California labor law set forth by the Supreme Court of California. That's how we reached yesterday's opinion. 

Defendant Jan-Pro mostly argued that Dynamex didn't apply because the law doesn't apply retroactively but the three-judge panel of the Ninth Circuit disagreed since the Supreme Court of California's holding was based on the California Labor Code, which had not changed. 

In short, the Ninth Circuit yesterday ruled that indeed Dynamex does apply retroactively and sent it back to the Southern District to hear the case under Dynamex's ABC test and provided guidance for the district court to consider on remand (pp. 37-48).

To be classified as an independent contractor requires three prongs to be satisfied:

  • (A) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract for the performance of the work and in fact;
  • (B) that the worker performs work that is outside the usual course of the hiring entity’s business; and
  • (C) that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

The Ninth Circuit sets out a strong case against summary judgment and a further exploration of the facts under Prongs A and C. The opinion explains that B may be the most susceptible to summary judgment but, again, all three are required. 

The Jan-Pro defendants have asked for a rehearing, which would occur if a majority of the sitting Ninth Circuit judges vote for an en banc review. If such review is not granted, Jan-Pro may seek a review by the Supreme Court of the United States. I've gone back and forth in thinking about this overnight. At first I thought that the current high court would love to get their hands on this to settle the three-tier franchisee relationship in favor of business (International Franchisors Association is very involved and companies like McDonald's are looking at huge liability). But that's really not what the Ninth Circuit decision yesterday really was about. So, SCOTUS granting certiorari on the retroactivity of the application of California Labor Law seems a bit of a stretch. 

For now, the gates are open for many lawsuits are open on the retroactivity of Dynamex and the pressure--particularly by the "gig economy" on the Legislature to codify the old Borello standard will only increase. Several lawsuits are already in the mix.

 

Wildfire liability after the jump...

 

 

SDG&E v. PUC: Yesterday, I discussed the request for review by the Supreme Court of the United States by San Diego Gas & Electric (SDG&E) in its challenge to California's application of inverse condemnation in absence of rate approval to recover the costs for the "just compensation" required under the United States and California Constitutions. First, nobody caught that I screwed up and wrote Fourth Amendment yesterday (search and seizure) instead of Fifth Amendment (due process, incl. takings). We just spend so much more time on the former rather than the latter in talking state law.

Without getting too Con Law on you on a Friday, there are interesting things to think about. The legal concept of "inverse condemnation" applied in California is broader than other states. For example, California Constitution Article I, Section 19 includes "damaged" and not just "taken" property. That's very important in the wildfire (and other inverse condemnation cases). The parcels are still there, but the improvements are not. The Supreme Court jurisprudence to start with on this topic is unclear.

Of course, the real issue here is not the scope of inverse condemnation applied to governmental takings but rather whether that responsibility is passed along with a private entity ("utility") steps in to provide a service deemed to be in an essential responsibility of government. We can debate what those responsibilities are and they have certainly evolved since the Bill of Rights were approved in 1789 and submitted to the states for ratification. I think it's generally accepted that electricity fits in the category of essential and added after those amendments were ratified.

In the petition for writ of certiorari, SDG&E does not argue that the imposition of strict liability for inverse condemnation on the utility is unconstitutional. However, it argues that when the government's "just compensation" responsibility for a taking is passed along to a private regulated entity, the government must concomitantly pass along the ability for the entity to recover its costs to provide such compensation. Therefore, it argues that the Public Utilities Commission's refusal to approve a rate increase to cover SDG&E's remaining costs from 2007 wildfires is a "taking" in and of itself under the Fifth Amendment* from the utility itself.

Does that make sense?

*The legal beagles reading this would appropriately point out that the correct answer in the bar exam essay would be "under the Fifth Amendment applied to the State of California through the Fourteenth Amendment. 

Yes, we're talking about a takings over a taking. This is the stuff that fills constitutional lawyer dreams.

 

Here are some questions I've heard that I'll try to answer as it's easier than trying to write it in a narrarative. This is very simple and while I passed the bar and loved law school, I have never practiced. Nothing I ever write in The Nooner should be considered legal advice.

THIS IS A STATE CASE. WHY THE SUPREME COURT? In addition to being the ultimate arbiter of cases that commence in federal court, the Supreme Court of the United States can take up cases on matters of federal law that have been decided on by the court of last resort in a state. Because SDG&E is challenging a Supreme Court of California case on the issue of a taking prohibited by the Fifth Amendment to the United States Constitution, it has jurisdiction in this matter. In legalese, it has jurisdiction and the case is "ripe" for review.

WHO IS THE PETITIONER? The sole petitioner in this case is San Diego Gas & Electric, but the petition cites rate denials by the PUC of requests from Pacific Gas & Electric and Southern California Edison, which would almost certainly file amici curiae ("friend of the court") briefs. Many others would file amici curiae briefs as well. A "petitioner" in a Supreme Court case is the party seeking review of the previous court's ruling, regardless of whether they were initially the plaintiff or defendant. In this case, the petitioner is the original plaintiff.

WHO IS THE RESPONDENT? The sole respondent is the Public Utilities Commission of the State of California. If the Court takes up the case, there would be numerous amici curiae filing on the respondent side.

WHO ELSE WOULD BE INTERESTED ON THE PETITIONER'S SIDE? Under the concept of inverse condemnation in California and the issue presented to the court, any regulated private entity that a court could determine to be providing an essential public service has an interest in the outcome. One of the big areas would be private water districts.

WHO ELSE WOULD BE INTERESTED ON THE RESPONDENT'S SIDE? Ratepayers would prefer to keep these issues before the Public Utilities Commission. Although "ratepayers" often conjures up the image of granny on a fixed income, in fact the biggest interests concerned about forcing PUC approval of rate recovery for inverse condemnation are among the biggest agricultural, industrial, and manufacturing electricity consumers in the state. 

WHAT IS THE ARGUMENT TO PASS ALONG INVERSE CONDEMNATION STRICT LIABILITY?  Under the federal and state constitutions, governmental entities are required to provide just compensation for a taking of private property. The inverse condemnation pass-through discourages governments from franchising out essential services to avoid their constitutional obligations.

WHERE DO UTILITIES GET THEIR MONEY? Without covering the subject matter in which many people spend their professional, the simple formula for the rates charged to consumers is cost of procurement/generation/maintenance, cost of operations, and a reasonable profit. The state's three main utilities all have parent corporations (Edison Int'l, PCG Corp., Sempra) engaged in many other unregulated businesses. Those are the entities that pay out dividends.

WHY SHOULD UTILITIES BE ABLE TO PASS ALONG COSTS FOR INVERSE CONDEMNATION STRICT LIABILITY? If the government wants to take property whether it be affirmative or inverse, it must come up with the money, generally through taxation. Lots of property is being taken to build high-speed rail. High speed rail is being built with a combination of federal, bond, and cap-and-trade funds. In the end, all three are taxation (bonds are paid from taxes). Seeking rates to cover costs such as those from wildfires is analogous to the state financing its debt for projects or economic recovery.

WHY SHOULDN'T UTILITIES BE ABLE TO PASS ALONG COSTS FOR INVERSE CONDEMNATION STRICT LIABILITY? Unlike the government, utilities don't have citizen oversight over compensation and generally pay out dividends to shareholders. The formula in rate-making progress is imperfect, as evident the industry on both sides of rate-making, and utility parent companies have paid dividends to shareholders while seeking to recoup wildfire costs.

WHEN WILL THE SUPREME COURT DECIDE WHETHER TO HEAR THE CASE? It requires four justices to request to hear a case. The PUC has 30 days to file a brief in opposition to the writ of certiorari, although it can waive that right (although the Court can require a response). With only seven weeks left in the October 2018 term, it is very unlikely certiorari will be decided before the end of the term. The next term begins October 1, 2019.

WHAT IS THE LIKELIHOOD THE SUPREME COURT WILL TAKE UP THE CASE? As I suggested above, this is the type of case that makes a great constitutional law final exam. I don't know of any case truly on point making it an ideal one for review. I write that strictly from a legal observer perspective and not saying whether or not I would prefer to see Supreme Court review.

 

Budget and #CAKEDAY after the jump...

 

Probolsky Research 

 

BROTHER, CAN YOU SPARE A DIME? For CALmatters, Laurel Rosenhall looks at whether states can expect financial assistance from the federal government in the next recession like California and others did that reduced the budget-cutting that otherwise would have been required in the Great Recession. California's finance leaders aren't certain and the state's been hiding acorns in case federal help does not arrive.

It was brutal the last time around even with federal assistance. I remember convening community college leaders in my office on a Sunday night over Chinese food to work out a deal among leaders across constituencies. Advocates no the faces and names of those affected so while the task from the budget committees may be to turn in a spreadsheet with an ideal compromise, there were simply no easy answers. 

Of course, we never had a true budget reserve in my twenty years of advocacy (don't blame me!). The Department of Finance believes that annual revenues could drop by as much as $25 billion annually during a deep recession because of the state's reliance on high-income earners.  

The 2019-20 budget proposes adding $1.8 billion to the Budget Stabilization account, bringing it to $15.3 billion. The question about the next recession are threefold--when, how deep, and how long. Three straightforward questions that are completely unanswerable.

 

#CAKEDAY: Happy birthday to Amy Blumberg James!

DEPT OF CORRECTIONS: Indeed, Katie Hill is still a Democrat in CA25.

 

 

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