Wednesday, July 24, 2019
Court of Appeal:
First District Sides With Third District, Rejects Fifth District View That Indirect Costs Are Confined to Those Related to Copying
By a MetNews Staff Writer
The First District Court of Appeal has stripped a public records retrieval company of its victory in a writ action challenging the County of Alameda’s charge of $3.50 per page for copies of documents, with the trial court’s subsequent orders for a preliminary injunction and an award of $268,154.51 in attorney fees also falling.
The opinion, filed Monday, was written by Div. Five’s presiding justice, Barbara Jones. It adopts the reasoning of an Oct. 14, 2016 decision of the Third District Court of Appeal and rejects that appearing in an April 28, 2016 Fifth District case.
Challenges to the counties’ fees in each case came from California Public Records Research, Inc. (“CPRR”). The Third District opinion stems from its assault on a charge in Yolo County of $10 for the first page (later reduced to $7.35) and $2 for each subsequent page.
The Fifth District opinion concerns CPRR’s contesting of Stanislaus County’s fee of $3 for the first page and $2 for each page after that.
Government Code Section
At issue in each case was whether the county’s board of supervisors had abused its discretion under Government Code §27366 which provides:
“The fee for any copy of any other record or paper on file in the office of the recorder, when the copy is made by the recorder, shall be set by the board of supervisors in an amount necessary to recover the direct and indirect costs of providing the product or service or the cost of enforcing any regulation for which the fee or charge is levied.”
No definition for “indirect costs” is provided.
Fifth District Decision
In the Fifth District case, Justice Donald R. Franson Jr. said, in announcing a reversal of an order denying a writ of mandate:
“[W]e conclude the term ‘indirect costs’ is ambiguous because it does not have a single, plain meaning. Among other things, the variety of dictionary definitions of ‘indirect costs’ presented by County establish that there is no single definition that can be classified as the ordinary, usual meaning.”
To resolve the ambiguity, Franson looked to the 1990 Court of Appeal decision in Turnbull & Turnbull v. ARA Transportation, Inc. which considered what a “fully allocated cost” is for the purpose of determining whether a competitor was selling below cost to harm competitors in violation of the Unfair Competition Law.
That opinion says:
“To be legally acceptable, the allocation of indirect or fixed overhead costs to a particular product or service must be reasonably related to the burden such product or service imposes on the overall cost of doing business.”
“[W]e conclude that the ambiguity in the term ‘indirect costs’ is resolved by a general test that requires such costs to be reasonably attributed to (i.e., reasonably related to) providing copies and excludes costs that cannot be reasonably attributed to the service of providing copies.”
He said it could not be determined from the record whether that test was met and the court remanded the case for further proceedings.
Third District Opinion
In the Third District’s opinion, Justice Jonathan Renner found no ambiguity. He set forth, in his opinion affirming a summary judgment in favor of Yolo County:
“[W]e conclude the term ‘indirect costs’ has an established and generally accepted meaning in the context of governmental accounting and fee setting legislation, and includes overhead and operating costs not specifically associated with the production of copies. We therefore conclude that the plain meaning of section 27366 unambiguously authorizes—indeed, requires—the Board to set copy fees in an amount necessary to recover overhead and other operating costs incurred in the day-to-day operation of the Recorder’s Office.”
Although the Fifth District’s ruling in the appeal in CPRR’s action against Stanislaus County had found that a charge must be “reasonably related to” to the cost of providing copies and the Third District was authorizing fees not “specifically associated” with that service, Renner only referred to Franson’s decision in a footnote.
He pointed out that in that decision, the Court of Appeal noted that the county’s study of costs was “on a per document basis” while the later setting of a price for copies was set by the Board of Supervisors on a “per page basis.” Renner said:
“There is no such ‘disconnect’ on the record before us, as the County’s fee study appropriately considers costs on a per page basis.”
The same day that the case involving Yolo County was decided, the Third District, in an opinion that was not certified for publication, found no fault in Sacramento County charging $12 for providing a copy of the first page of a document and $2 for a copy of succeeding pages. The opinion, also by Renner—and also stemming from an action by CPRR—notes that according to evidence, the average price for copies in other counties was $2.75 for the first page and $1.03 for each subsequent page.
In Monday’s decision, Jones said:
“[W]e agree with the Stanislaus court that the term ‘indirect costs’ is ambiguous, but we disagree with its interpretation.”
Jones observed that the trial judge “sided with Stanislaus over Yolo”; she sided with Yolo over Stanislaus.
The jurist pointed out that an earlier version of §27366 set copying fees but was amended to give counties discretion. In amending it, she said, the Legislature did not insert a limitation on indirect costs to those authorized by a circular of federal Office of Management and Budget (“OMB”), which a general Government Code section pertaining to county fees includes.
Effect of Omission
“By omitting any reference to the OMB Circular in the amended version of section 27366, we conclude the Legislature sought to allow counties to recover ‘indirect costs’ that are not limited to the items listed in the OMB Circular,” she wrote.
“[W]e agree with the Yolo court,” Jones declared, that §27366 permits counties to take into account a wider range of indirect costs than under the section referencing the circular. She quoted with approval Renner’s statement that “the overall statutory scheme suggests the Legislature intended to give boards of supervisors greater flexibility in identifying indirect costs associated with the production of copies.”
Under that interpretation, Jones said, CPRR failed to show a violation of §27366.
The case is California Public Records Research, Inc. v. County of Alameda, 2019 S.O.S. 3523.
Los Angeles Case
CPRR filed a similar action in Los Angeles Country in 2009 but was dismissed by CPRR after the county demurred to the first amended complaint. That pleading, confined to the cost of copies of real estate records, said:
“The fees charged by Defendants to Plaintiff on October 2. 2008, and to all members of the class alleged herein for paper copies of recorded real estate records include unpermitted and inflated indirect costs and inflated direct costs, are magnitudes over market rates, were intended to produce revenue for defendants in excess of the cost of producing and delivering paper copies of recorded real estate documents to the public, violate said section, and were unlawfully collected.”
In the Alameda County decision, Jones noted that “CPRR contends it is not ‘credible’ that it costs the County $52.50 to copy a 15-page document.” The current rate in Los Angeles County for a copy of a real estate document would be $47—$5 for the first page, $3 for the following pages—or $48 for a certified copy, plus 50 cents for a “Search Fee (per name/per year),” with a $1 minimum.
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