11

Calculating Backwards to Calculating Backwards to Resolve AEO Penalty Resolve AEO Penalty

CasesCases

Rod LorangRod Lorang

Senior Deputy County CounselSenior Deputy County Counsel

County of San DiegoCounty of San Diego

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Calculating ForwardCalculating Forward

Facts on handFacts on hand Violations by type Violations by type Days in violation [adjusted]Days in violation [adjusted]

Statutory penalty rangeStatutory penalty range Statutory penalty factorsStatutory penalty factors

33

Problems Problems

A huge penalty rangeA huge penalty range A huge UST “minimum” penalty number A huge UST “minimum” penalty number

Unrealistic politically and for settlementUnrealistic politically and for settlement Disproportionate Disproportionate Unnecessary for an effective programUnnecessary for an effective program

You need to settle most casesYou need to settle most cases You need to “be reasonable”You need to “be reasonable” You need to win if an order is appealedYou need to win if an order is appealed

44

Your GoalsYour Goals

Settle the case; ORSettle the case; OR Win the hearingWin the hearing

ANDAND Be legalBe legal Be fairBe fair Be consistentBe consistent Be effectiveBe effective

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Addressing ProblemsAddressing Problems

Find some flexibilityFind some flexibility Create and communicate riskCreate and communicate risk Get the factsGet the facts Get the pictureGet the picture Resolve the real issuesResolve the real issues Pick your forum, then pull the triggerPick your forum, then pull the trigger NegotiateNegotiate

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Finding some flexibility:Finding some flexibility:level one / statutory factorslevel one / statutory factors

Ch. 6.11; H&S 25404.1.1(b)Ch. 6.11; H&S 25404.1.1(b) ““nature, circumstances, extent, and gravity of the nature, circumstances, extent, and gravity of the

violation, the violator’s past and present efforts to violation, the violator’s past and present efforts to prevent, abate, or clean up conditions posing a threat prevent, abate, or clean up conditions posing a threat to the public health or safety or the environment, the to the public health or safety or the environment, the violator’s ability to pay the penalty, and the deterrent violator’s ability to pay the penalty, and the deterrent effect that the imposition of the penalty would have on effect that the imposition of the penalty would have on the violator and the regulated community.” the violator and the regulated community.”

Don’t overanalyzeDon’t overanalyze Show “consideration,” retain discretionShow “consideration,” retain discretion Cf. other similar provisions Cf. other similar provisions

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Find some flexibility:Find some flexibility:level two / endorsed by Lisalevel two / endorsed by Lisa

The (borrowed) “one day” optionThe (borrowed) “one day” option Same requirement on multiple days with no Same requirement on multiple days with no

intervening notice and cure opportunityintervening notice and cure opportunity The (borrowed) “one error” optionThe (borrowed) “one error” option

Same requirement at multiple units at the Same requirement at multiple units at the facilityfacility

The (borrowed) “same elements” optionThe (borrowed) “same elements” option Violations are not independent or substantially Violations are not independent or substantially

distinguishabledistinguishable

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Find more flexibility: Find more flexibility: Enforcement DiscretionEnforcement Discretion

Which violations do Which violations do youyou choosechoose to penalize? to penalize? Remember your goals. What do you need?Remember your goals. What do you need? Select by significance? to educate? to deter?Select by significance? to educate? to deter? Maintain a focused case and focused Maintain a focused case and focused

message message ““Same facts” Same facts”

Did one thing wrong but multiple violationsDid one thing wrong but multiple violations Not the same as “same elements”Not the same as “same elements”

Your litigation risksYour litigation risks

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Create and communicate Create and communicate risk to the operatorrisk to the operator

Creating risk is easy Creating risk is easy Note that:Note that:

Settlement proposals do not limit a Settlement proposals do not limit a potential unilateral orderpotential unilateral order

Violations omitted for settlement Violations omitted for settlement purposes can come backpurposes can come back

““One day” offers can be for settlement One day” offers can be for settlement purposes onlypurposes only

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Risks to the operatorRisks to the operator

Kicker: what else could we prove if we did Kicker: what else could we prove if we did discovery?discovery?

UST Kicker: ALJ must impose at least the UST Kicker: ALJ must impose at least the statutory minimum penalty for proven statutory minimum penalty for proven violationsviolations

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… … communicate riskcommunicate risk

Communication is strategicCommunication is strategic No smoke re critical potential add-onsNo smoke re critical potential add-ons Must convey directly to the “client”Must convey directly to the “client” Must respect the role of the attorneyMust respect the role of the attorney Have and show no fear re going to hearingHave and show no fear re going to hearing

To be credible, you must also explain why To be credible, you must also explain why you are still willing to settleyou are still willing to settle

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Get the factsGet the facts

Don’t commit to a penalty position too Don’t commit to a penalty position too soonsoon

Meet and Meet and listenlisten Attitude and efforts pre-violationAttitude and efforts pre-violation Extenuating circumstancesExtenuating circumstances Things (allegedly) said by your staffThings (allegedly) said by your staff Corrective efforts and attitude nowCorrective efforts and attitude now

Legal issuesLegal issues Always listenAlways listen

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Get the factsGet the facts

Meet and Meet and pokepoke Knowledge, negligenceKnowledge, negligence Program deficienciesProgram deficiencies

• Staffing, training, resourcesStaffing, training, resources

• ConfigurationsConfigurations Decisions madeDecisions made Days in violationDays in violation

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Get the pictureGet the picture

Are they ready to comply?Are they ready to comply? Are they on the right path to comply?Are they on the right path to comply? (Hard to assess except face to face with (Hard to assess except face to face with

the right people)the right people)

Then ask yourself:Then ask yourself: How can this enforcement action best How can this enforcement action best

contribute to future compliance?contribute to future compliance?

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Resolve the Real Issues before Resolve the Real Issues before addressing penalty issuesaddressing penalty issues

Your real issuesYour real issues Return to complianceReturn to compliance Robust program for complianceRobust program for compliance

Operator’s real issues (typical)Operator’s real issues (typical) I’m not really a bad guyI’m not really a bad guy You listened to me and are treating me fairlyYou listened to me and are treating me fairly My relationship with your agency will be o.k.My relationship with your agency will be o.k.

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Resolve the Real IssuesResolve the Real Issues

Attorney’s real issues: Attorney’s real issues: I spotted and raised issues effectivelyI spotted and raised issues effectively My client understands this decisionMy client understands this decision The agency position is legally defensibleThe agency position is legally defensible The settlement does not damage my client’s The settlement does not damage my client’s

long term best interests long term best interests Sometimes, comparative penaltiesSometimes, comparative penalties

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Pick your forum…Pick your forum…

How will this case be resolved?How will this case be resolved? By the RP, or by an agent / attorneyBy the RP, or by an agent / attorney Based on numbers? adherence to rules? Based on numbers? adherence to rules?

perceived equity? business considerations?perceived equity? business considerations? What are the RP’s internal communication or What are the RP’s internal communication or

approval requirements?approval requirements?

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Pick your forumPick your forum

What forum for negotiations will work What forum for negotiations will work best?best? First meeting First meeting More meetingsMore meetings Written exchanges Written exchanges

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……then pull the triggerthen pull the trigger

The NumberThe Number The StoryThe Story

Note the issues, and issues already resolvedNote the issues, and issues already resolved Explain the numberExplain the number

• Cover the statutory issues Cover the statutory issues • Address your audienceAddress your audience• Introduce or note the role of SEPsIntroduce or note the role of SEPs

Specify next steps for resolutionSpecify next steps for resolution

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The NumbersThe Numbers

Target figure, opening offer, order figureTarget figure, opening offer, order figure

Calculate a defensible range per facts, Calculate a defensible range per facts, statute, DTSC, etc. statute, DTSC, etc. All three figures should be in this rangeAll three figures should be in this range

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Target figure Target figure

Your sense of what will work in this case,Your sense of what will work in this case,

Any consistency constraintsAny consistency constraints

2222

Opening OfferOpening Offer

Adjust the target figure with an allowance Adjust the target figure with an allowance for bargaining for bargaining

Depends on you and your dance partnerDepends on you and your dance partner As little as 20%?As little as 20%?

Agreed consistency contextAgreed consistency context Good performance by RPGood performance by RP

As much as 300%?As much as 300%? Big swing factorsBig swing factors Attorney negotiatorsAttorney negotiators

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Unilateral Order Penalty FigureUnilateral Order Penalty Figure

Probably not the same as your settlement Probably not the same as your settlement target figuretarget figure

Develop per Lisa and VinceDevelop per Lisa and Vince Or, drop “one day” limitationsOr, drop “one day” limitations Start with this in your pocketStart with this in your pocket

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NegotiateNegotiate

You can’t “lose” re the dollarsYou can’t “lose” re the dollars If you have an appropriate bottom line, and If you have an appropriate bottom line, and

are willing to issue a unilateral order if you are willing to issue a unilateral order if you don’t get that amount, you will get at least don’t get that amount, you will get at least your bottom line. your bottom line.

Winning on dollars isn’t the goalWinning on dollars isn’t the goal SEPs are a great closerSEPs are a great closer

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Additional IssuesAdditional Issues

Consistency and fairnessConsistency and fairness Economic benefits under Ch. 6.11Economic benefits under Ch. 6.11 Is action by the “governing body” really a Is action by the “governing body” really a

precondition for Ch. 6.95 Article 1 precondition for Ch. 6.95 Article 1 (business plan) penalties?(business plan) penalties?

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Consistency and FairnessConsistency and Fairness

Cases are all differentCases are all different Cases are all multi-facetedCases are all multi-faceted Enforcement discretion is well-establishedEnforcement discretion is well-established 10 times variation based on statutory 10 times variation based on statutory

factors, e.g. “deterrent effect”factors, e.g. “deterrent effect” Appellate risks are lowAppellate risks are low

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Economic Benefits under Ch. 6.11Economic Benefits under Ch. 6.11

Not obviously encompassed by “nature of Not obviously encompassed by “nature of the violation”the violation”

Your choiceYour choice

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Economic Benefits under Ch. 6.11:Economic Benefits under Ch. 6.11:ProsPros

““Level playing field”Level playing field” In theory, objectiveIn theory, objective In theory, eliminates the economic In theory, eliminates the economic

incentive to violateincentive to violate Dispassionate, not vindictiveDispassionate, not vindictive We think it is fair; they should tooWe think it is fair; they should too

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Economic Benefits under Ch. 6.11:Economic Benefits under Ch. 6.11:ConsCons

Invites intractable disputes into the settlement Invites intractable disputes into the settlement processprocess Whether to do itWhether to do it How to do itHow to do it Facts and parametersFacts and parameters

Not confined to “in the range” decisionsNot confined to “in the range” decisions A separate, inconsistent calculation modelA separate, inconsistent calculation model

For Ch. 6.11, minimal legal relevanceFor Ch. 6.11, minimal legal relevance An interpretation of one factor, in a list of An interpretation of one factor, in a list of

discretionary factorsdiscretionary factors Can’t override maximums, minimums, or listed Can’t override maximums, minimums, or listed

factorsfactors

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Economic Benefits under Ch. 6.11:Economic Benefits under Ch. 6.11:more consmore cons

Doomed by imperfect implementationDoomed by imperfect implementation Not all actors Not all actors No adjustment for expected valuesNo adjustment for expected values

Distracting to both sidesDistracting to both sides UnnecessaryUnnecessary

You probably don’t need it to justify your You probably don’t need it to justify your numbersnumbers

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Economic Benefits under Ch. 6.11:Economic Benefits under Ch. 6.11:Theoretical ConsTheoretical Cons

Not pricing the externalities from Not pricing the externalities from violations, only the private market benefitsviolations, only the private market benefits

Presumes optimal regulationPresumes optimal regulation Can’t get you to “optimal non-compliance”Can’t get you to “optimal non-compliance”

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Ch. 6.95 Article 1, 25514.5 Ch. 6.95 Article 1, 25514.5 “set by the governing body”“set by the governing body”

Is action by the “governing body of the Is action by the “governing body of the administering agency” necessary to administering agency” necessary to impose these administrative penalties? impose these administrative penalties?

25514.5 was originally enacted in the early 25514.5 was originally enacted in the early 1990’s “to provide local agencies with an 1990’s “to provide local agencies with an alternative and effective means of alternative and effective means of enforcing…”enforcing…”

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25514.5 continued25514.5 continued

Amended as part of the big UST / CUPA Amended as part of the big UST / CUPA bill in 2002 (AB 2481) bill in 2002 (AB 2481)

That bill was intended to provide for That bill was intended to provide for uniform administrative enforcement of uniform administrative enforcement of CUPA programsCUPA programs

25404.1.1(a)(3): “the violator shall be 25404.1.1(a)(3): “the violator shall be subject to a penalty that is consistent with subject to a penalty that is consistent with the administrative penalty imposed the administrative penalty imposed pursuant to Section 25514.5.”pursuant to Section 25514.5.”

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25514.5 “I think”25514.5 “I think”

Can read 25514.5 as authorizing but not Can read 25514.5 as authorizing but not requiring local bodies to set maximum requiring local bodies to set maximum penaltiespenalties

CUPA applications are a sufficient CUPA applications are a sufficient adoption of statutory penaltiesadoption of statutory penalties

It would be prudent to arrange for clear It would be prudent to arrange for clear governing body action anywaygoverning body action anyway