Source: https://www.importavehicle.info/2017/06/california-smog-impact-fee-300-to-no.html
Timestamp: 2019-04-24 05:56:10+00:00

Document:
This is an old judgement that came back up to me recently. California used to charge a $300 fee for an out of state vehicle titled in California. This fee was ruled unconstitutional, reversed, and money was refunded.
ANNA JORDAN et al., Plaintiffs and Respondents, v. DEPARTMENT OF MOTOR VEHICLES et al., Defendants and Appellants.
Milberg, Weiss, Bershad, Hynes & Lerach, Leonard B. Simon, Alan M. Mansfield, William S. Dato; Weiss & Yourman, Joseph H. Weiss, Joseph D. Cohen; Sullivan, Hill, Lewin, Rez, Engel & Labazzo, Michael A. Labazzo; Blumenthal Ostroff & Markham, Norman Blumenthal and David R. Markham for Plaintiffs and Respondents.
Daniel E. Lungren and Bill Lockyer, Attorneys General, Lawrence K. Keethe and Michael J. Cornez, Deputy Attorneys General, for Defendants and Appellants.
Plaintiffs, four individuals, brought suit for a refund of the $300 motor vehicle smog impact fee (Rev. & Tax. Code, §§ 6261-6263) each had paid for registering a car last registered outside California, even though the car passed California's smog check test. They also sought a declaration that the motor vehicle smog impact fee was unconstitutional. Defendants, State of California, Department of Motor Vehicles (DMV) and [75 Cal. App. 4th 454] the State Board of Equalization (SBE), appeal from the judgment in favor of plaintiffs. At issue in this case is whether the motor vehicle smog impact fee is unconstitutional under the commerce clause of the United States Constitution (U.S. Const., art. I, § 8, cl. 3) or under article XIX of the California Constitution, and if so, what the proper remedy is in this case.
Defendants contend the motor vehicle smog impact fee does not violate the commerce clause of the United States Constitution because Congress has created two classes of vehicles so there is no discrimination in treating one class differently. They contend the motor vehicle smog impact fee does not violate article XIX of the California Constitution, requiring taxes and fees on motor vehicles be used for enumerated transportation purposes, because the fee was imposed pursuant to the Sales and Use Tax Law (Rev. & Tax. Code, § 6001 et seq.) and therefore excepted from the constitutional restriction. Defendants contend the trial court exceeded its jurisdiction in ordering defendants to file refunds on behalf of those who paid the fee, in addition to ordering refunds to the plaintiffs. Finally, they raise two contentions concerning the proper party defendants and the admissibility of evidence considered by the trial court.
We find the motor vehicle smog impact fee is unconstitutional under the commerce clause and violates article XIX of the California Constitution. We find, however, the trial court exceeded its jurisdiction in ordering defendants to file refunds on behalf of payors who are not parties to this suit.
In enacting the motor vehicle smog impact fee, the Legislature found and declared, as amended later that year, as follows: "(a) Motor vehicles certified to meet California air quality standards (California-certified vehicles) are generally significantly more costly than otherwise equivalent vehicles sold elsewhere.
"(b) Motor vehicles generally are a major cause of poor air quality. However, California-certified vehicles have a less deleterious impact on air quality than other vehicles because California-certified vehicles are designed and manufactured to meet California's motor vehicle emission standards which are the most stringent emission standards in the nation and are, therefore, less polluting. Poor air quality imposes substantial costs on health services and environmental and other general fund programs.
"(c) Drivers of California-certified vehicles, in addition to higher vehicle acquisition costs, pay an added penalty because California-certified vehicles generally achieve lower fuel economy, resulting in a higher motor vehicle fuel tax burden.
Plaintiffs moved for summary judgment. They contended the motor vehicle smog impact fee was facially discriminatory because it was imposed on vehicles last registered out of state; it did not advance a legitimate local purpose because there was no factual support for the Legislature's finding that California-certified vehicles were less deleterious to the environment than federally certified vehicles; and there were less burdensome alternatives, such as imposing fees on all vehicles or tiered fees based on the actual emissions produced by the vehicle. Plaintiffs argued the fee violated article XIX of the California Constitution because it is not used for the transportation purposes enumerated in the constitution and it is not a sales or use tax that is exempt from the constitutional restriction.
Plaintiffs asserted it was undisputed that they paid the fee and their requests for a refund were denied; the motor vehicle smog impact fee was passed as part of budget negotiations; the legislative history made reference to the Florida vehicle impact fee that was later struck down as unconstitutional; fn. 3 the constitutional problems with the fees were raised by legislative counsel and the SBE's analysis of the bill; emissions standards for used [75 Cal. App. 4th 457] vehicles do not differentiate between California-certified vehicles and federally certified vehicles; there was no evidence that federally certified vehicles place more of a burden on the environment than California-certified vehicles; and the proceeds of the fee, less administrative costs, are deposited in the State's general fund.
Defendants opposed the motion. They posed the question as whether the motor vehicle smog impact fee was within California's power, as granted by Congress, to discriminate against interstate commerce as to federally certified vehicles. They contended there was no evidence to support plaintiffs' assertion that the legislative finding that federally certified vehicles were more deleterious to the environment were insupportable and inaccurate. Defendants argued California-certified vehicles were different, pointing to the substantial in-use compliance program under California law for California-certified vehicles. California tests used vehicles to ensure the emission system meets durability standards, and has the right to force manufacturers to recall and repair vehicles if the used vehicles fail the durability test. Defendants urged that article XIX of the California Constitution was inapplicable because the motor vehicle smog impact fee was imposed pursuant to the Sales and Use Tax Law.
Defendants also moved for summary judgment in their favor. They again asserted the question raised by this case was whether Congress's grant to California of the right to restrict interstate commerce ends with new motor vehicles or extends to used motor vehicles. They asserted the motor vehicle smog impact fee was permissible as part of the California waiver.
In support of their motion, defendants asserted as undisputed facts that California had received a waiver every year since 1971 and that 700 to 800 used California-certified vehicles were tested every year as part of California's in-use compliance program, which allowed California to continue to regulate California-certified motor vehicles after they were new.
In support of their motion for summary judgment, plaintiffs offered the declaration of Thomas Austin, a former executive officer of the California Air Resources Board and now a partner in a consulting firm specializing in air pollution. Austin declared his firm had performed a detailed analysis of the differences between California-certified vehicles and federally certified vehicles for model years 1981-1993. The analysis found a majority of federally certified vehicles, 56 percent, "complied with and could have been certified to California emission standards for new vehicles." (Original underscoring.) He further declared there was no differentiation in smog testing for used vehicles, whether California-certified or federally certified. Finally, [75 Cal. App. 4th 458] he opined that the California waiver did not cover the motor vehicle smog impact fee and a separate waiver would be required. He noted the California waiver applied only to new vehicles.
In reply, defendants asserted there was no interstate commerce discrimination because California-certified vehicles are different, factually and legally, from federally certified vehicles. They argued the motor vehicle smog impact fee furthers the goals of the California waiver.
The trial court ruled that the motor vehicle smog impact fee was a registration fee, not a sales or use tax. Since its proceeds went into the general fund, it violated article XIX of the California Constitution. The remedy, if the fee was otherwise valid, would be an order directing that the funds generated by the fee be placed in an account earmarked for the purposes set forth in article XIX.
The court then turned to the argument that the motor vehicle smog impact fee violated the negative or dormant commerce clause. It found that since the fee drew a distinction based on geographic origin of the vehicle, it was facially discriminatory. It rejected defendants' justification that California-certified vehicles were cleaner than federally certified vehicles because of defendants' lack of evidence and the declaration of Thomas Austin to the contrary. The court found the higher cost of California-certified vehicles did not meet the requirements of the compensatory tax doctrine to serve as a justification. Finally, the court noted defendants completely failed to address the availability of less burdensome alternatives. The court declined to address whether the motor vehicle smog impact fee violated equal protection. It ordered the parties to meet and confer and provide supplemental briefing on the appropriate remedy.
On the issue of the proper remedy, plaintiffs noted that defendants agreed to pay a refund to those who filed timely claims. They then argued the court had broad equitable powers to ensure a meaningful remedy. They asserted the remedy must begin with notice to affected persons that the motor vehicle smog impact fee was, or could be, unconstitutional. Defendants refused to do so, and plaintiffs reluctantly accepted defendants' assertion that they were unable to retrieve the names of those who had paid the fee in a cost-effective manner. Plaintiffs agreed to attempt to provide notice to those who had paid the fee. They argued for an order to refund the fee to those who timely filed for a refund, to order the DMV to notify those who paid the fee in the future, and to impose a constructive trust from which refunds could be paid.
Defendants argued the sole remedy was a refund to plaintiffs, noting the action was not a class action. Defendants argued a constructive trust was [75 Cal. App. 4th 459] legally impermissible because a demurrer had been sustained to the cause of action seeking a constructive trust.
After the hearing on various remedies, the court gave plaintiffs the opportunity to file briefing as to whether the court had authority to require defendants to transfer motor vehicle smog impact fees monies from the general fund to a segregated fund, as a remedy for violation of article XIX of the California Constitution. The court also required defendants to submit a proposed notice about the motor vehicle smog impact fee. The parties submitted supplemental briefing on the appropriate remedy for the violation of article XIX. Defendants submitted a proposed "fact sheet" indicating that the motor vehicle smog impact fee had been found unconstitutional, that the judgment would be appealed, and providing information as to how to request a refund.
The final judgment declared the motor vehicle smog impact fee unconstitutional under the commerce clause and article XIX of the California Constitution. It ordered defendants to enter a claim for refund for those who paid the fee after the date of entry of the judgment. As to those who paid the fee on or after September 19, 1992 (three years before the initial complaint by two of the plaintiffs), but prior to entry of judgment, the court ordered defendants to file claims for refunds or to set up and file a class action refund claim. Plaintiffs were to receive a refund of the fee.
Defendants focus on the court's reliance on the regulatory scheme for natural gas and argue the regulatory scheme for motor vehicles emissions is analogous. If a fungible product such as natural gas can be considered dissimilar if it serves different markets, they argue, motor vehicles that are subject to two different regulatory schemes by congressional decree, should also be treated as dissimilar for commerce clause purposes.
Under General Motors Corp. v. Tracy, supra, 519 U.S. 278, discrimination can be found only by comparing similarly situated entities. When the entities provide different products to different markets, they are not similarly situated. The focus is on markets, not taxpayers. Thus, we do not compare plaintiffs to others registering motor vehicles in California. Rather, the relevant comparison is those who sell used federally certified vehicles to those who sell used California-certified vehicles. It is more expensive to register a used federally certified vehicle in California than a comparable used California-certified vehicle. The question is whether there are different markets for used California-certified vehicles and used federally certified vehicles.
For used California-certified vehicles and used federally certified vehicles to constitute different products that are not similarly situated for commerce clause purposes, they must have different markets and not compete with each other. Defendants have failed to make that showing. They state simply, "Clearly, as to new vehicles, they do not compete as federally certified vehicles cannot be sold as new in California." They do not address vehicles that are no longer new, and it is these federally certified vehicles that are subject to the motor vehicle smog impact fee. Defendants have not offered any evidence that used California-certified vehicles serve a different market than used federally certified vehicles. They have failed to show that the different certifications create different products in the used vehicle market.
Defendants identify no congressional act that is "unmistakably clear" in exempting California regulation and taxation of used motor vehicles from commerce clause analysis. Indeed, on appeal they have abandoned the argument made below that the motor vehicle smog impact fee is authorized by the California waiver. While the differences between California-certified vehicles and federally certified vehicles may, as defendants assert, remain after the vehicles are no longer new, Congress has not expressly granted California the right to continue to treat the two classes of vehicles differently, immune from any commerce clause challenge.
Defendants failed to show that California-certified vehicles and federally certified vehicles serve different markets and thus are different products under General Motors Corp. v. Tracy, supra, 519 U.S. 278. Having limited their argument on appeal to this issue, their failure is fatal to their attempt to overturn the trial court's declaration of unconstitutionality. The trial court did not err in declaring that the motor vehicle smog impact fee violates the commerce clause.
Defendants' argument focuses on the word "imposed." They contend the Legislature may impose a fee pursuant to the Sales and Use Tax Law even if the fee is not a sales or use tax. This argument ignores that the constitution requires the fee or tax be imposed "pursuant to" the Sales and Use Tax Law.  "Pursuant to" means: "in the course of carrying out; in conformance to or agreement with; according to." (Webster's New Internat. Dict. (3d ed. 1971) p. 1848, col. 1.) [4b] The exception of section 7 of article XIX of the California Constitution applies only to fees or taxes that are imposed "in conformance to" the Sales and Use Tax Law or the Vehicle License Fee Law. In other words, the fees or taxes must be sales and use taxes or vehicle license fees.
The terms of the motor vehicle smog impact fee indicate it is a tax or fee on motor vehicles; the flat $300 fee is not a sales or use tax; and its revenues are placed in the general fund. On its own terms, the motor vehicle smog impact fee violates article XIX of the California Constitution.
[6a] Defendants contend the trial court exceeded its jurisdiction in ordering defendants to file claims for refunds on behalf of taxpayers who paid the motor vehicle smog impact fee but did not file for refunds themselves. We agree.
Plaintiffs cite no authority supporting the trial court's order. Instead, they argue the order is necessary to provide a meaningful remedy in light of defendants' egregious actions in passing and collecting an illegal tax and then opposing efforts to certify the affected class.
In Javor, plaintiff brought an action on behalf of consumer-purchasers against defendant retailers; plaintiff sought also to join the board, who could then compel the retailers to turn the refund over to the customers. The board demurred. The court first found the requirements of a class action were met. (Javor v. State Board of Equalization, supra, 12 Cal.3d at pp. 796-797.) It then reversed sustaining the board's demurrer. Although the court was "fashion[ing] an appropriate remedy to effect the customers' right to their refund" (id. at p. 800), the court did not order a remedy to anyone not a party to the action. Javor is distinguishable as a class action.
The trial court exceeded its jurisdiction in fashioning a remedy for taxpayers who were not properly before it.
Finally, plaintiffs request that this court take additional evidence of certain postjudgment correspondence between counsel on whether defendants were voluntarily giving notice of the court's ruling to those who paid the motor vehicle smog impact fee pursuant to the "fact sheet" proposed by defendants in response to the trial court's request. In cases where there is no jury trial, Code of Civil Procedure section 909 permits an appellate court to take additional evidence "in the interests of justice." Those interests are not implicated here. The judgment did not require defendants to give notice that the motor vehicle smog impact fee had been declared unconstitutional. Correspondence as to whether defendants were doing so voluntarily is irrelevant to any issue in this appeal. We decline the request to take additional evidence.
Defendants contend the only proper defendant in this case is the SBE, as it is the only entity that can provide plaintiffs with a refund. (Rev. & Tax. [75 Cal. App. 4th 469] Code, § 6933.) Defendants contend that since they have no power to grant a refund, the state and the DMV were improperly joined as defendants.
 In support of their motion for summary judgment, plaintiffs provided the declaration of Thomas Austin, who declared that a majority of federally certified vehicles "could have been" certified to California emission standards. Defendants objected to the admission of Austin's declaration. The trial court overruled the objection and relied on Austin's declaration in finding defendants failed to show a justification for the discriminatory motor vehicle smog impact fee. The court rejected defendants' assertion that California-certified vehicles were less harmful to the environment than federally certified vehicles.
Defendants contend it was error to consider Austin's declaration. They assert it does not meet the standards for admission of an expert's declaration; there are no facts to support the opinion given and what "could have" happened is speculative and irrelevant.
Austin's declaration is conclusory in that he provides no factual data to support his opinions. (Hoover Community Hotel Development Corp. v. Thomson (1985) 167 Cal. App. 3d 1130, 1137 [213 Cal. Rptr. 750].) [75 Cal. App. 4th 470]Defendants, however, have failed to show any prejudice from its admission. On appeal, defendants argue the motor vehicle smog impact fee is not discriminatory. They do not contend the discrimination was justified by a legitimate state purpose that could not be served by reasonable, nondiscriminatory means. Since the trial court relied on Austin's declaration only on the question of justification, an issue not raised on appeal, any error in so considering it must be deemed harmless. Moreover, even if the challenge to Austin's declaration is read to include an argument that the discrimination was justified, based on the Legislature's finding that California-certified vehicles are less harmful to the environment, defendants conceded at oral argument that they bore the burden of proof on this issue. They further conceded they failed to present any evidence that there was no reasonable, nondiscriminatory alternative. (Oregon Waste Systems, Inc. v. Department of Environmental Quality of Ore., supra, 511 U.S. 93, 100-101 [114 S. Ct. 1345, 1350-1351].) Any error in admission of Austin's declaration was harmless.
The judgment is reversed with respect to the order that defendants enter claims for refund on behalf of those who pay the motor vehicle smog impact fee after the date the judgment is entered and notify such persons that this system for refunds is in place. The judgment is also reversed with respect to the order that defendants review their records and file individual claims for refund or set up and file a class action refund claim on behalf of all those who paid the motor vehicle smog impact fee on or after September 19, 1992, but prior to entry of judgment. In all other respects, the judgment is affirmed. The parties shall bear their own costs on appeal.
Sims, Acting P. J., and Nicholson, J., concurred.
FN 1. The consolidated second amended complaint was filed by three plaintiffs. The fourth plaintiff, Michael Foley, filed suit several months later. The record does not reveal when his suit was consolidated with the other, but it occurred before plaintiffs filed the motion for summary judgment.
FN 2. The issue of attorney fees was addressed in a postjudgment hearing. Plaintiffs request that we take judicial notice of a transcript of that hearing. Since it occurred after the judgment and did not concern any issues raised in this appeal, we decline the request.
FN 4. The motor vehicle smog impact fee was passed as a tax levy. (Stats. 1990, ch. 453, § 2, p. 1956.) Plaintiffs do not dispute that characterization.
FN 6. Defendants' argument brings to mind the old riddle: If you call a tail a leg, how many legs does a dog have? The answer is four; calling a tail a leg does not make it one. Or, that which we call a rose by any other name would smell as sweet.

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