BILL ANALYSIS Ó
SB 841
SENATE COMMITTEE ON ENVIRONMENTAL QUALITY
Senator S. Joseph Simitian, Chairman
2011-2012 Regular Session
BILL NO: SB 841
AUTHOR: Wolk
AMENDED: May 2, 2011
FISCAL: No HEARING DATE: May 9, 2011
URGENCY: No CONSULTANT: Randy Pestor
SUBJECT : SOLID WASTE ENTERPRISE CONTRACTS
SUMMARY :
Existing law :
1) Under the California Integrated Waste Management Act of
1989 (Public Resources Code §40000 et seq.):
a) Authorizes a local agency to determine: i) aspects
of solid waste handling, including but not limited to,
frequency of collection, means of collection and
transportation, level of services, charges and fees, and
nature, location, and extent of providing solid waste
handling services; and ii) whether the services are to
be provided by means of nonexclusive franchise,
contract, license, permit, or otherwise, either with or
without competitive bidding, and under terms and
conditions prescribed by the governing body of the local
agency by resolution or ordinance. (§40059).
b) Contains various requirements relating to integrated
waste management, and requires each city or county
source reduction and recycling element to include an
implementation schedule that shows a city or county must
divert 25% of solid waste from landfill disposal or
transformation by January 1, 1995, through source
reduction, recycling, and composting activities, and
must divert 50% of solid waste on and after January 1,
2000. (§41780). Administrative civil penalties may be
imposed upon a local agency of up to $10,000 per day
until the local agency implements its source reduction
and recycling element or its household hazardous waste
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element. (§41850).
c) Contains requirements relating to an indemnity
obligation due to a local agency's failure to establish
and maintain a source reduction and recycling element,
and to meet the above solid waste diversion requirements
(§40059.1).
2) Sets numerous requirements relating to indemnity (Civil
Code §2772 et seq.). Indemnity is "a contract by which one
engages to save another from a legal consequence of the
conduct of one of the parties, or of some other person."
3) Under articles XIII C and XIII D of the state Constitution,
set various requirements relating to assessments, fees, and
taxes enacted by voter approved Proposition 218 (November
5, 1996, election) and Proposition 26 (November 2, 2010,
election).
This bill , under the California Integrated Waste Management
Act of 1989:
1) Defines "indemnity obligation" to mean an indemnity
obligation directly or indirectly related to a local
agency's failure to obtain voter or property owner approval
that may be required by articles XIII C or XIII D of the
state Constitution if that indemnity obligation is
expressly assumed by or imposed upon the solid waste
enterprise, including by "ordinance, contract, franchise,
license, permit, or other entitlement or right, for the
benefit of a local agency."
2) Requires an indemnity obligation to be null and void, and
not enforceable, if it does either of the following:
a) Requires a solid waste enterprise to defend and hold
harmless the local agency in connection with the local
agency's imposition of fees, charges, levies, exactions,
or assessments that are found by final judgment of a
court to have been imposed in violation of articles XIII
C or XIII D of the state Constitution.
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b) Requires a solid waste enterprise to refund fees to
its customers if the fees are collected on behalf of the
local agency by the solid waste enterprise and have been
remitted by the solid waste enterprise to the local
agency.
3) Requires an indemnity obligation to be subject to the above
null and void provision if it meets either of the following
conditions:
a) The indemnity obligation is authorized or required by
a provision, term, condition, or requirement contained
in an ordinance, contract, franchise, license, permit,
or other entitlement or right adopted, entered into,
issued, or granted by a local agency for solid waste
handling services, including the recycling, processing,
or composting of solid waste.
b) The indemnity obligation is authorized or required in
a request for bids or proposals in connection with a
contract or franchise specified above.
4) Provides that provisions of this bill are not subject to
waiver, and any attempted waiver must be null and void as
against public policy.
5) Provides that this bill cannot be intended to do any of the
following: a) add to or expand local agency authority to
determine aspects of solid waste collection and handling;
b) alter the authority of business entities to collect or
process materials that are not solid waste; or c) determine
whether or not a fee, levy, assessment, or exaction
requires voter or property owner approval by articles XIII
C or XIII D of the state Constitution.
6) Requires this bill to only apply to a provision, term,
condition, or requirement contained in an ordinance,
contract, franchise, license, permit, or other entitlement
or right adopted, entered into, issued, or granted on or
after January 1, 2012.
7) Contains related legislative intent.
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COMMENTS :
1) Purpose of Bill . The author is concerned that since
passage of Proposition 218 and Proposition 26 local
agencies may require that "solid waste handling firms
indemnify these local agencies if their franchises and
other fees are successfully challenged in court."
The author is responding to this concern by requiring an
indemnity obligation to be null and void, and not
enforceable, if it either: a) requires a solid waste
enterprise to defend and hold harmless the local agency in
connection with the local agency's imposition of fees,
charges, levies, exactions, or assessments that are found
by a court to have been imposed in violation of articles
XIII C or XIII D of the state Constitution; or b) requires
a solid waste enterprise to refund fees to its customers if
the fees are collected on behalf of the local agency by the
solid waste enterprise and have been remitted by the solid
waste enterprise to the local agency.
No information has been provided to the committee confirming
that any local agencies have required a solid waste
enterprise to indemnify local agencies on matters relating
to articles XIII C or XIII D of the state Constitution.
2) Background on indemnification. The Civil Code
indemnification procedures have been largely unchanged
since 1872, and indemnification is quite common for a
number of activities. One simply does not generally want
to be liable if another party is responsible for carrying
out a responsibility for them and fails to carry out that
obligation. This does not mean that in all cases the party
being "indemnified" (in the above case this would be the
local agency, or the "indemnitee") by the other party that
is "indemnifying" the local agency (in the above case this
would be the solid waste enterprise, or the "indemnitor")
is not responsible for all of its actions. Under a general
indemnity provision, for example, only passive negligence,
not active negligence, will be covered. A determination of
the negligence as being active or passive centers around
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the facts and circumstances of the case.
By specifying the conditions of indemnification, SB 841 is
inconsistent with current indemnification procedures. For
example, under current law the "person indemnifying is
bound, on request of the person indemnified, to defend
actions or proceedings brought against the latter in
respect to the matters embraced by the indemnity . . ."
Yet, SB 841 specifically sets several restrictions relating
to imposition of an indemnification obligation.
Are new indemnification restrictions relating solely to
articles XIII C and XIII D of the state Constitution
necessary when there are already existing procedures
relating to indemnification?
3) Previous attempts by solid waste interests to seek
indemnification restrictions . SB 1179 (Polanco) of 1997
set restrictions on the enforceability of an indemnity
obligation for solid waste collection. Governor Wilson
vetoed SB 1179, noting that "To assert that solid waste
management enterprises cannot indemnify losses based upon
their own breach without the state's intervention to
negotiate the terms of the agreement is ludicrous on its
face." According to this veto message, "When government
ventures into the arena of contractual negotiations it is
generally to protect an obviously disadvantaged party. In
this instance it appears that the state is being asked to
protect the industry from itself. Indeed there is
significant evidence that the industry is responsible for
the proliferation of waste diversion indemnification
agreements. Various solid waste management providers have
offered to indemnify prospective clients to gain an
advantage in a competitive marketplace."
SB 1340 (Polanco) Chapter 987, Statutes of 1998, set
requirements relating to an indemnity obligation due to a
local agency's failure to establish and maintain a source
reduction and recycling element, and meet solid waste
diversion requirements. SB 1340 prohibited an indemnity
obligation from being enforceable against a solid waste
enterprise until the local agency has affirmative sought in
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good faith, all administrative relief or demonstrates good
cause for not pursuing that administrative relief.
However, any penalty must be apportioned in accordance with
the percentage of fault of the local agency and the solid
waste enterprise.
SB 1340 addressed court interpreter compensation issues when
approved by the Senate, and these provisions were stricken
in the Assembly where the indemnification issues were
added. The Senate Environmental Quality Committee
concurred in Assembly amendments at a Senate Rule 29.10
concurrence hearing (5-2) (with 9 members on the
Committee). At that time, the Committee analysis raised
the following policy question: "Will this bill set a
precedent for other special local agency indemnification
procedures?"
Although the precedent was set with SB 1340, one may question
whether it is appropriate for the Legislature to continue
protecting solid waste interests from themselves by
declaring particular indemnification provisions null and
void.
4) Existing contracts . SB 841 does not apply to "a provision,
term, condition, or requirement contained in an ordinance,
contract, franchise license, permit, or other entitlement
or right adopted, entered into, issued, or granted on or
after January 1, 2012."
To avoid affecting any existing requests for proposals or
contracts subject to negotiation, any indemnification
restrictions should establish an operative date that gives
parties time to be aware of the restrictions ( i.e. , six to
nine months following the effective date of this bill).
5) Clarification needed . If the Committee believes this bill
is necessary, clarification is needed to ensure that the
fee refunding provisions of §40059.2(d)(2) (page 3, lines
31 to 34) apply when the fees are found to have been
collected in violation of articles XIII C and XIII D of the
state Constitution.
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SOURCE : California Refuse Removal Council, Republic
Services, Waste Management
SUPPORT : Inland Empire Disposal Association, Los Angeles
County Waste Management Association, Solid
Waste Association of Orange County
OPPOSITION : Central Contra Costa Solid Waste Authority