ELJEN CORP. v. DEPT. OF HEALTH, 29813-9-II (Wash.App. 7-1-2003)

No. 29813-9-IIThe Court of Appeals of Washington, Division Two.
Filed: July 1, 2003 DO NOT CITE. SEE RAP 10.4(h). UNPUBLISHED OPINION

Appeal from Superior Court of Thurston County Docket No: 01-2-02241-2 Judgment or order under review Date filed: 07/26/2002

Counsel for Appellant(s), Rhys Alden Sterling, Attorney at Law, P.O. Box 218, Hobart, WA 98025-0218.

Counsel for Respondent(s), Lilia Lopez, Aty General’s Ofc, 2425 Bristol Ct SW, P.O. Box 40109, Olympia, WA 98504-0109.

HUNT, C.J.

Eljen Corporation appeals the superior court’s affirmance of the Department of Health’s rejection of its experimental sewage system application. Eljen argues that (1) the Department must approve any minimally complete experimental proposal; (2) the administrative code lacks any set criteria for the Department’s evaluation of experimental sewer system applications, thereby creating an arbitrary approval process in violation of Eljen’s due process rights; and (3) the Health Law Judge denied Eljen a de novo hearing. We affirm.

FACTS I. Background
The Washington State Board of Health regulates the disposal of solid and liquid waste.[1] Generally, a waste disposal system can be (1) `conventional,’ involving a septic tank and a gravity flow or pressure distribution to a gravel-filled drain field; or (2) `alternative,’ including any other system that can `provide equivalent or enhanced treatment performance as compared to conventional gravity systems.’[2]
If the Department of Health has not developed design guidelines for a particular alternative system, an applicant may submit a proposal for an `experimental system.’ WAC 246.272.01001, .05001.

The approval process for an `experimental system’ application requires (1) a written proposal;[3] (2) technical and scientific review by the technical review committee (TRC);[4] and (3) an approval decision, which an applicant may contest in an adjudicative proceeding.[5] After the experimental phase, the Department may approve the system as an `alternative’ system only if such approval is based upon sufficient theory, applied research, performance data, and a recommendation from the TRC.[6]

Eljen manufactures the In-Drain System, an on-site, underground sewage disposal apparatus that utilizes a patented geotextile fabric cover and a layer of biological growth and inorganic residue to treat effluent in a drain field sized as much as 78 percent smaller than a conventional drain field. While used in a number of other states and countries, the In-Drain System has not yet been approved for operation in Washington.

II. Eljen’s Application for Experimental System Approval
In December 1999, Eljen applied to the Department for permission to operate 18 experimental test sites equipped with the In-Drain System in order to pave the way for statewide consumer sales. The proposal represented that (1) Eljen would monitor 18 systems for 18 months starting from completed installation of the last system; and (2) the total effluent per site would vary with the site, not exceeding 3,500 gallons per day.

Based on a previous Eljen proposal, a member of the Department’s sewage program sent a draft approval letter for Eljen’s comment. But after the specialist whose review of Eljen’s data had led to the tentative approval recommendation left the Department (and the country), others were unable to reconstruct his conclusions.

A wastewater management program supervisor told Eljen that the monitoring time frame should far exceed 18 to 24 months. He offered to let Eljen utilize the existing approved guidelines for gravelless drain field systems, which would reduce the drain field’s required size by 50 percent,[7] less than the 70 percent reduction Eljen had requested. Eljen declined.

Meanwhile, the TRC review resulted in numerous questions. Eljen declined to attend the TRC meeting. Instead, it submitted a letter replying to some of the TRC’s concerns. Because some of the questions it had posed to Eljen remained unanswered, the TRC unanimously rejected Eljen’s application; it did, however, decide to continue discussions at the next meeting. But Eljen declined to engage in further discussions with the TRC.

The Department then accepted the TRC’s recommendation and denied Eljen’s application, citing seven unresolved issues.

III. Health Law Judge Hearing
Eljen timely requested an adjudicative hearing before a Health Law Judge (HLJ). Eljen waived its right to an evidentiary hearing.

The Health Law Judge (HLJ) affirmed based on two of the Department’s seven grounds: (1) Eljen’s proposed 18-month time frame for monitoring the experimental system was too short to generate sufficient data on system longevity; and (2) the proposal did not include testing the maximum capacity of the drainage loading design, so it would not meaningfully test system capabilities.

IV. Judicial Review
Eljen then sought judicial review in Thurston County Superior Court.

The superior court affirmed the Department’s denial of Eljen’s application.

Eljen appealed to the Supreme Court, which transferred the case to us.

ANALYSIS I. Standard of Review
The Department’s processing and denial of Eljen’s application for an experimental on-site sewage system was a `licensing’ action. RCW 34.05.010(3), (9)(a).[8] We review an agency’s final order in a licensing action for constitutional violations, unlawful procedures or decision-making processes, erroneous legal interpretations, substantial evidence in the whole record, resolution of all required issues, and arbitrary or capricious decisions.[9] RCW 34.05.570(3)(a), (c)-(f), (i).

We apply these standards directly to the record before the licensing agency. Tapper v. Employment Sec. Dep’t, 122 Wn.2d 397, 402, 858 P.2d 494
(1993). The burden is on the party challenging the agency action to show that it was invalid. RCW 34.05.570(1)(a). And we accord great weight to an agency’s interpretation of its own rules. Safeco Ins. Cos. v. Meyering, 102 Wn.2d 385, 390, 687 P.2d 195 (1984); Washington State Employment Ass’n v. Cleary, 86 Wn.2d 124, 129, 542 P.2d 1249 (1975).

II. Approval Not Mandatory
Eljen argues that WAC 246-272-05001(1)(a) mandates approval of any experimental system proposal containing the requested information. WAC 246-272-05001(1) provides, in relevant part, `Persons proposing a system for inclusion on the departmental approved list of experimental systems shall submit to the department for review and approval, a written proposal.’ Eljen contends that (1) any TRC recommendations can result only in the Department imposing conditions on the experimental system; (2) the goal of promoting technology indicates that experimentation should be approved; and (3) unlike related provisions, this WAC provision contains no express grant of discretion to the Department to deny an experimental system.

The Department counters that the statutes and regulations implicitly grant it discretion to deny experimental system applications. We agree. While no cases have interpreted whether the Department’s `approval’ is mandatory upon submission of a complete proposal, generally, as both the U.S. and Washington Supreme Courts have stated, `The power to approve implies the power to disapprove and the power to disapprove necessarily includes the lesser power to condition an approval.’ State v. Crown Zellerbach Corp., 92 Wn.2d 894, 899, 602 P.2d 1172 (1979) (quoting S. Pac. Co. v. Olympian Dredging Co., 260 U.S. 205, 208, 43 S.Ct. 26, 67
L.Ed. 213 (1922)). See also State v. Maxwell, 74 Wn. App. 688, 693, 878 P.2d 1220 (1994). In light of both this principle and the great weight we give to an agency’s interpretation of its own rules, Cleary, 86 Wn.2d at 129, we hold that the Department has discretion to disapprove an experimental system application under WAC 246-272-05001.

III. Standards for Evaluating an Experimental System
Eljen argues that because the Department did not apply published objective standards for assessing experimental waste system proposals, the Department’s denial of Eljen’s application denied it due process. Eljen contends that, rather than setting standards, WAC 246-272-05001
merely lists required informational components of an application for experimental system approval.[10]

The Department replies that WAC 246-272-05001 provides flexible standards that enable it to gather specified information about a proposal in order to fulfill the Department’s mandate to protect the public health. WAC 246-272-00101(1)-(2) states that the `purpose’ of the chapter is `to protect the public health’ by regulating the `location, design, installation, operation, maintenance, and monitoring of on-site sewage systems’ with a view toward the long term.

A. Flexible Standards and Meaningful Review
Precise standards are `not always appropriate in administrative actions,’ as when the relevant `factors’ affecting the administrative decision `differ from case to case.’ State ex rel. Standard Mining
Dev. Corp. v. City of Auburn, 82 Wn.2d 321, 330-31, 510 P.2d 647 (1973) (citing Barry Barry, Inc. v. Dep’t of Motor Vehicles, 81 Wn.2d 155, 500 P.2d 540 (1972). Imprecise administrative standards are sufficient to satisfy due process if (1) they provide applicants sufficient notice of the `general requirements,’ Weyerhaeuser Co. v. S.W. Air Pollution Control Auth., 91 Wn.2d 77, 83, 586 P.2d 1163 (1978); (2) there exist adequate procedural safeguards, such as an adjudicative `hearing, a right of appeal, and a chance to show that the conditions are unreasonable,’ Standard Mining, 82 Wn.2d at 330-31; and (3) they `enable courts to provide meaningful review.’ Weyerhaeuser, 91 Wn.2d at 83. These criteria are met here.

First, WAC 246-272-05001(1) lists the following general requirements for proposing an experimental waste system:

Persons proposing a system for inclusion on the departmental approved list of experimental systems shall submit to the department for review and approval, a written proposal which includes:
(a) Description of existing theory and/or applied research supporting the application;
(b) Proposed testing protocol;
(c) Proposed operation, maintenance, and monitoring detail and schedules;
(d) Maximum number of installations;
(e) Proposed locations and uses, if multiple locations are proposed;
(f) Proposed reporting detail and frequency;
(g) Proposed schedule for the experimental program;
(h) Name(s) of the person(s) financially responsible for the experimental program, including:
(i) Routine operation and maintenance;
(ii) Monitoring; and
(iii) Repair and/or replacement of the system.
(i) Verification that the proposal is consistent with the intent of this chapter, requirements of this section, and the departmental application process.

WAC 246-272-05001(1) (emphasis added). The purpose of this chapter is to `protect the public health’ by regulating `on-site sewage systems’ with a view toward `long-term’ functional capabilities. WAC 246-272-00101.

These nine requirements provide notice of the `general requirements,’ Weyerhaeuser, 91 Wn.2d at 83, to an experimental system applicant to supply the requisite information so that an experimental period can be designed, after which the Department can evaluate the functionality of the system and discharge its duty to `protect the public health.’ Protection of the public health is the familiar standard for action taken under the police powers, which Washington courts frequently apply.[11]

Second, WAC 246-272-27001(1) and (3) requires `an administrative appeals process to consider procedural and technical conflicts arising from the administration of local regulations’ through which a `person contesting a departmental decision regarding a[n] . . . approval . . . may file a written application for an adjudicative proceeding.’ Eljen clearly had recourse to procedural safeguards related to the decision not to approve its experimental system, including an adjudicative hearing, appeals process, and judicial review. WAC 246-272-27001; RCW 34.05.510.[12]

Third, WAC 246-272-27001(4) incorporates the Administrative Procedure Act (APA), which also provides for review by the courts. RCW 34.05.510. Thus, the nine requirements of WAC 246-272-05001(1) and the purpose of protecting the public health are capable of meaningful judicial review. Weyerhaeuser, 91 Wn.2d at 83.

Finally, alternative and experimental systems may vary substantially. An `alternative’ system is defined to include all systems that are not `conventional,’ so long as they can `provide equivalent or enhanced treatment performance as compared to conventional gravity systems.’ WAC 246.272.01001. `Experimental’ systems include `proprietary device[s] or method[s] which [have] not yet been evaluated and approved by the department.’ WAC 246.272.01001. Because the types of systems can be so varied, the Department promulgates lists of `approved’ alternative and experimental systems. WAC 246-272-04001(1)(b), 05001(5)(b). Given such variation from case to case and the myriad technological possibilities, precise standards are not appropriate. Standard Mining, 82 Wn.2d at 331.

B. Eljen’s Failure To Provide Required Information
The Department was unable to reconstruct the conclusions of its previous staff person who had given draft approval for Eljen’s unprecedented (in Washington), small drain field. So it proposed conditioning Eljen’s experimental system on a larger drain field than the size stated in Eljen’s application (but substantially smaller than a conventional drain field), a longer testing period than the 18 months listed in Eljen’s application, and a testing site using the maximum disposal flow rate. Eljen refused.

The TRC also made several inquiries about functional matters, but Eljen declined to attend the TRC’s meeting and did not reply to all of its questions. Although Eljen represented that it had thousands of functional, essentially problem-free systems operating in many other states and in some foreign countries, it did not provide any studies or data to back up these assertions so the TRC could review the experience elsewhere and evaluate its potential applicability to the variable soils around the state of Washington. Because Eljen did not complete the application process, the Department was unable to complete its review and, consequently, denied the application.[13]

We find no denial of due process here.

IV. The Health Law Judge A. Standard of Review
Generally, Department adjudicative proceedings incorporate the APA rules, RCW 34.05.449 through 34.05.455. WAC 246-10-602(1). A reviewing court grants relief only if the `person seeking judicial relief has been substantially prejudiced’ by the agency action. RCW 34.05.570(1)(d).

In licensing actions, the applicant bears the burden of establishing by a preponderance of the evidence `that the application meets all applicable criteria.’ WAC 246-10-606. The officer presiding over a Department adjudicative hearing may ‘[c]onduct the hearing de novo,’ may receive evidence, and may request evidence. WAC 246-10-602(2)(a), (f), (h). The hearing officer must base his order `on the kind of evidence upon which reasonably prudent persons are accustomed to rely in the conduct of their affairs.’ WAC 246-10-606.

B. Application of Proper Standard of Review
Eljen argues that the Health Law Judge (HLJ) applied an improper standard of review because he never stated that Eljen need only show by a preponderance of the evidence that its application met the requirements for acceptability and he repeatedly noted that Eljen failed to show that the Department acted arbitrarily and capriciously. The Department replies that (1) the HLJ did provide a proper de novo hearing; (2) the HLJ first considered the preponderance of the evidence and then, because Eljen raised the argument, he considered whether the Department’s action was arbitrary or capricious; and (3) there was no substantial prejudice from this procedure. The record supports the Department’s characterization of the procedure.

Although the HLJ did state that Eljen failed to show that the Department acted arbitrarily, capriciously, or clearly erroneously, the HLJ clearly indicated that he made these statements in response to Eljen’s arguments that the Department had been arbitrary or capricious. Contrary to Eljen’s contention, the record does not show that the HLJ applied the wrong standard of review.

Further, the HLJ properly held a hearing de novo. He requested and received several new evidentiary submissions from both parties. He carefully traced the record and the arguments of the parties in a long, well considered opinion. He also made credibility determinations consistent with applying a preponderance standard.

Affirmed.

A majority of the panel having determined that this opinion will not be printed in the Washington Appellate Reports, but will be filed for public record pursuant to RCW 2.06.040, it is so ordered.

SEINFELD and HOUGHTON, JJ., concur.