Petition — Southern Pacific Transportation Co. v. Public Utilities Commission

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83- 1 053 Office Supreme Court, U.S,

. FILED

No... ORE _23 1963

In THE

Supreme Court of the United States

Octoser TERM, 1983

SOUTHERN PACIFIC TRANSPORTATION COMPANY

Petitioner,

PuBLIC UTILITIES COMMISSION OF CALIFORNIA,

Respondent,

and

CALIFORNIA DEPARTMENT OF TRANSPORTATION,

| Intervenor-Respondent.

TO THE UNITED STATES COURT OF

PETITION FOR A WRIT OF CERTIORARI :

APPEALS FOR THE NINTH CIRCUIT

San Francisco, CA 94105

Telephone: (415) 541-1756

Attorneys for Petitioners

QUESTIONS PRESENTED

Must a party seek immediate review in this Court of a state

court decision containing a federal issue arguably ripe for

review, when that same issue has already been presented by the

same parties to a federal district court for determination, and

ongoing state proceedings may dispose of the state dispute on

nonfederal grounds?

Must not the res judicata rule give way to a conflicting and

preemptive federal. statute which directly derives from Con-

gress’ constitutional power to regulate interstate commerce?

Where the federal constitutional issue was not fully liti-

gated and finally determined in the state court, can a federal

court invoke the res judicata doctrine in defiance of the settled

rule allowing a party to litigate that issue in a new, related cause

of action?

LIST OF CORPORATE SUBSIDIARIES AND AFFILIATES

Petitioner’s parent company is Southern Pacific Company.

The partially owned subsidiaries and affiliates of the petitioner

are:

St. Louis Southwestern Railway Co.

The Ogden Union Railway & Depot Co.

Portland Traction Company

Portland Terminal Railroad Co.

Sunset Railway Company

Central California Traction Company

Trailer Train Company

The wholly and partially-owned subsidiaries and affiliates

of St. Louis Southwestern Railway Co. are:

Alton & Southern Ry. Co.

Arkansas & Memphis Ry. Bridge & Terminal Co.

Dallas Terminal Ry. & Union Depot Co.

St. Louis Southern Ry. Co. of Texas

Southern Illinois & Missouri Bridge Co.

Southwestern Transportation Co.

Terminal R.R. Association of St. Louis

Glascar Inc.

Main Street Warehouse Company

The Southwestern Town Lot Corp.

Kansas City Terminal Railway Co.

Trailer Train Company

" .

7 ’ - ¥ \ is se) ihe

TABLE OF CONTENTS

PAGE(S)

QUESTIONS PRESENTED ......5...ccsssccscsescscssvorcseescsevescceseses i

LIST OF CORPORATE SUBSIDIARIES AND

Fe lentes hsinspnvecqntihinssisinsestipbesianteeseantt ii

Fe PUN IIE IIIED asccscncteccoccccsnnsstastecateesetieindndeions v

CO id ontechanhenstiibes l

JURISDICTIONAL STATEMENT ....000.......cccccccesecscesseeseees 2

CONSTITUTIONAL AND STATUTORY

PN ied nintitivsientasenabinaiiendbiintiessteciinasvorntnetntinh 2

STATEMENT OF THE CASE .........cccccscossccscssoscsessscsssseessees 2

A. _ The Factual Background Of This Case.............. 3

B. The Statutory Background Of This Case ........... 5

C. The PUC’s Constitutional Challenge To Sec-

tion 214 of The Staggers Act..............cccccceeeeee 7

D. The PUC’s Affirmative Relinquishment. Of

Jurisdiction Over Intrastate Transportation... 8

E. Thee Decisions Below .....cccccoccoccessosecccsccccccccesesesees &

EXISTENCE OF JURISDICTION IN THE COURT OF

FRR a Sv a

REASONS FOR GRANTING THE WRIT................000000-- 9

I. THE DECISIONS BELOW ARE AN ERRONEOUS

APPLICATION OF RES JUDICATA, SURE TO

INCREASE THE NUMBER OF PRECAUTION-

ARY INTERLOCUTORY PETITIONS AND

APPEALS TO THIS COURT..............c0ccesscsssssseseseses 9

A. California Had Lost Jurisdiction Of Intrastate

Rail Passenger Service Before The June 2

8 SR es a u

B. The Constitutionality And Effect Of The fey a

Se Act Was Already Being Litigated

ederal Court 10

C. Review By This Court Of The Federal Issue In

~ December 1981 Would Have Been Pre- i

mature

Il. WHERE THE BASIS FOR THE CALIFORNIA

SUPREME COURT'S DENIAL OF A PETITICN

FOR REVIEW IS UNCERTAIN, THE CALI-

FORNIA RULE FORBIDS THE APPLICATION

OF RES JUDICATA 14

PaGE(S)

A. The Denials Of December 23, 1981, By The

California Supreme Court Could Have Been

On Procedural Grounds... 14

B. Where The Basis For The Piaalitels Is “wang

. tain, Res Judicata Cannot Applly................... 16

Ill. RES JUDICATA CANNOT BE APPLIED TO

STATE COURT JUDGMENTS WHICH FRUS-

TRATE AN EXERCISE OF CONSTITUTIONAL

POWERS RESERVED TO CONGRESG................ 17

IV. WHERE SP DID NOT RAISE THE STAGGERS

ACT ISSUE TO THE STATE SUPREME

COURT, SP CANNOT BE BARRED FROM

LITIGATING THE ISSUE IN A NEW, RE-

LATED CAUSE OF ACTION ..........ccccscccsesesessereees 20

A. The Staggers Act Issue Was Not Raised For

Res Judicata Purposes Because SP Did Not

Freely And Voluntarily Submit It To The

California Supreme Court.................:-sccesee00s 21

B. SP’s June 1982 Federal Court Lawsuit Was

Based On A New Cause Of Action................ 23

C. Both Federal And State Law Prohibit Appli-

cation Of Res Judicata To Issues That Could

Have Been Raised In A Prior Lawsuit

Where The Current Suit Is Based On A New

oe Ree er rae 24

GIS ebdiciricecttcetinvainninscentincstiunecticieinciisncaaiiionasanes 2b

LTE LTS IRAE ATID CO SS la

TABLE OF AUTHORITIES

CASES PAGE(S)

Ackerman v. Ackerman, 676 F.2d. 898 (2d. Cir. 1982)........ 16

Consolidated Rail Corp. v. State of Ill., 423 F. Supp. 941

a ee a 17, 18

Commissioner v. Sunnen, 333 U.S. 591 (1948) ........cccccccceeeee 25

Consumers Lobby, Etc. v. Public Util. Com’n., 25 Cal. 3d

ee ae Ie 0 IU OP cdcteceenittinsectcinieecesninitiaithadlhieaptesisntiins 15

Cromwell v. County of Sac., 94 U.S. 351 (1876) .......cccccccceee 24

Cox Broadcasting Corp. v. Cohn, 420 U.S. 469 (1975) .. 12, 13

Dump Truck Owners Assn. v. Public Util. Comm’'n., 434

US. 9 (1977) (per curiam) .........cccccccccsccccccoccccoccscecsee 13, 14

Durfee v. Duke, 375 U.S. 106 (1963) ..........cccccccsseeeeseeeceeeeees 17

Eichler Homes, Inc..v. Anderson, 9 Cal.App.3d 224, 87

Se CD ON a chattels tticdencccnisnihensincewianminniannanins 25

England v. Medical Examiners, 375 U.S. 411 (1964)..... 21, 22

eer or Department Stores, Inc. v. Moitie, 452 U.S. 394

( FF accu tieisintpesincdald bids Midnesnissntinpinditibtemnansnidstasnantnaitiigtiliabie ll

Government Employees v. Windsor, 353 U.S. 364 (1957)..... 21

Grubb v. Public Utilities Commission, 281 U.S. 470 (1970). 17

Houston & Texas Ry. v. United States, 234 U.S. 342 (1914) 19

Irwin v. Irwin, 69 Cal.App.3d 317, 138 Cal. Rptr. 9 (1977) . 16

Kalb v. Feuerstein Co., 308 U.S. 433 (1940) .......ccccccccccceseeeee 17

Mercoid Corp. v. Mid-Continent Co., 320 U.S. 661 (1944) .. 24

Napa Valley Co. v. R.R. Comm., 251 U.S. 366 ( 1920).......... 15

Pennsylvania Railroad C. my v. Sharfsin, 240 A Supp.

233 (M.D. Pa.) vaca on other grounds sub. nom.

Utility Comm'n. v. eo gor R. Co., 382 US. 28

(1965) (per curiam), aff'd, 365 F.2d 276 (3d Cir. ), cert.

denied, 386 U.S. 982 ( 1966) 17

Shaw v. Delta Airlines, Inc., 51 U.S.L.W. 4968 (US. June

24, 1983) 9

Southern Pacific ation Company v. Public Utilities

ism No. C-82-3074 MHP (N.D. Cal., filed June .

hana

ee orcas eew's. Public Utilities

“Commision. No h Cir. filed August 19, .

Texas v. United States, No. A 80 CA 487 (W.D. Texas,

filed December 12, 1980) 7 7, 11,20

CASES PAGE(S)

Title Guarantee & Trust Co. v. Monson, \1 C.2d 621

ESSE er Asie aren eererame ses < * 16,25

United States v. United States Fidelity Co., 309 U.S. 506

III Uditdentdicevndypseniinendetnahdicetistiniianaacititenaiabiiioees 17

Younger v. Jensen, 26 C.3d 397, 605 P.2d 813 (1980)......... 25

ADMINISTRATIVE DECISIONS AND ORDERS

INTERSTATE COMMERCE COMMISSION

Ex Parte No. 388, STATE INTRASTATE RAIL RATE

AuTHORITY—P. L. 96-448

Order, 364 ICC 881 (April 17, 1981), 46 Fed.Reg. 23335

I 51s acted chinsnciiimatignicgennestosnnnesensatigilinbses 6

Decision (unreported ), 47 Fed.Reg. 5786 ( February 8,

a Rd ead saccieahittteedictsainenstitinitidamacaasanssitibdinnnsiogaciasaiin 23

Order, 365 ICC 700 (May 4, 1982), 47 Fed.Reg. 20220

NE Tia TTI ssid sa snidepncliooctioohnstipbbdesnonipeesucensbghagi 8, 10, 23

Pusiic Utitrries COMMISSION

Decision 91847, Case No. 10575, 3 Cal.PUC 2d, 679 (June

Na NN ANIA a RS Sit ane ee INS 3

Decision 92230, Case No. 10575 (September 3, 1980)

IE Ri titesicenclipassinistbiceinineniaiuecndaatdiniailiitbaeatibativcessenns 3

ported ) Ello oem aalatieselidialddiatatigaialeliediisiainedsicaaste 4

7, (1981) diisiiihdacniepbsilapletieediieabtanlisiatniitliatai ti piiinsia casual banat

TI Nie Sscdisnpiahascapatepibateacitehtachecbidbbawingesesialintibetiailiiie 4,12

Decision 93211, Case No. 10575 (June 16, 1981) (unre-

stan cntnindpiapkeccussctcossaincietipeniidanieseltings dais 4,13

Decision 93391, Case No. 10575 (August 4, 1981) (unre-

| RR eae ONS.” SEO AST 4

Decision 82-06-045, Case No. 10575 (June 2, 1982) (unre-

MIIIIIEEY i cenit ieaidulsinphc case sttsiciigabesedneititesiendiantuistsinicslopetasiehanaala 5

b a. ea * ak

CONSTITUTIONS, STATUTES PAGE(S)

FEDERAL

United States Constitution, Article I, Section 8, Clause 3...... 19

Be eas EOE OO incxcitznsceaencstnnentiamnaniasnaglticsidenwaiaalinasl 2,6

IIE slic ctl cidinlicsdecentnccsudaadedibtinsaskadeninbbisieabesten ee 9

Interstate Commerce Act, including the Staggers Rail Act of

1980, P.L. 96-448, 94 Stat. 1895

Fe EE kn id dbineiiticsicdccvecinrvcnencantinssiaesinns 5

PP Cire, TE ca hitcthid evicickcdininedinlthemiseenemvsbancomanatina 2, 6

OD Fs I Prncectstcesedeoaserastecestthionseidicecnitshigialion 6

DE aie I iiiiieetetssaccosscencnsivhssereicerss 8, 10, 18, 23

A See hic cctiteicvchesscheenttiaaacllbicapeusthctbesivuccasemiitin 2

A es eT TIES D ccenndsirvninststctabhvtcndnteietiovimtsnivem 9, 10

OD a ees HN ee EP hentnccctuicincace vobinedervebbnhacanibiiios 10

Us Be Ce FIED encccictncictninipniccecccnensicvesigiiaitil 10

FT a a ee seesttccvtiqancstccvinecssnscighbeiiuninn 6

49 U.S.C. §11501(b)(4)(A) «0.0... 6, 10, 13, 18, 23

49 U.S.C. $11501(b)(4)(B).... 0... ceccccceeseeeeees 10, 18, 23

FF ee PISCE D sscbinesiesedresscoccasaiacinaseecvtneabamasiliomaual 23

NED cell inpiventccecesanbeshterdsenctlinnieatantedl 18

STATE

California Public Utilities Code

a FU cxosceinpbpttniilensiceniiiiesleseasonetivanaaiteidaldiiciia nana iitece Den 22

BE Fai o.coltcsnesnscbtisiantetnaiidanadadinemamidnili taste ate 3, 4, 22

TREATIES AND LAW REVIEW ARTICLES

Dobbs, The Validation of Void Judgments:

The Bootstrap Principle, 53 Va. L. Rev. 1003 (1967).... 19

46 American Jurisprudence 2d, Judgments §461..................+. 11

MISCELLANEOUS

House Conference nae No. 96-1430, 4 U.S. Code Co

& Ad. News 4110 (

th Cong., 2d Sess., 1980) .....csm 19

IN THE

Supreme Court of the Hnited States

OcToser TERM, 1983

No.

SOUTHERN PACIFIC TRANSPORTATION COMPANY

Petitioner,

Vv.

PusBLic UTILITIES COMMISSION OF CALIFORNIA,

Respondent,

and

CALIFORNIA DEPARTMENT OF TRANSPORTATION,

Intervenor- Respondent.

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF

APPEALS FOR THE NINTH CIRCUIT

Petitioner Southern Pacific Transportation Company re-

spectfully prays that a Writ of Certiorari issue to review the

opinion of the United States Court of Appeals for the Ninth

Circuit entered in this proceeding on September 27, 1983.

OPINIONS BELOW

The opinion of the court of appeals is reported at 716 F.2d

1285 (9th Cir. 1983)\-and appears in the Appendix at la. The

opinion and judgment of the United States District Court for

the Northern District of California issued August 9, 1982, which

have not been reported, appear in the Appendix at 12a and

3la, respectively. An amendment to the order of the district

court appears in the Appendix at 19a. The district court’s order

denying SP’s motion for an injunction pending appeal appears

in the Appendix at 21a. The ninth circuit’s order denying SP’s

emergency motion for an injunction appears in the Appendix at

23a.

JURISDICTIONAL STATEMENT

The mandate of the United States Court of Appeals for the

Ninth Circuit was entered on October 24, 1983. App. at 29a.

The jurisdiction of this Court is invoked under 28 U.S.C.

$1254(1).

CONSTITUTIONAL AND STATUTORY PROVISIONS

The following constitutional and statutory provisions are

set forth in the Appendix commencing at 32a.

United States Constitution article I, section 8, clause 3.

Interstate Commerce Act, as amended by the Staggers Rail

Act of 1980, P.L. 96-448, 94 Stat. 1895, 49 U.S.C. §§10101a,

10501, 11501.

California Public Utilities Code §§1732, 1756.

STATEMENT OF THE CASE

Petitioner Southern Pacific Transportation Company

(“SP”) brought suit in the United States District Court for the

Northern District of California against respondent Public Utili-

ties Commission of California (“PUC”) and intervening re-

spondent California Department of Transportation (“Calt-

rans”) on June 15, 1982, to enjoin the PUC from enforcing its

order of June 2, 1982, directing SP to build new commuter

stations, file tariffs, and institute intrastate passenger commuter

train service.

The related proceedings before the PUC and the Interstate

Commerce Commission (“ICC”) and in the state courts are

described in the “Statement of the Case” filed December 13,

1982, in No. 83-985, wherein SP has appealed from two

decisions of the Supreme Court of California declining to

review subsequent PUC orders.'

‘The decisions and orders in these related cases are included in the

appendix to SP’s jurisdictional statement in No. 83-985, hereafter referred to

as “Appeal App.”

The appeals in No. 83-895, and this petition for writ of

certiorari involve different facets of a continuing controversy

and the same primary parties.

A. The Factual Background Of This Case

There is no dispute as to the essential facts. On May 18,

1978, the County of Los Angeles (“County”) and Caltrans

petitioned the PUC for an order directing SP to start commuter

passenger train service on a 66-mile segment of SP’s Coast main

line between Oxnard, CA and Los Angeles, CA. On June 3,

1980, the PUC ruled in favor of the requested service, but its

implementing order was stayed by the timely filing by SP of an

application for rehearing. Decision 91847, 3 Cal.PUC 2d 679,

Appeal App. at 3a. On September 3, 1980, the PUC granted

partial rehearing and reopened for the taking of additional

evidence, thereby continuing the stay. Decision No. 92230

(unreported), Appeal App. at 66a.

On October 3, 1980, SP filed with the Supreme Court of

California a petition for writ of review of those issues in

Decision 91847 that were reaffirmed in the September order.

Southern Pacific Transportation Company v. Public Utilities

Commission, S.F. No. 24220. Specifically, SP appealed to the

California supreme court on the following issues: (1) whether

the requested short-haul passenger rail service was within the

scope of SP’s dedication and (2) whether the PUC could ignore

the offer of Greyhound Lines, Inc. to provide alternative bus

transportation in making its findings of public convenience and

necessity for the rail service.

Section 1756 of the California Public Utilities Code re-

quired SP to appeal any issues not reheard by the PUC within

30 days of the denial of rehearing.2 However, because SP

2 Section 1756 provides:

“Within 30 days after the application for a rehearing is denied, or, if the

application is granted, then within 30 days after the decision on rehearing, the

applicant may apply to the Supreme Court of this State for a writ of certiorari

or review for the purpose of having the lawfulness of the original order or

decision or of the order or decision on rehearing inquired into and deéter-

mined.” °

believed it likely that there would be further appeals after the

rehearings, SP asked the California supreme court to stay any

consideration of its petition until the reopened hearings were

completed. The court made no written response but did not act.

The PUC conducted further hearings during October and

November, 1980. Thereafter, the County decided that the trains

would be contrary to the interests of its citizens and withdrew.

Caltrans persisted, offering to pay the train deficits from its

budget. In two decisions dated April 7, 1981, the PUC

significantly modified its earlier findings but still required SP to

institute the train service. Decision 92862 (unreported), Ap-

peal App. at 73a and Decision 92863, 5 Cal.PUC 2d 773,

Appeal App. at 82a.

On May 7, 1981, SP applied to the PUC for rehearing of

both decisions and for a stay of outstanding orders. On May

22, 1981, the PUC stayed “pending further review of this

matter” all of the provisions of its orders directed at SP except

for a requirement that SP and Caltrans negotiate a contract to

provide commuter service. Decision 93118 (unreported),

Appeal App. at 100a. On June 16, 1981, the PUC again modified

its findings significantly by increasing the costs which Caltrans

would have to pay, but it affirmed its conclusion that the

commuter service should be started. It did, however, continue

the stay. Decision No. 93211 (unreported Appeal App. at

102a.3

Because SP believed that the PUC’s findings on the public

convenience and necessity for the commute trains were in-

correct in its April 7 and May 22 orders, on July 16, 1981, SP

filed a second petition for writ of review in the California

supreme court, again pursuant to Cal. P.U. Code $1756. South-

ern Pacific Transportation Company v. Public Utilities Commis-

sion, S.F. No. 24316.4 That petition raised the following issues:

3 Caltrans petitioned for rehearing of the new compensation require-

ments, claiming they exceeded Caltrans’ ability to pay, but its petition was

denied by the PUC on August 4, 1981. Decision 93391 ( unreported), App. at

43a. Caltrans did not appeal.

“SP’s petition for writ of review appears in the Appendix at page 44a.

The PUC's answer filed August 14, 1981, appears in the Appendix at page.

59a. SP's reply filed September 3, 1981, appears in the Appendix at page 78a.

(1) whether the PUC erred in reaffirming its finding of public

convenience and necessity in the face of the County’s repudia-

tion of the service and (2) whether the PUC denied SP due

process in refusing to consider additional evidence showing that

the federal funding that Caltrans anticipated receiving was no

longer available.

Notwithstanding its pending state court challenges to the

PUC orders, SP offered to run the commuter service for

Caltrans if Caltrans would provide capital funding for certain

track and facility improvements needed to avoid disruption to

SP’s existing business and if Caltrans would pay adequate

compensation so that the commute trains would be operated as

a for-profit, and not a profitless, service. This Caltrans refused

to do. Caltrans also refused to compensate SP in accordance

with the requirements established in the PUC’s June 16, 1981,

order. Instead, Caltrans requested the PUC to lift its stay and

~ to order the commuter service into effect, leaving the parties to

resolve their dispute over compensation after the service had

started. The PUC did so on June 2, 1982. Decision 82-06-045

(unreported), Appeal App. at liSa (“June 2 Order’’).

All previous effective orders directed to SP had been to

negotiate; the June 2 Order was different: it laid down a

timetable for constructing stations, filing tariffs, and starting up

train service. Because that order asserted the power to force the

start-up of a new commuter rail service, it represented a serious

incursion into the rights conferred upon SP by the Staggers Rail

Act of 1980.

B. The Statutory Background Of This Case

The Staggers Rail Act of 1980, PL 96-448, 94 Stat. 1895,

effective October |, 1980 (“Staggers Act”), proposed the

revitalization of an ailing railroad industry by lessening regu-

lation and thereby allowing the railroads to price their services

in response to market forces. The new rail transportation policy

was to allow “to the maximum extent possible, competition and

the demand for services to establish reasonable rates for

transportation by rail ...” 49 U.S.C. §10101a.

In order to prevent state regulatory commissions from

using state police powers to require profitless local services,

Section 2145 of the Staggers Act preempted states from regu-

lating intrastate rail transportation unless they are certified by

the ICC under the Staggers Act certification procedures. The

Conference Report states:

“The conferees’ intent is to ensure that the price and

service flexibility and revenue adequacy goals of the Act

are not undermined by state regulation of rates, practices,

etc., which are not in accordance with these goals. Accord-

ingly, the Act preempts state authority over rail rates,

classifications, rules and practices. States may only regu-

late in these areas if they are certified under the procedures

of this section.” House Conference Report No. 96-1430, 4

U.S. Code Cong. & Ad. News 4110 (96th Cong., 2d Sess.

1980), p. 106.

States were given a grace period of 120 days after the

effective date of the Staggers Act to continue regulating in-

trastate rail transportation. 49 U.S.C. §11501(b)(2). If,

during that period, a state filed its standards and procedures for

regulating intrastate rail transportation with the ICC estab-

lishing that it would regulate according to standards and

procedures for interstate transportation under the Interstate

Commerce Act as amended by the Staggers Act, the grace

period was further extended until decision on certification. 49

U.S.C. §11501(6)(3)(B). California did not file for certifica-

tion, so that when the 120-day grace period expired January 29,

1981, California immediately lost iurisdiction over “intrastate

rates, classifications, rules, and practices.” 49 U.S.C.

§11S01(b)(4)(A); Ex Parte No. 388, State Intrastate Rail Rate

Authority, P.L. 96-448, 364 ICC 881 (April 7, 1981), 46

Fed.Reg. 23335 (April 24, 1981), Appeal App. at 180a.

5 Section 214 has been codified in relevant part in 49 U.S.C. §10501 and

49 U.S.C. §11501.

C. The PUC’s Constitutional Challenge To Section 214 Of

The Staggers Act

On December 23, 1980, the PUC intervened in a con-

stitutional challenge by the state of Texas attacking the preemp-

tion provisions of Section 214 of the Staggers Act. Texas y¥.

United States, No. A 80 CA 487, (W.D. Texas, filed December

12, 1980). On January 7, 1981, SP intervened to oppose the

PUC and other states challenging the Staggers Act. Cross

motions for summary judgment were filed. On November 3,

1982, the Texas district court issued an order and judgment for

the railroads and the ICC, upholding the constitutionality of

Section 214; the PUC and state motions were denied. App. at

26a and 30a. The PUC did not appeal, although Texas and

several other parties did. Texas v. U.S.A., No. 82-1693 (5th

Cir., argued September 27, 1983).

Meanwhile, the PUC, on January 6, 1981, had advised SP

by letter that it was challenging Section 214 of the Staggers Act

in Texas and refused to be bound by the Staggers Act. Appeal

App. at 287a. Despite that challenge, on August 14, 1981, in its

answer to SP’s petition for review in S.F. No. 24316, the PUC

told the California supreme court that if the court should issue a

writ of review, as requested by SP, the court should also decide

whether the PUC’s jurisdiction over intrastate rail passenger

service was preempted by the Staggers Act. App. at 75a-76a.

SP replied, pointing out to the court that SP and the PUC were

already litigating the issue of the constitutionality and scope of

the Staggers Act in the Texas district court. App. at 9la.

On December 23, 1981, while the motions for summary

judgment were still pending in the Texas case, the California

supreme court, by minute orders, denied SP’s petitions in S,.F.

No. 24220 and in S.F. No. 24316, App. at 24a and 24b,

respectively.

—.

D. The PUC’s Affirmative Relinquishment of Jurisdiction

Over Intrastate Transportation

Shortly thereafter, the PUC asked the ICC to undertake

regulation of all California intrastate rail transportation, and

the ICC did so on May ll, 1982. Ex Parte No. 388, State

Intrastate Rail Rate Authority—P.L. 96-448, 365 ICC 700, 701,

47 Fed. Reg. 20220 (May 11, 1982), Appeal App. at 1838a.

Assumption of jurisdiction over California intrastate rail trans-

portation by the ICC under 49 U.S.C. §11501(d)(4)(B)

automatically terminates any residual police power of the state

to order intrastate transportation services by carriers subject to

the Interstate Commerce Act. 49 U.S.C. §10501(c).

California thus had no remaining police power to order

intrastate transportation services from its railroads when the

PUC issued its June 2 Order against SP requiring construction

of stations, filing of tariffs and starting up of train service, the

order which SP asked the federal district court to enjoin.

E. The Decisions Below

In response to the June 2 Order, SP filed suit on June 15,

1983, in the United States District Court for the Northern

District of California seeking to enjoin the PUC from enforcing

its order on the grounds that the Staggers Act had deprived

California of jurisdiction to order the service. Southern Pacific

Transportation Company v. Public Utilities Commission, No. C-

82-3074 MHP. However, SP’s action was dismissed by District

Judge Marilyn H. Patel without reaching the fundamental

question of the Staggers Act preemption. App. at 12a. Judge

Patel concluded that the PUC’s loss of jurisdiction over rail

passenger service under Section 214 of the Staggers Act was, or

could have been, raised and considered by the California

supreme court and that the state court’s denials of review on

December 23, 1981, were appealable rulings to this Court on the

issue of whether or not the Staggers Act applied to intrastate

rail passenger service. App. at 14a. Motions for an emergency

stay were denied by both the district court and the ninth circuit.

App. at 21a and 23a, respectively.

SP appealed Judge Patel’s decision to the United States

Court of Appeals for the Ninth Circuit, which sustained the

district court, again without reaching the merits of the preemp-

tion issue. Southern Pacific Transportation Co. v. Public

Utilities Commission, No. 82-446 ( filed August 19, 1982), App.

at la. The Ninth Circuit rejected out of hand SP’s contention

that the Staggers Act preempts state regulation of intrastate

railroad service:

“... [W]e cannot accept that premise, in view of the state

supreme court’s decision to the contrary which Southern

Pacific did not take to the Supreme Court of the United

States.” App. at 10a.

EXISTENCE OF JURISDICTION IN THE COURT OF

FIRST INSTANCE

The action was brought in the United States District Court

for the Northern District of California under 28 U.S.C. §1331

as a case arising under the Constitution and laws of the United

States seeking injunctive relief from state regulation on the

ground that such regulation is preempted by a new law enacted

by Congress in the Staggers Rail Act of 1980. Shaw v. Delta

Airlines, Inc., 51 U.S.L.W. 4968 (U.S. June 24, 1983).

REASONS FOR GRANTING THE WRIT

THE DECISIONS BELOW ARE AN ERRONEOUS APPiI-

CATION OF RES JUDICATA, SURE TO INCREASE THE

NUMBER OF PRECAUTIONARY INTERLOCUTORY PE-

TITIONS AND APPEALS TO THIS COURT

The clear message of the opinions below is that a litigant

must appeal to this Court whenever a federal question is

arguably ripe for review — even where the ongoing state

proceedings may dispose of the entire dispute on nonfederal

grounds and where the parties a have presented the

federal issue to a federal court.

A. California Had Lost Jurisdiction Of Intrastate Rail Pas-

senger Service Before The June 2 Order Issued

The core issue here is the preemption of California’s

authority to order intrastate rail passenger service by the

Staggers Act. The facts are undisputed; the Staggers Act was

enacted by Congress, signed by the President, and is the law of

rs <

a rc

the land. If states desire to continue a role in regulating

intrastate transportation, they must do so “exclusively in ac-

cordance with” the Interstate Commerce Act. 49 U.S.C.

§11SO1(b)(1).

The first step which a state must take to continue regu-

lation is to secure approval of state regulatory standards and

procedures from the ICC. 49 U.S.C. §11501(b)(2) and 49

U.S.C. §11501(b)(3)(A). It is conceded that California never

took that first step; it did not seek certification, whereupon it

“may not exercise any jurisdiction over intrastate rates, classifi-

cations, rules and practices until it receives certification...” 49

U.S.C. §11501(b)(4)(A). (emphasis added). Then, Califor-

nia affirmatively requested the ICC to assume regulation of

California intrastate rail traffic, and the ICC did so on May ll,

1982. Ex Parte 388, State Intrastate Rail Authority—P.L. 96-

448, supra, 365 (CC at 701; 49 U.S.C. §11501(b)(4)(B). When

the ICC accepted jurisdiction, California lost authority to order

California railroads to provide transportation services. 49

U.S.C. §10501(c).

On these facts, it is impossible to avoid the conclusion that

California had, prior to June 2, 1982, lost jurisdiction to order

SP to provide intrastate rail passenger transportation.

B. The Constitutionality And Effect Of The Staggers Act

Was Already Being Litigated In Federal Court

The Staggers Act issue was not submitted by SP to the

California supreme court for ruling on the merits because the

issue was already being litigated by the same parties in a

federal court. SP advised the California court in its pleadings

that a primary jurisdictional forum had already been selected by

California for testing the constitutionality of the Staggers Act

provisions.

“... we should advise the Court that the scope and effect

of the Staggers Act preemptions, for both freight and

passenger service, has been assailed by a number of states,

including California, in a constitutional test filed in the

United States District Court for the Western District of

Texas ( State of Texas, et al. v. United States of America, et

al., Docket No. A-80-CA-487) .. . it is anticipated that the

Texas litigation will serve as the primary constitutional

challenge on this and related issues.” Petitioners’ Reply to

Answers of Respondent and Real Party in Interest, S.F.

No. 24316, filed September 3, 1981, App. at 91a.

Indeed if the doctrine of res judicata is to be applied at all

in this case, it should be applied against the PUC; the PUC

should be bound by the result of the proceeding in which both

the PUC and SP argued the preemption of Section 214 of the

Staggers Act at length: the Texas case.

This litigation was started by the State of Texas; on

December 23, 1980, the PUC intervened; on January 7, 1981, SP

intervened. On March 12, 1981, SP filed a joint motion with the

ICC for summary judgment; on April 21, 1981, the PUC, jointly

with the states of Texas, New York, Tennessee and Kansas,

filed a cross-motion for summary judgment. On November 3,

1982, the court entered its order and judgment denying the PUC

joint motion and granting the SP joint motion. It thus held that

the Staggers Rail Act of 1980 does in fact preempt California’s

jurisdiction over California intrastate rail transportation. App.

at __.. The PUC did not appeal; thus, that judgment is final

as to the PUC.€ The PUC should now be estopped, by the

doctrine of res judicata, from challenging in this or any other

court the proposition that the PUC has no jurisdiction to

regulate California intrastate rail transportation.

Judge Patel considered the PUC’s actions complete on

June 3, 1980, with implementation delayed by procedural stays

until June 2, 1982. App. at 13a. Yet those stays and extensions

were ordered by the PUC for one reason, a reason which was

obvious from the context in which they were entered: SP and

the PUC had already joined issue in Texas in the constitutional

challenge to Section 214 of the Staggers Act, and the PUC

elected not to attempt to exercise authority which the Texas

court could, at any moment, tell the PUC it did not have.

® As stated in 46 AM. JUR. 2d Judgments § 461: “It is clear that, for

purposes of res judicata, a judgment is final where the time to appeal has

expired without an appeal being taken.” See also Federated Department

Stores, Inc. v. Moitie, 452 U.S. 394, 399 (1981).

C. Review By This Court Of The Federal Issue In December

‘ 1981 Would Have Been Premature

Even putting aside the primary forum election of the PUC

to litigate in Texas, the certainty that further orders would be

issued by the PUC before actual start-up of the commuter train

plus the substantial possibility that the dispute might be

resolved in the course of discussion and negotiation between SP

and Caltrans meant that the dispute could well be disposed of

on nonfederal grounds or could become moot.

This Court’s decision in Cox Broadcasting Corp. v. Cohn,

420 U.S. 469 (1975) established that where a federal issue has

been finally decided in the state courts but the proceeding

remains open below with a possibility of resolution on state

grounds, immediate review of the federal issue is appropriate

where “the refusal immediately to review the state-court deci-

sion might seriously erode federal policy”. 420 U.S. at 483.

(emphasis added). But this case was not a case in which a

failure to seek immediate review might seriously erode federal

policy.

First, a comprehensive judicial chalienge to Section 214 of

the Staggers Act, in which both SP and the PUC were full

participants, and in which every major relevant interest, in-

cluding the ICC and the National Association of Railroad and

Utility Commissioners, were represented, had already been

undertaken in the Texas district court. It would have been an

unreasonable imposition on the time of this Court to request

immediate review of a subissue involving a portion of that

controversy, i.e., whether passenger service was included within

the scope of Section 214, while the Texas case was pending.

Furthermore, prior to June 2, 1982, SP was not required to

do anything more than negotiate with Caltrans. The PUC had

stayed all other orders against SP “pending further review of

this matter”. Decision 93118 (May 22, 1981) (unreported),

Appeal App. at 100a. Later, the PUC had modified essential

findings to put Caltrans on notice that it should be prepared to

pay SP a significantly higher rate of compensation than had

;

at ed 9

been ordered in earlier decisions. Decision 932Il ( June 16, 1981)

(unreported ), Appeal App. at 102a. Specifically, the PUC told

Caltrans that SP must be “compensated for all freight and

Amtrak delay costs” caused by the commuter trains and must

receive “a reasonable rental” for the commuter stations and

parking lots. Jd. at li3a. The PUC further informed Caltrans

that the contract with SP must provide SP “a just and reason-

able rate of return in light of federal and state statutory and

constitutional law.” Jd. at ll4a. The stay was to “remain in

effect until further order of the [PUC].” Jd. at ll4a. It was not

until June 2, 1982 that service was actually ordered, and it was

at that point that federal policy—the Staggers Act—was seri-

ously threatened.

In these circumstances it can hardly be argued that the

April 1981 decisions appealed from in SP’s petition to the

California supreme court were final. The ultimate service order

was premised upon Caltrans’ willingness to pay. If Caltrans

had been willing to adequately compensate SP for operating

the commuter trains so that the proposed commuter service

would be as compensatory to SP as a new freight service with

comparable demands, the proceedings would have become

moot. If, on the other hand, Caltrans had been unwilling to pay

revenue adequate compensation, SP could reasonably expect

that the request would be abandoned, and the proceedings

terminated. Had Caltrans’ purse suggested a modification of its

initial proposal, further proceedings before the PUC would

have been required.

Under all these circumstances, the PUC order to negotiate,

though concededly a prohibited trespass upon the ICC’s

jurisdiction to regulate intrastate transportation,” was not such

as to “seriously erode federal policy” and to justify immediate

review under Cox Broadcasting, supra.

Indeed, based on this Court’s prior decision in Dump Truck

Owners Assn. v. Public Util. Comm'n, 434 U.S. 9 (1977) (per

curiam), this Court would not have accepted SP’s appeal in

7 Because it directed negotiation of rates and practices. 49 U.S.C.

§11501(b)(4)(A).

these circumstances. This Court has held that, while proceed-

ings remain open before a state agency and those hearings

““may remove the basis for, or significantly alter the nature of,

appellants’ constitutional attack,” this Court will not hear a

challenge to constitutional issues. Jbid. In Dump Truck, a

group of dump truck owners attempted to challenge the

constitutionality of tariffs promulgated by the PUC. After the

appellants had filed their jurisdictional statement with this

Court, the PUC reopened its proceedings. Because those

proceedings might dispose of the dispute on other than con-

stitutional grounds, this Court dismissed the appeal without

prejudice. Ibid.

Precisely the same result should lie here. The PUC—the

same PUC as in Dump Truck — had stayed its proceedings

pending negotiations. Had SP appealed to this Court in

December 1981, it would have been told that its appeal was

premature.

If a party must appeal to this Court each time a federal

issue is arguably ripe for review, even when the same issue is

being litigated in a different forum or when the matter may be

resolved on a nonfederal basis, parties will be forced to take

precautionary appeals to this Court immediately. The result

will be an increase of petitions on an already overburdened

system.

WHERE THE BASIS FOR THE CALIFORNIA SUPREME

COURT’S DENIAL OF A PETITION FOR REVIEW IS

UNCERTAIN, THE CALIFORNIA RULE FORBIDS THE

APPLICATION OF RES JUDICATA

A. The Denials Of December 23, 1981, By The California

Supreme Court Could Have Been On Procedural Grounds

The California supreme court’s minute orders of December

23, 1981, denying review were entered without opinion. While

this Court in 1920 accepted California’s contention that the

effect of such orders is a denial on the merits of all issues raised,

Napa Valley Co. v. R.R. Comm., 251 U.S. 366, 372-373 (1920),

a much more recent California supreme court opinion explained

that such a mechanical rule “ignores the realities of our rulings

on such petitions.” Consumers Lobby, Etc. v. Public Util. Com’n,

25 C.3d 891, 899, 603 P.2d 41, 45 (1979). In Consumers Lobby,

the California supreme court revealed that petitions for writs of

review may be denied on any number of grounds, procedural or

substantive. There are two grounds which are specifically

applicable here: (1) lack of finality in the PUC order, and (2)

speculative harm.

As to the first ground, the California supreme court

explained:

“., the petitioner may bring his case before us too soon.

Although the code appears to permit the filing of a petition

for rehearing and hence a petition for review after ‘any

order or decision’ of the [PUC],”

it may be denied if it appears that the order is

“a step in a larger, ongoing proceeding not yet finally

resolved by the [PUC]...[T]he question of when a

[PUC] action is sufficiently final for purposes of judicial

review is often perplexing to the court. It is clear, however,

that each time we deny all or part of a petition for lack of

ripeness, we do not adjudicate its substantive issues.” 25

C.3d at 903-904, 603 P.2d at 48.

Second, the California supreme court stated:

“[ W]e will deny the petition without reaching substantive

issues when it appears that for any reason the applicant

was not in fact aggrieved by the action of the [PUC]. This

result follows, for example, if the alleged harm is merely

speculative...” Id. at 904, 603 P.2d at 48.

Either ground applies with equal force to the facts of this

case. First, the PUC proceedings remained open long after the

denials by the California supreme court of SP’s petitions on

December 23, 1981; hearings were held and further decisions

were issued by the PUC with respect to the passenger train

service. Second, while the proceedings were ongoing, the only

. Obligation imposed on SP was to negotiate with Caltrans over a

facilities and service agreement. A directive to negotiate,

without more, produces only speculative harm.

B. Where The Basis For The Decision Is Uncertain, Res

Judicata Cannot Apply

The very fact, however, that SP’s petitions could have been

denied on either of these procedural grounds means that the

denials cannot be the basis for the application of the res

judicata doctrine. The California courts have held that:

“(I]t is settled that a judgment should not be the basis for

the application of the doctrine of res judicata if anything is

left to conjecture as to what was necessarily involved and

decided.” Irwin v. Irwin, 69 C.A.3d 317, 322, 138 Cal.Rptr.

9, ll (1977).

See also Title Guarantee & Trust Co. v. Monson, 11 C.2d 621,

632 (1938).

The second circuit has held that California law on res

judicata must be applied as to a California judgment. Acker-

man v. Ackerman, 676 F.2d 898, 903-904 (2d. Cir. 1982). In

that case the second circuit refused to give res judicata effect to

a California judgment because it held the case to be one in

which “the California courts would give equitable relief from

the doctrine of res judicata...” Ackerman v. Ackerman, supra

at 904.8

Thus, since the minute orders of December 23, 1981 do not

specify the basis for the denial of SP’s petitions and could have

been on at least two procedural grounds, the rule of California

forbids application of res judicata to those decisions.

® The circumstances of this case compel a similar conclusion: this is a

case in which an ongoing federal court proceeding was considering the

constitutionality of the very statute which the ninth circuit says SP should

have challenged more forcefully in the state supreme court. Moreover, SP

had no reason to doubt that the dispute would be resolved on nonfederal

issues in the state proceeding. Equity dictates that the December 31, 1981,

minute orders should not be given res judicata effect as to any Staggers Act

issue.

III.

RES JUDICATA CANNOT BE APPLIED TO STATE

COURT JUDGMENTS WHICH FRUSTRATE AN EX-

ERCISE OF CONSTITUTIONAL POWERS RESERVED

TO CONGRESS

The ninth circuit summarily rejected SP’s contention that

res judicata cannot be applied here by relying upon the general

proposition that the federal courts will give res judicata effect to

state court decisions on federal constitutional issues, citing

Grubb v. Public Utilities Commission, 281 U.S. 470 (1970).

However, this general proposition has important ex-

ceptions. In Durfee v. Duke, 375 U.S. 106 (1963), this Court

cautioned:

“To be sure, the general rule of finality of jurisdictional

determinations is not without exceptions. Doctrines of

federal pre-emption or sovereign immunity may in some

contexts be controliing. Kalb v. Feuerstein, 308 U.S. 433

[1940]; United States v. United States Fidelity Co., 309

U.S. 506 [1940].” 375 U.S. at 114, also citing at n. 12,

RESTATEMENT OF CONFLICT OF LAWS §451(2)

(Supp. 1948).

Examples of refusals to accord res judicata effect include

Kalb v. Feuerstein, supra, in which Congress had evidenced an

explicit intention to withdraw the subject matter from state

authority and place it in the bankruptcy courts; United States v.

United States Fidelity Co., supra, involving claims of Indian

_ sovereign immunity, Consolidated Rail Corp. v. State of Iil., 423

F. Supp. 941 (Rail Reorg. 1976), cert. denied, 429 U.S. 1095

(1977) in which the special court established under the Regio-

nal Rail Reorganization Act refused to accord preclusive effect

to a judgment from the United States District Court for the

Eastern District of Illinois; and Pennsylvania Railroad Company

Co. v. Sharfsin, 240 F. Supp. 233 (M.D. Pa.), vacated on other

grounds sub. nom. Utility Comm'n v. Pennaylvania R. Co., 382

U.S. 281 (1965) (per curiam), aff'd, 369 F.2d 276 ( 3rd Cir. ),

cert. denied, 386 U.S. 982 (1966), in which the district court

refused to accord preclusive effect to prior state proceedings.

The doctrine of res judicata has as its justification society’s

need for finality in matters fairly adjudicated. However, when

the application of that policy collides with a higher policy

whose force flows directly from the Constitution itself, the

former must give way. As the court stated in Consolidated Rail

Corp. v. State of Ill., supra:

“Although the policies of terminating litigation, avoiding

inconsistent results, and repose, which support application

of res judicata to questions of subject matter jurisdictign,

may vindicate the general rule that litigated questions of

subject matter jurisdiction cannot be collaterally attacked,

the policy basis for the rule should make us wary of its

procrustean application. Here, countervailing policy con-

siderations support the conclusion that Congress...intended

to void determinations made by other courts, when these

determinations were reserved for our exclusive consid-

eration. [Footnote omitted]. The legislative mandate

overpowers the general rule.” 423 F.Supp at 947-948,

The express language of the Staggers Act strips uncertified

states of “jurisdiction” over the subject of “intrastate rates,

classifications, rules and practices”. 49 US.C. §11501

(b)(4)(A). After the ICC assumed jurisdiction over California

intrastate transportation pursuant to 49 USC.

§11501(b)(4)(B), California lost its “police power, to require

reasonable intrastate transportation.” 49 U.S.C. §10501(c).

Furthermore, Congress has declared that the “action of the

[ICC] under this section supersedes state law or action taken

under state law in conflict with the action of the [ICC].” 49

U.S.C. §11501(f).

The Congressional purpose of Section 214 of the Staggers

Act is explicitly stated thus:

“The remedies available against rail carriers with

respect to rail rates, classifications, rules and practices are

exclusively those provided by the Interstate Commerce

Act, as amended, and any other federal statutes which are

not inconsistent with the Interstate Commerce Act. No

state law or federal or state common law remedies are

available.” House Conference Report No. 96-1430, supra.

Here, Congress’ power to regulate interstate commerce

flows directly from art. I, §8, cl. 3 of the United States

Constitution, and Congress’ power to control related intrastate

transactions cannot be questioned. Houston & Texas Ry. v.

United States, 234 U.S. 342, 351-352 (1914). Pursuant to that

authority, Congress enacted the Staggers Act.

The language adopted by Congress in the Staggers Act and

the Conference Report explaining its purpose evidences a clear

intention of Congress to piace beyond the reach of uncertified

states any power to preserve state jurisdiction, difectly or

indirectly. Thus, the state court must give way to the force of

the Congressional mandate; the state court judgment cannot be

res judicata. See Dobbs, The Validation of Void Judgments:

The Bootstrap Principle, 53 Va. L. Rev. 1003 (1967) at 1027:

“If a court has jurisdiction to determine its own jurisdiction

because the sovereign has granted this preliminary power

res judicata does not necessarily apply. Res judicata is a

judicial doctrine and the judiciary may refuse to apply it

when public interest demands. Thus even though a court

has jurisdiction to decide its own jurisdiction, its judgment

may still be denied any effect for reasons of public policy.”

In this case, the Staggers Act represents Congress’ action in

the area of interstate commerce, and the policies and specific

preemption of intrastate transportation embodied in the Stag-

gers Act must take precedence over the doctrine of res judicata.

IV.

WHERE SP DID NOT RAISE THE STAGGERS ACT

ISSUE TO THE STATE SUPREME COURT, SP CANNOT

BE BARRED FROM LITIGATING THE ISSUE IN A NEW,

RELATED CAUSE OF ACTION

A. The Staggers Act Issue Was Not Raised For Res Judicata

Purposes Because SP Did Not Freely And Voluntarily

Submit It To The California Supreme Court

The ninth circuit’s decision affirming the res judicata effect

of the California supreme court’s December 23, 1981 denial of

SP’s petitions for review rests upon the assumption that that

court had before it the question as to whether the Staggers Act

preempts state regulation of intrastate railroad passenger ser-

vice, and that the court concluded that the Staggers Act did not

preempt. App. at 6a. Similarly, Judge Patel had held that SP’s

September 3, 1981 pleading in S.F. No. 24316 raised and

argued the Staggers Act preemption and had concluded that SP

had had its day in court. App. at 14a.

Both decisions completely mischaracterize the pleadings

before the California supreme court. The SP discussion of the

Staggers Act referenced by Judge Patel commenced with an

explicit reservation:

“Preliminarily, we should advise the court that the

scope and effect of the Staggers Act preemptions for both

freight and passenger service has been assailed by a

number of states, including California, in a constitutional

test filed in United States District Court for the Western

District of Texas ( State of Texas et al. v. United States of

America, et al., Docket No. A-80-CA 487)... it is antici-

pated that the Texas litigation will serve as the primary

constitutional challenge on this and related issues. Mean-

while, we believe that the Act is clear and explicit and

holds that California, as a non-certified state under the

Staggers Act, may not enter intrastate service orders, and

that if it attempts to enforce an intrastate service order,

such an attempt can be enjoined in federal court.

“Should this Court desire to address this important

issue, it would seem appropriate that further briefing

would be called for from the parties so that this Court

could have the full benefit of all the arguments on this very

important matter and not just the rough-and-ready treat-

ment which is all that is possible here.

“Although SP does not believe the issue is properly

before this Court at this time, it might be helpful if we

provided a brief background explanation of the Staggers

Act preemption and explain why the California argument

that passenger matters have not been preempted is fal-

lacious and unfounded.” ( Petitioner’s Reply to Answers of

PUC and Caltrans, September 3, 1981, App. at 9la.

(emphasis added).

Thus, SP told the California supreme court that a federal

forum had already been invoked by the PUC for adjudication

of the federal issue (the Texas litigation). Moreover, SP made

it plain that SP did not intend, in any event, to have its Staggers

Act claim decided by the state court. SP did, however, apprise

the court of the federal issues so it might construe SP’s non-

federal claims with knowledge of the existence of federal

claims.

In England v. Medical Examiners, 375 U.S. 4ll (1964) this

Court held that only

“if a party freely and without reservation submits his

federal claims for decision by the state courts, litigates

them there, and has them decided there, then—whether or

not he seeks direct review of the state decision in this Court

—he has elected to forego his right to return to the District

Court.” 375 U.S. at 419.

But, this Court held, a free and voluntary submission by a party

of a federal claim is not to be implied unless “it clearly appears

that he voluntarily did more than [Government Employees v.|

Windsor (353 U.S. 364 (1957)] required and fully litigated his

federal claims in the state courts.” Id. at 421. (emphasis

added). (In Government Employees v. Windsor, supra at 366,

the Court indicated that a party should at least advise the state

court of any constitutional issues, just as SP did here.)

The fact that a litigant furnishes the state court with a

complete explanation of the federal issue does not prejudice his

right to return to the federal court, this Court said in England,

for “in the typice’ case.... [t]he litigant... may be led not

merely to state his federal constitutional claim but to argue it.”

England v. Medical Examiners, supra at 420. This may invite

the state to rule in his favor, but it does not imply a surrender to

the state authority on the issue.

While England v. Medical Examiners arose in the context

of an abstention, its holding is equally applicable here. SP’s

petitions to the California supreme court raised a number of

issues totally unrelated to the Staggers Act, as described on pp.

3-5, supra. Additionally, it advised the court of the federal

constitutional issue as well as the fact that it was being litigated

in Texas. However, the PUC cannot now deprive SP of its

victory on the merits in Texas by a tenuous construction of the

significance of the California supreme court’s denial of petitions

directed to state issues that SP was required under state law to

raise.? As this Court stated in England v. Medical Examiners,

supra at 4I5S:

“There are fundamental objections to any conclusion that

a litigant who has properly invoked the jurisdiction of a

Federal District Court to consider federal constitutional

claims can be compelled, without his consent and through

no fault of his own, to accept instead a state court's

determination of those claims.”

This Court also rejected the notion that the right to appeal the

state court denials provides a sufficient opportunity to have the

federal claim considered:

“The possibility of appellate review by this Court of a state

court determination may not be substituted, against a

party’s wishes, ior his right to litigate his federal claims

fully in the federal courts.” Jd. at 417.

As this Court held in England, so should it hold here.

® Under California law, the only means of challenging a PUC order is by

the timely filing of an application for rehearing setting forth the grounds on

which the order is believed to be unlawful. Cal.P.U.Code §1732. Those

issues must then be raised in a petition for review to the California supreme

court within 30 days after rehearing is denied, or, if it is granted, within 30

days after the decision on rehearing. Cal.P.U.Code §1756.

B. SP’s June 1982 Federal Court Lawsuit Was Based On A

New Cause of Action

The first event affecting California’s jurisdiction over in-

trastate rail service took place on January 29, 1981, when, 120

days after the effective date of the Staggers Act, California

failed to file for certification to regulate intrastate rail trans-

portation. At that point, California could not exercise

“any jurisdiction over intrastate rates, classifications, rules and

practices” until it received certification. 49 USC.

§$11501(b)(4)(A). As of January 29, 1981, California’s au-

thority over “rates, classifications, rules, and practices” had

been preempted.

But California’s loss of jurisdiction did not mean that the

ICC contemporaneously acquired jurisdiction. The event which

vests jurisdiction in the ICC is the denial of the state application

for certification. 49 U.S.C. §11501(b)(4)(B). Since California

and certain other states did not apply, the ICC devised a

procedure whereby these states could affirmatively request the

ICC to assume jurisdiction. Ex Parte 388, State Intrastate Rail

Rate Authority—P.L. 96-448, Decision served February 8, 1982,

47 F.R. 5786, App. at 97a. California and five other states

asked the ICC to assume intrastate regulation, and, accordingly,

the ICC took jurisdiction May 11, 1982, five months after the

December 23, 1981, minute order was issued. Ex Parte 388,

State Intrastate Rail Rate Authority—P.L. 96-448, supra at

700, Appeal App. at 188a.

When the ICC took jurisdiction, two things happened:

First, all California intrastate rail transportation became di-

rectly subject to the express provisions of the Interstate Com-

merce Act, to be regulated as if the California transportation

were in interstate commerce. 49 U.S.C. §11501(b)(4)(B).

Second, to ensure that the ICC’s authority would be complete,

unfettered, and unhindered by any inconsistent state conduct,

states were stripped of any remaining police power authority

“to require reasonable intrastate transportation,” i.e., the right

to order new train service. 49 U.S.C. §10501(c). And when

the ICC acted to take jurisdiction, its action “supersedes state

law or action taken under state law in conflict with the action of

the Commission.” 49 U.S.C. §11501(e).

Neither the district court nor the ninth circuit gave any

consideration to SP’s argument that, even if res judicata should

apply as to issues of loss of state jurisdiction over rates and

practices, the district court was not precluded from examining

the consequences of the assumption of jurisdiction by the ICC.

The June 2 Order which the action in the district court sought to

block was an attempted exercise of jurisdiction over intrastate

passenger transportation by California which was then ex-

pressly the ICC’s, not because of anything that had transpired

prior to the California supreme court’s December 23, 198],

decision, but rather because of the May I1, 1982 order of the

ICC assuming exclusive jurisdiction.

C. Both Federal And State Law Prohibit Application Of Res

Judicata To Issues That Could Have Been Raised In A

Prior Lawsuit Where The Current Suit Is Based On A

New Cause Of Action

The assertion by the ICC of jurisdiction over California

intrastate rail transportation, coupled with the direct appli-

cation of the Interstate Commerce Act to California intrastate

matters and an explicit loss of state power to order trans-

portation, gave rise to a new cause of action on May 11, 1982.

Res judicata cannot bar a new suit based on the new cause

between the same parties.

This Court has repeatedly held that preclusive effect is

given only to “the point or question actually litigated and

-determined in the original action, not what might have been thus

litigated and determined.” Cromwell v. County of Sac., 94 U.S.

351, 353 (1876). (emphasis added). See also Mercoid Corp. v.

Mid-Continent Co., 320 U.S. 661, 671 (1944) (“The case

is... governed by the principle that where the second cause of

action between the parties is upon a different claim the prior

judgment is res judicata not as to issues which might have been

tendered but ‘only as to those matters in issue on points

controverted, upon the determination of which the finding or

verdict was rendered.’ ”’).

This Court reaffirmed that principle in Commissioner v.

Sunnen, 333 U.S. 591, 597-598 (1948), where it held again that

“where the second action between the same parties is upon

a different cause or demand, the principle of res judicata is

applied much more narrowly. In this situation, the judg-

ment in the prior action operates as an estoppel, not as to

matters which might have been litigated and determined”

but only as to controverted issues actually determined. To put

it another way:

“Before a party can invoke the collateral estoppel doctrine

[in the second suit], the legal matter raised in the second

proceeding must involve the same set of events or docu-

ments and the same bundle of legal principles that contrib-

uted to the rendering of the first judgment.” Jd. at 601-602.

(emphasis added).

The California rule is the same. Indeed, California has

adopted the Sunnen rule. Younger v. Jensen, 26 C.3d 412-413,

605 P.2d 813, 823 (1980). See also Eichler Homes, Inc. v.

Anderson, 9 Cal.App 3d 244, 233, 87 Cal.Rptr. 893, 898 (1970)

(“It is basic to the application of res judicata or collateral

estoppel that the issue of the earlier action be identical to that in

which the application is sought [citations omitted]. The

principle operates only as to an issue which was actually

litigated and determined in the first action.”} (emphasis in

original); Title Guarantee & Trust Co. v. Monson, supra at 631

(Res judicata is not “applicable to rights, claims or demands,

although growing out of the same subject matter, but which

constitute separate or distinct causes of action, and which were

not put in issue in the former action.”’).

In this case, the May Il, 1982, assumption of jurisdiction

created a new cause of action. SP’s June 15, 1982, federal court

lawsuit could not be barred, therefore, on the grounds that the

Staggers Act issue might have been raised in its 1981 petitions.

Thus, this Court should reverse the court of appeals’ erroneous

application of the res judicata doctrine.

CONCLUSION

For these reasons, a Writ of Certiorari should issue to

review the opinion of the Court of Appeals for the Ninth

Circuit.

Respectfully submitted,

THORMUND A. MILLER

JOHN MACDONALD SMITH

CaROL A. Harris

ANN FINGARETTE HASSE

813 Southern Pacific Building

One Market Plaza

San Francisco, California 94105

Attorneys for Petitioner

Dated: December 23, 1983

FILED

September 27, 1983

PHILLIP B. WINBERRY

CLERK, US. COURT OF

APPEALS

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

SOUTHERN PACIFIC :

TRANSPORTATION Co.,

Plaintiff-Appellant,

VS.

No. 82-4466

PuBLic UTILITIES COMMISSION OF

THE STATE OF CALIFORNIA, (D.C. No.

Defendant-Appellee, C-82-3074-MHP )

OPINION

STATE OF CALIFORNIA DEPARTMENT

Or TRANSPORTATION,

Intervenor-Defendant-Appellee.

Appeal from the United States District Court

for the Northern District of California

Honorable Marilyn Hall Patel, District Judge, Presiding

Argued and Submitted— April 11, 1983

Before: DUNIWAY, SNEED AND FARRIS,

Circuit Judges

Duniway, Circuit Judge:

Southern Pacific Transportation Co. appeals from the

district court’s judgment dismissing Southern Pacific’s action

seeking an injunction against enforcement of an order by the

California Public Utilities Commission requiring Southern Paci-

fic to run certain commuter trains within the state. The district

court held that res judicata prevents consideration of Southern

Pacific’s argument that the Commission order is illegal because

the order is preempted by federal law.

I. Facts.

This dispute arises from orders of the California Commis-

sion requiring Southern Pacific to run weekday commuter trains

over its line between Oxnard and Los Angeles.

The Commission issued its first order on June 3, 1980. It

required Southern Pacific to build several station platforms and

parking lots and to run two trains each way every weekday.

Equipment was to be provided by the county of Los Angeles

and the state Department of Transportation (Caltrans), which

had requested the commuter service. That order was stayed,

however, and on September 23, 1980, the Commission issued

another decision modifying the first order. The railroad

petitioned for rehearing of the September order, and then on

October 3, 1980 filed in the supreme court of California a

petition for writ of review. That petition was docketed as No.

S.F. 24220. It sought review of so much of the June order as

was reaffirmed in the September order.

Early in 1981, the county of Los Angeles moved to

withdraw as a complainant. On April 7, 1981, the Commission

granted the county’s motion. In two orders issued on that day,

it also denied a motion by Southern Pacific to dismiss, and

ordered the commuter service to begin. In response, Southern

Pacific filed, on May 7, 1981, petitions for rehearing of the two

April orders. The Commission stayed the portions of the orders

demanding immediate construction of stations and parking lots,

but on June 16, 1981, denied rehearing. Southern Pacific then,

on July 16, 1981, filed in the state supreme court a second

petition for a writ of review, this one referring to the Commis-

sion’s April 7 and June 16 orders. The petition was docketed as

S.F. No. 24316. On December 23, 1981, the state supreme

court denied the two petitions for review without hearing or

opinion. Southern Pacific did not seek review of the state

supreme court’s decision in the United States Supreme Court.

The Commission lifted the stay of its last order on June 2,

1982 and directed that the railroad begin construction of the

station platforms and parking lots. In response, Southern

Pacific filed in federal district court its complaint seeking

declaratory and injunctive relief against enforcement of the

Commission’s order. Its complaint named the Commission as

the only defendant, but the district court later granted Caltrans’

motion to intervene as a defendant.

Southern Pacific argued, inter alia, that the Staggers Rail

Act of 1980, Pub. L. 96-448, 94 Stat. 1895, section 214(a) of

which amended 49 U.S.C. §11501, preempted the Commis-

sion’s jurisdiction over commuter service. The Staggers Act was

enacted on October 14, 1980, during the early stages of the

proceedings before the state Commission. It required that a

state “authority” seeking to exercise “jurisdiction over intrastate

rates, classifications, rules and practices” must apply, within 120

days, for certification to the Interstate Commerce Commission

(ICC). 49 U.S.C. § 11501(b)(2). If, after applying certain

standards, the ICC refused to certify a state authority, of if the

authority did not apply for certification, the authority was

forbidden to “exercise any jurisdiction over intrastate rates,

classifications, rules and practices ....” Jd, 11501(b)

(4)(A).

California did not seek certification within the deadline

under § 11501, and, on April 17, 1981, the ICC issued a

decision stating, “States ... that did not seek certification have

loss all jurisdiction to regulate intrastate rail transportation.”

Ex Parte No. 388, 364 LC.C. 881, 46 Fed. Reg. 23335, 23337

(April 24, 1981). In another order, issued May 4, 1982, the

ICC explained that California had since asked it to assume

jurisdiction. It stated, “Consequently, the [Interstate Com-

merce] Commission shall assume jurisdiction over intrastate

rail transportation in [California] upon publication of this

notice in the Federal Register.” Ex Parte No. 388, 365 LC.C.

700, 47 Fed. Reg. 20220 (May 11, 1982).

Southern Pacific argued before the district court that

because the Staggers Act preempted all state jurisdiction over

all intrastate rail service in California, the Commission’s orders

were invalid. The Commission argued in response that the

Staggers Act preempted state authority only over intrastate

freight service, not passenger service. The district court did not

reach the merits. It held instead that the California supreme

court’s denial of the petitions for review was res judicata as to

the preemption issue. Summary judgment was entered against

Southern Pacific.

II. Our Jurisdiction.

We first consider whether Southern Pacific’s action to

enjoin enforcement of the Commission’s order is a case “arising

under” the federal Constitution or laws and thus is within the

jurisdiction of the federal courts. 28 U.S.C. § 1331. This issue

was not raised in the district court, and the parties argued it

here only upon our instructions.

Southern Pacific’s action to enjoin enforcement of the

California Commission’s order is based on its claim that federal

law preempts the Commission’s jurisdiction over passenger rail

service. Thus, Southern Pacific sought to use preemption,

which might have been its defense to a state court action to

enforce the Commission’s order, offensively in federal court to

enjoin enforcement. Our order to the parties asked them to

brief the issue of whether there is federal jurisdiction of such an

action, citing Miller-Wohl Co. v. Commissioner of Labor &

Industry, 9 Cir., 1982, 685 F.2d 1088.

Miller-Wohl was an action in federal district court by an

employer seeking a declaratory judgment that federal law

preempted a state law that the employer was accused of

violating. We held that there was no federal jurisdiction of the

employer’s action because its claim was essentially a defense to

the state court action. 685 F.2d at 1090-1091. Accord

Armstrong v. Armstrong, 9 Cir., 1983, 696 F.2d 1237.

The plaintiffs in Miller-Wohl and Armstrong sought only

declaratory judgments that federal law preempted the relevant

state law. A decision by the Supreme Court since the date of

oral argument in this case makes clear, however, that when a

plaintiff seeks to enjoin state action because federal law pre-

empts it, jurisdiction is proper. Shaw v. Delta Air Lines, Inc.,

1983, ___ U.S. —__, fn. 14 at _____ ( June 24, 1983, slip op. at

9-10, n.14); Franchise Tax Board v. Construction Laborers

Vacation Trust, 1983, ____ US. ; - , 0.20 (June

24, 1983, slip op. at 18-19 & n.20).

In Shaw, plaintiffs filed actions for injunctive and declara-

tory relief in district court, alleging that the Employee Retire-

ment Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001

et seq., preempted certain state civil rights and disability

payments statutes. In footnote 14, id. (slip op. at 9-10) the

Court held that federal jurisdiction existed:

It is beyond dispute that federal courts have jurisdic-

tion Over suits to enjoin state officials from interfering with

federal rights. See Ex parte Young, 209 U.S. 123, 160-162

(1908). A plaintiff who seeks injunctive relief from state

regulation, on the ground that such regulation is pre-

empted by a federal statute which, by virtue of the

Supremacy Clause of the Constitution, must prevail, thus

presents a federal question which the federal courts have

jurisdiction under 28 U.S.C. § 1331 to resolve. (citations

omitted. )

See, to the same effect, Construction Laborers Vacation Trust,

supra, U.S. at ____ n.20 (slip op. at 18 n.20).

Because Southern Pacific’s complaint sought to enjoin

enforcement of an order it claimed to be preempted by federal

law, the case “arose under” federal law. 28 U.S.C. § 1331. See

Conference of Federal Savings & Loan Ass’ns v. Stein, 9 Cir.,

1979, 604 F.2d 1256, 1259, aff'd mem., 1980, 445 U.S. 921

(cross claim for injunction); Rath Packing Co. v. Becker, 9 Cir.,

1975, 530 F.2d 1295, 1303-1306, aff'd sub nom. Jones v. Rath

Packing Co., 1977, 430 U.S. 519. United Air Lines, Inc. v.

Division of Industrial Safety of the Department of Industrial

Relations, 9 Cir., 1980, 633 F.2d 814, appears to be the

contrary, but its holding on this issue, id. at 816-817, is

disapproved by the rule recited in Shaw. See Justice White’s

dissent to the denial of certiorari, 1981, 454 U.S. 944, 946-950.

III. Res Judicata.

The California supreme court denied writs of review of

decisions of the California Commission. That is a denial on the

merits and is to be given res judicata effect in federal courts.

The Pacific Telephone & Telegraph Co. v. Public Utilities

Commission, 9 Cir., 1979, 600 F.2d 1309, 1311-1312; see 28

U.S.C. § 1738. “Under res judicata, a final judgment on the

merits of an action precludes the parties ... from relitigating

issues that were or could have been raised in that action.” Allen

v. McCurry, 1980, 449 U.S. 90, 94.

Southern Pacific does not dispute these general proposi-

tions, but argues that they do not apply here. Its principal

argument, which it repeats in various forms, is that because the

Staggers Act preempts state regulatory jurisdiction over in-

trastate railway service, it forbids any state court from ruling to

the contrary. Southern Pacific misses the mark in two direc-

tions. First, it presumes its own interpretation of the Act—that

the Act does indeed preempt state regulatory jurisdiction over

all intrastate rail service. That, of course, is contrary to the state

court decision to which we are considering giving res judicata

effect. If res judicata applies, a fortiori, it defeats Southern

Pacific’s premise. Second, the railroad confuses a state’s

regulatory authority under the Act with a state court’s authority

to interpret the Act.

The Supreme Court in Grubb v. Public Utilities Commis-

sion of Ohio, 1930, 281 U.S. 470, made it clear that, where res

judicata applies, a federal court must respect a state court’s

interpretation of federal law. In that case, a bus operator sued

in federal court to enjoin a state utilities commission order. The

federal court dismissed the action, holding it barred by the res

judicata accorded a state supreme court decision issued while

the federal suit was pending. The issue in both suits was

whether the state commission’s order violated the Commerce

Clause. The bus operator argued that res judicata did not apply

because the state court lacked subject matter jurisdiction. The

Court stated:

The [bus operator] relies on the commerce clause of

the Constitution as in some way operating to commit to the

federal courts and to withhold from the state courts

jurisdiction of all suits relating to the regulation or at-

tempted regulation of interstate commerce. This view of

that clause is quite inadmissible. It has no support in any

quarter, is at variance with the actual practice in this class

of litigation, ... and is in conflict with the doctrine often

sustained by this Court that the state and federal courts

have concurrent jurisdiction of suits of a civil nature arising

under the Constitution and laws of the United States, save

in exceptional instances where the jurisdiction has been

restricted by Congress to the federal courts.

281 U.S. at 475-476 (citations omitted ).

We applied the principle of Grubb in Board of Trustees of

Carpenters Pension Trust Fund for Northern California v.

Reyes, 9 Cir., 1982, 688 F.2d 671, to give res judicata effect to a

California state court ruling on a preemption issue, and see no

reason why we should not do the same here.

Nevertheless, Southern Pacific contends that Grubb does

not require res judicata treatment of a California court’s

interpretation of the Staggers Act because the Interstate Com-

merce Commission has exclusive “subject matter” jurisdiction

under the Act. It relies on the decision of a three-judge district

court in Pennsylvania Railroad Co. v. Sharfsin, M.D. Pa., 240

F. Supp. 233, vacated sub nom. Pennsylvania Public Utilities

Commission v. Pennsylvania Railroad Co., 1965, 382 U.S. 281.

The Supreme Court vacated the decision because a three-judge

court was not required. Thus the decision of the three-judge

court is a nullity.

Southern Pacific points to nothing in the Staggers Act

giving federal courts exclusive subject matter jurisdiction over

cases arising under the Act. For that reason, Kalb v. Feuerstein,

1940, 308 U.S. 433, and Consolidated Rail Corporation v.

Illinois, Regional Rail Reorg. Ct., 1976, 423 F. Supp. 941, do

not control. Absent such a grant of exclusive judicial subject

matter jurisdiction, the Act is subject to state court inter-

pretation. The case of Chicago v. Atchison, Topeka & Santa Fe

Ry. Co., 1958, 357 U.S. 77, is not in point for several reasons,

the most readily apparent being that no state court there had

interpreted the state’s regulatory jurisdiction under a federal

statute.

Southern Pacific further argues that a state administrative

agency’s decision should not be given preclusive effect when the

agency lacks jurisdiction over the subject matter of the decision.

However, it is not the State Commission’s decision to which the

district court gave res judicata effect, it was the decision of the

California supreme court. For that reason, Lightsey v. Harding,

Dahm & Co., 7 Cir., 1980, 623 F. 2d 1219, is not persuasive.

The railroad argues that res judicata cannot permit a state

to violate the Supremacy Clause, any more than a common law

doctrine or state statute can. Federal courts, however, are

required by federal law to apply res judicata to state court

decisions. 28 U.S.C. § 1738; see Allen, supra, 499 U.S. at 96.

Moreover, the cases upon which Southern Pacific relies, Chi-

cago & N. W. Transportation Co. v. Kalo Brick & Tile Co., 1981,

450 U.S. 311, and Texas & Pacific Ry. Co. v. Abilene Cotton Oil

Co., 1907, 204 U.S. 426, are not in point because they concern

state court claims for relief that were appealed to the Supreme

Court and held by it to be preempted. These cases might have

helped Southern Pacific in a direct appeal or petition to the

Supreme Court of the decisions of the California supreme court.

They go to the merits of the railroad’s preemption claim, a

subject we do not reach here.

Southern Pacific argues in its reply brief for the first time

on appeal that the state supreme court’s denial of its petitions

for review of the Commission’s orders should not be given res

judicata effect because the denial was not on the merits, but

“purely procedural.” It contends that state law required the

California court to deny the petitions because (1) the Commis-

sion proceedings appealed from were not final, and (2) the

Staggers Act preemption issue was not raised, and could not

have been raised, before the Commission; therefore, the state

court was not permitted to rule on it.

‘ We need not consider the first argument because it was not

raised below. See Hamilton v. Firestone Tire & Rubber Co., 9

Cir., 1982, 679 F.2d 143, 146.

The second argument is that because Art. III, § 3.5 of the

California constitution prohibits the Comm’:.ion from enter-

taining the preemption issue, under Cal. Pub. Util. Code

§ 1732, the state supreme court could not have entertained the

issue either.

CPN CORES

Art. III, § 3.5 states that an administrative agency has no

power: 2

(a) To declare a statute unenforceable, or to refuse to

enforce a statute, on the basis of it being unconstitutional

unless an appellate court has made a determination that

such statute is unconstitutional;

(b) To declare a statute unconstitutional;

enforce a statute on the basis that federal law or federal

regulations prohibit the enforcement of such statute unless

an appellate court has made a determination that the

enforcement of such statute is prohibited by federal law or

federal regulations.

Cal. Pub. Util. Code § 1732 limits judicial review of

Commission proceedings by providing:

The application [to the Commission] for a rehearing

shall set forth specifically the ground or grounds on which

the applicant considers the decision or order to be unlaw-

ful. No corporation or person shall in any court urge or

rely on any ground not so set forth in the application.

Thus, Southern Pacific contends that § 3.5 prohibited the

Commission from considering the preemption question, that

therefore the issue could not have been raised in an application

for rehearing under § 1732, and that therefore the California

supreme court could not have considered it on review.

Section 3.5 did not prohibit Southern Pacific from stating

its preemption claim to the Commission, however. It forbids

the Commission from declaring any state statute uncon-

stitutional or unenforceable, but it does not prohibit a party

before the Commission from stating an issue in order to

preserve it for review by the California supreme court. More-

over, Southern Pacific has pointed to no statute that the

Commission would be striking down by recognizing any pur-

ported preemption of state authority by the Staggers Act.

Southern Pacific argues further that it could not have

raised the Staggers Act issue before the Commission because,

10a

under the Act, the state was not divested of railroad authority

until after the Commission’s orders were issued. But Southern

Pacific could have raised, and apparently did raise, the preemp-

tion issue in its motion for rehearing of the Commission’s orders

of April 7, 1°81. The ICC stated on April 17, 1981, that

California was without jurisdiction under the Staggers Act. Ex

Parte No. 388, 364 I.C.C. 881, 46 Fed. Reg. 23335. Southern

Pacific’s petition for rehearing of the Commission’s orders was

not filed until May 7, 1981, and the railroad admits that that

petition “referr[ed] in the process to the Staggers Act.”

Opening brief at 12.

Finally, Southern Pacific suggests that even if res judicata

would otherwise be proper, this court should decline to apply it

here for reasons of equity. But the only equitable concern the

railroad puts forth is its contention, made repeatedly above,

that the Staggers Act preempts state regulation of intra-state

railroad service. As we have already explained, we cannot

accept that premise, in view of the state supreme court’s

decision to the contrary which Southern Pacific did not take to

the Supreme Court of the United States.

Affirmed.

IV.

We feel compelled to note what appears to us to be a

dereliction of duty to the court on the part of Southern Pacific’s

counsel. On its face, this court’s decision in United Airlines, Inc.

v. Division of Industrial Safety, supra, is contrary to Southern

Pacific’s contention that the district court had “arising under”

jurisdiction, 28 U.S.C. § 1331. However, counsel did not

mention it in their briefs. This, we suggest, is a breach of the

duty imposed by counsel in the Code of Professional Responsi-

bility DR 7-106(B)(1):

In presenting a matter to a tribunal, a lawyer shall disclose

... legal authority in the controlling jurisdiction known to

him to be directly adverse to the position of his client and

which is not disclosed by opposing counsel.

We note that the law firm that represents Southern Pacific here

also represented United Airlines in that case.

We are equally puzzled that counsel for the California

Commission and Caltrans did not cite United Airlines, but we

_ |

know of no rule of professional responsibility that requires a

lawyer to cite to the court every case that supports the lawyer’s

position. We shudder to think what problems such a rule

would create, in light of the enormous increase in reported

decisions of this and other courts in recent years.

Southern Pacific Transportation Co. v. Public Utilities Com-

mission Of the State of California, et al.—No. 82-4466

SNEED, Circuit Judge, Concurring:

In a very real sense this case reveals a series of missed

opportunities on the part of appeliant to have its preemption

claims heard and decided. As it turns out, the appellant could

have brought its suit to obtain an injunction in federal court

following the enactment of the Staggers Act and prior to the

California Supreme Court’s denial of appellant’s petition for

review. Perhaps, but by no means certainly, it could have

brought suit in federal court seeking only a declaratory judg-

ment at that time also. At the time any decision to initiate such

suit would have had to have been made, however, United Air

Lines, Inc. v. Division of Industrial Safety of the Department of

Industrial Relations, 633 F.2d 814 (9th Cir. 1980), presented a

formidable obstacle to such a course of action. Justice White’s

dissent to the Supreme Court’s failure to grant United’s petition

for certiorari made plain that the Court clearly understood the

scope of this court’s holding. The footnotes in Franchise Tax

Board v. Construction Laborers Vacation Trust, US.

(1983), and Shaw v. Delat Air Lines, Incl, US. (1983),

now make clear that Justice White’s views have prevailed and

that United Air Lines no longer properly represents the law.

The appellant, of course, must suffer for failing to urge at an

earlier point in time that United Air Lines be overturned.

The missed opportunity that proves fatal, however, is the

faliure to present vigorously the preemption argument before

the California Supreme Court and the failure to seek review by

the Supreme Court of the United States. Having chosen to

exchew recourse to the federal courts prior to termination of the

state proceedings, although perhaps on the basis of a mis-

apprehension of the law, the appellant must be subjected to the

consequences of res judicata.

12a

FILED

Aug 9 4:17 PM ‘82

Witiiam L. WHITTAKER

U.S. DIST. COURT

NO. DIST. OF CA

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SOUTHERN PACIFIC TRANSPORTATION

COMPANY,

Plaintiff, No. C-82-3074

MHP

vs. r

ORDER

PuBLic UTILITIES COMMISSION OF

THE STATE OF CALIFORNIA,

Defendant.

Southern Pacific Transportation Company (hereinafter

“Southern Pacific”) has filed an action seeking an injunction

against the Public Utilities Commission of the State of Califor-

nia ( hereinafter the ““PUC”’) to prevent it from enforcing PUC

Decision No. 82-06-045, issued on June 2, 1982. Southern

Pacific has moved for a preliminary injunction, and the PUC

has moved to dismiss the complaint (the court understands this

to be a motion to dismiss the action with prejudice) on res

judicata grounds. The State of California has applied to

intervene as a defendant. The court, having considered the

memoranda and other papers submitted by the parties, and

having heard oral argument on the motions, dismisses the

action. It is therefore unnecessary to act on the application for

intervention.

The uncontroverted allegations of the complaint are as

follows. This controversy began on May 18, 1978, when

complaints were filed with the PUC, requesting that if-order

13a

Southern Pacific to institute commuter rail service between

Oxnard and Los Angeles. Public hearings on the question

commenced on July 30, 1979. On June 3, 1980, the PUC issued

its first order requiring that Southern Pacific provide the service.

Pursuant to a petition by Southern Pacific, the PUC agreed to a

rehearing, but only on the issue whether it was operationally

feasible to combine commuter service with existing service on

that line. On October 30, 1980, Southern Pacific filed with the

California Supreme Court a petition for a writ of review of the

PUC’s decision as to issues that were not to be reheard,

pursuant to Cal. Pub. Util. Code § 1756. (On July 16, 1981,

Southern Pacific supplemented that petition to include issues

that, by then, had been reheard.) The rehearing resulted in two

PUC decisions, issued April 7, 1981, essentially reaffirming its

earlier decision to require Southern Pacific to institute the

service.

Further petitions for rehearing were denied, although

Southern Pacific received stays and extensions of time there-

after from the PUC. On December 23, 1981, the California

Supreme Court denied without comment Southern Pacific’s

petition for review. After more extensions of time, the PUC on

June 2, 1982 issued Decision No. 82-06-045, requiring that

construction of improvements needed to institute the service

begin on or before June 15, 1982, and that they be completed

on or before October 15, 1982. Southern Pacific then filed this

action, alleging that federal law preempts state law and pre-

cludes PUC regulation of intrastate commuter service, and that

the action of the PUC places an undue burden on interstate

commerce.

Southern Pacific contends that because California failed to

seek certification by the Interstate Commerce Commission

(hereinafter the “ICC”) of its standards and procedures for

regulation of intrastate rail passenger transportation by January

29, 1981, the PUC lost jurisdiction as a result of preemption by

section 214 of the Staggers Rail Act, 49 U.S.C. § 11501. It

points to the ICC’s decision of April 22, 1981 in Ex Parte 388, at

p. 7, in which the ICC said that ten states, including California,

and the District of Columbia, “have lost all jurisdiction to

regulate intrastate rail transportation.”

l4a

This court does not reach the question whether or when the

PUC lost jurisdiction. But it is clear from the undisputed

allegations of the complaint that the question of preemption

and loss of jurisdiction was available as an issue to be raised by

Southern Pacific long before the briefing was completed in the

petition to the California Supreme Court. And, in fact,

Southern Pacific did argue the question before that court. See

Petitioner’s Reply to Answers of Respondent and Real Party in

Interest, dated Sept. 3, 1981, at pp. 14-20. It also raised the

interstate commerce issue in its petition. Supplement to Petition

for Writ of Review, dated May 7, 1981. Review by the United

States Supreme Court of the state Supreme Court’s adverse

decision was available to Southern Pacific. 28 U.S.C. §1257.'

When there has been a final judgment on the merits in a

prior state-court action, a federal-law claim between the same

parties, seeking similar relief in federal court, is barred by the

doctrine of res judicata, if it arises from the same wrong as that

on which the judgment was based, and if it could have been

raised in the state court action, whether or not it was actually

was raised. Gallagher v. Frye, 631 F.2d 127 (9th Cir. 1980);

‘The PUC suggests that Southern Pacific, having been unsuccessful

before the PUC, could have chosen to present its claims in federal district

court, foregoing review by the California Supreme Court. Whether this is so

is unclear. There is authority supporting abstention by the district courts in

these circumstances. See Alabama Pub. Serv. Comm'n v. Southern Ry., 341

U.S. 341 (1951); Allegheny Airlines, Inc. v. Pa. Pub. Util. Comm'n, 465 F.2d

237 (3d Cir. 1972), cert. denied, 410 U.S. 943 (1973); Cal. v. Oroville-

Wyandotte Irrigation Dist., 409 F.2d 532 (9th Cir. 1969); Atlantic Coast Line

R.R. v. City of St. Petersburg, 242 F.2d 613 (5th Cir. 1957). Underlying such

abstention by district courts is the doctrine of Burford v. Sun Oil Co., 319 U.S.

315, reh’g denied, 320 U.S. 214 (1943). But it is unclear whether a district

court could properly abstain on Burford grounds in the circumstances of this

case. See Turf Paradise, Inc. v. Arizona Downs, 670 F.2d 813, 820 ( 9th Cir.

1982).

However, it is unnecessary to decide whether abstention would have

prevented Southern Pacific from coming straightaway to federal district court.

If so, there is all the more reason why this court should not now

merits of the controversy. If not, then Southern Pacific, having

forum, should not now be permitted to utilize this one the

disturbing the state Supreme Court's judgment on the

It appears from section 214 of the Staggers Rail ‘

11501, that Southern Pacific might have brought its preemption claim, and

possibly also its interstate commerce claim, before the Interstate Commerce

Commission. See id, § 11501(c). Again, this is an issue the court need not

and does not reach.

15a

Scoggin v. Schrunk, 522 F.2d 436 (9th Cir. 1975), cert. denied,

423 U.S. 1066 (1976). See also Grubb v. Public Utilities

Commission of Ohio, 281 U.S. 470 (1930) (all matters that

were or could have been raised were concluded, so long as the

State supreme court had jurisdiction of the subject matter). A

denial by the state Supreme Court, even without written

opinion, of a petition for a writ of review of a PUC order

constitutes a final adjudication on the merits for res judicata

purposes. Pacific Telephone & Telegraph Co. v. Public Utilities

Commission of the State of California, 600 F.2d 1309 (9th

Cir.), cert. denied, 444 U.S. 920 (1979). Southern Pacific,

having had its day in court, is barred here.2 See Alabama Public

Service Commission v. Southern Railway, 341 U.S. 341, 349

2 In oral argument before this court, Southern Pacific suggested that the

combined effect of article II], § 3.5 of the California Constitution and Cal.

Pub. Util. Code § 1732 is to withdraw jurisdiction from the California

Supreme Court to entertain Southern Pacific’s federal-law claims based on

preemption and lack of PUC jurisdiction, and on the commerce clause.

Article III, § 3.5 provides that administrative agencies have no power to

declare a statute unconstitutional or to refuse to enforce it on the ground that

it is unconstitutional, absent a determination of its unconstitutionality by an

appellate court. It also provides that absent an appellate court determination,

an agency may not refuse to enforce a statute on the ground that federal law

or federal regulations prohibit its enforcement. Cal. Pub. Util. Code § 1732

requires that a court challenge to a PUC order or decision be only on grounds

previously raised in a petition to the PUC for a rehearing. Southern Pacific

contends that the PUC could not have entertained the federal questions

presented here because of article III, § 3.5, and that the state Supreme Court

therefore could not have entertained them because of § 1732. It cites

Southern California Gas Co. v. Pub. Util. Comm’n, 24 Cal. 3d 653, 156 Cal.

Rptr 733, 596 P.2d 1149 (1979), as authority for this novel construction.

But Southern California Gas does not mention article III, § 3.5. (It is

possible—though the opinion leaves this uncertain—that article III, § 3.5 was

enacted only after the petition for rehearing was filed.) There is no authority

for the absurd proposition that the California Supreme Court is now, as a

side-effect of article III, § 3.5, divested of the power to consider federal

constitutional provisions in reviewing PUC orders, or that it is divested of the

subject matter. See Restatement, Second, Judgments § 12, Comment (d).

Moreover, it is doubtful that Southern Pacific would even have been

precluded by article III, § 3.5 from having the federal questions determined in

the PUC proceedings, since it was not, strictly speaking, asking the PUC to

declare a statute unconstitutional or unenforceable, but asserting federal

defenses, including preemption. There is nothing in § 3.5 that precludes a

party from raising defenses that it may then reassert on review.

l6a

(1951) (ultimate review of federal questions by United States

Supreme Court was an adequate safeguard ).

There are certain circumstances in which overriding con-

siderations of public policy require that final state court judg-

ments adjudicating federal questions not be given res judicata

effect in a subsequent action in federal court. For example, in

Red Fox v. Red Fox, 564 F.2d 361 (9th Cir. 1977), the court,

while acknowledging that 28 U.S.C. § 1738 ordinarily requires

that federal courts respect the res judicata effect of state court

judgments on subsequent federal-law claims, recognized that

“the implementation of federal statutes representing counter-

vailing and compelling federal policies justifies departures from

a strict application of that rule.” Jd. at 365 n.3. It went on to

hold that because of the American Indian’s “peculiar and

protected status” in the eyes of Congress, the Indian Civil

Rights Act, 25 U.S.C. §§ 1301 et seq., is one such stature, and

therefore a “transparently erroneous” state court determination

of a claim cognizable under the Indian Civil Rights Act will not

preclude a subsequent federal court action, if preclusion would

result in a “miscarriage of justice.” Jd. at 365. See also Brown

v. Felsen, 442 U.S. 127 (1979) (section 17 of the Bankruptcy

Act of 1898, formerly 11 U.S.C. § 35); Gunther v. Iowa State

Men’s Reformatory, 612 F.2d 1079 (8th Cir.), cert. denied, 446

U.S. 966 (1980) (Title VII of the Civil Rights Act, 42 U.S.C.

§$§ 2000e et seq. ), disapproved in Kremer v. Chemical Construc-

tion Corp., US. , 102 S.Ct. 1883 (1982); American

Mannex Corp. v. Rozands, 462 F.2d 688 (Sth Cir.), cert.

denied, 409 U.S. 1040 (1972) (dictum—federal tax statutes);

Mach-Tronics, Inc. vy. Zirpoli, 316 F.2d 820 (9th Cir. 1963)

(dictum—Sherman Anti-Trust Act, 15 U.S.C. §§1 et seq.,

Clayton Act, 15 U.S.C. §§ 12 et seq.).

However, “the intention of Congress to make such an

exception [to 28 U.S.C. § 1738] should not be readily in-

ferred.” Restatement, Second, Judgments § 86, Comment (d).

See also Kremer v. Chemical Construction Corp., 012 S.Ct. at

1890. Application of this exception to the traditional res

judicata doctrine is “rare,” 1B J. Moore & T. Currier, Moore’s

Federal Practice 4 0.405[11] at 784, 786 (2d ed. 1982), and

17a

may become even more so after the Supreme Court’s sharp

disavowal of public policy-based erosions of the res judicata

principle in Federated Department Stores v. Moitie, 452 US.

394, 401 (1981). And there has been no showing in this case

that any public policy or Congressional purpose requires reliti-

gation by a federal district court of the federal questions.*

Rather, the contrary appears to be true. See Allegheny Airlines,

Inc. v. Pennsylvania Public Utility Commission, 465 F.2d 237

(3r Cir. 1972), cert. denied, 410 U.S. 943 (1973); State of

California vy. Oroville-Wyandotte Irrigation District, 409 F.2d

532 (9th Cir. 1969); Atlantic Coast Line Railroad v. City of St.

Petersburg, 242 F.2d 613 (Sth Cir. 1957).

To permit such relitigation after a full opportunity was

afforded Southern Pacific to present these issues to the Califor-

nia and United States Supreme Courts would risk encouraging

dilatory tactics by unhappy litigants.

3As Southern Pacific conceded in oral argument, section 214 of the

Staggers Rail Act of 1980, 49 U.S.C. § 11501, permits state authorities to

exercise regulatory jurisdiction over intrastate rail transportation, so long as

they receive from the Interstate Commerce Commission certification of their

standards and procedures. Therefore, it cannot be maintained that actions

challenging the acts of these state authorities arise in an area of such inherent

and exclusive federal concern that relitigation is warranted.

Of course, if the federal question brought before a federal court is one of

which federal courts have exclusive jurisdiction, the plaintiff cannot be barred

by res judicata as a consequence of a prior state court judgment. This is the

import of some of the cases cited by Southern Pacific in its Reply Memo-

randum of Points and Authorities in Support of Motion for Preliminary

Injunction: Kalb v. Feuerstein, 308 U.S. 433 (1940) (Bankruptcy Act);

United States v. Ohio, 487 F.2d 936, 943 (T.E.C.A. 1973), aff'd sub nom. Fry

v. United States, 421 U.S. 542 (1975) (Economic Stabilization Act of 1970).

But because the California Supreme Court had jurisdiction to decide the

federal questions in this case, see note 2, supra, these cases are inapposite.

Other cases cited by Southern Pacific in its Reply Memorandum are in-

apposite for other reasons—e.g., because the federal statute involved called

for some sort of federal review after review by the state authority (North

Carolina v. United States, 210 F.Supp. 675, 679 (D.N.C. 1962), rev'd on other

grounds, 376 U.S. 93 (1964)), or because the decision that was not given

preclusive effect was a decision by a state administrative body that lacked

jurisdiction over the subject matter (Lightsey v. Harding, Dahm & Co., 623

F.2d 1219 (7th Cir. 1980), cert. denied, 449 U.S. 1077 (1981); Pennsylvania

R.R. v. Sharfsin, 369 F.2d 276 (3d Cir. 1966), cert. denied, 386 U.S. 982

( 1967)).

18a

For the foregoing reasons, the PUC’s motion to dismiss

under Fed. R. Civ. P. 12(b) will be deemed a motion for

summary judgment under Fed. R. Civ. P. 56, and as such it is

granted.

MARILYN HALL PATEL

Marilyn Hall Patel

United States District Judge

9 August 1982.

19a

ORIGINAL

FILED

11 AUG 1982

CLERK, US. DIST.

COURT

SAN FRANCISCO

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SOUTHERN PACIFIC TRANSPORTATION

COMPANY, No. C-82-3074

Plaintiff, MHP

AMENDMENT

vs. TO ORDER

FILED

PuBLic UTILITIES COMMISSION OF THE AUGUST 9, 1982

STATE OF CALIFORNIA,

Defendant.

THE STATE OF CALIFORNIA, ACTING BY

AND THROUGH THE DEPARTMENT OF

TRANSPORTATION,

Intervenor.

The order of this court filed August 9, 1982 is amended as

follows.

At page |, lines 19-24 delete “The State of California has

applied to intervene as a defendant. The court, having

considered the memoranda and other papers submitted by the

parties, and having heard oral argument on the motions,

dismisses the action. It is therefore unnecessary to act on the

application for intervention.” Replace the deleted sentences by

“The State of California has applied to intervene as a defend-

ant, and this application, being unopposed, is granted. The

20a

court, having considered the memoranda and other papers

submitted by the parties, and having heard oral argument on

the motions, dismisses the action.”

MARILYN HALL PATEL

Marilyn Hall Patel

United States District Judge

11 August 1982.

2la

Original

FILED

Nov. 3, 1982

Clerk, U.S. Dist. Court

San Francisco

FILED

Nov. 3 5:12 PM "82

William L. Whittaker

Clerk

U.S. District Court

No. Dist. of CA

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SOUTHERN PACIFIC TRANSPORTATION -

COMPANY,

Plaintiff, No. C-82-3074

MHP

vs. ORDER

PuBLic UTILITIES COMMISSION OF

THE STATE OF CALIFORNIA, f

Defendant.

STATE OF CALIFORNIA, ACTING BY ENTERED

AND THROUGH THE DEPARTMENT OF IN CIVIL

TRANSPORTATION, DOCKET

Intervenor-Defendant. | NOV. 4, 1982

The Southern Pacific Transportation Company’s motion

for injunctive relief pending appeal came on this day pursuant

to this Court’s order shortening time of October 20, 1982.

Malcolm T. Dugan appeared for plaintiff. Vincent MacKenzie

appeared for defendant California Public Utilities Commission.

O. J. Solander appeared for intervenor-defendant State of

California, Department of Transportation.

Oral argument having been heard and the Court having

reviewed all documents presented by the parties, and being

advised in the premises, finds that

1. The status quo has changed substantially since SP filed

its notice of appeal on August 19, 1982, ¢.g., the rail service has

22a

commenced on October 18, 1982, several station facilities have

been constructed and substantial expenditure of State funds has

occurred, litigation has been commenced and conducted and is

now pending in the State Court. Plaintiffs motion, therefore,

does not fall within the contemplation of Fed.R.Civ.P. 62(c).

McClatchy Newspapers v. Central Valley Typo, etc. (9th Cir.

1982) 686 F.2d 731, 735. The relief sought by this motion is

not to maintain the status quo at the time of appeal, but is in the

nature of a new action for injunctive relief.

The Court further finds:

a. Plaintiff is not likely to prevail on the merits of its

appeal. Plaintiff failed to cite any new authority, state any

new facts or make any arguments that persuade this Court

to change its previous decision, as set forth in its August 9,

1982 order.

b. Plaintiff has not shown that the public interest

favors the granting of the injunctive relief sought. Indeed,

the opposing party to this action, the Public Utilities

Commission of the State of California, created by the

California Constitution, art. 12, is mandated to protect the

public interest and deference should be given to its deci-

sion as being in the interest of the public. »

c. The public interest, which has been determined by

the State of California, supports continuation of the pas-

senger rail service that began October 18, 1982.

For the foregoing reasons, plaintiff's motion for injunction

pending appeal is denied.

Dated: November 3, 1982

MARILYN HALL PATEL

Marilyn Hall Patel

United States District Judge

23a

FILED

NOVEMBER 12, 1982

PHILLIP B. WINBERRY

CLERK, U.S. COURT OF

APPEALS

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

SOUTHERN PACIFIC TRANSPORTATION

COMPANY,

Plaintiff-Appellant,

vs.

PuBLIC UTILITIES COMMISSION

OF THE STATE OF CALIFORNIA,

Defendant-Appellee,

and

THE STATE OF CALIFORNIA acting by

and through the DEPARTMENT OF

TRANSPORTATION,

Intervenor-Appellee.

No. 82-446

DC# CV 82-3074 MHP

Northern California

ORDER

Before: FARRIS and NELSON, Circuit Judges

Appellant’s emergency motion for injuction pending ap-

peal is denied. In addition to the jurisdictional statement

required by 9th Cir. R. 13(b)(1)(A), the parties shall discuss

the district court’s subject matter jurisdiction over this action as

an issue in the appeal. See Miller-Wohl Co., Inc. v. Commis-

sioner of Labor and Industry, 685 F.2d 1088 (9th Cir. 1982);

Smari v. First Federal Savings & Loan Ass’n of Detroit, 500 F.

Supp. 1147 (E.D.Mich. 1980).

24a

Supreme Court

FILED

DEC. 23, 1981

Laurence P. Git, CLERK

Deputy

ORDER DENYING WRIT OF REVIEW

S.F. No. 24220

IN THE SUPREME COURT

OF THE

STATE OF CALIFORNIA

IN BANK

SOUTHERN PACIFIC TRANSPORTATION COMPANY,

Petitioner,

Vv.

THE PusBLic UTILITIES COMMISSION, ETC..,

Respondent;

County OF Los ANGELES et al.,

Real Parties in Interest.

Petition for writ of review DENIED.

Chief Justice

25a

Supreme Court

FILED

DEC 23 1981

Laurence P. Git, Clerk

Deputy

ORDER DENYING WRIT OF REVIEW

S. F. No. 24316

IN THE SUPREME COURT

OF THE

STATE OF CALIFORNIA

IN BANK

SOUTHERN PACIFIC TRANSPORTATION COMPANY,

Petitioner,

Vv.

THE PuBLic UTILITIES COMMISSION, etc.,

Respondent;

COUNTY OF LOS ANGELES et al.,

Real Parties in Interest.

Petition for writ of review DENIED.

Chief Justice

26a

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF TEXAS

STATE OF TEXAS AND RAILROAD

COMMISSION OF TEXAS, et al

Vv.

UNITED STATES OF AMERICA

AND INTERSTATE COMMERCE

COMMISSION, et al

ORDER

Civic ACTION

No. A-80-CA-487

Came on for consideration this date the following motions

for judgment on the pleadings, summary judgment, and partial

summary judgment filed in this cause.

Title of Motion

Defendants’ Motion for Judgment on

SE FIN catnteninicendehintaicvenaliahapiiceenss

Defendants’ Motion for Judgment on

i ilctcncsinncesesncctectinitasensderses

Motion of Intervenor-Defendant Associ-

ation of American Railroads for Sum-

GRAS TINIE oictiecitrcccessdeccsetssasesocoscees

Motion for Summary Judgment of

Intervenor-Defendants the Atchison,

Topeka and Santa Fe Railway Com-

Ok Sp RUSE SAS

Plaintiffs’ Motion for Summary Judg-

ment

Plaintiff-Intervenor’s Motion for Partial

Summary Judgment

Motion for Summary Judgment (State

9: SOR ARES, Sree

Motion for Summary Judgment ( Flori-

da Railroads)

Date Filed

March 9, 1981

March 10, 1981

March 11, 1981

March 12, 1981

April 21, 1981

June 4, 1981

July 7, 1981

27a

Title of Motion Date Filed

Plaintiff-Intervenor’s Motion for Partial

Summary Judgment....................0000000+ November 24, 1981

Defendant-Intervenor Association of

American Railroads’ Motion to Dis-

miss or, in the Alternative, for Partial

Summary Judgment as to Plaintiff In-

tervenor Illinois’ Third Cause of Ac-

PRIS lt SSA ae ae Ed RS December 28, 1981

Having carefully considered the grounds for said motions

and the parties’ responses thereto, together with all of the briefs

and documents on file in this cause, and having heard extensive

oral arguments on the motions, the Court is of the opinion, for

the reasons ably presented in the briefs and arguments of

Defendants and Defendants-Intervenors, that Defendants and

Defendants-Intervenors are entitled to judgment in their favor

as a matter of law, and that those above-cited motions filed by

Defandants and Defendants-Intervenors should be granted,

and that those above-cited motions filed by Plaintiffs and

Plaintiffs-Intervenors should be denied. The Court notes that

pursuant to Fed. R. Civ. P. 12(c), it has treated all motions for

judgment of the pleadings as motions for summary judgment

after notifying the parties and affording them an opportunity to

present all material made pertinent to a motion for summary

judgment under Rule 56.

It is therefore ORDERED that the following motions are

hereby GRANTED:

Title of Motion Date Filed

Defendants’ Motion for Judgment on

the Pleadings March 9, 1981

Defendants’ Motion for Judgment on

the Pleadings March 10, 1981

Motion of Intervenor-Defendant Asso-

ciation of American Railroads for

Summary Judgment March 11, 1981

Motion for Summary Judgment of

Intervenor-Defendants the Atchison,

Topeka and Santa Fe Railway Com-

pany, et al. March 12, 1981

28a

Title of Motion Date Filed

Motion for Summary Judgment

( Florida Railroads ) July 7, 1981

Defendant-Intervenor Association

of American Railroads’ Motion to

Dismiss or, in the Alternative, for

Partial Summary Judgment as to

Plaintiff Intervenor Illinois’ Third

Cause of Action December 28, 1981

It is further ORDERED that the following motions are

hereby DENIED:

Title of Motion Date Filed

Plaintiffs’ Motion for Summary

Judgment April 21, 1981

Plaintiff-Intervenor’s Motion for Partial

Summary Judgment April 21, 1981

Motion for Summary Judgment (State

of Florida ) June 4, 1981

Plaintiff-Intervenor’s Motion for Partial

Summary Judgment November 24, 1981

It is further ORDERED that the above-titled and num-

bered cause is hereby DISMISSED WITH PREJUDICE.

SIGNED AND ENTERED this 3rd day of November, 1982.

JAMES R. NOWLIN

James R. Nowlin

United States District Judge

29a

450 GOLDEN GATE AVENUE

SAN FRANCISCO, CALIF. 94102

(415) 556-3031

27 OCT 1983

WILLIAM L. WHITTAKER

CLERK

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

OFFICE OF THE CLERK

CASE NUMBER: C-82-3074 MHP

CASE TITLE: Southern Pacific Transportation Co. v. Public

Utilities Commission of CA.

DATE MANDATE FILED: 10-24-83

TO COUNSEL OF RECORD:

The mandate of the United States Court of Appeals for the

Ninth Circuit has been filed in the above captioned case.

Yours very truly,

WILLIAM L. WHITTAKER, Clerk

Case Systems Administrator

Distribution: Civil —Counsel of Record

Criminal —Counsel of Record

U.S. Marshal (Copy of

Mandate )

U.S. Probation Office

UNITED STATES DISTRICT COURT

FOR THE

WESTERN DISTRICT OF TEXAS—AUSTIN DIVISION

Crvit ACTION FILE No. A-80-CA-487

THE STATE OF TEXAS AND :

RAILROAD COMMISSION OF TEXAS

VS. * JUDGMENT

UNITED STATES OF AMERICA, et al

This action came on for trial before the Court, Honorable

James R. Nowlin, United States District Judge, presiding, and

the issues having been duly tried and a decision having been

duly rendered,

It is Ordered and Adjudged the Summary Judgment is“

GRANTED for Defendants and Defendant-Intervenors; that

Summary Judgment is DENIED for Plaintiffs and Plaintiff-

Intervenors; FURTHER ORDERED that this titled and num-

bered cause is hereby DISMISSED WITH PREJUDICE.

Dated at Austin, Texas , this 3rd day of November, 1982.

Deputy Clerk

3la

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

ORIGINAL

FILED

Aug 10 1982

WILLIAM L. WHITTAKER

CLERK, U.S. DISTRICT COURT

NORTHERN DISTRICT

OF CALIFORNIA

SOUTHERN PACIFIC TRANSPORTATION

COMPANY,

Plaintiff,

vs.

PuBLic UTILITIES COMMISSION OF THE

STATE OF CALIFORNIA,

Defendant.

No. C-82-3074

JUDGMENT

Fed. R. Civ. P. 58

This action having come before this court, the Honorable

Marilyn Hall Patel, United States District Judge, presiding, and

the issues having been duly wh pet and an Order having

been duly filed herein,

IT Is ORDERED AND ADJUDGED that defendant’s motion to

dismiss, deemed a motion for summary judgment, is granted.

MARILYN HALL PATEL

Marilyn Hall Patel

United States District Judge

10 August 1982.

32a

The Constitution of the United States

Art. I, Section 8. [1] The Congress shall have Power.

[3] To regulate Commerce with foreign Nations, and

among the several States, and with the Indian Tribes;

28 U.S.C. § 1331. Federal question

The district courts shall have original jurisdiction of all civil

actions arising under the Constitution, laws, or treaties of the

United States. As amended Oct. 21, 1976, Pub.L. 94-574, § 2,

90 Stat. 2721; Dec. 1, 1980, Pub.L. 96-486, § 2(a), 94 Stat.

2369.

33a

The Interstate Commerce Act, including the Staggers Rail

Act of 1980, P.L. 96-448, 94 Stat. 1895.

49 U.S.C. § 10101a. Rail transportation policy

In regulating the railroad industry, it is the policy of the

United States Government—

(1) to allow, to the maximum extent possible, com-

petition and the demand for services to establish reason-

able rates for transportation by rail;

(2) to minimize the need for Federal regulatory

control over the rail transportation system and to require

fair and expeditious regulatory decisions when regulation

is required;

(3) to promote a safe and efficient rail transportation

system by allowing rail carriers to earn adequate revenues,

as determined by the Interstate Commerce Commission;

(4) to ensure the development.and continuation of a

sound rail transportation system with effective competition

among rail carriers and with other modes, to meet the

needs of the public and the national defense;

(5) to foster sound economic conditions in trans-

portation and to ensure effective competition and coordina-

tion between rail carriers and other modes;

(6) to maintain reasonable rates where there is an

absence of effective competition and where rail rates

provide revenues which exceed the amount necessary to

maintain the rail system and to attract capital;

(7) to reduce regulatory barriers to entry into and

exit from the industry;

(8) to operate transportation facilities and equipment

without detriment to the public health and safety;

(9) to cooperate with the States on transportation

matters to assure that intrastate regulatory jurisdiction is

exercised in accordance with the standards established in

this subtitle;

(10) to encourage honest and efficient management

of railroads and, in particular, the elimination of

noncompensatory rates for rail transportation;

34a

(11) to require rail carriers, to the maximum extent

practicable, to rely on individual rate increases, and to

limit the use of increases of general applicability;

(12) to encourage fair wages and safe and suitable

working conditions in the railroad industry;

(13) to prohibit predatory pricing and practices, to

avoid undue concentrations of market power and to prohi-

bit unlawful discrimination;

(14) to ensure the availability of accurate cost infor-

mation in regulatory proceedings, while minimizing the

burden on rail carriers of developing and maintaining the

capability of providing such information; and

(15) to encourage and promote energy conservation.

Added Pub.L. 96-448, Title I, § 101(a), Oct. #4, 1980, 84

Stat. 1897.

§ 10501. General jurisdiction

(a) Subject to this chapter and other law, the Interstate

Commerce Commission has jurisdiction over transportation—

(1) by rail carrier, express carrier, slecping car car-

rier, water common carrier, and pipeline carrier that is—

(A) only by railroad;

(B) by railroad and water, when the trans-

portation is under common control, management, or

arrangement for a continuous carriage or shipment; or

water when transporting a commodity other than

water, gas, or oil; and

(2) to the extent such jurisdiciion is not limited by

subsection (b) of this section or the extent the trans- “

portation is in the United States and is between a place

in—

(A) a State and a place in another State;

(B) the District of Columbia and another place

in the District of Columbia;

35a

sion of the United States;

(D) a territory or possession of the United States

and a place in another such territory or possession;

(E) a territory or possession of the United States

and another place in the same territory or possession;

(F) the United States and another place in the

United States through a foreign country; or

(G) the United States and a place in a foreign

country.

(b) The Commission does not have jurisdiction under

subsection (a) of this section over-—

(i) the transportation of passengers or property, or

the receipt, delivery, storage, or handling of property,

entirely in a State (other than the District of Columbia)

and not transported between a place in the United States

and a place in a foreign country except as otherwise

provided in this subtitle; or

(2) transportation by a water common carrier when

that transportation would be subject to this subchapter

only because the water common carrier absorbs, out of its

port-to-port water rates or out of its proportional through

rates, a switching, terminal, lighterage, car rental, trackage,

handling, or other charge by a rail carrier for services in

the switching, drayage, lighterage, or corporate limits of a

port terminal or district.

exercising its police police power, to require reasonable in-

trastate transportation by carriers providing transportation sub-

ject to the jurisdiction of the Commission udner this subchapter

unless (1) the transportation is deemed to be subject to the

jurisdiction of the Commission pursuant to _ section

11501(b)(4)(B) of this title, or (2) the State requirement ic

inconsistent with an order of the Commission issued under this

subtitle or is prohibited under this subtitle.

(d) The jurisdiction of the Commission and of State

authorities (to the extent such authorities are authorized to

36a

administer the standards and procedures of this title pursuant to

this section and section 11501(b) of this title) over trans-

portation by rail carriers, and the remedies provided in this title

with respect to the rates, classifications, rules, and practices of

such carriers, is exclusive.

Pub.L. 95—473, Oct. 17, 1978, 92 Stat. 1359; Pub.L. 96—448,

Title II, § 214(c)(3)—(5), Oct. 14, 1980, 94 Stat. 1915.

§ 11501. Interstate Commerce Commission authority over

intrastate transportation

(a) The Interstate Commerce Commission shall prescribe

the rate, classification, rule, or practice for transportation or

service provided by a carrier subject to the jurisdiction of the

Commission under subchapter [V of chapter 105 of this title

when the Commission finds that a rate, classification, rule, or

practice of a State causes—

(1) between persons or localities in intrastate com-

merce and in interstate and foreign commerce, unreason-

able discrimination against those persons or localities in

interstate or foreign commerce; or

(2) unreasonable discrimination against or imposes

an unreasonable burden on interstate or foreign commerce.

(b)(1) A State authority may only exercise jurisdiction

over intrastate transportation provided by a rail carrier provi-

ding transportation subject to the jurisdiction of the Commis-

sion under subchapter I of chapter 105 of this title if such State

authority exercises such jurisdiction exclusively in accordance

with the provisions of this subtitle.

(2) Within 120 days after the effective date of the

Staggers Rail Act of 1980, each State authority exercising

jurisdiction over intrastate rates, classifications, rules, and prac-

tices for intrastate transportation described in paragraph (1) of

this subsection shall submit to the Commission the standards

and procedures (including timing requirements) used by such

State authority in exercising such jurisdiction.

(3)(A) Within 90 days after receipt of the intrastate

regulatory rate standards and procedures of a State authority

37a

under paragraph (2) of this subsection, the Commission shall

certify such State authority for purposes of this subsection if the

Commission determines that such standards and procedures are

in accordance with the standards and procedures applicable to

regulation of rail carriers by the Commission under this title. If

the Commission determines that such standards and procedures

are not in such accordance, it shall deny certification to such

State authority, and such State authority may resubmit new

standards and procedures to the Commission for review in

accordance with this subsection.

(B) The standards and procedures existing in each State

on the effective date of the Staggers Rail Act of 1980 for the

exercise of jurisdiction over intrastate rail rates, classifications,

rules, and practices shall be deemed to be certified by the

Commission from that date until the date an initial determina-

tion is made by the Commission under subparagraph (A) of

this paragraph.

(4)(A) Any State authority which is certified by the

Commission under this subsection may use its standards and

procedures in exercising jurisdiction over intrastate rail rates,

classifications, rules, and practices during the 5-year period

commencing on the date of such certification. Any State

authority which is denied certification or which does not seek

certification may not exercise any jurisdiction over intrastate

rates, classifications, rules, and practices until it receives certifi-

cation under this subsection.

(B) Any intrastate transportation provided by a rail

carrier in a State which may not exercise jurisdiction over an

intrastate rate, classification, rule, or practice of that carrier due

to a denial of certification under this subsection shall be deemed

to be transportation subject to the jurisdiction of the Commis-

sion under subchapter I of chapter 105 of this title.

(5)(A) Certification of a State authority under this

subsection is valid for the 5-year period beginning on the date

of such certification. Prior to the expiration of such 5-year

period, the State authority shall resubmit its intrastate regu-

latory standards procedures-to the Commission for subsequent

certification in accordance with this subsection.

Nate “

Bis... a . , ¥ is "at . - i Papel Peter. wt Meh ining ae eee

& i ae ged Tee Lee ae Se te, phage A. OS AE OO Pe a PE eee es

38a

(B) During any 5-year certification period, a State may

not change its certified standards and procedures without

notifying and receiving express approval from the Commission.

(6) Notwithstanding any other provision of this subtitle, a

State authority may not exercise any jurisdiction over general

rate increases under section 10706 of this title, inflation-based

rate increases under section 10712 of this title, or fuel adjust-

ment surcharges approved by the Commission.

jurisdiction of the Commission under subchapter I of chapter

105 of this title may petition the Commission to review the

decision of any State authority, in any administrative proceed-

ing in which the lawfulness of an intrastate rate, classification,

rule, or practice is determined, on the grounds that the stan-

dards and procedures applied by the State were not in accord-

ance with the provisions of this subtitle. The Commission shall

take final action on any such petition within 30 days after the

date it is received. If the Commission determines that the

standards and procedures were not in accordance with the

provisions of this subtitle, its order shall determine and author-

ize the carrier to establish the appropriate rate, classification,

rule, or practice.

(d)(1) The Commission has exclusive authority to pre-

scribe an intrastate rate for transportation provided by a rail

carrier subject to the jurisdiction of the Commission under

subchapter I of chapter 105 of this title when—

(A) a rail carrier files with an appropriate State

authority a change in an intrastate rate, or a change in

classification, rule, or practice that has the effect of chang-

ing an intrastate rate, that adjusts the rate to the rate

charged on similar traffic moving in interstate or foreign

commerce; and

(B) the State authority does not act finally on the

change by the 120th day after it was filed.

(2) When a rail carrier files an application with the

Commission under this subsection, the Commission shall pre-

scribe the intrastate rate under the standards of subsection (a)

39a

of this section and chapter 107 of this title. Notice of the

application shall be served on the State authority.

(e)(1) The Commission shall prescribe any rate, rule, or

practice applicable to transportation provided entirely in one

State by a motor common carrier of passengers providing

transportation subject to the jurisdiction of the Commission

under subchapter II of chapter 105 of this titlhe— -

(A) if the carrier has requested the department,

agency, or instrumentality of such State having jurisdiction

over such rate, rule, or practice for permission to establish

such rate, rule, or practice and the request has been denied

(in whole or in part) or the State authority has not acted

finally (in whole or in part) on the request by the 120th

day after the carrier made the request; and

(B) if the Commission finds that the rate, rule, or

practice in effect and applicable to such intrastate trans-

portation causes unreasonable discrimination against or

imposes an unreasonable burden on interstate or foreign

commerce.

(2) For purposes of paragraph (1)(B) of this subsection,

there shall be a rebuttable presumption that—

(A) any rate, rule, or practice applicable to trans-

portation provided by a motor common carrier of passen-

gers entirely in one State imposes an unreasonable burden

on interstate commerce if the Commission finds—

(i) that such rate, rule, or practice results in the

carrier charging a rate for such transportation which is

lower than the rate such carrier charges for com-

parable interstate transportation of passengers;

(ii) on the basis of evidence presented by the

carrier, that as a result of such rate, rule, or practice

40a

whole or in part) on the request of the carrier to

establish such rate, rule, or practice by the 120th day

after the date the carrier made the request; and

(B) any rate applicable to transportation entirely in one

State imposes an unreasonable burden on interstate commerce

if the Commission finds that the most recent general rate

increase applicable to transportation provided by motor com-

mon carriers of passengers in such State is less than the most

recent general rate increase applicable to interstate trans-

portation provided by motor common carriers of passengers

under this subtitle.

(3)(A) A motor common carrier of passengers must file

an application with the Commission for prescription under this

subsection of a rate, rule, or practice applicable to trans-

portation provided entirely in one State by such carrier. When

such application is filed with the Commission, the carrier shall

certify that he has notified (i) the Governor of such State, (ii)

the department, agency, or instrumentality of such State which

denied, or failed to take action on, the request of such carrier

related to such rate, rule, or practice, and (iii) such other

interested persons as the Commission may specify by regu-

lation. The Commission shall take final action on any such

application not later than 60 days after such application is filed

with the Commission.

(B) The Commission shall establish, by regulation, proce-

dures for processing applications under this subsection.

(4) This subsection shall not apply to any carrier owned

or controlled by a State or local government.

(5) No State or political subdivision thereof and no

interstate agency of other political agency of two or more States

shall enact or enforce any law, rule, regulation, standard, or

other provisions having the force and effect of law relating to

scheduling of interstate or intrastate transportation provided by

motor common carrier of passengers subject to the jurisdiction

of the Commission under subchapter II of chapter 105 of this

title on an authorized interstate route or relating to the

implementation of any reduction in the rates for such trans-

4la

portation except to the extent that notice, not in excess of 30

days, of changes in schedules may be required. This paragraph

shall not apply to intrastate commuter bus operations.

(6)(A) No motor common carrier of passengers provid-

ing transportation subject to the jurisdiction of the Commission

may charge or collect a rate for intrastate service provided on

an authorized interstate route which constitutes a predatory

practice in contravention of the transportation policy set forth in

section 10101(a) of this title.

(B) When the Commission decides, upon complaint by

any person, that a reduction in a rate charged or collected by

such a motor common carrier of passengers for intrastate

service provided on an authorized interstate route constitutes a

predatory practice in contravention of the transportation policy

set forth in section 10101(a) of this title, the Commission shall

prescribe the rate applicable to such service.

(f) The Commission may take action (1) under this

section only after a full hearing, or (2) with respect to a rate,

rule, or practice of a motor common carrier of passengers, in

accordance with the procedures established by the Commission

under subsection (¢)(3)(B) of this section. Action of the

Commission under this section supersedes State law or action

taken under State law in conflict with the action of the

Commission.

Pub.L. 95—473, Oct. 17, 1978, 92 Stat. 1444; Pub.L. 96—448,

Title I, § 214(a)—(c)(1), Oct. 14, 1980, 94 Stat. 1913; Pub.L.

97—261, § 17(a), Sept. 20, 1982, 96 Stat. 1117.

Enacted 1872.

CALIFORNIA PUBLIC UTILITIES CODE

§ 1732. Contents of application

The application for a rehearing shall set forth specifically

the ground or grounds on which the applicant considers the

decision or order to be unlawful. No corporation or person

shall in any court urge or rely on any ground not so set forth in

the application.

42a

§ 1756. Time for application for review to Supreme Court:

Return of writ: Certification of record

Within 30 days after the application for a rehearing is

denied, or, if the application is granted, then within 30 days

after the decision on rehearing, the applicant may apply to the

Supreme Court of this State for a writ of certiorari or review for

the purpose of having the lawfulness of the original order or

decision or of the order or decision on rehearing inquired into

and determined. The writ shall be made returnable at a time

and place then or thereafter specified by court order and shall

direct the commission to certify its record in the case to the

court within the time therein specified.

43a

Decision No. 93391

BEFORE THE PUBLIC UTILITIES COMMISSION

OF THE STATE OF CALIFORNIA

COUNTY OF Los ANGELES,

STATE OF CALIFORNIA,

Complainants,

v. + Case No. 10575

SOUTHERN PACIFIC TRANSPORTATION

COMPANY, a corporation,

Defendant.

ORDER DENYING REHEARING

A petition for rehearing of Decision No. 93211 has been

filed by the State of California Department of Transportation

(Caltrans). An Answer thereto has been filed by Southern

Pacific Transportation Company. We have considered each

and every allegation raised therein and are of the opinion that

good cause for granting rehearing has not been shown. There-

fore,

It Is OrDERED that rehearing of Decision No. 93211 is

hereby denied.

This order is effective today.

Dated August 4, 1981, at San Francisco, California.

JOHN E. BRYSON

President

RICHARD D. GRAVELLE |

LEONARD M. Grimes, Jr. :

Victor CALvo He

PRISCILLA C. GREW |

Commissioners ie

7% P| ‘-

44a

IN THE SUPREME COURT

OF THE

STATE OF CALIFORNIA

SOUTHERN PaciFic TRANSPORTATION

COMPANY,

Petitioner,

SF No. 24316

Tue Pusiic Utivitres COMMISSION

OF THE STATE OF CALIFORNIA,

Respondent.

[County of Los Angeles and State of

California, Real Parties in Interest}

PETITION FOR WRIT OF REVIEW

WITH

POINTS AND AUTHORITIES IN SUPPORT THEREOF

JOHN MACDONALD SMITH

Caroi A. HARRIS

ANN FINGARETTE HASSE

813 Southern Pacific Building

One Market Plaza

San Francisco, CA 94105

Attorneys for Petitioner

Southern Pacific

Transportation Company

Dated: July 16, 1981

—.

45a

TABLE OF CONTENTS

PETITION For Wait or REVIEW

NEE I GI GDUIG ccctcttesicecescssvectdeebebecdeemntteaestiosdlbities

ee IIIA, sisesnesescccnsvcensacevetbtevncndialiieiibbenetitas

TINT AIED ons sitrscntnndcticcveticuiitagnnasmendcaibsaadbins

SE IED vesecccsesccccdinnneniedesctenscinbbdduditbnaitidsastaiactens

IIIS os snsverceocsecndicobeenstioensemiesdibunabiinaidekinie’

MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT

OF PETITION For Wait or REVIEW

Decision 92862 is Unalwful Because the Record Does

Not Now Demonstrate the Necessary Public Con-

venience and Necessity for the Commute Service ..........

The Commission Denied SP Due Process When It Failed

to — or Consider the New Evidence Presented by

SP on the Issue of Public Convenience and Necessity...

CII cvacecssusunsodbasecccbaneesnesberstbeeeenindacsnsmlbiniintins

APPENDICES

A —— Public Utilities Commission Decision No.

B ao Public Utilities Commission Decision No.

C Resolution of the Board of Supervisors, County of

Los Angeles ti :

D_ SP’s Supplement to Petition for Re ing of Deci-

sion Nos. 92862 and 92863 and for Receipt of

PE RE a, Ee RE

46a

TABLE OF AUTHORITIES

FOR

MEMORANDUM OF POINTS AND AUTHORITIES

CASES PAGE

Air California, 66 Cal. PUC 230, 233 (1966) ........cceccereeesseersesees

Andre Guiton, 68 Cal. PUC 631, 638 (1958 )........c.ccssseseseeseereeeneneees

~ oe Transportation Co. v. E. H. Warren, 26 CRC 131, 134

( } ceseneescssnenccessecsienssonenssocnsteiecscsssoseccssesscossoscoees

Crystal Springs Water Co., 61 Cal. PUC 329, 332 (1963) ...........00+

In Re Beverly Givson, 26 CRC 892, 894 (1925) .......ccccccccccsseeseeseeeees

Labor Board v. I. & M. Electric Co., 318 U.S. 9, 28 (1943 )...........0-.

N.L.R.B. v. St. Francis Hospital of Lynwood, 601 F.2d 404, 417

(9th Cir. 1979)

Savage Transportation Co., 50 Cal. PUC 648, 649 (1951)...............

STATUTES

California Government Code § 11513............... ae

California Public Utilities Code § 1760 .0.............ccccccccccceseeeseeseseeeeenees

47a

IN THE SUPREME COURT

OF THE

STATE OF CALIFORAIA

SOUTHERN PACIFIC TRANSPORTATION

COMPANY,

Petitioner,

SF No.

Vv.

THE PuBLic UTILiTrEs COMMISSION

OF THE STATE OF CALIFORNIA,

Respondent.

[County of Los Angeles and State of

California, Real Parties in Interest]

PETITION FOR WRIT OF REVIEW

WITH

POINTS AND AUTHORITIES IN SUPPORT THEREOF

TO THE HONORABLE ROSE E. BIRD, CHIEF JUSTICE,

AND TO THE HONORABLE ASSOCIATE JUSTICES

OF THE SUPREME COURT OF THE STATE OF

CALIFORNIA:

Southern Pacific Transportation Company (“SP”) respect-

fully requests this Court to inquire into and determine the

lawfulness of Decision No. 92862 of the Public Utilities Com-

mission of the State of California (“Commission”) issued April

7, 1981. Decision 92862 was issued in CPUC 10575, County of

Les Angeles, State of California v. Southern Pacific Trans-

portation Company, wherein the State of California Department

of Transportation (“Caltrans”) seeks an order requiring SP to

institute rai] commuter service between Oxnard, California and

48a

Los Angeles Union Passenger Terminal in Los Angeles, Cali-

fornia. This petition is related to and arises out of the same

proceedings as the Petition for Writ of Review filed by SP on

October 3, 1980 in SF No. 24220.

I. JURISDICTION OF THE COURT

This Court has jurisdiction pursuant to Section 1756 ef seg.

of the California Public Utilities Code to review decisions of the

Commission.

Il. THE STATUS OF THE PARTIES

Petitioner SP is a corporation existing under and by virtue

of the laws of the State of Delaware. It is a railroad operating

in several states, including California, in which it is a common

carrier of freight over all of its lines throughout the state. SP is

also a common carrier of passengers in portions of San

Francisco, San Mateo, and Santa Clara Counties, California, in

which it provides commuter services between San Francisco

and San Jose, serving intermediate points.

Respondent Commission is an administrative agency of the

State of California existing pursuant to Article XII of the

California Constitution. It is charged with the duties and

authorities conferred upon it by Article XII and by the Califor-

nia legislature under the California Public Utilities Code.

The County of Los Angeles (“County”) and the State of

California Department of Transportation (“Caltrans”) are the

complainants in the proceeding before the Commission and are,

therefore, real parties in interest. A copy of this Petition is

being served upon all counsel who represented the County and

Caltrans and appeared on behalf of such parties in the proceed-

ing before the Commission.

Greyhound Lines, Inc. (“Greyhound”) is an intervenor in

the Commission proceeding. It is a passenger stage corporation

existing under and by virtue of the laws of California and

operates bus service in several states including California,

where it serves the cities of Oxnard and Los Angeles pursuant

to Certificated Authority issued by respondent Commission.

49a

Ill. STATEMENT OF THE CASE*

The County of Los Angeles and Caltrans filed a complaint

on May 18, 1980, requesting the Commission to order SP to

institute commuter train operations over its coastline of railroad

between Oxnard (Ventura County) and Los Angeles (Los

Angeles County). Hearings were held, and on June 3, 1980,

the Commission issued Decision 91847 which ordered SP, over

its vigorous objections, to institute the service. SP filed a

Petition for Rehearing and the Commission in Decision 92230

issued September 3, 1980 granted a limited hearing, primarily

on the issue of the operational feasibility of the service.

Decision 92230 denied rehearing on the issue of dedication and

failed to consider the proposed Greyhound service as an

alternative service, one which encompasses both lower cost and

greater fuel efficiency. Those two issues were raised in SP’s

Petition for Writ of Revew in SF 24220.

The limited rehearing was held but shortly after the

rehearing was concluded, County, one of the original com-

plainants in this proceeding, decided to withdraw from the

proceeding. On December 23, 1980, its Board of Supervisors

resolved to rescind its agreement with Caltrans to supply a

County-owned train set to Caltrans for the commute service.

On February 5, 1981, County voted to withdraw from the

proceedings because the Board of Supervisors found that the

service was no longer in the best interests of County’s residents.

(February 5, 1981, resolution; Exhibit G to SP’s Supplement to

Petition for Writ of Review in SF 24220 and Appendix C

hereto). On February 19, 1981, County formally asked the

Commission for permission to withdraw. SP and Greyhound,

after learning of the Board’s decision, had already made

motions to the Commission to dismiss the proceedings, arguing

that with the withdrawal of County there was no longer the

requisite showing of public convenience and necessity.

* A complete and detailed history of these proceedings was set forth in

SP’s Petition for Review in SF 24220 and thus will be only briefly summar-

‘Sead

50a

By its Decision 92862 issued April 7, 1981 (Appendix A

hereto), the Commission granted County’s motion to withdraw

but denied SP’s and Greyhound’s motion to dismiss, finding

that there was still “adequate public support”* for the service

and that County’s participation was not essential since Caltrans

stated that it has agreed with Amtrak to furnish and maintain

the necessary equipment’.

SP petitioned for rehearing of Decision 92862**. In its

Petition for Rehearing and for Receipt of Additional Evidence

filed May 7, 1981 (filed with this Court as Supplement to

Petition for Writ of Review in SF 24220), SP argued that the

Commission had erred when it refused to dismiss the complaint

and that an “adequate” showing of public convenience and

necessity is not sufficient to justify the institution of the service.

It further presented new evidence that the federal support

Caltrans had anticipated receiving is no longer available. In

addition, on June 5, 1981, SP filed a Supplement to its Petition

-for Rehearing and for Receipt of Additional Evidence ( Appen-

dix D hereto), presenting a letter written by U.S. Representa-

tive Bobbi Fiedler to the Commission. Representative Fiedler

represents the 21st District in California which includes the San

Fernando Valley, a prime user-to-be of the service. She is the

successor of Representative James Corman, who had initially

stated that he supported the proposed service. In her letter,

Representative Fiedler stated her “strong opposition” to the

commute service on behalf of both the inhabitants and the

industries in the San Fernando Valley. SP therefore requested

the Commission to modify its finding of Congressional support

in Decision 91847 to reflect the fact that her office. no longer

supports the proposed commuter service. ; .

Decision 93211 (Appendix B hereto) denied SP’s Petition

for Rehearing of Decision 92862 without comment; indeed, the

Commission made absolutely no reference to the public con-

venience and necessity issue in its decision. The Commission

additionally rejected SP’s Petition for Receipt of Additional

Evidence.

Sla

IV. GROUNDS FOR PETITION

Fundamental to the ordering of the commute service by

the Commission is a finding of public convenience and necessity

for the service. It was upon this basis that the original request

for the service was predicated. With the withdrawal of County

and its February 5 Resolution that public convenience and

necessity would not be served by institution of the commute

service and with Congresswoman Fiedler’s express opposition

to the service, the present record contains little evidence that

any public convenience and necessity will be served at this time

by the institution of the commute service. Therefore, the

Commission erred as a matter of law in reaffirming its finding

of public convenience and necessity in Decision 92862 and in

denying SP’s Petition for Rehearing of Decision 92862 in

Decision 93211.

V. QUESTIONS PRESENTED

1. Did the Commission err in reaffirming its finding of

public convenience and necessity in Decision 92862 in the face

of the County’s withdrawal of support and Congressional

opposition to the service?

2. Did the Commission deny SP due process by refusing to

consider the additional evidence SP submitted on the change in

circumstances on both the local and national level? *

Both questions must be answered in the affirmative.

WHEREFORE, SP prays that this Court:

1. Issue a Writ of Review with respect to Decision 92862

insofar as it relates to public conveniences and necessity;

2. Issue a Writ of Review with respect to Decision 93211

insofar as the Commission has unlawfully failed to consider

new evidence on the issue of public convenience and necessity

and has thereby denied SP due process on this issue;

3. Grant all other relief to SP as the Court may deem

proper, including its costs of suit.

52a

Dated at San Francisco, California this 16th day of July,

1981.

JOHN MACDONALD SMITH

CaROL A. HARRIS

ANN FINGARETTE HASSE

813 Southern Pacific Building

One Market Plaza

San Francisco, CA 94105

By ANN FINGARETTE HASSE

Attorneys for Petitioner

Southern Pacific Transportation

Company

VERIFICATION

I, D. M. MOHAN, an Assistant to President, of Southern

Pacific Transportation Company, Petitioner in the above-

entitled matter. I have read the foregoing Petition for Writ of

Review and know the contents thereof; and I certify that the

same is true of my own knowledge, except as to those matters

which are therein stated on information or belief, and as to

those matters I believe them to be true.

I declare under penalty of perjury that the foregoing is true

and correct.

Dated at San Francisco, California, this 16th day of July,

1981.

D. M. MOHAN

D. M. Mohan

Subscribed and sworn to be-

fore me this 16th day of July,

1981.

CaTuerine B. LUNDY

NOTARY PUBLIC

. 7 t , wa, f

~ - iar. Uae i.

arr oe se ee

53a

MEMORANDUM OF POINTS AND AUTHORITIES

IN SUPPORT OF

PETITION FOR WRIT OF REVIEW

1. Decision 92862 is Unlawful Because the Record Does

Not Now Demonstrate the Necessary Public Convenience

and Necessity for the Commute Service

The initial complaint filed by the County and Caltrans was

premised on the contention that rail passenger commute service

between Oxnard and Los Angeles is required by the public

convenience and necessity. Public convenience and necessity is

an “exacting standard” requiring a high level of proof ( Savage

Transportation Co., 50 Cal. PUC 648, 649 (1951), and com-

plainants have the burden of meeting that standard. Crystal

Springs Water Co., 61 Cal. PUC 329, 332 (1963)); In Re

Beverly Gibson, 26 CRC 892, 894 (1925).

Initially, one of the primary bases for the proposed service

was County’s support of the service as expressed in large part

by its role as one of the two complainants in these proceedings.

Moreover, County had originally agreed, at the urging of

former County Supervisor Baxter Ward, to give eight rail

coaches to the service. Indeed, the only concrete support

offered by any local agency in connection with the proposed

service was County’s; Ventura County’s Board of Supervisors,

for example, indicated in testimony at the initial hearings that it

was unwilling to provide any funding for the service despite the

fact that its inhabitants would be primary users. (Transcript,

Initial Hearings, p. 199).

The Commission made findings in its initial Decision

91847 that the service had support at local, regional and

national levels. (Findings 8 and 9, Decision 91847; Appendix

to Petition for Writ of Review in SF 24220.) Since the initial

hearings and the issuance of Decision 91847, the situation has

substantially changed. County has withdrawn its agreement to

supply the railcars tc the service; more important, on February 1

“$5, 1981, the Board of Supervisors of County resolved to .

withdraw as a participant in these proceedings, specifically :

finding that the commute service “is unwarranted at this time.”

54a

The Board found that the service would “increase pollution”

and that, “[C]onsequently, it is not in the best interest of the

citizens of the County of Los Angeles to continue to participate

in this action.” (Appendix C hereto. )

The national situation has changed as well. Congress-

woman Fiedler, representing the Twenty-First Congressional

District (which includes the San Fernando Valley, one of the

major areas for the commute service) informed the Commis-

sion by letter of her strong opposition to the service. Although

her predecessor, James Corman, had supported the proposal,

Representative Fiedler stated that the service “would be a

disaster for the people of the [San Fernando] Valley at this

time.” (Appendix D hereto.) She noted in her letter that

federal budgetary considerations have changed since the com-

plaint was first filed in this proceeding. As SP showed in its

Petition for Rehearing and for Receipt of Additional Fvidence

(Supplement to Petition for Writ of Review in SF 24220),

Caltrans had shown in its initial budget that it was relying on |

federal subsidies from the Urban Mass Transit Adminisiration

(UMTA). UMTA’s budget has since been dramatically

slashed. Indeed, UMTA does not plan to get involved in

funding local service. (See Exhibit I to Supplement to Petition

for Writ of Review in SF 24220.)

Upon County’s motion to withdraw, SP urged the Com-

mission to reassess its findings of public convenience and

necessity and dismiss the complaint. In response to SP’s

motion, the Commission found in Decision 92862 that, despite

County’s withdrawal, there was an “adequate” showing of

public support for the service. ( Finding No. 2, Decision

55a

The present record af most presents a substantial conflict

over the degree of public support for the proposed commute

service. The Commission therefore erred in Decision 92862

when it denied SP’s and Greyhound’s motions to dismiss the

complaint, and it further erred when it denied rehearing on

Decision 92862 in Decision 93211.

2. The Commission Denied SP Due Process When It Failed

to Accept or Consider the New Evidence Presented by SP

on the Issue of Public Convenience and Necessity

After the Commission denied SP’s motion to dismiss the

complaint in its Decision 92862, SP filed a Petition for Re-

hearing and for Receipt of Additional Evidence ( filed with this

Court as Supplement to Petition for Writ of Review in SF

24220, hereafter cited as “Supplement”). In that Petition, SP

introduced evidence of future federal budget cuts affecting

UMTA, the national transportation agency; SP introduced

further evidence that, as a result of budget cuts and change in

national policy, UMTA will no longer fund local transportation

services (Exhibits H and I, Supplement). In addition, SP

proposed commute service. In addition, SP stressed the

February 5, 1981 Resolution of County stating that the service

was not in the best interests of County’s residents; the Resolu-

tion had not been mentioned by the Commission in its Decision

92862 in which it found “adequate support” for the service.

56a

Under the Commission’s own decisions, the Commission is

required to consider all the evidence and all the public interests

affected by the proposed service before making a decision on

public convenience and necessity. Andre Guiton, 68 Cal. PUC

631, 638 (1958); Air California, 66 Cal. PUC 230, 233 (1966).

Morecver, due process as guaranteed by the Fourteenth

Amendment requires that the Commission review all relevant

evidence.

Relevant evidence in an administrative hearing is evidence

that a reasonable person might rely on in deciding serious

matters. California Government Code § 11513.* The new

evidence presented by SP was just such evidence and should

have resulted in the Commission’s granting SP’s Petition for

Rehearing. Since the Commission refused to grant a rehearing,

this Court can require the Commission to do so.

Alternatively, this Court can reverse Decision 92862. This

Court is specifically empowered to make new findings where

there is a constitutional challenge to a Commission decision.

California Public Utilities Code § 1760.* Here, SP was denied

due process by the Commission’s rejection of relevant evidence.

In Labor Board v. I. & M. Electric Co., 318 U.S. 9, 28 (1943),

the Supreme Court said:

“(T]he court is given discretion to see that before a

party’s rights are finally foreclosed his case has been fairly

heard. Findings cannot be said to have been fairly reached

unless material evidence which might impeach, as well as

that which will support, its findings,.is heard and

weighed.”

* California Government Code § 11513 specifically provides in pertinent

part: “Any relevant evidence shall be admitted if it is the sort of evidence on

pment sen glwssa eager pees path caldera

affairs, regardless of the existence of any common law or statutory rule .

* California Public U Code § 1760 provides in pertinent part. “In

material to the determination of the constitutional question shall not be final.”

57a

See, also, N.L.R.B. v. St. Francis Hospital of Lynwood, 60\ F.2d

404, 417 (9th Cir. 1979). The Court should reassess the

findings in Decision 92862 in light of all the evidence. If it does

so, it will find as a matter of law that complainants have not

sustained their burden of showing the necessary public con-

venience and necessity for the commute service.

CONCLUSION

The Commission erred as a matter of law in Decision

92862 in holding that “adequate support” for the requested

service was sufficient to fulfill complainants’ burden of proving

the requisite public convenience and necessity, and Decision

92862 should therefore be reversed. Alternatively, pursuant to

P.U.C. Code §1760, the Court can itself make findings based on

all the evidence that complainants have failed to sustain their

burden of demonstrating the necessary public convenience and

necessity. In either case, because public convenience and

necessity was the basis upon which the service was requested,

the Court must then necessarily find that the Commission

cannot order the proposed commute service.

Dated at San Francisco, California, this 16th day of July,

1981.

JOHN MACDONALD SMITH

CaROL A. HARRIS

ANN FINGARETTE HASSE

813 Southern Pacific Building

One M Plaza

San F , CA 94

+ /

=.)

se) — + —_—™ "'

58a

CERTIFICATE OF SERVICE BY MAIL

I hereby certify that I am a citizen of the United States,

over the age of 18 years, with business address at Southern

Pacific Building, One Market Plaza, San Francisco, California

94105, and am not a party to nor interested in Southern Pacific

Transportation Company v. The Public Utilities Commission of

the State of California, S.F. No. 24220 before the Supreme

Court of California.

On July 16, 1981, in San Francisco, California, I personally

deposited in the United States mail copies of the attached

Petition For Writ Of Review With Points And Authorities In

Support Thereof addressed as follows:

Janice E. Kerr O. J. Solander

Hector Anninos E Bonnstetter

O Nicholas Sel Tran

° ton

5066 State Building at 1120 N Street, Box 1438

San Francisco, CA 94102 Sacramento, CA 95807

Angeles Bryan, Cave, McPheeters

Hall of Administration & McRoberts

500 West Te: 1015—15th Street

Los Angeles, CA 90012 Washington, D.C. 20005

Lat J. Celmins ‘|

Tower—1742

Phoenix, AZ 85077

Each copy was enclosed in a sealed envelope and all

postage thereon fully prepaid. .

I certify under penalty of perjury that the foregoing is true i

and correct.

) Terri A. Brown

Terri A. Brown

59a

S.F. No. 24316

IN THE SUPREME COURT

OF THE

STATE OF CALIFORNIA

SOUTHERN PACIFIC TRANSPORTATION

COMPANY,

Petitioner,

vs.

THe Pusiic UTILities COMMISSION

OF THE STATE OF CALIFORNIA,

Respondent,

COUNTY OF Los ANGELES AND THE

STATE OF CALIFORNIA,

Real Parties in Interest.

RESPONDENT'S ANSWER IN OPPOSITION

TO PETITION FOR WRIT OF REVIEW

JANICE E. Kerr

HECTOR ANNINOS

ANNE K. MESTER

E. NICHOLAS SELBY

5066 State Building |

San Francisco, California 94102

Attorneys for the Public Utilities

Commission of the

State of California

" August 14, 1981 ’

oes , = — ao. an ok Pe i A .

60a

SUBJECT INDEX

TABLE OF AUTHORITIES CITED .....scssssssssssssssssssssssssee

| i aa

I. THE COMMISSION DID NOT ERR IN

REAFFIRMING ITS FINDING OF PUBLIC

CONVENIENCE AND NECESSITY, DESPITE

THE WITHDRAWAL OF LOS ANGELES

COUNTY AND THE OPPOSITION OF CON-

GRESSWOMAN FIEDLER

Il. THE COMMISSION DID NOT DENY SP DUE

PROCESS BY REFUSING TO RECEIVE INTO

THE RECORD THE CONGRESSWOMAN’S

LETTER AND THE EXHIBITS RELATED TO

POTENTIAL FEDERAL FUNDING ..........0.......

- Ill. THE COMMISSION’S LACK OF ICC CERTIFI-

CATION UNDER THE STAGGERS ACT

DOES NOT BAR AN ORDER TO SP TO PRO-

VIDE RAIL PASSENGER SERVICE. .......c.c00.0000

RET etich tcckibesttiitadnriectecssoepbenbiseckgeysenecesteveneceesaneste

6la

TABLE OF AUTHORITIES CITED

CASES PAGE

California Manufacturers Assn. v. Public Utilities Com. (1979) 24

Cal, 36 2350 BEB cerccccrcccesceses

= Motor Transport Co. v. Public Utilities Com. (1963) 59

. 2d 270, 275..

a Toe: ~ ad Cement Co. v. Public Util. Com. (1957) 49 Cal. 2d

171, 176 «2.4...

Goldin v. Public Utilities Commission (1979) 23 Cal. 3d 638, 653....

Los Angeles Met. Transit Authority v. Public Utilities Com. (1959)

Re RES OE NR ET

San Diego.etc. Ferry Co. v. Railroad Com. (1930) 210 Cal. 504.......

Southern Pac. Co. v. Public Utilities Com. (1953) 41 Cal. 2d 354...

UNITED STATES CONSTITUTION

Article VI, 42

FEDERAL STATUTES

94 Stat. 1913, “The Staggers Rail Act of 1980” ( P.L. 96-448) ....... oe

Title Il, Section 201(a)( 49 U.S.C. § 10701a) -

Title I, Section 205( b )( 49 U.S.C. § 10704)

Title Il, Section 217(a)( 1)(49 U.S.C. § 10705a) ............cccccc0

Title Il, Section 203( a)( 49 U.S.C. § 10707a)

Title II, Section 202 (49 U.S.C. § 10709)

Title Il, Section 214 (49 U.S.C. § 11501)

CALIFORNIA CONSTITUTION

Re Be ND ee cate ttccccsscceserttocnsncescnensbineeeans

CALIFORNIA STATUTES

Public Utilities Code Section 1757

Public Utilities Code Section 1760

Stats. 1979, ch. 161, “Senate Bill 620”

CALIFORNIA PUBLIC UTILITIES COMMISSION

DECISIONS AND CASES

Decision No. 91874

Decision No. 92230

Decision No. 92862

Decision No. 92863

Decision No. 93211

Commission Case No. 10575

in a¢ Beventy Grasow ( 1925) 26 CRC 131, 134

62a

CASES PAGE

MISCELLANEOUS

Letter of Congresswoman Bobbi Fiedler

Letter from Counsel for SP, dated May 7, 1981

Letter from Counsel for SP, dated July 9, 1981

SP’s “Petition for Rehearing of Decision Nos. 92862 and 92863” ....

Exhibits A through I

Exhibits A through F

Exhibit D

Exhibit G

Exhibit H

Exhibit I

i ee to Caltrans’ Petition for Rehearing of Decision No.

Greyhound’s Motion to Dismiss

Puneeiee Transcript and Exhibits (Testimony) in Case No.

Exhibit 4 ‘

Exhibit 8

Exhibit 9

Exhibit 10

Exhibits 11 through 17

Exhibit 18

Exhibit 19

Exhibit 20

63a

S.F. No. 24316

IN THE SUPREME COURT

. OF THE

STATE OF CALIFORNIA

SOUTHERN PACIFIC TRANSPORTATION

COMPANY,

Petitioner,

vs.

THe Pusiic UTILiT1eEs COMMISSION OF

THE STATE OF CALIFORNIA,

Respondent,

COUNTY OF Los ANGELES AND THE

STATE OF CALIFORNIA,

Real Parties in Interest.

RESPONDENT’S ANSWER IN OPPOSITION

TO PETITION FOR WRIT OF REVIEW

TO THE HONORABLE ROSE ELIZABETH BIRD, CHIEF

JUSTICE, AND TO THE HONORABLE ASSOCIATE JUS-

TICES OF THE SUPREME COURT OF THE STATE OF

CALIFORNIA:

The respondent Public Utilities Commission of the State of

California (hereinafter, Commission) hereby respectfully sub-_

mits its Answer in opposition to the petition for writ of review of

Southern Pacific Transportation Company (hereinafter, SP),

and denies that SP is entitled to have said writ granted.

64a

ISSUES PRESENTED

This case is a companion case to S.F. 24220,' in which SP

challenges Commission Decision No. 91847. In Decision No.

91847, the Commission ordered SP to reinstitute passenger rail

service between Oxnard and Los Angeles. Decision No. 91847

has now been modified and amended by four decisions, Nos.

92230, 92862, 92863 and 93211. In this case SP challenges

Decision Nos. 92862 and 93211.

This case presents three questions.

First, in view of its findings of fact concerning popular

support, ridership projections, state subsidies, and endorse-

ments from governmental officials and planning agencies, did

the Commission abuse its discretion in Decision No. 92862 by

reaffirming its finding in Decision No. 91847 that public

convenience and necessity require Oxnard-Los Angeles rail

passenger service, despite the withdrawal of Los Angeles

County as a complainant in Case No. 10575 and the opposition,

by letter, of a local Congresswoman?

Second, in view of its findings on adequate and existing

state funding, did the Commission deny

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