California Supreme Court Holds CEQA Applies to State Entity’s Railroad Project on State-Owned Rail Line As Act of “Self-Governance”, Not “Regulation” That Would Be Preempted By Federal Law

by Miller Starr Regalia
Contact

On July 7, 2017, the California Supreme Court filed its 69-page opinion, written by Chief Justice Cantil-Sakauye and joined by five other justices, in Friends of the Eel River v. North Coast Railroad Authority, et al. (2017) __ Cal.5th ___.  The Court held that the Interstate Commerce Commission Termination Act of 1995 (“ICCTA”; 49 U.S.C., § 10101 et seq.) does not exempt the application of CEQA to a railroad project undertaken by a state public entity, defendant North Coast Railroad Authority (NCRA), on a rail line also owned by that entity.  The Court acknowledged that ICCTA’s federal regulatory scheme would preempt a state’s imposition of environmental regulation such as CEQA on a privately owned railroad.  That is because settled federal law holds ICCTA preempts a state’s imposition of “environmental preclearance requirements” that have the effect of preventing or delaying the operation of a privately owned railroad.  But the Court also held that, as applied to govern the conduct of subdivisions of the sovereign state, the CEQA process constitutes an act of “self-governance” and not preempted “regulation” within the meaning of ICCTA.

In reaching its conclusion that CEQA applied to NCRA’s project to restore and resume freight service in the “Russian River division” of an intrastate railroad line running between Napa and Humboldt counties, the Supreme Court’s extensive federal preemption analysis relied heavily on the “presumption that, in the absence of unmistakably clear language, Congress does not intend to deprive the state of sovereignty over its own subdivisions to the point of upsetting the usual constitutional balance of state and federal powers.”  The Court reasoned that while ICCTA is a “deregulating” act, which contemplates a unified nationwide rail industry subject to relatively limited federal regulation and under which states are not free to fill regulatory voids, it also leaves both private and state owners with a “considerable sphere of action free from regulation.”  As a result of this “sphere of regulatory freedom” enjoyed by railroad owners, the State, as owner, is free to voluntarily subject itself when undertaking its own railroad projects to state environmental laws such as CEQA as a matter of “self-governance.”  The Court reasoned this situation is analogous to the “freedom” of a private corporate owner to rely on its own internal corporate rules and by-laws to guide its market-based decisions.

The Court’s analysis of the ICCTA and federal preemption law also referenced the “market participant doctrine” exception to preemption as not fully on point, but nonetheless somewhat supportive and instructive to the extent “CEQA can be seen as an expression of how the state, as proprietor, directs that a state enterprise will be run – an expression that can be analogized to private corporate bylaws and guidelines governing corporate subsidiaries.”

While ruling NCRA’s project was subject to CEQA (and attendant citizen suit enforcement actions), and reversing the Court of Appeal’s contrary holding in that regard, the Supreme Court agreed with the Court of Appeal’s holding that CEQA causes of action could not support plaintiffs’ prayer for an injunction against NCRA’s private-entity operator and franchisee, real party in interest Northwestern Pacific Railroad Company (NWPCo).  Per the high Court: “Such an application of state law would be tantamount to the operation of state environmental preclearance rules that … cannot be used to halt railroad operations pending compliance. [citation] … [T]he order directly restraining NWPCo from operating freight service pending CEQA compliance would not involve simply the state’s autonomy and control over its subdivisions, but would constitute use of state law to restrict operations by a private rail carrier – a classic example of state regulation.” It added: “Whether NWPCo would be able to carry on with service despite the application of CEQA to NCRA is a question that is beyond the scope of this case.”  Acknowledging that applying CEQA and its remedies to state-entity NCRA may have some impact on private party NWPCo, however, the Court stated “this is merely derivative of the state’s efforts at self-governance in this marketplace.”

Justice Kruger separately concurred.  She emphasized that while under the majority’s holding the ICCTA did not categorically preempt plaintiffs’ CEQA claims as applied to NCRA, it still remained relevant to the proceedings on remand because under it particular CEQA remedies might be preempted “as applied” to the extent they unreasonably interfered with the jurisdiction of the federal Surface Transportation Board (STB), which has authorized service over the railroad line at issue.

Justice Corrigan’s dissenting opinion stated she did “not follow” the majority opinion’s “logic” that a generally applicable state law could be considered a “regulation” of private, but not public, activity within the same sphere, and that such reasoning “appears to be unsupported by precedent.”  Focusing on the practical implications of what she termed the majority’s “entirely novel theory construing regulation as a form of “self-governance[,]”” she observed that “neither NCRA nor any of the other state agencies involved in this case subscribe to the self-governance theory.  The majority’s approach forces the state to undertake a burden no private railroad owner must bear.”  She argued that the Court’s “holding will displace the longstanding supremacy of federal regulation in the area of railroad operations by allowing third party plaintiffs to thwart or delay public railroad projects with CEQA suits” and decried this outcome as “both unfair to public entities and inimical to the deregulatory purpose of ICCTA.”  She concluded by further questioning the “wisdom” of the majority holding’s creation of a “direct conflict with the stated views of the STB.”

Written by:

Miller Starr Regalia
Contact
more
less

Miller Starr Regalia on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.