Posts Tagged ‘Preemption’


In Friends of the Eel River v. North Coast Railroad Authority (2017) ___Cal.5th ___ (No. S222472) [http://www.courts.ca.gov/opinions/documents/S222472.PDF] the California Supreme Court held that the Interstate Commerce Commission Termination Act (ICCTA) does not preempt CEQA when a California public agency decides to undertake a new railroad project, even if the state agency later authorizes a private entity to operate the new rail line. The Court therefore concluded that the North Coast Railroad Authority (NCRA) was required to comply with CEQA prior to taking steps to reinitiate rail service on a segment of an interstate rail line that had gone out of operation for many years. The Court declined, however, to enjoin the ongoing operations of the railroad by NWPCo, the private operator. Because these operations had been occurring during the course of the litigation against NCRA, any such injunction would intrude into an area of activity that is preempted by the ICCTA, namely, private railroad operations.

The NCRA is a state agency created in 1989 for the purpose of resuming railroad freight service along a previously-abandoned route through Napa and Humboldt Counties. The northern portion of the line runs along the Eel River, while the southern portion, at issue in the case, runs along the Russian River.  In 2000, the Legislature authorized funding for NCRA’s program, with the express condition of CEQA compliance. NCRA subsequently contracted with NWPCo, a private company, to run the railroad. As part of the lease agreement between the two entities, NWPCo agreed that CEQA compliance by NCRA was a precondition to resumed operation. Accordingly, in 2007, NCRA issued a notice of preparation, and in June 2011, it certified a Final EIR. In July 2011, petitioners sued, challenging the adequacy of the EIR on a number of grounds. Concurrently, NWPCo commenced limited freight service along the Russian River. In 2013, NCRA took the unusual step of rescinding its certification of the Final EIR, asserting in explanation as follows: that ICCTA preempted California environmental laws; that the reinitiation of rail service was not a “project” under CEQA; and that the EIR NCRA had prepared had not been legally required. Although NCRA successfully removed the case to federal court, the case subsequently sent back to state court for a resolution of both the state CEQA claims and NCRA’s ICCTA preemption defense. The Court of Appeal sided with NCRA, finding that ICCTA was broadly preemptive of CEQA. The Supreme Court granted review.

Federal preemption is based on the Supremacy Clause of the United States Constitution, which provides that federal law is the supreme law of the land. Preemption can occur expressly, through the plain words of a federal statute, or can be implied, as when a court discerns that Congress intends to occupy an entire field of regulation, or when a court concludes that a state law conflicts with a federal purpose or the means of achieving that purpose. A federal statute can be preemptive on its face or as applied. There is a presumption against preemption, particularly in areas traditionally regulated by the states, which can only be overcome by a clear expression of intent (the Nixon/Gregory rule). The market participant doctrine is a related concept and holds that a public agency has all the freedoms and restrictions of a private party when it engages in the market (provided that the state does not use tools that are unavailable to private actors). The courts presume that Congress did not intend to reach into and preempt such proprietary marketplace arrangements, absent clear evidence of such expansive intent.

The Court began by recognizing that ICCTA does preempt state environmental laws, including CEQA, that interfere with private railroad operations authorized by the federal government. ICCTA contains an express preemption clause giving the federal Surface Transportation Board (STB) jurisdiction over railroad transportation (including operation, construction, acquisition, and abandonment). ICCTA’s purpose was both unifying (to create national standards) and deregulatory (to minimize state and federal barriers). Although ICCTA is a form of economic regulation, state environmental laws are also economic in nature when they facially, or as applied, dictate where or how a railroad can operate in light of environmental concerns. Such state laws act impermissibly as “environmental preclearance statutes.” These legal principles, however, did not extend to the actions of NCRA in this case. Just as a private railroad company may make operational decisions based on internal policies and procedures, and may even modify its operations voluntarily in order to reduce environmental risks and effects, so too may a state, in determining whether to create a new railroad line, subject itself to its own internal requirements aimed at environmental concerns. In the latter context, though, a state operates through laws and regulations, as opposed to purely private policies. When a state acts in such a manner, its laws and regulations are a form of self-governance, and are not regulatory in character. CEQA is an example of such an internal guideline that governs the process by which a state, through its subdivisions, may develop and approve projects that affect the environment. Viewed in this context, CEQA is part of state self-governance, and is not a regulation of private activity.

Although the market participant doctrine does not directly apply, being mainly applicable in Commerce Clause jurisprudence, the doctrine supports by analogy the view that that California was not acting in a regulatory capacity in this case. CEQA is analogous to private company bylaws and guidance to which corporations voluntarily subject themselves. By imposing CEQA requirements on the NCRA, the state was not “regulating” any private entity, but rather was simply requiring that NCRA, as one of its subdivisions, conduct environmental review prior to making a policy decision to recommence the operation of an abandoned rail line. If Congress had intended to preempt the ability of states to govern themselves in such a fashion, any such intention should have been clear and unequivocal. The Court found no such intent in the ICCTA.

The Court’s remedy, however, was cognizant of the narrowness of its holding. The Court concluded that, because NWPCo is currently operating the line, the California Judiciary could not enjoin that private entity’s operations even if, on remand, the lower state courts found problems with NCRA’s CEQA documentation. An injunction under CEQA against NWPCo would act as a regulation, by having the state dictate the actions to private railroad operator. Such action would go beyond the state controlling its own operations.

Sara Dudley

Supreme Court will hear Friends of the Eel River

December 26th, 2014 by Gwynne Hunter

The California Supreme Court has granted a petition for review of Friends of the Eel River v. North Coast Railroad Authority. We previously wrote about the case here.

Friends of the Eel River and Town of Atherton created an appellate court split on the issue of federal preemption of railway projects. The court in Atherton held that the market participant doctrine, whereby proprietary state actions are protected from federal preemption, applies to the High Speed Rail. Friends of the Eel River disagreed. The court held that even if the decision to prepare an EIR were proprietary, a writ proceeding by a private group challenging the adequacy of that review would be regulatory, and not part of the proprietary action.

Recently, the Surface Transportation board issued a decision holding that federal law preempts application of CEQA to a portion of the High Speed Rail line. In reading this conclusion, the court sided with Friends of the Eel River and disagreed with Atherton on the market participant issue.

Appellants are set to file their opening brief on the merits at the end of February.

In the recently published decision of The People v. Rinehart (Oct. 8, 2014) Case No. C074662, the Third District Court of Appeal considered whether criminal enforcement provisions of the Fish and Game Code addressing suction dredge mining are preempted by federal law. Although the court did not conclude that California’s ban on dredge and suction mining is preempted, the court left open the possibility that it is.

Section 5653 of the Fish and Game Code requires those operating vacuum or suction dredge mining equipment to obtain a permit from the California Department of Fish and Wildlife. A permit may be issued if the Department determines the proposed suction dredge mining “will not be deleterious to fish.”

In 2009, the Governor signed Senate Bill 670, prohibiting the Department from issuing new permits under 5653, and imposing a statewide moratorium on instream suction dredge mining until the Department has undertaken the conditions required by Fish and Game Code section 5653.1. Under that provision, the Department must satisfy numerous requirements, including environmental review of the standing 1994 suction dredge mining regulations, before the moratorium is lifted.

This case began when the District Attorney of Plumas County filed a criminal complaint against Defendant Rinehart alleging that he violated Fish and Game Code section 5653 by operating suction dredge mining equipment in waters closed to that type of equipment. Rinehart demurred to the complaint and argued that Fish and Game Code sections 5653 and 5653.1 operated together to create a de facto ban on suction dredge mining in California. Rinehart reasoned that this de facto ban was an unconstitutional interference with his federally-protected mining rights under the Mining Act of 1872. The trial court overruled the demurrer, holding that Fish and Game Codes sections 5653 and 5653.1 were not preempted by federal law. The trial court thereafter convicted Rinehart for possessing and using vacuum and suction dredge equipment without a permit. Rinehart appealed.

The Court of Appeal reversed and remanded the case to the trial court for further consideration of the preemption issue. In an opinion authored by Justice Hull, the court explained the constitutional principles at play, noting that Congress has authority over the regulation of federal lands under the United States Constitution Property Clause. But not all state regulation of federal land is preempted under the Property Clause. States are free to enforce state criminal and civil law on federal lands so long as the state law does not conflict with the “operation or objectives of federal law.” In this case, the Mining Act of 1872 sets forth the federal government’s stance on mining and mineral exploration on federal land. The act encourages surveying and mining for valuable minerals, and if a private citizen perfects a claim in compliance with the act, the claimant secures exclusive right of possession (but not title) and use of the claim.

The Court of Appeal concluded that the factual record before it insufficient to reach a decision. Instead, the court identified two discrete issues for the trial court to address on remand: (1) Does Fish and Game Code section 5653.1 operate to prohibit the issuance of permits required by section 5653; and if so, (2) does this prohibition on dredge mining permits render the defendant’s exercise of federal mining rights impracticable? Although the court remanded the issue to the trial court for further consideration, the decision nevertheless represents a considerable victory for proponents of dredge mining in the state.

On September 29, 2014, the First District Court of Appeal affirmed the trial court’s determination that federal law preempted review of the EIR certified by North Coast Railroad Authority (NCRA) approving Northwestern Pacific Railroad Company’s (NWPRC) freight operations on NCRA’s tracks. The court also rejected petitioners’ claims that NCRA and NWPRC were estopped from arguing that CEQA did not apply. Friends of the Eel River v. North Coast Railroad Authority, Case No. A139222 (September 29, 2014).

The Interstate Commerce Commission Termination Act (ICCTA) was enacted to eliminate outdated, burdensome regulatory restrictions on the rail industry. ICCTA grants the Surface Transportation Board (STB) exclusive jurisdiction over rail operations, whether or not they take place entirely within one state. The rail line at issue in this dispute was the Northwest Pacific Railroad line, which extends from Arcata to Lombard, with its geographical center in Willits. Above Willits lies the Eel River Division of the line, and below is the Russian River Division. The line, in serious disrepair, secured state funds for repair work on the Russian River Division. NCRA indicated it would issue a categorical exemption for the repair work, but would prepare an EIR for the freight operations within that Division. As part of a 2008 settlement with the City of Novato, which had challenged the notice of exemption, the parties entered a consent decree requiring NCRA to perform certain work and comply with CEQA in doing so. In 2011, NCRA certified an EIR approving resumed freight rail service from Willits to Lombard. Petitioners challenged this certification and sought to halt rail operations pending additional CEQA review. In 2013, NCRA passed a resolution rescinding the EIR certification, stating that the EIR was not a legal prerequisite to NWPRC’s operation of the line, given STB’s exclusive jurisdiction over the line. Petitioners challenged the railroads’ claim of federal preemption, and argued in the alternative that the railroads were estopped from asserting preemption given their prior agreement to comply with CEQA. The court held that a state statute requiring environmental review as a condition to railroad operations is preempted by ICCTA. The court only found support for its holding in lower court decisions, but noted there was no contradictory federal appellate court decision. In concluding that ICCTA expressly preempts CEQA review of proposed railroad operations, the court distinguished the recent Third District decision in Town of Atherton v. California High Speed Rail Authority (2014) 228 Cal.App.4th 314, which required CEQA analysis as part of the process for determining where to place a rail line, noting that the issue in Atherton differed from this case’s issue of resuming rail operations. The court was not persuaded that the market participant doctrine, which counteracts preemption where government agencies act as property owners or purchasers, applied here. The court noted that the doctrine is typically used defensively. Even if the decision to prepare an EIR were proprietary, a writ proceeding by a private citizen’s group challenging the adequacy of the review would be regulatory in nature and would not be part of that proprietary action. The court acknowledged that its holding contradicted Atherton, and respectfully disagreed with the Atherton court’s analysis of the market participant doctrine.

On the issue of judicial estoppel, the court noted that estoppel was an equitable doctrine and thus its application was discretionary. Regardless, the court found NCRA and NWPRC never asserted a contrary position on federal preemption in a prior judicial or quasi-judicial proceeding. Even if the elements of judicial estoppel were satisfied, the trial court had declined to apply the doctrine due to policy reasons, stating that estoppel would burden STB’s exclusive jurisdiction to regulate freight operations. Neither could NCRA’s preparation of an EIR estop its current position that no EIR was required, as there was no final ruling on the merits on the issue of federal preemption of CEQA with respect to railroad operations.