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Ninth Circuit:
Utility Companies Must Bear Cost of Relocation for Streetcar Project
By a MetNews Staff Writer
The Ninth U.S. Circuit Court of Appeals held yesterday that a judge properly granted summary judgment in favor of a transit authority that had been sued by public utility companies on constitutional and statutory grounds over the utilities having to relocate equipment at their own expense from public streets to allow for the construction of a streetcar line.
Circuit Judge Eric D. Miller wrote the opinion affirming summary judgment by District Court Judge David O. Carter of the Central District of California. Circuit Judge Salvador Mendoza Jr. and District Court Judge Barry Ted Moskowitz of the Southern District of California, sitting by designation, joined in the opinion.
Southern California Edison Company (“SCE”) and Southern California Gas Company (“SCG”) are both investor-owned public utilities and have operated under franchise agreements with the City of Santa Ana governed by the Franchise Act of 1937.
The franchise agreements granted the utilities the right to lay materials such as pipes and wires on, in or under the streets of the city in order to provide electric and gas services. The utilities have borne the costs of installing and maintaining those facilities.
Street Car Construction
Several Orange County cities have joined together to plan a streetcar line connecting the Santa Ana Regional Transportation Center to downtown Santa Ana and a new transportation hub in Garden Grove. The Orange County Transportation Authority (“OCTA”) is leading the design and construction of the project.
In planning for the project, OCTA identified locations where construction of the line would conflict with the utilities’ existing infrastructure and facilities, and came to an agreement with SCE and SCG as to which facilities needed to be relocated. However, the utilities and the transportation authority could not agree on who should bear the cost of relocation.
SCE forecast that relocation of its facilities would cost approximately $8.8 million and SCG forecast that the relocation would cost it approximately $6.35 million. OCTA agreed to advance the utilities their relocation costs but reserved the right to demand that the costs be ultimately paid by the utilities.
District Court Action
On Nov. 13, 2020, SCE and SGC brought suit under 42 U.S.C §1983 alleging that the relocation constituted a taking of private property requiring just compensation under the Fifth and Fourteenth Amendments. They separately argued that the California Utilities Code §40162 placed the costs of relocation on OCTA, and OCTA counterclaimed for the funds it had advanced the utilities, plus interest.
The parties filed a joint stipulation of undisputed facts and cross-moved for summary judgment.
Carter granted summary judgment for OCTA and ordered the utilities to repay all costs OCTA had advanced and determined that OCTA had no further liabilities. He did not award interest.
Carter found that OCTA was acting in its governmental role in building the streetcar project and common law requires the utilities to pay in that circumstance. He further found that California did not shift that obligation to pay from the utilities to OCTA in enacting §40162.
After granting the motion for summary judgment, Carter wrote “[t]he parties agreed that there are no remaining issues in the case, so the matter is administratively closed.”
SCE and SCG appealed.
California Law
Miller explained that the Takings Clause of the Fifth Amendment, made applicable to the states by the Fourteenth Amendment, provides that “private property [shall not] be taken for public use, without just compensation.” As a first step in the analysis, Miller said “we must first determine wither any property interest exists” under California law or traditional property-law principles, historical practice and precedent.
Turning to California law, Miller wrote:
“California law does not give the Utilities the property interest that they assert. More than fifty years ago, the California Supreme Court recognized in Southern California Gas Co. v. City of Los Angeles that ‘it has generally been held that a public utility accepts franchise rights in public streets subject to an implied obligation to relocate its facilities therein at its own expense when necessary to make way for a proper governmental use of the streets.’ ”
The utilities argued that constructing rail lines is per se a proprietary activity and not a governmental one, but Miller distinguished the two cases upon which they relied, saying “neither supports their argument.”
He explained that Southern California Gas Co. made clear that “the power to make utilities bear the costs of relocation for governmental projects invoked a public right for a public benefit.”
The judge wrote:
“In building the streetcar line…OCTA exercised its state delegated authority to meet the ‘demand for an efficient public transportation system in the southern California region,’ ‘reduce the levels of automobile-related air pollution,’ and ‘offer adequate public transportation to all citizens, including those immobilized by poverty, age, physical handicaps, or other reasons.’ Cal. Pub. Util. Code § 130001(a), (b), (e). In other words, OCTA invoked the public right to use the streets for the public benefit.”
Property Law
Miller explained that “[i]n denying the Utilities a property interest that would implicate the Takings Clause in these circumstances, California law is consistent with traditional principles of property law, historical practice, and Supreme Court precedent.”
Looking to U.S. Supreme Court precedent, he said “for more than a hundred years, utilities have been required to relocate to make way for a government that seeks to vindicate its right to use the streets” and enact provisions in the public interest.
In rejecting a narrow reading requested by the utilities that the street car construction must be shown to satisfy a “public necessity,” pulling the phrase from one case analyzing an ordinance which authorized the relocation of utility poles in order to construct a street-lighting project, he wrote that “[o]n the strictest possible understanding of ‘necessity,’ it seems that few, if any, public projects would qualify.”
The streetcar project, Miller wrote, “is a governmental project that fits comfortably within a long tradition of relocations for which franchisees must foot the bill.”
Public Utilities Code
The jurist turned to whether California Public Utility Code places the costs of relocation on OCTA. He explained that the utilities relied on §40162 to argue that OCTA must bear the cost, writing:
“The Utilities focus on California Public Utilities Code section 40162, which provides that ‘[t]he district may exercise the right of eminent domain….[But] the district in exercising such power shall…pay the cost of…relocation of any structure…mains, pipes, conduits, cables or poles of any public utility which is required to be moved to a new location.’”
Miller pointed out “the provision applies not to OCTA but to the Orange County Transit District, a separate regional transit authority.”
SCE and SCG, however, argued that an interplay between §130241 and §40162 of the code made the provisions of the latter applicable to OCTA. §130241 provides:
“All the provisions of the Orange County Transit District Act of 1965…regarding the powers and functions of the Orange County Transit District shall be equally applicable to the Orange County Transportation Authority as if set forth herein, and shall be in addition to the powers and functions set forth in this division. The authority shall determine which provisions are applicable to the authority.”
Miller dismissed the utilities’ desired application of the law, writing that the utilities’ argument “effectively erases the last sentence of section 130241.” He found that OCTA “has not chosen to subject itself to section 40162, so the Utilities’ arguments about the duties imposed by that section are unavailing.”
Miller declined to award interest, noting that the district court did not award it and OCTA did not seek reconsideration of the award.
The case is Southern California Edison Company v. Orange County Transportation Authority, 22-55498.
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