FRIENDS OF THE EEL RIVER v. NORTH COAST RAILROAD AUTHORITY (NORTHWESTERN PACIFIC RAILROAD COMPANY)

Appellants, Californians for Alternatives to Toxics and Friends of Eel River, Response to Amicus Curiae Brief

Cal.August 27, 2015

“Sebeseequrr ~”CaseNo. 8222472 “Sy ED In the Supreme Court of the State of California AUG 27 2015 Frank A. McGuire Clerk FRIENDS OF THE EEL RIVER AND CALIFORNIANS FOR ALTERNATIVES s Plaintiffs and Appellants, Puly VS. NORTH COAST RAILROAD AUTHORITY AND BOARD OF DIRECTORS OF NORTH COAST RAILROAD AUTHORITY, Defendants and Respondents, NORTHWESTERNPACIFIC RAILROAD COMPANY, Real Party in Interest and Respondent. After a Decision by the Court of Appeal First Appellate District, Division One, Case Nos. A 139222, A139235 Appeal from Superior Court ofthe State of California for the County of Marin Case Nos. CIV 1103605, CIV 1103591 The Honorable Roy Chernus, Presiding PLAINTIFFS’ CONSOLIDATED RESPONSE TO BRIEFS OF AMICI CURIAE IN SUPPORT OF RESPONDENTS AND REALPARTYIN INTEREST Ellison Folk (SBN 149232) Sharon E. Duggan* (SBN 105108) Amy J. Bricker* (SBN 227073) 336 Adeline Street Edward T. Schexnayder (SBN 284494) Oakland, California 94607-2520 Shute, Mihaly & Weinberger LLP foxduggan@aol.com 396 HayesStreet Telephone: (510) 271-0825 San Francisco, California 94102-4421 Facsimile: By Request folk@smwlaw.com bricker@smwlaw.com Attorneyfor Californiansfor Alternatives Telephone: (415) 552-7272 to Toxics Facsimile: (415) 552-5816 Attorneysfor Friends ofthe Eel River " Additional Counselfor Plaintiffs appear onfollowing page Case No. S222472 In the Supreme Court of the State of California FRIENDS OF THE EEL RIVER AND CALIFORNIANS FOR ALTERNATIVES TO TOXICS, Plaintiffs and Appellants, VS. NORTH COAST RAILROAD AUTHORITY AND BOARD OF DIRECTORS OF NORTH COAST RAILROAD AUTHORITY, Defendants and Respondents, NORTHWESTERNPACIFIC RAILROAD COMPANY, Real Party in Interest and Respondent. After a Decision by the Court of Appeal First Appellate District, Division One, Case Nos. A 139222, A139235 Appeal from Superior Court of the State of California for the County of Marin Case Nos. CIV 1103605, CIV 1103591 The Honorable Roy Chernus, Presiding PLAINTIFFS’ CONSOLIDATED RESPONSE TO BRIEFS OF AMICI CURIAE IN SUPPORT OF RESPONDENTSAND REAL PARTYIN INTEREST Ellison Folk (SBN 149232) Sharon E. Duggan* (SBN 105108) AmyJ. Bricker* (SBN 227073) 336 Adeline Street Edward T. Schexnayder (SBN 284494) Oakland, California 94607-2520 Shute, Mihaly & Weinberger LLP foxduggan@aol.com 396 Hayes Street Telephone: (510) 271-0825 San Francisco, California 94102-4421 Facsimile: By Request folk@smwlaw.com bricker@smwlaw.com Attorneyfor Californiansfor Alternatives Telephone: (415) 552-7272 to Toxics Facsimile: (415) 552-5816 Attorneysfor Friends ofthe Eel River Additional Counselfor Plaintiffs appear onfollowingpage Helen H. Kang (SBN 124730) Environmental Law andJustice Clinic Golden Gate University School of Law 536 Mission Street San Francisco, California 94105-2968 hkang@ggu.edu Telephone: (415) 442-6647 Facsimile: (415) 896-2450 Attorneysfor Californiansfor Alternatives to Toxics William Verick (SBN 140972) Klamath Environmental Law Center 424 First Street Eureka, California 95501-0404 wverick@igc.org Telephone: (707) 268-8900 Facsimile: (707) 268-8901 Attorneysfor Californiansfor Alternatives to Toxics Deborah A. Sivas (SBN 135446) Environmental Law Clinic Mills Legal Clinic at Stanford Law School 559 Nathan Abbott Way Stanford, California 94305-8610 dsivas@stanford.edu Telephone: (650) 723-0325 Facsimile: (650) 723-4426 Attorneysfor Californiansfor Alternatives to Toxics TABLE OF CONTENTS INTRODUCTIONoo.ccecceeseeeeeeceeseeceeceeneesessesanseecessssesaeesesesseesecsussecaeeas 1 ARGUMENT...cccecscceesseesesseeeeececeaeeseesseeseesensesssasseeseesessscsssecsecceecessaseaaes 4 I. The ICCTA Does Not Preempt California’s Requirementthat Adequate CEQA Review Precede NCRA’sLine Repair Project........... 4 A. HSRA’s Preemption ArgumentRests on the Faulty Assumption of STB Jurisdiction over NCRA’S .....ccccsesesseeseeeees 4 B. The History of the ICCTA Reflects Evolving Congressional Concern About the Financial Viability of the Industry, Not an Intent to Preempt Traditional State Decisionmaking Authority......6 1. The Interstate Commerce Act of 1887 .......cccceceesscesessssseceeeee 8 2. The Transportation Act Of 1920.0... ccccccccesseesesssssesseessseeseaees 9 3. The Staggers Act of 1980...ccc cccscsscesscseecessecseessssssseeeseseas 11 A, The ICCTA 0f 1995 oesceesceseeeeeeeeeaeneeeeeeenseseenesessaeees 14 C. The ICCTA Does Not Convey STB Jurisdiction Over the NCRA Rail Line Project or Expressly Preempt CEQA Compliance for the Project .........ccccccscssesessesecsseessessessessesessessscees 17 1. The STB Lacks Jurisdiction Over NCRA’s Proposed Repair Project...ccceeessesecessessecsseesseseeseeseessesseesecsesseseescesesees 17 2. Section 10501(b) Does Not Expressly or Categorically Preempt CEQA... ciecesccsseessseesssesseeseeessecsseeensesseessccesssensesens 25 D. There Is No Implied or “As Applied” Preemption ofCEQA Compliance or Litigation in This Case...ceceecessssssesseceseeeeee 29 II. The Nixon Clear-Statement Rule Applies to California’s Governance ofIts Subdivision Rail Agencies.............cccccsseeseeseeees 34 A. Nixon and Gregory Govern the Interpretation of Section 10501(b); They Are Not the Basis of a Tenth Amendment Challenge 0.0... cee ecececesecseceseeeeencessseseesseeccesssuersesssssassseeeeseeeeeesanens 35 B. The Clear-Statement Rule Does Not Make Exceptions for Cases Involving State Governance of Public Rail Agencies......... 36 C. The Court Should Be Skeptical of Rail Agencies’ Attempts to Shed the Sovereign’s Control 20.0... .ccceeececeeeseseneeeeseeecesececessseeeerees 43 Ill. The ICCTA Does Not Preempt CEQA’s Requirements Pertaining to State Proprietary Conduct...eeeeeeeeeeee seen eeneeee 45 A. The Market Participant Doctrine Applies to Preemption Underthe ICCTA...eee ceceeeceeeseeeseceeseneeeeeeeseeeeseeenssessessaseeeeenenees 46 B. NCRA’s Obligation to Comply with CEQA WhenIt Pursues Proprietary State Activity Is Not Preempted ............. cccesses 50 C. Contrary to HSRA’s Assertion, Market Participant Cases Protect from Preemption State Rules Governing Proprietary ACUIVILY oo. ceeceeeceeseceseececeseeenecteccteeenersceeeseeesseseeonseeesseeuseseuersnsenseseness 52 IV. Defendants’ Voluntary Agreements to Comply with CEQA Are Not Preempted...........:cccccsccsssseseeeeceeessreseeeeseeeeeseeesecsesesasessseseeseseesenes 58 CONCLUSIONQu... ecccecsccssssesscssceeecetececeeseeeecceseesaneeeseneecesesescsssesssssueacaesess 61 ii TABLE OF AUTHORITIES Page(s) Federal Cases Ass'n ofAm. R.Rs. v. Cal. Office ofSpill Prevention and Response, Case No. 2:14-cv-02354-TLN-CKD (E.D. Cal. Oct. 30, 2014) oooccccccccscssessssescsessesecsestssestatstscsescseseseeseeeees 31 Big Country Foods, Inc. v. Bd. ofEduc. ofAnchorage School Dist., Anchorage, Alaska, 952 F.2d 1173 (9th Cir. 1992)......... 51, 53, 55 Bldg. & Constr. Trades Council v. Associated Builders & Contractors, 507 U.S. 218 (1993) ...ccccccsssssccssesessssesestscsesssssesececececeseees 46 California v. Taylor, 353 U.S. 553 (1957) oeccccccscssssescsescscscscsessssscecsssseersscseassnassesesesecesseeespassim Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691 (1984) ooo ececcessesesesesesscscscssssssssssstsvssesasstetssecssscsescsvessenes 42 Cardinal Towing v. City ofBedford, Tex., 180 F.3d 686 (Sth Cir. 1999)...ccscssessecsesecssestsestacscavecscscecsenees 50 Chamber ofCommerce of U.S. v. Brown, S54 U.S. 60 (2008) oeeeececessscsesesssssvssscsssvevarsceusecatscsesesatseseecsevees 55, 57 City ofColumbus v. Ours Garage & Wrecker Service, Inc., 536 U.S. 424 (2002) oo. .ceeeccssssscsssessscevecssscssssscssscsessatsssesasstecseses 37, 49, 53 City ofNew Orleans v. Tex. & Pac. Ry. Co., 195 F.2d 887 (Sth Cir. 1952) ....cccccccsccsssscsssssssesecsessestsesscscseacscseaeessnes 39 Dan’s City Used Car, Inc. v. Pelkey, 133 S. Ct. 1769 (2013) oe eeeecesesssssseseessecscscsssscsessssesecsesavacseatacseavesescesseses 33 Dayton-Goose Creek Ry. Co. v. United States, 263 U.S. 456 (1924)ooececesessssesesesesesssscsssescsesessecassusaeatatatstseresessecseees 10 Denver & Rio Grande W.R.R.—Joint Constr. Project- Relocation Over Burlington N.R.R.,FD 30733, 41 LC.C.2d 95, 1987 WL 97286 (LC.C. Oct. 20, 1987) ciceeeccscscescesesssessesessessessee, 21 ili Detroit/Wayne County Port Auth. v. LC.C., 59 F.3d 1314 (D.C.Cir. 1995) eeecceseecsseeseceecsecesseneenseeseeseeeneenees 20 Engine Mfrs. Ass'n v. S. Coast Air Quality Mgmt. Dist., 498 F.3d 1031 (9th Cir. 2007)...eeeceeesseceesesecrsesseenseseeeesseeesseeespassim Flynn v. Burlington N. Santa Fe Corp., 98 F. Supp. 2d 1186 (E.D. Wash. 2000) 00... cece ecceeeeeseeeeeseeneeeneeeees 58 Franks Inv. Co. v. Union Pac. R.R. Co., 593 F.3d 404 (Sth Cir. 2010)...ccceceeseeeneeeeseeeeeeeseeetsseeeeseeeseeeees 30, 61 Freeman v. Burlington Broads., Inc., 204 F.3d 311 (2d Cir. 2000)... eeeecccneeeeeeseceeeseeeeseecnssessasensaeeeeneeees 42 Gregory v. Ashcroft, 501 U.S. 452 (1991) oo ccceccsseesseceseeseeeseeeseseeeeeseceseaeeesaeseeesseeeeneapassim Hines v. Davidowitz, 312 U.S. 52 (1941) occcccccccccsseceseceeseeecseesecseneeceteeeaeseseeeesesssesescsaeeesesenes 31 Hughes v. Alexandria Scrap Corp., 426 U.S. 794 (1976)....cescccsscccsnecseesecceecsercseesseeessnssssesesessneesstessenseeesenees 55 Johnson v. Rancho Santiago Cmty. Coll. Dist., 623 F.3d 1011 (Oth Cir, 2010)...eeeesccssreeeenecetersssesssssessecsnessneeses 50 Lee’s Summit, Mo. v. Surface Transp. Bd., | 231 F.3d 39 (D.C.Cir. 2000)...vecacessseceecseseaccesstaceestsecessaceessseeceeess 20 United States ex rel. Long v. SCS Bus. & Tech. Institute, Inc., 173 F.3d 870 (D.C.Cir. 1999) oo. eececesseesereeeeeeeseceeseessessressseesaeesseeegs 40 - Mason & Dixon Lines Inc. v. Steudle, 683 F.3d 289 (6th Cir. 2012)...eeeeeeeeceeeeeeceeeseeeesseeeseeesesenseceessaeeees 59 Nixon v. Missouri Municipal League, 541 U.S. 125 (2004) won ecceeecscecessneceeeeeesceeeeeseessseecescssereeeesssaneeespassim Oneok, Inc. v. Learjet, Inc., 135 S. Ct. 1591 (2015) wo. eeeeccsceesseeeeessceeseteeceeseeseaueessereneocseesees 31, 32 Printz v. United States, 521 U.S. 898 (1997) .ccccsscccsssssestcecseessecseceesesseesceseesenseeensssssusssesceneesensess 6 iv R.R. Comm’n ofCal. v. S. Pac. Co. 264 U.S. 331 (1924) oeeeececcssessessessecseseessesseesseesscseesseneenecsecensencats 10, 11 Rowe v. New Hampshire Motor Transp. Ass’n, S52 U.S. 364 (2008) oo.ee eceecsceseeseseeeseeseceeseeseeseeseeseseesesseeeeseesesaseeenesens 26 Solid Waste Agency ofN. Cook County v. U.S. Army Corps of Eng’rs, 531 U.S. 159 (2001) oo. eeecceeccesesseseesseeseensesecseeseesseaccsecseesseneses 39 St. Louis & Pac. Ry. Co. v. Illinois, L18 U.S. 557 (1886)oeeeceesessesssessesseessesecesessteseesessecsessecsessucsueseecesens 8 Tocher v. City ofSanta Ana, 219 F.3d 1040 (9th Cir. 2000)...ceceescceseesseseessesssseeeee 49,51, 55, 57 Twp. of Woodbridge v. Consol. Rail Corp., Inc., FD No. 42053, 2001 WL 283507 (S.T.B. Mar. 22, 2001)........ceee 61 United States v. California, 297 U.S. 175 (1936) occ eceesceccsceteesesesesesseesessesecseeseeessetesseseeesens 35, 36, 39 United Transp. Union v. Long Island R.R. Co., A55 U.S. 678 (1982)ccccecsccceseseseseeeeseesecssesseesesescesesseeeseeceessseseeaseceee 38 White v. Mass. Council ofConst. Emp’rs, Inc., 460 U.S. 204 (1983) ooo. eeccccssessccssccssecssscsesssesssssssesseesssenssenenes 51, 54 Wichita Terminal Ass’n, BNSF Ry. & Union Pac. R.R. Co.— Petitionfor Declaratory Order, FD No. 35765, 2015 WL 3875937 (S.T.B. June 22, 2015) ...cceccececcssessscessssetsscssceseeees 60 Wis. Dept. ofIndus., Labor and Human Relations v. Gould Inc., 475 US. 282 (1986) oo. eeceecesesssesseseeseeseseesseseeessesesssssesscsessessssseneens 55 California Cases Agua Caliente Band ofCahuilla Indians v. Superior Court, 40 Cal. 4th 239 (2006) 0... eeeeesecsssssseseeeeseeeessessesesssseeseessescsesessesscsesenss 40 Cal. Redevelopment Ass’n v. Matosantos, 53 Cal. 4th 231 (2011) wn.ccesccesessesessessessesseseesesseneensLesseseeeeeeeneeeeees 37 Children’s Hosp. & Med. Ctr. v. Bonta, 97 Cal. App. 4th 740 (2002)...ecsesessssessesesscssesesseecsessenssessescsesecsesseses 50 ConcernedCitizens ofCosta Mesa, Inc. v. 32nd Dist. Agricultural Ass’n, 42 Cal. 3d 929 (1986) .....:cccsscscsessseeseesecenseneeaseereees 4] People ex rel. Harris v. Pac Anchor Transportation, Inc., 59 Cal. 4th 772 (2014) oo.cecseseccseeeecceessesssesesseceseesseeseeens 25, 26, 33, 39 Laurel Heights Improvement Ass’n v. Regents of Univ. of Cal., 47 Cal. 3d. 376 (1988)... ceceescseeeseeeeecseeeseeassecseesseeseeesseenseeegs 41,52 Mountain Lion Found. v. Fish & Game Comm’n, 16 Cal. 4th 105 (1997)oo.cececeeeecseesseesesecessessesesseseeseseesseesesseseneneey 36 Mullaney v. Woods, 97 Cal. App. 3d 710 (1979)... ee csesseeseescssessessecsssessssesseseeeeseeeeesecenearats 61 People v. County ofKern, 39 Cal. App. 3d 830 (1974)... cecscesecssssseeseessecseecsecsseseesesneesseeneeenetaees 4] Inre Pfahler, 150 Cal. 71 (1906)... cccceecseceecseenecrecseessnceescseccsresseenessenseseeensentens 37, 44 Inre Sanitary Bd. ofE. Fruitvale Sanitary Dist., 158 Cal. 453 (1910)...ccc eceeseesseseeeeeneeeseeescesessecssetsssssessseeseeesseesseeeaees 37 Servs. Emps. Int’l Union, Local 99 v. Options—A Child Care and Human Services Agency, 200 Cal. App. 4th 869 (2011) .........0 51 Town ofAtherton v. California High-Speed Rail Authority, 228 Cal. App. 4th 314 (2014)...eecceessseeeeneeenseenenaeereeeceeeeeespassim Other State Cases DHL Express (USA), Inc. v. Florida ex rel. Grupp, 60 So.3d 426 (Fla. Dist. Ct. App. 2011) oo.eee eeescssssseesseeeeseseesaeeneees 57 Elec. Contractors, Inc. v. Dept. ofEdu., 303 Conn. 402 (2012) wo. ceceecescsecseseceessesesesrceesesseeseessessenseeseerseserenees 56 New York ex rel. Grupp v. DHL Express (USA), Inc., 19 N.Y.3d 278 (2012) oo. ceeesccscsecssecsceeseceseesssssesseecssssseeseesssecseeesseesseenaes 57 New York ex rel. Grupp v. DHL Express (USA), Inc., 922 N.Y.S.2d 888 (2011) occ eeceeeceereeesseseseeeecsscessessseeeeseeeseneessseeeseneeses 57 Whitten v. Vehicle Removal Corp., 56 S.W.3d 293 (Tex. Ct. App. 2001), HSRA:43, 50 oo... ceceeseeteseeeeees 57 vi Administrative Decisions BNSF Ry.—Petitionfor Declaratory Order, FD No. 35164, 2009 WL 1416468 (S.T.B. May 19, 2009) ooo. cccceceseessesesseeseeeeees 21 City ofStafford, Tex. v. S. Pac. Transp. Co., FD No. 32395, 1994 WL 613381 (1.C.C. Oct. 28, 1994), aff'd City ofStafford v. ICC, 69 F.3d 535 (Sth Cir. 1995)...21 Swanson Rail Transfer, LB—Declaratory Order—Swanson Rail Yard Terminal, FD No. 37354, 2011 WL 2356468,at *2-3 (S.T.B. June 13, 2011)eee ceeccssesssessesseeteseesecssessessecsscssscseesees 22 Union Pac. R.R. Co.—Petitionfor Declaratory Order— Rehabilitation ofMo.-Kan.-Tex. R.R. Between Jude and Ogden Junction, Tex., FD No. 33611, 3 S.T.B. 646, 1998 WL 525587 (S.T.B. Aug. 19, 1998)...cccecsccseceeesseessssecessseeeees 21,22 Federal Statutes Airline Deregulation Act .......cccccescssssssssssscssesssssecssesseeseccescssssssessssenseasenacs 26 Clean Air ACt oi. cccccccecscccssessscesscscccsssesssssssssssssseccssesesseserseesseenecenseesees 49, 54 Federal Aviation Administration Authorization ACt.......ccccleespassim Interstate Commerce Act (1887) .....cccccccsscssscssscessescesssscsesesssssusssseeseeeeeees 8,9 Interstate Commerce Commission Termination Act (1995), AOD U.S.C. §§ 10101-11908oecececseesseeseessecsecsessessesecessaeespassim National Environmental Policy Acto.......ccccccscsscesecsssessesscssessesssssceseeseees 23 National Labor Relations Act. ........cccccccccsesscssesecescsecsscesscesccsesssssesacsasseessess 55 Staggers Act, (1980)nieeecsscssesssscssssscssssecsscseecssesecsssssesescecsusessceseaspassim Transportation Act (1920) 0... cccccccccsssssesesscssesecsecsssesseesessscssccssesesansaeespassim California Statutes Cal. Gov’t Code §§ 6250-6277 oo..ecccccccessccsccssssscccccecesscessseceececssucececssessuseecnssesevsesesesonsees 40 Vii §§ 11120, 54950 .aaeccsessssssesesccccssssssvecessccssssssnsssesssssnsnsssssecesnnseeesecenneestesees 43 §§ 14556.40(a)(32), 14556.13(b)(1) 14556.50(e), (i)... eeeceseeseeeeeeeees 47 §§ 93000-93034. oo. eeseecseseereescssssssscsseesesesneeneeseseessseeseeeseeateeeeceetees 36, 47 § 93020 .o.cecsccsesscessescecesceceescesessessteccsecsssssseesessusesssessesesseeseeesesseeensneesenes 53 Cal. Pub. Res. Code § 21QO8O(a) oo. eeeececceseececeeesecesceeeesesecseeseesecsssenseeseaesssessssesaeeceaeeseeneseeesseeeees 52 Cal. Pub. Util. Code §§ [85000-1855 11 oneeeece eseeecsseeessescsnsesseessseseseeesaaeeenessenseseeeaeeeeees 47 §§ 185020-1855 11 eeeeesccsseceecceeceeesesseseesssesesesesaecaenseeeneneseeseeeetees 44 § 185033 ..cccceseesccssesecseeeeeeceeenscssesesseeseesssaseeesecsesteseanensecsaeeaeeneeanenessetees 48 §§ 185033-1855 11 eeeeeeeeeeessseceneceesessscseessessessesesessessaeeseeseseessesneeeeens 45 State Regulations Cal. Code Regs., tit. 14 § 15378(a)(1), (2) ..sseceeseesesesesesseeseeeereesneneeereneneeees 52 Legislative History ELR.Rep. No. 96-1430 (1980) (Conf. Rep.) ......ccccsssseceseeteereeeeteeeneaeeeeeees 13 HLR. Rep. No. 104-311 (1995) ...ceeceeeessssetsesseseeeeteneeseeseeeees 11, 12, 14, 16 HLR. Rep. No. 104-422 (1995) (Conf. Rep.) ......ccscsesesesseeesseeeceteceeseeneeentes 15 S. Rep. No. 104-176 (1995)... cesssssesscsesseseseensesseesessesseesseeseeeeeteeeeseessens 15 Journal Articles Herbert Hovenkamp, Regulatory Conflict in the Gilded Age: Federalism andthe Railroad Problem, 97 Yale L.J. 1017 (1988) oecececcsccssccssesscsecsecerseeecseseceeceeesseeseeseesessscesesesseessasenseeeseeneeseeeeensees 8 James W.Ely, Jr., The Railroad System Has Burst Through State Limits”: Railroads and Interstate Commerce, 1830-| 1920, 55 Ark. L. Rev. 933 (2003) ...... cc eseeseesessresseeseseeseeeeesseeeesseteeeeeeneens 8 Paul Stephen Dempsey, The Rise and Fall ofthe Interstate Commerce Commission: The Tortuous Pathfrom Regulation to Deregulation ofAmerica’s Infrastructure, 95 Marg. L. Rev. 1151, 1152 (2012) veecceeesesteesereneneeeeeteseeeneenes 7 Paul Stephen Dempsey, Transportation: A Legal History, 30 Transp. L.J. 235, 254-65 (2003)... ccccssseseesseseeessseeseeeecneeeeseeseseeeesneneeaes 8 Vill Zachary Smith, Tailor-Made: State Regulation at the Periphery ofFederal Law, 36 Transp. L.J. 335, 338 (2009)ooo. eeseeecceeseesecseessessecsceensecesetscssecssseceaessesenerseesseessseessesetacenseeaterees 8 Other Railroad: Eel River Canyon, YouTube (May 26, 2009), https://www.youtube.com/watch?v=RhCjYNKXNVKk........ceeeeeeeeeeees 24 ix INTRODUCTION The California High Speed Rail Authority (“HSRA”)basesits preemption arguments on a misunderstanding. Congress did not give the Surface Transportation Board (“STB”) “exclusive and plenary jurisdiction overrailroad operations.” The Interstate Commerce Commission Termination Act (“ICCTA”), 49 U.S.C. §§ 10101-11908, does not provide a pervasive schemeofnational railroad regulation or planning that bars state exercise of police powers to protect the health and the environment. To the contrary, Congress entered therailroad regulatory arena in 1887 for the limited purpose of bringing economicstability to an emergentindustry, and every statutory revision over the following century wasdirected at the same objective — facilitating a competitive market. In continually adjusting the law to meet the economic concerns ofthe time, Congress has consistently preservedtraditional state powersto protect public health, safety, and the environment, even when those powersincidentally affect railroad operations. The STB hasnojurisdiction over the North Coast Railroad Authority (“NCRA”)project at issue here — the potential rehabilitation and reopening ofa rail line shut down for safety reasons by anotherfederal agency. NCRA did not apply for or receive STB approvalto restore service and recommenceoperationon its existing line. The single action that the STB took (and had authority to take) was certifying Defendant Northwest Pacific Railroad Company (““NWPCo”)as qualified to becomethe line operator should NCRA’s putative lease with NWPCo be consummated and the rail line reopened. The STB did not approve day-to-day “operations” on the line, as HSRA implies, when it granted NWPCo’soperator status license application. Nor does the STB havestatutory authority to pass judgmenton the wisdom of California’s investment decision to repair and reopen the line. The STB merely granted new operatorstatus if and when the line returnedto service. | The express language in the ICCTA does not preempt howa railroad decides whetherto rehabilitate a line and bring it back into service, such as through the environmental review process NCRA used here. Instead, the ICCTA preempts only those other state and federal remedies “with respect to the regulation of rail transportation.” The California Environmental Quality Act (“CEQA”) does not target railroad economics, or even railroads, for regulation and thus does notintrude into that area in which the ICCTA forbids states to regulate. As is undisputed, CEQAis a law of general application, intended to inform California public agency decisionmaking. It requires disclosure of potential adverse environmental impacts from public agency project approvals and mitigation of those impacts where feasible. Similarly, state law remedies for NCRA’s failure to comply with CEQA in connection with its repair and reopening project do not conflict with any STB-approved activities or ICCTA remedies. CEQAis California’s tool to hold politically accountable subsidiary public agencies and the officials who fund and administer agency assets and decisions. Under the Nixon-Gregory doctrine, absent a clear statement from Congress, federal law maynot “trench on” howa state choosesto constitute itself as a sovereign political entity. HSRA’s attempt to avoid the Nixon clear-statementrule by arguing that Congress intendedthat public railroads be treated the sameas private railroads is unavailing. Without an unambiguousand explicit statement that Congress intended the ICCTAto preempt howstates govern the decisionmaking processofpublic rail authorities, courts may not interpret the ICCTA to preempt how California determines the legitimacy and legal enforceability of decisions madebya subsidiary agency to conduct state-owned business. Moreover, as market participants, both public and private entities are free to consider the environmental effects of capital investments they make. HSRA cannotcite any ICCTAprovision that preempts such internal decisionmaking. Instead, to avoid the determination that NCRA wasacting on behalf of the State, as a market participant, HSRA falls back onits fundamental misconception that Congress intended plenary regulation of the rail industry, notwithstanding the ICCTA’sclearintent to largely deregulate therail industry and allow the market to operate freely. HSRA is thus incorrect whenit argues that California cannot act as a market O R E G e i n i : participant, or proprietor, when deciding howto lease and invest millions of dollars in rehabilitating a decrepitrail line. Finally, HSRA argues that even if there are voluntary agreements not subject to ICCTA preemption, where those agreements impose an unreasonable burden onrailroad operations, their terms are preempted. But HSRA fails to apply the rule to the facts here, where agreements provided state funding necessary to repair and reopen therail line and to secure authorization from the co-ownerofthe line for NWPCotoact as the future operator. These agreements further demonstrate that CEQAis not preempted here. ARGUMENT 1. The ICCTA Does Not Preempt California’s Requirement that Adequate CEQA Review Precede NCRA’s Line Repair Project. A. HSRA’s Preemption Argument Rests on the Faulty Assumption of STB Jurisdiction over NCRA’s Project. HSRA’s brief hinges almost entirely on an erroneous premise — that the CEQA “project” at issue here “is subject to STB jurisdiction and regulation under the ICCTA.” California High-Speed Rail Authority Amicus Brief in Support of Respondents at 5 (“HSRA:5”).! According to ’ See also, e.g., HSRA:10 (contending that“the public rail agency is subject to STBjurisdiction and is operating a railroad in interstate commerce pursuantto a license from the STB”); 38 (claiming this case involves “section 10501(b) and actions subject to the STB’s exclusive Jurisdiction and regulation”); 40 (claiming NCRA is “engagedin interstate HSRA,the STB’s approval ofNWPCoasa potential operator established STB jurisdiction and therefore the ICCTA’s preemptive reach over NCRA’srepair and reopening project. This premise is wrong. The CEQA“project” for which the challenged EIR waspreparedis NCRA’s decision to repair and reopen the line. The EIR here was intended to inform NCRA’s decision whether to move forward with rehabilitating a dilapidated railroad that another agency, the Federal Railroad Administration, shuttered years ago for safety reasons. See AR:9:4592 (Dec. 9, 1998).’ The STB did notassert any jurisdiction over NCRA’s | process for deciding whether and howtoreestablish service along the Russian River Division ofthe railroad. It merely certified lessee NWPCo as a potential future operator ofthe line “upon consummation of the transaction.” AR:16:8117, 8207. That “transaction” included CEQA compliance and consent by the Sonoma-Marin Area Rail Transit District, co-owneroftherail line. AR:13:6731. Asdiscussed further below, the STB does not have authority over rehabilitation work on an existing line or any say in the processa private or commercebyrailroad and under the STB’ s exclusivejurisdiction, and facing CEQAlawsuits”); 49 (implying NCRA is a “public rail agencies constructing or operating rail lines under STBjurisdiction’). ” Citations to the Administrative Record andto Plaintiffs’ Consolidated Appendix appear, respectively, as “AR:[volume]:[page]” and “App:[volume]:[tab]:[page].” public railroad uses to decide whether to proceed with that work. Nor does the STB’s approval of a change in operator status preempt California’s ability to make an informed decision about state-funded, discretionary infrastructure projects merely because CEQA compliance mayaffect how repairs are conducted, mayresult in judicial review, or may convince the state not to go forward with the project atall. Were HSRA’slegal theory correct, the STB could dramatically expandits legislatively-limited jurisdiction and effectively commandeer taxpayer revenue to compelstate action, even if California ultimately decided to forego the project for financial, environmental, or other reasons. As explained below, Congress did not grant such plenary authority to the STB,whichis not surprising since HSRA’s position here is inconsistent with the mostbasic tenets of federalism. E.g., Printz v. United States, 521 US. 898 (1997). B. The History of the ICCTA Reflects Evolving Congressional Concern Aboutthe Financial Viability of the Industry, Not an Intent to Preempt Traditional State Decisionmaking Authority. HSRA’s preemptionanalysis relies selectively on a statutory predecessor to the ICCTA — the Transportation Act of 1920 but ignores the context in which Congress waslegislating. The Transportation Act was designedto bolster the economic sustainability of the interstate rail transportation system as a whole. It did so by giving the federal government morerate-setting authority and shieldinginterstate carriers from financially onerous state mandatesto invest in capital-intensive new lines or operations for the benefit of local commerce. The Transportation Act wasthus consistent with earlier and later versions of the law,all of which reflect Congress’ focus on responding to the unstable economics of the rail industry — rapid expansion followed by contraction.> In nearly 130 yearsofrailroad legislating, Congress has never expressed an intent either to displace the states’ ability to control their own public expenditures and decisionmakingprocessesor to preempt the exercise oftraditional state police powerprotecting public health, safety, and the environment. Nor has Congress extended federaljurisdiction over repair work on existing lines. The ICCTA,in short,is notthe all-pervasive federal regulatory regime that HSRA suggests. See Plaintiffs’ Opening Brief at 17-22 (“OB:17-21”); Plaintiffs’ Reply Briefat 3-4 (“RB:3-4”). > Paul Stephen Dempsey, The Rise and Fall ofthe Interstate Commerce Commission: The Tortuous Pathfrom Regulation to Deregulation of America’s Infrastructure, 95 Marq. L. Rev. 1151, 1152 (2012) (“Dempsey I’) “Congress [in 1887] instituted regulation under the ICC largely to protect the public from the monopolistic abuses of the railroads. Between 1920 and 1975, however, the goal ofthe national transportation policy shifted to protection of the transportation industry from . . . unconstrained competition.”). 1. The Interstate Commerce Act of 1887 American railroads were originally chartered under state law and regulated pursuantto historic state police powers.’ But early state efforts to curb monopolistic behavior and corruption in the rapidly-expandingrail industry proved largely ineffective.’ After the U.S. Supreme Court struck downIllinois’ ability to regulate freight rates on interstate routes, St. Louis & Pac. Ry. Co. v. Illinois, 118 U.S. 557 (1886) (finding regulation unconstitutional under the Commerce Clause), the federal government stepped into the economic regulation ofrailroads for thefirst time with adoption of the Interstate Commerce Act (“ICA”) in 1887. The ICA outlawed rebates and pooling, forced railroads to publish rates, and ultimately required the new Interstate Commerce Commission (“Commission”) to ensure that rail fees were “just and reasonable.” Smith at 339-40; DempseyII at 265; Hovenkampat 1035. * Zachary Smith, Tailor-Made: State Regulation at the Periphery of Federal Law, 36 Transp. L.J. 335, 338 (2009) (citing James Ely, Jr. Railroads andAmerican Law (2001)); Herbert Hovenkamp, Regulatory Conflict in the Gilded Age: Federalism and the Railroad Problem, 97 Yale L.J. 1017, 1034 n.90 (1988) (noting that the rail system was developed “largely by meansofstate initiative and almost exclusively understate control” and that “before 1887 federal regulation wasvirtually nonexistent”). > See James W. Ely, Jr., “The Railroad System Has Burst Through State Limits”: Railroads and Interstate Commerce, 1830-1920, 55 Ark. L. Rev. 933 (2003) (“Ely”); Paul Stephen Dempsey, Transportation: A Legal History, 30 Transp. L.J. 235, 254-65 (2003) (“Dempsey II’””).) In responseto early, narrow judicial interpretationsofthe ICA, Congress conveyedincreasing authority on the Commission overthe next three decadesto regulate interstate rail rates. Hovenkampat 1035-44; Ely at 966-67; Dempsey | at 1163-64. The economic challenge facing regulators at the time was that “[m]Jonopolyrailroads earned monopoly profits, while competingrailroads were driven into bankruptcy.” Hovenkampat 1035-44 (explaining that “railroad interests seemed destined to beeither filthy rich or perpetually broke”). Fierce competition in long- haulinterstate markets drove rates downto the point wherecarriers often couldnot cover fixed costs, while state regulators tried to prevent monopoly rents on moreprofitable short-haulintrastate routes, where lack of competition alloweda greater return. Id. at 1049-55. The Supreme Court eventually recognized that this short-haul/long-haul problem threatened the long-term economic health oftherail industry, and allowed the federal governmentincreasing leeway to addressintrastate rates in connection with the Commission’s supervision of interstate routes. Ely at 969-73. 2. The Transportation Act of 1920 These concerns moved Congress to enact the Transportation Act of 1920. DempseyII at 272 (“After World WarI, [federal] policy .. . shifted from oneofprotecting the public from the market abuses ofthe transportation industry to one ofpreserving a healthy economic environment for common carriers.”). Congress was concerned with “freeriding by the states,” with state-imposed low rates for intrastate rail traffic threatening the overall financial viability of the industry. Ely at 976 (citing R.R. Comm’n of Wisconsin v. Chicago, B. & QO. R. Co., 257 US. 563, 588 (1922)). To address this concern, the Transportation Act augmented the Commission’s powers, conveying new authority to supervise the rail industry’s issuance of securities andto regulate intrastate rates when they affected interstate commerce. Ely at 974; Dayton-Goose Creek Ry. Co. v. United States, 263 U.S. 456, 478 (1924). Relevant here, the Transportation Act also provided “that no interstate carrier shall undertake the extensionofits line of railroad or the construction of a new line ofrailroad, or shall acquire or operate any line of railroad, or extension thereof, or shall engage in transportation over such additional or extendedline of railroad unless and until the Commission shall certify that public convenience present or future requires it, and that no carrier shall abandonall or any portion ofits line or the operation ofit without a similar certificate of approval.” R.R. Comm’n ofCal. v. S. Pac. Co. 264 U.S. 331, 344 (1924) (discussing paragraphs 18 to 21 of section 402). This new statutory language did not provide plenary federal jurisdiction overrail operations, but instead targeted specific activities, and there is no evidence that Congress intended the Commission to engage in affirmative planning for a national rail system, or to oversee repairs of 10 regulations governing the interstate rail market. See, e.g., City ofNew Orleans v. Tex. & Pac. Ry. Co., 195 F.2d 887, 889 (Sth Cir. 1952) (public railroad subject to federal law “so long asit engagesin interstate and foreign commerce”). Contrary to HSRA’s argument, however, these cases do not go further and preemptstate statutes that are unrelated to federalrail regulation and that instead only govern public state and local entities generally.'* Cf Pac Anchor, 59 Cal. 4th at 783-84 (upholding California’s generally-applicable unfair competition law that did not directly regulate matters covered by the FAAAA). Thereis no conflict between California’s interests in making public rail authorities comply with CEQAandthe holdings in United States v. California and Taylor. Further, HSRA’s preemption argument focuses exclusively on federal requirements appliedto rail carriers, arguing that they displace state-law obligations that otherwise control California agencies. HSRA:30- 34. Yet this exclusive focus on federal law conflicts with the analysis required by clear-statement precedent. “The Supreme Court has applied Gregory [by] focusing on the state functions necessarily affected by operation ofthe [federal] statute, and not exclusively on the actual conduct '4 STB decisions addressing federal regulation of public railroads (HSRA:32-33) are also irrelevant. NCRA’s obligation to comply with federal law is undisputed. To the extent that HSRA asks this Court to read these decisionsas limiting California’s sovereign authority overits subdivisions, the Court should decline to do so. Solid Waste Agency ofN. Cook County v. U.S. Army Corps ofEng’rs, 531 U.S. 159, 172-74 (2001). 39 proscribed by Congress.” United States ex rel. Long v. SCS Bus. & Tech. Institute, Inc., 173 F.3d 870, 888 (D.C. Cir. 1999). This one-sided analysis leads HSRA to overlook the important sovereign interests that would be nullified by preemption in this case, and assumesa conflict between CEQA and Congress’ powerto regulate rail where none exists. Aspreviously explained, through CEQA,the Legislature established requirements for public-agency decisionmaking and accountability when agencies take actions that may cause significant environmental impacts. OB:29-32, 36; RB:18. CEQAis but one ofmany agency-governance and accountability statutes through which California exercises sovereign control overits subdivisions. See Nixon, 541 U.S. at 140-41; see also Gov’t Code §§ 6250-6277 (California Public Records Act); §§ 11120-11132 (Bagley- Keene Act); §§ 54950-71132 (Brown Act); §§ 81000-91094 (Political Reform Act). | Oe In fact, the sovereign interests that CEQA advances extend further than the self-governance principles that Nixon protected. California expresses its sovereignty through lawsthat reach the heart of representative governmentin this State. Gregory, 501 U.S. at 461; Agua Caliente Band of Cahuilla Indians v. Superior Court, 40 Cal. 4th 239, 249, 256-59 (2006) (acknowledging that the Political Reform Act’s regulation of electoral process furthers “a state interest that is beyond . . . commercial and regulatory interests”). This Court has held that CEQA’s environmental 40 review processfacilitates informed democracy by promoting agency accountability to the electorate. An EIR “is a document of accountability. If CEQAis scrupulously followed, the public will know the basis on which its responsible officials either approve or reject environmentally significant action, and the public, being duly informed, can respond accordingly to action with whichit disagrees.” Laurel Heights Improvement Ass’nv. Regents of Univ. ofCal., 47 Cal. 3d 376, 392 (1988); see also Concerned Citizens ofCosta Mesa, Inc. v. 32nd Dist. Agricultural Ass’n, 42 Cal. 3d 929, 936 (1986) (the “privileged position”that the public holds in the CEQAprocess“is based . . . on notions of democratic decision-making”). Consequently, requiring an agency “to fully comply with theletter of [CEQA],” including its public disclosure provisions, facilitates “appropriate action come election day should a majority of the voters disagree” with an agency’s decision. People v. County ofKern, 39 Cal. App. 3d 830, 842 (1974). For these reasons, the sovereignty issues here reach further than those in Nixon. There, the state sovereignty at stake was limited to the state’s authority to control its subsidiary agencies. CEQA serves a similar purpose, but becauseit is also an instrumentthat California selected to enhancepolitical accountability in public decisionmaking, the clear- statement requirement operates with greater force here. 41 The facts in Nixon further demonstrate why preemption of CEQAis unavailable here. Like regulation ofrailways, regulation ofthe telecommunicationsindustry falls well within Congress’ commerce power. Unlike the STB’slimited regulatory authority, however, Congress chose to give broad regulatory authority to the Federal Communications Commission. See Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691, 700 (1984) (Congress gave the FCC “broadresponsibilities to regulateall aspects of interstate communication”); Freeman v. Burlington Broads., Inc., 204 F.3d 311, 320 (2d Cir. 2000) (recognizing “the FCC’s broad authority” over telecommunications). Despite this broad federal authority over telecommunications, Nixon refused to uniformly apply, to both state and private telecommunication providers, Congress’ prohibition on states restricting the “ability of any entity” to offer telecommunicationservices. Nixon, 541 U.S.at 140-41. Moreover, Nixon resolved a much greater conflict between Missouri law and federal law than is alleged to exist between CEQAandthe ICCTA. In Nixon, Missouri’s law specifically targeted the subject matter of the Telecommunications Act’s preemption clause — the entry of“an entity” (i.e., a municipality) into the telecommunications market. Nixon, 541 U.S. at 129. Nonetheless, the Court would not read that federal preemption clause to interfere with the state’s control over telecommunication services offered by its subdivision. Jd. at 140-41. Here, while ICCTA preemption 42 is limited to state regulation ofrail transportation, CEQA doesnottarget the railroad industry. As a law of general application, CEQA’s effect on railroads is, at most, indirect and incidental. Compared with Nixon,it is even harderto find congressionalintent to preempt how California controls public railroads through CEQA. If a conflict did arise between California’s exercise of its sovereign interests through CEQAandfederal regulation in the ICCTA, Nixon and Gregory still require an unmistakably clear statement before the state’s sovereign interest gives way. But HSRA,like Defendants, is unable to identify any ICCTAtextorlegislative history that clearly shows congressional intent to preemptstate control of the decisionmaking processes ofpublic rail agencies. The “context of section 10501(b)” (HSRA:34) does notsuffice. C. The Court Should Be Skeptical of Rail Agencies’ Attempts to Shed the Legislature’s and the People’s Sovereign Control. In enacting California’s open-meeting laws, the Brown Act and the Bagley-Keene Act, the Legislature observed that the people of California “do notyield their sovereignty to the agencies that serve them.” Gov’t Code §§ 11120, 54950. To the contrary, “the people insist on remaining informed sothat they mayretain control over the [agencies] they have created.” Id. 43 Thoughit is subject to the sovereign control of the Legislature and the electorate, HSRA purports to represent the viewsof“the State” regarding ICCTA preemption of CEQA. See HSRA:2. But HSRA is simply the agency that the Legislature created to pursue California’s high speed rail project. See Cal. Pub. Util. Code §§ 185020-185511. HSRA does not speak for the State any more than other public agencies in California. Cf In re Pfahler, 150 Cal. at 80 (defining “state” to encompass “the entire body of the people, who together form the body politic, known as the ‘state’’’). Indeed, the amicusbriefs in this case reveal marked disagreement among California agencies regarding the ICCTA’s preemptive reach. As a single-purpose rail agency, HSRA’s desire for ICCTA preemptionis understandably aligned with NCRA. But other agencies established by the Legislature recognize the impropriety of extending ICCTA preemption to this case. See Brief of Amici Curiae South Coast Air Quality Management District and Bay Area Air Quality ManagementDistrict. Even the position taken by the California Environmental Protection Agency and the Natural Resources Agencyis in tension with the position ofHSRA and NCRA. See Section LC. | As discussed, HSRA and NCRA must comply with numerous California laws (including CEQA)that apply only to public agenciesin this state. Indeed, the Legislature has imposed specific obligations on HSRA. 44 See, e.g., Cal. Pub. Util. Code §§ 185033-185511 (requirements for submitting business plansto the Legislature); § 185033.5 (requirements for submitting project update reports to the Secretary of Transportation); § 185036.1 (requirement relating to purchasing California-made equipment). Rail agencies like HSRA and NCRA cannot, solely by virtue oftheir rail carrier status, disregard suchdirectives from the Legislature and their ultimate responsibility to the people of California. Because “preemptingstate or local governmentalself-regulation (or regulation ofpolitical inferiors) would work so differently from preempting regulationofprivate players,” Nixon found “it highly unlikely that Congressintendedto set off on such uncertain adventures.” Nixon, 541 US. at 126. The Court should be similarly skeptical ofHSRA’s and NCRA’s attemptto shed their statutory obligations, and should preserve California’s sovereign control over these subdivisions. Ili. The ICCTA Does Not Preempt CEQA’s Requirements Pertaining to State Proprietary Conduct. In addition to the clear-statement doctrine, the market participant doctrine defeats preemption here. In authorizing HSRA and NCRA to use public funds andresources to pursue opportunitiesin the rail market, the State acted as a proprietor of public property. Under the market participant doctrine, courts presume that state and local requirements governing such market activities are not preempted unless Congress evidences contrary 45 intent. In Atherton, HSRA unsuccessfully argued against the market participant doctrine, contending that it does not save from ICCTA preemption CEQA’s requirementsfor the State’s proprietary rail projects. HSRA renewsthat failed argument here. But despite HSRA’s contention, the market participant doctrine is both “available” in the context of ICCTA preemption and defeats any such preemption here. A. The Market Participant Doctrine Applies to Preemption Under the ICCTA. Somecourts conduct a threshold inquiry to determine whetherthe market participant doctrine is available under a particular statutory scheme. They consider whethera statute “contains ‘any express or implied indication by Congress’”that it intended to preemptstate proprietary activities. Engine Mfrs. Ass’n v. S. Coast Air Quality Mgmt. Dist., 498 F.3d 1031, 1042 (9th Cir. 2007) (quoting Bldg. & Constr. Trades Councilv. Associated Builders & Contractors, 507 U.S. 218, 23 1 (1993)) (‘Boston Harbor’). HSRA claimsthat Atherton was wrongly decided becauseit supposedly failed to undertake this analysis. HSRA:41. Atherton, however, recognizedthis threshold inquiry but found that HSRA impliedly conceded “that the [market participant] doctrine applies” to ICCTA preemption by expressly reserving HSRA’s right to assert the doctrine in future ICCTA preemption cases. 228 Cal. App. 4th at 337 n.5. 46 HSRA nowturns away from that earlier concession by arguing that the ICCTA will never accommodate the market participant doctrine. The ICCTAdoes not support HSRA’s newposition. The statute does not contain an express statement preempting states’ proprietary decisions regardingrail transportation. Consequently, HSRA contendsthat the ICCTA impliedly preempts proprietary decisionmaking, arguing that applying the marketparticipant doctrine here “would be contrary to both congressional andstate intent.” HSRA:40. HSRA is incorrect on both counts. First, there is no “state intent” to remove either NCRA or HSRA from their respective obligations to comply with CEQA whencarrying out State proprietary activities. The Legislature has never exemptedtheserail agencies from CEQA. See Cal. Gov’t Code §§ 93000-93034 (lacking CEQA exemption for NCRA); Cal. Pub. Util. Code §§ 185000-185511 (lacking CEQA exemption for HSRA). Instead, the Legislature has repeatedly assumed that both agencies must comply with the Act. For instance, the Legislature appropriated over $60 million to NCRA underthe State’s Transportation Congestion Relief Program, which anticipates that | funded agencies will comply with CEQA. Cal. Gov’t Code §§ 14556.40(a)(32), 14556.13(b)(1) 14556.50(e),(i); see also App:9:84:2373 (Relief Program funding guidelines making recipient agencies responsible for “[c]omplying with all legal requirements . . . including ... CEQA”). 47 SR OR R R N R E g t a t e k B rae ae The Legislature likewise presented the Proposition 1A funding plan for the high-speed rail project to California’s voters for approval, expecting that HSRA would continue to comply with CEQA. Atherton, 228 Cal. App. 4th at 338; see also Cal. Pub. Util. Code § 185033 (biennial business plans to the Legislature include the “expected schedule for completing environmental review . . . for each segment or combination of segments of Phase 1” of that project). Nor did Congress, in enacting the ICCTA,impliedly preempt state proprietary activity in the rail market. HSRA primarily argues that applying the market participant doctrine here is contrary to the ICCTA’s “preemption principles” and would defeat Congress’s intent “to have uniform and exclusive federal regulation.” HSRA:39-40. Butthis is not the correct threshold inquiry. Instead, courts consider only whether “Congress intended to extend the [federal statute’s] reach to preemptstate proprietary action.” Engine Mfrs., 498 F.3d at 1043. Nothing in the ICCTA implies that Congress intended to foreclose state proprietary activity in the rail market. Rather, numerous cases cited by HSRA acknowledgethat public entities can enter the rail market, just like private entities. See HSRA:40. Moreover, while HSRA acknowledges the deregulatory purpose of the ICCTA (HSRA:24-25),it fails to reconcile its “uniformity” argument with the largely-deregulated rail market. The goal of both the Staggers Act 48 and the ICCTA wasto reduce federal regulation overinterstate rail and encourage free market activity. See Section I; 49 U.S.C. § 10101(2) (statutory policy “to minimize the need for Federal regulatory control over the rail transportation system”). Deregulation allows both public and private entities to decide for themselves how to engagethe rail market, and Congress likely expected that Burlington Northern, Union Pacific, and the State of California would makethese decisions differently, not uniformly. Nothing in the ICCTA forecloses either private or state proprietors from setting their owncriteria governing such decisions. Cf Tocher v. City of Santa Ana, 219 F.3d 1040, 1048-50 (9th Cir. 2000) (upholding public market participation despite the FAAAA preemption clause intended toset national standards for conducting towing business), abrogated on other grounds in City ofColumbus, 536 U.S.at 432. Likewise, applying the marketparticipant doctrine in ICCTA preemption cases does not intrude on the STB’s limited jurisdiction. The STB never “specifically authorized” NCRA’s repair activities here. HSRA:41; see Section I. Moreover, grants of federal regulatory jurisdiction do not by themselves demonstrate congressional intent to preempt state market behavior. See Engine Mfrs., 498 F.3d at 1042-43 (market participant doctrine available despite EPA’s regulatory jurisdiction under the Clean Air Act); Atherton, 228 Cal. App. 4th at 329-41 (applying the market participant doctrine to ICCTA preemption claim after the STB 49 exercised jurisdiction over the high-speed rail project). Thus, the ICCTA does not imply any congressional intent to preempt California’s proprietary decisions in the rail market and foreclose the availability of the market participant doctrine. B. NCRA’s Obligation to Comply with CEQA WhenIt Pursues Proprietary State Activity Is Not Preempted. The market participant doctrine recognizes that public entities, like private entities, engage markets in numerous waysto pursue their unique interests. See Boston Harbor, 507 U.S. at 227. As Plaintiffs have explained, federal courts have adopted alternative tests to determine whethera particular state action falls within the market participant doctrine. See OB:39 (citing Cardinal Towing v. City ofBedford, Tex., 180 F.3d 686 (Sth Cir. 1999), and Johnson v. Rancho Santiago Cmty. Coll. Dist., 623 F.3d 1011 (9th Cir. 2010)). Here, the relevant test is whether the challenged state action reflects the state’s “interest in its efficient procurement of needed goods and services, as measured by comparison with the typical behavior ofprivate parties in similar circumstances.” Cardinal Towing, 180 F.3d at 693 (emphasis added); cf Children’s Hosp. & Med. Ctr. v. Bonta, 97 Cal. App. 4th 740, 768 (2002) (declining to apply the market participant doctrine where there was “no genuine private market regarding the delivery of” healthcareat issue there). 50 HSRA echoes Defendants’ argumentthat this test is not satisfied because “[o]nly public agencies must comply with CEQA’s procedural and substantive mandates.” HSRA:46-47. Butthat fact is irrelevant under the market participant doctrine. Numerous courts have upheld standards for proprietary actions that apply to public agencies but not private entities. See White v. Mass. Council ofConst. Emp’rs, Inc., 460 U.S. 204 (1983); Engine Mfrs., 498 F.3d at 1045-46; Tocher, 219 F.3d at 1048-50; Big Country Foods, Inc. v. Bd. ofEduc. ofAnchorage School Dist., Anchorage, Alaska, 952 F.2d 1173, 1178-79 (9th Cir. 1992). There is no requirement that public and private proprietors act identically. See Rancho Santiago, 623 F.3d at 1026-28. oeMoreover, ““‘efficient procurement’ means procurementthat serves the state’s purposes — which mayinclude purposes other than saving money — just as private entities serve their purposes by taking into accountfactors other than price.” Engine Mfrs., 498 F.3d at 1045-46. It is undisputed that private entities may,as part of their proprietary actions, embrace environmental standards in their decisionmaking processes. Id. at 1047 (citing private programsfor procuring less-polluting vehicles]; see also Servs. Emps. Int’l Union, Local 99 v. Options—A Child Care and Human Services Agency, 200 Cal. App. 4th 869, 873, 877 (2011) (private childcare provider agreed to Brown Act compliance). Neither the parties nor amici haveidentified a provision in the ICCTA that would prevent such private 51 behavior. RB:23-24. Consequently, the ICCTA does not preempt CEQA’s application to state proprietary actions, which serves California’s purpose of considering and, where feasible, reducing the environmental impacts of public actions before resources are irretrievably committed to those endeavors. Laurel Heights, 47 Cal. 3d at 392. C. Contrary to HSRA’s Assertion, Market Participant Cases Protect from Preemption State Rules Governing Proprietary Activity. HSRA contends that this case does not involve state proprietary conduct because “a public agency’s actions to comply with CEQA, standing alone, are not market participation.” HSRA:44. This argument misunderstands both CEQAand the marketparticipant doctrine. First, an agency’s actions and obligation to comply with CEQA do not “stand alone.” CEQA always applies to decisions regarding “discretionary projects proposed to be carried out or approved by public agencies.” Cal. Pub. Res. Code § 21080(a). Relevant here, discretionary projects subject to CEQA include “actions undertaken by any public agency including but not limited to public works construction” and publicly- financedactivities. Cal. Code Regs., tit. 14, § 15378(a)(1), (2). Thus, CEQAoperates only in conjunction with discretionary agency actions to pursuethe state’s proprietary interests, including NCRA’s discretionary actionsto lease therail line, fund line repair and rehabilitation, and carry out its project. See Agency:7-8 (stating same). HSRA is simply wrong to 52 claim that “voluntary action by [NCRA] makingchoices in a specific free market. . . [is] lacking in this case.” HSRA:44. HSRA’s attempt to define NCRA as a separate proprietor “regulated” by CEQAdoes not changethis analysis. HSRA:47-49. NCRA exists only as an agentof the State of California; it has no legally distinct status. City ofColumbus, 536 U.S.at 425 (state subdivisions “are created as convenient agencies to exercise such of the State’s powers as it chooses to entrust to them”). Under the market participant doctrine, it is irrelevant that “not only the state, but also someofits political subdivisions, are directed to take” actions. Engine Mfrs., 498 F.3d at 1045-46; Big Country Foods, 952 F.2d at 1179 (9th Cir. 1992) (“A state should not be penalized for exercising its power through smaller, localized units; local control fosters both administrative efficiency and democratic governance.”). NCRA’sspending andcontractualactions in furtherance ofits statutory mission to own and operate the NWP line, including spending on major repairs to reopen the line and on an EIRto evaluate the impactsofthat work, merely advancethestate’s proprietary interests. See AR:13:6796, 16:8080, 8572; Gov’t Code § 93020 (empowering NCRA to “acquire, own, operate, and lease ... property” to pursue its mission). Second, the marketparticipant doctrine does not support HSRA’s attempt to sever CEQAandits enforcement mechanismsfromstate proprietary conduct. Rather, under the doctrine, courts evaluate the 53 standards that govern proprietary actions as a componentofthe larger state proprietary decisionmaking process. For instance, in Engine Manufacturers, plaintiffs argued that the Clean Air Act preempted “fleet rules” adopted by the South Coast Air Quality ManagementDistrict, which set various environmental standards for vehicles purchased or leased by state or local agencies. 498 F.3d at 1036-37. In establishing theserules, the South Coast Air District did not itself procure goods in the marketplace. Rather, the District’s rules set standards that “govern[ed] purchasing, procuring, leasing, and contracting for the use of vehicles by state and local governmentalentities.” Jd. at 1045. The Ninth Circuit held that the environmental standards required for these proprietary actions ultimately reflected California’s “interest in its efficient procurement of needed goods and services,” and thus the rules were not preempted. Jd. at 1048; but see 1049 (fleet rules that governed private purchases fell outside of the market participant doctrine). Similarly, in White v. Massachusetts Council ofConstruction Employers, Inc., the Supreme Court considered an as-applied challenge to an executive order setting workforce standards for construction projects financed by the city of Boston. 460 U.S. at 205-06, 209. The court held that “applying . . . the executive order to projects funded wholly with city funds” was protected under the market participant doctrine because “the Commerce Clauseestablishes no barrier to conditions” that govern the 54 market behavior of public entities. Jd. at 209, 214-15. Other market participant cases employ the same methodofanalysis. See Hughesv. Alexandria Scrap Corp., 426 U.S. 794, 797-98, 809-10 (1976) (upholding statutes enacted to encourage markettransactions for protecting Maryland’s environment); Tocher, 219 F.3d 1040, 1048-49 (upholding ordinance authorizing the creation of “rules and regulations to guide [a city’s] formation of contracts for towing services”); Big Country Foods, 952 F.2d at 1175 (upholding Alaska statute requiring school districts to pay more to purchasein-state milk).'° Thus, HSRA is incorrect that the focus of market-participant cases “is whetherthe particular challenged action or state law is its market participation” (HSRA:43), and that applying CEQAtothe proprietary actionsofpublicrail entities falls outside of the doctrine. HSRA:49. Like other market participant cases, applying CEQAto publicly-financedrail projects properly furthers the State’s proprietary interest in ensuring that agencies consider environmental impacts when spending public resources on publicly-pursued projects. Engine Mfrs., 498 F.3d 1031. '> Tn contrast, the market participant doctrine does not shield states’ exercise oftheir spending powers to regulate private conduct in a manner that would interfere with the National Labor Relations Act. Chamber of Commerce of U.S. v. Brown, 554 U.S. 60 (2008); Wis. Dept. ofIndus., Labor and Human Relations v. Gould Inc., 475 U.S. 282, 287 (1986). 55 Nor does CEQA’scitizen enforcement mechanism transform state requirements for proprietary action into preempted regulations. Engine Manufactures rejected an almost identical argument: “we do not see how action by a state or local governmentthat is proprietary when enforced by one mechanism losesits proprietary character when enforced by some other mechanism.” Engine Mfrs., 498 F.3d at 1048 (upholding rules that contained enforcement mechanisms). HSRA’s attempts to distinguish this holding are unavailing. See HSRA:50. First, CEQA’s codification in the Public Resources Code provides no meaningfulbasis for distinction. Just like CEQA, the vehicle emission rules in Engine Manufacturers were adopted separately from the proprietary behavior they governed. Nor did the Clean Air Act’s preemption waiver for certain California air regulations dictate the outcome in Engine Manufacturers. See HSRA:51. The Ninth Circuit observed that there was “no contention that California has obtained a waiver for the [challenged] Fleet Rules.” Engine Mfrs., 498 F.3d at 1043 n.3. For similar reasons, HSRA incorrectly suggests that the “unprecedented” posture of this case casts doubt on employing the market participant doctrine. HSRA:34-35. First, at least one non-California case has allowedplaintiffs to rely on the doctrine to defeat preemption as against public agencies. See Elec. Contractors, Inc. v. Dept. ofEdu., 303 Conn. 402, 449-54 (2012). Moreover, Atherton properly rejected HSRA’s 56 argument, observing that “there is no authority supporting the argument that the powerto ‘invoke’ the doctrine is reserved for [public agencies] to selectively assert in order to exemptthose projectsof[their] choosing from federal preemption.” 228 Cal. App. 4th at 339(it is “unusual to say the least” that a public agency wasasserting federal preemption “instead of defending the application of state law’). As a question of law, the applicability ofthe market participant doctrine does not turn on the identity of the party that assertsit. Ultimately, it is the purpose, not the form, of the state action that matters. Tocher, 219 F.3d at 1048-50. State statutes that are intended to regulate private behaviorfall outside of the marketparticipant doctrine.!° For instance, the False Claims Act provisions in the Grupp cases regulated the conductof a private entity, DHL, not the conductofpublic entities. See New York ex rel. Grupp v. DHL Express (USA), Inc., 19 N.Y.3d 278 (2012); New York ex rel. Grupp v. DHL Express (USA), Inc., 922 N.Y.S.2d 888 (2011); DHL Express (USA), Inc. v. Florida ex rel. Grupp, 60 So0.3d 426 (Fla. Dist. Ct. App. 2011). Similarly, the spending regulations in Gould and Chamber ofCommerce v. Brownset standardsfor private '© HSRA mistakenly relies on Whitten v. Vehicle Removal Corp., 56 S.W.3d 293 (Tex. Ct. App. 2001), HSRA:43, 50, which did not consider the market participant doctrine. Whitten foundthat Texas regulation of private tow operations was not covered by the “safety regulation exception”to preemption, which is unique to the FAAAA. 56 S.W.3d at 304-08. 57 individuals and entities that received public funds and contracts, purposefully regulating their behavior through thestates’ spending power. Chamber ofCommerce v. Brown, 554 U.S. 60; Gould, 475 U.S.at 287. In contrast, enactments that are intended to govern a public entity’s proprietary actions — like the fleet rules upheld in Engine Manufacturers, the workforce standards applied in White, and CEQAhere — are properly protected by the market participant doctrine. IV. Defendants’ Voluntary Agreements to Comply with CEQA Are Not Preempted. HSRA doesnotdispute the generalrule that voluntary) agreements are not subject to preemption. HSRA:51-53; see Flynn v. Burlington N. Santa Fe Corp., 98 F. Supp. 2d 1186, 1189 (E.D. Wash. 2000) (“no authority” under ICCTAforthe proposition that a carrier is “precluded from voluntarily complying with local permitting regulations”). Rather, HSRA asserts that if specific facts show a voluntary agreement unreasonablyinterferes with railroad operations, the presumption against preemption maybe rebutted. HSRA:53-54. HSRA offers only a theoretical argument without facts relevant to this case. Here,there is no question that Defendants voluntarily agreed to comply with CEQA on numerousoccasions. AR:9:4620-46 (Master Agreement with State); AR:13:6731 (Lease Agreement between NCRA and NWPCo); App:8:77b:2055, 2064, (2006 NWPCoBusiness Plan); 58 AR:17:8911 (Novato Consent Decree). Defendants also voluntarily agreed that the right to operate under the lease was subject to Sonoma-Marin Area Rail Transit District’s consent, execution of equipmentlease and tax approvals (AR:13:6731), and NWPCo’s compliance with the State Consent Decree (AR:13:6746). Moreover, as HSRA concedes, the question of unreasonable interference is a fact-based inquiry. HSRA:51. Defendants cannot possibly demonstrate that enforcement of CEQAinterferes with interstate commerce. To the contrary, the facts here show unequivocally that CEQA complianceis a benefit, not a burden, because it was an integral element of the public funding to enable rail transport. OB:48-51. NCRA freely elected to receive over $31 million in state funds with conditions, including CEQAcompliance,to start trains hauling freight in interstate commerce again. This public financial support wasalso critical to the NCRA partnership with NWPCoto reopenthe line. See, e.g., AR:13:6595, 6600- 01, 6739, 6750. Enabling commerceis the opposite of interfering with commerce. See Mason & Dixon Lines Inc. v. Steudle, 683 F.3d 289, 294 (6th Cir. 2012) (no dormant Commerce Clause violation when completionofstate-funded road construction contract “encourage[s] the flow of commerce”); AR:17:8901-02 (in Novato Consent Decree, Defendants averring CEQA review is not “unreasonable burden on interstate commerce”). A contrary 59 interpretation is antithetical to the ICCTA’s very purpose, which was enacted to allow railroads to be competitive against other modes of ground transportation. Asdiscussed, the only relevant transaction before the STB was a conveyance to NWPCo ofNCRA’sright to operate; the STB lacks jurisdiction overline rehabilitation, repair and maintenance. See Section I.C. Since NWPCo and NCRA had agreedin the lease to condition NWPCo’s operation rights on NCRA’s CEQA compliance, the STB could not have approved anything different from rights given by the lease. The STB could not approve rights NCRA did not have, including the right to proceed without CEQA compliance to which NCRA committed in the Master Agreement andits internal directive.'” Voluntary CEQA compliance here does not unreasonably burden railroad operations; in fact, the facts establish that CEQA compliance facilitates operations. As HSRA concedes, Defendants have the burden to establish facts that a voluntary agreement constitutes an unreasonable burden on railroad operations. Wichita Terminal Ass’n, BNSF Ry. & Union '’ The STB acknowledged that NWPCo’sright to operate was subject to conditions outside ofits jurisdiction: “NWPCo. invoked the Board’s authority to acquire the commoncarrier obligations and, after repairs, to conduct rail operations on the line.” AR:16:8540 (emphasis added). Thus, the STB recognized that rail operations could occurafter repairs, which understate law and the voluntary commitments ofNCRA required CEQA review. 60 Pac. R.R. Co.— Petition for Declaratory Order, FD No. 35765, 2015 WL 3875937, at *7 (S.T.B. June 22, 2015) (“voluntary agreements betweenrail carriers andstate or local entities are not enforceable under § 10501(b) where[ ] the railroad demonstrates that enforcementof its agreement would unreasonably interfere with the railroad’s operations”) (emphasis added). Because Defendants have neverpresented facts to rebut the presumption that the voluntary agreements benefit railroad operations, HSRA’sreliance on Woodbridge is unavailing. Twp. of Woodbridgev. Consol. Rail Corp., Inc., FD No. 42053, 2001 WL 283507, at *2-3 (S.T.B. Mar. 22, 2001). There is no onerous contract enforcement or law that unreasonably interferes with the line’s operations. The STB’s HSRA decision is not binding authority. See Mullaney v. Woods, 97 Cal. App. 3d 710, 719 (1979); RB:11-12. Moreover, the STB’s notion that a “potential ... effect” of CEQA compliance through a third-party enforcement action would be sufficient to preempt voluntary agreements, absent specific facts, contravenes well-established case law. See Franks Inv. Co., 593 F.3d at 414-15. CONCLUSION The ICCTAreflects a century of congressional concern over economic regulation ofrailroads — such as unfair competition betweenrail carries, fair and non-discriminatory rates, and rail line expansionsthat might undothe rail industry. The statute is not intended to wrest state 61 decisionmaking from California’s legislature or its people. Plaintiffs respectfully requestthat the Court reverse the Court of Appeal and remand the case with directions to tule on the merits of Plaintiffs’ CEQA claims. DATED:Aug.26, 2015 Respectfully submitted, SHUTE, MIHALY & WEINBERGER LLP y Chien EllfsLAS. ELLISON FOLK Attorneys for Friends of the Eel River LAW OFFICES OF SHARON E. DUGGAN By: Shuson.1Aug gon[ots SHARON E. DUGGAN Attorneys for Californians for Alternatives To Toxics 62 CERTIFICATE OF COMPLIANCE Pursuant to Rule 8.520(c)(1) of the California Rules of Court, I herebycertify that this brief contains 13,961 words, including footnotes, but excluding the tables of contents and authorities, signature block, and this certificate. I have relied on the word count of the Microsoft Word program used to prepare this Certificate. Dk. Stiree DEBORAHA. SIVAS CERTIFICATE OF SERVICE LYNDAF. JOHNSTONdeclares: I am overthe age of eighteen years and not a partyto this action. My business address is 559 Nathan Abbott Way, Stanford, California 94305- 8610. On August 26, 2015, I served the foregoing PLAINTIFFS’ CONSOLIDATED RESPONSE TO BRIEFS OF AMICI CURIAE IN SUPPORT OF RESPONDENTS AND REAL PARTYIN INTEREST on each person namedbelowbyplacing a true and correct copy thereof in a sealed envelope, with postage thereon fully prepaid, in the United States Mailat Stanford, California, addressed to each recipient respectively as follows: ChristopherJ. Neary, Esq. Neary and O’Brien 110 South Main Street, Suite C Willits, California 95490-3533 Attorneysfor North Coast Railroad Authority and Board ofDirectors ofNorth Coast Railroad Authority Clare Lakewood, Attorney at Law Center for Biological Diversity 1212 Broaway, Suite 800 Oakland, California 94612-1805 Attorneysfor Amicus Curiae Center for Biological Diversity Andrew B. Sabey, Esq. Linda C. Klein, Attorney at Law Cox, Castle & Nicholson LLP 555 California Street, 10th Floor San Francisco, California 94104-1513 Attorneysfor Northwestern Pacific Railroad Company Kurt R. Wiese, General Counsel Barbara Baird, Chief Deputy Counsel South Coast Air Quality Management District 21865 Copley Drive DiamondBar, California 91765-4178 Attorneysfor Amicus Curiae South Coast Air Quality ManagementDistrict Jason W.Holder, Esq. Holder Law Group 339 15th Street, Suite 202 Oakland, California 94612-3319 Attorneysfor Amici Curiae Madera County Farm Bureau and Merced County Farm Bureau Stuart M. Flashman, Esq. 5626 Ocean View Drive Oakland, California 94618-1533 Attorneyfor Amici Curiae Town of Atherton, California Rail Foundation, Transportation Solutions Defense and Education Fund, Community Coalition on High-Speed Rail, and Patricia Hogan-Giorni Mark N. Melnick MyungJ. Park Carolyn Nelson Rowan Deputy Attorneys General Office of the Attorney General 455 Golden Gate Avenue, Suite 11000 San Francisco, California 94102-7004 Attorneysfor Amici Curiae the California Environmental Protection Agency, the California Natural Resources Agency, and certain oftheir Departments and Boards Clerk of the Court Superior Court of California, County of Marin P.O. Box 4988 San Rafael, California 94913-4988 Trial Court Brian C. Bunger, District Counsel Bay Area Air Quality Management District 939 Ellis Street San Francisco, California 94101-7714 Attorneyfor Amicus Curiae Bay Area Air Quality ManagementDistrict David Pettit, Esq. Melissa Lin Perrella, Attorney at Law Ramya Sivasubramanian, Attorney at Law Natural Resources Defense Council 1314 SecondStreet Santa Monica, California 90401-1103 Attorneysfor Amici Curiae Sierra Club, Coalition for Clean Air, Natural Resources Defense Council, Planning and Conservation League, and Communitiesfor a Better Environment DanaeJ. Aitchison, Deputy Attorney General Office of the Attorney General 1300 I Street, Suite 125 P. O. Box 944255 Sacramento, California 94244-2550 Attorneysfor Amicus Curiae California High-Speed Rail Authority Clerk of the Court California Court of Appeal First Appellate District, Division Five 350 McAllister Street San Francisco, California 94102-4796 Court ofAppeal I declare under penalty of perjury that the foregoingis true and correct, andthat this declaration was executed August 26, 2015 at Stanford, Hyunt fptnster LYNDAF. JOHKSTON California.