Taxpayer Lawsuit Alleges Legislature Violated the State Constitution to Fund HSR Projects
On December 13, 2016, the California High-Speed Rail Authority, CHSRA, met and gave preliminary approval to submit funding plans seeking $3.2 billion in HSR bond funding for the San Francisco to San Jose Peninsula Corridor project (the Caltrain Electrification project) and Central Valley HSR project. The same day, four individuals, three non-profit organizations, the Town of Atherton and Kings County filed a lawsuit, seeking a ruling that the CHSRA’s efforts to obtain construction funding not only failed to meet the statutory requirements of Proposition 1A, but were unconstitutional as well.
The case is the second Tos v. California High-Speed Rail Authority, or Tos II and the plaintiffs are John Tos, Town of Atherton, Kings County, Morris Brown, Patricia Louise Hogan-Giorni, Anthony Wynne, Community Coalition on High-Speed Rail, Transportation Solutions Defense and Education Fund, and California Rail Foundation.
The Third District Court of Appeal had previously ruled that Prop. 1A, the 2008 $9.9 billion high-speed rail bond measure, created a “financial straitjacket” restricting the use of the bond funds. Many of the Plaintiffs had written to the Legislature and written to the Director of the Department of Finance to express concerns about the unconstitutionality of AB 1889. Plaintiffs allege in their suit that the Legislature’s passage of AB 1889 created a tool that attempts to evade the bond measure’s restrictions. However, because AB 1889 fundamentally alters that voter-approved measure, plaintiffs allege it is unconstitutional, as are the funding plans that rely on it.
On January 3, 2017, CHSRA submitted a package of Funding Plans to the Department of Finance, thereby triggering the ripeness of a challenge to the plans’ compliance with the requirements of Proposition 1A. (See the final 3 paragraphs here.)
On January 31, 2017, Plaintiffs filed their First Amended Complaint in response to the threatened filing of a demurrer by CHSRA. Narrowing the issues to a facial challenge to the constitutionality of AB 1889 and CHSRA’s illegal use of public funds will allow for a much speedier resolution of the claims. Should this case not result in AB 1889 being found unconstitutional, compliance claims can be raised in later litigation. Newly added to the suit as a plaintiff is retired judge and former CHSRA Chair Quentin Kopp, who helped write Prop. 1A and has joined the case to defend that measure as the voters approved it.
Plaintiff co-counsel Stuart Flashman said, “The High-Speed Rail Authority has approved funding plans that rely on AB 1889 to undermine the clear voter-enacted restrictions built into Proposition 1A.”
Temporary Restraining Order (TRO)
Petitioners moved for an ex parte (i.e., not previously noticed) Temporary Restraining Order on March 12, 2017, seeking to restrain the expenditure or commitment of bond funds until a hearing on a preliminary injunction could be held. A counsel’s Declaration, an expert Declaration, a Request for Judicial Notice and a Proposed Order accompanied the application for TRO. CHSRA filed its Opposition. At the hearing on March 22, 2017, CHSRA disclosed it would not be selling bonds until April 20th. Because the Court thus saw no urgency, it denied the motion and set a hearing for a Preliminary Injunction on April 19. In its April 18 Tentative Ruling. (case #15), the Court then continued the hearing to April 26, 2017 to be able to hear at the same time both this matter and a demurrer that had just been filed.
Three days later, on March 15, 2017, CHSRA roared into action filing both a Demurrer to plaintiff’s First Amended Complaint and a Motion to Strike. If either motion was granted by the Court, it would block Petitioners’ ability to stop what they have alleged ever since 2011 to be illegal State expenditures. Either of these motions would effectively throw the Tos II lawsuit out of court. In addition, they filed a Request for Judicial Notice.
Petitioners responded with an Objection to Demurrer and Objection to Motion to Strike. CHSRA then filed a Reply in Support of Demurrer and a Reply in Support of Motion to Strike, along with Defendant’s Objection to Plaintiffs RJN, The Court sustained the Demurrer (i.e., granted it) with leave to amend. Plaintiffs filed a Second Amended Petition as a result. CHSRA later filed its Answer to the Petition. and then amended it to provide further defenses (which Petitioners thought unusable).
Petitioners’ earlier TRO filings constituted the filings for a Preliminary Injunction. CHSRA responded with Opposition to Plaintiff’s Motion, a Declaration of O’Grady, a Declaration of Jarvis, and a Declaration of Alan Glen. Petitioners filed their Reply Brief and Objection to Declaration of O’Grady. The Court ruled that Petitioners were unlikely to succeed with their claims, and denied the motion.
The State Attorney General, representing both CHSRA and the State of California, filed a CHSRA Demurrer, a State Demurrer and a Motion to Strike, challenging the Second Amended Petition. Petitioners responded with an Opposition to CHSRA Demurrer, Opposition to State Demurrer, and Opposition to Motion to Strike. CHSRA then filed a Reply in Support of CHSRA’s Motion to Strike, a Reply in Support of CA’s Demurrer, and a Reply in Support of CHSRA’s Demurrer. The Court’s ruling
Motion to Bifurcate
Because the entire Tos II case rests on its First Cause of Action, the constitutionality of AB 1899, Petitioners filed a Motion to Bifurcate. to speedily dispose of an issue that is purely a matter of legal interpretation, requiring little in the way of an evidentiary record. CHSRA responded with an Opposition to Motion to Bifurcate and a Request for Judicial Notice. Petitioners followed with a Reply on Motion to Bifurcate, and an Opposition to Respondent’s Request for Judicial Notice. After a hearing on February 16, 2018, the Court adopted its Tentative Ruling denying the motion, finding that “bifurcating the trial as Petitioners request would not be conducive to expedition and economy and would not promote the economy and efficiency of handling the litigation or the ends of justice.” In the same ruling, the Court sustained the Demurrer as to the Second Cause of Action, without leave to amend. This greatly limits Petitioners’ ability to proceed with a taxpayer claim under § 526a.
Unfazed, the Tos litigants then moved on to Part II.