Jackson Water Works, Inc. v. Public Utilities Com'n of State of Cal.

• Decision Date: 08 July 1986
• Docket Number: No. 85-1667,85-1667
• Citation: 793 F.2d 1090
• Parties: JACKSON WATER WORKS, INC., a California corporation, and Citizens Utilities Company, a Delaware corporation, Plaintiffs-Appellants, v. The PUBLIC UTILITIES COMMISSION OF the STATE OF CALIFORNIA, et al., Defendants- Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1090

793 F.2d 1090

JACKSON WATER WORKS, INC., a California corporation, and Citizens Utilities Company, a Delaware corporation, Plaintiffs-Appellants, v. The PUBLIC UTILITIES COMMISSION OF the STATE OF CALIFORNIA et al., Defendants- Appellees.

No. 85-1667.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Oct. 11, 1985.

Decided July 8, 1986.

James M. Wagstaffe, Cooper, White & Cooper, San Francisco, Cal., for plaintiffs-appellants.

Lawrence Q. Garcia, Public Utilities Comm., Richard J. Massa, Richard J. Massa & Associates, San Francisco, Cal., for defendants-appellees.

Appeal from the United States District Court for the Northern District of California.

Before SKOPIL, PREGERSON, and WIGGINS, Circuit Judges.

SKOPIL, Circuit Judge:

This is a challenge by a private utility to the constitutionality of a state statutory scheme which allows public condemnors the choice of adjudicating just compensation in either state court or before the Public Utility Commission. We agree with the district court that the statutes do not facially violate either equal protection or due process. We affirm.

FACTS AND PROCEEDINGS BELOW

Plaintiff-appellant Jackson Water Works ("JWW") is an investor-owned public utility water system serving customers in and around Jackson, California. Plaintiff-appellant Citizens Utilities Company is JWW's sole shareholder. Defendant-appellees are the City of Jackson and its various officers ("City") and the California Public Utility Commission and its members ("PUC").

On April 10, 1984 the City, acting pursuant to Cal.Pub.Util.Code Secs. 1403-04 (West 1975), declared its intention to acquire JWW through eminent domain by filing a petition with the PUC. The petition sought a determination by the PUC of the amount of just compensation to be paid by the City. Before such a determination could be made, JWW filed this action in federal district court seeking declaratory and injunctive relief. JWW contended that the administrative procedure offends equal protection because similarly situated utilities are subjected to just compensation determination at the City's option in either state court or before the PUC. JWW further alleged that adjudication of just compensation by the PUC violates due process because it denies an impartial tribunal and meaningful appellate review.

On cross-motions for summary judgment the district court granted the City's motion. JWW timely appealed. Thereafter, the district court granted JWW's motion for an injunction pending appeal that has prevented the PUC from proceeding with the just compensation determination.

STANDARD OF REVIEW

A grant of summary judgment is reviewed de novo. Lupert v. California State Bar, 761 F.2d 1325, 1327 (9th Cir.), appeal dismissed and cert. denied, --- U.S. ----, 106 S.Ct. 241, 88 L.Ed.2d 251 (1985). Summary judgment is proper only if there is no genuine issue of material fact and the moving party is entitled to prevail as a matter of law. Jung v. FMC Corp., 755 F.2d 708, 710 (9th Cir.1985). There are no disputed facts in this case. Resolution therefore depends upon de novo examination of questions of law. See United States v. McConney, 728 F.2d 1195, 1201 (9th Cir.) (en banc), cert. denied, --- U.S. ----, 105 S.Ct. 101 (1984). The district court's interpretation and application of state law is entitled to no special deference; questions of state law are reviewed de novo. Matter of McLinn, 739 F.2d 1395, 1397 (9th Cir.1984) (en banc).

DISCUSSION

A. Equal Protection.

The equal protection clause of the fourteenth amendment commands that no state shall deny any person the equal protection of the laws. City of Cleburne v. Cleburne Living Center, --- U.S. ----, 105 S.Ct. 3249, 3254, 87 L.Ed.2d 313 (1985). This requires that "all persons similarly circumstanced shall be treated alike." Plyler v. Doe, 457 U.S. 202, 216, 102 S.Ct. 2382, 2394, 72 L.Ed.2d 786 (1982) (quoting F.S. Royster Guano Co. v. Virginia, 253 U.S. 412, 415, 40 S.Ct. 560, 561, 64 L.Ed. 989 (1920)).

JWW complains that equal protection is violated by arbitrary discrimination between identically situated public utility condemnees. The alleged discrimination is the result of a statutory condemnation scheme which allows a city condemnor to unilaterally select the forum for the adjudication of just compensation. Significant procedural differences between the forums, JWW argues, give rise to the equal protection violation.

1. Statutory Scheme

A California political subdivision which seeks to exercise its powers of eminent domain to acquire property must institute and conduct an action in the California Superior Court. Cal.Civ.Proc.Code Secs. 1230.010-070 (West 1982). Both condemnor and condemnee have the right to a jury determination of just compensation. Cal. Const. art. I, Sec. 19. The condemnee may seek review of the court's determination by an absolute right of appeal to the California Court of Appeals. Cal. Const. art. VI, Sec. 11; Cal.Civ.Proc.Code Sec. 904.1. A discretionary writ of review may be made to the California Supreme Court. Cal. Rules of Court, Rule 28.

When the condemnee is a public utility, the political subdivision may elect the procedures provided by the California Public Utility Code. Cal.Pub.Util.Code Secs. 1401-21. That statute provides that upon petition by the City, the PUC, acting in its judicial capacity, will conduct proceedings to determine just compensation. Id. at Sec. 1411. The administrative procedure is commenced at the City's option. It is an "alternative and cumulative and not exclusive" procedure for the determination of just compensation. Id. at Sec. 1421. There are no juries. Review is by application for rehearing to the Commission and by writ of review to the California Supreme Court. Id. at Sec. 1420.

If the utility refuses to accept the compensation, the City is required to obtain an order of condemnation by commencing an action in Superior Court. Id. at Sec. 1413. In such court proceedings the finding of the Commission fixing compensation are "final and shall not be subject to modification, alteration, reversal or review." Id. at Sec. 1416.

2. Level of Review

In determining whether the statutory scheme violates equal protection, we must first determine the level of scrutiny to apply. See San Antonio Independent School District v. Rodriguez, 411 U.S. 1, 17, 93 S.Ct. 1278, 1288, 36 L.Ed.2d 16 (1973). JWW argues we must apply strict scrutiny because the state's classifications impinges upon fundamental rights. The City contends that the district court correctly applied a rational basis standard.

Traditionally, these two standards, strict scrutiny and rational basis, have been applied when state action is challenged on equal protection grounds. Hoffman v. United States, 767 F.2d 1431, 1434 (9th Cir.1985). Strict scrutiny is applied when the state's classification is deemed to be made on "suspect" grounds such as race, ancestry, alienage, or categorizations impinging upon fundamental rights such as privacy, marriage, voting, travel, and freedom of association. Id. at 1434-35. ¹ When no suspect class is involved and no fundamental right is burdened, we are obligated to apply a rational basis test to determine the legitimacy of the state's classifications. Olagues v. Russoniello, 770 F.2d 791, 802 (9th Cir.1985).

JWW contends that the classification here impinges on its rights to just compensation, a right expressly protected by the fifth amendment. Such a right has not been deemed "fundamental" for purposes of applying strict scrutiny in an equal protection analysis. More important, as the district court reasoned, JWW does not contend that it is denied just compensation, but only complains of the process. Deficiencies in that process such as lack of a jury trial and limited appeal rights, JWW contends, call for at least heightened scrutiny. But while these alleged deficiencies may give rise to equal protection arguments, i.e., Lindsey v. Normet, 405 U.S. 56, 77, 92 S.Ct. 862, 876, 31 L.Ed.2d 36 (1972) (right of appeal); Humphrey v. Cady, 405 U.S. 504, 512, 92 S.Ct. 1048, 1053, 31 L.Ed.2d 394 (1972) (jury), neither has been accorded heightened review. See Hoffman, 767 F.2d at 1435 (noting that intermediate review has been limited to gender and legitimacy classifications).

We conclude that the district court properly chose to apply the rational basis standard. Where a regulation or statute affects only economic and not fundamental interests, the state is free to create any classification scheme that does not invidiously discriminate. Burlington Northern Railroad Co. v. Department of Public Service Regulation, 763 F.2d 1106, 1113 (9th Cir.1985). The proper test for judging the constitutionality of statutes regulating economic activity challenged on equal protection grounds is whether the legislation bears a rational relationship to a legitimate state interest. Id. at 1109; Jones v. Reagan, 748 F.2d 1331, 1337 (9th Cir.1984), cert. denied, --- U.S. ----, 105 S.Ct. 3505, 87 L.Ed.2d 636 (1985). "Because the classification at issue does not interfere with the exercise of a fundamental right or operate to the peculiar disadvantage of a suspect class, the proper standard for review is the rational basis test...." In re Lara, 731 F.2d 1455, 1460 (9th Cir.1984).

3. Rationality of the Statutory Scheme

Application of the rational basis standard requires a two-step analysis. Hoffman, 767 F.2d at 1436 (citing Western & Southern Life Insurance Co. v. State Board of Equalization, 451 U.S. 648, 668, 101 S.Ct. 2070, 2083, 68 L.Ed.2d 514 (1981)). First, we must determine whether the challenged legislation has a legitimate purpose. Id. Second, assuming a legitimate purpose, we must decide whether the challenged classification promotes that purpose. Id. at 1436-37. There need not be a "tight fitting relationship" between the legislative goal and the result. Id. at 1437 n. 7. All that is needed to uphold the state's...