City of Palmdale v. California High-Speed Rail Authority et al
Filing
35
ORDER signed by Judge Garland E. Burrell, Jr on 9/14/11 ORDERING Plaintiff's Misuse of Federal Grant Funds claim is dismissed for lack of jurisdiction. Since that claim is dismissed for lack of jurisdiction, Plaintiff's state claim for misuse of state bond funds also is dismissed for lack of jurisdiction. This action shall be closed. Civil Case Terminated. CASE CLOSED.(Matson, R)
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IN THE UNITED STATES DISTRICT COURT
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FOR THE EASTERN DISTRICT OF CALIFORNIA
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CITY OF PALMDALE, a charter
city,
Plaintiff,
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v.
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CALIFORNIA HIGH-SPEED RAIL
AUTHORITY, a public agency;
ROELOF VAN ARK, Chief Executive
Officer; and DOES 1-10,
inclusive,
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Defendants.
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2:11-cv-01808-GEB-GGH
ORDER
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Subject matter jurisdiction in this case was raised sua sponte
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in a show cause order filed on August 3, 2011, which states, in
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pertinent part:
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Plaintiff has filed a motion for a preliminary
injunction in which it argues that Defendants
should be prohibited “from continuing to improperly
and illegally use state and/or federal funds to
conduct a study of an alignment for the California
High-Speed Rail Project.” (Pl.’s Mot. for Prelim.
Inj. 1:2-5.) However, Plaintiff has not stated the
basis of federal court subject matter jurisdiction
over this case.
“The party seeking to invoke the court’s
jurisdiction bears the burden of establishing that
jurisdiction exists.” Scott v. Breeland, 792 F.2d
925, 927 (9th Cir. 1986). . . . While Plaintiff has
cited federal statutes in its complaint, Plaintiff
has not shown on what basis the cited statutes
provide
a
“ground[]
for
the
court’s
jurisdiction[.]” Fed. R. Civ. P. 8(a)(1).
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Specifically, Plaintiff alleges in paragraph
one of its complaint that it “brings this complaint
for declaratory and injunctive relief against
Defendants for their misappropriation of federal
monies specifically earmarked under the American
Recovery and Reinvestment Act pursuant to a grant
issued by the Federal Railroad Administration in
2010[.]” (Compl. ¶ 1.) Further, the second
paragraph of the complaint contains the following
conclusory allegations: “This Court has subject
matter jurisdiction pursuant to 28 U.S.C. §§ 1331
(federal question), 2201 (authorizing declaratory
relief) and 2202 (authorizing injunctive relief).”
Id. ¶ 2.
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28 U.S.C. § 1331 confers subject matter
jurisdiction over “all civil actions arising under
the Constitution, laws, or treaties of the United
States.” Nothing in the complaint indicates this
case concerns the Constitution or a treaty of the
United
States.
Moreover,
notwithstanding
Plaintiff’s contrary indication, § 1331 alone does
not confer subject matter jurisdiction, since it is
a “general federal-question jurisdiction statute
[which] is applicable only when the plaintiff sues
under a federal statute that creates a right of
action in federal court.” Williams v. United
Airlines, Inc., 500 F.3d 1019, 1022 (9th Cir.
2007). Therefore, Plaintiff’s conclusory statement
that
jurisdiction
is
based
on
§
1331
is
insufficient.
Further, Plaintiff’s citation to 28 U.S.C. §§
2201 and 2202 does not establish subject matter
jurisdiction, since “the Declaratory Judgment Act[,
codified at 28 U.S.C. §§ 2201 and 2202,] does not
itself confer federal subject matter jurisdiction
but merely provides an additional remedy in cases
where jurisdiction is otherwise established.” City
of Colton v. Am. Promotional Events, Inc., 614 F.3d
998, 1006 (9th Cir. 2010) (internal quotation marks
omitted).
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The court raises the issue of subject matter
jurisdiction sua sponte, since “courts . . . have
an independent obligation to determine whether
subject-matter jurisdiction exists, even in the
absence of a challenge from any party.” Arbaugh v.
Y & H Corp., 546 U.S. 500, 514 (2006); see also
Fed. R. Civ. P. 12(h)(3) (“If the court determines
at
any
time
that
it
lacks
subject-matter
jurisdiction, the court must dismiss the action.”).
“The existence of subject matter jurisdiction goes
to the very power of the district court to issue .
. . rulings” on the now pending injunction motion,
since “the district court’s order . . . would be
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meaningless if the district court was without
jurisdiction over that [matter] in the first
instance.” Merritt v. Shuttle, Inc., 187 F.3d 263,
269 (2d Cir. 1999). Therefore, failure to determine
whether subject matter jurisdiction exists before
briefing on the matter and decision could “waste[]
the court’s time[,]” and that of the parties if the
district
court
is
without
subject
matter
jurisdiction. Int’l Union of Operating Eng’rs v.
Cnty. Of Plumas, 559 F.3d 1041, 1045 (9th Cir.
2009) (reversing and remanding district court’s
judgment since Ninth Circuit determined the
district court lacked subject matter jurisdiction
over the case).
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Therefore, Plaintiff shall explain the basis
of subject matter jurisdiction in a filing due on
or before August 12, 2011; any response to this
filing shall be filed on or before August 22, 2011.
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(Order to Show Cause Re: Federal Subject Matter Jurisdiction 1:16-4:3.)
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Responsive briefs have been filed, and the matter was argued on August
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29, 2011.
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“If
the
court
determines
at
any
time
that
it
lacks
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subject-matter jurisdiction, the court must dismiss the action.” Fed. R.
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Civ. P. 12(h)(3). “It is the burden of plaintiffs to persuade the
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federal courts that subject matter jurisdiction does exist.” Hexom v.
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Oregon Dept. of Transp., 177 F.3d 1134, 1135 (9th Cir. 1999). “It is
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firmly established . . . that the absence of a valid (as opposed to
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arguable)
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jurisdiction, i.e., the courts’ statutory or constitutional power to
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adjudicate the case.” Steel Co. v. Citizens for a Better Env’t, 523 U.S.
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83, 89 (1998). “Dismissal for lack of subject-matter jurisdiction
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because of the inadequacy of the federal claim is proper only when the
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claim is ‘so . . . implausible, foreclosed by prior decisions of this
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Court, or otherwise completely devoid of merit as not to involve a
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federal controversy.’” Id. (quoting Oneida Indian Nation of N.Y. v.
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Cnty. of Oneida, 414 U.S. 661, 666 (1974)).
cause
of
action
does
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not
implicate
subject-matter
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Plaintiff’s Complaint is comprised of two claims: a claim
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alleging “Misuse of Federal Grant Funds,” and a claim alleging misuse of
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state bond funds. Plaintiff alleges federal question jurisdiction is
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premised on their Misuse of Federal Grant Funds claim since Defendants
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are breaching the terms of a Grant Agreement into which Defendants
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entered with the federal government. Plaintiffs’ claims concern a high-
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speed rail project in California. Plaintiffs’ Complaint includes the
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allegation:
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All Californians, including the citizens of
Palmdale, a city designated as a station stop hub
between two Approved Segments along the Preferred
Alignment of the [High-Speed Rail] project, are
intended beneficiaries of the Federal Amended Grant
awarding
federal
funding
to
the
[Defendant
High-Speed Rail] Authority for Phase 1 of the
[High-Speed Rail] project.
(Compl. ¶ 54.) The Grant Agreement is attached to Plaintiff’s Complaint.
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Plaintiff argues in its response to the show cause order that
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subject matter jurisdiction exists over its Misuse of Federal Grant
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Funds claim because that claim is a federal question under 28 U.S.C. §
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1331, since the Grant Agreement is a government contract, and “[f]ederal
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law governs the interpretation of contracts entered into pursuant to
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federal law and to which the government is a party.” (Pl.’s Resp. to
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Order to Show Cause 4:6-8.) Plaintiff further argues:
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[Plaintiff’s] right to relief necessarily depends
on resolution of [whether it is] an intended third
party beneficiary [of the Grant Agreement] under
federal law. Under the federal common law of
contracts, a third party may recover under a
contract if it can show that the contract was made
for its direct benefit such that it is an intended
beneficiary of the contract.
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Id. 5:1-6.
Defendants
counter
the
court
is
without
subject
matter
jurisdiction over Plaintiff’s Misuse of Federal Grant Funds claim,
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arguing: “Plaintiff’s allegation that it is an intended beneficiary of
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the Grant Agreement is clearly an unsupported, conclusory assertion of
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law” that “is irreconcilable” with the language of the Grant Agreement.
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(Defs.’ Opp’n 9:18-19, 21.) Moreover, Defendants dispute Plaintiff’s
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argument that federal law applies to Plaintiff’s Misuse of Federal Grant
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Funds claim, contending “[b]ecause the City has failed to demonstrate ‘a
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significant conflict . . . between an identifiable federal policy or
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interest and the operation of state law,’ this Court lacks federal
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subject matter jurisdiction.” Id. 12:20-23 (quoting Empire Healthchoice
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Assurance, Inc. v. McVeigh, 547 U.S. 677, 693 (2006)). The merits of the
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argument concerning whether state or federal law applies to the claim
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need not be decided, however, since even assuming, arguendo, Plaintiff’s
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assertion that federal common law applies to the Misuse of Federal Grant
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Funds claim, the Court must dismiss this claim for lack of subject
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matter jurisdiction.
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Under the federal common law of contracts, “before a third
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party can recover under a contract, it must show that the contract was
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made for its direct benefit—that it is an intended beneficiary of the
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contract.” Klamath Water Users Protective Ass’n v. Patterson, 204 F.3d
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1206, 1210 (9th Cir. 1999).
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Plaintiff
argued
at
the
hearing
on
the
subject
matter
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jurisdiction motion that subject matter jurisdiction exists since the
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government is a party to the Grant Agreement and Plaintiff, as a
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designated stop along the proposed route for the high speed train, is a
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third-party beneficiary of the Grant Agreement under federal common law.
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However, Plaintiff’s designation as a train stop does not establish that
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it is third-party beneficiary, since:
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[p]arties that benefit from a government contract
are
generally
assumed
to
be
incidental
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beneficiaries, rather than intended ones, and so
may not enforce the contract absent a clear intent
to the contrary. This clear intent hurdle is not
satisfied by a contract’s recitation of interested
constituencies[;] . . . explicit reference to a
third party[;] or even a showing that the contract
operates to the [third parties’] benefit and was
entered into with [them] in mind.
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Cnty. of Santa Clara v. Astra USA, Inc., 588 F.3d, 1237, 1244 (9th Cir.
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2009) (rev’d on other grounds, 131 S. Ct. 1342) (internal citations and
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quotation marks omitted). Instead, third-party beneficiary status is
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established under federal law only if the “precise language of [a]
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contract [shows] a clear intent to rebut the presumption that the [third
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parties] are merely incidental beneficiaries.” Id. Plaintiff has not
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cited to any such language in the Grant Agreement.
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Moreover,
“[t]o
sue
as
a
third-party
beneficiary
of
a
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contract, the third party must show that the contract reflects the
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express or implied intention of the parties to the contract to benefit
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the third party.” Klamath, 204 F.3d at 1211. However, the following
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provision of the Grant Agreement evinces that Defendants and the federal
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government did not intend to confer third-party beneficiary status on
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Plaintiff: “Absent FRA’s [i.e. the federal government] express written
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consent . . . FRA shall not be subject to any obligations or liabilities
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to third party contractors or third party subcontractors or any other
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person not a party to this Agreement in connection with the performance
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of the Project.” (Compl. Ex. F, at 91 (emphasis added).) Plaintiff
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conceded during oral argument that the allegations in its Misuse of
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Federal Grant Funds claim are clearly in connection with the performance
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of the Project, but argued the provision does not negate Plaintiff’s
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position that the Grant Agreement reflects their implied intention to
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make Plaintiff a third-party beneficiary of the Grant Agreement. The
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language
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argument.
in
this
provision
clearly
does
not
support
Plaintiff’s
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For the stated reasons, Plaintiff’s Misuse of Federal Grant
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Funds claim is “so . . . implausible, foreclosed by prior decisions of
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this Court, [and] otherwise completely devoid of merit as not to involve
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a
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Plaintiff’s Misuse of Federal Grant Funds claim is dismissed for lack of
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jurisdiction. Since that claim is dismissed for lack of jurisdiction,
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Plaintiff’s state claim for misuse of state bond funds also is dismissed
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federal
Steel
Co.,
523
U.S.
at
89.
for lack of jurisdiction.
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controversy.”
This action shall be closed.
Dated:
September 14, 2011
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GARLAND E. BURRELL, JR.
United States District Judge
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Therefore,
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