United States District Court, D. Arizona
G. CAMPBELL UNITED STATES DISTRICT JUDGE
question to be decided is whether Defendant Union Pacific
Railroad Company is foreclosed from arguing that Congress
granted it certain rights with respect to more than 500 miles
of railroad rights-of-way in Arizona because a California
Court of Appeal, addressing a question that had not been
ruled on by the trial court or presented by the parties,
decided that Congress had not granted Union Pacific these
rights. The Court concludes that the appellate court's
decision does not have collateral estoppel effect.
Court of Appeal's decision is found at Union Pacific
Railroad Co. v. Santa Fe Pacific Pipelines, Inc., 231
Cal.App.4th 134 (2014). It arose out of a long-running
California lawsuit between Union Pacific and Defendant Kinder
Morgan, which the parties refer to as the "Rent
The Rent Action.
Morgan operates pipelines located within Union Pacific
rights-of-way. The pipelines carry fuel, coal slurry, and
other products. In 1994, Union Pacific and Kinder Morgan
entered into an amended and restated easement agreement
("AREA") which granted Kinder Morgan an easement to
operate the pipelines "in, upon, along[, ] and across
the property of [the] Railroad" in exchange for annual
rent. Doc. 141-2 at 13-21. The AREA set forth a procedure for
determining rent increases. Id. at 15-17. In 2004, a
dispute arose as to the amount of the rent increase, and
Union Pacific brought the Rent Action in the Superior Court
for Los Angeles County. See Id. at 7-11.
Rent Action lasted almost eight years and included more than
250 days of trial. See Union Pacific, 231
Cal.App.4th at 153 (describing trial court proceedings). The
trial court eventually issued a comprehensive, 105-page
statement of decision, setting the base annual rent $14, 080,
487 and awarding back rent of $81, 589, 584 and prejudgment
interest of $19, 372, 195.50 to Union Pacific. Id.
Morgan appealed, raising four issues. Doc. 141-3 at 107-08.
One issue was whether the trial judge erred by awarding rent
for a stretch of land known as the Iron Horse Trail that
Union Pacific sold nearly a decade before executing the AREA.
Doc. 143-2 at 61-66, 147-50. None of the other issues
questioned Union Pacific's ownership of the property
burdened by the easement. Docs. 143-2 at 2-78 (Kinder
Morgan's opening brief), 100-79 (Kinder Morgan's
reply brief); see also Union Pacific, 231
Cal.App.4th at 145 (describing issues raised on appeal).
27, 2014, the California Court of Appeal held oral argument.
Following discussion of the Iron Horse Trail issue, Justice
Rubin stated: "Let me take that subject and go a little
bit broader. I don't mean to be opening up a hornet's
nest . . . Did the railroad ever own the right to grant these
pipelines, ever, under the 1862 or 1875 act?" Doc. 141-3
at 121. Justice Rubin's question was referring to
congressional land grants enacted prior to 1871 (the
"pre-1871 Acts") and the General Railroad
Right-of-Way Act of 1875 (the "1875 Act"), which
the Court will refer to collectively in this order as the
"Congressional Acts." Kinder Morgan's counsel
stated that he would defer to Union Pacific's counsel on
this issue, but then went on to say that there was no issue
on appeal as to whether the pipeline easements were properly
granted. Id. Justice Kussman responded: "I
know. That is the problem: You didn't raise it on
appeal." Id. at 122. The Justices continued to
question Union Pacific's title under the Congressional
Acts. Union Pacific's counsel objected that this issue
was not before the Court. Id. at 124. Justice Rubin
Obviously, we feel it's before this Court. . . . And we
have this concern - and I realize this is not briefed and
everything. But we have this concern based on our review of
the '75 and '62 acts as to whether the railroad ever
had the right to grant any easements to this. . . . And we
may need to have further briefing on this. . . . It would be
terribly wrong for us to decide this issue given the state of
the hearing, the Court of Appeal requested additional
briefing on Union Pacific's right to grant pipeline
easements under the Congressional Acts. Doc. 128-3 at 2-3.
The parties were allowed two weeks to submit opening briefs
limited to 15 double-spaced pages, and 12 more days to submit
reply briefs of ten pages. Id. at 3. The court
specifically asked the parties to address whether there was
"evidence in the record to support a finding
that the railroad had sufficient ownership interests in the
subject property to grant subsurface easements to the
pipeline." Id. at 2 (emphasis added).
the supplemental briefing, the Court of Appeal held that (1)
"a railroad's rights to the land underneath its
rights-of-way granted by the 1875 Act were limited to what
was necessary to support the railroad itself" and
"[o]therwise . . . remained with the owner of the
servient estate, " (2) a railroad's rights under the
pre-1871 Acts were similarly limited, and (3) because using
the subsurface for a pipeline was not a "railroad
purpose, " Union Pacific had no right to lease the
subsurface for that use. 231 Cal.App.4th at 160-78. Union
Pacific sought rehearing (Doc. 128-4 at 2-62), but its
request was denied. Union Pacific then sought review before
the California Supreme Court (Doc. 128-4 at 106-49), but its
petition was denied. The case was remanded to the trial court
because issues remained regarding rights-of-way acquired by
means other than the Congressional Acts. Doc. 130-1 (trial
court order on scope of remand).
the Court of Appeal's decision, Plaintiffs brought this
case on behalf of a class of property owners whose land lies
adjacent to Union Pacific's rights-of-way in Arizona.
Doc. 75. Plaintiffs contend that Union Pacific possesses only
a surface easement, and that they own the subsurface where
the pipelines are located. Id., ¶ 114.
Plaintiffs have sued Union Pacific and Kinder Morgan,
asserting claims for declaratory relief, trespass, and quiet
title, among others. Id., ¶¶ 81-121.
Pacific has asserted counterclaims for quiet title and
declaratory relief. Doc. 115 at 26-36, ¶¶ 17-55.
Union Pacific maintains that it acquired rights in the
property below its rights-of-way from the Congressional Acts
or private conveyances. Id., ¶ 5.
have moved to dismiss the counterclaims, arguing, among other
things, that Union Pacific is collaterally estopped from
pursuing the counterclaims by the Court of Appeal's
decision. Doc. 117. Kinder Morgan has filed a brief in
support of Plaintiffs' collateral estoppel argument. Doc.
128. The Court discussed this issue with the parties at the
May 25, 2016 status conference and entered an order
requesting additional briefing. Doc. 135. The parties have
provided the additional briefing, and the Court heard oral
argument on July 5, 2016.
Full Faith and Credit Act provides that a state's
judicial proceedings "shall have the same full faith and
credit in every court within the United States . . . as they
have by law or usage in the courts of such State . . . from
which they are taken." 28 U.S.C. § 1738. Thus, in
determining the collateral estoppel consequences of a state
court judgment, federal courts apply the collateral estoppel
doctrine of the state where the judgment was rendered.
See Migra v. Warren City Sch. Dist. Bd. of Educ.,
465 U.S. 75, 81 (1984). The parties agreed during oral
argument that the Court should look to the collateral
estoppel law of California.
California, the party asserting collateral estoppel must show
five elements: (1) "the issue sought to be precluded
from relitigation [is] identical to that decided in a former
proceeding, " (2) "this issue must have been
actually litigated in the former proceeding, " (3)
"it must have been necessarily decided in the former
proceeding, " (4) "the decision in the former
proceeding must be final and on the merits, " and (5)
"the party against whom preclusion is sought must be the
same as, or in privity with, the party to the former
proceeding." Lucido v. Superior Court, 51
Cal.3d 335, 341-42 (1990). Significantly, for purposes of
this order, "[t]he party asserting collateral estoppel
bears the burden of establishing these requirements."
the elements of collateral estoppel are not in serious
dispute. The parties focus their attention only on the second
element: whether Union Pacific's property rights under
the Congressional Acts were "actually litigated" in
the Rent Action.
parties briefed Plaintiffs' motion to dismiss, including
a memorandum filed by Kinder Morgan and several notices of
supplemental authority. See Docs. 117, 121, 126,
127, 128, 130, 131, 138. Finding that the parties had not
provided enough factual detail to determine whether the
effect of the Congressional Acts was actually litigated in
the Rent Action, the Court entered an order asking the
parties to respond to several specific questions:
A. Did Kinder Morgan ask the California trial court to hold
that Union Pacific lacked title under the pre-1871 Acts or
the 1875 Act to grant the easements at issue in the
litigation? If yes, Plaintiffs or Kinder Morgan should
provide the Court with the specific trial court pleadings in
which that request was made.
B. Did the trial court decide whether Union Pacific had title
under the pre-1871 Acts or the 1875 Act to grant the
easements at issue in that litigation? If yes, Plaintiffs or
Kinder Morgan should provide the court with the transcript,
minute entry, or order in which the trial court decided that
issue. If no, why did the trial court not decide that issue
if it was raised by Kinder Morgan?
C. Was this assertion - that Union Pacific did not have title
under the pre-1871 Acts or the 1875 Act to grant the
easements - raised by Kinder Morgan on appeal to the
California Court of Appeal, either in its notice of appeal
or its pre-hearing briefs? If yes, Plaintiffs or Kinder
Morgan should provide the Court with the notice of appeal or
pre-oral- argument appellate briefs in which it was raised.
If no, why was it not raised by Kinder Morgan on appeal if,
in fact, it was raised and decided in the trial court?
D. According to Kinder Morgan's brief, an issue is
sufficiently litigated for collateral estoppel purposes
"when it is properly raised, by the pleadings
or otherwise, and is submitted for determination, and is
determined." Doc. 128 at 6 (emphasis in
original; citation omitted). If Kinder Morgan did not ask the
trial court to hold that Union Pacific lacked title under the