Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Pacific Gas and Electric Co. v. City and County of San Francisco

June 20, 2005


The opinion of the court was delivered by: Vaughn R Walker United States District Judge


Plaintiff Pacific Gas & Electric Company ("PG&E") moves the court for partial summary judgment on the first and second causes of action and the fifth and sixth causes of action in its first amended complaint ("FAC"). Pl Mot (Doc #133). Defendant City and County of San Francisco ("CCSF") moves for partial summary judgment on the first through fourth, sixth, and eighth through twelfth causes of action in the FAC. Def Mot (Doc #131). For the reasons that follow, the court GRANTS IN PART CCSF's motion for summary judgment; DECLINES to exercise supplemental jurisdiction over certain claims; and DENIES as moot PG&E's motion for summary judgment.



In 1939, CCSF granted PG&E franchises to sell gas and electricity within the city. See Doc #137, Exhs A & B. The franchises authorize PG&E to excavate the streets of CCSF to construct, install and maintain gas and electric facilities. PG&E paid an initial fee of $200,000 for each franchise and continues to pay an annual percentage of its gross receipts under the franchises. In general, PG&E performs two types of excavations: main line trenches and bell-holes. "A 'main line trench' is a long trench with a narrow width, typically between 18 inches and 2 feet." Dias Decl (Doc #134) at ¶ 5. Bell-holes are roughly equal in length and width and "are typically 4 feet by 6 feet." Id. Main line trenches are used to access gas mains that run along the length of the streets, whereas bell-holes are generally used to access gas service lines that run off the main line to buildings on the side of the street. Id.

These two types of excavations are performed on the two types of streets in CCSF: asphalt and concrete. Asphalt streets have three layers: a layer of sand at the bottom, a 6- to 8-inch layer of concrete base in the middle and a 2-inch asphalt concrete wearing surface on top. Id at ¶ 4. Concrete streets have only two layers: a layer of sand at the bottom and a slightly larger 7- to 8-inch concrete base on top.

In December 1998, CCSF amended the Public Works Code ("PWC") to impose a "street damage restoration fee." 1999 PWC (Doc #137, Exh H) at § 2.4.44. In a prior order, the court held that the street damage restoration fee impaired the franchises in violation of the Contract Clause of the United States and California Constitutions. See Pacific Gas and Electric Co v City and County of San Francisco, 220 F Supp 2d 1070 (ND Cal 2002) ("PG&E").

PG&E contends in its present motion for partial summary judgment that four "non-fee regulations" passed in 1999 also impair the franchises in violation of the Contract Clause. The four nonfee regulations are described as: (1) the 13-foot rule, (2) the 50-foot rule, (3) the concrete panel replacement rule and (4) the warranty requirement.

The 13-foot rule and the 50-foot rule describe repaving requirements for asphalt streets. The 13-foot rule describes the width (direction perpendicular to the direction of car traffic) of repaving required following an excavation. The 50-foot rule concerns the length (direction of car traffic) of repaving required for noncontiguous excavations.

Under the 13-foot rule, the excavator must repave the street to a "constant width equal to the widest part of the Excavation * * * provided, however, that the width of the resurfacing need not exceed thirteen (13) feet." 1999 PWC § 2.4.55(a) (Doc #137, Exh H). A diagram depicting the 13-foot rule can be found at § 2.4.55(a). Id; see also Dias Decl (Doc #134) (providing a diagram depicting the 13-foot rule).

Under the 50-foot rule, an excavator is required to repave the length of the excavation. An excavator is also required to repave the unexcavated area between two noncontiguous excavations if the distance between the two excavations is less than or equal to 50 feet. See Summary (Doc #136, Exh C, Depo Exh 26) at 2 (providing a diagram depicting the 50-foot rule); Diagram (Doc #134, Exh C) (same). The court notes that the 50-foot rule is not codified in the 1999 PWC but has been enforced since 1999. See Chono Depo (Doc #136, Exh C) at 249-250. It is an overformalization, though, to treat the 50-foot rule as distinct from the 13-foot rule; it is easier to see the 50-foot rule as a limitation on a 13-foot rule that applies to noncontiguous trenches. In other words, the 13-foot rule applies to all contiguous and noncontiguous excavations of asphalt streets, except that trenches separated by 50 feet or more are treated separately under the 13-foot rule. Accordingly, the court will analyze the rules together and refer to integrated scheme of the 13-foot rule and the 50-foot rule as "the 13-foot rule."

The concrete panel replacement rule describes "repaving" requirements for excavation in concrete streets. Regulatory Order (Doc #137, Exh I) at § 9.1(D). In essence, the rule requires that a full concrete panel be replaced anytime an excavation occurs within the panel. Concrete panels are generally 20 feet long by 16 feet wide. Diagram (Doc #134, Exh B). A diagram of the concrete panel replacement rule is provided as an exhibit to the Dias declaration. Id.

Finally, PG&E describes PWC § 2.4.70 as an "Extension of Warranty" provision. Pl Mot (Doc #133) at 5. Section 2.4.70 provides:

Each Owner and Permittee that excavates or causes to be made an Excavation in the Public Right-of-Way shall be responsible to maintain, repair, or reconstruct the site of the Excavation so as to maintain a condition acceptable to the Director until such time as the Public Right-of-Way is reconstructed, repaved, or resurfaced by the Department.

Id (Doc #137, Exh H). PG&E contends that this provision extends its obligations to repair. Because this is a disputed contention, the court will refer to this provision as the "warranty provision," rather than the "extension of warranty provision."


The activities at issue here can be classified into three categories: excavation, restoration and repair. First, excavation is defined as an "opening in the street." 1939 PWC (Doc #137, Exh C) § 353. Second, restoration is described as a requirement that the excavator restore the street excavated to "as good a condition as it was in before the opening or tearing up thereof." Id § 342. The sections immediately following § 342 outline the short time limits within which restoration must occur. See, e g, id § 346 (providing that repaving must occur immediately following backfill of the excavation). Finally, the excavator has a "duty to repair * * * [i]n case the pavement or surface of the street over said openings should become depressed or broken at any time after the work has been completed." Id § 349.

Excavation is thus a process by which the street is opened that occurs at the time of installation or maintenance of pipes or other appurtenances. Restoration is a process by which the street is restored to its pre-excavation condition and which occurs immediately upon completion of the installation or maintenance of the pipes. Repair is a process by which later appearing problems in the street are repaired and which occurs after the completion of excavation and restoration.

Evidence for the distinction between restoration and repair in the 1939 PWC includes the following. First, obligations associated with restoration and repair are described in different sections of the 1939 PWC; § 342 describes restoration requirements and § 349 describes repair requirements. See id §§ 342, 349. Second, § 342 is entitled "Restoration of Streets-Penalty," whereas § 349 is entitled "Defects Appearing After Completion-Duty to Repair-Expense." Id. Third, the text of § 349 distinguishes between repair work performed "after the work has been completed" from "the original work of restoring said pavement." Id § 349.

But there is considerable slippage in the distinction between restoration and repair. The 1939 PWC uses "restoration" and "repair" interchangeably when referring to a type of activity. For example, in § 349, the 1939 PWC describes the duty to repair in terms of a requirement "to repair and restore said pavement." Id. Likewise, the parties, their FRCP 30(b)(6) designees and the court itself have used the terms interchangeably. See PG&E Supp Memo (Doc #177) at 9-11.

In any event, the distinction between restoration and repair is analytically helpful, and, accordingly, the court treats restoration and repair separately in this order. That said, the court does not believe its result -- or even much of its analysis -- would change if the two were treated together.

In classifying the non-fee regulations, the 13-foot rule, the 50-foot rule and the concrete panel replacement rule relate primarily to restoration. These rules describe requirements for restoring a street immediately following an excavation. These rules also relate to excavation because they require an excavator to remove certain portions of the street before repaving. For example, to restore an asphalt street under the 13-foot rule, the excavator must remove the asphalt wearing surface for a width of 13 feet before repaving. Because these non-fee regulations relate primarily to restoration, the court refers to them collectively as the "restoration regulations."

The warranty rule relates to an excavator's continuing obligation to pay for damage to the street that appears after the completion of excavation and restoration. Accordingly, the warranty rule falls under the rubric of repair.


The first cause of action in PG&E's FAC is for violation of the Contract Clause of the United States Constitution and the second cause of action is for violation of the Contract Clause of the California Constitution (collectively, the "Contract Clause"). FAC (Doc #18). PG&E alleges in the FAC that the imposition of the street damage restoration fee and various non-fee regulations violate the Contract Clause. The court previously granted partial summary judgment in favor of PG&E, finding that the street damage restoration fee violates the Contract Clause. PG&E, 220 F Supp 2d at 1088. PG&E now moves the court for partial summary judgment on the basis that the non-fee regulations also violate the Contract Clause. Pl Mot (Doc #133). CCSF opposes PG&E's motion and also moves for partial summary judgment of non-violation on the non-fee regulation claims. Def Opp (Doc #144); Def Mot (Doc #131).

The court set out the basic standard for Contract Clause analysis in a previous order in this case:

[T]he analysis of a Contract Clause claim under the California Constitution is identical to the analysis under the United States Constitution. To prevail on a claim under the Contract Clause, a party must show (1) a substantial impairment of a contractual relationship and (2) that the impairment was not reasonable and necessary to fulfill an important public purpose.

The first inquiry is further divided into three parts: (1) whether a contractual relationship existed; (2) whether the contract was impaired; and (3) whether the impairment was substantial.

PG&E, 220 F Supp 2d at 1086 (internal citations and quotation marks omitted). "An impairment of a public contract is substantial if it deprives a private party of an important right, thwarts performance of an essential term, defeats the expectations of the parties, or alters a financial term." Southern California Gas Company v City of Santa Ana, 336 F3d 885, 890 (9th Cir 2003) (per curiam) ("Santa Ana"). Moreover, "when the State is a party to the contract, 'complete deference to a legislative assessment of reasonableness and necessity is not appropriate because the State's self-interest is at stake.'" Energy Reserves Group, Inc v Kansas Power and Light Co, 459 US 400, 413 n14 (1983) (quoting United States Trust Co of New York v New Jersey, 431 US 1, 26 (1977)).

The court's prior order elides an alternative ground to upholding a legislative action against a Contract Clause challenge: the reserved-powers doctrine. That doctrine holds that a state need not "adhere to a contract that surrenders an essential attribute of its sovereignty." United States Trust, 431 US at 23. The omission from the court's 2002 order -- which concerned the financial promises exchanged under the franchise -- is unsurprising, for a still earlier order in this case established that the making and revision of financial promises do not implicate CCSF's reserved police powers. See 10/31/00 Order (Doc #60) at 12-13. But the regulations at issue here involve more than financial promises, and thus they may be the proper subject of a reserved-powers argument by CCSF.


The first question the court considers is whether the non-fee regulations are within the scope of CCSF's reserved powers. As described in United States Trust, 431 US at 23, the "inquiry concerns the ability of the State to enter into an agreement that limits its power to act in the future." Under the "reserved-powers doctrine," a state cannot contract away "an essential attribute of its sovereignty." Id. Accordingly, if the non-fee regulations are within the scope of CCSF's reserved powers, then any franchise term contradicting the right to promulgate the non-fee regulations would be invalid.

Supreme Court doctrine prior to United States Trust used bright line rules to determine whether a contract term was valid. These rules were based on the type of authority invoked to enact a law or regulation. For example, "the police power and the power of eminent domain could not be 'contracted away,' but the State could bind itself in the future exercise of the taxing and spending powers." Id at 23-24.

In United States Trust, the Court noted the weakness in such "formalistic distinctions" and applied a more particularized analysis. Id at 24. The Court found that "the scope of the State's reserved power depends on the nature of the contractual relationship with which the challenged law conflicts." Id at 21-22. The Court compared a contractual term and legislation related to "health or safety," which would create an impermissible conflict with the state's reserved powers, against a contractual term and legislation related merely to a state's "financial obligation," which would not create an impermissible conflict with the state's reserved powers. Id at 24-25.

In Santa Ana, the Ninth Circuit touched on the reserved-powers doctrine. 336 F3d at 893 (noting that a "state governmental entity cannot contract away its police powers"). Santa Ana argued that it retained the right to pass ordinances under its police powers, despite a franchise granted to the franchisee, Southern California Gas Company. In particular, Santa Ana argued that its reserved police powers allowed it to pass an ordinance imposing street cut fees in addition to fees described in a franchise negotiated between Santa Ana and the franchisee. Santa Ana pointed to a provision of the franchise that described the franchisee's duty to abide by regulations passed under Santa Ana's police powers.

The Ninth Circuit rejected Santa Ana's argument, finding that a public entity's reserved powers do not allow a public entity to "compromise [the] material terms" of a franchise, even if an explicit reservation of the police powers is described in the franchise. Id at 893. The Ninth Circuit concluded that the franchise imposed an obligation on the franchisee to pay Santa Ana a franchise fee at a specific rate in return for a right to excavate and to repair. Because the street cut fee ordinance merely imposed an additional cost, the conflict between the franchise term and the challenged street cut fee was financial. Accordingly, the Ninth Circuit concluded that the street cut fee was not within the scope of Santa Ana's reserved police powers.

United States Trust and Santa Ana both require the court to look behind the formal characterization of a law or regulation, such as whether the regulation was passed under the public entity's police powers. The court must, therefore, examine the type of conflict between the contractual term and the regulation in question. If the type of conflict is merely financial, then the reserved-powers doctrine is not implicated. See also Continental Illinois Nat'l Bank & Trust Co of Chicago v Washington, 696 F2d 692, 699 (9th Cir 1983) (holding that a change in the manner in which bonds were approved by voters "simply altered the manner in which WPPSS [a municipal corporation] can raise money," and was thus not "an act inherently within the sovereign's power" for purposes of the reserved-powers doctrine).

Whether the non-fee regulations are within the scope of CCSF's reserved powers seems at first a close question. On the one hand, the non-fee regulations provide benefits to residents of CCSF that are not merely financial. The restoration regulations concern the amount of repaving that must occur when a street is excavated. The primary claimed benefits are a "smoother ride," "a good surface and better paving jobs." Id at 254-58. Better paving jobs result in fewer defects in the street and increased street longevity. On the other hand, the restoration regulations have financial implications. The restoration regulations impose repaving obligations that require PG&E and other excavators to incur substantial additional restoration costs. The restoration regulations also provide essentially financial benefits to CCSF in that the regulations tend to increase the expected life of streets over prior excavation practices.

But taking a step back, the court concludes that CCSF's argument fails as a matter of law. The police power has always encompassed the power to protect the public health, safety and welfare; as acceptable limits of governmental authority have expanded, the police power has grown to encompass not only protection of society but also its betterment -- the "public welfare" has expanded to include actions by government for the positive good as well as protection against the adverse. The police power has for some time now encompassed both protection from the bad and promotion of the good. For the reserved-powers doctrine, however, there is a critical distinction between protection from the bad (e g, saving society and its members from adversities) and promotion of the good. Protection from the bad encompasses many things, but it is not infinitely elastic --threats to life, limb and property may be many, but to be considered a threat, they can and must be identified. What prompts exercise of the police power to protect is a specific threat. What prompts exercise of the police power to enhance, by contrast, is almost infinitely elastic, covering a virtually unlimited number of things that improve citizens' welfare. Hence, governments must make choices every day about which of these unlimited array of ways they may seek to promote the public good. Government seeking to protect its citizens against harm acts in a manner significantly more delimited than when government seeks positively to promote its citizens' welfare.

In promoting the public good, governments are constantly engaging private parties and they have essentially limitless choices for what will serve the public good -- roads, schools, recreation and so on. But when government acts to protect the public from harm, it is inherently reactive; the government cannot protect its citizens from harms that do not exist and cannot be identified. The reserved-powers doctrine is concerned with retaining for the government the power to respond to threats as they arise. See, e g, Linton ex rel Arnold v Commissioner of Health & Environment, 65 F3d 508, 517 (6th Cir 1995) ("The restrictions of the Contract Clause must be reconciled with the 'essential attributes of sovereign power,' which are necessarily reserved by the states to safeguard their citizens.") (quoting United States Trust, 431 US at 21) (emphasis added, internal quotation marks omitted)); Sanitation & Recycling ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.