Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-1_03-cv-06706/USCOURTS-caed-1_03-cv-06706-11/pdf.json

Nature of Suit Code: 290
Nature of Suit: Other Real Property Actions
Cause of Action: 28:1332 Diversity-Contract Dispute

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1

IN THE UNITED STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF CALIFORNIA

FLYING J, INC., )

)

)

)

Plaintiff, )

)

vs. )

)

)

THOMAS PISTACCHIO, et al., )

)

)

Defendant. )

)

)

No. CV-F-03-6706 OWW/GSA

MEMORANDUM DECISION GRANTING 

DEFENDANTS' MOTIONS TO

DISMISS AND STRIKE SAC AS

MOOT AND AS BARRED BY

COLLATERAL ESTOPPEL (Docs.

78 & 83) AND DENYING AS MOOT

DEFENDANTS’ MOTIONS TO

STRIKE AND TO DISMISS (Docs.

72, 84 & 85)

On December 1, 2006, Plaintiff Flying J, Inc. (“Flying J”)

filed a Second Amended Complaint for Damages (“SAC”). Defendants

are Thomas and Delores Pistacchio, Central California Kenworth

(“CCK”), John R. Lawson, and Lawson Rock & Oil, Inc. (“Lawson

Rock & Oil”). 

Defendants respectively filed (1) motions to dismiss

pursuant to Rules 12(b)(1) and 12(b)(6), Federal Rules of Civil

Procedure; and (3) motions to strike pursuant to California Code

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Defendants also filed motions to dismiss or stay/abstain 1

pursuant to Colorado River Conservation Dist. v. United States, 424

U.S. 800 (1976) and the Court’s inherent power. These motions have

been withdrawn.

2

of Civil Procedure § 425.16 (Anti-SLAPP motions). 

1

Because of the Court’s schedule and the sheer length and

complexity of these motions, the Court heard oral argument on

November 5, 2007 solely on the issues of mootness and collateral

estoppel. 

At the November 5, 2007 hearing, Flying J requested and

obtained leave to file a supplemental brief; Defendants were

given leave to reply. All supplemental briefing is now complete.

A. LIMITATION OF ISSUES IN FLYING J’S SUPPLEMENTAL BRIEF.

At the November 5, 2007 hearing, the following statements

were made:

MR. KATZ: It was our strongly held position

that they had to have vacated what happened

in 2003. That was ... the issue. They had

to have vacated before they could have a

clean hearing in 2004. We lost on that. But

that was the only way the 2003 was involved. 

The Court did not have jurisdiction to

consider the 2003. The statute of

limitations had past, and all we could ask

for, and all we did ask for was with respect

to the 2004, and all that the Appellate Court

decided was with respect to the 2004. 

There's nothing else.

...

MR. KATZ: We would like permission of the

Court to brief the statute of limitations on

the mandamus proceedings. Because the '03

was - we hadn't looked at that, ironically,

and the '03 was something by the time we got

into the case where the statute of

limitations had passed. There's simply -

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there was only one thing at issue in the

mandamus - there's only one thing that could

have been at issue. There was only one thing

that the court had the power, the

jurisdiction to decide, and so we would ask

for permission of the Court to brief the

Court on the statute of limitations for

mandamus proceeding.

...

MR. KATZ: Well, the request is simply

whether we can brief two questions that I had

mentioned to Your Honor.

...

MR. HAHESY: Well, I want to make sure what

we're briefing on so that -

THE COURT: Well, we're -

MR. HAHESY: I know one issue's about the

statute of limitations -

THE COURT: Here's what I understand. We're

briefing the legal ability of the superior

court to hear the '03 conflict claims and

whether or not it was in excess of its

jurisdiction if it did consider them as well

as the court of appeal then affirming and

discussing the '03 claims. If there's law

out there, I would like to see it because I'm

not familiar with it.

MR. KATZ: And there's a second issue, Your

Honor, too, that I mentioned. And that is

whether the CTC in '03 could even go forward

-

THE COURT: Yes.

MR. KATZ: - in '03 -

THE COURT: Yes.

MR. KATZ: - based on the conflict - 

THE COURT: All right.

MR. KATZ: - of interest.

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MR. HAHESY: I'm not sure I understand the

second issue, Your Honor -

THE COURT: Well, he's saying there's a

jurisdictional bar once a conflict exists,

and I don't know whether anybody brought it

up that Lawson had a conflict, that in effect

the Commission is disabled, it's got to stop

and determine the conflict, and see if the

hearing can go forward. Now, I don't know

that to be the law, but it's the law, then we

need to know it.

...

MR. HAHESY: We have briefed, Your Honor, ad

nauseam in this case the conflict of interest

issues under the Political Reform Act,

Government Code Section 1090, the common law

conflict of interest. You know, this

motion's been pending for a year. I'm not

sure why this issue is now being presented -

...

MR. HAHESY: No, but this issue about the

conflict of interest ... this was front and

center in their case and they -

THE COURT: Well -

MR. HAHESY: - we've been briefing it -

THE COURT: - here's the thing. Discretely,

if we can do it in - 

You can do it in five pages?

...

MR. KATZ: And I think we're pinpointing two

important issues that came after a lengthy

hearing -

THE COURT: All right.

MR. KATZ: - and I don't think 15 pages is too

much, Your Honor.

THE COURT: We're overwhelmed. I'm going to

say that it is. Do it in 10 pages. That's

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my final word.

Flying’s J’s supplemental brief (Doc. 166) exceeds the scope

of the leave granted by the Court. On pages 2:11-4:3 of Flying

J’s supplemental brief, Flying J presents legal arguments

concerning the effect of the Court of Appeal’s “express refusal

to consider conflict of interest issues affecting the CTC’s 2002

and/or 2003 decisions.” On pages 4:4-7:22, Flying J presents

arguments concerning the inapplicability of collateral estoppel

to the Court of Appeal’s decision. On pages 7:24-10:20, Flying J

presents arguments that Defendant Lawson’s participation in the

2002 and 2003 CTC proceedings should have barred the CTC’s

decisions even if Defendant Lawson was not the deciding vote,

thereby making the 2004 CTC hearing unnecessary.

Defendants correctly object to those portions of Flying J’s

supplemental brief that address issues which Flying J was not

given leave to raise. Defendants request that these portions of

the supplemental brief be stricken or that Defendants be given

the opportunity to respond. Because resolution of Defendants’

motions has been delayed by repeated stipulations of the parties

and, on one occasion, the press of court business, the

unauthorized portions of Flying J’s supplemental brief are

STRICKEN and will not be considered.

B. BACKGROUND.

1. PRIOR PROCEEDINGS BEFORE JUDGE COYLE.

This action commenced on November 26, 2003. By Order filed

on May 24, 2004, Judge Coyle dismissed Flying J’s First Amended

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Complaint against Defendants Thomas and Delores Pistacchio and

Central California Kenworth (Pistacchio Defendants) for lack of

subject matter jurisdiction. (Doc. 32). Judge Coyle ruled that

Flying J’s claims against the Pistacchio Defendants were moot

because the California Transportation Commission (CTC)

subsequently independently rejected the real property conveyance:

Plaintiff can no longer argue that its injury

was caused by Defendants’ alleged

interference because the CTC independently

rejected the proposed conveyance. Plaintiff

can no longer prove that Defendants’ actions

led the CTC to reject the proposed

conveyance. Plaintiff no longer satisfies

the causation element.

...

Plaintiff complains that the CTC’s

reconsideration of the proposal was flawed

and that Plaintiff remains injured to the

extent that it has not obtained possession of

the property. Plaintiff’s allegations of CTC

error do not persuade the court that it has

jurisdiction. Plaintiff does not allege that

the flaws in the reconveyance are the result

of Defendants’ actions. In order to maintain

a suit against the Pistacchios, Plaintiff

must allege that the Pistacchios caused its

injury. At the present time, Plaintiff

alleges that its current injury was caused by

the CTC’s mistaken legal analysis of the

proposal, not by the Pistacchios. Plaintiff

is rightfully challenging the CTC’s

reconsideration of its proposal, and thereby

seeking redress for its injury, in state

court. 

Flying J appealed Judge Coyle’s ruling. The Ninth Circuit

reversed, limiting its ruling to granting Flying J leave to

amend:

Flying J argues that the February 2004

hearing did not sever the connection between

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Pistacchio’s conduct and loss of the parcel,

and did not remedy the harm it had suffered. 

Pistacchio contends the opposite, that the

February 2004 decision cut off any and all

damages. However, we need not decide whether

on the basis of the FAC either side’s

position, or that of the district court, is

correct, for it is clear to us that leave to

amend should have been granted ... We express

no opinion on how new allegations will play

out, or whether it is necessary to reach them

in order to decide the underlying case, but

we cannot say at this stage of the

proceedings that amendment would be futile. 

Flying J suggested ... that additional facts

could be averred which would clearly show

that the February 2004 decision was not

independent and that it suffered compensable

injury on account of Pistacchio’s allegedly

wrongful conduct. Therefore, it should have

the opportunity to amend.

Thereafter, the SAC was filed adding the Lawson Defendants.

2. ALLEGATIONS OF SAC.

The “Factual Background” in the SAC alleges in pertinent

part as follows:

25. In or around January 1997, Flying J

acquired an 18.8 acre parcel of land, located

adjacent to State Route 14 in the Mojave Area

of Kern County, California (the ‘Flying J

Property’).

26. On August 26, 1999, Caltrans filed an

action for eminent domain against Flying J

(the ‘Eminent Domain Action’) seeking to

condemn 4.43 acres along the southeast border

of the Flying J Property (the ‘4.43-Acre

Parcel’) for the purposes of a proposed

highway expansion.

27. Throughout 2001, Flying J and Caltrans

engaged in negotiations concerning the 4.43-

Acre Parcel and the Eminent Domain Action. 

These negotiations resulted in the creation

of a December 13, 2001 Right-of-Way Contract

(‘Settlement Agreement’) between Caltrans and

Flying J wherein:

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a. Caltrans agreed to dismiss, and

Flying J consented to the dismissal

of, the Eminent Domain Action

which, on information and belief,

was worth in excess of $200,000.00

to Caltrans;

b. Flying J agreed to convey to

Caltrans the 4.43-Acre Parcel in

exchange for $14,800.00, and;

c. Caltrans agreed to convey to

Flying J, upon the approval of the

California Transportation

Commission (‘CTC’), an

approximately 20-acre parcel of

State-owned land immediately

adjacent to the Flying J Property

(the ‘20-Acre Parcel’) in exchange

for Flying J’s 4.43-Acre Parcel and

approximately $87,954.00 in cash.

28. The 20-Acre Parcel, which was part of a

larger tract of land owned by Caltrans, was

specifically carved out and made available to

Flying J as a result of the Settlement

Agreement.

29. The acquisition of the 20-Acre Parcel

was a material inducement for Flying J to

enter into the Settlement Agreement.

30. Flying J has performed all conditions,

covenants and promises required on its part

to be performed in accordance with the terms

and conditions of the Settlement Agreement,

except for those terms and conditions that

have been excused, prevented, waived and/or

released.

31. Throughout the negotiations leading up

to the Settlement Agreement, Caltrans

repeatedly stated and gave assurances to

Flying J that Caltrans was willing and able

to convey the 20-Acre Parcel to Flying J and

that CTC approval of the conveyance was a

mere formality and would occur without any

debate or discussion.

32. The CTC consists of nine members

appointed by the Governor, all appointed to

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staggered four-year terms, and two non-voting

ex-officio members, one from the State Senate

and one from the State Assembly.

33. Flying J ... alleges that from November

8, 2000, at least through February 26, 2003,

Lawson was an acting Commissioner of the CTC.

34. Flying J ... alleges that Pistacchio has

maintained a close personal and business

relationship with Lawson for over twenty-five

years, that they meet socially on a monthly,

if not weekly basis, and that their children

are good friends.

35. Flying J ... alleges that at all

relevant times, Lawson knew that Pistacchio

had a running feud with Flying J. Flying J

... alleges that Lawson tried to help

Pistacchio settle a previous lawsuit with

Flying J (a lawsuit that resulted in a $7

million verdict against Pistacchio) by

putting Pistacchio in touch with a mutual

acquaintance who knew a Flying J principal.

36. Flying J ... alleges that on at least a

dozen occasions prior to the CTC’s

consideration of the conveyance of the 20-

Acre Parcel to Flying J, Pistacchio made

slanderous and libelous statements about

Flying J to Commissioner Lawson. Flying J

... alleges that Lawson is the owner of

Lawson Rock & Oil ... [and] that Lawson,

Lawson Rock & Oil and/or businesses

controlled by Lawson, utilize the types of

trucks, trailers and other heavy equipment

sold by CCK and that Lawson, Lawson Rock &

Oil and/or businesses controlled by Lawson

have an ongoing business relationship with

Pistacchio, CCK and/or businesses controlled

by Pistacchio for the purchasing and leasing

of such trucks, trailers and/or equipment. 

Flying J ... alleges that Lawson, Lawson Rock

& Oil and/or businesses controlled by Lawson

have personally negotiated and regularly

purchased from Pistacchio and/or businesses

controlled by Pistacchio approximately 20

large semi-trucks for Lawson’s various

trucking businesses for anywhere between

$70,000 and $85,000 - even though the list

price on these trucks is somewhere in the

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range of $160,000 and that over the past

approximately five years, Lawson, Lawson Rock

& Oil and/or businesses controlled by Lawson

have been the beneficiary of retail price

breaks exceeding one million dollars from

Defendant Thomas Pistacchio’s truck

franchise, CCK.

37. Flying J ... alleges that CCK’s

Bakersfield, California offices are located

on property owned by Lawson and leased to

CCK.

38. Flying J ... alleges that Pistacchio

learned of the pending conveyance of the 20-

Acre Parcel to Flying J several months prior

to the CTC’s consideration of the proposed

conveyance.

39. Flying J ... alleges that ... Pistacchio

expressed to Lawson his desire to obtain the

20-Acre Parcel.

40. Flying J ... alleges that upon learning

of the pending conveyance of the 20-Acre

Parcel to Flying J, Pistacchio, at the

request of Lawson, unlawfully and

fraudulently entered upon the 20-Acre Parcel

to survey and appraise the property.

41. Flying J ... alleges that Pistacchio

used the information obtained during his

unlawful entry upon the 20-Acre Parcel to

prepare a secret bid for the 20-Acre Parcel,

which he gave to Lawson, to induce Caltrans

and the CTC to cause the rejection of the

conveyance of the 20-Acre Parcel to Flying J.

42. Flying J ... alleges that through an

express and/or implied agreement by and among

Defendants, Lawson, Lawson Rock & Oil and/or

businesses controlled by Lawson received

significant financial benefits (‘Benefits’)

from Pistacchio and/or businesses controlled

by Pistacchio in the form of either political

contributions, surreptitious kick-backs on

goods and services purchased by Lawson,

Lawson Rock & Oil and/or businesses

controlled by Lawson from CCK, or other

financial benefits. As a quid pro quo for

these surreptitious Benefits, Defendants

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embarked upon a secret conspiracy to deprive

Flying J of the 20-Acre Parcel in a manner

that would inure to the direct and indirect

benefit of Defendants.

43. The conveyance of the 20-Acre Parcel

from Caltrans to Flying J was initially

placed on the consent agenda for the CTC’s

October 3, 2002, meeting. Even though every

other consent item on the October 3, 2002,

agenda was approved without discussion, thenCTC Commissioner Lawson, in furtherance of

his conspiracy with Defendants, unilaterally

initiated discussion and criticism over the

conveyance of the 20-Acre Parcel to Flying J. 

This criticism was baseless in that it was

based on the allegedly one-sidedness of the

transaction favoring Flying J but did not

take into account the settlement value of

Caltrans’ Eminent Domain Action against

Flying J.

44. Although it was clear from the CTC’s

October 2002 staff report that Caltrans had

worked out a settlement of the Eminent Domain

Action, and the damages and exposure relating

thereto, resulting in the proposed conveyance

of the 20-Acre Parcel to Flying J, Lawson

misleadingly characterized the settlement

arrangement as a transaction requiring the

State to sell 20 acres for $55,000.00. This

characterization wholly ignored the

substantial severance damages that were a

material component of the settlement. As a

direct result of Lawson’s illegal actions,

the Commission pulled the conveyance from the

CTC’s consent agenda.

45. The conveyance of the 20-Acre Parcel to

Flying J was not agendized for CTC

consideration again until the CTC’s February

27, 2003, meeting. The conveyance was

specifically not agendized for the CTC’s

November 2002 meeting because Commissioner

Lawson could not be there. Flying J ...

alleges Defendants orchestrated a push to

strong-arm the staff at Caltrans and

undermine their support for the conveyance,

making it painfully clear that he would not

allow the conveyance of the 20-Acre Parcel

pursuant to the terms of the Settlement

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Agreement under any circumstances. This

strong-arm campaign worked in that Caltrans

ultimately agreed to pretend to support the

conveyance while actively working against it.

46. Flying J ... alleges that at a February

26, 2003, dinner meeting of CTC Commissioners

(the evening before the publicly noticed

February 27, 2003, meeting), Commissioner

Lawson circulated a written document,

prepared by Pistacchio, among the other

Commissioners that purported to be a bid,

proposal or offer to purchase the 20-Acre

Parcel for $250,000.00.

47. The next morning, at the February 27,

2003, CTC meeting, Commissioner Lawson made

no mention publicly of the fact that he had a

written proposal from Pistacchio to purchase

the 20-Acre Parcel for $250,000.00 or that he

had shared such a written proposal with other

CTC Commissioners the evening before, thus

enabling him to ensure that the outcome of

the hearing would be predetermined. Further,

during the February 27, 2003, CTC meeting

Lawson did not publicly reveal that he had

informed Pistacchio of the pending sale of

the 20-Acre Parcel to Flying J months before;

that Pistacchio was and is a close friend;

that he asked Pistacchio to provide him with

an estimate on the value of the 20-Acre

Parcel; that Pistacchio had visited the 20-

Acre Parcel in January 2003; that Pistacchio

gained access to the site in January 2003, by

informing a foreman that he was there at the

request of CTC Commissioner Lawson; that

Lawson, Lawson Rock & Oil and/or businesses

controlled by Lawson purchase and lease

trucks and equipment from Pistacchio, CCK

and/or businesses controlled by Pistacchio at

a significant discount; that Lawson has been

the beneficiary of retail price breaks

exceeding one million dollars from Defendant

Thomas Pistacchio’s truck franschise, CCK,

or; that CCK’s Bakersfield offices are

located on property owned by Lawson and

leased to CCK.

48. Despite the fact that consent items are

routinely approved without inquiry or debate,

that no other Caltrans excess land

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disposition was rejected by the CTC during

Lawson’s tenure, and despite statements and

assurances from Caltrans that CTC approval of

the conveyance of the 20-Acre Parcel to

Flying J would be a mere formality, on

February 27, 2003, the CTC, upon Lawson’s

motion, ordered the 20-Acre Parcel sold at

public auction.

49. The CTC, however, is authorized only to

accept or reject proposed dispositions of

Caltrans’ excess lands. The CTC has no

authority to order Caltrans to dispose of

excess land or to make any orders regarding

the method of such disposition - i.e., direct

sale, public auction, exchange, etc. The CTC

has admitted that its February 27, 2003 order

to dispose of the 20-Acre Parcel by public

auction exceeded the CTC’s authority.

50. The auction of the 20-Acre Parcel took

place on May 20, 2003. Unsurprisingly,

Pistacchio was the successful bidder and

obtained an option to purchase the 20-Acre

Parcel for a purchase price of $377,000.00. 

The contract for the option to purchase the

20-Acre Parcel, however, was executed in the

name of Pistacchio’s wife, Delores

Pistacchio.

51. The CTC’s rejection of the conveyance of

the 20-Acre Parcel to Flying J and the

decision to sell the 20-Acre Parcel by public

auction are the direct and proximate result

of Defendants’ wrongful conduct, as alleged

herein. But for the conspiracy between

Defendants, as alleged herein, the CTC would

have approved the conveyance of the 20-Acre

Parcel to Flying J in February 2003 and the

auction of the 20-Acre Parcel would never

have occurred.

52. Defendants’ wrongful and improper use

and manipulation of their personal and

business relationships and their manipulation

and influence on the CTC and Caltrans to

deprive Flying J of the 20-Acre Parcel, not

only constitutes actionable slander and/or

libel, bribery and trespass, but also a

conspiracy to commit violations of

California’s Political Reform Act (Government

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Code sections 81000-91014), California

Government Code section 1090 and California’s

common law doctrine against conflict of

interest, as alleged herein.

53. Upon learning of the existence and scope

of the relationship among Defendants,

Lawson’s resulting conflict of interest and

Defendants’ conspiracy to sabotage the CTC

approval process for the conveyance of the

20-Acre Parcel to Flying J, Flying J

requested the CTC to remedy the injustice

that had occurred as a result of the conduct

described above.

54. On January 23, 2004, Flying J was

advised that the CTC would consider the

following two issues at the CTC’s February

26, 2004 agenda: (1) Should the Commission

reconsider the proposal to convey the 20-Acre

Parcel to Flying J?, and (2) Assuming the

first question is answered in the

affirmative, should the Commission approve or

disapprove the proposed conveyance to Flying

J?

55. On February 17, 2004, Flying J submitted

a letter to the CTC providing a detailed

explanation of the relevant facts and law

necessitating that the CTC reconsider and

invalidate its decision of February 2003,

based on Lawson’s blatant conflict of

interest and other wrongful conduct of Lawson

and Defendants which rendered the CTC’s

February 2003, disapproval of the conveyance

void from its inception.

56. At the February 26, 2004, hearing, the

CTC refused to consider, address or remedy

the conflict of interest and illegal

activities described above or make any

determination whatsoever regarding the

impropriety of any of its previous actions

concerning the proposed conveyance to Flying

J. Without invalidating its February 2003,

decision, which the CTC has admitted exceeded

its authority, or otherwise curing the

blatant improprieties surrounding such

decision, the CTC again voted to reject the

proposed conveyance of the 20-Acre Parcel to

Flying J on the alleged grounds that the

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proposed conveyance is in conflict with the

terms, standards and conditions established

by the Commission in its procedures for sale

of excess property under CTC Resolution G-98-

22 and on the grounds that the terms of the

Settlement Agreement were based on an

allegedly flawed appraisal. 

57. However, CTC Resolution G-98-22 does not

require that the 20-Acre Parcel be disposed

of by public auction. In fact, Resolution G98-22 expressly states that excess property

(such as the 20-Acre Parcel) may be exchanged

for other land required for transportation

purposes (such as the 4.43-Acre Parcel). The

sole basis for the CTC’s purported conclusion

that the conveyance of the 20-Acre Parcel to

Flying J was in conflict with the terms,

standards and conditions established by the

CTC was the personal opinion of a CTC deputy

director who had no prior experience with

Resolution G-98-22 or other Caltrans property

exchanges and not qualified to render a legal

opinion.

58. Further, there was no documentary or

testimonial evidence presented to the CTC in

support of its conclusion that the appraisal

of the 20-Acre Parcel was flawed.

59. The CTC’s February 2004 alleged

reconsideration of the conveyance of the 20-

Acre Parcel to Flying J was not an

independent review or reconsideration of the

CTC’s February 2003 decision. Rather the

February 2004 ‘reconsideration’ was another

by-product of Lawson’s influence and improper

conduct on the CTC approval process, as

alleged herein.

60. Six of the nine CTC Commissioners who

were exposed to Lawson’s improper conduct and

participated in the ultra vires order that

the 20-Acre Parcel be sold at public auction

were still sitting Commissioners in February

2004 and were not acting independently when

they voted to re-approve the unauthorized

decision of February 2003. Lawson’s

continuing influence over these commissioners

is reflected by the fact that the CTC

expressly refused to consider whether Lawson

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had a conflict of interest, or whether the

CTC’s prior order was improper.

61. Despite specific questions regarding the

value of the 20-Acre Parcel raised in a CTC

Staff Report prepared in connection with the

CTC February 2004 hearing, not a single

Commissioner asked a single substantive

question during the ‘reconsideration’

hearing.

62. By refusing to invalidate its decision

of February 2003, or even consider the

improprieties associated with such decision,

the CTC’s February 26, 2004, decision was

nothing more that a meaningless after-thefact rationalization of its previous flawed

decisions and in no way an independent review

or reconsideration. Had the CTC considered

and acknowledged the blatant improprieties of

its actions of October 2002, and February

2003, it would have had no choice but to

invalidate such actions and either order that

the property be sold by a new public auction

or that the 20-Acre Parcel be conveyed to

Flying J, as intended in the Settlement

Agreement.

63. Because the CTC refused to invalidate

its ultra-vires decision of February 2003 and

failed to conduct an independent review of

the February 2003 decision or the alleged

improprieties relating thereto, the CTC’s

February 2004 ‘reconsideration’ is still

infected by Defendants’ wrongful conduct. As

a result, Defendants’ maintain the ill-gotten

option to purchase the 20-Acre Parcel and

Flying J continues to be damaged by the

conduct alleged herein. Indeed, but for

Defendants’ wrongful conduct there never

would have been a February 2003 order to

auction the 20-Acre Property [sic] or a

February 2004 reconsideration. Accordingly,

the CTC’s actions of February 26, 2004, have

had no effect on any of the relief sought

herein.

64. The CTC has never been asked to

consider, has never considered, and lacks the

authority to render any decision with respect

to, Defendants’ wrongful and illegal conduct,

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as alleged herein, or the damages to Flying J

resulting therefrom. Nor has the CTC ever

considered the propriety of Defendants’

acquisition and retention of the rights to

the 20-Acre Parcel or any legal obligation

for Defendants to convey such rights to

Flying J.

The SAC alleges the following Claims for Relief:

1. First Claim for Relief - intentional

interference with the Settlement Agreement

between Flying J and Caltrans by all

Defendants;

2. Second Claim for Relief - intentional

interference with prospective economic

advantage - against all Defendants;

3. Third Claim for Relief - violation of

California Business and Professions Code §

17200 - against all Defendants;

4. Fourth Claim for Relief - imposition of

constructive trust on Pistacchio Defendants

and CCK;

5. Fifth Claim for Relief - conspiracy to

intentionally interfere with contract -

against all Defendants;

6. Sixth Claim for Relief - conspiracy to

intentionally interfere with prospective

economic advantage - against all Defendants.

The SAC prays for compensatory and punitive damages, for an

order prohibiting Defendants from selling or otherwise disposing

of the 20-Acre Parcel, for an order that Defendants hold an

interest in the 20-Acre Parcel in trust for Flying J, and for an

order requiring Defendants to assign or convey the option to

purchase the 20-Acre Parcel and any right, title and interest in

the 20-Acre Parcel to Flying J.

3. PROCEEDINGS IN STATE COURT RE FLYING J’S PETITION

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FOR WRIT OF MANDATE.

On March 24, 2006, Flying J filed a petition for writ of

mandamus in the Kern County Superior Court, Case No. S-1500-

253208, SPC, against Caltrans and the CTC to in substance set

aside the 2003 auction of the real property and the 2004 hearing

before the CTC and to require conveyance of the 20 Acre Parcel 

to Flying J. Following the submission of evidence and arguments

by the parties, Judge Sidney P. Chapin issued a Statement of

Decision on October 17, 2005, denying the petition. Judge

Chapin’s Statement of Decision ruled in pertinent part:

The claim made for administrative mandamus

(first cause of action) has been previously

disposed of and is not part of this ruling. 

this ruling pertains to the remaining causes

of action.

Evidence had been introduced by the parties

prior to the hearing. At the hearing, the

cause was argued and submitted for decision. 

The court, having considered the evidence and

heard the arguments of counsel and being

fully advised, issued the following statement

of decision:

This case focuses on the propriety of actions

by the California Transportation Commission

(“Commission”) and the Department of

Transportation (“Caltrans”) with regard to 20

acres of state-owned land in Kern County. 

According to the certified Administrative

Record, the state-owned land consists of two

adjoining parcels. (AR Tab Q.) One of the

two state-owned parcels adjoins land owned by

Petitioner Flying J, Inc., and according to

Flying J is “fully developable.” (AR Tab 1,

p. 3, last paragraph.) The case arises due

to the Commission’s rejection of a proposal

that Caltrans convey the 20-acre property to

Flying J.

The legal presumption, pursuant to Evidence

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Code § 664 that the California Transportation

Commission regularly performed its official

duties, imposes on the Petitioner the burden

to establish the Commission’s actions were

arbitrary, capricious, unlawful, contrary to

public policy or procedurally unfair.

Petitioner/Plaintiff fails to carry its

burden.

In amending Streets and Highways Code § 118,

the Legislature intended that the Commission

exercise independent discretionary oversight

over conveyances of excess land. 

Although this decision discusses whether the

Commission properly exercised its discretion

in acting on the proposed conveyance, and

whether former Commissioner John J. Lawson

had a conflict of interest affecting the

validity of the Commission’s actions, there

is a separate, independent basis far denying

Flying J’s petition. The proposed conveyance

did not comply with Streets and Highways code

§ 118 or with the guidelines adopted by the

Commission pursuant to that section, and as a

consequence the Commission did not have the

authority to approve it.

This result follows regardless which of two

conceptions of the nature of the proposed

conveyance are assumed to be correct. The

Commission contends that the conveyance of

the 20-acre property was in exchange for

$55,000. Flying J contends that the

conveyance of the 20-acre property was part

of an exchange of properties, in which

Caltrans would be receiving, as part of the

consideration for the 20-acre property, 4.5

acres of Flying J-owned property (part of an

18.8-acre parcel adjoining the 20-acre state

owned property) needed by Caltrans for

highway purposes.

At least one of the two state-owned parcels

which make up the 20 acres, and the parcel

which was adjacent to the Flying J owned

parcel, was described by Flying J’s

representative as being “fully developable.” 

(Administrative Record Tab J, p. 3, last

par.) If so, and if the proposed conveyance

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consisted of a sale of the 20-acres for

$55,000 cash, as the Commission contends,

then the property should have been sold on a

competitive basis as required by Streets and

Highways Code § 118 and the guidelines

adopted thereto by the Commission.

If, on the other hand, as Flying J has

argued, the proposed conveyance consisted of

an exchange of the 20-acres of State-owned

land for flying J’s 4.5-acre parcel (valued

according to the contract between Flying J

and Caltrans at $14,800) and cash in the

amount of $40,200, Streets and Highways Code

§ 118 and the guidelines adopted pursuant

thereto do not allow that type of property

exchange. Streets and Highways Code § 118,

subdivision (c), allows state-owned excess

highway property to be exchanged, “either as

whole or part consideration, for any other

real property or interest therein needed for

state highway purposes.” This provision

means that Caltrans can dispose of Stateowned excess highway property on a noncompetitive basis in exchange for

consideration the major portion of which is

cash. Based on the values set forth in the

contract between Flying J and Caltrans, the

monetary portion of the consideration for the

20-acre property was 73%, making the

acquisition of land by the state a secondary

part of the consideration for the sale of two

parcels of state-owned land to a private

party on a non-competitive basis.

Whether the proposed conveyance of the 20-

acres of state-owned land is viewed as part

of an exchange of state-owned land for

privately owned land and monetary

consideration, as described by Flying J, or

as simply a sale of the 20-acre property in

exchange for cash, as the Commission

contends, it was not a conveyance allowable

under the applicable statutes and guidelines. 

The Commission did not have authority to

approve such a conveyance, and its

disapproval of the proposed conveyance was

not an abuse of discretion. However, even if

the Commission otherwise had the authority to

approve a conveyance of the property, it was

within its discretion to disapprove it for

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other reasons.

The first Commission meeting at which the

subject of the proposed conveyance of the 20

acres was brought up was the October 2002

meeting. Based on the memorandum prepared by

the Department of Transportation, the

proposed transaction appeared to involve an

exchange of parcels valued at $55,000. (AR

Tab F, p. 2.) Although it appears the item

had been placed on the consent agenda, it was

brought up for discussion. Former

Commissioner John Lawson, as well as several

other Commissioners, participated in the

discussion which involved questions

concerning the value of the 20 acres, its

location, the nature of the transaction, and

the nature of any property to be received by

Caltrans from Flying J. Caltrans staff was

unable to respond to all of the questions but

offered to provide more information at a

later time. During the discussion,

statements were made by a Caltrans’

representative that suggested that the

proposed transaction was something other than

the exchange of two parcels valued at

$55,000. The Chairperson of the Commission

then ordered that the matter be withdrawn

from the consent calendar.

To the extent that Mr. Lawson was involved in

removing the item from the October 2002

consent calendar, he was not precluded from

doing so by any conflict of interest. Flying

J alleges that Mr. Lawson had a conflict of

interest that should have prevented him from

being so involved based on a financial and

social relationship he allegedly had with

Thomas Pistacchio, the person who later

submitted the highest bid at the May 2003

auction of the property. However, according

to Flying J’s own allegations, Mr. Pistacchio

first learned of the existence of the

property from Mr. Lawson in December 2002 or

January 2003. (Flying J’s Opening Brief on

the Merits, p. 8.) Thus, at the October 2002

meeting, Mr. Lawson could not possibly have

been aware of any interest in the property on

the part of Mr. Pistacchio.

Flying J also alleges that Mr. Pistacchio had

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often complained to Mr. Lawson about Flying

J’s treatment of him in an unrelated legal

dispute between Flying J and Mr. Pistacchio,

and had sought his intercession in an effort

to resolve the dispute, and contends that Mr.

Lawson was thereby prejudiced against Flying

J at the time the proposed conveyance was

brought before the Commission at the October

2002 meeting. However, there is no evidence

that any such complaints by Mr. Pistacchio

prejudiced Mr. Lawson with regard to Flying

J. Moreover, members of legislative and

quasi-legislative bodies are not precluded

from acting on matters which may come before

them because they may have heard something

which pertains to the matter. (See, e.g.,

City of Fairfield v. Superior Court (1975) 14

Cal.3d 768.)

Furthermore, the evidence on which Flying J’s

allegations of a conflict are based is

inadmissible. In addition, the Court notes

that removing an item from a consent calendar

subjects it to public discussion and debate.

The proposed conveyance of the 20 acres was

tentatively scheduled for the November 2002

meeting. However, the item was removed from

the agenda prior to the meeting by the

Executive Director of the Commission based on

her having been informed that Mr. Lawson

would be absent from that meeting due to

medical reasons. She removed the item from

the November 2002 on her own initiative. She

was not asked to do so by Caltrans, by Mr.

Lawson, or by anyone acting on Mr. Lawson’s

behalf. The removal of the item was not the

product of any conflict of interest, does not

establish the existence of any conflict of

interest, and did not constitute procedural

abuse by the Commission.

At the February 27, 2003, meeting of the

Commission, The Commission properly rejected

the proposed conveyance. In determining

whether an agency decision was within its

discretion, the test is whether substantial

information supported the decision. Western

States Petroleum Association v. Air Resources

Board (1995) 9 Cal.4th 559, 565, 574. There

was substantial information before the

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Commission to support the Commission’s

rejection of the proposed conveyance.

Caltrans submitted a memorandum to the

Commission. (AR, Tab H.) Among other

things, the Caltrans memorandum made

reference to an appraised value for the 20

acres of $55,000 (AR Tab H, p. 1), described

the payment which the state would receive for

the 20 acres as consisting of $40,200 cash

and land valued at $14,800. (AR Tab H, p.

2.) The memorandum included a map which

showed that the 20 acres actually consisted

of two adjoining parcels. (AR Tab H, last

page.) The memorandum stated that Flying J’s

property adjoined the 20 acre property, and

that the 20 acres were located “adjacent to

State Route 14, in Kern County near the new

alignment of State Route 58 (Mojave

Bypass)....” (AR Tab H, p. 2.)

The Caltrans memorandum also stated that the

appraised value of the 20 acres “was based on

existing sales in the vicinity but excluded

Flying J’s purchase of their property from

consideration on the basis the sales price

was not supported by market data.” 

Immediately following this statement, the

memorandum contained the following:

“The Department [i.e., Caltrans] is

aware of a possible perception of a

financial windfall to the buyer

based on the perceived speculative

trends after completion of the

State’s highway project.”

(AR Tab H, p. 3; emphasis added.)

Following this statement the memorandum noted

that Caltrans had attempted to renegotiate

its agreement with Flying J so as to exchange

equally sized parcels which would have

represented like value and which would

“preserve the before functional utility of

their [i.e., Flying J’s] parcel,” but that

Flying J had deferred the offer pending the

Commission’s action. (AR Tab H, p. 3.)

Steve Ikeda, Caltrans spokesman, presented

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the item to the Commission. He repeated the

statement in the Caltrans memorandum

concerning the “possible perception of an

immediate windfall to the buyer” and referred

to Caltrans’ unsuccessful attempt “to

renegotiate with Flying J, recognizing the

perception.” (AR Tab J, p. 1.) Flying J’s

representative addressed the Commission but

did not disagree with any of Caltrans’

assertions.

In light of the discussions and the

information presented to the Commission,

including those at the October 2002 meeting,

and to the extent that the Commission had the

discretion to approve or to disapprove the

proposed conveyance, it was not an abuse of

the Commission’s discretion to disapprove the

proposed conveyance.

The Commission’s February 27, 2003, rejection

of the proposed conveyance took the form of

the adoption of a motion to put the property

“out to bid.” Streets and Highways Code

§ 118 gives the Commission the authority to

reject a proposed conveyance. However, the

Commission does not have the direct authority

to order Caltrans to sell property at

auction. Nonetheless, it is undisputed that

the adoption of the motion constituted a

rejection of the proposed conveyance to

Flying J. Flying J so alleges in paragraph

29 of its Petition (Pct., 8:26). Following

the Commission’s rejection of the proposed

conveyance, the Commission’s staff advised

Caltrans that it could still negotiate an

exchange of property with Flying J. However,

Flying J refused to engage in such

negotiations. Upon Flying J’s refusal,

Caltrans was under a statutory duty to

dispose of the excess property, “to the

greatest extent possible,” through a

competitive sale pursuant to Streets and

Highways code §§ 118 and 118.6, and the

guidelines adopted pursuant to § 118. 

Caltrans arranged the auction which occurred

in May 2003 and in which several bidders,

including Flying J, submitted bids for the

20-acre property in excess of $300,000.

Flying J contends that John Lawson had a

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conflict of interest at the time of the

February 27, 2003, meeting, predicated on his

relationship with Thomas Pistacchio. This

contention is based on two things: (1) the

allegation that Pistacchio had complained to

Lawson about how Flying J had treated

Pistacchio in unrelated litigation, and (2)

the alleged financial relationship between

Lawson and Pistacchio. However, there is no

admissible evidence showing any such conflict

of interest on the part of Lawson.

Putting aside its inadmissibility, the

evidence offered by Flying J still does not

compel the conclusion that Lawson had a

conflict of interest. First, the fact that

Lawson may have heard complaints by

Pistacchio concerning Flying J and its

treatment of Pistacchio in litigation brought

by Flying J against Pistacchio (unrelated to

the instant litigation) does not establish

that Lawson was precluded from acting as a

member of a quasi-legislative body with

regard to a decision which might affect

Flying J. Legislators hear many things, some

negative, some positive, concerning persons

and entities who may be affected by decisions

made by the bodies on which those legislators

serve. It does not follow that they become

prejudiced for or against such persons or

entities. Moreover, in the instant

proceeding, there has been no evidence

offered to show that Lawson became prejudiced

against Flying J as a result of whatever he

may have heard from Pistacchio.

First, the evidence offered by Flying J does

not show that Mr. Lawson’s participation

would have “a reasonably foreseeable material

financial effect” on one or more of Lawson’s

economic interests.

Second, the effect of the Commission’s

February 2003 decision was to disapprove the

proposed conveyance to Flying J. However,

Flying J and Caltrans could still have

negotiated a proper exchange. It was Flying

J’s refusal to renegotiate that opened the

way to the auction; the auction was not an

inevitable consequence of the Commission’s

February 2003 decision.

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Third, even if Lawson knew or believed that

the February 2003 decision would result in an

auction, the evidence does not support the

assertion that he knew that Pistacchio would

participate in the auction. The evidence

offered by Flying J at most suggests that

Pistacchio told Lawson that “he might” bid on

the property if it were available.

Fourth, even if Lawson is presumed to have

known that Pistacchio would bid on the

property if there were an auction, there was

no way for Lawson to know that Pistacchio

would be the successful bidder at such a

public, competitive auction.

Fifth, even if it is presumed that Lawson

knew that Pistacchio would be the successful

bidder, the evidence offered by Flying J does

not establish that there would be a

“material” financial affect on any of

Lawson’s economic interests. According to

Flying J’s evidence, Lawson had interests in

certain business entities. However, the

evidence does not show with sufficient

certainty, clarity, or detail the extent of

Pistacchio’s ownership in those entities, nor

does it show the other information on which

an analysis could be made with regard to the

materiality standards set forth in applicable

law and regulation.

Even if it is assumed that Lawson had a

conflict of interest which should have

precluded his participation at the February

2003 meeting, the proper remedy would depend

on whether the Commission would have reached

a different decision in the absence of

Lawson’s participation or whether Lawson’s

vote was essential to the adoption of the

decision. See, e.g., Downey Cares v. Downey

Community Dev. Comm. (1987) 196 Cal.App.3d

983, 989. The Administrative Record shows

that the Commission’s decision at the

February 2003 meeting was adopted on a vote

of seven to one. Even if Lawson’s vote (one

of the seven) had been excluded from the

total, there would still have been sufficient

votes to adopt the decision. Moreover, there

is no evidence of any kind to support a

finding that a different decision would have

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been reached absent Lawson’s participation. 

See Government Code § 91003, subdivision (b).

Even if it were assumed that Lawson’s

participation somehow affected the essence of

the Commission’s February 2003 decision, and

assuming that the Commission had not on its

own initiative, reconsidered the matter, the

remedy would have been to require the

Commission to reconsider the decision to

disapprove the proposed conveyance without

the participation of Lawson. See, e.g.,

Clark v. City of Hermosa Beach (1996) 48

Cal.App.4th 1152. The Administrative Record,

however, shows that the Commission did decide

to reconsider the disapproval of the proposed

conveyance, without judicial compulsion, and

following a request by Flying J.

Flying J contends that there occurred a

violation of the Open Meeting Act in

connection with the Commission’s February

2003 meeting, or at the dinner which occurred

the evening before the meeting. The Court

does not find a violation of the Open Meeting

Act at the February 2003 scheduled dinner of

the Commission. There is no competent

evidence to support a finding that the

members of the Commission discussed the

proposed conveyance and reached a decision

outside of the context of the public meeting. 

In any event, any such claim is barred by the

applicable Statute of Limitations pursuant to

Government Code § 11130.3.

Flying J requested reconsideration of the

proposed conveyance. At the February 2004

meeting, the Commission reconsidered the

decision made at the February 2003 meeting. 

Doing so was within the Commission’s

discretion. It was further within its

discretion to reject the originally proposed

transfer. There was substantial information

before the Commission to support the

Commission’s rejection of the proposed

conveyance. Western States Petroleum

Association v. Air Resources Board, supra.

The information presented to the Commission

at the February 2004 meeting included the

fact that several persons submitted bids at

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the May 2003 auction in excess of $300,000. 

In addition, the Commission’s staff reported

that the appraisal by Flying J’s appraiser,

who appraised the property for $55,000,

contained significant contradictions. Flying

J’s representatives stated that the

consideration for the 20-acre property

included not only the $55,000 but also the

waiver of severance damages and a compromise

value for Flying J’s 4.5-acre parcel. 

However, other information presented to the

Commission included the fact that the values

asserted by Flying J with regard to potential

severance damages and the value of Flying J’s

4.5 acre parcel were contradicted by other

appraisals and valuations which suggested

that the value of the 4.5-acre parcel was

less than what Flying J claimed and that the

value of severance damages was zero. (AR Tab

U, p. 4.)

Based on the information presented to the

Commission at the February 2004 meeting, and

assuming the Commission had the authority to

approve the proposed conveyance, it was not

an abuse of discretion for the Commission to

disapprove it.

The February 2004 reconsideration cured any

defects affecting the earlier decision. 

There is no evidence of any conflict of

interest in connection with the February 2004

meeting. Moreover, the evidence does not

support a finding of any violation of the

Open Meeting Act in connection with the

February 2004 meeting. In addition, the

Commission had before it a large, detailed

record. The evidence does not support a

finding that the Commission did not consider

the proposed conveyance ab initio.

The evidence does not support any finding to

the effect that the Commission has routinely

violated the law with regard to such dinners. 

There is no evidence that meetings occurred

during such dinners nor that they went

“secret,” as Flying J contends. To the

contrary, the Administrative Record shows

that the time and place of such dinners was

included in the notices of the Commission’s

meetings. Moreover, Government Code

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§ 11122.5, subdivision (5), expressly allows

“[t]he attendance of a majority of the

members of a state body at a purely social or

ceremonial occasion, provided that a majority

of the members do not discuss among

themselves business of a specific nature that

is within the subject matter jurisdiction of

the state body.”

Flying J contends that there was a violation

of Government Code § 1090 due to Lawson’s

participation in the Commission’s decision to

disapprove the proposed conveyance to Flying

J. Government Code § 1090 provides, in

pertinent part, that “... state...

officers... shall not be financially

interested in any contract made by them in

their official capacity, or by anybody or

board of which they are members.” There is

no evidence that Lawson or the Commission

entered into any such contract as a result of

any action on the part of the Commission. 

The Commission’s decision in February 2003

constituted a disapproval of the proposed

conveyance to Flying J. As a matter of fact,

following the February 2003 decision,

Caltrans and Flying J were free to

renegotiate an agreement, but Flying J

refused to do so. As a result of Flying J’s

refusal to do so, state law required

Caltrans, “to the greatest extent

possible...” to attempt to dispose of the

property through a competitive sale process. 

that it was possible to do so is evident from

the fact that several bidders participated at

the auction in May 2003.

As for Caltrans, a writ of mandate is an

improper remedy to enforce a contract, and

other than as may exist in contract, there is

no other duty owed by Caltrans making it

subject to a remedy sought in this

proceeding.

Flying J appealed the denial of the petition for writ of mandamus

to the Court of Appeal. The Fifth District Court of Appeal

affirmed the Superior Court, Flying J., Inc. v. California

Transportation Commission, 2007 WL 926648 (2007), ruling in

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pertinent part:

Respondent California Department of

Transportation (Caltrans) brought an eminent

domain action against appellant Flying J,

Inc. (Flying J). Caltrans wished to acquire

4.4 acres of Flying J’s property for

construction of a frontage road as part of a

project known as the “Route 58 Mojave Bypass

Project” located at the intersection of state

highways 58 and 14 in Mojave. This 4.4 acres

was part of a larger 18.8 acre parcel owned

by Flying J. Caltrans owned a 20.57 acre

parcel located adjacent to Flying J’s 18.8

acre parcel. Caltrans no longer needed its

20.57 acre parcel. Caltrans and Flying J

reached an agreement to settle the eminent

domain action.

Under the terms of the settlement, Flying J

would convey to Caltrans the 4.4 acre parcel

Caltrans sought for its project. This parcel

was valued at $14,800. Caltrans would convey

to Flying J the 20.57 acres Caltrans no

longer needed. This parcel was valued at

$55,000. Flying J would pay Caltrans the

$40,200 difference between the values of the

two properties, plus an additional $47,754

described in the settlement agreement as “the

amount necessary for Contractor to implement

the Construction Change Order required to

remove said [20.57 acre] parcel ... from the

area delineated for excavation by the State’s

Contractor.” The end result would be that

Flying J would have a contiguous 34.9 acres

(the 20.5 from Caltrans plus the remaining

14.4 acres of its original 18.8 acre parcel)

for a “travel plaza” Flying J wished to

construct there, and Caltrans would have the

4.4 acres it wanted for its frontage road. 

The settlement agreement described the

proposed conveyance of the Caltrans 20.5

acres to Flying J as being “[s]ubject to

approval by the California Transportation

Commission.” Caltrans dismissed its eminent

domain action, apparently anticipating that

the California Transportation Commission

(respondent Commission or the Commission)

would approve the conveyance.

The Commission refused to approve the

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conveyance of the 20.5 acres to Flying J. 

The 20.5 acre parcel was later auctioned by

Caltrans at a public auction. The winning

bid at the auction for this parcel, which

Caltrans and Flying J had valued in their

settlement agreement at $55,000, was

$377,000. At least six different persons or

entities placed bids at the auction. 

Nineteen bids of $300,000 or higher, by a

total of four different bidders, were placed

on the property. Four of these bids were

placed by Flying J’s own agent (bidder No.

654), whose high bid was $350,000. Seven

bids higher than $350,000 were placed, by a

total of three different bidders. The

winning bidder was Thomas Pistachio [sic]. 

The second and third highest bidders placed

bids of $376,000 and $371,000, respectively.

Flying J sued Caltrans for breach of contract

(the settlement agreement, also referred to

by the parties as the Right of Way Contract). 

Caltrans also refiled its eminent domain

action against Flying J to acquire the 4.4

acres. The present appeal arises from

neither of these two actions, but rather from

a third one-Flying J’s unsuccessful superior

court petition for a writ of mandate

directing the Commission to approve the

settlement agreement’s proposed conveyance of

the 20.5 acre parcel to Flying J. As we

shall explain, the Commission had no

mandatory duty to approve a conveyance of

state property valued by Caltrans and Flying

J at $55,000 when in fact that same property

could be and was auctioned off for almost

seven times that much ($377,000). The court

therefore did not err in denying Flying J’s

petition.

PROCEEDINGS BEFORE THE COMMISSION

The Commission’s October 3, 2002 Meeting

The issue of possible approval of the

conveyance of the 20.5 acres to Flying J

first came before the Commission as one of at

least 81 items or matters on the Commission’s

October 3, 2002 calendar. Four of the eight

commissioners present at the October 3

meeting of the Commission asked questions of

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Caltrans representative Steve Ikeda about the

proposed conveyance. Among them was

Commission John Lawson’s question “Are we

selling them 20 acres for 55 thousand dollars

[$55,000]?” Ikeda answered “Yes, we are.” 

After Ikeda told the Commission that this

conveyance was part of a settlement,

Commissioner Allen Lawrence stated “Not at

that price?” Ikeda responded “Yes-well, that

is the value of the property that we’re

selling to them.” Ikeda then explained that

Caltrans would be receiving from Flying J

$40,200 in cash and “property that’s valued

at 14 thousand 8 hundred [$14,800].” 

Commissioner Lawson asked “And how many acres

are you acquiring?” Ikeda responded “Oh-I

don’t have that information with me.” After

Ikeda added “I can get that for you” and said

that the property was along a highway, Lawson

stated: “And business property doesn’t sell

for 2 thousand 750 dollars [$2,750] an

acre.... I don’t understand the deal. Is

there any way we can pull this and put it on

next month?” Commissioner Lawrence and

Commission Chair Dianne McKenna expressed

agreement with this course of action. 

McKenna then added: “We’ll get all the

information. I think we’re talking about

having all the information in front of us. 

If we bring it back next month with, you

know, what’s involved if we bring - what the

lawsuit was, what the settlement - all of

that information, then we’ll understand.” 

Ikeda stated “Okay, fine, I’ll have it for

you next time.”

Commissioner Chair McKenna then solicited a

“motion to approve the other remaining items

on 43.” Commissioner R. Kirk Lindsey so

moved. Commissioner Lawson seconded the

motion, and the motion then passed by a vote

of eight to zero. Commission Chair McKenna

then stated “So the [Flying J Matter] will be

brought back.”

The Commission’s February 27, 2003 Meeting

The Commission considered the proposed

conveyance once again at the Commission’s

February 27, 2003 meeting. In connection

with this meeting, Caltrans Chief Financial

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Officer Robert L. Garcia addressed a

memorandum to the Commission. The memorandum

stated in part: “The department is presenting

a Director’s Deed for the sale of 20.57 acres

of excess, state-owned real property,

adjacent to State Route 14 in Kern County.

... [¶] The Commission’s approval of the

attached Director’s Deed would allow the sale

of the property .. for the approved appraisal

value of $55,000. Under the terms of the

Right of Way Contract, State is receiving the

full amount of the appraised market value in

a combination of cash and property.... [¶]

The State is receiving payment from the

buyer, Flying J, in the form of cash

($40,200) and the conveyance of 4.426 acres

of property required for the State’s highway

project - the value of which is $14,800,

including statutory interest - for a total

consideration of $55,000.” The Garcia memo

also stated that after the October 2002

Commission meeting Caltrans had offered to

give Flying J 4.4 acres of the Caltrans 20.5

acre parcel in exchange for the 4.4 acres of

Flying J property Caltrans wanted for its

project. The memo added that Flying J had

rejected this attempt to “renegotiate the

settlement” and “has deferred the

Department’s offers of renegotiation pending

the Commission’s action on the original

proposed settlement.” In short, Flying J

still wanted the 20.5 acres for $55,000.

The appraisal relied on by Flying J to value

the 20.5 acres at $55,000 stated that “[t]his

appraisal report has been prepared for the

exclusive benefit of” two named attorneys

representing Flying J. The portion of the

appraisal report documenting comparable sales

stated that Flying J purchased its own 18.8

acre parcel (containing the 4.4 acres

Caltrans sought to acquire) in 1997 for the

$15,000 per acre price of $282,000. A 20.5

acre parcel valued at $15,000 per acre (even

six years later) would thus be worth

$307,500. The appraisal report downplayed

the significance of this 1997 sale as

follows: “Sale 3 is the acquisition of the

Flying J parcel prior to the development of

the Freeway 58 Mojave Bypass Project. 

However, it was purchased with the

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understanding that there was a high

probability that the freeway would be

developed at this location. In consideration

of this factor, the buyer paid a significant

premium. This is well above market levels as

established by sales comparisons.”

At the February 27, 2003 Commission meeting,

Mr. Terrence Bride of Flying J spoke in favor

of approving the conveyance of the 20.5 acres

to Flying J. He stated that approval of the

conveyance would settle the eminent domain

action, allow Flying J to build the “travel

plaza” Flying J wished to build at the site,

provide 89 new jobs, and bring two to three

hundred thousand dollars of new sales tax

revenue to Kern County. He asserted that the

value of the property was $55,000. Caltrans

representative Steve Ikeda told the

Commission essentially the same thing Garcia

had told the Commission in his memo - that

Flying J wanted the property for $55,000 and

would not renegotiate, at least not until the

Commission disapproved the proposed

conveyance. Ikeda said: “The Department is

presenting this item subject to the

contractual obligations to Flying J, and

seeks Commission approval. We are aware of a

possible perception of an immediate windfall

to the buyer based on the potential for

speculative trends after the completion of

the State’s highway project, the Mojave

Bypass. [¶] Subsequent to entering into this

agreement, the Department staff attempted to

renegotiate with Flying J, recognizing the

perception. Flying J, however, has deferred

the Department’s offers of renegotiation

pending the Commission’s action on the

original settlement.”

In response to Mr. Bride’s comments,

Commission Chair R. Kirk Lindsey

stated: “You know I’ve heard very clearly

the interest in the community and in economic

development, jobs, and certainly appreciate

that. What I still haven’t got is why you

are opposed to going out to bid on this

thing?” Bride responded that Flying J had

negotiated in good faith, had “come to an

agreement” and “essentially we’re prepared to

walk from the project.” Commissioner John

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Lawson described this position as: “It’s

your way or the highway. Nah. It’s your way

or the desert.” Commissioner Allen Lawrence

pointed out to Mr. Bride that the written

settlement agreement, by its own terms,

stated that the proposed conveyance of the

20.5 acres to Flying J was subject to CTC

approval. Bride stated “[i]t most definitely

does, and that’s way we’ve come here today to

culminate that arrangement....” Even though

approval of the conveyance would have

increased the size of Flying J’s parcel from

18.8 acres to 34.9 acres (18.8 minus the 4.4

going to Caltrans under the settlement

agreement, plus the 20.5 acre excess parcel

to be conveyed by Caltrans to Flying J under

the settlement if this conveyance were

approved by the Commission), Bride argued

that Flying J “was damaged” by the proposed

taking by Caltrans of the 4.4 acres of Flying

J property Caltrans would acquire under the

settlement agreement. Bride stated “We had

requested one hundred and seventy-five

thousand [$175,000] in damages.” This

appears to have been an argument that even if

the Commission viewed the $55,000 valuation

of the 20.5 acres to be low, the Commission

should approve the conveyance anyway because

Flying J was foregoing $175,000 in “severance

damages” for its loss of the 4.4 acres to be

acquired by Caltrans for its frontage road. 

Nothing in the settlement agreement itself,

however, acknowledges the existence of any

such severance damages. Bride also told the

Commission “given that we have been damaged,

we will not participate in a bidding

situation.[”]

Commissioner Lawson moved to “put it out to

bid.” Commissioner Lawrence seconded the

motion. The motion passed by a vote of 7 to

1.

The 20.5 acres were then auctioned off by

Caltrans in May of 2003. As we have already

stated, the winning bid was $377,000. Flying

J did participate in the auction, through an

agent, but was outbid. The winning bidder,

Mr. Pistachio [sic], was sued by Flying J in

the United States District Court for the

Eastern District of California in November of

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2003 for intentional interference with

contract and other causes of action.

The Commission’s February 26, 2004 Meeting

The Commission was asked to, and did,

reconsider in February of 2004 the proposed

20.5 acre conveyance to Flying J. Flying J

claimed that because Commissioner Lawson had

an ongoing business relationship with the

winning bidder (Thomas Pistachio [sic]),

Lawson should not have participated in the

Commission’s decision on whether to approve

the proposed conveyance of the 20.5 acres to

Flying J. Commissioner Lawson’s term on the

Commission had ended after the Commission’s

February 2003 meeting. The February 2004

Commission first decided whether to

reconsider the proposed conveyance to Flying

J, without making any determination regarding

the propriety of any previous Commission

action concerning the proposed conveyance. 

The motion to reconsider, made by

Commissioner Jeremiah Hallisey and seconded

by Commissioner Jim Ghielmetti, carried by a

vote of six to zero. The Commission then

heard arguments as to whether it should or

should not approve the proposed conveyance. 

Commissioner Hallisey then moved that the

Commission reject the proposed conveyance to

Flying J. Commissioner Allen Lawrence

seconded the motion, and the motion passed

six to zero.

THE SUPERIOR COURT ACTION

In March of 2004 Flying J filed its superior

court action seeking a writ of administrative

mandamus (first cause of action), a writ of

traditional mandamus (second cause of

action), and declaratory and injunctive

relief (third cause of action). Flying J

sought to have the superior court direct the

Commission to (1) “invalidate the

Commission’s decisions disapproving a

conveyance to Flying J of” the subject 20.5

acre parcel, (2) “invalidate Caltrans

subsequent sale of the real property,” and

(4) “approve the conveyance of” the 20.5

acres to Flying J and “direct Caltrans to

deliver to Flying J a Director’s Deed” to the

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20.5 acre parcel. Flying J also sought to

have the court direct the Commission to (3)

“conduct the Commission’s proceedings without

violating California’s conflict of interest

or open meeting laws.” Although Flying J’s

superior court action named both the

Commission and Caltrans as respondents, it

does not appear to have sought any actual

relief against Caltrans. The court

sustained, without leave to amend, demurrers

by the Commission and Caltrans to Flying J’s

first (administrative mandamus) cause of

action. The parties submitted briefing and

documentary evidence. The court held a

hearing, heard oral argument, and took the

matter under submission. The court then

ruled against Flying J on the remaining two

causes of action, and entered judgment in

favor of the Commission and Caltrans.

Flying J’s appeal to this court argues that

Flying J did not receive a fair hearing

before the Commission, and that the court

therefore erred in refusing to order the

Commission to invalidate the Commission’s

disapproval of the proposed conveyance of the

20.5 acres to Flying J. As we shall explain,

we disagree with Flying J, and we agree with

the superior court’s conclusion that Flying J

is not entitled to any relief.

STANDARD OF REVIEW

The Commission

The California Transportation Commission was

established in 1978 as part of the AlquistIngalls Act. (Stats. 1977, ch. 1106; Gov.

Code § 14500 et seq.) The Legislature’s

stated intent in enacting this legislation

was: “to reform the state transportation

program by all of the following: [¶] (a)

Simplifying and clarifying the transportation

planning and programming process. [¶] (b)

Consolidating the various transportation

boards and commissions into a single planning

and fund allocation commission. [¶] (c)

Increasing the responsibility and

effectiveness of the role of the Legislature

in deciding state transportation policy and

budgeting.” (Stats. 1977, ch. 1106, § 2, pp.

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3531-3532.) The California Transportation

Commission replaced and assumed the

responsibilities of four previously existing

bodies: the State Transportation Board (gov.

Code, § 13990), the State Aeronautics Board

(Pub. Util. Code § 21215), the California

Highway Commission (Sts. & Hy. Code § 70),

and the California Toll Bridge Authority

(Sts. & Hy. Code § 30050). (Stats. 1977, ch.

1106, §§ 9, 29, 36, 63.)

The Commission consists of nine members

appointed by the Governor, with the advice

and consent of the state Senate, to staggered

four-year terms, plus two non-voting exofficial members. (Gov. Code §§ 14502 &

14503.) The non-voting members are a member

of the state Senate appointed by the Senate

Rules Committee and a member of the state

Assembly appointed by the Speaker of the

Assembly. (Gov. Code § 14502.)

Pertinent to this appeal is the Commission’s

function of approving conveyances of state

properties owned by the state but no longer

needed for highway purposes. In California’s

Streets and Highways code, the term

“department” means “the Department of

Transportation of this state” (i.e.,

Caltrans) (Sts. & Hy. Code § 20), and

“[u]nless the particular provision or the

context requires otherwise, ‘commission’

means the California Transportation

Commission.” (Sts. & Hy. Code § 22.) The

term “director” means the director of the

Department of Transportation. (Sts. & Hy.

Code § 21.) The Commission’s approval

function appears in section 118 of the

Streets and Highways Code.

Subdivision (a) of section 118 states in

pertinent part: “Whenever the department

determines that any real property or interest

therein, previously or hereafter acquired by

the state for highway purposes, is no longer

necessary for these purposes, the department

may sell, contract to sell, sell by trust

deed, or exchange the real property or

interest therein in the manner and upon

terms, standards, and conditions established

by the commission.” Subdivision (b) of

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section 118 states: “Any conveyance under

this section shall be approved by the

commission and shall be executed on behalf of

the state by the director and the purchase

price shall be paid into the State Treasury

to the credit of any fund, available to the

department for highway purposes, which the

commission designates.” Subdivision (c) of

section 118 states: “Any such real property

or interest therein may in like manner be

exchanged, either as whole or part

consideration, for any other real property or

interest therein needed for state highway

purposes.” The key words of this section are

the subdivision (b) worlds “[a]ny conveyance

under this section shall be approved by the

commission....” The conveyance of the 20.5

acres could not take place without the

Commission’s approval, and Flying J was

unsuccessful in its attempt to obtain that

approval.

Judicial Review of The Commission’s Decisions

Administrative decisions are classified as

either quasi-legislative or quasi-judicial

(sometimes also called “adjudicatory”). 

(Western States Petroleum Assn. v. Superior

Court (1995) 9 Cal.4th 559, 566-567, 38

Cal.Rptr.2d 139, 888 P.2d 1268.) Quasijudicial or “adjudicative” administrative

decisions have been described as “‘decisions

that determine what the facts are in relation

to specific private rights or interests.’”

(Western States Petroleum Assn. v. Superior

Court, supra, 9 Cal.4th at p. 567, 38

Cal.rptr.2d 139, 888 P.2d 1268) and reviewed

by a petition for administrative mandamus

under the standard of review described in

Code of Civil procedure section 1094.5

(Western States Petroleum Assn. v. Superior

Court, supra, 9 Cal.4th at pp. 566-567, 38

Cal.rptr.2d 139, 888 P.2d 1268.) Other

administrative decisions are quasilegislative and are reviewed under the socalled “traditional mandamus” standard set

forth in Code of Civil Procedure section

1085. (Western States Petroleum Assn. v.

Superior Court, supra, 9 Cal.4th at pp. 567-

568, 38 Cal.Rptr.2d 139, 888 P.2d 1268.)” 

There is no doubt that a public agency’s

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decision to sell a piece of property it

wishes to dispose of is nonadjudicatory in

character, so Code of Civil Procedure section

1085 applied.” (Friends of the Sierra

Railroad v. Tuolumne Park and Recreation

District (2007) 147 Cal.App.4th 643, 652, 54

Cal.Rptr.3d 500.)

“A writ of mandate may be issued by any court

to any inferior tribunal, corporation, board,

or person, to compel the performance of an

act which the law specially enjoins....” 

(Code Civ. Proc. § 1085, subd. (a).) This

code section “permits judicial review of

ministerial duties as well as quasilegislative acts of public agencies.” 

(Carrancho v. California Air Resources Board

(2003) 111 Cal.App.4th 1255, 1264-1265, 4

Cal.Rptr.3d 536.) We are not concerned in

this case with the performance of any

ministerial duty. We are concerned with the

Commission’s refusal to approve the proposed

conveyance of the 20.5 acres to Flying J. 

“In reviewing such quasi-legislative

decisions, the trial court does not inquire

whether, if it had the power to act in the

first instance, it would have taken the

action taken by the administrative agency. 

The authority of the court is limited to

determining whether the decision of the

agency was arbitrary, capricious, entirely

lacking in evidentiary support, or unlawfully

or procedurally unfair.” (Fullerton Joint

Union High School Dist. v. State Bd. of

Education (1982) 32 Cal.3d 779, 786, 187

Cal.Rptr. 398, 654 P.2d 168 (disapproved on

another ground in board of Supervisors v.

Local Agency Formation Com. (1992) 3 Cal.4th

903, 918, 13 Cal.Rptr.2d 245, 838 P.2d 1198);

in accord, see Pitts v. Perluss (1962) 58

Cal.2d 824, 833, 27 Cal.Rptr. 19, 377 P.2d

83.).) “Traditional mandamus may be used to

compel an agency to exercise its discretion

but not to control it, i.e., to force the

exercise of discretion in a particular manner

or to reach a particular result.” (Carrancho

v. California Air Resources Board, supra, 111

Cal.App.4th at p. 1268, 4 Cal.Rptr.3d 536.)

Although Flying J, on the last page of its

brief, asks us to “order approval of” the

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proposed conveyance to Flying J, nothing in

Flying J’s brief even attempts to explain why

any court would have any legal obligation to

direct the Commission to exercise its

discretion to approve the proposed

conveyance. Section 118 gives the discretion

to approve or not to approve to the

Commission, not to any court. The thrust of

Flying J’s brief to this court appears to be

an argument that the Commission’s proceedings

were “unlawfully or procedurally unfair”

(Fullerton Joint Union High School Dist. v.

State Bd. of Education, supra, 32 Cal.3d at

p. 786, 187 Cal.Rptr. 398, 654 P.2d 168.) 

This is the primary argument that was raised

by Flying J in the superior court. Flying J

contended that the Commission’s proceedings

were tainted because Commissioner Lawson was

a personal friend of winning bidder Thomas

Pistachio [sic] and had business dealings

with Pistachio [sic]. Flying J also raised

this argument at the February 2004 Commission

meeting where the Commission reconsidered

whether to approve the proposed conveyance. 

The Commission at its February 2004 meeting

expressly did not address the question of

whether its prior proceedings had been fair

or unfair. It simply reconsidered the

proposed conveyance anew at a time when

Lawson was no longer a member of the

Commission, and exercised its discretion not

to approve the proposed conveyance. The

superior court found no unfairness.

“In reviewing the denial of a petition for

writ of mandamus, whether under Code of Civil

Procedure section 1085 or section 1094.5, we

review questions of law de novo.” (Fry v.

Saenz (2002) 98 Cal.App.4th 256, 262, 120

Cal.Rptr.2d 30.) In the traditional mandamus

case of Cosgrove v. County of Sacramento

(1967) 252 Cal.App.2d 45, 59 Cal.Rptr. 919,

the court stated: “All presumptions usually

made by an appellate court in considering

appeals apply to a proceeding in mandamus.

[Citation.] The judgment is presumed to be

correct, and the burden is on appellant to

show reversible error. [Citations.] The

presumption that public officials have

performed their duty as required by law is

applicable. [Citation.] [¶] The duty of

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determining questions of fact in proceedings

in mandate heard below is for the trial

court. [Citations.] [¶] Findings of the lower

court will not be disturbed by the appellate

court if they are based on substantial

evidence even though the evidence is

conflicting.” [Citations.] (Id. at pp. 50-51,

59 Cal.Rptr. 919.)

THE PETITION WAS PROPERLY DENIED

Flying J raises five arguments on this

appeal. It designates these in its brief as

arguments “A” through “E.” We will address

each of these, but before we do so, we deem

it prudent to emphasize what appears to us to

be by far the most salient aspect of this

case - the fact that the Commission in

February of 2004, when Lawson was no longer a

Commission member, reconsidered the proposed

conveyance of the 20.5 acres to Flying J and

refused to approve that proposed conveyance. 

All of Flying J’s voluminous argument about

what it deems to be a bias or impermissible

interest of Lawson simply no longer mattered

after the commission decided in February of

2004, at the request of Flying J, to

reconsider anew the proposed conveyance on

its merits. Flying J was successful in its

attempt to have the Commission reconsider the

proposed conveyance, but was unsuccessful on

that reconsideration in its attempt to

persuade the Lawson-less Commission to

approve the proposed conveyance.

The Commission’s February 2004 refusal to

approve the proposed transaction was simply

an exercise of the Commission’s quasilegislative discretion. After the Commission

entertained argument on the proposed

conveyance, Commissioner Hallisey moved to

adopt the staff recommendation. That

recommendation, recited by Commission staff

member Stephen Maller, was: “The Staff

recommends that the Commission reject the

proposed conveyance to Flying J. The

proposed conveyance is in conflict with the

terms, standards and conditions as

established by the Commission in its

procedures for sale of excess property under

Resolution G98-22. [¶] In addition, the

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proposed conveyance is based on an appraisal

with substantive flaws.” The second one

especially is, frankly, somewhat

overwhelming. Several bidders (including

Flying J itself, through its agent Lee

Pulsipher) had already bid more than $300,000

on the 20.5 acre parcel that was valued in

the settlement agreement at $55,000. And the

appraisal relied on for that valuation

essentially downplayed the fact that Flying J

itself had paid $282,000 ($15,000 per acre)

for its own adjacent 18.8 acre parcel in

1997.

We should also mention here that there is no

dispute that the subject 20.5 acres has not

been sold to Pistachio [sic]. Pistachio’s

[sic] winning bid earned him an option to

purchase the property if certain conditions

were met. As with any conveyance of excess

property, any sale to Pistachio [sic] would

be subject to approval by the Commission. 

(§ 118.) Indeed, the bid form signed by

Pistachio sates “bidder understands and

agrees that this option is subject to the

approval of the California Transportation

Commission....” The Commission’s brief to

the superior court also informed the court:

“There has never been a sale of the property. 

The state still owns it. No request for

approval of any conveyance of the property

has been made....” In short, there was

nothing to prevent the Commission from

approving the proposed conveyance of the 20.5

acres to Flying J at the February 2004

Commission meeting of the Commission had

chosen to exercise its discretion to do so.

A. Flying J’s Argument that “Neither

Streets & Highways Code Section 118 Nor

Any Commission Resolution Precluded the

Commission From Approving the Property

Exchange As A Matter of Law”

The superior court’s statement of decision

stated in part: “The proposed conveyance did

not comply with Streets and Highways Code

section 118 or with the guidelines adopted by

the commission pursuant to that section, and

as a consequence the Commission did not have

the authority to disapprove it.” The

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statement of decision also added: “However,

even if the Commission otherwise had the

authority to approve a conveyance of the

property, it was within its discretion to

disapprove it for other reasons.” Flying J’s

argument “A” pertains to the first of these

two sentences. Subdivision (a) of section

118 provides that “the department may sell,

contract to sell, sell by trust deed, or

exchange the real property or interest

therein in the manner and upon terms,

standards, and conditions established by the

commission.” Pursuant to this statutory

authority the commission adopted its

Resolution G-98-22 entitled “Procedure For

Sale of Excess Property.”

Paragraph 2.1 of Resolution G-98-22 permits a

sale of “the excess parcel to the owner of

adjoining property without the necessity of

calling for competitive sealed bids or

selling same at public auction” when certain

“facts ... exist pertaining to such excess

parcel.” There are two sets of such “facts.” 

One set of such facts is labeled “Finding A”

and the other is labeled “Finding B.” A sale

to the adjoining owner without competitive

sealed bids or a public auction is authorized

“whenever the Department of Transportation

finds and determines that the following facts

either under Findings A or B exist pertaining

to such excess parcel.” For purposes of this

appeal, all that matters about Paragraph 2.1

is that the parties agree Paragraph 2.1 does

not authorize a sale to Flying J without

competitive sealed bids or a public auction

because “facts under either findings A or B”

do not “exist” pertaining to the 20.5 acre

parcel at issue here. Flying J relies on

Paragraph 2.3 of Resolution G-98-22. 

Paragraph 2.3 states: 

“THEREFORE BE IT FURTHER RESOLVED,

that in all cases other than sales

to adjoining landowners, either

under Finding A or Finding B, or

sales to public agencies, excess

property shall be either sold by

receipt of competitive sealed bids,

or by sale at public auction, or

exchanged for other land required

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for transportation purposes....”

Flying J contends that under the terms of the

proposed conveyance of the State’s excess

20.5 acres to Flying J, the 20.5 excess acres

would be “exchanged for other land required

for transportation purposes,” namely the 4.4

acres the state would receive from Flying J

along with the $40,200 monetary payment. 

Both the Commission and the court were of the

view that the proposed conveyance was not an

“exchange” because 73 percent of the

consideration for the 20.5 acres to be

conveyed to Flying J was cash (the $40,200)

and only 27 percent was “other land required

for transportation purposes” (i.e., the 4.4

acres valued at $14,800 to be conveyed by

Flying J to the state for the highway project

frontage road). The Commission is entitled

to some discretion in its interpretation of

its own resolution. It acted well within

that discretion in concluding that the

proposed conveyance would not be an

“exchange” within the meaning of the

Paragraph 2.3 words “excess property ...

exchanged for other land required for

transportation purposes.” We also note that

Flying J unquestionably could have had an

“exchange” within the meaning of Paragraph

2.3 if Flying J had accepted the Caltrans

offer of 4.4 acres of the state’s excess 20.5

acres in exchange for the 4.4 acres the state

wished to acquire from Flying J for the

state’s project. Flying J rejected this

offer.

More importantly, however, even if we could

conclude that the proposed conveyance were

authorized by Paragraph 2.3 of Resolution G98-22, the proposed conveyance was still

subject to Commission approval. (§ 118.) 

Lack of compliance with Resolution G-98-22

was not the only reason the Commission did

not approve the proposed conveyance. The

other reason was that the Commission was

unwilling to approve the conveyance of the

20.5 acres to Flying J for $55,000 ($40,200

in cash plus 4.4 acres of property valued at

$14,800) when several interested potential

buyers, including Flying J itself, had bid

more than $300,000 on the property. 

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Throughout the Commission proceedings, this

undervaluation of the 20.5 acres appears to

have been the primary concern of the

Commission in its consistent refusal to

approve the proposed conveyance. The

Commission’s refusal to approve the proposed

conveyance was not “arbitrary” or

“capricious” or “entirely lacking in

evidentiary support.” (Pitts v. Perluss,

supra, 58 Cal.2d at p. 833, 27 Cal.rptr. 19,

377 P.2d 83.)

B. Flying J’s argument that “The Trial

Court Erred In Failing To Invalidate An

Auction That Was Conducted Solely and

Exclusively Because The Commission

Issued An Order That Admittedly Exceeded

Its Own Powers”

As we have already explained, the Caltrans

auction in no way prevented the Commission

from approving the proposed conveyance to

Flying J. Flying J seizes upon the

Commission’s admission that the Commission

has no authority to order Caltrans to conduct

an auction, but Flying J ignores altogether

the apparent authority of Caltrans to conduct

such an auction. Flying J calls our

attention to no law violated by Caltrans in

conducting the auction. We also note that

Flying J did not object to the auction when

it took place in May of 2003, or take any

steps to stop it, but instead participated in

the auction through an agent who placed a

$350,000 bid on the property. Flying J’s

superior court petition asked the court to

issue a writ of mandate “ordering the

commission to ... invalidate Caltrans’

subsequent sale of the real property.” As we

have already pointed out, there has not yet

been any sale of the 20.5 acres, and any such

sale would be subject to Commission approval. 

Nor has Flying J called our attention to any

law which would authorize (much less require)

the Commission to invalidate any auction

conducted by Caltrans.

C. Flying J’s argument that “The Trial

Court Failed To Apply A De Novo Standard

Of Review To The Claim of Procedural

Impropriety - The Same Standard of

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Review This Court Now Applies”

Flying J cites to no portion of the superior

court’s statement of decision to support this

argument. More importantly, Flying J points

to no procedural impropriety at all in the

Commission’s February 2004 refusal to approve

the proposed conveyance to Flying J. Under

this heading “C” Flying J then argues that

the court’s evidentiary rulings were

erroneous. “A verdict or finding shall not

be set aside, nor shall the judgment or

decision based thereon be reversed, by reason

of the erroneous exclusion of evidence unless

the court which passes upon the effect of the

error or errors is of the opinion that the

error or errors complained of resulted in a

miscarriage of justice....” (Evid. Code

§ 354.) A miscarriage of justice “‘should be

declared only when the court, ‘after an

examination of the entire cause, including

the evidence,’ is of the ‘opinion’ that it is

reasonably probable that a result more

favorable to the appealing party would have

been reached in the absence of the error.’”

(Pool v. City of Oakland (1986) 42 Cal.3d

1051, 1069, 232 Cal.Rptr. 528, 728 P.2d

1163.) Flying J argues that the court

“rejected all evidence outside the

administrative record,” but calls our

attention to no ruling by the court stating

that the court would refuse to admit evidence

outside the administrative record. Indeed,

the Commission’s counsel expressly told the

court that the Commission was not objecting

to any otherwise admissible extra-record

evidence offered by Flying J “that might

pertain to an alleged procedural

irregularity.” The Commission also repeated

this position in its written argument to the

court. Whatever objections were sustained

were sustained on other grounds.

The evidence Flying J claims was erroneously

excluded appears to have pertained to its

contention that Commissioner Lawson should

not have participated in any Commission

decision regarding the proposed conveyance. 

Flying J makes no attempt to explain how

exclusion of this evidence caused Flying J

any prejudice, given that the Commission

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reconsidered and again disapproved the

proposed conveyance a year after Lawson’s

term on the Commission ended. (The trial

court’s statement of decision also

stated: “Putting aside its inadmissibility,

the evidence offered by Flying J still does

not compel the conclusion that Lawson had a

conflict of interest.” The court then gave

its reasons for reaching this conclusion.)

Flying J further argues that the trial court

violated its right to due process by

sustaining objections to its evidence

“without affording Flying J an opportunity to

be heard.” In fact, however, the court held

a hearing on Flying J’s petition and also

received extensive written briefing on

objections made by all parties. After the

parties had rested and after the court had

issued a proposed statement of decision (on

which the court also held a hearing), Flying

J requested another opportunity to submit

additional evidence. Due process requires an

opportunity to be heard, but it does not

require an opportunity to be heard twice.

D. Flying J’s argument that “Statutory And

Common Law Prohibit Lawson’s Actions And

compel A Conflict Of Interest Finding”

Under this heading Flying J again argues that

the evidence presented showed a conflict of

interest on the part of Commissioner Lawson

prohibiting him from lawfully participating

in the Commission’s decision on whether to

approve the proposed conveyance to Flying J. 

Again we reiterate that in February 2004 the

Commission, without Lawson as a member, voted

not to approve the proposed conveyance. Thus

even if we were to assume (without deciding)

that Commissioner Lawson had such a conflict

of interest, Flying J has failed to show how

the superior court erred in concluding that

Flying J was entitled to no relief.

E. Flying J’s argument that “Lawson’s

Conflict of Interest Was Not Harmless

Error Nor Cured By Reconsideration”

The trial court concluded [e]ven if it is

assumed that Lawson had a conflict of

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interest which should have precluded his

participation at the February 2003 meeting,

the proper remedy would depend on whether the

commission would have reached a different

decision in the absence of Lawson[‘s]

participation or whether Lawson’s vote was

essential to the adoption of the decision.” 

The court then concluded that given the

Commission’s seven to one vote against

approval, “there is no evidence of any kind

to support a finding that a different

decision would have been reached absent

Lawson’s participation.” Flying J argues

that this conclusion was legally incorrect

and that the February 2003 decision should be

nullified. The argument is inconsequential

because the Commission reconsidered the

proposed conveyance anew in February of 2004

without Lawson as a member and again

disapproved the proposed conveyance.

The superior court also concluded: “The

February 2004 reconsideration cured any

defects affecting the earlier decision. 

There is no evidence of any conflict of

interest in connection with the February 2004

meeting.” Flying J disputes this conclusion

and argues that “[n]othing about the

reconsideration hearing indicated any true

re-evaluation of” the proposed conveyance. 

This is simply incorrect. At the February

200r meeting Commissioner Hallisey expressly

moved to reconsider the proposed conveyance. 

The motion passed unanimously. Flying J

argues that the Commission could not lawfully

reconsider the proposed conveyance in

February 2004 without first setting aside its

February 2003 decision. Flying J does not

call our attention to anything in section 118

or in any other law, however, that would bar

the Commission from approving the proposed

conveyance to Flying J in February of 2004

after already once having refused to approve

the proposed conveyance in February of 2003. 

We see nothing in Clark v. City of Hermosa

Beach (1996) 48 Cal.App.4th 1152, 56

Cal.Rptr.2d 223, which supports Flying J’s

argument. In Clark a City Council denied the

Clarks a building permit by a vote of three

to two. The Clarks then persuaded the court

that one of the voting council members was

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biased against them. “The trial court set

aside the Council’s decision and ordered the

City to reinstate the planning commission’s

approval of the Clark’s permits. This was

error. The trial court should have ordered

the Council to rehear the matter and to

provide the Clerks with a fair hearing.” 

(Clark v. City of Hermosa Beach, supra, 48

Cal.App.4th at p. 1174, 56 Cal.rptr.2d 223,

fn. omitted.) In the present case the

Commission, on its own initiative, voted to

rehear and did rehear the matter after Lawson

was no longer on the Commission. There was

no error.

DISPOSITION

The judgment is affirmed. Costs to

respondents. [Footnotes omitted]

Flying J’s petition for hearing to the California Supreme Court

has been denied. The Court of Appeals’ decision is a final

judgment that is dispositive of the issues of fact and law

decided.

C. DEFENDANTS’ MOTION TO DISMISS ACTION AS MOOT.

Defendants move to dismiss the SAC for lack of subject

matter jurisdiction pursuant to Rule 12(b)(1), Federal Rules of

Civil Procedure, on the ground that the action is moot.

Defendants argue that the allegations in the SAC purporting

to cast doubt on the independence of the CTC’s 2004

reconsideration fail to establish that the original denial by the

CTC of the conveyance played a causal role in the denial on

reconsideration.

“A case becomes moot if (1) there is no reasonable

expectation that the alleged violation will recur and (2) interim

relief or events have completely and irrevocably eradicated the

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effects of the alleged violation.” Texas Office of Public

Utility Counsel v. F.C.C., 183 F.3d 393, 413-414 (5 Cir.1999), th

citing County of Los Angeles v. Davis, 440 U.S. 625, 631 (1979). 

Defendants place primary reliance on Coliseum Square Ass’n,

Inc. v. Jackson, 465 F.3d 215 (5 Cir.2006), cert. denied, 126 th

S.Ct. 40 (2007). In Coliseum Square, nonprofit organizations

representing citizens, residents and merchants in New Orleans

brought an action against the Housing Authority of New Orleans

(HANO) and the United States Department of Housing and Urban

Development (HUD) for judicial review, seeking declaratory

judgment that HUD failed to comply with the National

Environmental Policy Act (NEPA) and the National Historic

Preservation Act (NHPA) in funding a housing development

revitalization project, and an injunction compelling HUD to

withhold federal funds from the project until it fully complied

with those statutes. Shortly after the lawsuit was filed, HUD

voluntarily re-opened the NEPA process, which resulted in a new

FONSI and MOA. The Fifth Circuit held in pertinent part:

Corrective action by an agency can moot an

issue ....

In reopening the NHPA process, HUD took the

voluntary action required to address

plaintiffs’ original claims. At the closure

of that process, a second, final MOA was

produced. As the St. Thomas project is no

longer proceeding under the original version

of the MOA, any remaining challenges to its

validity have been mooted. The district

court rightly disposed of claims against the

final MOA ....

Id. at 246. 

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Defendants argue that Flying J has failed to allege activity

sufficient to show that any alleged conflict on interest by

Lawson with Pistacchio in 2003 during the CTC’s 2003

consideration of the proposed transaction had a causal role in

the CTC’s 2004 reconsideration of its denial of the conveyance. 

Defendants contend that Flying J’s allegations in Paragraphs 59

and 60 of the SAC that the CTC’s reconsideration was not

independent are “mere conclusions”. Defendants argue that the

allegation in Paragraph 60 that “Lawson’s continuing influence

over these commissioners is reflected by the fact that the CTC

expressly refused to consider whether Lawson had a conflict of

interest, or whether the CTC’s prior order was improper” is

nonsensical given the allegation in Paragraph 64 that “[t]he CTC

has never been asked to consider, has never considered, and lacks

the authority to render any decision with respect to, Defendants’

wrongful and illegal conduct, as alleged herein, or the damages

to Flying J resulting therefrom.” 

Flying J argues that the 2004 CTC reconsideration does not

moot this action. Flying J cites GATX/Airlog Co. v. U.S. Dist.

Court for Northern Dist. of California, 192 F.3d 1304, 1306 (9th

Cir.1999):

A case is moot only if interim events have

completely and irrevocably eradicated the

effects of an allegedly improper ruling ...

The party asserting mootness has the heavy

burden of establishing that there is no

effective relief remaining for a court to

provide.

Flying J concedes that “there is some factual overlap between the

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present case and the February 26, 2004, CTC hearing regarding the

conveyance of the 20-Acre Parcel to Flying J.” Flying J contends

that the claims made and the relief requested here are “very

different.” Flying J asserts that it requested the CTC in

February 2004 “to address and, if determined necessary, remedy

the improprieties associated with the CTC’s ultimate rejection of

the conveyance of the 20-Acre Parcel to Flying J in February

2003.” Flying J asserts that the relief sought in the 2004 

reconsideration hearing before the CTC was “the rectification of

Lawson’s and the CTC’s improprieties of October 2002 and February

2003" and “the nullification of the May 2002 auction of the

property and the approval by CTC of the conveyance of the 20-Acre

Parcel to Flying J.” In contrast, Flying J argues, this action

addresses whether Pistacchio and Lawson’s conduct caused the CTC

to disapprove the conveyance of the 20-Acre Parcel to Flying J

resulting in the alleged deprivation of Flying J’s rights and

seeks damages and the recovery of the 20-Acre Parcel. 

Flying J contends that the relief sought in this action is

still available because Pistacchio is in possession of the right

to purchase the 20-Acre Parcel and Flying J has suffered damages

resulting from Defendants’ allegedly unlawful conduct: “The CTC

did not and could not address Flying J’s claims in this action

against Defendants or provide Flying J with the relief requested

in this action.”

Flying J argues that the allegations in Paragraphs 59-60

establish that the CTC’s reconsideration “was another by-product

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of Lawson’s influence and improper conduct on the CTC approval

process.” Although Lawson was not acting as a Commissioner

during the 2004 reconsideration, Flying J asserts that “his

cronies were.” Flying J refers to Lawson’s deposition testimony

that Allen Lawrence, who was one of the Commissioners presiding

over the 2004 reconsideration, is Lawson’s insurance broker and

that Lawson and Lawrence discussed the possibility of doing

business together while Lawson was still a Commissioner, and that

Lawrence is currently the broker of record for several of

Lawson’s properties. 

As Defendants reply, despite being afforded leave to conduct

further discovery, the only new factual allegation developed to

show Lawson’s allegedly continuing influence over the

Commissioners hearing the 2004 reconsideration is that involving

Lawrence’s insurance business relationship with Lawson. Flying J

makes no allegation that Lawson ever spoke with Lawrence

concerning the proposed conveyance or the reconsideration hearing

after Lawson left the Commission, or that Lawson attempted to

influence Lawrence in connection with the reconsideration

hearing. With regard to the allegation in Paragraphs 59-60,

Defendants note that there is no allegation or evidence that

Lawson even spoke to the Commissioners after the February 2003

hearing or that he spoke with the Commissioners prior to the

February 2004 reconsideration hearing.

Flying J argues that the CTC’s 2004 reconsideration does not

moot this action because, but for Defendants’ alleged unlawful

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Flying J contends that the Ninth Circuit acknowledged “this 2

fact”, quoting a statement by Judge Reinhardt during oral argument

of Flying J’s appeal of Judge Coyle’s order dismissing this action

as moot. Defendants correctly object to Flying J’s

characterization of the Ninth Circuit’s position. The Ninth

Circuit’s order of reversal expresses no opinion on this issue:

We express no opinion on how new allegations

will play out, or whether it is necessary to

reach them in order to decide the underlying

case, but we cannot say at this stage of the

proceedings that amendment would be futile.

Flying J suggested ... that additional facts

could be averred which would clearly show that

the February 2004 decision was not independent

and that it suffered compensable injury on

account of Pistacchio’s allegedly wrongful

conduct. Therefore, it should have the

opportunity to amend.

55

conduct, the CTC would have approved the conveyance of the 20-

Acre Parcel to Flying J in October 2002 or February 2003: “The

alleged intervening event - the CTC’s 2004 ‘reconsideration’ of

the conveyance - would have never occurred but for Defendants

[sic] unlawful manipulation of the CTC processes in October 2002

and February 2003.”2

Flying J contends that the 2004 reconsideration has “no

effect” on the “CTC ultra vires order of February 2003 that

Caltrans sell the 20-Acre Parcel at public auction and the

resulting damage Flying J.” Flying J argues:

This unauthorized order was the direct result

of defendant Lawson’s conflict of interest

and a central component of Defendants’

conspiracy to steal the 20-Acre Parcel from

Flying J. Had the CTC in February 2003

simply approved or rejected the conveyance to

Flying J - which is all they were authorized

to do - Pistacchio would not have had the

opportunity to acquire the parcel. The ultra

vires order that the 20-Acre Parcel be

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auctioned was necessary to pry open Flying

J’s lock on the property and insure that

Pistacchio had an opportunity to acquire the

20-Acre Parcel. Had the CTC not ordered the

parcel to be sold at public auction, Flying J

could have renegotiated the deal with

Caltrans to meet CTC approval. Simply

stated, the CTC’s February 2003 order to sell

the 20-Acre Parcel at public auction deprived

Flying J of the 20-Acre Parcel and the CTC’s

February 2004 decision did not address or

remedy this fact.

Flying J’s contention is mired in conflict of interest

contentions and an excursion into the nongermane; even accepting,

arguendo, as did both state courts that decided the conflict

issue, the prerequisite of causation remains; i.e., is there a

causal link between the alleged harm, disapproval of the sale to

Flying J, and the conflict of interest actions complained of by

Flying J? That issue has been decided against Flying J as a

matter of law and affirmed on appeal:

Because the CTC elected to reconsider the

proposed conveyance almost an entire year

after Lawson left the Commission - at Flying

J’s special request - and Flying J has failed

to allege facts showing the decision somehow

remained ‘tainted,’ this argument is of no

help to Flying J.

Flying J’s contention that, had CTC not ordered the parcel to be

sold at public auction, Flying J would have renegotiated the deal

with Caltrans to meet CTC approval, is totally belied by the

record. Following the February 2003 hearing, CTC staff informed

Caltrans representatives that Caltrans and Flying J could still

negotiate an equal exchange of properties. Reference is made to

Exhibit D to the deposition Steven Ikeda of Caltrans:

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Immediately after the vote [at the February

27, 2003, CTC hearing] - I was seated at the

table next to Stephen Maller [the CTC Liaison

for Caltrans]. And immediately after the

vote in the lull before the next item, I

turned to him and I asked, ‘Can we still

exchange to make them whole and put the rest

up for auction?’ And he said yes, he would

support that. And that was the basis for my

statement here. I clarified with CTC staff

after the vote to ensure that we are still

able to negotiate an even exchange.

Thereafter, representatives of Caltrans contacted Terrance Bride,

Flying J’s Project Director, to attempt to renegotiate an evenacre exchange with Flying J. According to Caltrans’ Right of Way

Parcel Diary dated March 5, 2003:

Nancy [Escallier of Caltrans] able to contact

Terrance during lunch ... they [Flying J and

their representatives] don’t want 4 acre

exchange - they don’t want to bid on excess -

they will just carry parcel on their

inventory.

Caltrans’ Right of Way Parcel Diary dated March 17, 2003 states:

Nancy says Terrance ph[oned] Friday and they

[Flying J and their representatives] do not

want an even exchange - feels it would limite

their options with damages. DG. Phoned Phil

Acosta [of Caltrans]. He said they are

moving forward with public action.

Caltrans attempted to renegotiate with Flying J and only after

Flying J’s refusal to do so did Caltrans schedule the auction.

There is no dispute, factually or legally, that Flying J’s

proposed transaction with Caltrans was always subject to the

Commission’s approval; Flying J never had or has any absolute,

unconditional “right” to purchase the 20-acre parcel under the

terms of the Settlement Agreement with Caltrans. The purchase of

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public property was always subject to CTC approval. The record

in this action demonstrates strong justification existed for

questions to be raised about the economic viability and fairness

of the proposed transaction, to the extent that the gross

disparity in value between the real property and money to be

provided by Flying J to pay for the significantly more valuable

state 20 acre parcel of real property, could be interpreted as an

unlawful gift of public property, the disparity in values is so

great. This is borne out by the commission’s concerns about

Flying J’s appraisal submitted to support the valuation of the

transaction. Competitive bidding laws are designed to protect

the public fisc by preventing public officials from awarding

contracts uneconomically to protect taxpayers from public

corruption and prevent waste of public funds. Assoc. Gen.

Contractors of California v. San Francisco Unified., 616 F.2d

1381, 1391 (9th Cir. 1990). The CTC cannot be restrained from

open and public consideration of transaction. A public body

cannot contract to “approve” by vote in advance. This is a sale

of the public domain. California Constitution Article XVI, § 6

prevents a gift of public funds. See Alameda County v. Ross, 32

Cal.App.2d 135, 147 (1939)(a contract to improve a bridge and

grant a license to a railroad was illegal as an unlawful gift or

free contribution to the corporation and void for lack of

mutuality of obligations.)

The party, Flying J, against which issue and claim

preclusion is asserted, has had full opportunity to fully and

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finally litigate the alleged conflict of interest and the alleged

impropriety of Lawson’s actions to deprive Flying J of an obvious

economic windfall at public expense in the forum of Flying J’s

choice. Flying J has had its day in court at the trial and

appellate levels. Both courts fully analyzed and decided the

issue of alleged conflict of interest. Further, appellate review

was denied. Both state courts found the facts that Lawson was

off the Commission and had no vote on or wrongful role in the

Commission’s rejection by disapproval of the proposed Flying J

transaction or decision to release the real property for sale at

public auction. Both courts independently found that no

conflict, act or omission by Lawson or anyone associated or

acting in concert with him had any role in nor did it cause the

disapproval of the Flying J purchase. It has been completely and

finally adjudicated that there is a total absence of causation

for Plaintiff’s claims and failure of proof that any Defendant

engaged in any wrongful act or omission that caused Flying J to

lose the purchase of the 20.4 acre parcel. 

Flying J ignores the infirmity of its fundamental premise

that the Caltrans settlement agreement was enforceable because

Commission approval was a fait accompli or a mere formality on a

public agency’s consent calendar. The express condition

precedent to an enforceable contract was CTC approval. Flying J

had no legitimate or lawful expectation that the CTC was a rubber

stamp for CALTRANS and would not exercise independent legislative

judgment in the approval process. Flying J never had a right or

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Flying J’s argument, made for the first time at the hearing 3

on November 5, 2007, that the statute of limitations set forth in

California Code of Civil Procedure § 340 barred authority of the

trial court and the Court of Appeals to consider the validity of

the CTC’s February 27, 2003 ruling, does not alter this conclusion.

Flying J’s briefs in support of the petition for writ of mandate

specifically refer to the “decisions” of the CTC, no argument was

made during the petition for writ of mandate proceedings that the

trial court lacked jurisdiction because of the statute of

limitations, and, for the reasons set forth above, lack of

causation has been conclusively determined. 

60

reasonable expectation to perfunctory approval by CTC consent. 

No public agency can contract or pre-commit to the performance of

a quasi-legislative act, approval of the purchase agreement. The

entire foundation of Flying J’s lawsuit is fatally flawed. The

State Courts finally decided Flying J had and has had its day in

court on the enforceability of the contract and the propriety of

the proceedings by which its agreement was disapproved.3

Defendants’ motions to dismiss the SAC on the ground that

this action is moot are GRANTED. 

D. COLLATERAL ESTOPPEL.

In moving to strike the SAC under the AntiSLAPP provisions

and to dismiss the SAC for failure to state a claim upon which

relief can be granted, Defendants argue that collateral estoppel

effect should be given to the rulings made by the Kern County

Superior Court and the now final judgment of the state Court of

Appeals.

The parties dispute whether collateral estoppel effect can

be given under California law to the findings and conclusions of

the Kern County Superior Court. Flying J argues that they cannot

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unless the trial court’s findings were specifically adopted by

the Court of Appeal and asserts that no collateral estoppel

effect can be given to the issues whether Lawson had a conflict

of interest and whether the Right of Way Contract is authorized

under Section 118. Flying J contends that the Court of Appeal

did not rule against Flying J on these issues:

The Court of Appeal affirmed the Superior

Court’s judgment on only two of the grounds

relied upon by the Superior Court - that

Lawson’s conflict of interest did not matter

because of the CTC’s February 2004

reconsideration and that the CTC was within

its discretion to disapprove the conveyance

in February 2004. Although the Superior

Court in the Mandamus Action determined that

Flying J did not meet its burden of

establishing Lawson’s disqualifying conflict

of interest in October 2002, November 2002,

or February 2003, the Court of Appeal

expressly refused to consider this issue,

stating in pertinent part:

Again, we reiterated that in

February 2004 the Commission

without Lawson as a member, voted

not to approve the proposed

conveyance. Thus, even if we

assume (without deciding) that

Commissioner Lawson had a conflict

of interest, Flying J has failed to

show how the superior court erred

in concluding that Flying J was

entitled to no relief.

Flying J argues that the Superior Court’s determination that the

Right of Way Contract in the settlement agreement was

unauthorized under Section 118 and has no preclusive effect. See

discussion infra. What the Court of Appeals decided was that

Flying J’s case is ill-conceived and cannot succeed because

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nothing it alleges any defendant did was or could have been the

legal cause of harm to Flying J.

In determining the preclusive effect of a state-court

judgment, the federal court must “refer to the preclusion law of

the State in which judgment was rendered.” Marrese v. Am. Acad.

of Orthopaedic Surgeons, 470 U.S. 373, 380 (1985); 28 U.S.C. §

1738 (state 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”). As explained in Lucido v. Superior Court, 51

Cal.3d 335, 341 (1990):

Collateral estoppel precludes relitigation of

issues argued and decided in prior

proceedings ... Traditionally, we have

applied the doctrine only if several

threshold requirements are fulfilled. First,

the issue sought to be precluded from

relitigation must be identical to that

decided in the former proceeding. Second,

this issue must have been actually litigated

in the former proceeding. Third, it must

have been necessarily decided in the former

proceeding. Fourth, the decision in the

former proceeding must be final and on the

merits. Finally, the party against whom

preclusion is sought must be the same as, or

in privity with, the party to the former

proceeding ... The party asserting collateral

estoppel bears the burden of establishing

these requirements.

In DiRuzza v. County of Tehama, 323 F.3d 1147 (9th

Cir.2003), the Ninth Circuit addressed whether “the collateral

estoppel effect of the issues decided by a trial court survive

after a reviewing court’s affirmance on different grounds?” Id.

at 1153. The Ninth Circuit held in pertinent part:

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California case law addressing this question

is sparse. The earliest of the relevant

cases, a California Supreme Court case

decided in 1865, supports the conclusion that

an appellate court’s affirmance for any

reason implicitly ratifies all reasoning

given in the court below. To be sure, a

nebulous exception to the rule and a recent

California appellate decision cut against

timeworn precedent and may counsel in favor

of more selective application of collateral

estoppel principles. In the end, however, we

conclude that the 1865 decision is

controlling. The principles enunciated in

that opinion have been questioned by a lower

appellate court, but we find no opinions from

the highest California court undermining the

authority of its early holding.

The venerable nineteenth-century case to

which we refer is People v. Skidmore, 27 Cal.

287 (Cal.1865). In the initial stages of

Skidmore’s procedural history, the parties

stipulated that a referee would ‘try all the

issues of law and fact ... and ... report a

judgment thereon.” Id. at 289. In the

resulting report, the referee found ‘from the

facts ... stated [in the pleadings]’ that the

plaintiff should not be permitted to recover. 

Id. at 292. Judgment was entered

accordingly, and the plaintiff took the case

to the California Supreme Court. That court

affirmed the judgment, but relied upon a

procedural issue - misjoinder - in reaching

its decision. The case eventually returned

to the California Supreme Court for a

determination whether the plaintiff having

corrected the misjoinder, could bring suit

again. The court determined that, regardless

of its previous opinion’s reliance on the

misjoinder issue, the referee’s report and

resulting judgment, which reached the merits

of the case, had been affirmed by the

judgment accompanying the previous opinion. 

Accordingly, the plaintiff could not bring

suit again, as the merits of the case had

already been adjudicated - this despite dicta

in the California Supreme Court’s first

opinion that assured ‘[t]he effect of the

judgment will not be to preclude the

plaintiff from suing again when the cause of

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action can be more formally set out.’ Id. at

292. The pertinent portion of the later and

controlling California Supreme Court opinion

reads:

The judgment below was not

reversed, either in whole or in

part, by the Supreme Court, nor was

it modified in any particular; and

it follows, if the Court dealt with

that judgment at all, it must have

affirmed it to the whole extent of

its terms. But the nature and

scope of the Court’s final action

is clearly indicated by the words

‘judgment affirmed,’ as they occur

in the published report of the

case. (17 Cal. 261) We have

examined the record, now remaining

in this Court, and find an

unqualified entry to the effect

that the judgment was affirmed.

The Court, in examining the

judgment in connection with the

errors assigned, found that there

was at least one ground upon which

the judgment could be justified,

and therefore very properly

refrained from considering it in

connection with the other errors. 

But the affirmance, still, was an

affirmance to the whole extent of

the legal effect of the judgment at

the time when it was entered in the

court below. The Supreme Court

found no error in the record, and

therefore not only allowed it to

stand, but affirmed it as an

entirety, and by direct expression.

Id. at 292-93.

Decades later - in 1940 - the California

Court of Appeals for the First District

arrived at the same conclusion as the

Skidmore court, but did not cite that 1865

decision. In Bank of America National Trust

& Savings Ass’n v. McLaughlin Land &

Livestock Co., 40 Cal.App.2d 620 ... (1940),

the state court evaluated the collateral

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estoppel effect of an affirmance by this

court of a judgment of a bankruptcy court. 

The bankruptcy court had based its decision

on two grounds, only one of which was invoked

by this court when we affirmed. The state

court wrote: ‘[I]t must be assumed that when

the Circuit Court of Appeals affirmed the

judgment it became res judicata of both the

issues tendered and tried.’ 105 P.2d at 612. 

In support of its ruling, the McLaughlin

court relied upon the following passage from

34 Corpus Juris 773: ‘A general affirmance of

a judgment on appeal makes it res judicata as

to all the issues, claims, or controversies

involved in the action and passed upon by the

court below, although the appellate court

does not consider or decide upon all of

them.’ 

In 1952 the California Court of Appeals for

the First District, in Natural Soda Products

Co. v. City of Los Angeles, 109 Cal.App.3d

440 ... (1952), cited both the Skidmore and

McLaughlin decisions for the ‘general rule’

for which they stand, but noted that some

cases might fall outside the reach of the

principle: ‘the rule is not without

exceptions, and where a finding is

unnecessary and immaterial the rule of

collateral estoppel does not operate.’ One

might infer, based on Natural Soda’s caveat,

that, when an appellate court affirms without

relying upon any aspect of the trial court’s

rationale, the affirmed court’s holding will

not necessarily be a bar to future litigation

of any - or at least some - of the issues. 

However, in the Skidmore case itself, the

California Supreme Court, in its first

opinion, in reviewing the trial-court [sic]

judgment entered pursuant to the referee’s

report, did not discuss the merits of the

controversy - i.e., the issues canvassed by

the referee. Rather, the court cited

misjoinder as the basis for the affirmance. 

Thus the Skidmore referee’s entire

discussion, under an expansive reading of

Natural Soda, could be viewed as ‘unnecessary

and immaterial,’ and hence not being entitled

to any preclusive effect. Thus, the Natural

Soda exception, if writ large, has the

potential to eviscerate the

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Skidmore/McLaughlin rule. 

After Natural Soda, all was generally quiet

on the collateral estoppel front in the

courts of California for almost fifty years. 

But three years ago the Court of Appeals for

the Second District called the state’s

doctrine into question. In Butcher v. Truck

Insurance Exchange, although determining the

effect of a prior federal diversity judgment,

the court made clear that it was

‘consider[ing] the rule that applies in

California.’ 77 Cal.App. 4 1442 ... th

(2000). Butcher acknowledged two competing

lines of case authority: (1) decisions

representing what appeared to be the

prevailing California rule discussed above;

and (2) decisions exemplified by the Second

Circuit’s opinion in Moran Towing &

Transportation Co. v. Navigazione Libera

Triestina, S.A., 92 F.3d 37 (2 Cir.1937), nd

which held that ‘the appellate court in the

prior action determines the preclusive effect

of its judgment, i.e., the judgment is

conclusive on [the ground upheld by the

appellate court],’ Butcher, 92 Cal.Rptr.2d at

531.

Butcher did not cite the Skidmore holding at

all, and noted that the portion of Corpus

Juris relied upon by McLaughlin had lost any

claim to authority, having been completely

abandoned in Corpus Juris Secundum. Id. at

533. Further, the Butcher court observed,

the McLaughlin court had failed to consider

the persuasive arguments marshaled by Judge

Augustus Hand in Moran Towing. Id. at 534. 

Ultimately, the Butcher court opined that

‘the reasoning of the McLaughlin court has

not withstood the test of time, and it would

be unwise to follow a rule that looks only to

the judgments, without taking into account of

the reasons for those judgments as stated in

the appellate courts’ opinions .... We hold

that if a court of first instance makes its

judgment on alternative grounds and the

reviewing court affirms on only one of those

grounds, declining to consider the other, the

second ground is no longer conclusively

established.’ Id.

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Butcher appears to be the only published

California appellate opinion clearly

supporting a departure from the general

California rule that an affirmance of a

judgment blesses all the grounds voiced in

the trial court. Butcher advances plausible

arguments against the general California

rule, but it comes from an intermediate

appellate court which failed to acknowledge

that the California Supreme Court, in

Skidmore, had addressed the subject. Until

we receive a definitive indication that

Skidmore no longer represents the law of

California, we will adhere to that case’s

precepts. Therefore, we reiterate the

understanding of California law we stated in

Markoff v. New York Life Insurance Co., 530

F.2d 841, 842 (9 Cir.1976) ...: ‘[The th

California position] is that even if the

appellate court refrains from considering one

of the grounds upon which the decision below

rests, an affirmance of the decision below

extends legal effects to the whole of the

lower court’s determination, with attendant

collateral estoppel effect.’ 

...

Because Skidmore remains the law of

California, it controls here and, therefore,

collateral estoppel bars DiRuzza’s suit. In

the instant case and in Skidmore, the

appellate court in prior litigation affirmed

on a ground other than that relied upon by

the trial court’s judgment. Skidmore makes

clear that, in that situation, the trial

court’s judgment, once affirmed, may be

invoked as a bar to relitigation of the issue

or issues deemed conclusive in the trial

court. In the state litigation that

proceeded parallel to the instant federal

litigation, the state trial court found that

DiRuzza’s resignation was voluntary and that

the voluntariness in turn vitiated any claim

that the alleged acts of the defendants

caused her ‘discharge.’ That finding, we

hold today, is one the defendants may rely

upon to bar relitigation of the issue in

federal court. Absent the causal link found

lacking by the state court, DiRuzza’s federal

claims of retaliatory discharge cannot stand. 

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Because we conclude that collateral estoppel

- i.e., issue preclusion - disposes of the

plaintiff’s claims, we find it unnecessary to

address the district court’s alternative

holding that res judicata - i.e., claim

preclusion - bars DiRuzza’s suit.

323 F.3d at 1153-1157. 

In 2006, the California Court of Appeals for the Fourth

District decided Newport Beach Country Club, Inc. v. Founding

Members of Newport Beach Country Club, 140 Cal.App.4th 1120

(2006). The procedural background of Newport Beach may be

important to resolving the collateral estoppel issue, it is set

forth below.

The trial court granted summary judgment in favor of The

Newport Beach Country Club, Inc. (NBCC), on two grounds. In

Founding Members of the Newport Beach Country Club v. Newport

Beach Country Club, Inc., 109 Cal.App.4th 944 (2003) (Founding

Members I), the Fourth District affirmed based on the first

ground and expressly declined to address the second ground

dealing with the registration/notice issue:

We conclude the trial court correctly

construed the contract as extending the Right

of First Offer only to a ‘Member Organization

... in existence.’ Because the undisputed

facts revealed that neither the Founding

Members nor any member organization, as

referred to in the governing regulations,

existed as of the date of the agreement to

sell IBC’s stock, NBCC had no obligations

under the Right of First Offer. In light of

this conclusion, we do not address whether

the agreement to sell IBC’s stock constituted

an agreement to sell ‘part or all of’ NBCC’s

‘legal interest in the Club.’ ....

...

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We need not decide the issue. The 1987

Governing Regulations requires NBCC to extend

the Right of First Offer only to a ‘Member

Organization ... in existence.’ As of

October 26, 1999, the date of the PacPro

agreement, neither Founding Members nor any

member organization, as contemplated by the

governing regulations, existed. Accordingly,

NBCC did not breach the governing regulations

by not extending the Right of First Offer to

Founding Members, regardless whether or not

any Class A Founding Member was required to,

or did, notify NBCC of the member’s election

to become a shareholder or member of a member

organization.

...

The judgment is affirmed. NBCC shall recover

its costs on appeal.

Founding Members I, 109 Cal.App.4th at 948, 963-965. After

Founding Members I was decided, Founding Members registered with

NBCC as an organization entitled to exercise the Right of First

Offer. NBCC recognized that right, subject to the limitation

that Founding Members had no right to exercise the Right of First

Offer with respect to the sale of the stock of IBC. When

Founding Members refused to acknowledge that limitation, NBCC

filed a suit for declaratory relief, seeking inter alia, a

declaration that “The Order and Judgment in [Founding Members I]

are binding in their entirety on Defendants and establish,

through collateral estoppel/res judicata, that the Right of First

Offer is not triggered and does not apply to a proposed sale of

all or a majority of the stock of IBC.” The trial court granted

declaratory relief for NBC on this ground. In Newport Beach

Country Club, Inc. v. Founding Members of Newport Beach Country

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Club, supra, 140 Cal.App.4th 1120 (Founding Members II), the

Fourth District Court of Appeals discussed the cases cited in

DiRuzza as well as DiRuzza, and also cited Section 27 of the

Restatement Second of Judgments, Comment o, which states in

pertinent part:

‘If the judgment of the court of first

instance was based on a determination of two

issues, either of which standing

independently would be sufficient to support

the result, and the appellate court upholds

both of these determinations as sufficient,

and accordingly affirms the judgment, the

judgment is conclusive as to both

determinations ....’

‘If the appellate court upholds one of these

determinations as sufficient but not the

other, and accordingly affirms the judgment,

the judgment is conclusive as to the first

determination.’

‘If the appellate court upholds one of these

determinations as sufficient and refuses to

consider whether or not the other is

sufficient and accordingly affirms the

judgment, the judgment is conclusive as to

the first determination.’

140 Cal.App.4th at 1128-1129. The Fourth District then ruled:

That criticism [in Butcher] of the

traditional rule is particularly forceful in

this case. Unlike the California appellate

courts in Butcher and McLaughlin, and the

Ninth Circuit in DiRuzza v. County of Tehama,

we wrote the appellate decision in Founding

Members I. We know we did not decide whether

the Right of First Offer was triggered by a

proposed sale of IBC’s stock and expressly

stated, ‘we do not address whether the

agreement to sell IBC’s stock constituted an

agreement to sell “part or all” of NBCC’s

“legal interest in the Club.” ... To hold now

the judgment in Founding Members I is res

judicata on that issue would be, as Judge

Hand put it, ‘the height of unreason.’

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...

We would agree with Butcher without

equivocation, but for one weakness in that

decision: Butcher did not cite or discuss

Skidmore. Skidmore is very old - 75 years

older than McLaughlin - and like McLaughlin

its reasoning has not stood the test of time. 

The Restatement Second of Judgments, Corpus

Juris Secundum, Judge Augustus Hand’s

insight, the Butcher decision, logic, and

reality are all contrary to Skidmore. But

Skidmore is, unlike McLaughlin, California

Supreme Court authority which, age and reason

notwithstanding, NBCC argues we are obliged

to follow ....

We do not believe we are bound by Skidmore

for the following reasons. The California

Supreme Court, in questioning the authority

of likewise binding United States Supreme

Court cases, has recognized ‘the authority of

an older case may be as effectively

dissipated by a later trend of decision as by

a statement expressly overruling it. (Sei

Fujii v. State of California (1952) 38 Cal.2d

718 ...). In Adams v. Southern Pac.

Transportation Co. (1975) 50 Cal.App.3d 37,41

..., the Court of Appeal declined to follow

Fifield Manor v. Finston (1960) 54 Cal.2d 632

..., concluding that the rule expressed in

Fifield ‘is inconsistent with two later

developments of California tort doctrine.’ 

The Court of Appeal justified this departure

from stare decisis by stating: ‘Principled

obedience to the Fifield rule need not

prevent awareness that it may be ripe for

renunciation or limitation. In following a

rule decisional of law, an intermediate court

of appeal may appropriately analyze the

factors which would cast doubt upon its

validity.’ (Adams v. Southern Pac.

Transportation Co., supra, 50 Cal.App.3d at

p. 41.)

Later developments in California law

certainly draw the validity of Skidmore into

question and dissipate whatever strength that

case once had. Since Skidmore was decided in

1865, the law of res judicata has undergone

tremendous change culminating in the

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Restatement Second of Judgments. The

California Supreme Court has expressed

approval of the Restatement Second of

Judgments and has cited approvingly to

section 27 and the comments to it. In George

Arakelian Farms, Inc. v. Agricultural Labor

Relations Bd. (1989) 49 Cal.3d 1279, 1290,

footnote 8 ..., the court, quoting an

administrative law treatise, stated:

‘”Perhaps because it rests so much on logic,

res judicata is especially appropriate for a

Restatement, and the American Law Institute’s

Restatement of Judgments (1942) has been an

unusually powerful force, but it is now

succeeded by a second and improved

Restatement of Judgments (1982) which focuses

mainly on the two subjects of ‘claim

preclusion’ and ‘issue preclusion’”’ (See

also County of Santa Clara v. Deputy

Sheriffs’ Assn. (1992) 3 Cal.4th 873, 879,

fn. 7 ... [citing Rest.2nd Judgments, § 27,

com. h]; Lucido v. Superior Court (1990) 51

Cal.3d 335, 342, fn. 3 ... [citing § 27];

People v. Sims (1982) 32 Cal.3d 468, 484 ...

[citing § 27, com. d].)

The Supreme Court’s acceptance of the

Restatement Second of Judgments undercuts

Skidmore, if not impliedly overruling it. 

The Supreme Court has never confirmed

Skidmore. In Martin v. Martin (1970) 2

Cal.3d 752, 763 ..., the court found it

unnecessary to address the issue whether a

judgment is conclusive only on the ground

affirmed by an appellate court decision. 

(See Pitts v. City of Sacramento (2006) 138

Cal.App.4th 853, 858, fn. 7 ... [declining to

resolve whether ‘scholarly opinion’ in

Butcher was correct].)

The traditional rule is inconsistent with an

appellate court’s duty under the California

Constitution, article VI, section 14 to set

forth its decisions in writing ‘with reasons

stated.’ Giving preclusive effect to both of

two alternative grounds for a judgment, when

the Court of Appeal expressly declines to

address one ground, undermines the

credibility and accuracy of the decision. To

comply with the constitutional mandate, and

to avoid unintended collateral estoppel

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consequences under the traditional rule, the

appellate court would have to address every

ground recited in a judgment, even though a

decision on one ground would resolve the

dispute before the court. The traditional

rule thus results in judicial inefficiency.

We find no justification for being bound by

Skidmore. As Justice Holmes argued in a

similar context: ‘It is revolting to have no

better reason for a rule of law than that so

it was laid down in the time of Henry IV. It

is still more revolting if the grounds upon

which it was laid down have vanished long

since, and the rule simply persists from

blind imitation of the past.’ ....

We believe the California Supreme Court, if

faced with the issue today, would adopt the

modern rule expressed in comment o to the

Restatement Second of Judgments, section 27. 

We therefore adopt the modern/Restatement

Second rule and, agreeing with Butcher, hold

that ‘if a court of first instance makes its

judgment on alternative grounds and the

reviewing court affirms on only one of those

grounds, declining to consider the other, the

second ground is no longer conclusively

established.’ (Butcher, supra, 77

Cal.App.4th at p. 1460.)

140 Cal.App.4th at 1130-1132.

A later case has bearing on the issue of issue preclusion, 

Zeynik v. Superior Court, 159 Cal.App.4th 76 (2008). In Zeynik,

a law firm that had been sued by its former clients for legal

malpractice moved to determine the collateral estoppel effect of

the Court of Appeal’s opinion in an insurance coverage action

affirming the trial court’s denial of the clients’ motion to

disqualify the law firm. The former clients were coplaintiffs

with two other companies in the insurance coverage action. The

Court of Appeal affirmed the denial of the motion to disqualify

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counsel in the insurance coverage action based on laches and did

not reach the merits. The law firm argued that the facts

determined by the trial court in the insurance coverage action

with respect to the merits of the disqualification motion were

conclusively established for purposes of the malpractice action. 

The trial court denied the law firm’s collateral estoppel motion

and the Court of Appeal denied the law firm’s petition for writ

of mandamus, holding:

We conclude that the governing rule of law is

that if a trial court relies on alternative

grounds to support its decision and an

appellate court affirms the decision based on

fewer than all of those grounds, only the

grounds relied on by the appellate court can

establish collateral estoppel. In so

holding, we agree with the rule of law stated

in Newport Beach County Club, Inc. v.

Founding Members of Newport Beach Country

Club (2006) 140 Cal.App.4th 1120 ... and

Butcher v. Truck Ins. Exchange (2000) 77

Cal.App.4th 1442 ... We conclude that People

v. Skidmore (1865) 27 Cal. 287, which has

been cited in support of a contrary rule, is

not on point and should not be extended to

apply in these circumstances.

159 Cal.App.4th at 79. The Zeynik Court explained:

The opportunity for review of a decision is

an important procedural protection against a

potentially erroneous determination and is a

factor to consider in determining whether

collateral estoppel applies ... Appellate

review provides a degree of assurance that

the issue was correctly decided and enhances

the reliability of the determination. When

an appellate court declines to review a

particular ground for a trial court decision,

the reliability of that ground is not

enhanced and is left in the same condition as

if there had been no opportunity for review. 

The principal reason for an appellate court

to decline to review alternative grounds for

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a trial court decision is judicial economy,

which is a justification that we would not

impugn. With regard to ensuring the

reliability of a determination, however, an

appellate court’s failure to review an

alternative ground on appeal has the same

effect as the absence of an opportunity for

review and, we believe, should result in no

collateral estoppel as to that alternative

ground.

Moreover, to accord collateral estoppel

effect to alternative grounds relied on by

the trial court after the appellate court

affirmed on another ground and declined to

review the alternative grounds as a matter of

course, in order to avoid the unintended

consequence of establishing collateral

estoppel on grounds that the appellate court

did not review. This would dramatically

increase the burden on appellate courts. Any

benefit that might result from precluding the

relitigation of issues in potential

collateral litigation, which may or may not

arise, would come at the cost of increasing

the burden on the appellate court in the

initial action. If an appellate court is

aware of or anticipates collateral litigation

and believes that to establish collateral

estoppel on an alternative ground would be

beneficial, the court may affirm the trial

court judgment on more than one ground. (See

Rest.2d Judgments, § 27, com. o, p.263.) The

respondent on appeal may urge the court to do

so. In our view, a blanket rule according

collateral estoppel effect to each

alternative and unreviewed ground for a trial

court decision in these circumstances for the

purpose of precluding relitigation of issues

in collateral litigation is unnecessary and

would be unwise.

159 Cal.App.4th at 85. 

A district court is bound by Ninth Circuit precedent. See

Zuniga v. United Can Co., 812 F.2d 443, 450 (9 Cir.1987); th

Olympic Sports Products, Inc. v. Universal Athletic Sales Co.,

760 F.2d 910, 912-913 (9 Cir.1985), cert. denied sub nom. th

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Whitaker Corporation v. Olympic Sports Products, Inc., 474 U.S.

1060 (1986). In Torrance National Bank v. The Aetna Casualty &

Surety Company, 251 F.2d 666, 669 n.5 (9 Cir.1958), the Ninth th

Circuit noted:

This Court does not overlook that in some

situations a federal court, in a diversity

suit, may refuse to follow a state supreme

court decision. It is not necessary that a

case be expressly overruled in order to lose

its persuasive force. Cf. Mason v. American

Emery Wheelworks, 1 Cir., 1957, 241 F.2d 906. 

the law is in part an evolutionary process of

judicial reasoning. If convinced that the

California Supreme Court would no longer

follow the Bendit case, then, under the Erie

Railroad Co. v. Tompkins decision ..., this

Court should apply the same standards which

it believes the highest court of this State

would use.

Because the California Supreme Court’s decision in Skidmore and

the Ninth Circuit’s decision in DiRuzza are binding law of the

state and Ninth Circuit, respectively, and a federal trial court

does not have the authority to change the state law of California

even if a Supreme Court decision is criticized and not followed 

by more recent intermediate California appellate decisions, see

Butcher, Newport Beach, and Zeynik, the rule of Skidmore applies.

Defendants argue that Newport Beach’s reliance on

Restatement 2nd’s Comment o is flawed because that court failed

to recognize that the Restatement Second of Judgments has not

been incorporated into California law in its entirety and that

comment i to Section 27 is not followed in California and has 

been harshly criticized in other jurisdictions.

Comment i to Section 27 states:

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i. Alterative determinations by court of

first instance. 

If a judgment of a court of first instance is

based on determinations of two issues, either

of which standing independently would be

sufficient to support the result, the

judgment is not conclusive with respect to

either issue standing alone. See

Illustration 14. Cf. § 20, comment e.

The California case Defendants represent does not follow the

Section 27, comment i standard, Wall v. Donovan, 113 Cal.App.3d

122 (1980), does not so hold. Wall expressed the rule set forth

in the 1942 version of the Restatement of Judgments, section 68,

comment n: “Where the judgment is based upon the matters

litigated as alternative grounds, the judgment is determinative

on both grounds, although either alone would have been sufficient

to support the judgment.” Wall was decided before the

Restatement Second of Torts was issued in 1982, it does not

support Defendants’ position. Independent research reveals no

reported California decision discussing or applying comment i to

Section 27.

Defendants cite Griset v. Fair Political Practices

Commission, 25 Cal.4th 668 (2001). In Griset, a political

candidate brought an action for writ of mandamus against the Fair

Political Practices Commission, challenging the constitutionality

of Government Code § 84305. The trial court granted summary

judgment holding the statute was constitutional. The state Court

of Appeal and state Supreme Court affirmed that ruling. 

Thereafter, the plaintiff renewed the motion for summary judgment

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in the trial court, relying on a United States Supreme Court

decision issued after the California Supreme Court had issued its

decision. The trial court entered summary judgment for the

defendant. The Court of Appeal affirmed in part and reversed in

part, and remanded with directions, finding that plaintiff’s

litigation could be revived and that Government Code § 84305 was 

unconstitutional based on the intervening United States Supreme

Court decision. The California Supreme Court reversed the Court

of Appeal’s judgment with directions to reverse as void the trial

court’s second judgment. In pertinent part, the Supreme Court

held:

A reviewing court has authority to ‘affirm,

reverse, or modify any judgment or order

appealed from, and may direct the proper

judgment or order to be entered, or direct a

new trial or further proceedings to be had.’ 

(Code Civ. Proc., § 43.) The order to the

reviewing court is contained in its

remittitur, which defines the scope of the

jurisdiction of the court to which the matter

is returned. ‘The order of the appellate

court as stated in the remittitur, “is

decisive of the character of the judgment to

which the appellant is entitled. The lower

court cannot reopen the case on the facts,

allow the filing of amended or supplemental

pleadings, nor retry the case, and if it

should do so, the judgment rendered thereon

would be void.”’ ....

In Griset I, ..., we affirmed without

directions the judgment of the Court of

Appeal, which in turn had rendered an

unqualified affirmance of the superior

court’s judgment. An unqualified affirmance

‘ordinarily sustains the judgment and ends

the litigation.’ ... Once our decision in

Griset I became final, the superior court did

not have jurisdiction to reopen or retry the

case, which the court purported to do when it

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allowed plaintiffs in 1995 to ‘renew[]’ their

1991 motions for summary adjudication and

summary judgment. Therefore, the superior

court’s later judgment was void insofar as it

encompassed or rested upon a redetermination

of the merits of the litigation.

25 Cal.4th at 701.

Relying on Griset, Defendants argue that neither Butcher nor

Newport Beach “recognize the fact that, under California law, a

general affirmance, like the affirmance here, operates to sustain

the judgment of the superior court and end the litigation” as if

the judgment is final, notwithstanding later changes in the law. 

Defendants contend:

This concept was of primary importance in

Skidmore, which explained the judgment in the

original action ‘was not reversed, either in

whole or in part, by the Supreme Court, nor

was it modified in any particular,’ and that

‘it affirmed to the whole extent of its

terms.’ Skidmore, 27 Cal. at 292. The Court

also explained that in the original

proceeding it:

found that there was at least one

ground upon which the judgment

could be justified, and therefore

very properly refrained from

considering it in connection with

the other errors. But the

affirmance, still, was an

affirmance to the whole extent of

the legal effect of the judgment at

the time when it was entered in the

court below. The Supreme Court

found no error in the record, and

therefore not only allowed it to

stand, but affirmed it as an

entirety, and by direct expression.

Id. at 292-93 (emph. added). Thus, because

a ‘general’ or ‘unqualified’ affirmance under

California law operates to sustain the legal

effect of the judgment at the time it was

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entered below, it analytically follows that

all grounds fully litigated and decided by

the superior court, and left undisturbed by

the appellate courts, should receive the

effect of a final judgment for collateral

estoppel purposes.

Griset is not dispositive as that factual background is

simply too different from this case where there has been no

change in the law.

Defendants argue that Founding Members II is distinguishable

because of the opinion’s reference to the fact that the Fourth

District Court of Appeals wrote Founding Members I. Defendants

cite Moran Towing & Transportation Co. v. Navigazione Libera

Triestina, S.A., supra, 92 F.3d at 40: “To treat as controlling

the findings of a trial court when the appellate court upsets or

disregards them and renders a decision of affirmance on different

grounds furnishes parties to other litigations affected by the

decision with a false guide.” Defendants argue that the

“reasoning of [Founding Members II] is simply inapplicable here”

because “[i]n contrast to [Founding Members II], no findings of

the trial court were ‘upset’ or ‘disregarded’ by the Fifth

District; rather, all of the findings remained intact and were

unqualifiedly affirmed on appeal.” This assertion fails to

address the appellate court’s election not to dispositively

address all issues by its statement declining to do so. 

Defendants cite People v. Taylor, 12 Cal.3d 686, 695 (1974):

We deem the purposes of an application of the

doctrine [of collateral estoppel] to be: (1)

to promote judicial economy by minimizing

repetitive litigation; (2) to prevent

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inconsistent judgments which undermine the

integrity of the judicial system; and (3) to

provide repose by preventing a person from

being harassed by vexatious litigation ... In

deciding whether the doctrine is applicable

in a particular situation a court must

balance the need to limit litigation against

the right of a fair adversary proceeding in

which a party may fully present his case.

Defendants contend that Flying J, through its opposition to

[Defendants’ AntiSLAPP motions], “is attempting to secure a

ruling from this Court that would entirely contradict the

findings of the Kern County Superior Court, a decision that has

now become final and remains in full effect, irrespective of the

Fifth District’s decision not to specifically address those

findings.” Defendants assert that Flying J has cut and pasted,

mostly verbatim, its entire argument on this issue from the

merits briefing in the Kern County Superior Court case and

contend that this Court “should not entertain Flying J’s attempt

to secure a squarely inconsistent judgment from this Court.”

Flying J argues that, even if Skidmore is controlling, the

Superior Court’s determinations that Lawson did not have a

disqualifying conflict of interest and that the proposed

conveyance was not authorized under Section 118 are not

conclusive against Flying J because “the factual and procedural

posture of Skidmore is distinguishable from this case” and

because “the Superior Court’s determinations regarding Lawson’s

conflict of interest and the propriety of the proposed conveyance

were not necessary to the judgment.”

In contending that the Fifth District rejected the Superior

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Court’s decision that the proposed conveyance was not authorized

by either Section 118 or Resolution G-98-22, Flying J relies on

the following sentences from the Fifth District’s opinion: 

“There was nothing to prevent the Commission from approving the

proposed conveyance of 20.5 acres to Flying J at the February

2004 Commission meeting if the Commission had chosen to exercise

its discretion to do so” and “The Commission’s refusal to approve

the proposed conveyance was not ‘arbitrary’ or ‘capricious’ or

‘entirely lacking in evidentiary support.’”

Defendants respond that Flying J is focusing on one sentence

out of context. When the Fifth District opinion is examined in

its entirety, Defendants contend:

([W]hile arguably worded awkwardly) the

quotation reflects the obvious notion that

the CTC could have approved the proposed

conveyance to Flying J had it determined that

the proposed conveyance constituted an

‘exchange’ under the law. Since the CTC

found the proposed conveyance was not an

exchange, the proposed conveyance was

unauthorized under section 118 and Resolution

G-98-22. Both the Superior Court and the

Fifth District reached the same conclusion in

this regard.

Defendants argue that the Fifth District did not “reject” the

Superior Court’s conclusion 

but instead ruled that the CTC appropriately

found ‘the proposed conveyance would not be

an ‘exchange’ within the meaning of the

Paragraph 2.3 words “excess property ...

exchanged for other land required for

transportation purposes.”’ ... The court of

appeal further explained that, ‘even if we

could conclude that the proposed conveyance

were authorized by Paragraph 2.3 of

Resolution G-98-22,’ a finding the court of

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appeal certainly did not affirmative [sic]

make, ‘the proposed conveyance was still

subject to Commission approval.’ ... This

portion of the opinion - which, incidentally,

is the only portion of the opinion that

discusses the substantive issue of whether

the proposed conveyance as presented by

Flying [sic] was authorized - makes plain

that the Fifth District found that the

proposed conveyance was not authorized as

presented to the CTC. Thus, Flying J cannot

reasonably contend that the Fifth District

found the conveyance was legally valid.

Defendants’ contention accurately states the meaning of the

Court of Appeals decision affirming the Superior Court. Flying

J’s assertions to the contrary are based on a tortured reading of

the Court of Appeals’ decision. Neither state court found the

proposed conveyance to Flying J legally enforceable without CTC

approval. 

Flying J argues that even if preclusive effect is given to

the determination that the Right of Way Contract did not comply

with Section 118 and Resolution G-98-22, because the object of

the Right of Way Contract was lawful, the Right of Way Contract

is not “illegal” or “void.” See City of Orange v. San Diego

County Employees Retirement Assn., 103 Cal.App.4th 45, 57 (2002).

Sanders v. Superior Court, 27 Cal.App.4th 832, 843 (1994), holds

that “case law recognizes a tort action for interference with a

contract even if the contract is unenforceable”, citing Pacific

Gas & Electric Co. v. Bear Stearns & Co., 50 Cal.3d 1118, 1127-

1128 (1990). Therefore, Flying J contends, it is entitled to

proceed with its claims against Defendants for intentional

interference with contract, intentional interference with

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prospective economic advantage, and unfair competition.

Flying J does not accurately state the law as to the tort of

intentional interference with contract. In Pacific Gas &

Electric Co. v. Bear Stearns & Co., the California Supreme Court,

discussing an “at-will” employment contract, stated:

Cases establishing a cause of action for

interference with at-will and voidable

contracts make it clear that it is the

contractual relationship, not any term of the

contract, which is protected against outside

interference. We have affirmed that

interference with an at-will contract is

actionable interference with the contractual

relationship, on the theory that a contract

‘”at the will of the parties, respectively

does not make it one at the will of others.’

... As Justice Tobriner said in the context

of voidable contracts: ‘The actionable wrong

lies in the inducement to break the contract

or to sever the relationship, not in the kind

of contract or relationship so disrupted,

whether it is written or oral, enforceable or

not enforceable.’ ... Reviewing courts have

reiterated in case after case that the

contractual relationship is at the will of

the parties, not at the will of outsiders

....

Further, the expectation that the parties

will honor the terms of the contract is

protected against officious intermeddlers. 

Since people ‘”usually honor their promises

no matter what flaws a lawyer can find, the

offender should not be heard to say that the

contract ... meddled with could not have been

enforced ....’ ....

However, in PMC, Inc. v. Saban Entertainment, Inc., 45

Cal.App.4th 579 (1996), overruled on other grounds, Korea Supply

Co. v. Lockheed Martin Corp., 29 Cal.4th 1134 (2003), the Court

of Appeal, relying on Della Penna v. Toyota Motors Sales, U.S.A.,

Inc., 11 Cal.4th 376 (1995), held that, if there is no

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enforceable contract, the plaintiff is limited to a cause of

action for interference with prospective economic advantage. 45

Cal.App.4th at 594-602. PMC, Inc. has been followed by Bed, Bath

& Beyond of La Jolla, Inc. v. La Jolla Village Square Venture

Partners, 52 Cal.App.4th 867, 877-879 (1997): 

We agree with PMC’s analysis and conclusion

that a cause of action for intentional

interference with contractual relations

requires an underlying enforceable contract,

and where the underlying contract is

unenforceable, only a claim for interference

with prospective economic advantage lies. We

believe this rule is a proper extension of

the California Supreme Court’s admonition

that courts should not blur the analytical

line between the two interference torts and

its recognition that the ‘formally cemented

economic relationship’ created by an

‘existing contract’ is entitled to greater

solicitude than a relationship falling short

of that. ....

Here, Flying J had an inchoate, conditional agreement with

Caltrans, that by its terms and law, was subject to CTC approval. 

The agreement was for the purchase of publically owned real

property, subject to laws and regulations governing the sale,

disposition, and/or exchange of publically owned real property. 

CTC approval was to be obtained in a quasi-legislative

proceeding, a CTC hearing in open session to approve the

agreement on the calendar without public discussion, consent or

after CTC discussion and vote in a public session of the CTC. 

Whether an interference with contract or prospective advantage

theory is advanced, Defendants had a constitutional First

Amendment right to petition their government and provide comment

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pro or con on the proposed agreement for purchase, sale, and

exchange of public land. Flying J seeks to make tortious conduct

absolutely authorized by and privileged under law; i.e., to

challenge before the commission the fairness and value of the

consideration to be received for the purchase of excess public

property and in relation to a public hearing before a public

agency. 

Flying J further argues that collateral estoppel will not

bar its claims that Defendants engaged in unfair conduct as

defined under California’s Unfair Competition Law.

Defendants respond that Flying J is barred from relitigating

the issue of the legality of the proposed conveyance which was

decided by the Superior Court and affirmed by the Fifth District

Court of Appeals. The Court of Appeals specifically affirmed the

finding that there was no causal connection between the alleged

behavior of Defendants and the CTC’s ultimate decision on

reconsideration in 2004 to reject the proposed conveyance, as the

2004 decision was unrelated to Lawson or anyone associated with

him. 

The Court of Appeal did not ignore the issue of Defendant

Lawson’s alleged conflict of interest in affirming the Superior

Court’s judgment. The Court of Appeal assumed for purposes of

appeal that Lawson did have a conflict of interest, but ruled

that the conflict of interest was irrelevant because of the

Superior Court’s accurate analysis that the 2004 CTC

reconsideration of the proposed transaction, made at Flying J’s

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The rulings in this Memorandum Decision make unnecessary 4

resolution of the grounds for relief asserted in Defendants’

motions to strike pursuant to California Code of Civil Procedure §

425.16 and to dismiss pursuant to Rule 12(b)(6), Federal Rules of

Civil Procedure. 

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request, negated any impact or effect of any assumed conflict of

interest by reason of Lawson’s absence from the CTC and failure

of proof that Lawson had any role in the public decision. 

These issues that the settlement agreement was not

authorized by Section 118 or Resolution G-98-22, of conflict of

interest and lack of causation cannot be relitigated de novo, a

third time.4

Defendants’ motions to dismiss and/or strike the SAC on the

ground of collateral estoppel are GRANTED.

CONCLUSION

For the reasons stated above:

1. Defendants’ motions to dismiss and/or strike the Second

Amended Complaint as moot and barred by collateral estoppel are

GRANTED;

2. Defendants’ motions to strike and to dismiss the Second

Amended Complaint are DENIED AS MOOT;

3. Counsel for Defendants shall prepare and lodge a form of

order setting consistent with this Memorandum Decision within

five (5) days following the date of service of this decision.

IT IS SO ORDERED.

Dated: March 31, 2008 /s/ Oliver W. Wanger 

668554 UNITED STATES DISTRICT JUDGE

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