Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_19-cv-07230/USCOURTS-cand-4_19-cv-07230-6/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 28:1331 Fed. Question

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

BNSF RAILWAY COMPANY,

Plaintiff,

v.

ALAMEDA COUNTY, et al.,

Defendants.

Case No. 19-cv-07230-HSG 

ORDER GRANTING PLAINTIFF'S 

MOTION FOR PRELIMINARY 

INJUNCTION

Re: Dkt. No. 35

Pending before the Court is Plaintiff BNSF Railway Company’s (“BNSF”) motion for a 

preliminary injunction (Dkt. No. 35 (“Mot.”)), for which briefing is complete. Dkt. Nos. 43 (“SD 

Opp.”), 44 (“Counties’ Opp.”), 53 (“Reply”). BNSF requests a preliminary injunction against

fifteen counties (“Defendants,” or “Defendant Counties”) under 49 U.S.C. § 11501(b)(3), which

prohibits applying higher tax rates to railroad property. On March 12, 2020, the Court held a 

hearing on the motion. Dkt. No. 58. The Court GRANTS the motion for preliminary injunction.

I. BACKGROUND

A. The 4-R Act

The 4-R Act (now codified at 49 U.S.C. § 11501 (“Section 11501”)) was passed in 1976 to 

“restore the financial stability of the railway system.” Burlington N. R.R. v. Oklahoma Tax 

Comm’n, 481 U.S. 454, 457 (1987). This was, in part, because railroads “are easy prey for State 

and local tax assessors,” as they are “nonvoting, often nonresident, targets for local taxation” that 

cannot easily remove themselves from the locality. W. Air Lines, Inc. v. Board of Equalization of 

State of S.D., 480 U.S. 123, 131 (1987). Congress declared that state and local taxation schemes 

that discriminate against rail carriers “unreasonably burden and discriminate against interstate 

commerce.” 49 U.S.C. § 11501(b). As relevant here, Section 11501(b)(3) bans discriminatory tax 

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rates, and provides that state and local governments may not “levy or collect an ad valorem tax on 

rail transportation property at a tax rate that exceeds the tax rate applicable to commercial and 

industrial property in the same assessment jurisdiction.” Id. 

B. California Property Taxation

California’s system of taxation is, in a word, complicated. California law imposes an ad 

valorem (i.e., value-based) property tax on all property in the State, unless exempt, in proportion 

to its assessed value. Cal. Const. Art. XIII, § 1. Taxation is a three-step process. First, the value 

of taxable property is assessed. Next, the applicable tax rate is computed, typically expressed as a 

percentage of assessed value. Finally, the tax is levied and collected from the taxpayer.

Most property in California, including general “commercial and industrial property,” is 

“locally assessed,” meaning that county assessors determine the assessed value of the property for 

tax purposes. See Declaration of Alan M. Annis, Dkt. No. 35-1, (“Annis Decl.”) ¶ 7. California 

classifies and taxes the bulk of property in the state as either “secured” or “unsecured.” See id. ¶ 

8. The “secured roll” consists of most state-assessed property and that portion of locally assessed 

property for which the taxes are secured by a lien on real property of a value sufficient to pay the 

taxes. See Cal. Rev. & Tax. Code § 109. The “unsecured roll” consists of all other property, such 

as personal property and possessory interests in tax-exempt land. Id. 

Every year, each Defendant County’s board of supervisors determines the tax rates to be 

applied in the county for locally assessed property and for unitary property, applying different 

statutory formulas. Cal. Rev. & Tax. Code § 2151. Defendants’ respective auditors apply these 

applicable tax rates to the assessed value shown on the assessment rolls. Cal. Rev. & Tax. Code § 

2152. Then, Defendants’ respective tax collectors collect the taxes on unitary property at the 

unitary rate determined by each county. Cal. Rev. & Tax. Code §§ 2605, 2610.5. Locally 

assessed property, including commercial and industrial property, is assigned to a particular “Tax 

Rate Area” within each county, based on the property’s location. See Annis Decl. ¶ 11. 

For property on the secured tax roll, the annual ad valorem tax rate for each Tax Rate Area 

is established as (a) a 1% general tax levy, typically used to fund general government services,

plus (b) an amount necessary to produce sufficient revenues to pay the interest and principal on 

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any voter-approved bonded indebtedness issued by the county or by the local agencies, school 

entities, and special districts serving that Tax Rate Area. Cal. Rev. & Tax. Code § 93 (“Section 

93”), enacted per Cal. Const. Art. XIIIA, § 1 (“Proposition 13”). This latter portion of the Section 

93 tax rate above the 1% base levy is known as the “debt service component.” Under Proposition 

13, real property must be valued at its 1975 fair market value (as shown on the 1975-76 

assessment roll), or thereafter, the fair market value when purchased, newly constructed, or a 

change of ownership has occurred after the 1975 assessment (i.e., the occurrence of an “assessable 

event”). Cal. Const., art. XIII, § 2(a).

The debt service component is the sum of separately calculated rates for each local agency, 

school entity or special district with outstanding debt. To calculate the elements of the debt 

service component, the County first determines how much revenue it will need to make debt 

service payments for the upcoming year for the voter-approved debt of the local agency, school 

entity, or special district. See Cal. Gov. Code § 29100. Next, the County determines the portion 

of assessed property values on the secured roll subject to the voter-approved debt issued by the 

local agency, school entity or special district (i.e., the property located within the boundaries of 

each local entity). Id. The County then calculates the percentage of those total property values 

that will produce the necessary revenues to service the debt issued by that local entity, after 

allowances for delinquencies and annual changes to the roll, among other factors. Id. The debt 

service component in each Tax Rate Area is the sum of these calculated percentages for every 

local agency, school entity or special district serving that Tax Rate Area. The debt service 

component is combined with the 1% base levy to compute the total property tax rate in each Tax 

Rate Area for property on the secured roll.

The property tax rate for property on the unsecured roll is the secured roll tax rate for that 

Tax Rate Area for the previous year. Cal. Rev. & Tax. Code § 2905. This rule is consistent with

the separate requirement that unsecured taxes are due each year before the County calculates the 

secured tax rate for that year. See Cal. Rev. & Tax. Code § 2922.

In contrast, the State Board assesses the value of certain utility and railroad property 

(including Plaintiff’s property). Cal. Rev. & Tax. Code § 721. The State Board assesses 

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Plaintiff’s property using the principle of unit valuation, under which all of a taxpayer’s assets, 

wherever located, are valued as a unit, and that unitary value is then allocated among particular 

taxing jurisdictions. See Annis Decl. ¶ 6. State-assessed property that is valued under the 

principle of unit valuation is also referred to as “unitary property.” See Cal. Rev. & Tax. Code §§ 

723, 723.1. Unit taxation provides a way to value and tax property in businesses for which the 

component parts of the business are valuable when considered as a whole, but worth less when 

considered in isolation. See ITT World Commc’ns, Inc. v. City & Cnty. of S.F., 37 Cal. 3d 859, 

863 (Cal. 1985). For example, “ten miles of [railroad] track . . . ‘would have a questionable value, 

other than as scrap, without the benefit of the rest of the system as a whole.’” Am. Airlines, Inc. v. 

Cnty. of San Mateo, 12 Cal. 4th 1110, 1126 (Cal. 1996) (internal citations and brackets omitted). 

C. Taxation Applicable to Railways

Plaintiff’s primary argument is that the tax rate applicable to its property is calculated 

under a different formula than the Section 93 tax rate for locally-assessed commercial and 

industrial property, resulting in a tax rate higher than the Section 93 tax rate. According to 

Plaintiff, first, under Cal. Rev & Tax. Code § 100.11, the value attributable to the state-assessed 

unitary property of a regulated railway company is generally allocated to a single countywide Tax 

Rate Area in each county in which the property is located. The “unitary” tax rate to be applied to 

these countywide tax rate areas is established in accordance with the formula in Cal. Rev. & Tax. 

Code § 100(b)(2) (“Section 100”). Cal. Rev. & Tax. Code § 100.11(a)(2)(B).

Section 100 (like Section 93) includes the base 1% tax levy. However, the additional 

unitary debt service component under Section 100 is calculated by taking the County’s previous 

year’s unitary debt service rate and multiplying it by the percentage change between the two 

preceding fiscal years in the County’s ad valorem debt service levy for the secured roll (excluding 

unitary and operating nonunitary debt service levies). See Mot. at 8. Plaintiff contends that this 

formula has caused the Section 100 unitary tax rate to diverge from the Section 93 secured and 

unsecured tax rates. In particular, when a County’s debt service needs increase, the secured and 

unsecured rates will not rise if property values also rise and keep pace with inflation. But under 

those same circumstances, the Section 100 unitary debt service rate will increase because it 

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depends on the absolute dollar amount of debt service.

The State Board calculates and publishes the annual “average rate of general property 

taxation” in each California county. Annis Decl. ¶¶ 24–26, 32. The State Board computes this 

average tax rate by dividing (a) the sum of the total ad valorem property tax levies in each county 

for each year, by (b) the total assessed value of all property in that county for that same year. See 

Cal. Rev. & Tax. Code § 11403. For the 2019-20 tax year, using the methods described above,

Plaintiff contends that the Defendant Counties have levied property taxes at the unitary rate 

applicable in their respective assessment jurisdictions. Below are the alleged differences between 

the unitary rate applied to Plaintiff’s property and the Section 11501 “benchmark rate”:

County

2019-20 Plaintiff

Unitary Rate

2019-20

Section 11501 

Benchmark Rate

Alameda 2.5187% 1.241%

Contra Costa 1.6865% 1.148%

Fresno 1.370408% 1.181%

Kern 1.611299% 1.24%

Kings 1.326084% 1.087%

Madera 1.203169% 1.089%

Merced 1.4109014% 1.088%

Orange 1.28173% 1.064%

Plumas 1.11652% 1.089%

Riverside 1.76133% 1.164%

San Bernardino 1.3645% 1.144%

San Diego 1.62331% 1.142%

San Joaquin 1.6922% 1.145%

Stanislaus 1.38011% 1.103%

Tulare 1.4002% 1.113%

See Annis Decl. ¶33.1 

1 The average rate difference for the Defendant Counties for the 2019-2020 fiscal year is only 

0.38%, while the median difference is 0.29%. Differences in prior years are generally even 

smaller. See Narciso Decl., ¶ 10 & Ex. 7. With these smaller differences, Defendants are correct 

that it is all the more important for Plaintiff to meet its burden of demonstrating that it has 

identified the tax rate applicable to the proper comparison class. However, most Defendants admit 

in their Answer (ECF No. 52 ¶ 34)—and San Diego states that it lacks sufficient information to 

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II. LEGAL STANDARD

The prohibition on tax rate discrimination is enforceable through an action for equitable 

relief in federal court. In enacting Section 11501, “Congress ... believed that a federal court 

remedy for carriers subject to discriminatory taxation was necessary because state courts were not 

providing them with a plain, speedy, and efficient remedy.” Trailer Train Co. v. State Bd. Of 

Equalization, 697 F.2d 860, 866 (9th Cir. 1983). Congress thus included in Section 11501 “a 

procedural component which authorizes victims of discrimination to seek injunctive relief in 

federal court.” Id. This provision specifically empowers federal courts to “grant such mandatory 

or prohibitive injunctive relief, interim equitable relief, and declaratory judgments as may be 

necessary to prevent, restrain, or terminate any acts in violation of [Section 11501],” 

notwithstanding 28 U.S.C. § 1341. Id. at 869 & n.16; see 49 U.S.C. § 11501(c). 

Plaintiff contends that a preliminary injunction under Section 11501 is not governed by the 

traditional equitable criteria of likelihood of success, irreparable harm, balance of hardships, or 

public interest. See Mot. at 5 (citing Trailer Train, 697 F.2d at 869). Instead, because Section 

11501 specifically contemplates interim equitable relief, a preliminary injunction must issue 

“[w]here the trial court finds reasonable cause to believe that a violation of Section [11501] has 

been, or is about to be, committed.” Burlington N. R. Co. v. Dep’t. of Revenue of State of Wash.,

934 F.2d 1064, 1074 (9th Cir. 1991); BNSF Ry. v. Tenn. Dep’t of Revenue, 800 F.3d 262, 268 (6th 

Cir. 2015) (“[A] railroad seeking injunctive relief under the 4-R Act need only demonstrate that 

there is ‘reasonable cause’ to believe a violation of the 4-R Act has occurred or is about to 

occur.”).

Defendants disagree, and contend that the Court should instead apply the traditional 

equitable criteria. Defendants believe that the Ninth Circuit’s decisions in Burlington and Trailer 

Train (as well as other circuit court decisions) misapplied—or failed to apply—the Supreme 

Court’s decision in Weinberger v. Romero-Barcelo, 456 U.S. 305 (1982), and instead incorrectly 

applied the Tenth Circuit’s standard in Atchison, T. & S.F. Railway Co. v. Lennen, 640 F.2d 255, 

state (ECF No. 51 ¶ 10)—that the tax rates set forth in the chart are the tax rates levied on Plaintiff

by the Defendant Counties, and the 2019-2020 tax rates the State Board calculates pursuant to 

Section 11403 of the Revenue and Taxation Code. 

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259-61 (10th Cir. 1981), the first instance in which the “reasonable cause” standard was applied to 

an alleged 4-R Act violation. 

Notwithstanding any arguments Defendants may wish to preserve for potential en banc

consideration on appeal, the Ninth Circuit has clearly decided this question. See Burlington N., 

934 F.2d at 1074 (“Issuance of preliminary injunctive relief in Section [11501] cases is not 

governed by the traditional equitable criteria applicable in actions between private litigants . . . .”); 

Trailer Train, 697 F.2d at 869 (“The standard requirements for equitable relief need not be 

satisfied when an injunction is sought to prevent the violation of a federal statute which 

specifically provides for injunctive relief. . . . Section [11501] clearly falls within this exception 

because its subsection (c) specifically authorizes a district court to grant injunctive relief to 

prevent a violation of the statute.”). This Court is bound to apply that clear holding unless the 

“circuit authority is clearly irreconcilable with the reasoning or theory of intervening higher 

authority.” Miller v. Gammie, 335 F.3d 889, 893 (9th Cir. 2003). The Court finds that no 

intervening authority permits it to disregard the “reasonable cause” standard set out by the Ninth 

Circuit in Burlington and Trailer Train.

2 Accordingly, the Court applies that standard, and will 

issue a preliminary injunction if there is reasonable cause to believe that a violation of the 4-R Act

has occurred, is occurring, or will occur.

III. ANALYSIS

A. Commercial and Industrial Property

The plain language of Section 11501(b)(3) prohibits levying “an ad valorem property tax 

on rail transportation property at a tax rate that exceeds the tax rate applicable to commercial and 

industrial property in the same assessment jurisdiction.” Section 11501(a)(2) defines “assessment 

jurisdiction” as “a geographical area in a State used in determining the assessed value of property 

for ad valorem taxation.” Section 11501(b)(3) recognizes that “tax-rate variation” is improper 

2 Defendants assert that Trailer Train neither cites nor acknowledges the Supreme Court’s ruling 

in Romero-Barcelo, presumably (according to Defendants) because Trailer Train was argued and 

submitted on March 10, 1982, while Romero-Barcelo was not decided until April 27, 1982. See

Counties’ Opp. at 10 n. 3. However, Trailer Train was decided by the Ninth Circuit on January 

25, 1983, more than seven months after Romero-Barcelo. 

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taxation of railroad property. Trailer Train, 697 F.2d at 865–66. The relevant section states:

(b) The following acts unreasonably burden and discriminate against 

interstate commerce, and a State, subdivision of a State, or authority 

acting for a State or subdivision of a State may not do any of them: * 

* * (3) Levy or collect an ad valorem property tax on rail 

transportation property at a tax rate that exceeds the tax rate 

applicable to commercial and industrial property in the same 

assessment jurisdiction.

49 U.S.C. § 11501 (emphasis added). Defendants, as counties of California, are legal subdivisions 

of the State of California, (Cal. Const. Art. XI, § 1), and thus are subject to Section 11501(b)(3). 

And Plaintiff’s unitary property in California is “rail transportation property” within the meaning 

of Section 11501(b)(3) and is, therefore, entitled to the protection of the statute. See Declaration 

of Judy A. Cummings, Dkt. No. 35-2 ¶ 4.

The disputed element of Section 11501(b)(3) is the comparison to “the tax rate applicable 

to commercial and industrial property.” See Mot. at 2. In order to prove a violation of Section 

11501(b)(3), Plaintiff must demonstrate that Defendants are levying or collecting an ad valorem 

property tax at a rate that exceeds the rate applicable to commercial and industrial property located 

in the same assessment jurisdiction as Plaintiff’s property. 49 U.S.C. § 11501(b)(3). 

The Ninth Circuit established the framework for that comparison in Trailer Train. 

Plaintiffs there sued to enjoin the collection of a state tax on private railroad cars because the 

applicable tax rate was higher than the rate for commercial and industrial property under the thenadopted Proposition 13, such that the private railroad car tax “discriminated against owners of railtransportation property” in violation of Section 11501(b)(3). 697 F.2d at 864. After recognizing 

the purpose of Section 11501 and affirming the district court’s authority to enjoin violations of the 

statute, the Ninth Circuit turned to comparing the challenged tax rate to “the rate generally 

applicable to commercial and industrial property.” Id. at 866-67.

The Ninth Circuit explained that this “task is complicated by the fact that,” due to 

California’s unique classification system (dividing property into secured and unsecured, as 

opposed to residential and commercial/industrial), “California has no specific tax rate for 

commercial and industrial property.” Id. at 867. Because neither Section 11501, “nor its 

legislative history provides guidance as to what should be done when a specific rate generally 

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applicable to commercial and industrial property is not readily apparent,” the Ninth Circuit 

articulated a framework with two alternative approaches for identifying “the tax rate generally 

applicable to commercial and industrial properties” specifically in California, and specifically

under Section 11501. Id.

The first approach in that framework is to determine “the tax rate applicable” to whichever 

tax roll, either secured or unsecured, contains “the majority of [the] commercial and industrial 

property.” Id. Determining which tax roll contains the majority of commercial and industrial 

property is (often) straightforward. The secured roll in each county contains the vast majority 

(consistently over 90%) of the assessed value and the taxes levied against all property in that 

county, and the secured roll, according to Plaintiff, almost certainly contains the majority of 

commercial and industrial property. See Annis Decl. ¶¶ 30–31. 

However, the weakness of this approach is that “the tax rate applicable” to the property on 

the secured roll cannot be determined. Plaintiff contends that the property on the secured roll is 

spread among the hundreds or thousands of Tax Rate Areas in each Defendant County that each 

have their own tax rates. See id. ¶¶ 15, 31. Thus, Plaintiff contends that there is no identifiable 

“tax rate applicable” to property on the secured or unsecured roll of any of the Counties.

As a fallback, the Ninth Circuit in Trailer Train authorized a second approach. First, the 

Court is to determine the average tax rate for all property in the relevant county. See Trailer 

Train, 697 F.2d at 868 n.13 (“We thus, for reasons different from those articulated by the district 

court, conclude that the average rate for all property should be used when the rate generally 

applicable to commercial and industrial property cannot be determined.”). 

Plaintiff alleges that identifying the “average rate for all property” is possible because the 

State Board already calculates that rate—the annual “average tax rate of general property taxation” 

in each county. See Annis Decl. ¶ 24. By statute, the State Board calculates this average tax rate 

by dividing (a) the sum of all ad valorem property tax levies in a given county for a given year by 

(b) the sum of the assessed values of all property in that county for that same year. Cal. Rev. & 

Tax. Code § 11403. According to Plaintiff, the State Board-calculated rate for each county is the 

maximum rate the Defendants can apply to railroad property, meaning that taxing railroad 

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property at rates that are higher than the Section 11501 “Benchmark Rate” is a violation of Section 

11501(b)(3).3

Defendants counter that the relevant assessment jurisdiction is the area of the entire State 

of California that contains the unitary property, and the tax rate applied to the railroad must be 

compared to the tax rate applied to other commercial and industrial property that is assessed as 

unitary property. Counties’ Opp. at 19. Defendants further contend that, under Article XIII, 

Section 19 of the California Constitution, the assessment jurisdiction of the State includes the 

following types of property: “(1) pipelines, flumes, canals, ditches, and aqueducts lying within 2 

or more counties and (2) property, except franchises, owned or used by regulated railway, 

telegraph, or telephone companies, car companies operating on railways in the State, and 

companies transmitting or selling gas or electricity.” Id. at 20.

Defendants, in theory, are contending that Section 100 (applicable to Plaintiff) does not

differentiate in the way tax rates are applied among these commercial and industrial properties,

because these nonrailroad companies do not have a different rate than Plaintiff. Put differently, all 

of the non-railroad commercial and industrial property that is assessed as “unitary property” for 

purposes of local property taxation is taxed pursuant to Section 100.

The Court finds Defendants’ suggestion that it should compare Plaintiff’s tax rate to the 

rates for a relatively narrow subset of other state-assessed utilities and other entities that pay the 

same unitary tax rate inconsistent with the 4-R Act. Section 11501(b)(3) calls for a broader 

comparison to the rate paid by “commercial and industrial property in the same assessment 

jurisdiction,” where an “assessment jurisdiction” is “a geographical area in a State.” 49 U.S.C. 

11501(a)(2) (emphasis added). The “commercial and industrial property in” the “geographical 

area” of California clearly is not limited to state-assessed utilities or similar Section 19 property: it 

embraces all commercial and industrial taxpayers in the state. For the same reasons that there are 

not county-specific rates for commercial and industrial taxpayers in California, (Mot. 9-10, 14-15), 

there are also no statewide rates.

3 Plaintiff contends they will pay, for the 2019-20 tax year, a total of more than $3.2 million in 

taxes prohibited by Section 11501. See Annis Decl. ¶ 35.

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Railroads, like other utilities such as pipelines and telecommunications companies, are 

“easy prey” in that they are “nonvoting, often nonresident” targets “who cannot easily remove 

themselves from the locality.” Western Air Lines, Inc. v. Board of Equal., 480 U.S. 123, 131 

(1987) (quotation marks omitted). The solution, Congress recognized early on, was to link 

railroads’ fate with a mass of other taxpayers by insisting that “[rail] carriers are accorded equal 

tax treatment with other taxpayers.” S. Rep. No. 87-445 at 466 (1961). Significantly, before the 

final version of Section 11501 was passed, a provision permitting comparisons solely against 

public utilities was introduced and rejected. See Atchison, Topeka & Santa Fe Ry. Co. v. Ariz.,

559 F. Supp. 1237, 1244 (D. Ariz. 1983) (citing S. Rep. No. 92-1085 (1972)). The upshot is that 

the comparison the Defendant Counties propose—between railroads and other state-assessed 

taxpayers subject to the same tax laws—does not comport with the statute Congress enacted.

Defendants appear to recognize that Trailer Train poses a challenge for their argument. 

They contend that the taxes at issue here are calculated at the local level and do not require use of 

a statewide general property tax rate, whereas Trailer Train involved the applicability of the 4-R 

Act to a statewide tax on plaintiffs’ private railroad cars, and the effort to identify a comparison 

class for that statewide tax. 697 F.2d at 862.

But that is a distinction without a difference. The challenge in Trailer Train, as here, was 

determining which group of commercial and industrial property to use as a comparison class, 

given that commercial and industrial property appeared on both the secured and unsecured rolls. 

The Ninth Circuit held first that “[t]he tax rate applicable to the roll that contained the majority of 

the commercial and industrial property shall be deemed the rate generally applicable to 

commercial and industrial property and will serve as the base rate for comparison against the 

Companies’ $10.68 rate.” Id. at 867. The Ninth Circuit further reasoned that “[i]f the 

determination of which roll contained the majority of the state’s commercial and industrial 

property in the 1978-79 fiscal year is not possible, the average tax rate for all property shall be 

used as the basis for comparison.” Id. 

Defendants characterize Trailer Train as hinging on its discussion of a uniform statewide 

tax versus local taxation of unitary property. But this ignores the Ninth Circuit’s recognition that 

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there is no specific commercial and industrial rate for locally assessed property in California. 

Defendants contention that Trailer Train predates the legislation subjecting railroad property to 

unitary rates is irrelevant to the key question that Trailer Train resolves—how to determine the 

appropriate comparison rate for locally-assessed property—and California law on that point 

remains unchanged. 

The Court finds that Defendants’ proposed comparison is untethered from the statutory 

language and unsupported by Section 11501 jurisprudence. Indeed, under the Defendants’

approach—under which railroads are only compared to taxpayers that are taxed like railroads—

violations of Section 11501(b)(3) likely would be rare or nonexistent, and Congress would have 

accomplished very little. The statute’s use of the term “assessment jurisdiction” demonstrates that 

Congress was concerned with the basic principle that like property should be treated alike. 

Because there is no specific commercial and industrial rate in the State of California, Trailer Train

authorized the use of either the rate for the secured roll or the average rate for all property.

Accordingly, under the Trailer Train framework, Plaintiff has established reasonable cause 

that a violation of Section 11501(b)(3) has occurred or will occur if it is required to pay taxes at 

the rate Defendants claim applies for the 2019-20 tax year.

B. Discrimination and Justification

Defendants make a secondary argument that Plaintiff (and the railroad industry) lobbied to 

be taxed at the Section 100(b) rate that Plaintiff now alleges is unlawful. According to 

Defendants, the railroad industry wanted its taxes to be calculated under Section 100(b) because

the railroads wanted to “reduce[ ] the administrative burden imposed on the Board of Equalization, 

county auditors and treasurers, and the railroads.” See Declaration of Michael Narciso, Dkt. No. 

44-4 Ex. 5 at pages 316-17 (ECF pagination). 

Defendants cite to the railroad industry’s arguments in favor of the current law, specifically 

the claim that “each year, the railroads, the State Board of Equalization (SBE) and individual 

taxing jurisdictions must undertake a painstaking and time consuming process in which they are 

forced to redraw hundreds of ‘tax maps’ and prepare a similar number of bills for each and every 

tax rate area where there are railroad tracks. . . . This year, for instance, Union Pacific Railroad 

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and BNSF Railway Company received more than 2,400 tax rate area changes and 2,850 operating 

tax bills from the tax districts.” Id. Defendants point out that this legislation, by allowing the 

railroad to pay only on one tax rate area in each county, reduced the number of operating tax bills 

from 2,850 to approximately 61. Id. 

Defendants thus argue that any discriminatory outcome for Plaintiff was a direct result of 

the railroad industry’s lobbying efforts regarding which tax rates would apply to its members in 

California. Defendants use the legislative history to argue that Plaintiff should not be allowed to 

reap the benefits of its lobbying efforts, then pounce only once it perceives an advantage in 

invoking Section 11501. Defendants contend that Section 11501 is meant to address concerns 

about the railroads’ political vulnerability and establishes a prohibition only as to discriminatory

state taxation of railroad property. Thus, Defendants conclude, because the railroads in California 

wanted to be taxed pursuant to Section 100(b), and wanted to benefit themselves through reduced 

administrative burdens provides, this provides sufficient justification for any alleged tax disparity.

Whatever equitable force Defendants’ argument might have in a vacuum, the Court finds it 

to be inconsistent with the relevant language in the statute. Section 11501(b)(3) does not use the 

word “discriminates.” Rather, subsection (b)(3) forbids “[l]evy[ing] or collect[ing] an ad valorem 

property tax on rail transportation property at a tax rate that exceeds the tax rate applicable to 

commercial and industrial property in the same assessment jurisdiction.” 49 U.S.C. § 

11501(b)(3). The statute does not require proof of discrimination, because Congress has already 

declared in the preface of Section 11501(b) that the imposition of such an ad valorem property tax 

rate disparity “unreasonably burden[s] and discriminate[s] against interstate commerce.” 49 

U.S.C. § 11501(b).

In arguing to the contrary, Defendants cite the Supreme Court’s 2011 decision in CSX 

Transportation, Inc. v. Alabama Department of Revenue, 562 U.S. 277 (2011) (“CSX I”), which 

discussed the meaning of the word “discriminate” in Section 11501 and explained how a state 

might engage in illegal discrimination under Section 11501(b)(4). The Court stated that if a state 

charged “one group of taxpayers a 2% rate and another group a 4% rate,” the State would be 

discriminating against the latter group, “assuming the groups are similarly situated and there is no 

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justification for the difference in treatment.” CSX I, 562 U.S. at 287.

Four years later, the Court found such justification for a difference in treatment in Alabama 

Department of Revenue v. CSX Transp., Inc. (“CSX II”), 575 U.S. 21 (2015). At issue there was 

whether the 4-R Act prohibited Alabama from imposing a 4% tax on the diesel fuel used by 

railroads that it did not impose on the diesel fuel used by the railroads’ competitors, given that 

Alabama also imposed comparable taxes on the competitors that it did not impose on railroads. 

Id. at 24, 30. The Court concluded that the 4-R Act did not prohibit such differential treatment 

because “an alternative, roughly equivalent tax is one possible justification that renders a tax 

disparity nondiscriminatory.” Id. at 30-31.

The Court finds the CSX cases inapplicable. In both CSX I and CSX II, Section 

11501(b)(3) was not at issue: the Court addressed Section (b)(4), which specifically prohibits a 

state from imposition “another tax that discriminates against a rail carrier ....” See Section 

11501(b)(4) (emphasis added). In CSX I, the “key question” was “whether a tax might be said to

‘discriminate’ against a railroad under subsection (b)(4).” 562 U.S. at 286. The Court held that 

subsection (b)(4) permits a justification defense because, as used in that subsection, the undefined 

term “discriminates” means a failure to treat similarly situated taxpayers the same without 

“justification for the difference in treatment.” Id. at 287. Then, in CSX II, the Court held that the 

existence of an “alternative, roughly equivalent tax” (paid by the taxpayers to which the railroad is 

compared) is a possible justification under subsection (b)(4). 575 U.S. at 30-31. These 

discussions about when the catchall provision regarding “another tax that discriminates” might be 

triggered do not shed light on the issue presented in this case, because the face of the statute

already reflects Congress’ determination that the acts set out in subsection (b)(3) amount to per se 

discrimination against interstate commerce. 

IV. CONCLUSION 

Because Plaintiff has established reasonable cause that a violation of Section 11501(b)(3) 

has occurred or will occur, the motion for a preliminary injunction is GRANTED. 

Defendants Alameda County, Contra Costa County, Fresno County, Kern County, Kings

County, Madera County, Merced County, Orange County, Plumas County, Riverside County, San 

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Bernardino County, San Diego County, San Joaquin County, Stanislaus County, and Tulare 

County, California; their boards of supervisors, county auditors, tax collectors, agents, employees, 

and all those acting in concert or participating with them who receive actual notice of this order 

(the “Enjoined Parties”) are hereby ENJOINED through the pendency of this litigation until entry 

of a final judgment from levying or collecting ad valorem property taxes from Plaintiff on its 

unitary property based on a tax rate higher than the annual average tax rate of general property 

taxation calculated and reported for each county by the California State Board of Equalization 

under Cal. Rev. & Tax Code §11403. 

The Enjoined Parties are further enjoined through the pendency of this litigation until entry 

of a final judgment from taking any action to impose any interest or penalties, from taking any 

action to record or enforce a tax lien upon any property used or owned by Plaintiff, or from taking 

any other action authorized by state law for delinquent or unpaid taxes under California law.

Plaintiff will be required to post a bond under Federal Rule of Civil Procedure 65(c). The 

parties are directed to meet and confer and agree if possible by 5:00 p.m. Pacific Time on April 9, 

2020 regarding the appropriate amount of the bond. See Opp. at 25 (seeking bond of “no less than 

$1.6 million in lost tax revenue”), Reply at 15 (acknowledging that Plaintiff will post a bond if 

ordered, without indicating its view as to the appropriate amount of the bond). By that time, the 

parties should either file an agreed-upon proposed bond order (which should be done if at all 

possible), or separate proposed forms of order (understanding that the Court is going to require a 

bond notwithstanding Plaintiff’s argument that doing so is unnecessary). 

Consistent with the discussion at the hearing, see Dkt. No. 61 at 41, the parties are also 

directed to meet and confer and submit a joint proposal by April 15, 2020 regarding the proposed 

timing of initial disclosures, discovery and other proceedings in light of this order. 

IT IS SO ORDERED.

Dated:

______________________________________

HAYWOOD S. GILLIAM, JR.

United States District Judge

4/8/2020

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