BNSF Railway Company v. Alameda County

Background

BNSF Railway Company sued Alameda, Contra Costa, Fresno, Kern, Madera, Merced, Orange, Plumas, Riverside, San Bernardino, San Diego, San Joaquin, Stanislaus, and Tulare Counties under Section 306 of the Railroad Revitalization and Regulatory Reform Act of 1976, 49 U.S.C. § 11501. BNSF challenged the rates at which the counties taxed its railway property valued under the “unit valuation” method.

The court had previously issued a preliminary injunction after finding reasonable cause to believe that the counties had violated, or were about to violate, 49 U.S.C. § 11501(b)(3). That provision prohibits a county from taxing railroad property at a rate higher than the rate applicable to commercial and industrial property in the same assessment jurisdiction. The Ninth Circuit affirmed the preliminary injunction.

Because California did not have one readily identifiable tax rate for commercial and industrial property, the earlier rulings used the average tax rate for all property in each county. The final judgment called this the “Benchmark Rate”: the average general-property-tax rate calculated and reported for the preceding tax year by the California State Board of Equalization under California Revenue and Taxation Code section 11403.

Judgment

Under the parties’ stipulation, the court entered final judgment as to the fourteen counties listed above. The court declared that the counties’ levy or collection of ad valorem property taxes—property taxes based on value—on BNSF’s unitary property was unlawful under 49 U.S.C. § 11501(b)(3) when the rate specified by California Revenue and Taxation Code section 100(b) was higher than the applicable Benchmark Rate.

The counties, their boards of supervisors, auditors, tax collectors, agents, employees, and those acting with them were enjoined from levying or collecting those taxes at a rate higher than the Benchmark Rate. A county could impose a lower rate if state law required or allowed it. The counties’ obligations became effective when the judgment was entered.

Other Terms and Disposition

The judgment ordered the full balance of the escrow account established as security for the preliminary injunction, including accrued interest, to be released to BNSF. BNSF was released from any continuing obligation to deposit escrow amounts attributable to the counties’ taxes on its unitary property. Except for releasing those escrow funds, the counties had no further liability for refunds or otherwise for the 2019–2020, 2020–2021, and 2021–2022 tax years.

The parties were ordered to bear their own costs and attorney fees. The court retained continuing jurisdiction to construe, modify, and enforce the judgment, including possible modification under Federal Rule of Civil Procedure 60(b) if facts or law materially changed. The judgment stated that it was a full and final resolution of all claims in the complaint. Judge Haywood S. Gilliam, Jr. entered and adjudged the final judgment on April 21, 2022.