Facts

On March 18, 2013, California High-Speed Rail Authority passed a resolution, asking the High Speed Passenger Train Finance Committee to authorize issuance of over $8 billion in general obligation bonds. The bonds were intended to help fund construction of an initial segment of the high-speed rail system. The funding of the project was approved by California voters in November 2008 through the Safe, Reliable High-Speed Passenger Train Bond Act for the 21st Century, a ballot measure also known as Proposition 1A.

The finance committee adopted a resolution authorizing the issuance of the bonds, on the same day the rail authority made its request, determining it was "necessary and desirable." The rail authority filed a complaint seeking to establish the validity of their actions including the adoption of the resolutions and the authorization of the issuance of the bonds.

PLAINTIFFS' CONTENTIONS:
The rail authority and the finance committee contended that it had satisfied all legal requirements to issue the bonds, and therefore the finance committee's authorization should be validated, foreclosing any future attempt to challenge the validity of the bonds.

DEFENDANTS' CONTENTIONS:
Defendants contended that the finance committee met the same afternoon the rail authority made its request and after a five-minute meeting with no discussion, voted 5-0 to authorize issuing the bonds, finding that it was necessary and desirable to issue the bonds at that time. However, there was no evidence before the finance committee to support its conclusion.

Defendants claimed that the conclusion was therefore arbitrary and capricious; the project, for which the bond proceeds would be used, wasn't the project the voters had approved, and therefore issuing the bonds for that use was improper; and the rail authority and finance committee hadn't fully satisfied all of the technical requirement for issuing the bonds.

Union Pacific took no position on whether the court should validate issuance of the bonds, but Union Pacific objected to the broad form of validation judgment the rail authority was requesting.

Result

The court denied the High-Speed Rail Authority's request that it validate the authorization to issue over $8 billion in general obligation bonds.

Other Information

The rail authority could proceed to issue bonds without validation. However, according to defendants, proceeding would be at very considerable risk given that the court found proper procedures weren't followed, and it's unlikely bonds will issue until the finance committee can make the required findings and support them with evidence in the record. Defendants intend to file a motion for attorney fees under CCP 1021.5. FILING DATE: March 19, 2013.