State high-speed rail panel sues everyone as safeguard for investors

San Jose Mercury NewsMarch 28, 2013 

— If you're reading this, consider yourself served.

The state of California has filed a civil case against everyone -- literally, the whole world -- seeking to validate $8.6 billion in voter-approved bonds for its $69 billion high-speed rail project.

The lawsuit, High-Speed Rail Authority v. All Persons Interested, is meant as a pre-emptive strike so the state can confirm that it's definitely legal to issue some of the bonds needed to begin bullet train construction this summer.

By citing a somewhat obscure California civil code, the state can use the "sue now or forever hold your peace" strategy to prevent a string of future lawsuits and, instead, deal with the legal issues in one fell swoop.

Anyone interested in trying to block the project can sign up with the court, put their endless hours of "Law & Order" watching to use, wear their best suit and show up at a hearing to argue their case. They would join lawyers who are suing the rail authority in other cases and go toe-to-toe with the state Attorney General's Office, which is representing the rail authority.

The state's biggest project is also one of its most controversial, which has led the rail authority to swat away lawsuit after lawsuit since California voters approved the bullet train in November 2008.

"You might as well do it for the whole shebang," said Oakland-based attorney Stuart Flashman, one of the lawyers already suing the rail authority. He will join this new case, too, and expects at least a half-dozen people to join him.

"It says you've got the court's stamp of approval," he said. "Nobody can come back and say, 'You shouldn't issue these bonds.' "

Not unheard of

Lawyers say this "validation" process, while not well known, isn't necessarily uncommon among public agencies that want to create a legal shield against future lawsuits to calm investors interested in their bonds.

The city of San Jose did it in 2009, for example, before issuing bonds to expand its convention center. Even then, the case was tied up for a year because a gadfly signed up to challenge it before the city won, said City Attorney Rick Doyle.

"You never know what you're going to get," he said. "You could get a crazy person filing something."

Riverside attorney Danielle Sakai, who has represented clients in several similar cases for the law firm Best Best & Krieger, said, "It could take years to work its way through the courts, but once that's done, it's done, and it can't be challenged."

It's still unclear whether the case could affect the construction schedule, as officials may be able to use federal funds first or roll the dice and spend the bonds before the judge makes a ruling.

The rail authority released a statement saying the attorney general's strategy, unveiled in Sacramento County Superior Court last week, "promotes judicial economy" by combining all potential lawsuits into one. It should provide certainty in the bond marketplace, giving the state a better chance to find investors with low interest rates, a key concern for taxpayers who say the project is too expensive.

They noted that lawsuits related to environmental law, which has been another popular legal avenue for opponents to sue to block the bullet train, would not be affected.

(At this point, we should mention that only public agencies can use this legal strategy, so you can't quietly file a lawsuit against the world, hoping to be named the next 49ers quarterback or CEO of Apple. Sorry.)

A "summons" for people interested in joining the lawsuit will be published once a week for three weeks in five major newspapers around the state. The summons will provide a detailed description of the bonds in question and directions for joining the lawsuit.

It's not clear when the hearing on this new case would be. And there are differing opinions about whether it will affect a Bay Area-based lawsuit dating back to 2011 that is trying to block the bond sales. That case, which could be decided at a May 31 hearing, is led by Flashman and Redwood City attorney Mike Brady and features star witness Quentin Kopp, the "grandfather" and former chairman of the bullet train project who has since turned against the plan.

Opponents argue that since voters approved the bonds, the project cost has grown, the scope of future service has shrunk, construction has been delayed, and projections say there will be fewer riders, making the original bond measure invalid.

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