Pacific Telephone & Telegraph Co. (PTT) and General Telephone Co. of California (GT) appeal from the district court's denial of a preliminary injunction. We affirm.

On September 13, 1977, the Public Utilities Commission of California (PUC), which regulates certain charges of PTT and GT, entered its Decision No. 87838. It ordered the two companies, engaged in providing telephone service in California, to refund certain monies paid by ratepayers for years prior to 1978 and to make rate reductions for the year 1978 and beyond. In so deciding, the PUC stated explicitly that it assumed that its order would not destroy the utilities' eligibility to take advantage of certain federal tax rules pertaining to accelerated depreciation and investment tax credits.

The PUC refused appellants' request for a rehearing on Decision No. 87838. The PUC, however, stayed implementation of its order pending judicial review. Upon two petitions by the utilities, the California Supreme Court refused to disturb the PUC's order.1 And the United States Supreme Court denied two writs of certiorari and later denied appellants' petitions for rehearing. On March 14, 1979, the PUC ended the stay of its order because "the avenues of judicial review have been exhausted" and also again denied appellants' petitions for rehearing.

Meanwhile, the utilities sought rulings from the United States Internal Revenue Service (IRS) concerning their eligibility for accelerated depreciation and investment tax credits under Decision No. 87838. The IRS ruled that the utilities would not be eligible for the tax advantages under the PUC's Decision No. 87838.

On March 15, 1979, a day after the PUC ended the stay of its order, the utilities began the instant litigation. PTT filed suit against the PUC and various federal officials related to the IRS2 seeking to enjoin implementation of the PUC's rate order and seeking a declaratory judgment regarding PTT's eligibility for the tax advantages under the PUC's order. PTT also requested that if the court determined that PTT would be ineligible, then the PUC should be enjoined permanently from putting its order into effect. On the same day, GT instituted a similar suit.

PTT and GT each sought a temporary restraining order (TRO) and a preliminary injunction against implementation of the PUC's order. The cities of Los Angeles and San Diego, the City and County of San Francisco, and an organization called Toward Utility Rate Normalization were allowed to intervene. The PUC and these intervenors3 opposed the motions for injunctive relief. The federal Government filed a motion to dismiss the action insofar as declaratory relief was sought.4

The district court granted a TRO staying implementation of the PUC order. Two weeks later the district court dissolved the TRO5 and denied appellants' prayers for preliminary injunctions. On the same day, PTT and GT filed appeals in this court. A few days later this court enjoined implementation of the PUC order pending this appeal.

The district court determined that appellants were not entitled to preliminary relief because

The relief requested by plaintiffs herein is barred under the doctrine of res judicata by the denial by the California Supreme Court without written opinion of petitions for writ of review of Decision No. 87838 filed by General and Pacific.

The district court properly applied the doctrine of res judicata.

A. Application of Res Judicata in California Rate Cases: The

The United States Supreme Court and this court have acknowledged that, under California law, the California Supreme Court's denial of writs of review of rate decisions constitutes a denial on the merits and have held that such denials are entitled to res judicata effect in federal courts. In Napa Valley Electric Co. v. Railroad Commission, 251 U.S. 366, 40 S. Ct. 174, 64 L. Ed. 310 (1920), a California electric company filed suit in federal district court seeking an injunction against a rate order of the California Railroad Commission, a forerunner of the present PUC. After the Commission had issued its rate order, the utility unsuccessfully sought a rehearing. The California Supreme Court later denied the utilities' petition for a writ of review. The federal suit was thereupon filed.

The district court denied the injunction and dismissed the federal suit because "the Electric Company filed in the (California) Supreme Court a petition for a review of the decision and order of the Commission and for their annulment, and . . . the Supreme Court denied the petition." Id. at 370, 40 S.Ct. at 175.

The United States Supreme Court held that the district court had properly invoked the doctrine of res judicata. See id. at 367, 40 S. Ct. 174. The Court wrote:

Whether . . . the (California) court was required to pursue the details of the section or decide upon the petition was a matter of the construction of the (California statutory) section and the procedure under it. And the (California) Supreme Court has so decided. (Citations omitted.) In those cases the applications for writs of certiorari were denied, which was tantamount to a decision of the (California) court that the orders and decisions of the Commission did not exceed its authority or violate any right of the several petitioners under the Constitution of the United States or of the State of California. . . . And we agree with the District Court that "the denial of the petition was necessarily a final judicial determination . . . ." And . . . "Such a determination is as effectual as an estoppel as would have been a formal judgment upon issues of fact." (Citations omitted.)

The (district) court held, and we concur, that absence of an opinion by the (California) Supreme Court did not affect the quality of its decision or detract from its efficacy as a judgment upon the questions presented, and Its subsequent conclusive effect upon the rights of the Electric Company.

Id. at 372-73, 40 S.Ct. at 176 (emphasis added).6 This Circuit has subsequently embraced the Napa Valley doctrine. See Southern Pacific Co. v. Van Hoosear, 72 F.2d 903, 905 (9th Cir. 1934); Wallace Ranch Water Co. v. Railroad Commission, 47 F.2d 8, 9 (9th Cir. 1931).

The procedure for obtaining review of rate orders with which the Supreme Court dealt in Napa Valley has since been slightly modified and recodified, but the essential attributes of the procedure upon which the Supreme Court relied have remained the same.7 Thus, in People v. Western Air Lines, 42 Cal. 2d 621, 268 P.2d 723 (1954),8 Appeal dismissed, 348 U.S. 859, 75 S. Ct. 87, 99 L. Ed. 677 (1955),9 the California Supreme Court reaffirmed the rule relied upon in Napa Valley that denial of a writ of review is a final judgment on the merits; it also applied that rule specifically to the PUC. The California court wrote:

Direct attack (on PUC orders) is made available by application for writ of review to this court . . . .

. . . It is established . . . that the denial by this court of a petition for review of an order of the commission is a decision on the merits both as to the law and the facts presented in the review proceedings. (Citation omitted.) This is so even though the order of this court is without opinion. Napa Valley Electric Co. . . ..

Id. at 630-31, 268 P.2d at 728. The court then quoted extensively from Napa Valley, including its language regarding application of res judicata to denials of writs of review by the California court. Id. We conclude, therefore, that the recodification of California law has not affected the vitality of the Napa Valley reading of California procedure or of the Napa Valley decision itself.

Appellants contend that People v. Medina, 6 Cal. 3d 484, 99 Cal. Rptr. 630, 492 P.2d 686 (1972), has undermined the rule that the California Supreme Court's denial of a writ of review of a PUC order constitutes a final adjudication for res judicata purposes. We disagree.

Medina was charged in a criminal prosecution with unlawfully possessing heroin for sale. At a pretrial hearing he moved to suppress evidence because of an alleged unlawful search. The trial court denied the motion. Medina filed a formally sufficient petition for a writ of prohibition to gain review of the trial court's evidentiary ruling as provided by California Penal Code § 1538.5.10 The Court of Appeal denied the petition without opinion and the California Supreme Court denied a hearing.

After conviction Medina appealed, again claiming that the evidence should have been suppressed. The Court of Appeal held that the denial of the writ of prohibition was res judicata upon this direct appeal, creating a conflict with another Court of Appeal decision which held "that the denial without opinion of a defendant's pretrial petition for a writ under section 1538.5 is not a conclusive determination of the validity of the challenged search." Id. at 488, 99 Cal.Rptr. at 632, 492 P.2d at 688. The California Supreme Court held that the latter view of a denial of a § 1538.5 writ was correct. Id. at 488, 99 Cal.Rptr. at 632, 492 P.2d at 688.

The California Supreme Court first noted that the legislative history of Penal Code § 1538.5 showed that the state legislature intended "that the merits of search and seizure challenges raised by a defendant's unsuccessful petition for a pretrial writ may remain open for further review on appeal from an ensuing judgment of conviction." Id. at 489, 99 Cal.Rptr. at 633, 492 P.2d at 689. The court also observed that the legislature in enacting "new procedures for the presentation of search and seizure challenges" did not intend to alter the traditional California procedure affording a criminal defendant a written opinion and formal hearing as to his fourth amendment contentions. Id. at 490, 99 Cal.Rptr. at 633, 492 P.2d at 689. Yet, the court wrote, if the denial of a writ, which does not require a hearing or written opinion under the California constitution or procedure, were given res judicata effect, then the criminal defendant would lose those benefits traditionally afforded. Moreover, defense counsel, recognizing this problem, would cease to invoke § 1538.5, thus undermining the legislature's intent to provide this method of challenging admissibility of evidence. Id. at 490, 99 Cal.Rptr. at 633-34, 492 P.2d at 689-90.

The court rejected the People's argument that res judicata should be applied anyway because "the sole possible ground of the . . . denial of defendant's petition . . . was on the merits . . . ." Id. at 490, 99 Cal.Rptr. at 634, 492 P.2d at 690. The court wrote:

(W)e cannot accept the People's contention that the sole possible ground for denying defendant's petition for the writ was a determination against him on the merits. We have continued to recognize that the writs of mandate and prohibition are "extraordinary" and "prerogative" and that therefore their use for pretrial review . . . should be confined to questions of . . . general importance.

Id. at 491, 99 Cal.Rptr. at 634, 402 P.2d at 690. The court then referred to the many reasons, not related to the merits, because of which the Court of Appeal may have denied the writ. The court concluded:

In light of the various considerations which may impel appellate justices to vote to deny a defendant's petition for a pretrial writ under section 1538.5 without opinion, we believe that giving such a minute order conclusive effect on an appeal from a subsequent judgment of conviction would amount to improper conjecture and surmise as to the theoretically possible mental processes of the justices.

Id. at 492, 99 Cal.Rptr. at 635, 492 P.2d at 691. The court added:

In view of the express language of section 1538.5, application of the doctrine of res judicata to give conclusive effect on appeal from a judgment of conviction to an appellate court's earlier decision denying defendant's application for a pretrial writ would be inappropriate even when the denial of the writ is by an opinion demonstrating adjudication of the merits. The statute permits the defendant to seek further review of the validity of the challenged search on appeal from a judgment of conviction . . . .

Id. at 492, 99 Cal.Rptr. at 635, 492 P.2d at 691.

The foregoing indicates that Medina did not affect the long-time California rule, reaffirmed in Western Air Lines, that the Supreme Court's denial of a writ of review of a rate order is a decision on the merits for res judicata purposes. Medina dealt with the res judicata effect of the denial of an extraordinary writ provided by the legislature under Penal Code § 1538.5 to afford a criminal defendant two opportunities to obtain review of trial court rulings on fourth amendment questions. The California Supreme Court concluded that application of res judicata, whether denial of a writ under § 1538.5 is with or without opinion, would be inconsistent with the legislature's intent in providing two opportunities for review.11

Thus, Medina did not deal with the non-criminal writ of review provided by Public Utilities Code § 1756 as the sole means of obtaining judicial review of PUC rate orders.12 Medina did not purport to overrule or limit Western Air Lines or the traditional rule applied in Napa Valley. Indeed, the Medina court did not even cite Western Air Lines, though one would expect such a citation were Medina intended to overrule the long-followed practice reaffirmed in that decision.

Appellants argue that Medina found the constitutional requirement of a written opinion to be an obstacle to application of res judicata when a writ is denied without written opinion. This is incorrect. First, while the particular case before the court involved a denial without written opinion, the court indicated that whether or not an opinion had been issued in denying a § 1538.5 writ, giving res judicata effect to the denial would conflict with the legislature's intent to provide duplicitous review.13 Second, the court noted that the California constitutional provision requiring written opinions in some cases did not apply to the denial of writs. Id. at 490, 99 Cal.Rptr. at 633, 492 P.2d at 689. Indeed, the court wrote:

The denial without opinion of a petition for a writ of mandate or prohibition is not res judicata except when the sole possible ground of denial was on the merits or it affirmatively appears that the denial was intended to be on the merits.

Id. at 491 n.6, 99 Cal. Rptr. at 634 n.6, 492 P.2d at 690 n.6. Thus, although the court also noted that the multitude of reasons why a writ under Penal Code § 1538.5 might be denied made it difficult to read the denial (at least in the case before it) as on the merits, it indicated that even in the context of writs of prohibition and mandate the absence of a written opinion was not necessarily fatal to application of res judicata.14

In short, we conclude that Medina did not undermine the long-followed California rule that the Supreme Court's denial of a writ of review of a rate order without opinion constitutes a final judgment entitled to res judicata effect. Therefore, Napa Valley, involving a situation almost identical to the case before us, mandates application of res judicata in the present case.15 Accordingly, the district court's invocation of res judicata and its judgment are

AFFIRMED.