Illinois Central Railroad Company v. Kinder Morgan LiquidsTerminals LLC

Filing 32

MEMORANDUM Opinion : The Court grants Kinder Morgan's motion to dismiss Count III of CN's Amended Complaint. Kinder Morgan's motion to dismiss Counts I and II is denied. It is so ordered. Status hearing set for 5/30/2017 at 9:30 AM. Signed by the Honorable Charles P. Kocoras on 5/9/2017. Mailed notice(vcf, )

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
ILLINOIS CENTRAL RAILROAD
COMPANY, an Illinois Corporation, d/b/a
CN,
Plaintiff,
v.

16 C 8044

KINDER MORGAN LIQUIDS
TERMINALS, a Delaware LLC,
Defendant.
MEMORANDUM OPINION
CHARLES P. KOCORAS, District Judge:
Before the Court is Defendant Kinder Morgan Liquids Terminals’ (“Kinder Morgan”)
motion to dismiss Plaintiff Illinois Central Railroad’s (“CN”) Amended Complaint pursuant to
Federal Rule of Civil Procedure 12(b)(6). For the following reasons, the Court grants in part and
denies in part Kinder Morgan’s motion.
BACKGROUND
The following facts are taken from CN’s Amended Complaint and are assumed to be true
for purposes of this motion. See Murphy v. Walker, 51 F.3d 714, 717 (7th Cir. 1995). The Court
draws all reasonable inferences in favor of CN. See Tamayo v. Blagojevich, 526 F.3d 1074,
1081 (7th Cir. 2008).
This lawsuit stems from alleged charges assessed by CN for demurrage1 and intraplant
switching2 fees. According to CN’s Amended Complaint, between August 2015 and October

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Demurrage is a “late charge” paid when an entity fails to load or unload cargo within a

2016, CN transported freight rail cars to Kinder Morgan’s Argo Facility. The Argo Terminal
acts as a rail transportation intermediary that will transload shipped materials by moving them
from the railroad to another form of transportation, such as pipeline or truck, or will temporarily
store shipped materials for the owner.

CN alleges that Kinder Morgan is responsible for

$1,841,045 in demurrage fees assessed in 95 invoices from August 2015 to October 2016. These
invoices relate to rail cars allegedly delayed at the Argo Terminal. CN seeks to recover the
balance of its invoices pursuant to the demurrage regulations and its demurrage tariff.
Additionally, CN claims Kinder Morgan is liable for $28,577.00 in intraplant switching charges
between August 2015 and October 2016. According to CN, Kinder Morgan requested intraplant
switching services which CN performed.

Furthermore, CN asserts they have not received

payment for services rendered.
LEGAL STANDARD
A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) “tests the
sufficiency of the complaint, not the merits of the case.” McReynolds v. Merrill Lynch & Co.,
694 F.3d 873, 878 (7th Cir. 2012). The allegations in a complaint must set forth a “short and
plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P.
8(a)(2). A plaintiff need not provide detailed factual allegations, but must provide enough
factual support to raise his right to relief above a speculative level. Bell Atlantic. Corp. v.
Twombly, 550 U.S. 544, 555 (2007). A claim must be facially plausible, meaning that the
pleadings must “allow . . . the court to draw the reasonable inference that the defendant is liable

specified time. See, e.g., Demurrage, Black’s Law Dictionary (10th ed. 2014).
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Intraplant switching involves the movement of rail cars from one location inside the Argo
Facility to another location within the Argo Facility.
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for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The claim must be
described “in sufficient detail to give the defendant ‘fair notice of what the . . . claim is and the
grounds upon which it rests.’” E.E.O.C. v. Concentra Health Servs., Inc., 496 F.3d 773, 776 (7th
Cir. 2007) (quoting Twombly, 550 U.S. at 555). “Threadbare recitals of the elements of a cause
of action, supported by mere conclusory statements,” are insufficient to withstand a 12(b)(6)
motion to dismiss. Iqbal, 556 U.S. at 678.
DISCUSSION
I.

Count I—Demurrage Charges
Kinder Morgan argues that Count I of CN’s Amended Complaint should be dismissed

because: (i) demurrage regulations do not apply to this dispute; (ii) CN fails to allege that Kinder
Morgan unduly caused the rail car delays; and (iii) CN fails to allege that it provided Kinder
Morgan with proper notice of the material changes to its tariff.
A.

Demurrage Regulations

Under the guidelines promulgated by the Surface Transportation Board (the “STB”),
Demurrage shall be assessed by the serving rail carrier, i.e., the rail carrier providing rail
cars to a shipper at an origin point or delivering them to a receiver at an end-point or
intermediate destination. A serving carrier and its customers (including those to which it
delivers rail cars at origin or destination) may enter into contracts pertaining to demurrage, but in
the absence of such contracts, demurrage will be governed by the demurrage tariff of the serving
carrier.
49 CFR § 1333.2
According to Kinder Morgan, demurrage regulations and a carrier’s tariff do not apply when the
relevant parties in a demurrage dispute—the carrier and its customers or shippers—entered into
contracts pertaining to demurrage. In the instant matter, Kinder Morgan contends that CN’s
customers entered into private contracts with it pertaining to the demurrage charges sought by

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CN. Therefore, Kinder Morgan maintains that these contracts supersede the STB’s regulations
and CN’s tariff.
CN counters that Kinder Morgan’s “assertion . . . that CN’s customers . . . have contracts
with [Kinder Morgan] under which they agree to pay demurrage is false, irrelevant and provides
no basis for the dismissal of the Amended Complaint.” Furthermore, CN contends “in the
absence of any allegations in the Amended Complaint that CN entered into contracts assigning
demurrage responsibility to another party, the agreements referenced by [Kinder Morgan] have
no bearing in the context of a motion to dismiss.” We agree.
The demurrage regulations specifically provide: “A serving carrier and its customers
(including those to which it delivers rail cars at origin or destination) may enter into contracts
pertaining to demurrage, but in the absence of such contracts, demurrage will be governed by the
demurrage tariff.” (Emphasis added). Kinder Morgan attempts to expand the scope of the
exclusion under 49 CFR § 1333.2 to include private contracts between a terminal and its
customers (shippers). This argument is misplaced. A plain reading of the demurrage regulations
clearly provides in the absence of a private contract between a common carrier and its customers
that the demurrage regulations will apply. Therefore, Kinder Morgan is excused from demurrage
liability only if CN is a party to the agreements. Here, CN’s Amended Complaint does not
include any allegations that CN and its customers entered into any private contracts pertaining to
liability for demurrage. Furthermore, CN explicitly maintains that they “have not entered into
any private contracts [with its customers] related to the payment of demurrage charges for
shipments made to [Kinder Morgan’s] storage facility.” For that reason, Kinder Morgan’s
motion to dismiss this claim is denied.
B.

Undue Delay
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Kinder Morgan further contends that Count I of CN’s Amended Complaint should be
dismissed because CN failed to allege that Kinder Morgan unduly caused delays of the rail cars.
Any person receiving rail cars from a rail carrier for loading or unloading who

detains

the cars beyond the period of free time set forth in the governing demurrage tariff may be held
liable for demurrage if the carrier has provided that person with actual notice of the demurrage
tariff providing for such liability prior to the placement of the rail cars. The notice required by
this section shall be in written or electronic form.
49 CFR § 1333.3
Kinder Morgan asserts that, “rather than placing liability directly on the party receiving the rail
cars, the demurrage regulations only allow for the possibility that a receiver may be liable.”
Furthermore, Kinder Morgan claims that CN must “allege facts showing Kinder Morgan actually
caused the delays resulting in CN’s demurrage claim or that Kinder Morgan unduly detained the
rail cars.” CN counters that, under 49 CFR § 1333.3, they are not required to show that Kinder
Morgan actually caused the delays or unduly detained the rail cars.
In interpreting a statute or a regulation, a court should not “read absent word[s]” into the
enactment to explain its meaning. Lamie v. U.S. Trustee, 540 U.S. 526, 538 (2004).

This is

particularly true where a party asks the Court to read a limitation into a statute or a regulation.
Bass v. Stolper, Koritzinsky, Brewster & Neider, S.C., 111 F.3d 1322, 1326 (7th Cir. 1997)
(“[W]e are prohibited from reading into clear statutory language a restriction that Congress itself
did not include.”). Under 49 CFR § 1333.3, there is no requirement that a party must prove that
the person receiving the rail cars caused the delays or unduly detained the rail cars. To establish
potential liability under § 1333.3, all that is required is for a party to “detain [ ] the cars beyond
the period of time set forth in the governing demurrage tariff.” Here, CN has alleged that Kinder
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Morgan detained the cars beyond the period of time they were allotted. Additionally, Fed. R.
Civ. P. 8(a)(2) only requires the allegations in a complaint to set forth a “short and plain
statement of the claim showing that the pleader is entitled to relief.” CN has set forth a succinct
claim for relief that meets the plain face reading of 49 CFR § 1333.3. Therefore, we deny
Kinder Morgan’s motion to dismiss this claim.
C.

Notice

Kinder Morgan contends that CN’s complaint should be dismissed because “under the
demurrage regulations, a rail carrier is required to provide actual notice of its demurrage tariff to
a party before the rail carrier seeks to recover demurrage charges from the party.” Furthermore,
Kinder Morgan alleges that CN failed to notify Kinder Morgan when it increased its demurrage
tariff in violation of 49 CFR § 1333.3. In response, CN asserts that Kinder Morgan was served
with “notice of the applicable tariff in compliance with 49 CFR §1333.3.” Moreover, CN claims
that “whether [they] updated [its] demurrage tariff subsequent to delivering a blanket notice to
[Kinder Morgan] and whether such changes to the CN tariff constitutes a ‘material change’”
requiring further notice is a fact question.
Under 49 CFR § 1333.3, a party is required to provide “actual notice of the demurrage
tariff . . . prior to the placement of the rail cars.” In its Amended Complaint, CN alleges that “all
customers, including Kinder Morgan,” were notified in compliance with 49 CFR § 1333. In
support of its claim, CN attached a letter to its Amended Complaint showing that Kinder Morgan
was notified in June 2014 about CN’s tariff. However, Kinder Morgan argues that CN adjusted
its demurrage rates a few months later and failed to notify CN as mandated by 49 CFR § 1333.3.
The purpose of a complaint is to give the opposing party “fair notice of what the . . .
claim is and the grounds upon which it rests.’” E.E.O.C., 496 F.3d at 776 (quoting Twombly,
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550 U.S. at 555). Here, CN has put Kinder Morgan on notice that it is seeking demurrage
charges for the period between August 2015 and October 2016. CN has also pled that it
provided Kinder Morgan with notice of its tariff. Whether CN updated its tariff, as Exhibit H
seems to suggest, and gave proper notice of the update to Kinder Morgan is a matter that can be
easily ascertained with limited fact discovery. Thus, Kinder Morgan’s motion to dismiss Count I
is denied.
II.

Count II—Switching Fees
CN claims that under the Interstate Commerce Commission Termination Act (“ICCTA”),

49 U.S.C.S. § 10101 “a rail carrier is required to provide transportation or services on a
reasonable request.” 49 U.S.C.S. § 10101. Furthermore, under 49 U.S.C. § 10702, “a rail
carrier providing transportation or services subject to the jurisdiction of the STB shall establish
reasonable rates for such services, and rules and practice for such services.” In accordance with
49 U.S.C. § 10702, CN created tariff Item 13000. Specifically, “Item 13000 of the CN tariff
describes switching services, including certain ‘optional switching services.”’ Item 13000 states
that while companies have the “option of hiring a third party contractor to perform . . . in-plant
switching [, companies can also] take advantage of CN’s optional services and have [its] crew
and local locomotives perform the work.” CN maintains that Kinder Morgan made requests for
the optional intraplant switching services, which CN performed. Therefore, CN argues Kinder
Morgan “is liable for such switching services as described under Item 13000 of the CN tariff and
pursuant to 49 U.S.C. § 11101 and 49 U.S.C. § 10702.
Kinder Morgan maintains that it is not responsible for the switching fees since it was not
a consignee, consignor, or owner of the goods being shipped.

Illinois Central Railroad

Company v. South-Tec Development Warehouse, 337 F.3d 813, 820 (7th Cir. 2003). However,
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Kinder Morgan’s reliance on Illinois Central Railroad is misplaced.

In Illinois Central

Railroad, the Seventh Circuit held that liability for freight charges may be imposed under six
circumstances: “against a consignor, consignee, owner of the property, or others by statute,
contract, or prevailing custom.” Id. (quoting Evans Prods. Co. v. I.C.C., 729 F.2d 1107, 1113
(7th Cir. 1984)). While Kinder Morgan correctly asserts it has no liability under the first three
circumstances, it fails to acknowledge its potential liability under the last three circumstances.
Here, CN argues that 49 U.S.C.S. § 10101 requires them to provide “transportation or
services on a reasonable request.” To comply with 49 U.S.C. § 10702, CN created Item 13000
of the CN tariff setting its rates and rules for such services. CN maintains that it provided Kinder
Morgan with Item 13000. According to CN, Kinder Morgan made a reasonable request for
optional intraplant switching services, which CN performed. Thus, CN claims, “[u]nder these
circumstances, [Kinder Morgan] as the party requesting the intraplant switching services, is
liable for switching fees, regardless of whether [Kinder Morgan] is a cosignee, consignor or
owner of the goods.” For these reasons, Kinder Morgan’s motion to dismiss Count II is denied.
III.

Count III—Declaratory Judgment
The Declaratory Judgment Act “allows federal courts, in their discretion, to render

declaratory judgments only where there exists an ‘actual controversy.’” 28 U.S.C. § 2201;
Trippe Mfg. Co. v. Am. Power Conversion Corp., 46 F.3d 624, 627 (7th Cir.1995) (citations
omitted). An actual controversy exists when “the facts alleged, under all the circumstances,
show that there is a substantial controversy, between parties having adverse legal interests, of
sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” Id. Here,
CN seeks a declaratory judgment “confirming (when there is no contractual agreement to pay
demurrage) that the entity receiving rail cars . . . is liable for the payment of demurrage under . . .
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49 CFR §1333.” Kinder Morgan asserts that CN’s declaratory judgment action is “duplicative
and unnecessary.” We agree.
In Tempco Electric Heater Corporation v. Omega Engineering, Inc., the Seventh Circuit
held that “[i]t is well settled that the federal courts have discretion to decline to hear a
declaratory judgment action, even though it is within their jurisdiction.” 819 F.2d 746, 747 (7th
Cir. 1987). Furthermore, this Court noted that in “this district, courts commonly exercise that
discretion where the claim for declaratory judgment substantially overlaps with Plaintiff’s
substantive claims.” Cohn v. Guaranteed Rate Inc., 130 F. Supp. 3d 1198, 1205 (N.D. Ill. 2015);
see Amari v. Radio Spirits, Inc., 219 F. Supp. 2d 942, 944 (N.D. Ill. 2002) (Where the
“substantive suit would resolve the issues raised by the declaratory judgment action, the
declaratory judgment action ‘serve[s] no useful purpose.’”).
Here, CN’s claim for declaratory judgment is duplicative of its demurrage claim in Count
I. Specifically, CN alleges that it is “entitled to declaratory relief finding that [Kinder Morgan]
was the party receiving railcars for loading and unloading” and that CN “followed the
regulations found at 49 CFR § 1333 et seq., including giving [Kinder Morgan] full notice of its
tariff and of the application of the new regulations,” that “no subsequent notice was required,”
and that “no material changes to the tariff related to demurrage charges . . . applied to the
[Kinder Morgan] liquid storage facility at Argo, Illinois.” Thus, the substantive legal issue,
whether Kinder Morgan is liable for demurrage fees under 49 CFR § 1333, is the same in both
Count I and in Count III. Therefore, this Court declines to exercise its discretion to hear the
declaratory judgment claim, and dismisses this Count.

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CONCLUSION
For the aforementioned reasons, the Court grants Kinder Morgan’s motion to dismiss
Count III of CN’s Amended Complaint. Kinder Morgan’s motion to dismiss Counts I and II is
denied. It is so ordered.
ENTER:

Charles P. Kocoras
United States District Judge
DATE: May 9, 2017

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