Illinois Extension Pipeline Company, L.L.C. v. Hagy et al

Filing 23

ORDER granting 15 MOTION for Judgment on the Pleadings, granting 16 MOTION to Dismiss Counterclaims filed by Illinois Extension Pipeline Company, L.L.C. Signed by Judge David R. Herndon on 2/8/16. (lmp)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
ILLINOIS EXTENSION PIPELINE
COMPANY, L.L.C.
Plaintiff,
v.
DWIGHT L. HAGY and
BESSIE HAGY,
Defendants.

No. 15-697-DRH-DGW
MEMORANDUM and ORDER

HERNDON, District Judge:
I.

Introduction

Pending before the Court is plaintiff Illinois Extension Pipeline Company,
L.L.C.’s (“IEPC”) Motion for Judgment on the Pleadings (Doc. 15) pursuant to
FEDERAL RULE

OF

CIVIL PROCEDURE 12(c) against defendants Dwight L. Hagy and

Bessie Hagy (hereinafter “defendants”). Defendants filed an opposing Response
(Doc. 17) to which IEPC replied (Doc. 20). IEPC also filed a Motion to Dismiss
Defendants’ Counterclaims (Doc. 16), to which Defendants have responded (Doc.
18). IEPC also filed a Reply to that response (Doc. 19). For the reasons discussed
herein, IEPC’s Motion for Judgment on the Pleadings (Doc. 15) and Motion to
Dismiss Defendants’ Counterclaims (Doc. 16) are granted.

Page 1 of 14

II. Background and Allegations
IEPC (formerly known as Enbridge Pipelines (Illinois) L.L.C.) filed its
Complaint in this Court on June 23, 2015, based on diversity of citizenship and
an amount in controversy in excess of $75,000, exclusive of interest and costs,
pursuant to 28 U.S.C. § 1332. (Doc. 1). In its Complaint, IEPC contends that it is
the current owner of a pipeline right-of-way that runs across a tract of land (Tract
12-087-1) owned by defendants in Fayette County, Illinois. (Doc 1 ¶¶ 6-7).
Defendants are successors to the grantors of this right-of-way, referred to as the
“1939 Luxor Easement.” (Doc. 1 ¶ 7). The 1939 Luxor Easement is part of a
series of easements obtained by IEPC’s predecessors in 1939 for the installation
of a pipeline between the towns of Heyworth and Patoka, Illinois, referred to as
the “Luxor Line.” (Doc. 1 ¶ 8).
IEPC is currently constructing a new underground pipeline for the
transportation of crude oil in interstate commerce, referred to as the “Southern
Access Extension (SAX) Pipeline.” (Doc. 1 ¶ 8; Doc. 20 P1). IEPC contends that it
may use its 1939 Luxor Line easement rights to construct the SAX Pipeline across
many tracts along the route, including defendants’ Tract 12-087-1. (Doc. 1 ¶ 8).
The 1939 Luxor Easement contains language that the owner of the easement has
“the right to lay, operate and maintain, adjacent to and parallel with the first, a
second pipe line….” (Doc. 1-1). According to IEPC’s Complaint, defendants
dispute the validity of IEPC’s rights under the 1939 Luxor Easement and contend
that IEPC does not have any right to lay the SAX Pipeline. (Doc. 1 ¶ 11).

Page 2 of 14

Therefore, IEPC’s Complaint seeks declaratory relief, pursuant to 28 U.S.C. §
2201, affirming that the 1939 Luxor Easement is valid and enforceable according
to its terms and gives IEPC all the rights set forth therein. (Doc. 1 Prayer for
Relief).
Defendants filed their Answer on July 17, 2015. (Doc. 13). In their Answer,
Defendants admit the jurisdiction and venue allegations of the Complaint. (Doc.
13 ¶¶ 1-5). Defendants also admit that IEPC owns the 1939 Luxor Easement
applicable to Tract 12-087-1 and that defendants are the current owners of Tract
12-087-1 and are the successors to the grantors under the 1939 Luxor Easement.
(Doc. 13 ¶¶ 7-8). Notably, the defendants admit that the 1939 Luxor Easement is
valid and enforceable according to its terms. (Doc. 13 ¶ 11). However, defendants
deny that the 1939 Luxor Easement provides IEPC with the necessary authority to
construct, operate, and maintain the SAX Pipeline. (Doc. 13 ¶ 11).
Defendants pleaded a Counterclaim along with their Answer. (Doc. 13).
Count I of the Counterclaim seeks declaratory relief determining that the 1939
Luxor Easement does not give IEPC the right to construct, operate, and maintain
the SAX Pipeline and that IEPC must obtain a new right-of-way grant for the SAX
Pipeline. (Doc. 13). Count II of the defendants’ Counterclaim seeks compensation
from IEPC for alleged damages to the defendants’ land caused by maintenance of
the pipeline easement and construction of the SAX Pipeline. (Doc. 13).
In recent years there has been extensive litigation surrounding IEPC’s Luxor
Line easements. In every case, district courts, including the undersigned, have

Page 3 of 14

consistently concluded that IEPC’s easement rights continue to be valid and
enforceable. 1 The Seventh Circuit Court of Appeals affirmed several of these
decisions in 2011. See Enbridge Pipelines (Illinois) L.L.C. v. Moore, 633 F.3d 602
(7th Cir. 2011). Thus, no court has ever found that IEPC’s Luxor Line easement
rights are not still valid and enforceable.
III. Judgment on the Pleadings
Federal Rule of Civil Procedure 12(c) permits a party to move for judgment
on the pleadings after the parties have filed the complaint and the answer.
Fed.R.Civ.P. 12(c); Brunt v. Serv. Employees Int’l Union, 284 F.3d 715, 718 (7th
Cir. 2002); N. Ind. Gun & Outdoor Shows, Inc. v. City of S. Bend, 163 F.3d 449,
452 (7th Cir. 1998). A court may grant judgment on the pleadings under Rule
12(c) when the “court determines that there is no material issue of fact presented
and that one party is clearly entitled to judgment.” Flora v. Home Fed. Sav. &

Loan Ass'n, 685 F.2d 209, 211 (7th Cir. 1982). The Court, in ruling on a motion
for judgment on the pleadings, must accept as true all well-pleaded allegations.

Forseth v. Village of Sussex, 199 F.3d 363, 364 (7th Cir. 2000); Thomas v.
Guardsmark, Inc., 381 F.3d 701, 704 (7th Cir. 2004). “The [C]ourt may consider
only matters presented in the pleadings and must view the facts in the light most

1

Litigation surrounding the IEPC Luxor Line in the Southern District of Illinois, Central
District of Illinois, and on appeal with the Seventh Circuit, held the easements to be valid
in each of the following cases: Enbridge Pipelines (Illinois) L.L.C. v. Burris, No. 08-cv-697
(S.D. Ill. 2010); Enbridge Pipelines (Illinois) L.L.C. v. Portz, No. 08-cv-841(S.D. Ill. 2010);
Enbridge Pipelines (Illinois) L.L.C. v. Hortenstine, No. 08-cv-842 (S.D. Ill. 2010);
Enbridge Pipelines (Illinois) L.L.C. v. Preiksaitis, 2:08-cv-02215-HAB-DGB (C.D. Ill. Feb.
1, 2010); Kelly v. Enbridge (U.S.) Inc., No. 07-3245, 2008 WL 2123755 (C.D. Ill. May 16,
2008).
Page 4 of 14

favorable to the nonmoving party,” but is “not bound by the nonmoving party's
legal characterizations of the facts.” Nat'l Fid. Life Ins. Co. v. Karaganis, 811 F.2d
357, 358 (7th Cir. 1987).
If the Court considers evidence outside the pleadings, a motion for
judgment on the pleadings is treated as one for summary judgment. Fed.R.Civ.P,
12(d). However, a district court may take judicial notice of matters of public
record, as well as orders and exhibits attached to the pleadings, without
converting a Rule 12(c) motion into a motion for summary judgment. Gen. Elec.

Capital Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1080 (7th Cir.1997). The
Court now turns to IEPC’s arguments seeking judgment and dismissal.
IV. Analysis
IEPC seeks a declaration that this 1939 Luxor Easement “is valid and
enforceable according to its terms and gives Illinois Extension Pipeline Company,
L.L.C., all the rights set forth therein.” (Doc. 1). 2 IEPC contends that judgment on

2

In order to be entitled to a declaratory judgment there must be a “substantial
controversy, between parties having adverse legal interests, of sufficient immediacy and
reality.” Maryland Cas. Co. v. Pac. Coal & Oil Co., 312 U.S. 270, 273 (1941). Defendants
contend that because they have admitted the 1939 Luxor Easement is valid and
enforceable, there is no controversy here. (Doc. 17 P2). The Court disagrees. Defendants
admit in their Answer that there is indeed a controversy between IEPC and defendants as
to the enforceability of the 1939 Luxor Easement. (Doc. 13 ¶ 13). Defendants also failed
to contest the allegation in the Complaint that the defendants dispute the validity of
IEPC’s rights under the 1939 Luxor Easement and contend that IEPC does not have any
right to lay this second pipeline. (Doc. 1 ¶ 11). See e.g., United States v. Wood, 925 F.2d
1580, 1581 (7th Cir. 1991) (the court regards as true all uncontested allegations to which
the parties had an opportunity to respond). Although defendants have acknowledged the
easement is valid, they persist in raising arguments about its meaning, suggesting that
they do in fact dispute IEPC’s rights under the easement. This is sufficient to establish
the existence of a real and justiciable controversy between the parties as contemplated by
the Declaratory Judgment Act, 28 U.S.C. § 2201. Knight v. Enbridge Pipelines (FSP)
Page 5 of 14

the pleadings in its favor is appropriate because the defendants’ Answer admits
virtually all allegations of IEPC’s Complaint. (Doc. 15 ¶ 2). According to IEPC,
defendants’ denial that the 1939 Luxor Easement gives IEPC the authority to
construct the SAX Pipeline is irrelevant because IEPC never sought such a
declaration. (Doc. 15 ¶ 3).
As noted above, the Seventh Circuit has affirmed a series of district court
judgments finding that IEPC’s 1939 easements are still valid and enforceable.

Enbridge Pipelines (Illinois) L.L.C. v. Moore, 633 F.3d 602 (7th Cir. 2011). The
1939 Luxor Easement in this case is in essence indistinguishable from the
easements previously upheld. (Doc. 1-1). Indeed, defendants do not even attempt
to distinguish the easement at issue in this case from those other easements, but
simply deny that the enforceability of this particular easement has ever been
litigated. (Doc. 13 ¶ 9).
Defendants admit that the 1939 Luxor Easement is valid and enforceable
according to its terms. (Doc. 13 ¶ 11). Defendants make no response to the
allegation in the Complaint that the easement “gives IEPC all the rights set forth
therein.” (Doc. 1 ¶ 11). “A defendant whose answer fails to contest critical
L.L.C., 759 F.3d 675, 677 (7th Cir. 2014) (“[T]he existence of competing claims to real
estate means that the controversy is real.”).

Additionally, defendants have raised this lack of controversy argument for the first
time in their opposing Response. (Doc. 17). The Court, in ruling on a judgment on the
pleadings, is constrained to the facts contained in the pleadings. Nat'l Fid. Life Ins. Co. v.
Karaganis, 811 F.2d 357, 358 (7th Cir. 1987). Therefore, the Court need not even
consider defendants’ eleventh-hour contention that there is no controversy here. N. Ind.
Gun & Outdoor Shows, Inc. v. City of S. Bend, 163 F.3d 449, 453 & n.5 (7th Cir. 1998)
(Motions and memoranda in support of motions are “not part of the pleadings” and are
“clearly outside the scope of Rule 12(c).”).
Page 6 of 14

averments in the complaint will, on motion, suffer a judgment on the
pleadings….” St. Mary's Honor Ctr. v. Hicks, 509 U.S. 502, 521-22 (1993).
Defendants do deny that the easement provides IEPC “authority to construct,
operate and maintain its proposed SAX pipeline.” (Doc. 13 ¶ 11). But as IEPC
rightly notes in its motion, this denial is irrelevant because IEPC never asked this
Court to determine whether the easement provides such authority. (Doc. 15 ¶ 3).
The Court finds that the Seventh Circuit’s decision in Enbridge Pipelines

(Illinois) L.L.C. v. Moore controls and that the easement in this case is
indistinguishable from the easements found to be valid and enforceable there.
Moreover, defendants have admitted that the 1939 Luxor Easement is valid and
enforceable according to its terms, and have failed to contest the contention that
the 1939 Luxor Easement gives IEPC all the rights set forth therein. Therefore,
the Court finds that IEPC is entitled to judgment on the pleadings as to the
declaration sought in its Complaint.
V.

Motion to Dismiss

When ruling on a motion to dismiss for failure to state a claim under
Federal Rule of Civil Procedure 12(b)(6), the Court must look to the pleading to
determine whether it satisfies the threshold requirements under Federal Rule of
Civil Procedure 8. Rule 8 requires a pleading to contain “a short and plain
statement of the claim showing that pleader is entitled to relief.” Fed.R.Civ.P. 8. A
pleading will survive a Rule 12(b)(6) motion if it alleges “enough facts to state a
claim to relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550

Page 7 of 14

U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Thus, a court may grant
dismissal of a counterclaim for failure to state a claim if the “nonmoving party can
prove no set of facts consistent with its…counterclaim that would entitle it to
relief.” N. Trust Co. v. Peters, 69 F.3d 123, 129 (7th Cir. 1995).
As with a motion for judgment on the pleadings, if the Court considers
evidence outside the pleadings it must convert the motion to dismiss under Rule
12(b)(6) to a motion for summary judgment. Tierney v. Vahle, 304 F.3d 734, 738
(7th Cir. 2002). The Court must accept “all well-pleaded allegations in the
counterclaim as true and draw[] all reasonable inferences in favor of the
counterclaim plaintiff.” Cozzi Iron & Metal, Inc. v. U.S. Office Equip., Inc., 250
F.3d 570, 574 (7th Cir. 2001). But “conclusory statements of law” and
“unwarranted inferences” contained in the counterclaim are insufficient to defeat a
12(b)(6) motion. Peters, 69 F.3d at 129. And a party “can plead himself out of
court by unnecessarily alleging facts which…demonstrate that he has no legal
claim.” Trevino v. Union Pac. R. Co., 916 F.2d 1230, 1234 (7th Cir. 1990).
VI. Analysis
IEPC argues that the Court should dismiss both counts of defendants’
Counterclaim (Doc. 16). In Count I, defendants seek declaratory relief
determining that the 1939 Luxor Easement does not give IEPC the right to
construct, operate, and maintain the SAX Pipeline and that IEPC must obtain a
new right-of-way grant for the SAX Pipeline. (Doc. 13, Count I). IEPC sets forth

Page 8 of 14

three grounds for dismissing Count I: inadequate pleading, preemption, and lack
of justiciable controversy. (Doc. 16 ¶¶ 1-9).

a. Count I—Declaratory Relief
The Court finds that Count I of defendants’ Counterclaim does not present
a justiciable controversy. The 1939 Luxor Easement expressly grants the owner of
the easement (IEPC) “the right to lay, operate and maintain, adjacent to and
parallel with the first, a second pipe line.” (Doc. 1-1). The Easement also requires
IEPC to agree “to bury such pipe lines so that they will not interfere with the
cultivation of the land.” (Id.). Defendants contend that the SAX Pipeline poses a
safety risk that is incompatible with farming and therefore not covered under the
1939 Luxor Easement. (Doc. 13, Count I).
In a similar case, Chief Judge Shadid of the Central District of Illinois
found that section 60104(c) of the Pipeline Safety Improvement Act of 2002, 49
U.S.C. §§ 60101, et seq., preempted enforcement of this “farmability” provision.

Knight et al v. Enbridge Pipelines (FSP) LLC et al. 12-cv-01244-JES-JEH (C.D.
Ill.) (Doc. 33). On appeal, the Seventh Circuit found that Judge Shadid should
have simply dismissed this claim because the landowner’s assertion that the new
“pipeline would be incompatible with farming the surface is just speculation.”

Knight v. Enbridge Pipelines (FSP) L.L.C., 759 F.3d 675, 677 (7th Cir. 2014). The
Seventh Circuit explained that only if the pipeline actually “prevents using the
land for agriculture would it be necessary (or for that matter prudent) to
determine” the applicability of the farmability provision. Id. Here, until IEPC has

Page 9 of 14

completed construction of the pipeline and surface restoration work, the Court
cannot properly determine whether IEPC has met any requirements it might have
to avoid interfering with the cultivation of the land. At that time, if defendants do
not believe IEPC kept its “promise[] to leave the surface farmable” under the 1939
Luxor Easement, they can, as the Seventh Circuit noted, address such a failure
“under the law of contract.” Id.
Defendants argue in their Response to IEPC’s Motion that Knight is
distinguishable because IEPC is actually currently constructing the SAX Pipeline,
whereas in Knight the construction was merely anticipated (Doc. 18). The Court
disagrees that this distinction creates a justiciable controversy. Until IEPC
completes post-construction surface restoration, this Court is unable to assess
whether IEPC has kept its promise to leave the surface farmable. Thus, this issue
is not yet ripe for judicial review. See Texas v. United States, 523 U.S. 296, 300
(1998) (“A claim is not ripe for adjudication if it rests upon contingent future
events that may not occur as anticipated, or indeed may not occur at all.”).
Moreover, Count I is a request for declaratory relief. Under the Declaratory
Judgment Act, 28 U.S.C. § 2201(a), this Court has discretion “to stay or to
dismiss an action seeking a declaratory judgment” based on “considerations of
practicality and wise judicial administration.” Wilton v. Seven Falls Co., 515 U.S.
277, 288 (1995). Thus, based on the above considerations regarding the Court’s
inability to determine whether IEPC has kept its promises under the 1939 Luxor
Easement, the Court exercises its discretion to dismiss this declaratory judgment

Page 10 of 14

request. Because the Court has determined that no justiciable controversy exists,
the Court does not determine whether Count I should be dismissed based on the
grounds of inadequate pleading 3 or preemption.

b. Count II—Damages
In Count II of their Counterclaim, defendants assert that IEPC has damaged
defendants’ land through its activities in maintaining its pipeline easement and
constructing its SAX Pipeline; that IEPC has failed to pay or promise to pay
defendants for these damages; and therefore requests that this Court enter
judgment against IEPC for damages to compensate defendants (Doc. 13).
Defendants’ claim is based on the 1939 Luxor Easement, which provides that
IECP will “pay for any and all damages to crops owned by grantor, fences, and
land which may be suffered from the construction, operation or maintenance of
such pipelines.” (Doc. 13, Count II ¶1). In its Motion to Dismiss, IEPC contends
that defendants have failed to state a claim based on the elements of a breach of
contract claim under applicable Illinois law. 4 (Doc. 16 ¶ 13). Those elements are:
“(1) the existence of a valid and enforceable contract; (2) performance by the
plaintiff; (3) breach of the contract by the defendant; and (4) resultant injury to
the plaintiff.” Nielsen v. United Servs. Auto. Ass'n, 244 Ill. App. 3d 658, 662, 612

3

The Court notes that defendants’ interpretation that the “farmability” provision implies
some nebulous safety standard is the very type of “unwarranted inference” not supported
by factual assertions that has been held insufficient to defeat a motion to dismiss.
N.Trust Co. v. Peters, 69 F.3d 123, 129 (7th Cir. 1995); Palda v. Gen. Dynamics Corp.,
47 F.3d 872, 875 (7th Cir. 1995) (a pleading “which consists of conclusory allegations
unsupported by factual assertions fails even the liberal standard of Rule 12(b)(6)”).
4
Illinois substantive law governs this case because jurisdiction is based on diversity of
citizenship and the land at issue is located in Illinois.
Page 11 of 14

N.E.2d 526, 529 (1993). IEPC contends that defendants have failed to properly
plead the second and third elements of a breach of contract. (Doc. 16 ¶¶ 14-15).
The Court agrees that defendants have not substantially performed on the
1939 Luxor Easement to establish the second element of a breach of contract
claim. The easement requires defendants to grant to IEPC “the right to lay,
operate and maintain...a second pipe line.” (Doc. 1-1). As discussed above,
defendants dispute the validity of IEPC’s rights under the 1939 Luxor Easement
and contend that IEPC does not have any right to lay the SAX Pipeline. (Doc. 1 ¶
11). Moreover, Count I of defendants’ Counterclaim seeks declaratory judgment
determining that the 1939 Luxor Easement does not give IEPC the right to build
the SAX Pipeline. (Doc. 13). Thus, as to Count II defendants have “plead[ed
themselves] out of court by unnecessarily alleging facts which…demonstrate that
[they have] no legal claim.” Trevino v. Union Pac. R. Co., 916 F.2d 1230, 1234
(7th Cir. 1990).
The Court also finds that defendants have not adequately pleaded the third
element: that IEPC has breached the contract. As IEPC correctly notes, defendants
do not allege that they ever notified IEPC of the damages or gave IEPC an
opportunity to pay. See Gamm Const. Co. v. Townsend, 32 Ill. App. 3d 848, 851,
336 N.E.2d 592, 594-95 (1975) (“After delays in performance have been waived a
contract cannot be rescinded for failure to strictly perform without giving notice
and a reasonable opportunity to perform.”). Defendants have failed to allege facts
that sufficient to show any breach on the part of IEPC.

Page 12 of 14

Finally, Count II also alleges that IEPC has refused to promise to pay to
defendants any amounts for damages to the land already incurred. (Doc. 13,
Count II ¶ 5). As IEPC notes in its Motion to Dismiss, both the 1939 Luxor
Easement itself and IEPC’s Agricultural Impact Mitigation Agreement (“AIMA”) 5
with the Illinois Department of Agriculture contain promises from IEPC to pay
landowners for damages not eliminated by IEPC’s post-construction surface
restoration. (Doc. 1-1; Doc. 16). Thus, to the extent that defendants are alleging
an anticipatory breach on behalf of IEPC as to the damages provision in the 1939
Luxor Easement, defendants have failed to allege any facts showing that such an
anticipatory breach has occurred. Asad v. Hartford Life Ins. Co., 116 F. Supp. 2d
960, 963 (N.D. Ill. 2000) (A contract claim is ripe under an anticipatory breach
theory “when a party to a contract manifests a definite intent prior to the time
fixed in the contract that it will not render its performance under the contract
when that time arrives.”).
VII. Conclusion
Accordingly, IEPC’s Motion for Judgment on the Pleadings as to the single
Count in IEPC’s Complaint is GRANTED. The Court DECLARES that the 1939
Luxor Easement applicable to Tract 12-087-1 is valid and enforceable according
to its terms and thereby gives IEPC the rights set forth therein.

5

The AIMA is a matter of public record so this Court may consider it without converting
the motion to dismiss into a motion for summary judgment. See Gen. Elec. Capital Corp.
v. Lease Resolution Corp., 128 F.3d 1074, 1080 (7th Cir.1997).
Page 13 of 14

Also, IEPC’s Motion to Dismiss Defendants’ Counterclaims (Doc. 16) is
GRANTED as to both Counts I and II.
The Court DIRECTS the Clerk of the Court to enter judgment reflecting the
same.
IT IS SO ORDERED.
Signed this 8th day of February, 2016

Digitally signed by
Judge David R.
Herndon
Date: 2016.02.08
14:24:11 -06'00'
United States District Judge

Page 14 of 14