Soo Line Railroad Company v. Consolidated Rail Corporation et al
OPINION AND ORDER: DISMISSING 108 MEMORANDUM in Opposition to 77 Motion To Dismiss For Failure To State A Claim And To Dismiss Or Strike The Amended Complaint's Requests For Relief filed by Soo Line Railroad Company and GRANTING 77 MOTIO N To Dismiss For Failure To State A Claim And To Dismiss Or Strike The Amended Complaint's Requests For Relief by Defendants CSX Transportation, Inc., Consolidated Rail Corporation, Norfolk Southern Railway Company. Signed by Magistrate Judge Andrew P Rodovich on 10/24/2018. (lhc)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
SOO LINE RAILROAD COMPANY,
d/b/a CANADIAN PACIFIC,
CONSOLIDATED RAIL CORPORATION, )
Case No. 2:17-cv-106
OPINION AND ORDER
This matter is before the court on the Supplemental Brief on O&M Expenses [DE 107]
filed by the defendant, Norfolk Southern Railway Company, on April 12, 2018, the
Supplemental Memorandum in Opposition to the Motion to Dismiss and/or Strike CP’s Request
for O&M Expenses [DE 108] filed by the plaintiff, Soo Line Railroad Company d/b/a Canadian
Pacific, on April 12, 2018, and the Supplemental Brief on O&M Expenses [DE 109] filed by the
defendant, Consolidated Rail Corporation, on April 12, 2018. For the following reasons, CP’s
request for O&M expenses is DISMISSED and the Motion to Dismiss for Failure to State a
Claim and to Dismiss or Strike the Amended Complaint’s Requests for Relief [DE 77] is
On August 3, 2017, the defendants Consolidated Rail Corporation (Conrail), Norfolk
Southern Railway Company (NSR), and CSX Transportation, Inc. (CSXT) filed a Motion to
Dismiss for Failure to State a Claim and to Dismiss or Strike the Amended Complaint’s Requests
for Relief [DE 77]. On March 29, 2018, the court granted in part and denied in part that motion,
finding that the state tort law claims brought by the plaintiff, Soo Line Railroad Company, d/b/a
Canadian Pacific (CP), were preempted by the ICC Termination Act. The court dismissed Count
I of the Amended Complaint. Additionally, the court found that without a viable underlying tort,
Count II, III, and IV were not recoverable.
However, as part of its breach of fiduciary duty claims, CP also requested that the court
award IHB operating and maintenance expenses (O&M expenses). CP maintains Conrail was
obligated to pay O&M expenses pursuant to the 1906 Agreement. CP has alleged that in 1999
Conrail stopped paying O&M expenses to IHB. [Amended Compl. ¶ 54]. Moreover, CP asserts
that upon information and belief, Conrail and IHB entered into a quid pro quo agreement in 1999
without the consent of the IHB Board to allow Conrail to avoid its obligation under the 1906
Agreement to pay certain O&M expenses, which totaled approximately $2.3 million in 1998, and
for IHB to stop paying rent to Conrail. [Amended Compl. ¶ 55].
The court requested supplemental briefing from CP and Conrail on this issue, noting that
due to space constraints imposed by N.D. Ind. L.R. 7-1(e), the parties had spent only 1-2 pages at
the conclusion of their briefs addressing it. On April 12, 2018, the parties filed their
supplemental briefs. NSR has indicated that it has paid O&M expenses to IHB that were due and
payable since 1998 and that CP has not asserted a claim to the contrary. The Amended
Complaint only seeks relief for O&M expenses from Conrail.
Federal Rule of Civil Procedure 12(b)(6) allows for a complaint to be dismissed if it
fails to “state a claim upon which relief can be granted.” Allegations other than those of fraud
and mistake are governed by the pleading standard outlined in Federal Rule of Civil Procedure
8(a)(2), which requires a “short and plain statement” to show that a pleader is entitled to relief.
See Cincinnati Life Ins. Co. v. Beyrer, 722 F.3d 939, 946 (7th Cir. 2013). The Supreme Court
clarified its interpretation of the Rule 8(a)(2) pleading standard in a decision issued in May 2009.
While Rule 8(a)(2) does not require the pleading of detailed allegations, it nevertheless demands
something more “than an un-adorned, the-defendant-unlawfully-harmed-me accusation.”
Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 1949, 173 L. Ed. 2d 868 (2009). In order
to survive a Rule 12(b)(6) motion, a complaint “must contain sufficient factual matter, accepted
as true, to ‘state a claim to relief that is plausible on its face.’” Iqbal, 556 U.S. at 678 (quoting
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007));
Cincinnati Life Ins., 722 F.3d at 946 (“The primary purpose of [Fed.R.Civ.P. 8 and 10(b)] is to
give defendants fair notice of the claims against them and the grounds supporting the claims.”)
(quoting Stanard v. Nygren, 658 F.3d 792, 797 (7th Cir. 2011)); Peele v. Clifford Burch, 722
F.3d 956, 959 (7th Cir. 2013) (explaining that one sentence of facts combined with boilerplate
language did not satisfy the requirements of Rule 8); Joren v. Napolitano, 633 F.3d. 1144, 1146
(7th Cir. 2011). This pleading standard applies to all civil matters. Iqbal, 556 U.S. at 684.
The decision in Iqbal discussed two principles that underscored the Rule 8(a)(2) pleading
standard announced by Twombly. See Twombly, 550 U.S. at 555 (discussing Rule 8(a)(2)’s
requirement that factual allegations in a complaint must “raise a right to relief above the
speculative level”). First, a court must accept as true only factual allegations pled in a
complaint—“[t]hreadbare recitals of the elements of a cause of action” that amount to “legal
conclusions” are insufficient. Iqbal, 556 U.S. at 678. Next, only complaints that state
“plausible” claims for relief will survive a motion to dismiss. Iqbal, 556 U.S. at 678. If the
pleaded facts do not permit the inference of more than a “mere possibility of misconduct,” then
the complaint has not met the pleading standard outlined in Rule 8(a)(2). Iqbal, 556 U.S. at
678–79. See Brown v. JP Morgan Chase Bank, 2009 WL 1761101, at *1 (7th Cir. June 23,
2009) (defining “facially plausible” claim as a set of facts that allows for a reasonable inference
First, the court agrees with CP that its claim for O&M expenses is not subject to the ICC
Termination Act (ICCTA) because it neither seeks nor has the effect of managing rail
transportation. Courts have held that a rail carrier asserting a state contract claim cannot use the
preemptive effect of the ICCTA to shield it from its own commitments. Pejepscot Indus. Park,
Inc. v. Maine Cent. R. Co., 297 F. Supp. 2d 326, 333 (D. Me. 2003). The ICCTA preempts state
or local regulations, not contracts or other agreements, that have a significant impact on railroad
transportation. Union Pacific R. Co. v. Chicago Transit Authority, 647 F.3d 675, 683 (7th Cir.
2011). Thus, Conrail has acknowledged that ICCTA does not preempt CP’s claim that it
breached the 1906 Agreement by failing to pay O&M expenses.
In their supplemental briefs, both parties have indicated that pursuant to the 1906
Agreement, Conrail was obligated to pay O&M expenses to IHB only if Conrail continued to
operate on or permitted other carriers to operate on the Rail Properties. The court has considered
the 1906 Agreement because it forms the basis of CP’s request for O&M expenses and therefore
is considered part of the pleadings. See 188 LLC v. Trinity Industries, Inc., 300 F.3d 730, 735
(7th Cir. 2002) (“documents attached to a motion to dismiss are considered part of the pleadings
if they are referred to in the plaintiff's complaint and are central to his claim. Such documents
may be considered by a district court in ruling on the motion to dismiss.”).
Conrail has argued that CP has failed to state a valid claim with respect to its request for
O&M expenses because the Amended Complaint alleges neither that Conrail operated on the
Rail Properties nor that Conrail allowed others to do so. Moreover, Conrail contends that CP has
not alleged a breach of contract, rather the allegations relating to O&M expenses are within its
primary and secondary breach of fiduciary claims that focused on the trackage rights rents.
However, CP asserts that the Amended Complaint has stated a claim for O&M expenses
for which relief can be granted. CP contends that the Amended Complaint contains the
following allegations: the 1906 Agreement required Conrail to pay O&M expenses to IHB;
Conrail has not done so since 1999; and the 1906 Agreement tied Conrail’s obligation to pay
O&M expenses to IHB’s obligation to pay rent to Conrail. [Amended Compl. ⁋ 51, 54, 55]. CP
also indicated that as a matter of public record, Conrail allowed other companies to operate on
the Rail Properties and suggested that the court should take this into account when determining
whether CP has stated a valid claim with respect to O&M expenses.
CP also points out that the Amended Complaint alleges a pattern of misconduct by
Conrail and other defendants, such as “demanding that IHB pay excessive amounts of back rent
that they claim IHB owes for operating over their property since 1999, even though they are
aware that they have no basis in law or fact to demand payment of these amounts.” [Amended
Compl. ⁋ 157]. CP contends that this conduct constitutes a breach of fiduciary duty and that
“IHB was entitled to use the O&M Expenses as an offset to the back rent that Defendants
CP has neither pled that Conrail nor Conrail’s admittees operated on the Rail Properties
during the relevant period. Thus, on the interpretation of the Agreement to which both parties
have agreed in their supplemental briefs, CP has failed to plead an essential element for its
recovery of O&M expenses. See McCalment v. Eli Lilly & Co., 860 N.E.2d. 884, 894 (Ind. Ct.
App. 2007) (holding breach is an essential element of a breach-of-contract action). A complaint
is insufficient if it does not contain “allegations concerning all of the material elements necessary
for recovery under the relevant legal theory.” Bell v. Trustees of Purdue Univ., 658 F. Supp.
184, 185 (N.D. Ind. 1987) (quoting Carl Sandberg Village Condominium Ass’n v. First
Condominium Development Co., 758 F.2d 203, 207 (7th Cir. 1985)). Thus, the court finds that
the complaint is insufficient under the Rule 8(a)(2) standard. A complaint which consists of
conclusory allegations unsupported by factual assertions fails even the liberal standard of Rule
12(b)(6). Cushing v. City of Chicago, 3 F.3d 1156, 1167 (7th Cir. 1993); Sutliff, Inc. v.
Donovan Companies, Inc., 727 F.2d 648, 654 (7th Cir. 1984) (“[Plaintiffs] may not avoid
dismissal, however, simply by attaching bare legal conclusions to narrated facts which fail to
outline the basis of their claims.”).
CP has requested that the court look beyond the four corners of its Amended Complaint.
It has indicated that it is a matter of public record that Conrail allowed other companies to
operate on the Rail Properties. In the Verified Notice, Conrail admits that CSXT and NSR have
“full, joint, and equal use of the Rail properties, including trackage rights over those properties.”
See, e.g. Verified Notice of Exemption, Ind. Harbor Belt R.R. Co. – Trackage Rights –
Consolidated Rail Corp. et al., FD 36099 (Feb. 13, 2017). CP contends that the court should
take this into account in determining that it adequately has pled its request for O&M expenses.
In support, CP cites case law where the Seventh Circuit has looked to previous court filings in
the public record in determining whether to grant a Rule 12(b)(6) motion to dismiss. See
Parungao v. Community Health Sys., Inc., 858 F.3d 452, 458 (7th Cir. 2017) (“Courts may take
judicial notice of court filings and other matters of public record when the accuracy of those
documents reasonably cannot be questioned.”). There, the Seventh Circuit found the complaint
insufficient to state a valid claim after taking judicial notice of previous court filings in the public
record that indicated that the case already had been adjudicated and thus was barred by res
Here, in contrast, CP asks the court to look outside the four corners of the Amended
Complaint to determine that a claim has been sufficiently pled. However, a court should not
look “beyond the four corners of the complaint itself to determine whether [the plaintiff] can
state a claim” for contractually-obligated payments, even when a plaintiff urges the court “to
look to . . . public record documents.” Palda v. Gen. Dynamics Corp., 47 F.3d 872, 874-75 (7th
Cir. 1995) (affirming dismissal of a breach-of-contract claim because plaintiff failed to plead one
of the conditions required for defendant to be obligated under the terms of the contract). When a
party “states in [its] brief” an essential element of the cause of action that is absent from the
complaint, this “does not cure the fatal defect in the pleadings since the sufficiency of a
complaint must be judged solely by the facts alleged therein.” Koch v. Schneider, 550 F. Supp.
846, 854 (N.D. Ill. 1982); see also Calhoun v. Am. Interstate Freight Lines Inc., 1987 WL
15755, at *2 (N.D. Ill. Aug. 10, 1987) (“[T]he sufficiency of a complaint must be judged solely
by the facts therein; statements found elsewhere, such as in a brief, cannot cure defects.”).
The Amended Complaint was devoid of any factual allegations that since 1999 Conrail
operated on or allowed others to operate on the Rail Properties. Therefore, CP has failed to show
that it is entitled to relief on this issue. As a result, the court also finds that CP’s request for
attorneys’ fees is not recoverable.
Based on the foregoing reasons, CP’s request for O&M expenses is DISMISSED and the
Motion to Dismiss for Failure to State a Claim and to Dismiss or Strike the Amended
Complaint’s Requests for Relief [DE 77] is GRANTED.
ENTERED this 24th day of October, 2018.
/s/ Andrew P. Rodovich
United States Magistrate Judge
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