Ohio River Trading Co., Inc. v. CSX Transportation, Inc.
Filing
16
OPINION AND ORDER by Chief Judge Thomas B. Russell on 10/26/2011 granting 10 Motion to Remand and denying 14 Motion for Leave to File Amended Petition for Removal. This matter is remanded to the Todd Circuit Court. cc: Counsel, Todd Circuit Court (cert.) (CDF)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
BOWLING GREEN DIVISION
CASE NO. 1:11-CV-133
OHIO RIVER TRADING CO., INC
PLAINTIFF
V.
CSX TRANSPORTATION, INC.
DEFENDANT
OPINION AND ORDER
This matter comes before the Court on Plaintiff’s Motion to Remand (DN 10).
Defendant has responded (DN 13) and has filed a Motion for Leave to File Amended Petition for
Removal (DN 14). Plaintiff has replied (DN 15). For the reasons that follow, Plaintiffs’ motion
(DN 10) is GRANTED and Defendant’s motion (DN 14) is DENIED.
BACKGROUND
Plaintiff Ohio River Trading Company (ORTC) filed a Verified Petition for
Condemnation in Todd County Circuit Court pursuant to the Kentucky Eminent Domain Act,
KRS 277.040 and KRS 416.540 et seq. The real property that is the subject of this action is
located in Todd County, Kentucky. ORTC seeks to condemn the CSXT rail crossing for
construction of a permanent haul road crossing over the rail track and for a temporary
construction easement along the CSXT rail track. In connection with the condemnation, ORTC
further requested the appointment of three Court Commissioners to determine the amount of
compensation to be awarded.
Shackelford Farms, the owner of the property on which the rail crossing is situated, leases
the property to ORTC to operate a limestone quarry. CSXT owns an easement for its rail track.
In a previous action between CSXT and the previous tenants of the land, Judge McKinley found
that CSXT had the “right to reasonable use of its easement—the right to run its trains along the
tracks” and that the owners of the fee had “the right to use the crossing for ingress and egress.”
ORTC asserts that the current rail crossing of 14 feet and 3 inches is not amenable to large trucks
coming into and out of the property.
CSXT filed a Petition for Removal (DN 1) based on § 1332 diversity jurisdiction. The
Petition stated that Defendant CSXT was a citizen of Virginia and Florida, and that Plaintiff
ORTC was a citizen of Delaware and Kentucky. The Petition further stated that the amount in
controversy requirement was satisfied because the rights and interests in the use of the rail
crossing will likely exceed the $75,000 jurisdictional amount. Plaintiff ORTC now moves to
remand this action to state court. In the motion, Plaintiff asserts that the amount in controversy
requirement is not satisfied.
STANDARD
To establish subject matter jurisdiction based on diversity of citizenship, the amount in
controversy must be at least $75,000. 28 U.S.C. § 1332(a). Diversity jurisdiction under section
1332 is determined at the time of removal. Rogers v. Wal-Mart Stores, Inc., 230 F.3d 868, 871
(6th Cir. 2000). On motions to remand, the district court must scrutinize “whether the action was
properly removed in the first place.” Ahearn v. Charter Township of Bloomfield, 100 F.3d 451,
453 (6th Cir. 1996). “[W]here the plaintiff's complaint does not specify an amount of damages
and does not affirmatively deny that damages will exceed $75,000, the burden is on the
defendant seeking removal ‘to show by a preponderance of the evidence that the amount-incontroversy requirement has been met.’” Riley v. Sodexho, Inc., No. 07–CV-86, 2007 WL
2592220, at *2 (E.D. Ky. Sept. 5, 2007) (quoting Hayes v. Equitable Energy Resources Co., 266
F.3d 560, 572 (6th Cir. 2001)). It not required that the defendants prove to a legal certainty that
plaintiff’s damages meet the amount-in-controversy requirement. Hayes, 266 F.3d at 572. Still,
the defendant “must prove more than a ‘possibility’ of recovery in excess of $75,000” for
diversity jurisdiction to attach. Tinsley v. Connecticut General Life Ins. Co., 744 F. Supp. 2d
637, 645 (W.D. Ky. 2010). Finally, “[i]f the case stated by the initial pleading is not removable,
a notice of removal may be filed within thirty days after receipt by the defendant . . . of a copy of
an amended pleading, motion, order or other paper from which it may first be ascertained that the
case is one which is or has become removable . . . .” 28 U.S.C. § 1446(b).
ANALYSIS
Defendant CSXT contends that this matter is properly before the Court on the basis of
diversity jurisdiction and, for the first time in its Response to Plaintiff’s Motion to Remand,
federal question jurisdiction. The Court will address each basis for subject matter jurisdiction.
1. Diversity Jurisdiction
In its petition for condemnation, ORTC does not does not specify an amount of damages
and does not affirmatively deny that damages will exceed $75,000. Accordingly, the burden is
on CSXT to show by a preponderance of the evidence that the amount-in-controversy
requirement has been met.
The Proper Measure of the Amount in Controversy
In its motion, ORTC states that the amount in controversy requirement is not satisfied
because, even if it is determined that the taking is compensable, the valuation of the taking is far
below the $75,000 jurisdictional amount. CSXT, who characterizes this action as a declaratory
action, asserts that the amount in controversy is measured by the value of the object of the
litigation—the value of the consequences which may result from litigation. If that is the proper
measure of the amount in controversy, CSXT claims that it may incur expenses associated with
the installation of a new full-width concrete crossing in excess of $75,000.
The Court does not agree with CSXT’s characterization of this action as a declaratory
judgment action. Although under the Kentucky Eminent Domain Act the judge must find that
the petitioner has the right to condemn the property at issue, a petition filed under the EDA is not
a declaratory judgment action. A declaratory judgment “establishes the rights and other legal
relations of the parties without providing for or ordering enforcement.” Black’s Law Dictionary
859 (8th ed. 2004). A petition, on the other hand, is “a formal written request presented to a
court or other official body.” Id. at 1182. ORTC, by filing a petition for condemnation in Todd
Circuit Court, requested the court to confirm its right to condemn the property, to authorize it to
take possession of the property upon proper compensation, and to order the conveyance of the
property by instrument. If this were a declaratory judgment action, a court could only determine
the right of ORTC to condemn the subject property and could not provide for enforcement.
Furthermore, such a determination in a declaratory judgment action would be a final judgment
and immediately appealable. Under the Eminent Domain Act, after the judge finds that the
petitioner has the right to condemn the property, the property owner cannot immediately appeal
or file exceptions concerning the right of the petitioner to condemn the property. KRS §
416.620(1)-(2). Final judgment is only entered after the amount of compensation is determined
and the court makes such orders as may be proper for the conveyance of the title of the
condemned property. KRS § 416.620(6).
CSXT cites Art Neon Co. v. Denver to support its contention that, in eminent domain
actions, the compensable value of the taking is not the proper standard for determining the
amount in controversy. 357 F. Supp. 466 (D.C. Colo. 1973). In that case the plaintiffs
challenged the constitutionality of a city sign ordinance as a taking without just compensation
and sought injunctive relief against enforcement of the ordinance. Id. The court in that case did
find that the proper measure of the amount in controversy was “the pecuniary result to either
party which the judgment would directly produce.” Id. at 469. However, in the instant case,
neither party seeks injunctive relief or a determination that the statute under which ORTC
proceeds is invalid or unconstitutional. Art Neon did not involve a petition for condemnation,
and its standard to measure the amount in controversy does not apply here. Because a petition
for condemnation is distinct from a declaratory judgment action, the method for determining the
amount in controversy proposed by CSXT is inapplicable in this matter.1
The Amount in Controversy
“A federal court sitting in diversity applies the substantive law of the state in which it
sits.” Hayes v. Equitable Energy Resources Company, 266 F.3d 560, 565 (6th Cir. 2001). In the
amount in controversy context, “most courts have found a legal certainty that more than the
jurisdictional amount could not be recovered only where the applicable state law barred the type
of damages sought by the plaintiff.” Wood v. Stark Tri-County Bldg. Trades Council, 473 F.2d
272, 274 (6th Cir. 1973).
In condemnations pursued under the Eminent Domain Act, the amount of compensation
the owner of the property is entitled to receive is determined by court-appointed commissioners.
Those commissioners are directed to award a sum that will fairly represent the reduction in the
market value of the entire property. KRS § 416.580(1). Likewise, the Kentucky Supreme Court
has stated that, where part of a tract of land is taken,” the measure of just compensation is the
difference between the fair market value of the property immediately before the taking and the
1
If this case were a declaratory judgment action, it is likely that CSXT would have premised its petition for removal
based on the Declaratory Judgment Act. The fact that CSXT did not do so undermines its assertion that this action
is a declaratory judgment action.
fair market value of the remainder immediately afterwards.” Commonwealth v. R.J. Corman
Railroad Company/Memphis Line, 116 S.W.3d 488, 491 (Ky. 2003). However, “[n]ot all
information may reasonably be considered in the valuation process, for some measures of value
are irrelevant to the determination of fair market value, while others are deemed noncompensable.” Id. at 492. For example, the Kentucky Supreme Court found that factors such as
anticipated expenses for the maintenance and operation of the crossing and the estimated
litigation and clean-up costs for accidents predicted to occur at the crossing may not be included
in determining the amount of compensation. Id. at 492-93.
CSXT has not put forth evidence regarding the valuation of the taking, or the measure of
just compensation. However, CSXT did assert that in the event ORTC successfully condemns
the subject property, it will incur substantial expenses to maintain the function of its railway
through the crossing.2 CSXT has provided a Force Account Estimate (FAE) of its costs related
to the modification of the rail crossing. The FAE states that CSXT would necessarily incur
expenses for engineering services, for flagging and contract labor, and for materials and labor
related to removing the current rail track and installing the new rail track. These expenses would
allegedly exceed the jurisdictional amount of $75,000.
However, the types of damages submitted by CSXT are barred under Kentucky
substantive law. Under Kentucky law, the measure of just compensation is the difference
between the fair market value of the property immediately before the taking and the fair market
value of the remainder immediately afterwards. The expenses put forth by CSXT are either
irrelevant to a determination of the fair market value of the subject property, or are noncompensable. Accordingly, these damages are unavailable under Kentucky law.
2
The Court notes that ORTC has clearly stated that it will bear all of the expenses of widening the crossing, either
paying its own engineer and contractor to design and widen the crossing in close cooperation with CSXT personnel
or paying CSXT to design and widen the crossing.
ORTC has put forth evidence regarding the measure of just compensation in this case.
Using the “Across the Fence” method recommended by the certified appraiser retained by
ORTC, ORTC submits that the maximum amount of compensation would be well below the
$75,000 jurisdictional amount. The appraiser calculated that 4,600 square feet would need to be
condemned to widen the crossing to 60 feet and that the value of the land would be .14 cents per
square foot. Applying the highest multiplier or “corridor factor” that is utilized in other cases,
3.34, results in a compensable taking of $2,150.96. Because CSXT has not put forth evidence
regarding the valuation of the subject property, and it is not probable that the damages in this
action will exceed $75,000, the Court finds that CSXT has failed to show by a preponderance of
the evidence that the amount in controversy requirement has been met. Accordingly, this Court
does not have diversity jurisdiction in this matter.
2. Federal Question Jurisdiction
CSXT next contends that this action is properly before the Court based upon federal question
jurisdiction. Although not mentioned in its Petition for Removal, Defendant CSXT first argues this
point in its Response to Plaintiff’s Motion to Remand (DN 13) and has filed a Motion for Leave to File
Amended Petition for Removal (DN 14). CSXT alleges that, based upon recent pleadings by Plaintiff, it
has now become clear that this Court has federal question jurisdiction. Specifically, for the first time in
Plaintiff’s Motion to Remand, the plaintiff pled that the purpose of the condemnation is to widen the road
at the crossing for the express purposes of permitting multiple trucks to cross CSXT’s tracks
simultaneously.3 Because of this stated purpose, CSXT claims that the Interstate Commerce Commission
Termination Act (ICCTA)4 expressly preempts any state law impairing railway operations and facilities.
3
For the time being, the Court will bypass CSXT’s dubious assertion that this statement of purpose in Plaintiff’s
Motion to Remand was the first time it could be ascertained that the case was removable on the basis of federal
question jurisdiction.
4
49 U.S.C. § 10501(b).
Section 10501 of the ICCTA is the Congressional expression of the jurisdiction of the Surface
Transportation Board (STB), which the ICCTA created to regulate rail transportation. That section
provides the STB with jurisdiction over the following: (1) transportation by rail carriers, and the remedies
provided in this part with respect to rates, classifications, rules (including car service, interchange, and
other operating rules), practices, routes, services, and facilities of such carriers; and (2) the construction,
acquisition, operation, abandonment, or discontinuance of spur, industrial, team, switching, or side tracks,
or facilities, even if the tracks are located, or intended to be located, entirely in one State. City of Sachse,
Texas v. KC Southern Ry Co., 564 F.Supp.2d 649, 655-56 (E.D. Tex. 2008). The statute goes on to
provide that “the remedies provided under this part with respect to regulation of rail transportation are
exclusive and preempt the remedies provided under Federal or State law.” Id. at 656. Despite this broad
expression of policy, the courts and the STB have not found the ICCTA to categorically preempt state
condemnation proceedings. Id. In the context of railway crossings, “where the power of eminent domain
is invoked to construct a mundane structure such as a railway crossing, the ICCTA completely preempts
state law if the project would impede rail operations or pose undue safety risks.” Id. (internal quotations
omitted).
CSXT claims that allowing more than one truck to cross CSXT’s railway simultaneously poses an
undue safety risk to its rail operations. Specifically, because the strip of land between U.S Highway 41
and the rail crossing is so thin, trucks crossing the track extend across the track while waiting to turn onto
the highway resulting in a continuing risk of collision. In City of Sachse, the court noted that “subject
matter jurisdiction must be based on the facts surrounding the railroad crossing design on record
at the time of removal.” Id. at 656. Here, there is no design for the railroad crossing before this
Court. The only statement as to the proposed design of the crossing comes from ORTC, which
stated that three vehicles will be able to occupy the widened crossing at the same time: one
entering, one exiting right, and one exiting left. Besides CSXT’s assertion that allowing multiple
trucks to simultaneously cross the track will increase collision risks, there is no evidence that this
design poses undue safety risks. Trucks already use this crossing to access U.S. Highway 41 and
it is difficult to ascertain how the already-present risk of collision is increased by widening the
crossing.5 In fact, this type of risk is present at all railroad crossings and does not impede
railroad operations or pose undue safety risks.6 Accordingly, there is not a sufficient basis for
finding that the ICCTA preempts this matter.
CONCLUSION
Because this Court has determined that the amount in controversy requirement for
diversity jurisdiction has not been met, and that there is no basis for finding that the ICCTA
preempts this matter, IT IS HEREBY ORDERED Plaintiff’s Motion to Remand is GRANTED.
Having found that the ICCTA does not preempt this matter, it is unnecessary to address whether
there is a sufficient basis to allow Defendant to file its amended petition for removal.
Accordingly, IT IS FURTHER ORDERED that Defendant’s Motion for Leave to File Amended
Petition for Removal is DENIED. This matter is remanded to the Todd Circuit Court.
October 26, 2011
5
Plaintiff ORTC points out that because trucks already using the crossing must cross one at a time, allowing
multiple trucks to cross simultaneously will reduce the amount of time that trucks are crossing the tracks.
6
Additionally, Judge McKinley has previously ruled that if CSXT wishes to add safety features it must do so at its
own expense.
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