Louisville Water Company v. CSX Transportation, Inc.

Filing 39

MEMORANDUM AND OPINION by Judge Charles R. Simpson, III on 9/14/12; Finding that there is no preemption in this instance, this action was improvidently removed and must be remanded to state court. A separate order will be entered this date in accordance with this opinion.cc:counsel (DAK)

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
AT LOUISVILLE

LOUISVILLE WATER COMPANY

v.

PLAINTIFF

CIVIL ACTION NO. 3:11CV-717-S

CSX TRANSPORTATION, INC.

DEFENDANT

MEMORANDUM OPINION

This matter is before the court on motion of the plaintiff, Louisville Water Company
(“LWC”), to remand the action to the Jefferson County, Kentucky, Circuit Court, Division Two.
This action was removed to this court by the defendant, CSX Transportation, Inc. (“CSX”), under
our federal question jurisdiction. CSX premised removal on the contention that LWC’s petition for
condemnation is completely preempted by the Interstate Commerce Commission Termination Act
(“ICCTA”); See 49 U.S.C. § 10501(b).
The ICCTA was passed in 1995, deregulating the rail and motor carrier industries, and
establishing the Surface Transportation Board having oversight authority over the nation’s rail
operations. The ICCTA was concerned for the continued economic viability of rail transportation.
The ICCTA provides that its remedies with respect to regulation of rail transportation are exclusive
and preempt the remedies provided under federal or state law. See, Who’s Driving the Train?
Railroad Regulation and Local Control, 75 U.Colo.L.Rev. 549 (Spring 2004).
As noted in Columbiana County Port Authority v. Boardman Township Park District, 154
F.Supp.2d 1165, 1180 (N.D.Ohio 2001),

The Interstate Commerce Act, ch. 104, 24 Stat. 379 (1887), which, as amended, still
governs federal regulation of railroads, has been recognized as ‘among the most
pervasive and comprehensive of federal regulatory schemes.’ Chicago & N.W.
Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311, 318, 101 S.Ct. 1124, 67 L.Ed.2d
258 (1981)...ICCTA also evidence the intent of Congress to preempt the field in
which state law previously operated with respect to railroads. In particular, Congress
granted the STB exclusive jurisdiction over all matters of rail transportation,
including intrastate railroad tracks. See 49 U.S.C. § 10501(b)(2).
CSX contends that LWC’s petition for condemnation is per se preempted by virtue of the
reach of the federal regulatory scheme. It further claims that the proposed crossing of CSX’s
easement would “impede rail operations or pose undue safety risks,” also requiring the court to find
LWC’s petition preempted. In the event the court finds preemption, removal was proper.
Otherwise, the action must be remanded to state court.
The following facts are undisputed, except where specifically indicated.
LWC, a public utility, seeks to install a new Water Main along a stretch of Thierman Lane
in the City of St. Matthews. The proposed project was planned for 2009, but, due to litigation in
state and federal court, has not commenced. The proposed Water Main would be approximately
thirty inches in diameter enclosed within a forty-two inch steel case pipe and would be run at a depth
below CSX’s railroad line.
LWC obtained the approval of its request to install the Water Main in the Thierman Lane
public right of way from the City of St. Matthews. LWC also completed an application for approval
of the construction from CSX. LWC did not submit any fees to CSX. There is some question
concerning the submission by LWC of plans and specifications for approval by CSX, however we
need not address that issue here. The parties are in agreement that LWC has consistently indicated
that it will comply with CSX’s Design & Construction Standard Specifications for Pipeline
Occupancies. CSX declined to approve LWC’s application, noting that LWC was required to pay
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a CSX “license fee” and enter into a “Crossing Agreement” before CSX would grant LWC the right
to cross its railroad lines.
When the parties were unable to resolve their differences, LWC filed suit in the Jefferson
Circuit Court challenging CSX’s right to require the “license fee” and “Crossing Agreement.”
The Circuit Court defined the issues to be resolved as (1) What are the parameters of CSX’s
right of way? and (2) Does it have a right of way or a fee? CSX contended that it held a fee simple
interest in the property and that it has a substantial safety justification for requiring LWC to submit
its plans and pay for its review. (7/27/10 Opinion).
The Court concluded that:
(1) Because CSX’s title was unclear, its interest in the property is an easement rather than
a fee simple interest.
(2) Because CSX has only an easement, LWC may install its pipeline so long as it does not
interfere with CSX’s use and enjoyment of the property.
(3) The City of St. Matthews has no right to approve the Water Main project, as the 1968
easement granted to it by CSX’s predecessor, Louisville and Nashville Railroad Company. for
purposes of the Thierman Lane right of way did not include the right to permit the construction of
pipelines thereon.
(4) As the right of authorization had been reserved by CSX and CSX has a protected interest
in the property, CSX has the right to the use and enjoyment of its easement and it is entitled to set
“conditions” to those coming upon the land, including contractual requirements concerning the
design specification and Crossing Agreement.
(7/27/10 and 9/21/10 Opinions).

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After these rulings issued, LWC amended its complaint and added a petition for
condemnation. The amended complaint seeks to condemn CSX’s “property interest,” the negative
covenant contained in Deed Book 4084, page 348, which states: [T]he right or easement hereby
conveyed shall not include the right to construct or maintain or permit the construction or
maintenance of any pipe lines, or of any pole lines for the conveyance of electric current for power
or communication, or otherwise...”
LWC appears to reason that, as CSX has only an easement rather than a fee interest, LWC
may proceed to install its pipeline so long as it does not interfere with CSX’s use and enjoyment of
the property. The Circuit Court so found. The “protected interest” which, according to the state
court, allows CSX to impose “conditions” on those who enter into the property has been referred
to as a “negative covenant” by which CSX reserved to itself the right to permit the construction of
pipelines in the right of way. (See 7/27/10 and 9/21/10 Opinions; Deed Book 4084, p. 348; Mo. for
Remand, pp. 8-9). Under its power of eminent domain, LWC “only seeks to condemn so much of
CSX’s Property Interest as is necessary for purposes of installing its Water Main.” Amend. Compl.
¶ 24.
The prayer for relief seeks:
(1) an interlocutory order and judgment (a) confirming LWC’s right to condemn CSX’s
property interest, (b) authorizing LWC to take possession of the property interest upon payment of
costs and compensation, (c) adjudging that the Report of Commission conforms to statutory
requirements, and (d) ordering the Master Commissioner to execute the appropriate legal instrument
conveying and/or releasing the property interest to LWC; and

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(2) a declaration that (a) construction of LWC’s pipeline in compliance with CSX’s pipeline
design and construction specifications will ensure that the project will not interfere with CSX’s full
and free enjoyment of CSX’s right of way, (b) that LWC need not obtain CSX’s authorization to
perform the work, and (c) that CSX has no right to require LWC to sign a Crossing Agreement or
to pay any fees.
It also seeks costs, attorneys fees, pre- and post-judgment interest.
CSX removed the action to this court on the ground of preemption by the ICCTA, stating:
The ICCTA established the Surface Transportation Board and in doing so granted
it exclusive jurisdiction over transportation by rail carriers and the construction and
operation of rail tracks. 49 U.S.C. 10501(b)...The Sixth Circuit has adopted the asapplied analysis to railroad crossings. Adrian v. Blissfield R.R. Co. v. Village of
Blissfield, 550 F.3d 533, 541 (6th Cir. 2008). “As-applied preemption covers state
and local actions according to a factual assessment of whether that action would have
the effect of preventing or unreasonably interfering with railroad transportation.”
New Orleans & Gulf Coast Ry. Co. v. Barrois, 533 F.3d 321 (5th Cir. 2008). Asapplied ICCTA preemption may apply if the railroad crossing dispute will “impede
rail operations or pose undue safety risks. Id. at 332 (quoting Maumee & W.R.R.
Co., 2004 STB Lexis 140, 2004 WL 395835 (S.T.B.), at 2 (Mar. 3, 2004)). CSX[]
believes that the Plaintiff’s attempt to condemn the property will impede rail
operations and pose undue safety risks. For these reasons, CSX[] maintains the
Plaintiff’s request to condemn the property is preempted by the ICCTA.
Notice of Removal, pp. 3-4.
In Maumee, supra., the STB stated that in “routine, non-conflicting uses, such as nonexclusive easements for at-grade road crossings, wire crossing, sewer crossings, etc. are not
preempted [by the ICCTA] so long as they would not impede rail operations or pose undue safety
risks.” Maumee, 2004 WL 395835 at *2.
CSX contends that the proposed project poses undue safety risks if not coordinated with CSX
“because certain techniques, materials and equipment which may be acceptable for other types of
right-of-way boring and excavating may not be adequate for railroad construction.” Elder Aff., ¶
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7. This purported “undue safety risk” is wholly non-specific and hypothetical. The assertion is not
based upon any distinguishing features of the property or any specified deficiencies in CSX’s
prescribed methodology for pipeline construction with which LWC urges it will fully comply. CSX
has offered nothing to substantiate that this is anything other than a garden variety water main
installation with which LWC is, by its own estimation, wholly familiar and sufficiently experienced.
We therefore find no evidentiary basis for the premise that the LWC Water Main plan poses an
undue safety risk which would bring the action within the purview of the ICCTA.
CSX bears the burden of establishing that removal was proper. See, Ahearn v. Charter
Township of Bloomfield, 100 F.3d 451 (6th Cir. 1996). CSX postulates a fear of the unknown. It
contends that, absent a finding that the petition for condemnation is preempted, LWC’s Water Main
installation plan will go untested and thus possibly place the community at risk or cause disruption
of rail activities.
To the extent that CSX has articulated the need for certain methodology in the construction
of an underground pipeline, LWC has already agreed to comply with the processes and procedures
set forth in CSX’s specification. To the extent that any additional or different procedures are
required for this particular property,1 CSX will have an opportunity to address such need and any
perceived risk in the state court proceeding. As noted herein, LWC’s prayer for relief seeks to have
the state court determine that LWC’s construction of its water main in accordance with CSX’s
specification will not interfere with CSX’s full and free enjoyment of CSX’s right of way. Risk of
damage to the community or property would constitute the ultimate interference with CSX’s full and

1

To date, none have been identified.

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free enjoyment of its right of way. Therefore, CSX’s concern that LWC’s proposed plan will go
unchecked is unfounded.
Questions concerning fees, Crossing Agreements, and responsibilities under the CSX
specification are matters which devolve from the nature and extent of CSX’s protected rights and
the outcome of LWC’s petition for condemnation and declaratory relief. We do not deign to predict
how the state court will ultimately decide those questions. However, this court is limited to
assessing whether it has jurisdiction by virtue of ICCTA preemption. Finding that there is no
preemption in this instance, this action was improvidently removed and must be remanded to state
court. A separate order will be entered this date in accordance with this opinion.

IT IS SO ORDERED.

September 14, 2012

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