American Premier Underwriters, Inc. et al v. National Railroad Passenger Corporation
Filing
67
OPINION AND ORDER granting 58 Defendant's Motion to Dismiss. This matter is DISMISSED from the Court's docket. Signed by Judge S Arthur Spiegel on 6/21/2011. (km1)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
AMERICAN PREMIER UNDERWRITERS, :
:
INC., et al.,
:
Plaintiffs,
:
:
:
:
v.
:
:
:
NATIONAL RAILROAD PASSENGER
:
CORPORATION,
:
:
Defendant.
NO. 1:08-CV-00346
OPINION AND ORDER
This matter is before the Court on Defendant’s Motion to
Dismiss Plaintiffs’ Complaint (doc. 58), Plaintiffs’ response in
opposition thereto (doc. 64), and Defendant’s reply in support
thereof (doc. 65).
For the following reasons, the Court GRANTS
Defendant’s motion.
I.
Background
In
response
to
the
failing
passenger
rail
service
industry, Congress enacted the Rail Passenger Service Act of 1970
("RPSA"), Pub. L. No. 91-518, 84 Stat. 1327, which created the
National Railroad Passenger Corporation, known as Amtrak.
Amtrak
was to be a private corporation designed to "meet the Nation's
intercity passenger transportation requirements." RPSA § 301. The
RPSA outlined a procedure by which railroads could choose to obtain
relief from their passenger service obligations by entering into
contracts with Amtrak. "In consideration of being relieved of this
responsibility by [Amtrak]," a participating railroad would pay
Amtrak an amount equal to half of that railroad’s losses from
intercity passenger service during 1969, and provide Amtrak with
the use of tracks, facilities, and services.
402.
RPSA §§ 401(a)(2),
A participating railroad could elect to receive either a tax
deduction or common stock of Amtrak in an amount equal to its
payment.
RPSA §§ 401(a)(2), 901.
In June 1970, American Premier Underwriters, Inc., a
freight and passenger rail service company then known as Penn
Central, filed for bankruptcy.1
Plaintiffs chose to obtain relief
from their passenger service obligations under the RPSA and entered
into an agreement with Amtrak, dated April 16, 1971 ("Basic
Agreement").
contribute
Under
half
of
the
Basic
their
Agreement,
1969
Plaintiffs
passenger
service
were
to
losses,
approximately $52 million, to Amtrak, and Amtrak would relieve
Plaintiffs of their responsibility for the provision of Intercity
Rail Passenger Service.
As provided by the RPSA, Plaintiffs
elected to take approximately five million shares of Amtrak common
stock and received a seat on Amtrak’s board of directors in 1971.
The Basic Agreement had a fixed term, becoming effective on May 1,
1
The other plaintiff in this matter is American Financial
Group, Inc., APU’s parent company and the beneficial owner of the
stock at issue (doc. 1). For ease of reading, the Court will
refer at all times to the plaintiffs as “Plaintiffs,” regardless
of which plaintiff took or was affected by the action at issue.
-2-
1971 and terminating on April 30, 1996.
No provision of the Basic
Agreement provided for stock redemption.
"In consideration of its
being relieved by [Amtrak] of its entire responsibility for the
provision of Intercity Rail Passenger Service, Railroad shall pay
[Amtrak] $52,382,109, being an amount equal to fifty per centum of
Railroad’s fully distributed passenger service deficit for the year
ending December 31, 1969" to be paid in cash in 36 monthly
installments.
After the payments were completed, Amtrak issued
Plaintiffs one share of Common Stock for each ten dollars of the
amount paid or satisfied, such shares to be memorialized by
corresponding certificates.
The Basic Agreement was made by and
between Amtrak and the trustees of the property of Penn Central
Transportation Company.
In 1978, in connection with Plaintiffs’ reorganization
under the Bankruptcy Code, Plaintiffs and Defendant entered into a
Settlement Agreement which provided that “[a]ll claims by Amtrak
against Penn Central, and all claims by Penn Central against
Amtrak, will be liquidated, extinguished and settled, as part of
the consummation of a plan of Penn Central.”
Agreement
further
provided
that
“all
rights
The Settlement
and
obligations
[between the parties] arising out of or based upon the agreements
listed below are released, and Penn Central and Amtrak hereby agree
never more to assert against each other any claim based on such
rights or obligations.”
-3-
In 1997, Congress enacted the Amtrak Reform Act of 1997,
Pub. L. No. 105-134, 111 Stat. 2570 (the “1997 Act”), and in
section 415(b) provided that “Amtrak shall, before October 1, 2002,
redeem all common stock previously issued, for the fair market
value of such stock.”
Negotiations between the parties were held
beginning in 2000, and Amtrak initially offered Plaintiffs a price
of $.03 per share.
This offer was rejected by Plaintiffs and
negotiations continued until January 2008, when Amtrak informed
Plaintiffs
that
it
would
not
consider
any
alternative
transaction–such as the transfer of real estate or other Amtrak
assets in exchange for the stock. The stock remains unredeemed, in
derogation of the mandate set forth in 1997 Act.
Plaintiffs’ complaint contains the following claims: (1)
Amtrak violated the Takings Clause of the Fifth Amendment when it
caused the value of Plaintiffs’ shares of common stock “to be
completely eroded”; (2) Plaintiffs are entitled to restitution for
the amount they paid for their stock, plus interest, because
“Amtrak repudiated its contract...by operating not to make a profit
but instead to achieve broad public and government objectives”
despite
“promis[ing]
to
manage
and
operate
as
a
for-profit
company”; (3) by failing to redeem Plaintiffs’ stock for fair
market value, as required by statute, Amtrak converted Plaintiffs’
property interest in the $52 Million Plaintiffs paid for the stock
and converted that capital because it did not use it for a for-
-4-
profit
enterprise
but,
instead,
for
public,
governmental
objectives; (4) & (5) Plaintiffs were denied procedural due process
in violation of the Fifth Amendment when Amtrak valued Plaintiffs’
shares at $.03 each without providing for a “rational, fact-based
and
neutral”
valuation
process;
(6)
Plaintiffs
were
denied
substantive due process in violation of the Fifth Amendment when
Amtrak valued Plaintiffs’ shares at “essentially zero” and such
valuation was “arbitrary and capricious since it is not based on
any recognized method of valuation and is an amount that is not
fair”; and (7) Amtrak violated Section 415(b) of the Amtrak Reform
and
Accountability
Act
of
1997
when
it
“unilaterally
and
erroneously” valued Plaintiffs’ shares at “zero or nearly zero” and
failed to offer fair market value for the stock.
Amtrak moves the
Court to dismiss Plaintiffs’ complaint in its entirety.
II.
The Applicable Standard
A motion to dismiss pursuant to Federal Rule of Civil
Procedure 12(b)(6) requires the Court to determine whether a
cognizable claim has been pled in the complaint. The basic federal
pleading requirement is contained in Fed. R. Civ. P. 8(a), which
requires that a pleading "contain . . . a short and plain statement
of the claim showing that the pleader is entitled to relief."
Westlake v. Lucas, 537 F.2d 857, 858 (6th
Pardus, 551 U.S. 89 (2007).
Cir. 1976); Erickson v.
In its scrutiny of the complaint, the
Court must construe all well-pleaded facts liberally in favor of
-5-
the party opposing the motion.
236 (1974).
Scheuer v. Rhodes, 416 U.S. 232,
A complaint survives a motion to dismiss if it
“contain[s] sufficient factual matter, accepted as true, to state
a claim to relief that is plausible on its face.”
Courie v. Alcoa
Wheel & Forged Products, 577 F.3d 625, 629-30 (6th Cir. 2009),
quoting Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009), citing Bell
Atlantic Corp. v. Twombly, 550 U.S. 544 (2007).
A motion to dismiss is therefore a vehicle to screen out
those
cases
implausible.
that
are
impossible
as
well
as
those
that
are
Courie, 577 F.3d at 629-30, citing Robert G. Bone,
Twombly, Pleading Rules, and the Regulation of Court Access, 94
IOWA L. REV. 873, 887-90 (2009).
A claim is facially plausible
when the plaintiff pleads facts that allow the court to draw the
reasonable inference that the defendant is liable for the conduct
alleged.
Iqbal, 129 S.Ct. at 1949.
Plausibility falls somewhere
between probability and possibility. Id., citing Twombly, 550 U.S.
at 557.
As the Supreme Court explained,
“In keeping with these principles a court considering a motion
to dismiss can choose to begin by identifying pleadings that,
because they are no more than conclusions, are not entitled to
the assumption of truth. While legal conclusions can provide
the framework of a complaint, they must be supported by
factual allegations. When there are well-pleaded factual
allegations, a court should assume their veracity and then
determine whether they plausibly give rise to an entitlement
to relief.” Id. at 1950.
The
admonishment
to
construe
the
plaintiff's
claim
liberally when evaluating a motion to dismiss does not relieve a
-6-
plaintiff of his obligation to satisfy federal notice pleading
requirements
conclusions.
and
allege
Wright,
more
than
Miller
&
Procedure: § 1357 at 596 (1969).
bare
Cooper,
assertions
Federal
of
legal
Practice
and
"In practice, a complaint . . .
must contain either direct or inferential allegations respecting
all of the material elements [in order] to sustain a recovery under
some viable legal theory."
Car Carriers, Inc. v. Ford Motor Co.,
745 F.2d 1101, 1106 (7th Cir. 1984), quoting In Re: Plywood
Antitrust Litigation, 655 F.2d 627, 641 (5th Cir. 1981); Wright,
Miller & Cooper, Federal Practice and Procedure, § 1216 at 121-23
(1969).
The United States Court of Appeals for the Sixth Circuit
clarified the threshold set for a Rule 12(b)(6) dismissal:
[W]e are not holding the pleader to an impossibly high
standard; we recognize the policies behind Rule 8 and the
concept of notice pleading.
A plaintiff will not be
thrown out of court for failing to plead facts in support
of every arcane element of his claim.
But when a
complaint omits facts that, if they existed, would
clearly dominate the case, it seems fair to assume that
those facts do not exist.
Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 437 (6th
Cir. 1988).
III. The State Law Claims
A.
As
Release and the Statute of Limitations
an
initial
matter,
Amtrak
asserts
that
all
of
Plaintiffs’ claims were released by the 1978 Settlement Agreement
and
that
the
claims
are
subject
-7-
to
a
three-year
statute
of
limitations, which means that Plaintiffs’ claims are barred as
untimely (doc. 58). As to these global issues of release under the
Settlement Agreement and the statute of limitations, Plaintiffs
contend
that
the
releases
contained
in
the
1978
Settlement
Agreement cannot serve to preclude Plaintiffs’ claims now because
the claims had not accrued at the time of execution of that
agreement (doc. 64).
Specifically, Plaintiffs note that the
Settlement Agreement released “claims or causes of action of any
sort whatsoever...arising or accruing from the beginning of the
world through and including March 31, 1976,” and Plaintiffs could
not have known by March 31, 1976 that Congress would, in 1997,
require Amtrak to redeem its shares at fair market value and that,
despite that requirement, Amtrak would refuse to do so and would
not afford Plaintiffs an opportunity to be heard before deciding on
a value of $.03 per share (Id.).
Further, Plaintiffs argue that granting Amtrak’s motion
to dismiss on the basis that Plaintiffs released all claims in 1978
would be to ignore the factual assertions made in Plaintiffs’
complaint,
which
proceedings.
the
Court
cannot
do
at
this
stage
in
the
Specifically, Plaintiffs note that Amtrak asserts
that the shares’ lack of value was established by the date of the
Settlement Agreement, while Plaintiffs allege in their complaint
that it was not until Amtrak offered the $.03 per share and then
made the decision to end negotiations on the congressionally-
-8-
mandated redemption at fair market value that Plaintiffs’ injury
with
respect
to
the
value
of
the
shares
became
known
and
actionable.
The Court finds that Plaintiffs’ claims are not timebarred, inasmuch as they relate to the question of the value of the
shares, because the value of the shares and, should they be found
to be worthless, the point in time at which their value was
depleted to essentially zero, are factual questions that would
require a fuller evidentiary record to answer.
a
motion
to
dismiss
is
improper.
See,
Resolving them on
e.g.,
Firestone
v.
Firestone, 76 F.3d 1205, 1208-09 (D.C. Cir. 1996)(“[C]ourts should
hesitate to dismiss a complaint on statute of limitations grounds
based solely on the face of the complaint.”).
With respect to the releases contained in the Settlement
Agreement, the Court finds them inapplicable to this action.
Plaintiffs did indisputably release any and all claims arising or
accruing through March 31, 1976, and all claims “arising from acts,
omissions or conditions which occurred or commenced on or before
March 31, 1976.”
such claims.
However, Plaintiffs are not seeking redress for
Instead, they seek redress for claims that arise out
of Amtrak’s failure to redeem Plaintiffs’ shares at fair market
value, something Amtrak was statutorily obligated to do in 1997.
To read that statutory obligation to be one that arose out of acts,
omissions or conditions occurring or commencing before March 31,
-9-
1976, is a reading this Court cannot subscribe to.
Such a reading
of the release language and the facts before the Court is far too
sweeping.
Plaintiffs cannot be held to have known that the
statutory obligation at issue would be imposed on Amtrak some 19
years after signing the release and certainly cannot be held to
have released any claim arising from Amtrak’s failure to abide by
that then-unknown and unforseeable obligation.
The Court further notes that Amtrak argues globally that
the National Arbitration Panel’s decision on whether the parties
were required to arbitrate these claims has a preclusive effect on
this matter and that its motion to dismiss should be granted
accordingly.
However, as Plaintiffs point out, the NAP expressly
did not reach the merits of this case and did not address Amtrak’s
motion to dismiss.
The Court sees nothing in the NAP’s decision
that the parties were not required to arbitrate that would bind the
Court on the issues raised in Amtrak’s motion to dismiss.
B.
The Restitution Claim
Plaintiffs seek restitution for the amount they paid for
their
stock,
plus
interest,
because
“Amtrak
repudiated
its
contract...by operating not to make a profit but instead to achieve
broad public and government objectives” despite “promis[ing] to
manage
and
operate
as
a
for-profit
company”
(doc.
1).
Specifically, Plaintiffs assert that Amtrak’s retention of the $52
million
that
Plaintiffs
paid
for
-10-
their
Amtrak
stock,
which,
Plaintiffs assert, Amtrak has used for the benefit of the public,
amounts to Amtrak being unjustly enriched. Plaintiffs contend that
they are entitled to recover on an unjust enrichment theory any
loss of their initial capital contribution resulting from Amtrak
not honoring its statutory obligation to operate as a for-profit
corporation and to redeem Plaintiffs’ shares at fair market value
(doc. 64).
Amtrak argues that Plaintiffs have failed to state a
claim for unjust enrichment because, as a matter of law, one cannot
exist under these circumstances.
Specifically, Amtrak argues that
because Plaintiffs received the benefit of their bargain when they
bought their Amtrak shares, they cannot now claim that Amtrak was
unjustly enriched (doc. 58).
Amtrak notes that, in exchange for
the $52 million investment made by Plaintiffs, they were relieved
of the costly obligation to provide passenger rail service.
Amtrak contends, cannot be seen to be unjust.
This,
In addition, Amtrak
notes that Plaintiffs would need to relinquish the consideration it
received in exchange for its investment and would need, therefore,
to
reassume
passenger
rail
service
and
reimburse
Amtrak
for
Amtrak’s losses that it incurred while providing passenger rail
service over the years.
The Court finds that Plaintiffs have failed to state a
claim for relief under an unjust enrichment theory, and Amtrak is
therefore
entitled
to
dismissal
-11-
of
this
claim.
Plaintiffs’
position appears to be that they seek restitution for the promises
that flowed from Amtrak’s commitment to run as a for-profit company
and from Congress’ mandate that Amtrak redeem Plaintiffs’ shares at
a fair market rate, and not from promises made in the parties’
original contract.
In short, to survive Amtrak’s motion to
dismiss, Plaintiffs ask the Court to find that they have alleged
sufficient facts from which the Court could plausibly infer that a
quasi-contract arose by virtue of Amtrak’s structure as a forprofit corporation and/or by virtue of Congress’ directive that
Amtrak redeem Plaintiffs’ shares.
See, e.g., 4934, Inc. v.
District of Columbia Dept. of Employment Svcs., 605 A.2d 50, 55
(D.C. 1992)(observing that unjust enrichment and restitution arise
from the common law where, in the absence of an actual contract,
courts
created
a
quasi-contract,
a
legal
fiction
‘where
circumstances are such that justice warrants a recovery as though
there had been a promise’)(citations omitted).
Plaintiffs have simply not met that burden.
First, with
respect to the issue of Amtrak being organized as a for-profit
corporation but not making a profit for its shareholders, it is not
disputed that Amtrak made a promise to manage and operate as a forprofit company, but this is in no way a guarantee that the
company’s shareholders will experience a profit, and Plaintiffs,
sophisticated investors that they are, know this well.
Such a
promise cannot possibly–let alone plausibly–form the basis of an
-12-
unjust enrichment claim.
With respect to Plaintiffs’ theory that
Amtrak made a contract-like promise to redeem Plaintiffs’ shares
when Congress imposed the statutory duty on it to do so, the Court
finds the theory too attenuated to plausibly present a claim for
unjust enrichment.
Here it is not “justice that warrants a
recovery,” it is, arguably, congressional action.
Amtrak did
nothing from which a promise could be imputed; on the contrary, it
was
a
passive
object
of
Congress’
act.
Therefore,
unjust
enrichment cannot provide Plaintiffs with an avenue for relief
under the facts alleged in their complaint; Amtrak is entitled to
a
dismissal
of
Plaintiffs’
restitution
claim
because,
even
accepting all of the factual allegations in the complaint as true,
Plaintiffs have failed to state a plausible claim for relief.
C.
The Conversion Claim
Plaintiffs claim that, by failing to redeem Plaintiffs’
stock
for
fair
market
value
as
required
by
statute,
Amtrak
converted Plaintiffs’ property interest in their stock shares (doc.
1).
Plaintiffs argue that because their stock isn’t traded on the
open market, Amtrak’s decision to not redeem the stock amounts to
a conversion because that decision places Amtrak in a position of
dominion or control over Plaintiffs’ rights (doc. 64, citing Ficken
v. AMR Corp., 578 F.Supp.2d 134, 143 (D. D.C. 2008) for the
proposition that intangible property rights that are identified by
a tangible document can be converted).
-13-
Plaintiffs’ conversion claim cannot survive Amtrak’s
motion for the simple reason that they have failed to allege a
critical element of the cause of action.
Specifically, as Amtrak
notes, in order for a conversion claim for an intangible benefit to
lie, the tangible document representing the intangible property
right must itself be converted.
Indeed, the case relied on by
Plaintiffs to establish that certain intangible rights can be
converted is clear about this.
See Ficken, 578 F.Supp.2d at 143
(“Conversion and trover extend only to intangible rights identified
by a tangible document that is converted; ‘thus a plaintiff may
bring suit for conversion of a promissory note, a check, a bank
book, or an insurance policy...but not for conversion of a debt,
the good will of a business or an idea.’”)(emphasis added).
Here, if the property right Plaintiffs allege Amtrak
converted is a property right created by the congressional mandate
that Amtrak redeem Plaintiffs’ shares, the claim fails because that
right is indisputably intangible and not represented by any kind of
tangible document. It thus falls on the debt/good will/idea end of
the spectrum and not on the promissory note/check/bank book end and
is therefore not subject to a conversion claim.
Plaintiffs
are
claiming
that
Amtrak
converted
To the extent
their
property
interest in their stock because the stock can’t be traded on the
open market, and Amtrak has not yet redeemed the stock, the claim
similarly fails because Plaintiffs have not alleged that Amtrak
-14-
converted the tangible document representing the intangible right,
i.e., the stock certificates.
As noted above, that is a critical
component of a successful claim for conversion of intangible
rights–the tangible document representing those rights must be
converted.
Plaintiffs
have
failed
to
set
forth
sufficient
allegations for a plausible claim for relief under a conversion
theory, and Amtrak is therefore entitled to dismissal of that
claim.
IV.
The Constitutional Claims
A.
Plaintiffs’ First, Fifth and Sixth Claims (Takings
Clause and Due Process Clause)
Plaintiffs contend that Amtrak violated the Takings
Clause
of
the
Fifth
Amendment
when
it
caused
the
value
of
Plaintiffs’ shares of common stock “to be completely eroded” (doc.
1). Specifically, Plaintiffs allege that Amtrak has, over a course
of years, shifted its operations from being private and profitoriented to being run at a deficit through the use of government
subsidies
to
passenger
rail
advance
service
the
at
government
below
cost
objective
(Id.).
of
providing
Additionally,
Plaintiffs allege that Amtrak used Plaintiffs’ capital to fund
political and government objectives, such as increasing the number
of unprofitable routes, rather than to increase Amtrak’s profit
and, thus, the value of Plaintiffs’ shares.
-15-
After years of discussions over the terms by which Amtrak
would redeem Plaintiffs’ shares, as it was congressionally mandated
to do by the Amtrak Reform and Accountability Act of 1997, Amtrak
put an end to the negotiations in January 2008 when it declared,
according to the complaint, that the shares were worthless and
their lack of value could not be obscured by becoming part of
another deal.
Plaintiffs assert that Amtrak’s decision to declare
the shares worthless and withdraw from negotiations premised on a
fair-market valuation of the shares completed the unconstitutional
taking
of
Plaintiffs’
investment
in
violation
of
the
Fifth
Amendment.
With respect to the Takings Clause claim, Amtrak contends
that Congress has not created a cause of action against Amtrak for
violations of the Fifth Amendment, and the Supreme Court has held
that direct constitutional damages claims against federal agencies
are not available (Id., citing Bivens v. Six Unknown Named Agents
of Fed. Bureau of Narcotics, 403 U.S. 388, 397 (1971); F.D.I.C. v.
Meyer, 510 U.S. 471, 486 (1994)).
In response, Plaintiffs contend that Bivens and Meyer are
inapplicable in this context because the Supreme Court expressly
held
that
Amtrak
could
be
sued
directly
for
constitutional
violations, albeit in the First Amendment context (doc. 64, citing
Lebron v. National Railroad Passenger Corp., 513 U.S. 374, 394
(1995)).
-16-
As Amtrak notes, suits seeking damages from federal
agencies are not permitted under Bivens.
See Meyer, 510 U.S. 471
(“An extension of Bivens [from agents] to agencies of the Federal
Government is not supported by the logic of Bivens itself.”).
Plaintiffs point to Lebron, which was decided after Meyer, for the
proposition that, because Lebron permitted a First Amendment suit
against Amtrak, a suit alleging violations of other constitutional
rights against Amtrak should similarly be allowed to proceed.
See
Lebron, 513 U.S. 374. Plaintiffs contend that Meyer and Bivens are
inapplicable and argue that there is no principled reason to allow
Amtrak to be sued for First Amendment violations but not violations
of other constitutional provisions.
Plaintiffs have created something of a red herring here.
The issue is not whether Amtrak can be sued only for violations of
the First Amendment or whether it can be sued for violations of
other constitutional provisions.
Instead, the issue is whether
Plaintiffs may pursue their constitutional claims against Amtrak if
they are seeking damages as opposed to equitable relief.
Meyer
holds that agencies may not be sued for damages resulting from
constitutional
violations,
and
Lebron,
which
was
a
suit
for
injunctive relief, not damages, holds that Amtrak qualifies as an
agency
for
violations.
the
purpose
of
seeking
redress
of
constitutional
See Meyer, 510 U.S. at 486; Lebron, 513 U.S. at 394.
The syllogism is complete only with the conclusion that, pursuant
-17-
to Meyer, Amtrak may not be sued for damages resulting from
constitutional violations but it may, pursuant to Lebron, be sued
for equitable relief.
With
respect
to
their
Takings
cause
of
action
in
Plaintiffs’ First Claim, the complaint can only reasonably be read
to lodge claims for damages.
That claim asks the Court to order
Amtrak to pay just compensation for the value of the property they
allege has been eroded and taken, in an amount to be determined at
trial.
Similarly,
Plaintiffs’
Due
Process
Clause
claims
articulated in their Fifth and Sixth Claims are explicitly damages
claims: “[Plaintiffs have] been damaged as a result of the denial
of [their] procedural [and substantive] due process rights and
[are] entitled to damages from Amtrak in an amount to be determined
at trial” (doc. 1).
Plaintiffs have sued Amtrak, a government agency for
these purposes, for damages resulting from alleged constitutional
violations.
Unfortunately for Plaintiffs, Meyer stands as an
insurmountable obstacle to those claims because it holds that
agencies may not be sued for damages.
Therefore, pursuant to
Meyer, Amtrak is entitled to dismissal of Plaintiffs’ First, Fifth
and Sixth Claims.
See Meyer, 510 U.S. at 486
Plaintiffs’ Due Process Clause claim articulated in their
Fourth Claim, on the other hand, is more properly viewed as seeking
equitable relief as they seek notice and an opportunity to be heard
-18-
on the valuation of the shares; a declaration that Amtrak’s
interpretation of the 1997 Act is unconstitutional and that eminent
domain proceedings should commence; and a declaration that Amtrak
must provide Plaintiffs with compensation in the amount deemed
appropriate and just by the Court (doc. 1). Therefore, Plaintiffs’
Fourth Claim survives Amtrak’s Meyer challenge, but, as will be
discussed below, it fails for other reasons.
B.
Plaintiffs’ Fourth Claim (Due Process Clause)
1.
No Private Right of Action
In their Fourth Claim for relief, Plaintiffs seek notice
and an opportunity to be heard on the valuation of the shares; a
declaration
that
unconstitutional
Amtrak’s
and
that
interpretation
eminent
of
domain
the
1997
proceedings
Act
is
should
commence; and a declaration that Amtrak must provide Plaintiffs
with compensation in the amount deemed appropriate and just by the
Court (doc. 1).
Amtrak contends that Plaintiffs have no private right of
action under the 1997 Act and no property right in redemption of
its stock, which consequently means they cannot pursue a due
process
claim
(doc.
58,
citing
Cleveland
Bd.
of
Educ.
v.
Loudermill, 470 U.S. 532, 538 (1985) for the proposition that due
process claims depend on the existence of a property right that is
entitled to protection).
Because, according to Amtrak, the 1997
Act did not create an individually enforceable right to redemption,
-19-
the Act created no property interest and thus nothing to be
implicated by the due process clause (Id.).
Plaintiffs contend that they do have an enforceable
property right and that, in any event, their complaint alleges both
a property right in the statutory mandate of redemption and a
property right in their shares of stock (docs. 1, 64).
Amtrak
violated their due process rights both in their stock shares and in
their right of redemption, Plaintiffs contend, by not providing a
fair analysis of the stock’s value (Id.).
a.
Amtrak’s Arguments
Amtrak argues that the 1997 Act does not create a private
right of action because, it contends, the statute does not contain
clear and unambiguous rights-creating language but it does contain
an express and exclusive public enforcement mechanism, thus it
cannot be inferred that Congress intended to create a private right
of action (doc. 65).
Amtrak asserts that the mandate that “Amtrak
shall...redeem all common stock” expresses an obligation imposed on
Amtrak, the regulated body, and does not, as Plaintiffs suggest,
express an entitlement of the shareholders (Id.).
In
addition,
Amtrak
contends
that
it,
not
the
shareholders, was the intended beneficiary of the 1997 Act and that
Congress passed the 1997 Act in order to create more options for
Amtrak to obtain private financing (Id.).
As support for its
contention that the shareholders are not the intended beneficiaries
-20-
of the 1997 Act, Amtrak notes that Congress knew when it passed the
1997 Act that Amtrak stock was generally considered to have no
market value (Id.).
Further, Amtrak notes that there is no mention of private
enforcement in the legislative history of the 1997 Act, which
“strongly suggests that Congress did not intend to imply a private
right of action” (Id., citing Bowling Green v. Martin Land Dev.
Co., 561 F.3d 556, 561 (6th Cir. 2009)).
On the contrary, Amtrak
observes, the 1997 Act was enacted as part of the RPSA, which
includes an express and exclusive public enforcement mechanism
(Id.,
citing
49
U.S.C.
§
24103(a)(1)(C)(“[O]nly
the
Attorney
General may bring a civil action for equitable relief in a district
court of the United States when Amtrak...refuses, fails or neglects
to discharge its duties and responsibilities under [Title 49,
Subtitle V, Part C]”).
This, Amtrak claims, indicates that
Congress did not intend to create a private right of action (Id.,
citing Alexander v. Sandoval, 532 U.S. 275, 290 (2001)(“The express
provision of one method of enforcing a substantive rule suggests
that Congress intended to preclude others.”)).
b.
Plaintiffs’ Arguments
Plaintiffs contend that there is nothing to support the
assumption that Congress intended to deny a private right of action
in the 1997 Act.
Plaintiffs argue that the use of the word
“shall”–as in, “Amtrak shall...redeem all common stock”–indicates
-21-
that Congress created a right of redemption for the shareholders
because “shall” is “classic individual rights-creating language”
(doc. 64).
Plaintiffs note that there are only four common stock
shareholders, which takes the redemption mandate out of the realm
of a statute that benefit the public at large through a regulatory
scheme and, instead, puts it squarely in the realm of a statute
creating “federal rights for the especial benefit of a class of
persons” (Id., citing California v. Sierra Club, 451 U.S. 287, 29798 (1981)).
Plaintiffs further observe that Congress did not include
a governmental enforcement mechanism when it enacted the 1997 Act,
and the Act does not expressly foreclose a private right of action
(Id.).
While Plaintiffs acknowledge that the RPSA provides that
equitable actions against Amtrak may be brought only by the
Attorney General, Plaintiffs argue that that RPSA provision is
inapplicable to a cause of action arising from the 1997 Act because
it would be illogical to expect the Attorney General to enforce the
rights of four shareholders; the Attorney General enforcement
provision was enacted in 1970, some 27 years before the 1997 Act;
and nothing in the 1997 Act or in its legislative history suggests
that Congress intended the Attorney General provision of the RPSA
to apply to the 1997 Act (Id.).
Plaintiffs observe that the 1997
Act only appears in the U.S. Code as a note to a section of the
RPSA and argue that this indicates that the Attorney General
-22-
provision of the RPSA should not apply to the 1997 Act (Id.).
Further, to the extent Plaintiffs seek monetary damages, they argue
that the provision in RPSA, if found to apply to the 1997 Act,
would not foreclose their private action because it applies only to
equitable actions (Id.).
In addition, Plaintiffs assert that finding a private
right of action in the 1997 Act is consistent with the purpose of
the
Act,
which
they
characterize
as
allowing
for
Amtrak
to
restructure its finances (Id., citing Bender v. Jordan, 439 F.Supp.
2d 139, 159 (D.D.C. 2006), where an implied private right of action
for shareholders was found where the statute at issue “was not
enacted for the benefit of the issuer [but rather where] its ‘sole
purpose was the protection of shareholders’”).
Because remedial
statutes should be construed broadly, and because Congress enacted
the 1997 Act because it felt that Amtrak needed significant
financial reforms, Plaintiffs argue that an implied right of action
should be found (Id., citing Carter v. United States, 553 F.3d 979,
985 (6th Cir. 2009), where the court found an implied private right
of action in a real estate reform statute, noting the remedial
nature of the statute and that Congress had recognized that
significant reforms were needed in the real estate settlement
process).
c.
Discussion
Cort v. Ash, 422 U.S. 66 (1975), provides the starting
-23-
point for determining whether a statute creates a private right of
action.
The four Cort factors are: (1) whether the plaintiff is
one of the class for whose benefit the statute was enacted; (2)
whether some indication exists of legislative intent, explicit or
implicit, either to create or to deny a private remedy; (3) whether
implying
a
private
right
of
action
is
consistent
with
the
underlying purposes of the legislative scheme; and (4) whether the
cause of action is one traditionally relegated to state law, such
that it would be inappropriate for the court to infer a cause of
action based solely on federal law.
Cort, 422 U.S. at 78.
The
Cort factors are not necessarily entitled to equal weight, however,
and the “central inquiry remains whether Congress intended to
create, whether expressly or by implication, a private cause of
action.” Touche Ross & Co. v. Redington, 442 U.S. 560, 575 (1979).
Indeed, it has been argued that Touche Ross effectively overruled
Cort’s four-factor test by elevating “one of its four factors
(congressional intent) into the determinative factor, with the
other three merely indicative of its presence or absence.”
Thompson
v.
concurring).
Thompson,
484
U.S.
174,
189
(1988)(Scalia,
J.,
Further, “unless this congressional intent can be
inferred from the language of the statute, the statutory structure,
or some other source, the essential predicate for implication of a
private remedy simply does not exist.” Northwest Airlines, Inc. v.
Transport Workers Union of America, 451 U.S. 77, 94 (1981).
-24-
i.
Congressional Intent
An application of the Cort factors in an effort to divine
congressional intent leads the Court to the conclusion that the
1997
Act
did
not
create
a
private
right
of
action
for
the
shareholders.
To
ascertain
whether
Congress
intended
to
create
a
private right of action, the Court first turns to the text of the
statute at issue. In re Carter, 553 F.3d 979, 985 (6th Cir. 2009).
Here, as Amtrak notes, the 1997 Act does not contain unambiguous
rights-creating language.
For support, Plaintiffs turn to the
phrase “Amtrak shall...redeem all common stock”, arguing that
“shall” is “classic individual rights-creating language”. However,
as Amtrak notes, the “shall” here clearly imposes an obligation on
Amtrak;
it
does
shareholders.
not
clearly
express
an
entitlement
of
the
Therefore it is quite unlike, for example the
“classic individual rights-creating language” of the Civil Rights
Act.
Compare the 1997 Act, “Amtrak shall...redeem all common
stock”, with Titles VI and IX of the Civil Rights Act of 1964, “No
person...shall...be subjected to discrimination.”
Plaintiffs assert that “Section 415(b) does not focus on
Amtrak as the regulated entity,” and cite Cenzon-Decarlo v. Mount
Sinai Hospital, 2010 U.S. Dist. LEXIS 3208 (E.D. Ny. Jan. 15,
2010).
position.
Cenzon-Decarlo does not serve to buttress Plaintiffs’
In Cenzon-Decarlo, the Church Amendment was found to
-25-
“speak[] to the funded entity rather than to any benefitted class
and, therefore, lacks the focus on individuals that would indicate
the necessary congressional intent that a private right of action
be implied.”
Id.
The statute at issue read in relevant part, “No
entity [receiving certain federal money] may discriminate in the
employment...of any physician or other health care personnel....”
Id., citing 42 U.S.C. § 300a-7(c).
This arguably contains clearer
“benefitted class” language than the 1997 Act, which, in the
section at issue here, does not even mention the shareholders.
Instead, notwithstanding Plaintiffs’ assertion to the contrary, the
1997 Act speaks solely to the regulated entity, Amtrak, with no
focus on individuals at all.
See Section 415(b) of the 1997 Act
(“Amtrak shall, before October 1, 2002, redeem all common stock
previously issued, for the fair market value of such stock.”).
Cenzon-Decarlo, therefore, does not advance Plaintiffs’ cause.
Given the absence of clear, unambiguous rights-creating
language, the text of the 1997 Act does not support a finding that
Congress intended to create a private right of action in favor of
the shareholders.
See Gonzaga Univ. v. Doe, 536 U.S. 273, 290
(2002)(“[I]f Congress wishes to create new rights enforceable under
§ 1983, it must do so in clear and unambiguous terms–no less and no
more than what is required for Congress to create new rights
enforceable under an implied private right of action.”).
That
could end the Court’s analysis, but out of an abundance of caution,
-26-
the Court will consider the remaining Cort factors as they may
demonstrate congressional intent.
ii.
Whether Plaintiffs are one of the
class for whose benefit the 1997 Act
was enacted
Plaintiffs argue that because the 1997 Act mandates that
Amtrak redeems all of its common shares at fair market value, and
because Plaintiffs are one of only four common stock shareholders,
the provision must have been enacted for the shareholders’ benefit
(doc. 64).
They argue that because the statute was not “intended
to benefit the public at large through a general regulatory
scheme,” it must have been enacted to “create federal rights for
the
especial
benefit
of
a
class
of
persons”
(Id.,
quoting
California v. Sierra Club, 451 U.S. 287, 297-98 (1981)).
Amtrak argues that the 1997 Act cannot be read to include
Plaintiffs as one of the class for whose benefit the Act was
created because the Act was expressly created to benefit Amtrak by
giving it more financing options (doc. 65, H.R. Rep. Nos. 105-251
at 14 (1997) and 108-792 at 1421 (2004)).
In addition, Amtrak
notes that at the time Congress passed the 1997 Act, it was of the
belief that
Amtrak common stock was “generally considered to have
no market value” (Id., quoting H.R. Rep. No. 105-251 at 19).
Therefore, Amtrak argues, Congress could not have intended for
Plaintiffs to be the beneficiaries of the Act.
The Court agrees.
Although Plaintiffs would benefit if
-27-
Amtrak redeems the stock at a price acceptable to Plaintiffs, that
fact does not mean that Plaintiffs were the intended beneficiaries
of the Act.
Such a benefit is simply too attenuated to form the
basis of a finding that Congress intended to create a private right
of action with the 1997 Act.
Indeed, it could just as easily be
argued that the public at large is the intended beneficiary of the
Act since the public would clearly benefit if Amtrak were to become
more financially viable.
What is clear and undisputed is that
Congress intended to create greater financing options for Amtrak.
Many people could benefit from those options, including Plaintiffs,
including the public at large, including new lenders, etc.
But
that does not mean that it can reasonably be inferred that Congress
intended all of those people to have a private cause of action
iii. The Purpose of the 1997 Act
Here, the Court inquires whether implying a private right
of action is consistent with the underlying purposes of the
legislative scheme.
Cort, 422 U.S. at 78.
Plaintiffs and Amtrak
agree that the purpose of the 1997 Act was to allow for Amtrak to
restructure its finances (docs. 58, 64).
Plaintiffs contend that
finding a private right of action would be consistent with that
purpose and cite Bender, 439 F.Supp.2d 139 for support.
In Bender, the court found an implied private right of
action for shareholders where the statute at issue “was not enacted
for the benefit of the issuer [but rather where] its ‘sole purpose
-28-
was the protection of shareholders’”.
439 F.Supp.2d at 159.
The
Court cannot see how Bender could support Plaintiffs’ position
here.
Plaintiffs agree with Amtrak that the 1997 Act was enacted
to allow Amtrak to engage in refinancing.
This distinguishes the
1997 Act from the Bender statute, as the 1997 Act was clearly
enacted for the benefit of Amtrak.
And no reading of the 1997 Act
as a whole could reasonably or even plausibly lead one to the
conclusion that it was enacted with a “sole purpose” of protecting
the Amtrak shareholders, again a clear distinction from Bender. On
the contrary, the legislative history and the text of the 1997 Act
itself demonstrate that the statute was enacted to facilitate
Amtrak’s financial restructuring because of congressional concerns
about Amtrak’s financial condition.
See, e.g., H.R. Rep. No. 108-
792 at 1491 (2004); H.R. Rep. No. 105-251 at 14 (1997); the 1997
Act, Pub. L. No. 105-134, 111 Stat. 2570 (“The Congress finds
that...Amtrak is facing a financial crisis...[and] immediate action
is required to improve Amtrak’s financial condition if Amtrak is to
survive....”).
In addition, Plaintiffs contend that the 1997 Act is a
remedial statute and argue that because remedial statutes should be
construed broadly, and because Congress enacted the 1997 Act
because it felt that Amtrak needed significant financial reforms,
an implied right of action should be found (doc. 64, citing In re
Carter, 553 F.3d 979, 985 (6th Cir. 2009)).
-29-
In Carter, the court
found an implied private right of action in a real estate reform
statute, noting the remedial nature of the statute and that
Congress had recognized that significant reforms were needed in the
real estate settlement process. In finding “little doubt” that the
statute at issue was a remedial one, the Carter court noted that
Congress specifically enacted it “to effect certain changes in the
settlement process for residential real estate” that would result,
in part, “in the elimination of kickbacks or referral fees that
tend to increase unnecessarily the costs of certain settlement
services.”
(b)(1).
Carter, 553 F.3d at 986, quoting 12 U.S.C. § 2601(a),
The evil that statute was meant to remedy is clearly
expressed in the congressional findings.
No similar findings with respect to the 1997 Act have
been presented here such that the Court would be compelled to
conclude
that
the
1997
Act
was
a
true
remedial
statute.
Nonetheless, stretching the meaning of “evil,” one could conclude
that the evil the 1997 Act meant to remedy was Amtrak’s restrictive
financing structure. Construing the 1997 Act as remedial, however,
does not grant Plaintiffs their ticket to sue.
The “liberal
construction”
in
of
remedial
statutes
is
justified
order
effectuate the congressional goals in enacting the statute.
to
See
California v. American Stores Co., 495 U.S. 271, 279 (1990). Here,
where everyone agrees that the goal of the 1997 Act was to provide
Amtrak with expanded opportunities to reach financial viability, a
-30-
liberal construction of the statute in order to effectuate that
goal simply does not–and cannot reasonably or plausibly–lead to the
conclusion that Congress intended to give the shareholders the
right to sue Amtrak to force redemption at a price acceptable to
the shareholders.
The Court cannot impose on the 1997 Act a
construction not reasonably supported by the language of the Act or
a meaning not intended by Congress merely because the statute could
be construed as being a remedial one.
The “purpose” Cort factor thus weighs in favor of the
Court’s determination that Congress did not intend to create a
private right of action in the 1997 Act.
iv.
State Law
Clearly, matters concerning Amtrak and the constitutional
causes of action set forth in Plaintiffs’ complaint are not
traditionally
relegated
to
state
law,
so
it
would
not
be
inappropriate for the Court to infer a private cause of action
based solely on the 1997 Act.
However, this factor does not tip
the scales in favor of finding that Congress intended to create a
private right of action with the 1997 Act.
d.
Conclusion
For the reason set forth above, the Court finds no
implied private right of action in the 1997 Act. Therefore, to the
extent that Plaintiffs’ Fourth Claim rests on an assertion that
their due process rights were violated when Amtrak did not give
-31-
them notice and an opportunity to be heard on the issue of the
stock redemption, the claim fails because Plaintiffs have not shown
that they have a property interest in the redemption.
To the extent Plaintiffs’ Fourth Claim rests on an
assertion that the property interest they seek to vindicate is the
interest they hold in the stock, as opposed to the redemption of
the stock, the Court finds that the complaint fails to set forth
sufficient factual allegations from which a cause of action on this
theory could plausibly be found.
factual
allegations
in
the
Specifically, there are no
complaint
supporting
a
reasonable
inference that Plaintiffs have been deprived of their stock.
On
the contrary, it seems clear that they still retain the stock, but
they contest Amtrak’s valuation of the stock and appear to take
issue with Amtrak’s management that, they allege, has led to a
devaluation
of
the
stock.
Neither
of
those
amounts
to
a
deprivation of property implicating the Due Process Clause of the
Constitution.
Plaintiffs have pointed to no authority that would
compel a different conclusion, and the Court can find none on its
own review.
Even if the Court were to find that Congress intended to
create a private right of action with the 1997 Act or that
Plaintiffs were somehow deprived of their property rights in their
stock
despite
the
fact
that
they
still
retain
the
stock,
Plaintiffs’ Fourth Claim would nonetheless fail by the express
-32-
wording of the statute.
The 1997 Act was codified as a note to 49
U.S.C. § 24304, Subtitle V, Part C.
Section
24103(a)(1)(C) of 49
U.S.C. provides that all equitable actions brought pursuant to
Subtitle V, Part C against Amtrak may only be brought by the
Attorney General.
49 U.S.C. § 24103.
As noted above, the Court
has determined that Plaintiffs’ Fourth Claim is an equitable claim.
Therefore, pursuant to 49 U.S.C. § 24103, that claim may only be
brought by the Attorney General and not by Plaintiffs. Plaintiffs’
argument that the Court should, essentially, ignore the plain
language of the statute because the 1997 Act was codified as a mere
note to section 24304, presumably as opposed to meriting its own
section, is unpersuasive.
Plaintiffs have provided no authority
indicating that a court should ignore notes to the U.S. Code or
otherwise see laws that are codified in the form of notes as not
being a part of the Code to which they are appended, and the Court
has been unable to find any such authority on its own.
The 1997
Act was codified in the U.S. Code in the manner chosen by Congress.
The fact that it appears as a note to section 24304 of Title 49
does not mean that the other limitations, mandates and rules set
forth in Subtitle V, Part C should not apply to the 1997 Act.
In addition, as Amtrak notes, the fact that section 24103
of Title 49, which includes the Attorney General provision, was
enacted well before the 1997 Act cuts against Plaintiffs’ argument.
Congress is presumed to be aware of its earlier enactments.
-33-
International Union, United Auto., Aerospace & Agric. Implement
Workers of Am., Local 737 v. Auto Glass Emp. Fed. Credit Union, 72
F.3d 1243, 1248 (6th Cir. 1996)(“It is a settled principle of
statutory construction that when Congress drafts a statute, courts
presume that it does so with full knowledge of the existing law.”).
Here, this means that the Court presumes that Congress was aware of
the Attorney General provision of 49 U.S.C. § 24103 both when it
enacted the 1997 Act and when it chose to append the Act as a note
to section 24304 of Title 49. For the reasons set forth above, the
Court finds that the 1997 Act is subject to the limitations imposed
by 49 U.S.C. § 24103, which expressly provides that equitable
actions
are
to
be
brought
solely
by
the
Attorney
Plaintiffs’ Fourth Claim is an equitable action.
General.
Therefore, even
if the Court were to find that the 1997 Act created a private right
of action or that Plaintiffs had alleged sufficient facts from
which a plausible cause of action relating to the deprivation of
the stock itself, Plaintiffs’ Fourth Claim would be subject to
dismissal, as it may only properly be brought by the Attorney
General.
The Court is not unsympathetic to Plaintiffs’ plight.
The fact that the Attorney General may not be motivated to pursue
the equitable rights of four shareholders is, indeed, an obstacle
for Plaintiffs.
Plaintiffs’ most compelling argument in favor of
finding a private right of action is that without the ability to
sue Amtrak for failure to redeem the shares Plaintiffs are subject
-34-
to Amtrak’s whim.
Unfortunately, if Congress did not intend to
create a private right of action, “a cause of action does not exist
and courts may not create one, no matter how desirable that might
be as a policy matter, or how compatible with the statute.”
Alexander v. Sandoval, 532 U.S. 275, 286-87 (2001).
Neither
Plaintiffs nor this Court can wish a private right of action into
existence when Congress has not indicated its intention to create
one.
V.
Violation of the Amtrak Reform and Accountability Act of 1997
Finally, in their Seventh Claim, Plaintiffs contend that
Amtrak
violated
Section
415(b)
of
the
1997
Act
when
it
“unilaterally and erroneously” valued Plaintiffs’ shares at “zero
or nearly zero” and failed to offer fair market value for the
stock.
Because the Court has determined that the 1997 Act did not
create an implied private right of action, this claim fails, and
Amtrak is entitled to dismissal of the claim.
VI.
Conclusion
The Court has thoroughly examined the matters presented
in Amtrak’s motion to dismiss and Plaintiffs’ response thereto and
has concluded that Plaintiffs’ complaint cannot withstand the
motion.
Although the heart may point in one direction, the Court
is bound by the constraints of the relevant case law and the
mandates of the Constitution. For the reasons set forth above, the
Court GRANTS Amtrak’s motion to dismiss (doc. 58).
-35-
Consequently,
this matter is DISMISSED from the Court’s docket.
SO ORDERED.
Dated:
June 21, 2011
s/S. Arthur Spiegel
S. Arthur Spiegel
United States Senior District Judge
-36-
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