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Soo Line Railroad Co. v. Consolidated Rail Corp.

United States District Court, N.D. Indiana, Hammond Division

October 24, 2018

SOO LINE RAILROAD COMPANY, d/b/a CANADIAN PACIFIC, Plaintiff,
v.
CONSOLIDATED RAIL CORPORATION, et al., Defendants.

          OPINION AND ORDER

          Andrew P. Rodovich United States Magistrate Judge.

         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 GRANTED.

         Background

         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.

         Discussion

         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 of liability).

         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 ...


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