ALASKA CARGO TRANSPORT v. Alaska RR Corp.

• Decision Date: 18 November 1991
• Docket Number: No. A90-269 Civ.,A90-269 Civ.
• Citation: 834 F. Supp. 1216
• Parties: ALASKA CARGO TRANSPORT, INC., Plaintiff, v. ALASKA RAILROAD CORPORATION, et al., Defendants.
• Court: U.S. District Court — District of Alaska

834 F. Supp. 1216

ALASKA CARGO TRANSPORT, INC., Plaintiff, v. ALASKA RAILROAD CORPORATION, et al., Defendants.

No. A90-269 Civ.

United States District Court, D. Alaska.

November 18, 1991.

COPYRIGHT MATERIAL OMITTED

Ronald D. Flansburg, Boyko, Breeze & Flansburg, Anchorage, AK, for plaintiff.

William R. Hupprich, Alaska R.R. Corp., Robert C. Bundy, Richard M. Clinton, Bogle & Gates, Anchorage, AK, Thomas J. Brewer, Gregory M. O'Leary, Molly B. Burke, Heller, Ehrman, White & McAuliffe, Seattle, WA, for defendants.

ORDER

(Case Dismissed)

HOLLAND, Chief Judge.

The court has before it two motions to dismiss. The motions have been filed by defendants Alaska Railroad Corporation, Frank Turpin, Denny Robertson, and Laurie Gray (herein collectively "ARRC") and defendant Crowley Maritime Corporation ("Hydro-Train").¹ The motions are opposed by plaintiff Alaska Cargo Transport ("Alaska Cargo"). The court has heard oral argument, and for the reasons set forth below, the court grants both motions.

FACTS

The court's jurisdiction is premised on 28 U.S.C. § 1332(a)(1), diversity of citizenship.² Alaska Cargo, a Washington corporation is in the business of providing freight and rail car transportation services from Seattle, Washington, to Seward, Alaska. Similarly, Hydro-Train is a Washington corporation in the business of transporting freight and rail cars by barge to the port of Whittier, Alaska.³ ARRC is an Alaska corporation which provides rail service to the cities of Anchorage, Fairbanks, Seward, and Whittier, Alaska.

Prior to 1986, Alaska Cargo based its business operations in the cities of Kenai and Anchorage. In June or July of 1986, representatives of ARRC contacted Alaska Cargo regarding a move of Alaska Cargo's business operations from Kenai and Anchorage to Seward. Alaska Cargo alleges that it was contacted by ARRC concerning the move to Seward as part of a marketing venture to increase utilization of rail services out of Seward to points north of the port.

On or about July 31, 1986, representatives of Alaska Cargo and ARRC met at a restaurant in Seattle, Washington. Present at the meeting were Dennis Robertson, vice-president of marketing for ARRC, and Laurie Gray, then sales manager for ARRC. Present for Alaska Cargo were John Harlowe, the owner, and Jeanne Macri who was acting as agent for Alaska Cargo.⁴

Alaska Cargo's complaint alleges that a verbal contract was entered into between Alaska Cargo and ARRC. The terms of the alleged agreement included favorable tariff rates and wharfage charges which ARRC would charge Alaska Cargo at ARRC's terminal in Seward. Alaska Cargo asserts that the existence of the contract was recognized by ARRC personnel at a later meeting held at a restaurant in Anchorage in September of 1986.

On October 30, 1986, believing that an agreement had been reached, Alaska Cargo made an initial shipment from Seattle to Seward. Things did not go according to plan, for when the Alaska Cargo barge arrived, ARRC refused to let it to dock. Relations between the two entities worsened with ARRC contending that no contract had been reached or entered into.

Alaska Cargo filed suit in this court on July 5, 1990, alleging a cause of action against ARRC for breach of contract, defamation, antitrust violations, and unfair trade practices, and seeking injunctive relief. Alaska Cargo also brought suit against Hydro-Train claiming that, on receiving notice of the favorable rates given Alaska Cargo, Hydro-Train threatened ARRC with the removal and cessation of its Whittier operations unless the arrangements with Alaska Cargo were terminated. Alaska Cargo believes the foregoing amounts to tortious interference with contract, conspiracy in restraint of trade, and an attempt to monopolize.

On November 6, 1990, ARRC filed a motion to dismiss pursuant to Rule 12(b)(1) and (6), Federal Rules of Civil Procedure, claiming that since it was an instrumentality of the State of Alaska, the Eleventh Amendment of the United States Constitution prohibits suits by state citizens against it in federal court. Additionally, the motion claims that the state action doctrine, Noerr-Pennington Doctrine, Local Government Antitrust Act, and Keough Doctrine all require that this court refrain from exercising its jurisdiction over this suit. Hydro-Train has filed a motion to dismiss urging similar arguments and concluding, under the Noerr-Pennington Doctrine, that it is also immune from suit.⁵

Alaska Cargo subsequently moved the court to take judicial notice of certain matters not put before the court during the briefing of defendants' motions to dismiss. The motion is granted; but the new information is not helpful in resolving the issues before the court.

ARGUMENT

Eleventh Amendment

Both ARRC and Hydro-Train assert that maintenance of this suit in federal court is barred by the eleventh amendment. ARRC maintains that it is an instrumentality of the state, performing an essential governmental function, and that it is immune from suit by citizens in federal court. Alaska Cargo argues that ARRC is sufficiently independent of the State of Alaska that suit in federal court will not offend the principles of state sovereignty protected by the eleventh amendment.

It is axiomatic that the eleventh amendment grants states immunity from suits brought against it by its own citizens or citizens of another state in federal court in the District of Alaska. Pennhurst State School & Hospital v. Halderman, 465 U.S. 89, 100, 104 S.Ct. 900, 908, 79 L.Ed.2d 67 (1984); Edelman v. Jordan, 415 U.S. 651, 662-63, 94 S.Ct. 1347, 1355-56, 39 L.Ed.2d 662 (1974). The issue before the court is whether ARRC can be considered an instrumentality, or arm, of the State of Alaska so as to have immunity under the eleventh amendment. Jackson v. Hayakawa, 682 F.2d 1344 (9th Cir.1982). In determining whether an entity can be considered an instrumentality of the state for eleventh amendment purposes, the most crucial question is whether the agency possesses the type of independent status such that a judgment against it would not impact the state's treasury. Id. at 1350.

In making its argument for ARRC's independence from the state, Alaska Cargo cites a myriad of statutory rules which it claims insulate the state from any liability incurred by ARRC. Specifically, Alaska Cargo relies on AS 42.40.500 which provides that any liability adjudged against ARRC will be satisfied from the revenue of the corporation, and that no creditor or other individual shall have a right of action against the state. Additionally, Alaska Cargo contends that ARRC exists in a capacity separate and distinct from the state because the state is not liable for the debts of ARRC, AS 42.40.690; that all claims and lawsuits shall be brought against ARRC and not against the state, AS 42.40.900(c); and that ARRC is not a party to the provisions of AS 44.80.010 regarding the state as a party to any legal action.

While the foregoing authorities may appear determinative on the issue of whether the state is liable for any money damages imposed on ARRC, they are in no way completely determinative of the question of whether any money judgment will have to be paid by the state treasury. See Mt. Healthy School District Board of Education v. Doyle, 429 U.S. 274, 280, 97 S.Ct. 568, 573, 50 L.Ed.2d 471 (1977). The answer depends, at least in part, on the nature of the entity created by state law.

Initially, the court notes that ARRC is a public corporation created by the Alaska Legislature. In creating the entity, the legislature has determined that ARRC is an instrumentality of the state, located within the Department of Commerce and Economic Development. See AS 42.40.010. The Alaska Legislature has endowed ARRC with a legal existence independent of and separate from the State of Alaska, and has found that ARRC's continued operation is considered to be an "essential government function of the state." Id.

In examining the question of whether the State of Alaska will ultimately bear responsibility for a money judgment against ARRC, the court first turns to the argument that payment of any money judgment imposed against ARRC will not be sought from the state coffers.

Put plainly, an analysis of the Alaska Railroad Corporation Act ("ARCA") points to the conclusion that the legislature would, by appropriation, protect ARRC in the event a money judgment was awarded against it. While Alaska Cargo urges this is not so, due in part to ARRC's self-insurance, the court sees the situation differently. Upon its purchase from the United States, ARRC was intended to be self-sustaining. However, the legislature also authorized ARRC to "request, with the concurrence of the governor, a direct appropriation or grant from the legislature" in order to fulfill its legislative mandate. AS 42.40.540.

Since the date of transfer of ARRC from the United States, at a cost to the state of $22 million, the "self-sustaining" ARRC has sought and obtained approximately $16 million in support appropriations from the State of Alaska.⁶ Moreover, since 1985 through November of 1990, ARRC has generated approximately $17,000 in revenue. ARRC is not as profitable as was originally hoped; and as evidence of its financial condition, ARRC keeps little cash on hand and is currently burdened by a $3 million debt due on short-term lines of credit. The court has little doubt that if faced with a large money judgment, ARRC would be compelled to turn to legislative appropriation in order to remain in business, and the legislature would have to respond favorably so that the "essential" transportation function would continue to be performed and to protect the state's very substantial investment in the Alaska Railroad. AS 42.40.010.

In determining this issue, the court finds further support for its decision in Supreme Court and Ninth Circuit precedent. While the Ninth Circuit has determined that an impact on a state's treasury is the...