Burlington N. & Santa Fe Ry. Co. v. Houston

• Decision Date: 12 May 2005
• Docket Number: No. 14-03-01311-CV.,14-03-01311-CV.
• Citation: 171 S.W.3d 240
• Parties: THE BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY, Appellant, v. The CITY OF HOUSTON, Texas, Appellee.
• Court: Texas Supreme Court

171 S.W.3d 240

THE BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY, Appellant, v. The CITY OF HOUSTON, Texas, Appellee.

No. 14-03-01311-CV.

Court of Appeals of Texas, Houston (14th Dist.).

May 12, 2005.

Rehearing Overruled August 18, 2005.

COPYRIGHT MATERIAL OMITTED

Thomas E. Sheffield, League City, Murry B. Cohen and Kent Rutter, Houston, TX, for appellants.

Alan Brandt Daughtry, H. Dixon Montague, Houston, TX, Christa Leigh Dean, Evelyn G. Kitay, Washington, DC, for appellees.

Panel consists of Justices YATES, EDELMAN, and GUZMAN.

MAJORITY OPINION

LESLIE BROCK YATES, Justice.

In this condemnation suit, appellant, The Burlington Northern and Santa Fe Railway Company ("BNSF"), is attempting to condemn an easement to build a federally-approved rail line through property owned by appellee, The City of Houston. BNSF appeals from the county court's dismissal of its condemnation suit. We reverse and remand.

BACKGROUND

It has long been national policy to promote an adequate and efficient rail transportation service. Norfolk & W. Ry. v. Am. Train Dispatchers' Ass'n, 499 U.S. 117, 119, 111 S.Ct. 1156, 113 L.Ed.2d 95 (1991). In 1995, Congress passed the Interstate Commerce Commission Termination Act ("ICCTA"), which reinforced the federal government's continued goals "to promote a safe and efficient rail transportation system" and "to ensure development and continuation of a sound rail transportation system with effective competition among rail carriers." 49 U.S.C. § 10101(3), (4) (2000). To accomplish these and other goals, the ICCTA abolished the former Interstate Commerce Commission and created the Surface Transportation Board ("STB"), which has exclusive jurisdiction over transportation by rail carriers and the construction and operation of rail tracks. Id. § 10501(b).

Pursuant to its broad statutory powers, the STB played an integral role in the 1996 merger between Union Pacific ("UP") and Southern Pacific ("SP"), which was the largest merger in American railroad history. In determining whether to approve the merger, the STB examined its impact on existing service and competition. The Bayport District in southeast Houston contains one of the largest concentrations of petrochemical producers in the world. Before 1996, SP was the sole rail service provider to this area through its Strang Subdivision line. However, the Bayport District was within a few miles of a nearby UP line called the GH & H line, which allowed for the possibility of competition through a build-out from the GH & H line to the Bayport District. Because the merger would result in UP owning both the Strang Subdivision and GH & H lines and therefore render the shippers in the Bayport District captive to UP, as a condition of the merger, the STB required UP to give its next largest remaining competitor, BNSF, trackage rights on the GH & H line. See Union Pac. Corp. — Control & Merger — S. Pac. Rail Corp., STB Finance Docket No. 32760, 1996 WL 467636, at *7 (1996). These trackage rights would allow BNSF to build-out from the GH & H line to provide service to the Bayport District, thereby preserving the possibility of competition.

In June 2001, BNSF formed a Delaware limited partnership called San Jacinto Rail Limited ("SJRL") with four shippers in the Bayport District. The purpose of this partnership, of which BNSF was the dominant partner,¹ was to build a rail line from the GH & H line to the Bayport District using the trackage rights BNSF obtained in the UP/SP merger. Under their agreement, SJRL is to build the line, and BNSF is to have exclusive operational control.² In August 2001, BNSF and SJRL filed a petition with the STB seeking authority for SJRL to construct and BNSF to operate this new 12.8 mile line. BNSF would be a common carrier and provide service to the four shippers partnered with BNSF as well as any other shipper who so requested.

In response to this petition, the STB initiated its lengthy evaluation process, including assessing the potential environmental impacts of the proposed rail line. This environmental impact assessment includes an analysis of a broad range of potential issues, including safety; noise and vibration; impacts on air, water, and soil; land use; hazardous materials issues; socioeconomics; cultural resources; and environmental justice. The STB sought public input in many ways, including establishing a toll-free hotline and holding two public meetings. The meetings were attended by nearly 200 people, and the STB received hundreds of written comments. In August 2002, the STB approved the proposal to build a new rail line, subject to the results of the ongoing environmental impact study. The STB explained that building this new line was in the public interest and consistent with national rail transportation policy in that it would allow suppliers to realize the benefits of competition and fulfill a condition of the UP/SP merger. The STB later issued a draft environmental impact statement and, after more public meetings and considering hundreds more written comments, a final environmental impact statement. Both the draft and the final statement were each several hundred pages long.

The STB studied in detail five proposed routes for the line, each of which would run through the City's property. The City actively participated in the STB's assessment process, submitting detailed comments to the draft environmental impact statement and objecting to each of the proposed routes. The City even passed a resolution declaring its opposition to every route under consideration. BNSF worked with the STB to develop a route, called Route 1-C, to address some of the City's objections, but the City opposed this route as well. The STB determined that the new line would pose no significant environmental threats and approved all five lines, designating Route 1-C as the preferred route.

Route 1-C is to run through an undeveloped portion of Ellington Field, which is one of three airports in the Houston Airport System. Ellington Field is a small airport used mostly by the military and for corporate and private general aviation. It has been a constant financial drain on the airport system, and the City hopes to reverse that. The City objected to Route 1-C, claiming it would interfere with plans to develop the property for aviation-related business because, among other things, the line would bisect the property, allow the transportation of hazardous materials, and make access to the property more difficult, thereby decreasing its marketability. The City also believes construction of the line would prevent the City from building a new road to make the property more accessible and relieve severe traffic congestion on nearby residential roads. The City presented these concerns and others to the STB, and the STB concluded that the proposed line would not significantly interfere with any reasonably foreseeable use the City had for its property.

The City filed a motion for reconsideration of the STB's decision and a motion for stay pending judicial review, see 49 C.F.R. § 1115.5(a) (2004), both of which the STB rejected. The City then filed a notice of appeal with the Fifth Circuit Court of Appeals, but the City dismissed that appeal, thereby making the STB's decision final. See 28 U.S.C. §§ 2321(a), 2342(5), 2344 (2000).

BNSF then attempted to purchase the necessary easement from the City to build along Route 1-C, but the City refused to sell. Therefore, BNSF commenced a condemnation action under TEX.REV.CIV. STAT. ANN. art. 6336 (Vernon 1926), which authorizes a railroad to condemn land.³ The City filed a plea to the jurisdiction, claiming immunity from suit and that BNSF had no right to take the property.⁴ BNSF responded to each of the City's points and also asserted federal preemption. After a two-day trial, the county court dismissed the condemnation suit. In its findings of fact and conclusions of law, the court rejected BNSF's preemption argument, determining that state law controls, and found that although the City's sovereign immunity had been waived, BNSF did not have the right to take the property under state law.

In its first two issues, BNSF challenges the county court's conclusion that BNSF had no right to condemn the City's property under state law and asserts that, in any event, the county court's interpretation and application of state law conflicts with federal law and is therefore preempted. In its third issue, BNSF asserts that the county court erred in rejecting two of its three theories as to why the City's sovereign immunity has been waived. In its third cross-issue, the City challenges the county court's ruling that its sovereign immunity has been waived. In its first and second cross-issues, the City provides two alternative state law grounds it contends are bases for affirming the county court's judgment. We conclude that the City's sovereign immunity has been waived and that federal preemption precludes the county court's application of its interpretation of state law, and therefore we reverse and remand.

ANALYSIS

Our review of the county court's ruling on a plea to the jurisdiction is de novo, as is our review of the county court's conclusions of law and statutory interpretation. See Nipper-Bertram Trust v. Aldine Indep. Sch. Dist., 76 S.W.3d 788, 791 (Tex.App.-Houston [14th Dist.] 2002, pet. denied); TRST Corpus, Inc. v. Fin. Ctr., Inc., 9 S.W.3d 316, 320 (Tex.App.-Houston [14th Dist.] 1999, pet. denied). Attacks on the county court's factual findings are governed by a legal and factual sufficiency standard of review. See Catalina v. Blasdel, 881 S.W.2d 295, 297 (Tex.1994).

Sovereign Immunity

Sovereign immunity bars suits against the state unless the state has consented to suit. Tex. Natural Res. Conservation Comm'n v. IT-Davy, 74 S.W.3d 849, 853 (Tex.2002). Cities, as political subdivisions of the state, are entitled to sovereign immunity unless it has been waived. San Antonio Indep. Sch. Dist....