CNW v. Webster County Bd. of Sup'rs

• Citation: 880 F. Supp. 1290
• Decision Date: 22 March 1995
• Docket Number: No. C 93-3070.,C 93-3070.
• Parties: CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY, n/k/a Chicago and North Western Railway Company, Plaintiff, v. WEBSTER COUNTY BOARD OF SUPERVISORS, as Trustees for Webster County Drainage Districts 197, 197 Branch 2, 106, 64, 89, and 225, Defendant.
• Court: U.S. District Court — Northern District of Iowa

880 F. Supp. 1290

CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY, n/k/a Chicago and North Western Railway Company, Plaintiff, v. WEBSTER COUNTY BOARD OF SUPERVISORS, as Trustees for Webster County Drainage Districts 197, 197 Branch 2, 106, 64, 89, and 225, Defendant.

No. C 93-3070.

United States District Court, N.D. Iowa, Central Division.

March 22, 1995.

Robert B. DePugh, pro se.

G. Daniel Gildemeister of Gildemeister, Willia & Keane, Sioux City, IA, for defendant.

MEMORANDUM OPINION AND ORDER ON THE PARTIES' CROSS-MOTIONS FOR SUMMARY JUDGMENT

BENNETT, District Judge.

                                                  TABLE OF CONTENTS
                I. INTRODUCTION ....................................................................... 1292
                   A. Procedural Background ........................................................... 1292
                   B. Factual Background .............................................................. 1293
                II. STANDARDS FOR SUMMARY JUDGMENT .................................................... 1294
                III. LEGAL ANALYSIS ................................................................... 1295
                     A. Iowa Code Provisions .......................................................... 1295
                     B. The "4-R Act".................................................................. 1297
                        1. Purpose of the "4-R Act .................................................... 1297
                        2. § 306's prohibitions ....................................................... 1298
                        3. The relief provided under the 4-R Act ...................................... 1299
                    C.  Iowa Code Ch. 468 And The 4-R Act ............................................. 1300
                        1. Does Iowa Code Ch. 468 impose a "tax" upon the Railroad? ................... 1300
                           a. The Union Pacific test of what is a tax ................................. 1301
                           b. An alternative test of what is a tax .................................... 1302
                               i. Legislative authority ............................................... 1302
                              ii. Raising revenue ..................................................... 1303
                             iii. Similarly situated persons .......................................... 1303
                              iv. Public Benefit ...................................................... 1303
                           b. Application of the tests ................................................ 1306
                        2. Is any "tax" imposed "discriminatory"? ..................................... 1308
                III. CONCLUSION ....................................................................... 1310
                

The threshold issue in this litigation illustrates one of life's basic truths: it is often the simple questions that are the hardest to answer. Examples abound. The small child asks, "Why is the sky blue?" The poet inquires, "What is love?" The physicist queries, "What is the smallest particle?" Here, in this otherwise rather ordinary dispute between a municipal drainage district and a railroad, the penetrating question raised is, "What is a tax?" The court has found the quest for an answer to the question posed here to be surprisingly disconcerting.

A railroad filed this lawsuit for declaratory and injunctive relief from efforts of a county board of supervisors, as trustees for several drainage districts, to recover the costs of building or rebuilding a culvert over a drain that crossed the railroad's right-of-way. The board had instituted a lawsuit in Iowa state court to recover the building costs involved pursuant to provisions of Iowa Code Ch. 468. Those proceedings in state court have been stayed. In this federal lawsuit, the railroad asserts that the actions of the board, if permitted, would allow imposition of a "discriminatory tax" upon the railroad in violation of § 306 of the Railroad Revitalization and Regulatory Reform Act (the "4-R Act"), 49 U.S.C. § 11503. The railroad's lawsuit requires the court to answer two questions: (1) whether or not the actions of the board pursuant to Iowa Code Ch. 468 seek to impose a "tax" upon the railroad, and (2) if a "tax" is involved, whether or not it is "discriminatory," and thus in violation of § 306 of the 4-R Act. The court has found substantial merit on both sides of these two questions and thus their resolution has been unusually difficult.

I. INTRODUCTION

A. Procedural Background

Plaintiff Chicago and North Western Transportation Company (CNW or the Railroad), formerly known as Chicago and North Western Railway Company, filed this lawsuit for declaratory and injunctive relief on October 15, 1993. The defendant is the Webster County Board of Supervisors (the Board), acting as trustees for Webster County Drainage Districts 197, 197 Branch 2, 101, 65, 89, and 225.¹ The Board filed suit in Iowa District Court for Webster County on June 14, 1993, pursuant to provisions of Iowa Code Ch. 468 seeking to recover from CNW $108,314.85 expended by the Board to build an improvement to a drain and culvert on CNW's right-of-way. The state court action has been stayed. In this federal action, CNW seeks declaratory judgment that the Board's efforts to recover the costs of building the culvert and drainage improvements constitute a discriminatory tax in violation § 306 of the Railroad Revitalization and Regulatory Reform Act (the "4-R Act"), 49 U.S.C. § 11503. CNW also seeks an injunction preventing any further attempts by the Board to recover the costs of building the culvert and drainage improvements. The Board answered the complaint in this matter on December 13, 1993.

The parties entered into a joint stipulation of facts, which was filed on October 31, 1994. On November 16, 1994, CNW moved for summary judgment on the ground that, as a matter of law, the Board's efforts to recover from the Railroad the costs of building the drainage improvements and culvert constitute efforts to impose a discriminatory tax in violation of § 306 of the 4-R Act. The Railroad argues that the effort to recover costs is a "tax," because the costs collected are not used to defray the expense of regulating railroads, something the Board is not authorized to do in any event, but solely for the purpose of reimbursing the drainage district for providing the general service of controlling drainage water flow for all property owners within the district. The Railroad argues further that no other private property owner, including any other owner of "commercial and industrial property," is required to make or pay for similar drainage district improvements without reimbursement.

The Board resisted CNW's motion for summary judgment on December 19, 1994, and also cross-moved for summary judgment in its favor. The Board argues that its efforts to recover construction costs and the provisions of the Iowa Code under which it is seeking those costs neither impose a tax on nor discriminate against the Railroad. The Board argues that the obligation imposed upon the Railroad is the same as that imposed upon any other owner of a surface right-of-way, that is, to build culverts and bridges over drains at the right-of-way owner's expense. Furthermore, the Board argues, the recovery of construction costs is not a "tax," because none of the costs recovered go into a general revenue fund, but instead are used only to pay for construction that should have been done or paid for by the railroad.

CNW resisted the cross-motion for summary judgment on December 30, 1994. The Board filed a supplemental brief on January 9, 1995, and CNW responded to that brief on January 17, 1995. The court held oral arguments on the cross-motions for summary judgment in Fort Dodge, Iowa, on March 10, 1995. CNW was represented at the oral arguments by Stephen P. DeVolder of Lewis, Webster, Johnson, Van Winkle & DeVolder, in Des Moines, Iowa. The Board was represented by James L. Kramer and Susan Ahlers of Johnson, Erb, Bice & Carlson, P.C., in Fort Dodge, Iowa. Both the briefing and the spirited oral argument were of exceptional quality. Counsel are commended for the superb advocacy. This matter is now fully submitted.

B. Factual Background

The parties have stipulated that the following facts are true and are admitted for any and all purposes of this lawsuit. The court therefore regards these facts as undisputed. CNW is a Delaware corporation with its principal place of business in the State of Illinois. It is an interstate common carrier by railroad, and is duly qualified to do business and does business in the State of Iowa. It is subject to the jurisdiction of the Interstate Commerce Commission under Subchapter I of Chapter 105 of Title 49, United States Code. Defendant Webster County Board of Supervisors acts as trustee for Webster County Drainage Districts 197, 197 Branch 2, 106, 64, 89, and 255, which are duly recognized subdivisions of the State of Iowa.

In formal action taken on January 7, 1992, the Board undertook to make repairs and improvements to the listed Drainage Districts within the City of Gowrie, Webster County, Iowa.² The railroad's right-of-way crosses the drain of Drainage District 197, 197 Branch 2, 106, 64, 89, and 255 within the City of Gowrie, Webster County, Iowa. On January 27, 1992, the Board caused to be served on the railroad an Iowa Code § 489.109 notice.³ The notice directed the railroad to, within 30 days, build or rebuild a culvert across the right-of-way in the manner specified by the Board.

Under Iowa law, the railroad was required to build or rebuild the culvert within the time specified by Iowa Code § 468.110, and the cost was to be borne by the railroad by operation of Iowa Code § 468.111. The railroad contends that these provisions do not apply because of federal law. The railroad did not build or rebuild the culvert. The Board caused the culvert to be built or rebuilt under the supervision of the engineer in charge of the improvement. The Board acted under authority of Iowa Code § 468.112. The fair and reasonable cost of this improvement was...