Csx Transp., Inc. v. City of Garden City, Georgia

• Decision Date: 25 February 2002
• Docket Number: No. 498 CV 223.,498 CV 223.
• Citation: 196 F.Supp.2d 1288
• Parties: CSX TRANSPORTATION, INC. and National Railroad Passenger Corporation (Amtrak), Plaintiffs, v. CITY OF GARDEN CITY, GEORGIA, Defendant/Third Party Plaintiff, v. Arco, Inc., Third Party Defendant.
• Court: U.S. District Court — Southern District of Georgia

Page 1288

196 F.Supp.2d 1288

CSX TRANSPORTATION, INC. and National Railroad Passenger Corporation (Amtrak), Plaintiffs, v. CITY OF GARDEN CITY, GEORGIA, Defendant/Third Party Plaintiff, v. Arco, Inc., Third Party Defendant.

No. 498 CV 223.

United States District Court, S.D. Georgia, Savannah Division.

February 25, 2002.

James W. Purcell, L. Dean Best, Amy R. Snell, Fulcher, Hagler, Reed, Hanks & Harper, LLP, Amy R. Snell, Fulcher Law Firm, Augusta, GA, for Plaintiffs.

James Philip Gerard, Patrick T. O'Connor, Christopher L. Ray, Oliver, Maner & Gray, Edward R. Stabell, III, Brennan, Harris & Rominger, Savannah, GA, for Defendants.

Edward R. Stabell, III, Brennan, Harris & Rominger, Savannah, GA, for Arco, Inc., defendant.

ORDER

EDENFIELD, District Judge.

I. INTRODUCTION

A 1997 truck/train collision resulted in litigation over the liability of plaintiffs CSX Transportation, Inc., the train track owner, and National Railroad Passenger Corporation (Amtrak), which owns the subject train. CSX¹ brought this indemnification action against the defendant City of Garden City, Georgia, which third-party claimed against ARCO, Inc.

Thereafter, the City moved for, and this Court granted, summary judgment against CSX. The Eleventh Circuit vacated that judgment on appeal, CSX Transp., Inc. v. City of Garden City, 235 F.3d 1325 (11th Cir.2000) (CSX), and on remand CSX moved for partial summary judgment against the City. Doc. # 58. This Court denied that motion, then ordered CSX to show why the City is not entitled to summary judgment. Doc. # 68. CSX has responded, doc. ## 69, 76, as has the City. Doc. # 70. ARCO, meanwhile, moves for summary judgment against CSX and the City. Doc. # 72.

II. BACKGROUND

The issue at this juncture is whether a Georgia municipality can, through the purchase of insurance, contractually waive its sovereign immunity for the specific purpose of indemnifying a private party against tort liability claims. That waiver would run against the City, which contracted to indemnify CSX against third party claims brought against CSX. The CSX opinion succinctly explains:

In 1996, the City . . . decided to install water and sewer lines along the public rights-of-way that ran across, under, and parallel to [CSX's] railroad tracks. The City contracted with CSX to use CSX's rights-of-ways and agreed to indemnify CSX for any damages arising out of the City's use of the rights-of-way. Under the contract, the City agreed to maintain insurance to cover the indemnity obligations it had assumed.

Garden City employed ARCO, Inc. as the general contractor for this project which employed CARLCO Trucking, Inc. as a sub-contractor. On [10/9/97] a CARLCO employee drove a tractor-trailer truck to the City's work site to remove equipment. As he crossed CSX's tracks, his truck stalled on the tracks where it was hit by a[n Amtrak] passenger train. CSX paid damages to passengers on the train and sued Garden City for indemnification under their agreement. Garden City filed a third-party claim against its contractor, ARCO.

235 F.3d at 1326-27.

Subsequently, the City moved for summary judgment against CSX on immunity and other grounds. Doc. # 32. Granting summary judgment,² this Court noted that the City's third-party complaint against ARCO for indemnification was still pending. Doc. # 44 at 10-11. Subsequently, the City dismissed that without prejudice, doc. # 47, thus enabling CSX's appeal under the "final judgment" doctrine.

On appeal the Eleventh Circuit focused on the indemnification issue:

The indemnification contract between CSX and Garden City provided that the City would assume liability for all claims arising out of its construction in CSX's rights-of-way. It, in effect, required the City to waive its sovereign immunity vis-a-vis CSX in connection with any claims against CSX arising out of the City's construction project. Georgia law, however, forbids a city from waiving its sovereign immunity unless it has insurance to fund any liability it might thereby incur.

Id. at 1329 (emphasis added).

This Court had concluded that "the indemnification agreement . . . is barred by municipal immunity — except to the extent that the City obtained insurance to cover it." Doc. # 44 at 4. Because CSX made no showing that the City procured or had any such insurance, this Court held that its agreement to indemnify CSX was ultra vires and thus void. Id. at 5-6.

Even though, according to the Eleventh Circuit, the City had identified (in an interrogatory response) an "insurance policy," CSX, 235 F.3d at 1330 n. 7, CSX did not move this Court to reconsider in light of the existence of any insurance policy. See doc. # 44 at 6. Instead, it waited until it was before the Eleventh Circuit, then moved that court for leave to supplement the record so it could point to it. In so doing, it sought

to show that Garden City participates in the Georgia Interlocal Risk Management Agency (GIRMA) fund which provides it coverage up to $1,000,000 against "all sums which [Garden City] shall be obligated to pay as money damages by reason of liability imposed upon [Garden City] by law or assumed by [Garden City] under contract or agreement." CSX argued in its motion that the grant of summary judgment was in error because the City does have the requisite insurance to enable it effectively to waive its sovereign immunity. An [Eleventh Circuit] panel . . . . denied the motion[,] but CSX renewed it on appeal in its brief and at oral argument.

CSX, 235 F.3d at 1330 (brackets original and added).

Noting that it "rarely enlarge[s] the record on appeal to include material not before the district court which has labored without the benefit of the proffered material," the Eleventh Circuit nevertheless exercised its "inherent equitable power to allow supplementation of the appellate record if it is in the interests of justice." Id.

Because the existence of the insurance was "pivotal" to the case, and the City had never argued "lack of insurance" before this Court,³ the appellate court granted CSX's supplementation motion over the City's opposition. Id. The Eleventh Circuit then concluded:

Since the district court never had the opportunity to consider what effect, if any, the City's participation in the GIRMA fund has on the City's indemnification agreement with CSX, we shall remand the case to the district court so that it may consider this fact before determining whether Garden City effectively waived its immunity by its agreement to indemnify CSX.

CSX, 235 F.3d at 1331.

That court thus vacated this Court's summary judgment to the City and remanded for further proceedings. Id. In response, the City obtained ARCO's reinstatement on remand. Doc. ##46, 49, 55-56, 61. On remand, CSX contended that, since the evidence shows the City's GIRMA participation, it was entitled to summary judgment against the City on liability. ARCO and the City disagreed. Doc. ## 65-66.

The City conceded GIRMA participation but insisted that

(a) the burden is on CSX to show that the City waived municipal immunity, doc. # 65 at 2-3;

(b) GIRMA-based waivers are narrow and specific, id. at 6 ("It is not clear, however, that such a waiver exists for all damages claims of whatever provenance") (emphasis original); (c) the Court must first determine that the City was negligent — CSX's or a third party's negligence could have caused the complained of damage — and then "determine whether Georgia law permits a waiver of sovereign immunity for purposes of assuming the tort liability of third parties," id. at 4-7;

(d) "the mere attempt by a municipality to shoulder the tort liability of a third party is an ultra vires act which cannot be countenanced by the courts"; id. at 7 (in other words, the City "lacked the legal capacity to undertake third party tort liability in the first instance," and the mere acquisition of insurance cannot ratify an otherwise unlawful act). Id.

Because the indemnity agreement is "utterly void and cannot be salvaged," the City concluded, the Court had to deny CSX's summary judgment motion. Id. The City essentially restates these arguments now, doc. # 70, and ARCO concurs. Doc. # 74 at 16.

As this Court explained in its last Order, doc. # 68 at 4, these arguments necessitate review of Georgia sovereign (governmental) immunity doctrine. Again, the issue is whether the City is legally authorized to contractually waive its immunity by purchasing insurance to indemnify CSX against third party liability claims.

Local government officials can make imprudent contractual decisions which can, in one fell swoop, wipe out an entire community's tax base well into the future. That's one of the reasons why Georgia's legislature statutorily restricts their contracting authority. See O.C.G.A. § 36-30-3(b)-(d); Unified Government of Athens Clarke County v. North, 250 Ga.App. 432, 436-37, 551 S.E.2d 798 (2001) (O.C.G.A. § 36-60-13, providing that a city or county multi-year purchase contract for goods or services must be subject to annual termination by the city or county, is intended to prohibit the creation of a county or municipal debt in excess of one year).

That legislative control is well-established and grounded in Georgia's constitution. See City of Bremen v. Regions Bank, 274 Ga. 733, ___, 559 S.E.2d 440, 443 (2002) (Written agreement between city and development authority, under which city would advance $200,000 to development authority for authority to pay debts owed for golf course's construction, did not exceed scope of city's authority pursuant to Georgia's Constitution, and thus city could not avoid its responsibility under tax anticipation note, where agreement was executed three months after city obtained loan in exchange for tax anticipation note); Martin v. Ga. Dept. of Pub. Safety, 257 Ga. 300, 301, 357 S.E.2d 569 (1987) (the Georgia Constitution's sovereign immunity extends "to preserve the protection of the public purse. . . ."); O.C.G.A. §...