CSX Transp., Inc. v. Mayor & City Council of Baltimore

• Decision Date: 20 February 1991
• Docket Number: Civ. No. JFM-90-690.
• Citation: 759 F. Supp. 281
• Parties: CSX TRANSPORTATION, INC. v. MAYOR AND CITY COUNCIL OF BALTIMORE CITY, MARYLAND.
• Court: U.S. District Court — District of Maryland

759 F. Supp. 281

CSX TRANSPORTATION, INC. v. MAYOR AND CITY COUNCIL OF BALTIMORE CITY, MARYLAND.

Civ. No. JFM-90-690.

United States District Court, D. Maryland.

February 20, 1991.

H. Russell Smouse, Whiteford, Taylor & Preston, Baltimore, Md., for plaintiff.

Richard Jacobsen, Baltimore, Md., for defendant.

MEMORANDUM

MOTZ, District Judge.

The question presented in this declaratory judgment action is whether a September 24, 1986 Agreement between the Baltimore and Ohio Railroad Company ("B & O"), the predecessor of CSX Transportation, Inc. ("CSXT"), and the City of Baltimore (the "City") is a valid and binding contract.¹ The Agreement pertains to the reconstruction of two railroad bridges, known as the Hamburg Street bridge and the Ostend Street bridge, and it was made in anticipation of obtaining federal funding for the reconstruction projects. It provides, inter alia, for the City to assume any responsibilities which CSXT may have for reconstruction and maintenance of the bridges in exchange for the payment by CSXT to the City of fifteen percent of the projects' costs, up to $916,000.

The City seeks to repudiate the Agreement. Citing Baltimore and Ohio Railroad Co. v. Kuchta, 76 Md.App. 1, 543 A.2d 371, cert. denied, 313 Md. 688, 548 A.2d 128 (1988), the City contends that entering into the contract was an ultra vires act on its behalf. In response, CSXT argues that assuming Kuchta, as a matter of state law, would have the effect of voiding the Agreement, federal law applies to matters pertaining to railway crossing construction projects for which a state or municipality has chosen to seek federal funding, and that under federal law the "second comer" doctrine upon which Kuchta rests is preempted.² The parties have filed cross-motions for summary judgment.

I.

In 1909 the City and the B & O entered into an agreement pertaining to the relocation of certain tracks in exchange for the B & O's commitment to build several bridges, including the Hamburg Street bridge and the Ostend Street bridge. The Mayor and City Council of Baltimore enacted an ordinance codifying the agreement. Under the terms of the ordinance, the B & O had the responsibility to maintain the bridges. The ordinance was silent on the question of which party had the responsibility to replace the bridges, if that were to prove necessary.

Over the course of time the bridges deteriorated. Beginning in 1981, a series of memoranda reflect the parties' increasing concern for the bridges' structural integrity and the need to replace or repair them. During the next several years engineering studies were conducted and the parties engaged in negotiations concerning the financing of the bridges' reconstruction or repair. These negotiations culminated in the execution of the September 24, 1986 Agreement now in issue. As indicated above, under the Agreement the City assumed responsibility for reconstruction and maintenance of the bridges. B & O gave various consideration in return, including the payment (up to $916,000) of fifteen percent of the project costs and a "close clearance" under the bridges. The close clearance was an item of significance because it results in an abnormally narrow clearance above and to the side of the railroad track, considerably increasing CSXT's burden of safety vigilance. The Agreement further contained an escape clause giving the City the right of rescission in the event that federal funding for the reconstruction of the bridges did not become available within thirty-six months of the date of the Agreement.

The old Hamburg Street bridge has now been demolished and replaced. A sum of $4,564,876 has been contributed by the Federal Highway Administration ("FHWA") to the cost of the project. Demolition and reconstruction of the Ostend Street bridge has not yet begun, but the City concedes that federal funding is available for the project if the City should choose to apply for it.³

While the 1986 Agreement was being negotiated, the City and the B & O were in the Circuit Court for Baltimore City litigating a dispute over whether the B & O was responsible for the cost of reconstruction of another bridge over B & O tracks in an area known as Morrell Park. This litigation ultimately resulted in the Maryland Court of Special Appeals' decision in Baltimore and Ohio Railroad Company v. Kuchta, supra. The Court of Special Appeals held that the B & O was liable for paying the entire cost of reconstruction of the Morrell Park bridge and that a 1907 agreement, which B & O contended required the City to pay one-half of the reconstruction cost, was void. The decision rested upon the "second comer" doctrine, well established in the common law, which provides, in effect, that a party who builds a new road or way intersecting an existing right of way is responsible for constructing and maintaining a safe crossing at the intersection. The court reasoned that, because the second comer doctrine made the B & O liable for one hundred percent of the cost of reconstruction of the Morrell Park bridge, the City unlawfully surrendered its police power and committed an ultra vires act when it entered into the 1907 agreement.

After Kuchta was decided by the Court of Special Appeals, the City declared its intent to repudiate the Agreement here in question. CSXT then instituted this action.

II.

In making its summary judgment motion, CSXT proceeds from the assumption that the City is correct in its contention that under Kuchta the Agreement is void as a matter of state law. Such an assumption is appropriate; if application of Kuchta to the particular facts of this case the sole question presented, the Maryland state courts might well constitute the proper forum for the conduct of this litigation.⁴ This Court, however, is the proper forum to decide the federal preemption question.

23 U.S.C. § 130 was originally enacted as a part of the Federal-Aid Highway Act of 1944, P.L. 78-521. A purpose of that Act was to relieve railroads of the burden of rehabilitating or replacing railway-highway crossings, including bridges. Section 5(a) of the Act (now codified as § 130(a)) provided in part:

That the entire construction cost of projects for the elimination of hazards of railway-highway crossings, including the separation or protection of grades at crossings, the reconstruction of existing railroad grade crossing structures, and the relocation of highways to eliminate grade crossings, may be paid from Federal funds....

Section 5(b) of the Act provided that railroads might be required to reimburse the federal government for the construction or reconstruction work. However, reimbursement could be ordered only to the extent of the "net benefit" to the railroad, and any such net benefit could not exceed ten percent of the total cost of the project. 23 U.S.C. § 130(b).

In 1958 the Act was revised and recodified. See Pub.L. 85-767, Aug. 27, 1958. A portion of the Senate Report leading to this reenactment demonstrates that Congress was fully aware of the general purpose of the Act to relieve railroads of the burden of paying for the improvement of crossings. The Report referred to new language which was intended to clarify that the ten percent "net benefit to the railroad" restriction is intended to apply to projects which are financed on a fifty-fifty basis by the state and federal governments, as well as to those which are one hundred percent federally funded. Likewise, language was added to "limit the contribution for a railway-highway crossing elimination to 10 percent from all railroads involved in a particular project, and not expect 10 percent contribution from each railroad." S.R. No. 1928, July 23, 1958, 2 1958 U.S.Code, Cong. & Admin.News 3942, 3945.

To permit states to recover from a railroad the cost of constructing or reconstructing a bridge under the second comer doctrine would be self-evidently inconsistent with Congress's intent to have at least ninety percent of that cost borne by governmental authorities on federally funded projects. Accordingly, the FHWA has issued regulations which provide that "State laws requiring railroads to share in the cost of work for the elimination of hazards at railroad-highway crossings shall not apply to Federal-aid projects." 23 C.F.R. § 646.210(a) (1990). This language could not be more clear. It means, very simply, that once a state or local government agrees to the federal funding of a railroad crossing construction or reconstruction project, it cannot seek to impose the cost of that project upon the railroad. To the extent that state law would void such an agreement (or any subsidiary implementing agreement between the state or local government and the railroad) as being ultra vires, that law is necessarily preempted.

23 C.F.R. § 646.210(b)(2) confirms that § 646.210(a) means what it says. It provides that "projects for the reconstruction of existing grade separations are deemed to generally be of no ascertainable net benefit to the railroad and there shall be no required railroad share of the costs, unless the railroad has a specific contractual obligation with the State or its political subdivision to share in the costs." Although the purpose of this section is to direct the FHWA itself to refrain from seeking reimbursement from a railroad, its unspoken premise is that the second comer doctrine does not apply where federal funding is provided. If the doctrine did apply, the FHWA would be paying a cost for which the railroad was one hundred percent liable; it would be nonsensical to conclude that the assumption of such a liability does not constitute a "net benefit" to the railroad. Moreover, it is obvious that to permit a state or local government to first receive federal funding for a project, and then to obtain like reimbursement from a railroad for the cost of the same project would be to provide a windfall to the state or local government. It hardly need be stated that this is not the purpose of...