Fayard v. Northeast Vehicle Services, LLC

• Decision Date: 14 July 2008
• Docket Number: No. 07-2222.,07-2222.
• Parties: Leo E. FAYARD and Sara K. Fayard, Plaintiffs, Appellants, v. NORTHEAST VEHICLE SERVICES, LLC, East Brookfield & Spencer Railroad, LLC, Holston Land Company, Incorporated, CSX Real Property, Inc., Steven M. Pugliese, and George W. Bell, II, Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

533 F.3d 42

Leo E. FAYARD and Sara K. Fayard, Plaintiffs, Appellants, v. NORTHEAST VEHICLE SERVICES, LLC, East Brookfield & Spencer Railroad, LLC, Holston Land Company, Incorporated, CSX Real Property, Inc., Steven M. Pugliese, and George W. Bell, II, Defendants, Appellees.

No. 07-2222.

United States Court of Appeals, First Circuit.

Heard May 5, 2008.

Decided July 14, 2008.

David A. Wojcik with whom Donald C. Keavany, Jr. and Christopher, Hays, Wojcik & Mavricos were on brief for appellants.

Ralph T. Lepore, III with whom Michael T. Maroney, Elizabeth A. Mulcahy and Holland & Knight LLP were on brief for appellees.

Before BOUDIN, Circuit Judge, O'CONNOR,^* Associate Justice (Ret.), and SELYA, Senior Circuit Judge.

BOUDIN, Circuit Judge.

Defendants Northeast Vehicle Services, LLC, East Brookfield & Spencer Railroad, LLC ("EB & SR"); Holston Land Company, Inc., CSX Real Property, Inc., Steven Pugliese, and George Bell all play various roles in the ownership and operation of an automobile distribution facility located in the towns of East Brookfield and Spencer, Massachusetts.¹ Plaintiffs, Leo and Sara Fayard, own a seventeen-acre farm in East Brookfield that abuts the rail line that services the facility.

In December 2006, the Fayards filed suit in Massachusetts state court asserting claims against the defendants based on defendants' operation of the rail line and distribution facility. They said that defendants' practices violated representations made to the Fayards and state and local environmental and zoning authorities as to various limits on the hours and volume of the operation, and interfered with the Fayards' use and enjoyment of their property—in particular, through noise, bright lights and the emission of diesel fumes.

Based on these events, the Fayards asserted in their complaint claims against the defendants under Massachusetts law for nuisance, misrepresentation and civil conspiracy. The Fayards asked for monetary and injunctive relief—including limits on the facility's hours and methods of operation in accordance with alleged prior representations by the defendants. These limits, according to the railroad, would make operations at the facility unworkable.

Defendants removed the case to federal court pursuant to 28 U.S.C. § 1441(b) (2000). Defendants contended that removal was proper because the primary federal statute governing regulation of railroads—the Interstate Commerce Commission Termination Act ("ICCTA"), Pub.L. No. 104-88, 109 Stat. 803 (codified in scattered sections of 11, 45, and 49 U.S.C. (2000))—"completely preempted" plaintiffs' state law claims against EB & SR, transforming the Fayards' suit into a federal action. See generally Negron-Fuentes v. UPSSCS, 532 F.3d 1 (1st Cir.2008).

The Fayards in turn sought a remand to state court, arguing that the doctrine of complete preemption was not applicable and that the district court therefore lacked subject matter jurisdiction to entertain the case. After briefing and a hearing, the district court denied the Fayards' motion, holding that the ICCTA "completely preempted" their nuisance claim, which the district court characterized—based largely on the relief sought by plaintiffs—as an attempt to regulate the railroad.

Plaintiffs moved for reconsideration, arguing for the first time that EB & SR was not a "rail carrier" under the ICCTA, 49 U.S.C. § 10102(5), and so not governed by the act. They also moved, in case the federal court retained jurisdiction, for a preliminary injunction. The court denied both motions, deeming the "rail carrier" argument untimely and the nuisance claim unlikely to succeed on the merits.

Plaintiffs now seek review of both rulings. Ordinarily, the denial of a motion for remand is not subject to immediate review, but the district court certified the question to this court giving us jurisdiction. 28 U.S.C. § 1292(b). In any event, we have jurisdiction to review the denial of the preliminary injunction, id. § 1292(a)(1), and can review the denial of remand as an ancillary matter. James v. Bellotti, 733 F.2d 989, 992 (1st Cir.), cert. denied, 467 U.S. 1209, 104 S.Ct. 2397, 81 L.Ed.2d 354 (1984).

Review of the district court's refusal to remand—turning as it did on a question of subject matter jurisdiction—is plenary. BIW Deceived v. Local S6, 132 F.3d 824, 830 (1st Cir.1997). The denial of the preliminary injunction is reviewed for abuse of discretion. Jean v. Mass. State Police, 492 F.3d 24, 26 (1st Cir.2007). As usual, underlying factual determinations are reviewed for clear error; legal questions de novo. Id.

The district court's subject matter jurisdiction here turns on whether defendants properly removed the suit. The removal statute, 28 U.S.C. § 1441, permits removal only where the district court could have exercised original jurisdiction over an action. The parties here are not of diverse citizenship, and the Fayards' complaint—at least on its face—raised only state law claims. So the only colorable basis for removal, which the defendants invoked and the district court upheld, is jurisdiction based on the doctrine of "complete preemption."

Complete preemption is a short-hand for the doctrine that in certain matters Congress so strongly intended an exclusive federal cause of action that what a plaintiff calls a state law claim is to be recharacterized as a federal claim. A federal claim, of course, falls within the district court's federal question jurisdiction, 28 U.S.C. § 1331; Am. Well Works Co. v. Layne & Bowler Co., 241 U.S. 257, 260, 36 S.Ct. 585, 60 L.Ed. 987 (1916), so permitting removal. By contrast, ordinary preemption—i.e., that a state claim conflicts with a federal statute—is merely a defense and is not a basis for removal. Gully v. First Nat'l Bank, 299 U.S. 109, 115-16, 57 S.Ct. 96, 81 L.Ed. 70 (1936).

Complete preemption originated with the Supreme Court's decision in Textile Workers Union of America v. Lincoln Mills of Alabama, 353 U.S. 448, 77 S.Ct. 912, 1 L.Ed.2d 972 (1957), and the Court has applied the doctrine in only a few contexts: labor contracts, Avco Corp. v. Aero Lodge No. 735, 390 U.S. 557, 88 S.Ct. 1235, 20 L.Ed.2d 126 (1968); claims for benefits from plans regulated by ERISA, Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 107 S.Ct. 1542, 95 L.Ed.2d 55 (1987); and usury claims against federally chartered banks, Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 123 S.Ct. 2058, 156 L.Ed.2d 1 (2003). Despite academic concerns,² the doctrine is well established, although perhaps poorly named, since ordinary "defensive" preemption may also be "complete," as where Congress "occupies the field," thereby blocking state regulation. E.g., Sullivan v. American Airlines, Inc., 424 F.3d 267, 273 n. 7 (2d Cir.2005).

The Supreme Court decisions finding complete preemption share a common denominator: exclusive federal regulation of the subject matter of the asserted state claim, e.g., Avco, 390 U.S. at 560, 88 S.Ct. 1235, coupled with a federal cause of action for wrongs of the same type, e.g., Beneficial, 539 U.S. at 10, 123 S.Ct. 2058. Exclusive federal regulation alone might preempt state claims; but it is the further presence of a counterpart federal cause of action that allows the state claim to be transformed into a federal one.

For complete preemption to operate, the federal claim need not be co-extensive with the ousted state claim. On the contrary, the superseding federal scheme may be more limited or different in its scope and still completely preempt. Cf. Caterpillar, Inc. v. Williams, 482 U.S. 386, 391 n. 4, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987). This means—an example would be some state-law claims relating to pension plans—that the coverage that would have been supplied by the state claim is not available under the federal ERISA scheme and so simply disappears. E.g., Felix v. Lucent Techs., Inc., 387 F.3d 1146, 1162 (10th Cir.2004), cert. denied, 545 U.S. 1149, 125 S.Ct. 2961, 162 L.Ed.2d 905 (2005).

This brings us to the application of the complete preemption doctrine in this case. Although the lower courts are divided over specific applications,³ one circuit has already held that the ICCTA can sometimes support complete preemption. PCI Transp., Inc. v. Fort Worth & W. R.R. Co., 418 F.3d 535 (5th Cir.2005). Historically, federal regulation of railroads has been extensive; and the ICCTA uses language that could support complete preemption in an appropriate case. In discussing the scope of regulatory authority granted to the agency that administers the ICCTA (the Surface Transportation Board) the act broadly provides:

The jurisdiction of the Board over transportation by rail carriers, and the remedies provided in this part with respect to rates, classifications, rules ... practices, routes, services, and facilities of such carriers ... is exclusive. Except as otherwise provided in this part, the remedies provided under this part with respect to regulation of rail transportation are exclusive and preempt the remedies provided under Federal or State laws.

49 U.S.C. § 10501(b).

Belatedly, the Fayards argue that the ICCTA has no bearing on this case because the EB & SR is not a rail carrier within the meaning of the act. But it appears that EB & SR contracts with CSX-a large interstate railroad and admittedly a common carrier—to undertake the last leg of transportation, and EB & SR apparently provides its services indiscriminately to any car shipper who wants them, meeting the conventional definition of common carrier. N.Y. Susquehanna & W. Ry Corp. v. Jackson, 500 F.3d 238, 250-51 (3d Cir.2007).⁴

But even where a federal statute can completely preempt some state law claims, the question remains which claims are so preempted. No one supposes that a railroad sued under state law for unpaid bills by a supplier of diesel fuel or ticket forms can remove the case based on complete preemption simply because the railroad is subject to the ICCTA. For complete preemption, the...