Florida East Coast Railway v. City of West Palm Beach, No. 00-14434

• Decision Date: 27 September 2001
• Docket Number: No. 00-14434
• Citation: 266 F.3d 1324
• Parties: (11th Cir. 2001) FLORIDA EAST COAST RAILWAY COMPANY, a Florida corporation, Plaintiff-Counter-Defendant-Appellant, v. CITY OF WEST PALM BEACH, a Florida municipal corporation, Defendant-Intervenor-Defendant-Counter-Claimant-Third-Party-Plaintiff-Appellee
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1324

266 F.3d 1324 (11th Cir. 2001)

FLORIDA EAST COAST RAILWAY COMPANY, a Florida corporation, Plaintiff-Counter-Defendant-Appellant, v. CITY OF WEST PALM BEACH, a Florida municipal corporation, Defendant-Intervenor-Defendant-Counter-Claimant-Third-Party-Plaintiff-Appellee.

No. 00-14434

UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT

September 27, 2001

[Copyrighted Material Omitted] Appeal from the United States District Court for the Southern District of Florida, D.C. Docket No. 00-08198-CV-DMM

Before TJOFLAT and WILSON, Circuit Judges, and RESTANI^*, Judge.

RESTANI, Judge:

Appellant Florida East Coast Railway Company ("FEC") seeks reversal of the district court's final judgment denying declaratory and injunctive relief against appellee City of West Palm Beach ("West Palm Beach" or "the City"). FEC sought a determination from the district court that the Interstate Commerce Commission Termination Act ("ICCTA"), 49 U.S.C. § 701 et seq. (1994 and Supp. 1998), pre-empts the City's application of zoning and occupational license ordinances against the operations of Rinker Materials Corporation ("Rinker") on property leased from FEC. We hold that the application of the ordinances does not constitute "regulation of rail transportation," 49 U.S.C. § 10501(b), and therefore, is not pre-empted by the ICCTA.

Jurisdiction

The district court had federal question jurisdiction over the complaint seeking declaratory relief pursuant to 28 U.S.C. § 2201(a) and 28 U.S.C. §§ 1331, 1337. Appellate jurisdiction is under 28 U.S.C. § 1291.

Facts

FEC owns 24.5 acres of property on 15th Street ("15th Street yard") in West Palm Beach, in an area otherwise zoned by the City as a multi-family high density residential district. Situated on this property are an office building, warehouses, five switching tracks, and two loading/unloading tracks. Although FEC had used the 15th Street yard for various intermodal operations for several years, the company ceased those operations in 1999 because of "diminishing business activity and cost of systems enhancements . . . along with marginal revenue per unit."

At the time FEC altered the nature of operations at the 15th Street yard, Rinker was FEC's largest customer. Rinker is in the business of supplying building material including "aggregate," the primary feedstock for cement. Rinker's aggregate originates in quarries in Miami-Dade County. For years Rinker had engaged FEC to transport the aggregate by rail to Rinker plants throughout Florida, including one on 7th Street in West Palm Beach.

In March of 1999, FEC and Rinker began discussing the possibility of a like-kind property exchange, whereby FEC would exchange its 15th Street yard for Rinker's 7th Street plant. Rinker recognized, however, that the 15th Street yard was not properly zoned for its proposed aggregate distribution business. Michael Bagley, head of real estate at FEC, suggested that "[p]rior to approaching the City, it [may be] wise to get Rinker established on a small scale, under lease arrangement to set precedent for continued use and expansion as an aggregate terminal." FEC and Rinker therefore negotiated a lease agreement and a trackage agreement whereby FEC would lease to Rinker twenty-one acres of the 15th Street yard (including the office building) and a side track. Additionally, FEC would no longer transport aggregate for Rinker to Rinker's plants throughout Florida; instead, FEC's rail services for Rinker would be limited to the transportation of the aggregate from the Miami-Dade quarries to the 15th Street yard. Operations under the new agreement commenced in January of 2000.

Once the aggregate entered the leased portion of the 15th Street yard, FEC's involvement ended. On the property leased from FEC, Rinker situated its aggregate distribution business, as evidenced by signs initially posted in the 15th Street yard that read "CSR Rinker -- West Palm Beach -- Aggregate Distribution." Sometime between February 14, 2000 and March 8, 2000, the signs were replaced with ones reading "FEC Distribution Terminal." Rinker hired a company to undertake the unloading of the aggregate but provided certain necessary equipment for the aggregate distribution, including a $79,300 truck-weighing scale and a $7000 loader bucket scale, or "backhoe." Then, Rinker employees loaded trucks, which were owned or hired by Rinker, and dispatched them to other Rinker plants or to external customers. Rinker employees coordinated the distribution network from the office building leased from FEC, including receiving requests for aggregate from Rinker plants and communicating with the aggregate truck drivers. Finally, Rinker was responsible for payment of its expenses on electricity, water, landscape maintenance, and telephone service.

On February 17, 2000, West Palm Beach issued Cease and Desist Orders to FEC and Rinker for operating a business that did not conform to the City's pre-existing zoning ordinance. FEC and Rinker also received notice of violations of Section 18-7 of the City Ordinances for unlawfully operating a business without an occupational license. After a hearing in March of 2000, a special magistrate found FEC and Rinker in violation of the zoning and occupational license ordinances, and therefore ordered both companies to cease and desist or face fines of $1000 per day. FEC then filed its complaint seeking a declaratory judgment that West Palm Beach's actions were pre-empted by the ICCTA, and therefore, the City could not impose its zoning and occupational license requirements on Rinker's operations. West Palm Beach filed a counterclaim against FEC and a third-party claim against Rinker, seeking a declaratory judgment that the application of its local regulations was not pre-empted by federal law.

Discussion

We review de novo the district court's legal conclusion as to the pre-emptive scope of the ICCTA; factual findings will be set aside only if clearly erroneous. See Ga. Manufactured Hous. Ass'n, Inc. v. Spalding County, 148 F.3d 1304, 1307 (11th Cir. 1998).

Presumption Against Pre-emption

"Consideration under the Supremacy Clause starts with the basic assumption that Congress did not intend to displace state law." Bldg. & Constr. Trades Council v. Associated Builders & Contractors, 507 U.S. 218, 224 (1993) (quoting Maryland v. Louisiana, 451 U.S. 725, 746 (1981)). We recognize that "an 'assumption' of nonpre-emption is not triggered when the State regulates in an area where there has been a history of significant federal presence." United States v. Locke, 529 U.S. 89, 108 (2000) (state regulation of maritime commerce and employment). See also Ray v. Atlantic Richfield Co., 435 U.S. 151 (1978) (same). Where the State acts "in a field which the States have traditionally occupied," however, we retain the "assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress." Medtronic, Inc. v. Lohr, 518 U.S. 470, 485 (1996) (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947)). Principles of federalism, including the recognition that "the States are independent sovereigns in our federal system," Medtronic, 518 U.S. at 485, dictate that in the absence of such clarity of intent, Congress cannot "be deemed to have significantly changed the federal-state balance." Jones v. United States, 529 U.S. 848, 860 (2000) (Stevens, J., concurring) (quoting United States v. Bass, 404 U.S. 336, 349 (1971)). Reliance on the presumption against pre-emption limits "congressional intrusion into the States' traditional prerogatives and general authority to regulate for the health and welfare of their citizens." City of Boerne v. Flores, 521 U.S. 507, 534 (1997).¹ Thus, "[i]f the statute's terms can be read sensibly not to have a pre-emptive effect, the presumption controls and no pre-emption may be inferred." Gade v. Nat'l Solid Wastes Mgmt. Ass'n, 505 U.S. 88, 116-17 (1992) (Souter, J., dissenting).

The ordinances at issue in this case are entitled to this presumption of validity under the Supremacy Clause. Although the federal government through the ICCTA has legislated in "an area where there has been a history of significant federal presence,"² Locke, 529 U.S. at 108 West Palm Beach is not legislating in that field of historic federal dominance. Rather, in contrast to the situation highlighted by the Court in Locke, West Palm Beach is acting under the traditionally local police power of zoning and health and safety regulation. The Supreme Court has long recognized the authority of local governments to establish guidelines for the use of property through such zoning ordinances. See generallyVillage of Belle Terre v. Boraas, 416 U.S. 1 (1974); Village of Euclid v. Ambler Realty Co., 272 U.S. 365 (1926). As we reiterated more recently,"[m]unicipalities may zone land to pursue any number of legitimate objectives related to the health, safety, morals, or general welfare of the community." Ga. Manufactured Hous. Ass'n, 148 F.3d at 1309 (quoting Scurlock v. City of Lynn Haven, 858 F.2d 1521, 1525 (11th Cir. 1988)). Because the alleged encroachment upon federal jurisdiction here does not occur by the municipality's legislating in a field of historic federal presence, but through the exercise of its inherently local powers, "[t]he principles of federalism and respect for state sovereignty that underlie the Court's reluctance to find pre-emption," Cipollone v. Liggett Group, Inc., 505 U.S. 504, 533 (1992) (Blackmun, J., concurring), place a "considerable burden" on appellant. De Buono v. NYSA-ILSA Med. & Clinical Servs. Fund, 520 U.S. 806, 814 (1997).

Nonpre-emption of West Palm Beach Ordinances

When evaluating the pre-emptive scope of a federal statute, we recall that "'[t]he purpose of Congress is the ultimate touchstone' in every pre-emption case." Medtronic, 518 U.S. at 485 (quoting Retail Clerks v. Schermerhorn, ...