Hall v. Norfolk Southern Ry. Co.

• Decision Date: 09 November 2006
• Docket Number: No. 04-1005.,04-1005.
• Citation: 469 F.3d 590
• Parties: Merrill E. HALL, Plaintiff-Appellant, v. NORFOLK SOUTHERN RAILWAY COMPANY, a corporation, partial successor in interest to Consolidated Rail Corporation doing business as Conrail, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 590

469 F.3d 590

Merrill E. HALL, Plaintiff-Appellant, v. NORFOLK SOUTHERN RAILWAY COMPANY, a corporation, partial successor in interest to Consolidated Rail Corporation doing business as Conrail, Defendant-Appellee.

No. 04-1005.

United States Court of Appeals, Seventh Circuit.

Argued January 17, 2006.

Decided November 9, 2006.

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Steven P. Garmisa (argued), Hoey & Farina, Chicago, IL, for Plaintiff-Appellant.

John C. Duffey, Geoffrey L. Blazi (argued), Stuart & Branigin, Lafayette, IN, for Defendant-Appellee.

Before BAUER, ROVNER, and SYKES, Circuit Judges.

SYKES, Circuit Judge.

This case requires us to consider what constitutes a "mistake concerning the identity of the proper party" that will permit an amended pleading to relate back to the date of the original complaint under Federal Rule of Civil Procedure 15(c)(3). Also at issue is the scope of the statutory liability exemption in 49 U.S.C. § 11321 for railroads that participate in consolidation transactions approved by the Surface Transportation Board ("STB").

Merrill Hall alleged in his original complaint that he was injured while working at an Elkhart, Indiana, rail yard. Hall brought his claim under the Federal Employers' Liability Act ("FELA"), 45 U.S.C. §§ 51 et seq., which makes railroad employers liable to their employees for work-related injuries.

Due to confusion stemming from a transaction in which Hall's employer, Consolidated Rail Corporation ("Conrail"), transferred many of its assets and liabilities to Norfolk Southern Railway Company, Hall named the wrong railroad — Norfolk Southern — as the defendant. Norfolk Southern moved to dismiss because it was not Hall's employer at the time of his alleged injury. Hall then moved to amend his complaint to add Conrail as a defendant, but by that time the statute of limitations had run and any claim against Conrail was time-barred unless it qualified for "relation back" under Rule 15(c)(3).

The district court denied the motion to amend the complaint, holding that Hall's misunderstanding regarding which railroad was liable for his injuries was not a "mistake concerning the identity of the proper party" that would allow relation back under Rule 15(c)(3). The district court then applied the § 11321 exemption to defeat any successor liability on the part of Norfolk Southern, and entered judgment for Norfolk Southern. We affirm.

I. Background

Hall filed his original complaint on January 30, 2002, three days before the limitations period expired. The original complaint named Norfolk Southern as the sole defendant and stated that at the time of the alleged injury, "Defendant" owned the Elkhart rail yard and employed Hall. Both of these allegations were inaccurate because on the date of the alleged incident, February 2, 1999, Conrail owned the rail yard and employed Hall. Norfolk Southern assumed ownership and control over the Elkhart rail yard and became Hall's employer only after June 1, 1999, when the transaction by which Norfolk Southern acquired certain assets and liabilities from Conrail was closed.

The terms of the June 1, 1999 transaction were submitted to the STB for approval pursuant to 49 U.S.C. §§ 11321 et seq., and the STB approved those terms. One of the terms provided that Conrail retained liability for all its employees' FELA claims that arose before the transaction's closing date. This included Hall's claim because he alleged he was injured on February 2, 1999, before the June 1 closing date. Norfolk Southern agreed to provide claims services for Conrail such as negotiating settlements and enrolling employees in rehabilitation programs, but Conrail retained liability for FELA claims that arose before June 1, 1999.

Norfolk Southern moved to dismiss Hall's complaint because it was not Hall's employer on the date of his alleged injury; FELA makes railroads liable only to persons "suffering injury while . . . employed by such carrier." 45 U.S.C. § 51. Hall responded by moving to amend his complaint. In the first three numbered paragraphs of his motion to amend, Hall asserted as follows:

1. Plaintiff is correct in asserting via affidavit that Plaintiff was a Conrail employee who was injured on February 2, 1999 at the Conrail Elkhart Yard in Elkhart, Indiana.

2. Plaintiff sued the correct party, NORFOLK SOUTHERN RAILWAY COMPANY, as Plaintiff's former employer, Conrail, no longer owns or operates said property nor is responsible for the debts and obligations arising out of said property.

3. [S]ince the accident, NORFOLK SOUTHERN RAILWAY COMPANY assumed control over Conrail's property in the Elkhart, Indiana area where the accident occurred and NORFOLK SOUTHERN RAILWAY COMPANY assumed responsibility for all debts and obligations relating to that portion of Conrail's assets which NORFOLK SOUTHERN RAILWAY COMPANY acquired, including those of this inquiry.

Hall's motion asked for leave under Rule 15(a) to amend his complaint to allege that Norfolk Southern is a "partial successor in interest to Conrail and has assumed responsibility for all debts and obligations relating to that portion of Conrail assets which NORFOLK SOUTHERN RAILWAY COMPANY acquired, including the Elkhart Yard." He did not request leave to add Conrail as a defendant.

Norfolk Southern opposed Hall's motion to amend his complaint because Norfolk had not assumed liability for FELA claims (such as Hall's) that arose before June 1, 1999. Hall then filed a second motion to amend in which he sought to name both Norfolk Southern and Conrail as defendants. Recognizing that the three-year limitations period for FELA claims had expired,¹ Hall argued that his failure to name Conrail as a defendant earlier was a "mistake concerning the identity of the proper party" under Rule 15(c)(3) such that his second amended complaint should relate back to the date on which he timely filed his original complaint. He characterized the error as "the classic mistake of identity of the correct party and not as the lack of knowledge of the correct party."

The magistrate judge found that Hall's failure to name Conrail as a defendant before the limitations period ran out was not a "mistake" as to "identity" within the meaning of Rule 15(c)(3) and accordingly denied his second motion to amend.² In his order the magistrate judge incorrectly stated that Hall "filed a complaint in which he allege[d] that his employer at the time, Consolidated Rail Corporation, violated the Federal Employers' Liability Act." The original complaint actually said Norfolk Southern employed Hall and operated the Elkhart rail yard on February 2, 1999, and made no mention of Conrail. The magistrate judge later correctly noted that neither Hall's original complaint nor his first amended complaint named Conrail as a defendant. He then concluded there was "no misnomer or misidentification: Hall made a conscious decision to sue Norfolk instead of his employer."

Hall objected to the magistrate's decision and asked the district court to reverse it. The district judge reviewed the magistrate's order for clear error because in his view the order was nondispositive.³ He acknowledged that the magistrate judge incorrectly stated "that the initial complaint alleged Conrail was Hall's employer," but found this error harmless because there was "sufficient evidence nonetheless to support [the magistrate judge's] finding that [Hall] was aware that Conrail was [his] employer, but chose to sue only Norfolk." The district judge affirmed the magistrate's ruling, pointing to Hall's first motion to amend — in which Hall clarified that Conrail was his employer at the time of his injury but insisted that Norfolk Southern was nonetheless the proper defendant — as evidence that Hall knew who his employer was but simply misunderstood which company was liable for his alleged injuries.

The litigation proceeded to a summary judgment ruling in favor of Norfolk Southern. The district judge concluded Hall could not hold Norfolk Southern liable under a theory of successor liability because the terms of the transaction between Norfolk Southern and Conrail — which were approved by the STB pursuant to §§ 11321 et seq. — specifically assigned liability for pretransaction FELA claims to Conrail. Hall appeals both the denial of his motion to amend and the grant of summary judgment in favor of Norfolk Southern.

II. Discussion

A. Motion to Amend Complaint under Rule 15(c)(3)

We review the district court's denial of Hall's motion to amend the complaint for abuse of discretion. United States v. Rogers, 387 F.3d 925 (7th Cir. 2004); Robinson v. Sappington, 351 F.3d 317, 328 (7th Cir. 2003); Williams v. United States Postal Service, 873 F.2d 1069, 1072-73 (7th Cir. 1989) (applying abuse of discretion standard to district court's decision on Rule 15(c)(3) relation back issue). Under this standard of review we will not reverse if we merely conclude that we would have reached a different decision if asked to consider the issue in the first instance; rather, "the district court's decision must strike us as fundamentally wrong." Johnson v. J.B. Hunt Transp., Inc., 280 F.3d 1125, 1131 (7th Cir. 2002).

The district court was itself reviewing an order of a magistrate judge, and the parties have a threshold dispute about whether the district court applied the proper standard of review. The Federal Rules of Civil Procedure provide that when parties object to a magistrate judge's order, district judges are to review nondispositive decisions for clear error and dispositive rulings de novo. FED.R.CIV.P. 72. Hall cites district court decisions from Maine, New York, and New Hampshire for the proposition that when a magistrate judge denies a motion to amend a pleading on grounds of futility, the magistrate has made a dispositive ruling that is therefore subject to de novo review by the district judge. See Allendale Mut. Ins. Co. v. Rutherford, 178 F.R.D. 1, 2 (D.Maine 1998); HCC, Inc. v. RH & M...