Holland v. Delray Connecting R. Co., 2:03 CV 163 JM.

• Decision Date: 22 March 2004
• Docket Number: No. 2:03 CV 163 JM.,2:03 CV 163 JM.
• Citation: 311 F.Supp.2d 744
• Parties: Michael H. HOLLAND, Marty D. Hudson, Elliott A. Segal, and A. Frank Dunham, as Trustees of the United Mine Workers of America 1992 Benefit Plan, and the United Mine Workers of America 1992 Benefit Plan, and Michael H. Holland, Thomas O.S. Rand, William P. Hobgood, Marty D. Hudson, Elliott A. Segal, Gail R. Wilensky, and Carl E. Van Horn, as Trustees of the United Mine Workers of America Combined Benefit Fund, and the United Mine Workers of America Combined Benefit Fund, Plaintiffs v. DELRAY CONNECTING RAILROAD COMPANY, Defendant
• Court: U.S. District Court — Northern District of Indiana

311 F.Supp.2d 744

Michael H. HOLLAND, Marty D. Hudson, Elliott A. Segal, and A. Frank Dunham, as Trustees of the United Mine Workers of America 1992 Benefit Plan, and the United Mine Workers of America 1992 Benefit Plan, and Michael H. Holland, Thomas O.S. Rand, William P. Hobgood, Marty D. Hudson, Elliott A. Segal, Gail R. Wilensky, and Carl E. Van Horn, as Trustees of the United Mine Workers of America Combined Benefit Fund, and the United Mine Workers of America Combined Benefit Fund, Plaintiffs v. DELRAY CONNECTING RAILROAD COMPANY, Defendant

No. 2:03 CV 163 JM.

United States District Court, N.D. Indiana, Hammond Division.

March 22, 2004.

David W. Allen, UMWA Health & Retirement Funds, John R. Mooney, Mooney Green Baker & Saindon PC, Jonathan Sokolow, UMWA Health & Retirement Funds, Marilyn Baker, Mooney Green Baker & Saindon PC, Washington, DC, Thomas J. Angell, Jacobs Burns Orlove Stanton & Hernandez, Chicago, IL, for Michael H. Holland, as Trustee of the United Mine Workers of America 1992 Benefit Plan and Trustee of the United Mine Workers of America Combined Benefit Fund, Marty D. Hudson, as Trustee of the United Mine Workers of America 1992 Benefit Plan and Trustee of the United Mine Workers of America Combined Benefit Fund, Elliott A. Segal, as Trustee of the United Mine Workers of America 1992 Benefit Plan and Trustee of the United Mine Workers of America Combined Benefit Fund, A Frank Dunham, as Trustee of the United Mine Workers of America 1992 Benefit Plan, United Mine Workers of America 1992 Benefit Plan, Thomas O. S. Rand, as Trustee of the United Mine Workers of America Combined Benefit Fund, William P. Hobgood, as Trustee of the United Mine Workers of America combined Benefit Fund, Gail R. Wilensky, as Trustee of the United Mine Workers of America combined Benefit Fund, Carl E. Van Horn, as Trustee of the United Mine Workers of America combined Benefit Fund, United Mine Workers of America combined Benefit Fund, Plaintiffs.

Elizabeth M. Bezak, Singleton Crist Austgen and Sears, Munster, IN, John A. Vuono, Vuono & Gray LLC, Pittsburgh, PA, John R. Woodrum, Ogletree Deakins Nash Smoak & Stewart PC — Was/DC, Washington, DC, Richard R. Wilson, Vuono & Gray LLC, Susan C. Indrisano, Vuono & Gray LLC, Pittsburgh, PA, Terence M. Austgen, Singleton Crist Austgen and Sears, Munster, IN, for Delray Connecting Railroad Company, Defendant.

MEMORANDUM and ORDER

MOODY, Senior District Judge.

The Coal Industry Retiree Health Benefits Act, 26 U.S.C. § 9701 et seq. ("the Coal Act"), requires persons (including corporations) who are "related person[s]" to persons who signed a coal wage agreement to fund health benefits for retired employees of the coal industry. 26 U.S.C. § 9701(b)(1), (c)(2); 26 U.S.C. § 9704. As is relevant to this case, even where a corporation itself is not, and never has been, involved in the coal industry, if it is a subsidiary of a corporation engaged in the coal industry or of a corporation that controls other subsidiaries engaged in the coal industry (i.e., the corporation in question has sibling corporations in the coal industry), it may be required to pay annual premiums to the United Mine Workers of America Combined Benefit Fund, one of the plaintiffs¹ here. This obligation, and the Combined Benefit Fund itself, was mandated by Congress in 1992 as part of its plan to remedy "a financial crisis that threatened the viability of the existing health benefit arrangement between miners and mining companies as well as the overall stability of the coal industry." Davon, Inc. v. Shalala, 75 F.3d 1114, 1116 (7th Cir.1996).

The UMW Combined Benefit Fund brought this action seeking a judgment: 1) declaring that defendant Delray Connecting Railroad Company ("Delray") is a "related person" under the Coal Act to the National Steel Corporation² and several of its coal-industry-engaged subsidiaries; 2) declaring the scope of Delray's liabilities under the Coal Act; and 3) enjoining Delray to post security in the approximate amount of $1 million against its alleged liabilities. Delray has filed a motion for dismissal pursuant to FED. R. CIV. P. 12(b)(1) and (b)(6), arguing that the court has no subject-matter jurisdiction over the case, or alternatively, that if jurisdiction exists the complaint nevertheless fails to state a claim upon which relief can be granted.

SUBJECT-MATTER JURISDICTION

As to subject-matter jurisdiction, Delray argues that in two separate provisions of the Interstate Commerce Commission Termination Act of 1995 ("ICCTA"),³ Congress vested exclusive jurisdiction over the operation and acquisition of railroads in the Surface Transportation Board ("STB"), depriving this court of subject-matter jurisdiction. To be blunt, the court finds this argument confused — it conflates preemption issues with subject-matter jurisdiction — and simply wrong.

First, Delray cites 49 U.S.C. § 10501(b), which vests exclusive jurisdiction in the STB over rail transportation, with "transportation" defined broadly. Citing two cases⁴ in which United States District Courts have held that § 10501(b) preempts the ability of the states to impose economic regulation on railroads, Delray notes that the Supreme Court has said that the Coal Act is an "economic regulation." Eastern Enterprises v. Apfel, 524 U.S. 498, 523, 118 S.Ct. 2131, 2146, 141 L.Ed.2d 451 (1998). Delray then concludes that "application of the Coal Act to Delray would be contrary to the clear intention of Congress to deregulate the rail industry by preempting regulatory authority over rail carriers and vesting it exclusively in the STB." Memorandum in Support of Delray's Motion to Dismiss ("Memorandum in Support") at 13.

Somehow, without explanation, Delray got switched off the subject-matter jurisdiction track onto a preemption siding. The concept of subject-matter jurisdiction refers to the court's power to hear the case. Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 89, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998). Delray never explains how, if this court has no power to hear the case, it has the power to determine whether 49 U.S.C. § 10501(b) preempts the Coal Act, or, conversely, how a finding that the Coal Act is preempted would implicate this court's subject matter jurisdiction. Conversely, Delray fails to explain why this court should pay any heed to the District Court decisions it cites concerning the preemptive effect of 49 U.S.C. § 10501(b), given that under Delray's reasoning those courts lacked subject-matter jurisdiction and so any holding concerning preemption would be meaningless.⁵ For that matter, Delray overlooks or ignores the fact that neither of the cases it cites even mentions the concept of subject-matter jurisdiction.

In short, Delray's argument is completely confused. Although 49 U.S.C. § 10501(b) may preempt state law, as to claims in federal court involving other federal statutes, § 10501(b) states a rule of primary jurisdiction: it has nothing to do with either preemption or subject-matter jurisdiction. See Baker v. IBP, Inc., 357 F.3d 685, 688 (7th Cir.2004) ("[f]ederal statutes do not `preempt' other federal statutes"); but cf. Jackson v. Consolidated Rail Corp., 717 F.2d 1045, 1054 (7th Cir.1983) (preemptive effect of Railway Labor Act, giving exclusive jurisdiction over pendent state-law wrongful discharge claim to National Railroad Adjustment Board, deprived district court of subject-matter jurisdiction.)⁶ The doctrine of primary jurisdiction simply means that this court has the option to stay the case and refer the issue to the STB for resolution, if the court believes that the issue falls outside conventional judicial wisdom and an agency with expertise should be given "first crack." Baker, 357 F.3d at 688; Arsberry v. Illinois, 244 F.3d 558, 563-64 (7th Cir.2001).

Delray has not asked for a stay, however, but for dismissal on the ground that the court lacks subject-matter jurisdiction. For the reasons just given, the court will not dismiss this case on the basis that 49 U.S.C. § 10501(b) deprives the court of subject-matter jurisdiction. However, the recognition that the question is one of primary jurisdiction dovetails nicely into Delray's second argument, which is that the court lacks subject-matter jurisdiction because only the STB has jurisdiction to decide whether the Coal Act is preempted.

This again confuses primary jurisdiction with subject-matter jurisdiction. Delray's argument is that because Delray was acquired by United States Steel Corporation ("US Steel") in an "exempted" transaction subject to the STB's authority to regulate certain transactions involving changes in ownership or control of rail carriers,⁷ Delray is exempt from "all other law" as is necessary for it to operate its business:

The authority of the Board under this subchapter is exclusive. A rail carrier or corporation participating in or resulting from a transaction approved by or exempted by the Board under this subchapter may carry out the transaction, own and operate property, and exercise control or [sic] franchises acquired through the transaction without the approval of a State authority. A rail carrier, corporation, or person participating in that approved or exempted transaction is exempt from the antitrust laws and from all other law, including State and municipal law, as necessary to let that rail carrier, corporation, or person carry out the transaction, hold, maintain, and operate property, and exercise control or [sic] franchises acquired through the transaction.

49 U.S.C. § 11321(a).

Relying on Railway Labor Executives' Ass'n v. Southern Pacific Transp. Co., 7 F.3d 902 (9th Cir.1993), Delray argues that the issue whether it is necessary to exempt Delray from the Coal Act in order for it to hold, maintain and operate its property falls within the STB's exclusive jurisdiction.⁸ In Railway Labor Executives' Ass'n, the Court of Appeals for the Ninth Circuit reasoned that because the STB has the...