South Dakota v. Burlington Northern & Santa Fe Ry., No. CIV 03-3012.

• Decision Date: 07 July 2003
• Docket Number: No. CIV 03-3012.
• Citation: 280 F.Supp.2d 919
• Parties: State of SOUTH DAKOTA by and through its SOUTH DAKOTA RAILROAD AUTHORITY and Dakota Missouri Valley & Western Railroad, Inc., a North Dakota Corporation, Plaintiffs, and Dakota, Minnesota & Eastern Railroad Company, a Delaware Corporation, Involuntary Plaintiff, v. BURLINGTON NORTHERN & SANTA FE RAILWAY COMPANY, a Delaware Corporation, Defendant.
• Court: U.S. District Court — District of South Dakota

Page 919

280 F.Supp.2d 919

State of SOUTH DAKOTA by and through its SOUTH DAKOTA RAILROAD AUTHORITY and Dakota Missouri Valley & Western Railroad, Inc., a North Dakota Corporation, Plaintiffs, and Dakota, Minnesota & Eastern Railroad Company, a Delaware Corporation, Involuntary Plaintiff, v. BURLINGTON NORTHERN & SANTA FE RAILWAY COMPANY, a Delaware Corporation, Defendant.

No. CIV 03-3012.

United States District Court, D. South Dakota, Central Division.

July 7, 2003.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Roxanne Giedd, Attorney General's Office, Pierre, SD, for State of South Dakota and South Dakota Railroad Authority.

Charles M. Thompson, May, Adam, Gerdes & Thompson, Pierre, SD, for Dakota Missouri Valley & Western Railroad, Inc.

Brian J. Donahoe, David Lindsay Edwards, Cutler & Donahoe, LLP, Sioux Falls, SD, for Dakota, Minnesota & Eastern Railroad Company.

Rory King, Bantz, Gosch, Cremer, Peterson, Sommers & Wager, Aberdeen, SD, for Defendants.

ORDER

KORNMANN, District Judge.

INTRODUCTION

[¶ 1] On March 20, 2003, the State of South Dakota, by and through the South Dakota Railroad Authority ("SDRA"), filed a complaint in South Dakota, Sixth Judicial Circuit, Hughes County, against the Burlington Northern & Santa Fe Railway Company ("BNSF"). The complaint seeks specific performance or injunctive relief enforcing the terms of a June 15, 2001, agreement between the SDRA and BNSF which allegedly allows the SDRA and its designees, the Dakota, Minnesota & Eastern Railroad Corporation ("the DM & E") and the Dakota, Missouri Valley & Western Railroad, Inc. ("the DMV&W"), the right to utilize BNSF's Aberdeen Interchange access line ("Aberdeen interchange") for rail traffic handled on the SDRA's own rail lines to the South and North of Aberdeen. The complaint also seeks damages for breach of contract and tortious interference with the business relationships (1) between the SDRA and the DM & E, (2) between the SDRA and the DMV & W, and (3) among various entities, including customers, regarding the transportation of goods on the SDRA's rail lines North through the Aberdeen interchange (subsequently accessing Canadian markets). Punitive damages are also sought.

[¶ 2] On March 31, 2003, the SDRA filed an amended complaint in state court wherein the DMV & W joined as a party plaintiff and the DM & E was named as an involuntary plaintiff pursuant to SDCL 15-6-19(a). The only possible basis for the SDRA filing an amended complaint naming the DM & E as an involuntary plaintiff, based upon SDCL 15-6-19(a), is to address a portion of the South Dakota rule: "If he should join as a plaintiff but refuses to do so, he may be made a defendant, or, in a proper case, an involuntary plaintiff." Thus, it is obvious that the DM & E refused to be made a party after having been requested by the SDRA to be a party.

[¶ 3] There are serious procedural problems with actions taken by the SDRA. If a party to an already filed lawsuit, whether in state or federal court, wants to add or drop a party, this is not to be accomplished by simply amending the complaint, especially since early on this could be done without leave of court and it could be done any time by stipulation. If this were allowed by the Rules of Civil Procedure, one or more defendants or plaintiffs could be added at any time without leave of court, whether or not the statute of limitations had expired, whether or not a scheduled trial date would be impacted, whether or not venue was proper, and whether or not jurisdiction existed as to a proposed party. Obviously, the rules would never permit this. The proper procedure in state court is to make a motion under SDCL 15-6-21, a mirror of Fed.R.Civ.P. 21. These rules state, in part: "Parties may be dropped or added by order of the court on motion of any party or of its own initiative at any stage of the action and on such terms as are just." (emphasis supplied) The words "by order of the court" mean something. It is up to the court to make the decision based on what the rule clearly says. Certainly, a party can move to add a party under Rule 21 and, contingent upon such motion being granted, move for leave to serve and file the amended complaint. Pleadings and Motions are dealt with under Part III of the Rules. Parties are dealt with under Part IV of the Rules. If a plaintiff could simply add a party by amending the complaint, there would be no purpose for Rule 19 or its state equivalent.

[¶ 4] The amended complaint alleges that, in addition to the June 15, 2001, contract set forth above, BNSF was also breaching a contract with the DM & E executed on October 8, 1986, and contracts between the SDRA's and BNSF's predecessors executed on August 13, 1975, and July 10, 1977. The amended complaint again seeks specific performance or injunctive relief enforcing the terms of the various agreements (copies of which agreements are attached to the amended complaint) and also seeks damages for breach of contract and tortious interference with business relationships, as well as punitive damages. The SDRA first adds an involuntary plaintiff, DM & E, and then attempts to assert DM & E's rights under a contract to which the SDRA is not a party. This is a curious approach. The SDRA seeks to specifically enforce a contract to which it is not a party. The SDRA also seeks to recover damages from BNSF on a claim that BNSF breached a contract between the predecessor of BNSF and the predecessor of the DM & E. All of this is despite the fact that the DM & E, after having been asked to do so, obviously declined to become voluntarily involved in litigation.

[¶ 5] There is a related action pending in this court. On March 19, 2003, the BNSF (a Delaware corporation) filed a federal diversity action against the DMV & W (a North Dakota corporation) concerning trackage rights and the use of the Aberdeen interchange as set forth in the agreements described above. See CIV 03-1003. That federal lawsuit was commenced on March 19, 2003. Fed.R.Civ.P. 3. In the amended complaint of that federal action, BNSF seeks a declaratory judgment that the 2001 and 1986 agreements do not grant the DMV & W the right to use the Aberdeen interchange for so-called bridge movement. BNSF's amended complaint also seeks damages, including punitive damages, for trespass and tortious interference with the 2001 agreement between BNSF and the SDRA and the 1986 agreement between BNSF and the DM & E. Finally, BNSF seeks preliminary and permanent injunctive relief preventing the DMV & W from unauthorized use of the Aberdeen interchange.

[¶ 6] To return to the case at hand, BNSF filed a notice of removal of the plaintiffs' state court lawsuit to federal court on April 8, 2003. Actions may be removed pursuant to 28 U.S.C. § 1441, inter alia, where the United States district courts have original jurisdiction over the action because the action is founded on a claim or right arising under the Constitution, treaties or law of the United States, or because there exists diversity of citizenship. BNSF contends that this court has original jurisdiction over the state court action pursuant to 28 U.S.C. § 1331 (federal question jurisdiction) because the plaintiffs' claims are preempted by federal law and because the "plaintiffs' claims are necessarily premised on and dependent on claims arising under the law of the United States."

[¶ 7] The SDRA, Doc. 3, and the DM & E, Doc. 7, filed so-called emergency motions to remand pursuant to 28 U.S.C. § 1447(c). The basis of the "emergency" was that a hearing on the plaintiffs' request for a preliminary injunction was, prior to removal, scheduled for April 17, 2003. That hearing was presumably cancelled when this matter was removed to federal court because, upon the filing of the notice of removal, the state court lost all jurisdiction. BNSF resists remand, claiming this matter is properly in federal court based upon the complete preemption of plaintiffs' state law claims.

DECISION

I. PREEMPTION.

[¶ 8] "The party opposing remand has the burden of establishing federal subject-matter jurisdiction." Green v. Ameritrade, Inc., 279 F.3d 590, 596 (8th Cir.2002).

Only state-court actions that originally could have been filed in federal court may be removed to federal court by the defendant. Absent diversity of citizenship, federal-question jurisdiction is required. The presence or absence of federal-question jurisdiction is governed by the "well-pleaded complaint rule," which provides that federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint.

Magee v. Exxon Corp., 135 F.3d 599, 601 (8th Cir.1998) (quoting Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 2429, 96 L.Ed.2d 318 (1987)). It is well established that the "right created by federal law must be an essential element of plaintiff's cause of action, and that the centrality of this federal claim must appear on the face of the `well-pleaded complaint,' unaided by the answer or petition for removal." First National Bank of Aberdeen v. Aberdeen National Bank, 627 F.2d 843, 848 n. 12 (8th Cir.1980).

[¶ 9] Plaintiffs' complaint does not, on its face, allege any claimed federal question for federal court jurisdiction. Plaintiffs have succeeded in at least temporarily defeating diversity jurisdiction by naming as an involuntary plaintiff a corporation which was organized under the laws of the state of Delaware, also the state of incorporation for BNSF. BNSF has made no claim that the non-diverse involuntary plaintiff (DM & E) was joined in the state court action to defeat diversity of citizenship. This is commonly called a "sham" or "fraudulent" joinder. The term "fraudulent" is not used to indicate any "bad motive" or improper conduct and there is no necessity to show that the joinder was for the purpose of preventing removal to federal court. One of the questions would be...