Union Pac. R.R. Co. v. Chicago Transit Auth.

• Decision Date: 25 July 2011
• Docket Number: No. 09–2147.,09–2147.
• Parties: UNION PACIFIC RAILROAD COMPANY, a Delaware corporation, Plaintiff–Appellee,v.CHICAGO TRANSIT AUTHORITY, a municipal corporation, Defendant–Appellant.
• Court: U.S. Court of Appeals — Seventh Circuit

647 F.3d 675

UNION PACIFIC RAILROAD COMPANY, a Delaware corporation, Plaintiff–Appellee,

v.CHICAGO TRANSIT AUTHORITY, a municipal corporation, Defendant–Appellant.

No. 09–2147.

United States Court of Appeals, Seventh Circuit.

Argued Jan. 21, 2011.Decided July 25, 2011.

Thomas A. Andreoli (argued), Attorney, Union Pacific Railroad Company, Chicago, IL, for Plaintiff–Appellee.Richard F. Friedman (argued), Attorney, Neal & Leroy, LLC, Chicago, IL, for Defendant–Appellant.Jane E. Notz, Attorney, Office of the Attorney General, Chicago, IL, for Amicus Curiae.Before FLAUM, MANION, and EVANS, Circuit Judges.MANION, Circuit Judge.

Union Pacific Railroad Company owns a 2.8–mile–long right-of-way that it has leased to the Chicago Transit Authority (CTA) for almost 50 years. When it became too costly for the CTA to continue leasing the land, the CTA sought to condemn the land and obtain a perpetual easement over it. Union Pacific filed for injunctive relief in federal district court, arguing that the state condemnation was preempted by the Interstate Commerce Commission Termination Act (“ICCTA” or “Act”), 49 U.S.C. § 10501(b). The district court agreed and granted the injunction. The CTA now appeals. Because we agree that the state condemnation is preempted by federal law, we affirm.

I.

Union Pacific operates railroad track throughout the United States and conducts a significant amount of freight shipping through Chicago. At the center of this litigation is a piece of railroad property owned by Union Pacific, which we refer to as the “Right of Way.” The Right of Way consists of an elevated structure on a man-made enbankment, running east to west for approximately 2.8 miles from Laramie Avenue in Chicago to Harlem Avenue in Oak Park, Illinois. This property is roughly 90 to 95 feet wide along most of its length. It covers an area greater than 32 acres (approximately 1,407,812 square feet), and includes 23 bridges over local streets. On the Right of Way, Union Pacific operates three railroad tracks.

Union Pacific also leases approximately 40% of the Right of Way (just under 13 acres) to the CTA, which is a municipal corporation providing mass transportation services for the city of Chicago. In the leased property, the CTA owns and operates two electric-powered local rapid transit tracks that run parallel to Union Pacific's three tracks. This arrangement between the CTA and Union Pacific has continued without interruption since 1962 and is governed by a written lease agreement.

Under the terms of the lease, the CTA must use the Right of Way only for passenger transportation, it must maintain its tracks in good condition, and it must get Union Pacific's approval before constructing new CTA facilities such as tracks, platforms, stations, and stairways. Union Pacific, however, maintains the Right of the Way and the joint facilities shared with the CTA, such as retaining walls, drainage facilities, and bridges. The distance between the CTA's and Union Pacific's closest tracks is approximately five feet for the entire length of the Right of Way. Because of this close proximity, Union Pacific must modify its regular maintenance procedures and use non-standard inspection procedures when maintaining the Right of Way. The lease also requires the CTA to reimburse Union Pacific for 40% of the cost of maintaining the Right of Way and the joint facilities, including constructing new joint facilities. Finally, the lease terminates if the CTA stops passenger transportation—other than temporary shutdowns for maintenance and repair—or if the CTA fails to make rental payments or to fulfill any of the lease's other conditions. As long as the CTA keeps its commitments, the lease does not expire but continues indefinitely.

In exchange for the use of the Right of Way, the CTA pays monthly rent to Union Pacific. Every ten years, the parties determine the monthly rent for the next ten-year period based on a formula specified in the lease and the appraised fair market value of the Right of Way. For the 1992–2002 lease period, the CTA's monthly rent was approximately $25,000.

This dispute began when the parties were calculating the rent for the 2002–2012 lease period. They obtained conflicting appraisals of the Right of Way's fair market value: Union Pacific's appraisal was $30.8 million, while that of the CTA was $11.3 million. So, as provided by the lease, the parties arranged for a neutral appraiser who valued the property at $25.9 million—setting the monthly rent at approximately $90,000.

During this time, the parties discussed the possibility of negotiating a one-time payment in exchange for a permanent easement over the Right of Way instead of maintaining the current rental arrangement. Nothing came of this discussion. Then, in July 2006, the CTA made Union Pacific an offer: Union Pacific had 14 days to either accept $7,564,400 for a “perpetual easement” on the Right of Way or the CTA would condemn the property. Union Pacific declined the offer. True to its word, the CTA began condemnation proceedings with the Illinois Commerce Commission, an administrative agency of the State of Illinois. In the proceedings, the CTA requested a perpetual easement that would be “coextensive” with the lease. Notably, the CTA's petition specified that “the CTA's obligations, interests and rights under the easement shall run with the land and not be subject to termination for any reason.”

To halt the condemnation, Union Pacific sought an injunction in federal district court, arguing that the condemnation was preempted by the Interstate Commerce Commission Termination Act. The district court agreed and granted summary judgment in Union Pacific's favor, holding that the condemnation was both categorically preempted and preempted “as applied.” The CTA now appeals.

II.

We review de novo the district court's grant of summary judgment. O'Rourke v. Palisades Acquisition XVI, LLC, 635 F.3d 938, 941 (7th Cir.2011). And we review de novo the district court's determination of the preemptive effect of a federal statute. Vill. of DePue v. Exxon Mobil Corp., 537 F.3d 775, 786 (7th Cir.2008); Franks Inv. Co. LLC v. Union Pac. R.R. Co., 593 F.3d 404, 407 (5th Cir.2010) (determining ICCTA preemption).

A.

The Supremacy Clause of the United States Constitution provides that the Constitution and laws of the United States are “the supreme Law of the Land ... any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.” U.S. Const. art. VI, cl. 2. Thus, under the Supremacy Clause, federal law “preempts state laws that interfere with, or are contrary to, federal law.” Boomer v. AT & T Corp., 309 F.3d 404, 417 (7th Cir.2002) (internal quotation omitted). In determining preemption, we look to Congress's intent in enacting the federal statute at issue. English v. Gen. Elec. Co., 496 U.S. 72, 78–79, 110 S.Ct. 2270, 110 L.Ed.2d 65 (1990).

In 1995, Congress enacted the Interstate Commerce Commission Termination Act and created the Surface Transportation Board to administer the Act. 49 U.S.C. §§ 10101, 10102(1). In the Act, Congress expressly conferred on the Board “exclusive” jurisdiction over the regulation of railroad transportation:

The jurisdiction of the Board over—

(1) transportation by rail carriers, and the remedies provided in this part with respect to rates, classifications, rules (including car service, interchange, and other operating rules), practices, routes, services, and facilities of such carriers; and

(2) the construction, acquisition, operation, abandonment, or discontinuance of spur, industrial, team, switching, or side tracks, or facilities, even if the tracks are located, or intended to be located, entirely in one State,

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 law.

49 U.S.C. § 10501(b). Congress also defined “transportation” to include railroad property, facilities, and equipment “related to the movement of passengers or property, or both, by rail, regardless of ownership or an agreement concerning use.” 49 U.S.C. § 10102(9). Congress's intent in the Act to preempt state and local regulation of railroad transportation has been recognized as broad and sweeping.¹

Here, there is no dispute that Union Pacific and its 2.8–mile Right of Way fall under the Act. Instead, the question at issue is whether the proposed state condemnation establishing a perpetual easement over the Right of Way is a regulation of railroad transportation preempted by the Act.²

Courts have treated preemption under the Act in a variety of ways. In 2005, the Board surveyed the different approaches in case law and suggested that there were two manners in which state or local actions or regulations could be preempted: (1) categorical, or per se, preemption, and (2) “as applied” preemption. CSX Transp., Inc.—Petition for Declaratory Order, STB Finance Docket No. 34662, 2005 WL 1024490, at *2–3 (S.T.B. May 3, 2005); see also New Orleans & Gulf Coast Ry. Co. v. Barrois, 533 F.3d 321, 332 (5th Cir.2008) (describing the Board's framework). Categorical preemption occurs when a state or local action is preempted on its face despite its context or rationale.³ Id at *2. If an action is not categorically preempted, it may be preempted “as applied” based on the degree of interference that the particular action has on railroad transportation—this occurs when the facts show that the action “would have the effect of preventing or unreasonably interfering with railroad transportation.” Id. at *3. In this case, the district court used the Board's suggested framework and found that the condemnation of the Right of Way was both categorically preempted and preempted “as applied.” Union Pacific urges us to adopt the same approach.

We believe, however, that for the condemnation case before us, an “as...