The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ILLINOIS
CERTAIN UNDERWRITERS AT
LLOYDS,
Plaintiffs,
Case No. 20-cv-0795-SPM
v.
CSX TRANSPORTATION, INC.,
EVANSVILLE WESTERN
RAILWAY, INC., AND PADUCAH &
LOUISVILLE RAILWAY, INC.,
Defendants.
MEMORANDUM AND ORDER
McGLYNN, District Judge:
Pending before the Court is a Motion for Summary Judgment pursuant to Rule
56 of the Federal Rules of Civil Procedure filed by defendant Paducah & Louisville
Railway, Inc. (“PAL”) (Doc. 243). Having been fully informed of the issues presented,
this Court GRANTS the Motion for Summary Judgment in its entirety.
RELEVANT FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff Certain Underwriters at Lloyds (“Lloyds”) commenced the present
action to recover damages associated with the derailment of a train while under care
of defendant CSX Transportation, Inc. (“CSX”). Lloyds sues as a subrogee for National
Railway Equipment Company (“NRE”) to recover the value associated with the loss
of four (4) locomotives. In September 2018, NRE sold these locomotives to a customer
in Guinea and arranged rail transport on Evansville Western Railway, Inc. (“EVWR”)
via a booking website known as PALConnect. Smith Dep.: 14, 28–30. EVWR
transported the locomotives from Mount Vernon, Illinois to Evansville, Indiana, at
which point CSX took custody of the locomotives to continue their transport to
Wilmington, NC. Id. at 41. While in North Carolina on September 16, 2018, the CSX
train carrying the locomotives derailed because of water on the tracks from Hurricane
Florence. Id. at 14, 112.
While not named in Lloyds’s initial Complaint (Doc. 1) or its First Amended
Complaint (Doc. 84), PAL was added in the Second Amended Complaint filed on
February 16, 2021 (Doc. 131). That complaint included six (6) claims for relief
including liability under the Carmack Amendment to the Interstate Commerce Act
(49 U.S.C. § 11706, “Carmack”), two violations of the Uniform Bills of Lading Act (49
U.S.C. §§ 80110, 80111), negligence and related claims, conversion, and, against PAL,
specifically, breach of contract to deliver goods (Doc. 131, ¶¶ 62–95). Defendants CSX,
EVWR, and PAL all filed Motions for Summary Judgment (Docs. 239, 242, and 243).
Lloyds subsequently filed its own Motion for Summary Judgment and a Response in
Opposition to PAL’s Motion for Summary Judgment (Docs. 251, 266).
Oral argument was held before the Court on January 18, 2022. At that time,
PAL argued that it should not be a party to the case at all, arguing that it was not
subject to this Court’s personal jurisdiction via established Supreme Court precedent
or Illinois’s long-arm statute and that, even if it were, it should be excluded from
liability as it was neither a party to any of the contracts nor did it provide any services
as a rail carrier within Carmack’s definition. Hr’g Tr.: 69–78, Jan. 18, 2022. Lloyds
contested both arguments, first arguing that personal jurisdiction was proper because
PAL and EVWR were inextricably connected within the same corporate
infrastructure and, second, that the use of PALConnect to book freight shipment on
EVWR fit the definition of a “service” under § 11706(a) of Carmack. Id. at 78–85. For
a more extensive description of the factual and procedural background of this case,
see Docs. 239, 242, 243, 251, and 266.
APPLICABLE LAW AND LEGAL STANDARDS
The court shall grant summary judgment “if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.” Spurling v. C & M Fine Pack, Inc., 739 F.3d 1055, 1060 (7th Cir. 2014)
(quoting Fed. R. Civ. P. 56(a)). Once the moving party has set forth the basis for
summary judgment, the burden then shifts to the nonmoving party who must go
beyond mere allegations and offer specific facts showing that there is a genuine issue
of fact for trial. Fed. R. Civ. P. 56(e); see Celotex Corp. v. Catrett, 477 U.S. 317, 322–
23 (1986). Stated another way, the nonmoving party must offer more than
“[c]onclusory allegations, unsupported by specific facts,” to establish a genuine issue
of material fact. Payne v. Pauley, 337 F.3d 767, 773 (7th Cir. 2003) (citing Lujan v.
Nat’l Wildlife Fed’n, 497 U.S. 871, 888 (1990)).
In determining whether a genuine issue of fact exists, the Court must view the
evidence and draw all reasonable inferences in favor of the party opposing the motion.
Bennington v. Caterpillar Inc., 275 F.3d 654, 658 (7th Cir. 2001); see also Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). However, no issue remains for trial if
“sufficient evidence favoring the nonmoving party exists to permit a jury to return a
verdict for that party.” Faas v. Sears, Roebuck & Co., 532 F.3d 633, 640–41 (7th Cir.
2008) (quoting Springer v. Durflinger, 518 F.3d 479, 483 (7th Cir. 2008)). The non-
movant cannot simply rely on its pleadings; the non-movant must present admissible
evidence that sufficiently shows the existence of each element of its case on which it
will bear the burden of proof at trial. Midwest Imps, Ltd. v. Coval, 71 F.3d 1311, 1317
(7th Cir. 1995) (citing Serfecz v. Jewel Food Stores, 67 F.3d 591, 596 (7th Cir. 1995);
Greater Rockford Energy and Tech. Corp. v. Shell Oil Co., 998 F.2d 391, 394 (7th Cir.
1993), cert. denied, 510 U.S. 1111 (1994)).
ANALYSIS
I. Personal Jurisdiction
In a federal question case under 28 U.S.C. § 1331 or a diversity case under 28
U.S.C. § 1332, a federal court has personal jurisdiction over a defendant if either
federal law or state law authorizes service of process against that defendant. Mobile
Anesthesiologists Chi., LLC v. Anesthesia Assocs. of Houston Metroplex, P.A., 623 F.3d
440, 443 (7th Cir. 2010) (citing Omni Cap. Int’l v. Rudolf Wolff & Co., 484 U.S. 97,
104–05 (1987)). Depending on the extent of the defendant’s contacts, personal
jurisdiction may be general or specific. Id. at 444.
PAL first argues that it is not subject to this Court’s general jurisdiction. For
this Court to exercise general jurisdiction, established Supreme Court precedent
states that the corporation must have connections that are “continuous and
systematic” so that they are “essentially at home in the forum State.” Goodyear
Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011); Daimler AG v.
Bauman, 571 U.S. 117, 138–39 (2014); BNSF Ry. v. Tyrrell, ___ U.S. ___, 137 S. Ct.
1549, 1559 (2017). Additionally, the Supreme Court clarified that the “paradigm”
forums in which a corporation is deemed to be “at home” are its place of incorporation
and its principal place of business. Goodyear, 564 U.S. at 924, Daimler, 571 U.S. at
137, BNSF Ry., 137 S. Ct. at 1558. PAL is incorporated in Kentucky and has its
headquarters in Paducah, Kentucky (Doc. 84, ¶ 5, Doc. 243, p. 7). While PAL operates
short-line railroads in Kentucky, it does not have any rail operations in Illinois (Doc.
243, p. 6–7). In order to surmount this barrier, Lloyds relies on its argument that
EVWR and PAL are closely linked. This would allow this Court to exercise personal
jurisdiction via EVWR’s operations in Illinois (Doc. 131, ¶ 12–13). This argument to
“pierce the veil” is addressed infra.
PAL argues next that it is not subject to this Court’s specific jurisdiction via
Illinois’s long-arm statute (Doc. 243, p. 8). Illinois law provides that jurisdiction may
be established within the confines of the Illinois and Federal Constitutions. 735 ILCS
5/2-209 (2016). Specific jurisdiction is proper when a defendant “purposefully directs
its activities at the forum state . . . .” Mobile Anesthesiologists Chi., 623 F.3d at 444.
See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 (1985). Once more under
established Supreme Court precedent, it is unconstitutional to force a defendant to
appear in court unless its actions in that forum state made it “reasonably anticipate
being haled into court there.” Mobile Anesthesiologists Chi., 623 F.3d at 444 (citing
Burger King, 471 U.S. at 474). Here, PAL does not have operations in Illinois and
does not offer rail services of any kind in Illinois (Doc. 243, p. 6–7). Lloyds also relies
on the connection between PAL and EVWR here to surmount the jurisdictional hurdle
(Doc. 131, ¶ 12–13, Doc. 266, p. 20).
Key to both general and specific jurisdiction is the question of whether PAL
and EVWR should be considered as a single corporate entity. PAL argues that it and
EVWR are separate corporations and that “piercing the corporate veil” is improper
absent evidence of insolvency or fraud (Doc. 243, p. 9). Lloyds responds that PAL and
EVWR are part of the same corporate family, sharing board members, management
teams, and services, and that EVWR is only a “paper barrier” used to confer tax
benefits on PAL and to shield it from liability (Doc. 84, ¶¶ 24, 36). See Hr’g. Tr.: 79–
81.
A two-pronged test is employed to determine whether the corporate veil
should be pierced to confer jurisdiction. Laborers' Pension Fund v. Lay-Com, Inc., 580
F.3d 602, 610 (7th Cir. 2009) (quoting Hystro Prods., Inc. v. MNP Corp., 18 F.3d 1384,
1388–89 (7th Cir.1994)). First, the plaintiff must demonstrate “unity of ownership
and interest” so significant that “the separate personalities” of the corporations cease
to exist. Id. Second, the plaintiff must show that that “adherence to the fiction of
separate corporate existence would sanction a fraud or promote injustice.” Id. See also
Chi. Florsheim Shoe Store Co. v. Cluett, Peabody & Co., 826 F.2d 725, 728 (7th Cir.
1987) (stating the same).
PAL and EVWR share directors and officers (Doc. 243, p. 5–6). The
Management Agreement between PAL and EVWR providing PALConnect service to
EVWR’s customers does show the different corporate structures at work here (Doc.
243, p. 8–9). EVWR pays a service fee to PAL for the services provided under this
Agreement (Doc. 243, p. 6). There are separate logins for PAL and for EVWR
customers on PALConnect (Doc. 243, p. 11). See Smith Dep.: 33. Employees of PAL
and EVWR wear a different “imaginary hat” when doing business for each corporation
but perform similar work for each role (Doc. 181, p. 2–3). While all of this shows the
close connection between PAL and EVWR, the question remains whether the
corporate veil should be pierced to confer jurisdiction. All of the evidence about the
close corporate linkage between PAL and EVWR would seem to meet the first prong
of the test. Laborers' Pension Fund v. Lay-Com, Inc., 580 F.3d 602, 610 (7th Cir. 2009)
(quoting Hystro Prods., Inc. v. MNP Corp., 18 F.3d 1384, 1388–89 (7th Cir.1994)).
That being said, the second prong poses an issue on Lloyds’s pleaded facts.
The Seventh Circuit has held that sharing a website is not enough to determine
that corporate entities were combined absent some other evidence of fraud. Bridge v.
New Holland Logansport, Inc., 815 F.3d 356, 365 (7th Cir. 2016). Additionally, Lloyds
has not introduced any evidence to indicate that EVWR is anything other than an
adequately capitalized corporation (Doc. 243, p. 6, 9). Thus, PAL’s presence is this
action is not required to prevent an unjust outcome, as Lloyds can recover against the
other defendants here.
Lloyds argues that it has already met its burden to establish personal
jurisdiction (Doc. 266, p. 20) and relies on this Court’s denial of PAL’s Motion to
Dismiss (Doc. 191, p. 5-8). However, Lloyds misunderstands the burden of proof at
this stage of the proceeding. At the Motion to Dismiss stage under Rule 12(b)(2), in
determining whether the “prima facie standard has been satisfied, the plaintiff ‘is
entitled to the resolution in its favor of all disputes concerning relevant facts
presented in the record.” Purdue Rsch. Found. v. Sanofi-Synthelabo, S.A., 338 F.3d
773, 782 (7th Cir. 2003) (quoting Nelson by Carson v. Park Indus., Inc., 717 F.2d 1120,
1123 (7th Cir. 1983)). In comparison, this standard is more stringent under Rule 56.
As PAL has as set forth the basis for summary judgment, the burden shifts to Lloyds
as the nonmoving party to demonstrate that there is a genuine issue of fact that
remains to be resolved. Quinn v. Wexford Health Sources, Inc., 8 F.4th 556, 567 (7th
Cir. 2021) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986)). While Lloyds’s
arguments about the intertwined nature of PAL and EVWR were sufficient to survive
PAL’s Motion to Dismiss, they are not persuasive at this stage. As Lloyds cannot meet
the second prong of the test, it has not pleaded facts showing that this Court should
pierce that corporate veil here to confer personal jurisdiction on PAL. Laborers'
Pension Fund v. Lay-Com, Inc., 580 F.3d 602, 610 (7th Cir. 2009) (quoting Hystro
Prods., Inc. v. MNP Corp., 18 F.3d 1384, 1388–89 (7th Cir.1994)).
II. Services under Carmack
Even if this Court were able to exercise personal jurisdiction, PAL must have
provided “services” under the cognizance of Carmack to be liable. 49 U.S.C. §
11706(a). During its oral argument, PAL argued that it was not directly involved with
the transportation of the locomotives at issue, stating that its only involvement with
the shipment was that NRE booked the shipment on PALConnect. Hr’g Tr.: 75-76.
Additionally, PAL is not listed as a party in any of the produced bills of lading. Id. at
75. Lloyds argued in response that the use of the website alone met the definition of
“services” under Carmack. Hr’g Tr.: 80-81.
While PAL shares its name with that of the website, NRE uses separate login
information for the PAL and EVWR railroad portions of the website (Doc. 243, p. 11).
See Smith Dep: 33, 144. NRE did not use the PAL portion of the site to book shipment.
Smith Dep: 144. Thus, the question before the Court is whether use of the
PALConnect web service shared between PAL and EVWR adequately qualifies as a
“service” under Carmack.
Subsection (a) of § 11706 states that “[a] rail carrier and any other carrier that
delivers the property and is providing transportation or service . . . are liable to the
person entitled to recover . . . .” Id. (emphasis added). 49 U.S.C. § 11706(a). Section
10102 of the statute provides the definitions of key terms. 49 U.S.C. § 10102.
Subsection (9)(B) defines “services” as being “related to that movement, including
receipt, delivery, elevation, transfer in transit, refrigeration, icing, ventilation,
storage, handling, and interchange of passengers and property . . . .” 49 U.S.C. §
10102(9)(B). The plain language of the statute delineates services directly related to
the transportation of cargo. It does not include “services” like those Lloyds purports
that PAL provided via PALConnect.
The language of § 10102 differs from that in other parts of the statute. While
Part A of Subtitle IV governs rail carriers, Part B covers motor carriers, water
carriers, brokers, and freight forwarders. 49 U.S.C. § 13102. In Part B, “services” are
defined as “services related to that movement, including arranging for, receipt,
delivery, elevation, transfer in transit, refrigeration, icing, ventilation, storage,
handling, packing, unpacking, and interchange of passengers and property . . . .” 49
U.S.C § 13102(23)(B) (emphasis added). While this section includes “arranging for”
transportation as being within the realm of “services,” the statute for rail carriers
expressly excludes this language. See 49 U.S.C. § 10102(9)(B). This vitiates Lloyds’s
argument that PALConnect is a “service” in accordance with Carmack. The omission
of an “arranging for” provision in § 10101(9)(B) reflects a clear intent by Congress to
limit the definition of “services” to those directly related to the rail transport of freight
(e.g. refrigeration, icing, ventilation, and similar services).
Additionally, while Part B does cover “brokers,” § 13102 defines a “broker” as
“a person, other than a motor carrier or an employee or agent of a motor carrier, that
as a principal or agent sells, offers for sale, negotiates for, or holds itself out by
solicitation, advertisement, or otherwise as selling, providing, or arranging for,
transportation by motor carrier for compensation.” 49 U.S.C. § 13102(2) (emphasis
added). Not only is the definition limited to brokers of transportation via motor
carrier, but, like the definition of “services,” analogous language is not included in §
10102. See 49 U.S.C. § 10102. Thus, even if PAL were a broker here, broker liability
is neither discussed nor included in the relevant portion of Carmack.
While neither the Supreme Court nor the Seventh Circuit has addressed the
interpretation of rail carrier “services” under Carmack, the Second Circuit adopted
the narrow definition of services in § 10102. Rexroth Hydraudyne B.V. v. Ocean World
Lines, Inc., 547 F.3d 351, 361–62 (2d Cir. 2008). As § 10102 “specifically references
operational functions related to the actual movement or storage of property or
passengers,” the Rexroth court determined that “arranging or booking rail
transportation” did not fall within Carmack’s “statutory definition of
‘transportation.’” Rexroth, 547 F.3d at 362.1
If Lloyds’s definition of “services” were permitted, it would vastly expand the
scope of liability in the rail industry. While Carmack governs the liability of rail
carriers vis-à-vis the transportation of goods, Lloyds’s construction of the statute
would bring PAL within the penumbra of Carmack liability even though it did not
move or touch the freight in question, but only happened to share a website and
corporate resources with EVWR. This reductio ad absurdum cannot reflect Congress’s
intent and is not adopted by this Court. Based on the plain language of the statute,
PAL did not provide “services” under Carmack and, thus, cannot be maintained as a
party in the present suit.
CONCLUSION
For the reasons set forth above, the Court GRANTS defendant PAL’s Motion
for Summary Judgment (Doc. 243) for lack of subject matter jurisdiction and dearth
of services provided under the Carmack Amendment. Accordingly, plaintiff’s claims
against defendant, Paducah and Louisville Railway, Inc., are DISMISSED with
prejudice and the Clerk of Court is DIRECTED to enter judgment accordingly.
1 Rexroth’s holding involved a categorical exclusion of ocean liners from Carmack liability. 547 F.3d
at 362. The Ninth Circuit declined to follow this exception in Regal-Beloit Corp. v. Kawasaki Kisen
Kaisha Ltd., 557 F.3d 985 (9th Cir. 2009), rev'd and remanded, 561 U.S. 89 (2010). While the Supreme
Court’s ruling abrogated Rexroth’s reasoning in relation to ocean carriers, its analysis of the definition
of “services” under Carmack was not affected.
IT IS SO ORDERED.
DATED: February 11, 2022
/s/ Stephen P. McGlynn_
STEPHEN P. McGLYNN
U.S. District Judge