The opinion
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
ZAYO GROUP, LLC, : CIVIL ACTION NO. 1:21-CV-600
:
Plaintiff : (Judge Conner)
:
v. :
:
NORFOLK SOUTHERN RAILWAY :
COMPANY, :
:
Defendant :
MEMORANDUM
Defendant Norfolk Southern Railway Company (“Norfolk Southern”)
removed the present action from the Dauphin County Court of Common Pleas.
Plaintiff Zayo Group, LLC (“Zayo”), now seeks to remand the action back to state
court for lack of subject matter jurisdiction. We will grant Zayo’s motion to remand.
I. Factual Background & Procedural History
Zayo is a telecommunications company headquartered in Boulder, Colorado.
(See Doc. 1-3 ¶¶ 1-2, 4; Doc. 1 ¶ 4). The federal government awarded Zayo a contract
to provide fiber optic service to Central Dauphin School District in Dauphin
County, Pennsylvania. (See Doc. 1-3 ¶¶ 4-5, 44). Zayo alleges completing the
contract necessitates stringing a fiber optic wire along a 0.89-mile stretch of
telephone poles located on Norfolk Southern’s property and running alongside
Norfolk Southern’s railroad tracks. (See Doc. 1-3 ¶¶ 5-6, 13-14, 49; Doc. 1-3, Ex. D).
The telephone poles belong to an electric company which installed the poles
pursuant to a revocable licensing agreement with Norfolk Southern. (See Doc. 1-3
¶¶ 15-16; Doc. 1 ¶ 2). Zayo reached an agreement with the electric company that
allows Zayo to attach the fiber optic wire to the electric company’s poles, subject to
Norfolk Southern’s approval. (See Doc. 1-3 ¶¶ 17-20).
Norfolk Southern offered Zayo permission to affix its fiber optic wire in
exchange for $75,000 and execution of a licensing agreement. (See Doc. 1-3 ¶¶ 7-8,
20; Doc. 1 ¶ 3). Zayo balked at Norfolk Southern’s asking price and countered with
an offer of $20,000. (See Doc. 1-3 ¶¶ 9-10; Doc. 1 ¶ 3). Norfolk Southern refused to
lower their price. (See Doc. 1-3 ¶¶ 9-10; Doc. 1 ¶ 3). Unable to come to an
agreement, Zayo filed a condemnation action against Norfolk Southern in the
Dauphin County Court of Common Pleas, seeking an aerial easement subordinate
to the electric company’s licensing agreement and a temporary construction
easement. (See Doc. 1-2 ¶¶ 1-3; Doc. 1 ¶¶ 1-2; Doc. 1-3 ¶¶ 11-12, 21-27). The
requested aerial easement consists of a ten-foot-wide corridor running alongside
Norfolk Southern’s railroad track for 0.89 miles. (See Doc. 1-3 ¶¶ 24-25; Doc. 1-3, Ex.
D).
Norfolk Southern timely removed the condemnation action to this court
claiming federal question and diversity jurisdiction under 28 U.S.C. § 1331 and
§ 1332(a), respectively. Norfolk Southern then promptly filed a motion to dismiss
under Federal Rule of Civil Procedure 12(b)(6). Zayo responded by filing a motion
to remand the matter back to state court for lack of subject matter jurisdiction.
Both motions are now fully briefed and ripe for disposition.
II. Legal Standard
Under 28 U.S.C. § 1441, a defendant may remove an action brought in state
court to federal district court when the claims fall within the federal court’s original
jurisdiction. See 28 U.S.C. § 1441(a). A plaintiff may challenge removal for lack of
jurisdiction by moving to remand the matter to state court. See id. § 1447(c). Such
motions may be filed at any time before final judgment is entered. See id. If the
district court indeed lacks subject matter jurisdiction, it must remand to the state
court from which the action was removed. See id. Statutes permitting removal
“are to be strictly construed against removal and all doubts should be resolved in
favor of remand.” Manning v. Merrill Lynch Pierce Fenner & Smith, Inc., 772 F.3d
158, 162 (3d Cir. 2014) (quoting Brown v. Jevic, 575 F.3d 322, 326 (3d Cir. 2009)).
As the party asserting jurisdiction, the defendant bears the burden of proving
the matter is properly before the federal court, viz., that the court has either federal
question or diversity jurisdiction over the suit. See Frederico v. Home Depot, 507
F.3d 188, 193 (3d Cir. 2007) (citations omitted); Steel Valley Auth. v. Union Switch &
Signal Div., 809 F.2d 1006, 1010 (3d Cir. 1987) (same)). Federal question jurisdiction
exists if the state-law claim in the complaint states an actual, disputed, and
substantial issue related to federal law that the federal court can resolve without
disrupting the balance of power between the federal and state courts. See Grable &
Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 314 (2005). A state-law
claim raises a federal issue when it involves a dispute over the “validity,
construction, or effect” of a federal statute or law. See id. at 313 (quoting Shulthis v.
McDougal, 225 U.S. 561, 569 (1912)). To invoke diversity jurisdiction, the defendant
must establish that the matter is between citizens of different states and that the
amount in controversy, exclusive of interest and costs, exceeds $75,000. See 28
U.S.C. § 1332(a).
III. Discussion
Zayo requests we remand this matter to state court for lack of subject matter
jurisdiction.1 Norfolk Southern insists our court has both federal question and
diversity jurisdiction over the parties’ eminent domain dispute. We will address the
two proposed grounds for jurisdiction seriatim.
A. Federal Question Jurisdiction
The well-pleaded complaint rule governs whether a federal court has federal
question jurisdiction over a particular matter. See Beneficial Nat’l Bank v.
Anderson, 539 U.S. 1, 6 (2003) (citing Louisville & Nashville R.R. Co. v. Mottley, 211
U.S. 149, 152-53 (1908)). Under that rule, “federal jurisdiction exists only when a
federal question is presented on the face of the plaintiff’s properly pleaded
complaint.” Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987) (citing Gully v.
First Nat’l Bank, 299 U.S. 109, 112-113 (1936)). The rule generally bars removal of
cases to federal court where the federal question arises out of the defendant’s
defense—including preemption defenses. See Beneficial Nat‘l Bank, 539 U.S. at 6
(citing Franchise Tax Bd. of Cal. v. Constr. Laborers Vacation Trust for Southern
Cal., 463 U.S. 1 (1983)). However, the Supreme Court of the United States has
carved out a narrow exception to the well-pleaded complaint rule for when “the
1 We turn to Zayo’s motion to remand before Norfolk Southern’s motion to
dismiss because district courts must establish jurisdiction over a matter and its
parties before reaching merits determinations. See Sinochem Int’l Co. v. Malaysia
Int’l Shipping Corp., 549 U.S. 422, 430-31 (2007) (quoting Steel Co. v. Citizens for
Better Env’t, 523 U.S. 83, 94 (1998)).
pre-emptive force of a [federal] statute is so extraordinary that it converts an
ordinary state common-law complaint into one stating a federal claim.” See
Caterpillar, 482 U.S. at 393 (internal quotation marks omitted). When federal law
“completely pre-empts” an area of state law, claims under the preempted state law
“are necessarily federal in character.” See Maglioli v. All. HC Holdings LLC, 16
F.4th 393, 407 (3d Cir. 2021) (quoting Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64
(1987)).
Norfolk Southern contends federal question jurisdiction exists over this
matter because the Interstate Commerce Clause Termination Act (“ICCTA”), see 49
U.S.C. § 10101 et seq., completely preempts Pennsylvania’s Eminent Domain Code,
26 PA. CONS. STAT. § 101 et seq. (See Doc. 1 at 1, ¶ 8; Doc. 15 at 3-10). The ICCTA
vests the federal Surface Transportation Board (“STB”) with “exclusive”
jurisdiction to decide disputes involving, inter alia, transportation by rail carriers,
the services and facilities of such carriers, and the acquisition of railroad facilities.
See 49 U.S.C. § 10501. But the ICCTA does not preempt all state regulation
affecting railroads. See N.Y. Susquehanna & W. Ry. Corp. v. Jackson, 500 F.3d 238,
252 (3d Cir. 2007). Per contra, it preempts only those state laws and regulations
which “may reasonably be said to have the effect of managing or governing rail
transportation.” See id. Laws and regulations bearing only a “remote or incidental
effect on rail transportation” are not preempted. See id. at 252 (citation omitted).
Regulation is permissible so long as “(1) [the regulation] is not unreasonably
burdensome, and (2) it does not discriminate against railroads.” See id. at 252-54
(citing Maumee & W. R.R. Corp. & RNW Ventures, LLC—Petition for Declaratory
Ord., No. 34354, 2004 WL 395835, at *2 (Surface Transp. Bd. Mar. 3, 2004). Norfolk
Southern proceeds under the first prong, arguing an eminent domain proceeding
seeking an aerial easement alongside a railroad track unreasonably burdens
railroad transportation. (See Doc. 15 at 3-10).
Our court of appeals has identified two forms of regulation as giving rise to
an undue burden: “draconian” regulations that prevent the railroad from carrying
out its normal business in a “sensible fashion,” and vague regulations likely to
create “open-ended delays” in railroad transportation. See id. at 254 (citation
omitted). The court of appeals has not addressed whether eminent domain
proceedings are categorically preempted, but the STB has considered the question
on several occasions. The STB has held that the ICCTA does not preempt state-law
condemnation proceedings when they seek to acquire “routine, non-conflicting
uses, such as non-exclusive easements for . . . wire crossings . . . so long as they
would not impede rail operations or pose undue safety risks.” See Maumee, 2004
WL 395835, at *2; Lincoln Lumber Co.—Petition for Declaratory Ord.—
Condemnation of R.R. Right-of-Way for a Storm Sewer, No. FIN 34915, 2007 WL
2299735, at *3 (Surface Transp. Bd. Aug. 13, 2007). Instead, the STB views
nonexclusive easements as “generally best addressed by state courts applying state
law” because they do not prevent the railroad from accessing the property in
question. See Jie Ao & Xin Zhou—Petition for Declaratory Ord., No. FD 35539,
2012 WL 2047726, at *8 (Surface Transp. Bd. June 6, 2012) (citing Maumee, 2004 WL
395835, at *2 (“These crossing cases are typically resolved in state courts.”)). When
the STB has found easements to be an unreasonable burden, it has relied on the
easement having clear, present, and tangible effects on the railroad’s operation, i.e.,
preventing construction of a necessary embankment, accessing a vital retaining
wall, or blocking modernization of a signal structure. See, e.g., Norfolk S. Ry. Co. &
the Ala. Great S. R.R. Co.—Petition for Declaratory Ord., No. FIN 35196, 2010 WL
691256, at *3-4 (Surface Transp. Bd. Feb. 26, 2010).
The aerial easement sought by Zayo does not cross over the railroad tracks; it
merely runs parallel to the track for less than a mile. (See Doc. 1-2 ¶ 2; Doc. 1-2, Ex.
1; Doc. 1-3, Ex. D). The easement is nonexclusive. (See Doc. 1-3 ¶¶ 25-26). It does
not require placement of new telephone poles or any other structural changes. (See
id. ¶¶ 18-19, 26-29). The only argument Norfolk Southern offers as to how the aerial
easement might burden the railroad hinges on a speculative future scenario where
the telephone poles need to be moved to accommodate a shift in the rail lines and
Zayo refuses to agree to a corresponding shift in the wires. (See Doc. 15 at 6-10). A
hypothetical future inconvenience does not resemble the clear, present, and
tangible impacts the STB has deemed an undue burden.2 See Norfolk S. Ry. Co.,
2010 WL 691256, at *3-4; see also N.Y. Susquehanna, 500 F.3d at 254. Norfolk
Southern has not meet its burden of establishing the state-law condemnation at
issue is preempted by the ICCTA. We do not have federal question jurisdiction over
this dispute.
B. Diversity Jurisdiction
2 Any risk of interference or delay is further alleviated by Zayo’s agreeing to
stipulate to easement terms addressing Norfolk Southern’s concerns about pole
maintenance and wire relocation. (See Doc. 17 at 2-3; Doc. 17-1 ¶ 6).
Norfolk Southern alternatively suggests our court has diversity jurisdiction
over its dispute with Zayo. (See Doc. 1 at 1, ¶¶ 4-6; Doc. 15 at 11-14). To establish
diversity jurisdiction, Norfolk Southern must demonstrate this matter is between
citizens of different states and the amount in controversy, exclusive of interest and
costs, exceeds $75,000. See 28 U.S.C. § 1332(a). The parties agree diversity exists.
(See Doc. 6 at 11). The only dispute is whether the matter satisfies the amount-in-
controversy requirement.
Ordinarily, the court determines the amount of controversy by looking at the
sum demanded in the complaint. See 28 U.S.C. § 1446(c)(2); Dart Cherokee Basin
Operating Co. v. Owens, 574 U.S. 81, 84 (2014). If, due to state-court practices, a
complaint is silent as to the precise damages demanded, the court looks to the
amount in controversy claimed in the notice of removal. See 28 U.S.C. §
1446(c)(2)(A)(ii); Dart Cherokee, 574 U.S. at 84. Absent a challenge from the
plaintiff, the court must accept the amount asserted in the notice of removal. See
Dart Cherokee, 574 U.S. at 84, 88. If the plaintiff contests the amount claimed, both
sides submit proof and the court determines, by a preponderance of the evidence,
whether the amount in controversy exceeds the jurisdictional threshold. See id. at
88.
Norfolk Southern claims in its notice of removal the value of the desired
aerial easement exceeds $75,000. (See Doc. 1 ¶ 6). It bases this valuation on the
compensation the company received for a “comparable license at the same location
in an arm’s length transaction.” (See id.) The only evidence Norfolk Southern
provides substantiating its assertion is an affidavit from Solomon Jackson, Norfolk
Southern’s director of real estate. (See Doc. 15-1). According to Jackson, another
telecommunications company paid in “in excess of $75,000” for a license agreement
for a “project identical in all significant aspects,” i.e., placing fiber optic cable on
telephone poles at a location coinciding with Zayo’s easement. (See id. ¶¶ 4-6). He
also claims the price paid by the other company “is consistent with fees paid by
other, similarly situated third parties seeking to locate their utilities within [Norfolk
Southern]’s railroad right-of-way.” (See id. ¶ 6).
Zayo contends the easement is worth a fraction of the amount Norfolk
Southern suggests. (See Doc. 6 at 12-13). In support of motion to remand, Zayo
relies on a 71-page valuation prepared by a third-party land appraiser submitted in
connection with the state condemnation proceeding. (See Doc. 1-3, Ex. E). The
appraiser physically inspected the property, (see id., Ex. E at 6), considered local
economic conditions, (see id., Ex. E at 12-19), compared several comparable
properties, (see id., Ex. E at 31-35, App. E), interviewed experts in corridor
valuation, (see id., Ex. E at 36), and applied a sophisticated valuation metric, (see id.,
Ex. E at 25-41). The valuation report concludes the aerial easement is worth a total
of $5,132. (See id., Ex. E at 41).
We find, by the preponderance of the evidence, the value of the proposed
easement is less than $75,000. The professional appraisal provided by Zayo is more
persuasive and authoritative than the attestations of Norfolk Southern’s employee.
Even if the fair market value of the aerial easement is ten times the value given in
Zayo’s appraisal, the amount in controversy would still fall well short of the $75,000
threshold. Norfolk Southern has not met its burden of establishing our court has
diversity jurisdiction over this matter. As we do not have federal question or
diversity jurisdiction, we must remand this matter to the Dauphin County Court of
Common Pleas.
C. Attorneys’ Fees
Zayo asks the court to award attorneys’ fees incurred in litigating the instant
motion. (See Doc. 5 ¶ 10; Doc. 6 at 17-18). Under 28 U.S.C. § 1447(c), a remand
order “may require payment of just costs and any actual expenses, including
attorney fees, incurred as a result of the removal.” 28 U.S.C. § 1447(c). As a general
rule, courts may award attorneys’ fees under Section 1447(c) “only where the
removing party lacked an objectively reasonable basis for seeking removal.” See
League of Women’s Voters of Pa. v. Pennsylvania, 921 F.3d 378, 383 (3d Cir. 2019)
(quoting Martin v. Franklin Cap. Corp., 546 U.S. 132, 141 (2005)). We find Norfolk
Southern’s removal was not objectively unreasonable under the circumstances.
Therefore, Zayo is not entitled to attorneys’ fees.
IV. Conclusion
For the reasons set forth herein, we will grant Zayo’s motion to remand. We
will also deny Norfolk Southern’s motion to dismiss as moot. An appropriate order
shall issue.
/S/ CHRISTOPHER C. CONNER
Christopher C. Conner
United States District Judge
Middle District of Pennsylvania
Dated: January 25, 2022