NATIONAL RAILROAD PASSENGER CORPORATION, Plaintiff, v. SOUTHEASTERN PENNSYLVANIA TRANSPORTATION AUTHORITY, Defendant.
Case No. 1:19-cv-00537 (TNM)
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
July 11, 2019
MEMORANDUM ORDER
This is a case about a relationship between two railroad authorities that has veered off track over a property dispute. The Southeastern Pennsylvania Transportation Authority (SEPTA) believes it possesses an easement granting it the right to provide commuter passenger services using property owned by the National Railroad Passenger Corporation (Amtrak). Amtrak disagrees. It seeks a declaratory judgment that SEPTA does not own the easement. In response, SEPTA has moved for a dismissal of Amtrak’s Complaint for lack of subject matter jurisdiction. Because the Court finds that it has jurisdiction to consider the merits of the parties’ arguments, it denies SEPTA’s Motion.
I.
In the early 1970s, several major railroads in the Northeast filed for bankruptcy. To ensure continued service in the region, Congress passed the Regional Rail Reorganization Act of 1973,
Under the Plan, Conrail conveyed to Amtrak the Northeast Corridor Properties, which include rail lines running from Washington to Boston, and from Philadelphia to Harrisburg. See ECF No. 8-6 at 7-9. To ensure that Conrail retained trackage rights on these properties, Amtrak granted it a Commuter Service Passenger Easement. See ECF No. 8-7.
The parties’ easement agreement gave Amtrak a right of first refusal. It stated that if Conrail elect[s] to abandon or assign the Commuter Passenger Service Easement, in whole or in part, other than to a subsidiary, affiliate or successor entity, [Amtrak] shall have a first option to acquire such easement, or portion thereof, at the purchase price of one dollar ($1.00).
Using this easement, Conrail began providing commuter passenger services on behalf of regional transport authorities like SEPTA. See ECF No. 8-1 at 9. But in 1981, Congress found that the 3R Act and Conrail had failed to create a self-sustaining railroad system in the Northeast and had cost United States taxpayers many billions of dollars over original estimates.
SEPTA chose door number one. See Compl. 6; ECF No. 8-1 at 10. Section 506 of NERSA states that a commuter authority choosing to operate its own service may initiate negotiations with Conrail for the transfer of commuter service operated by Conrail.
As required by Section 506, Conrail and SEPTA began negotiations for a transfer of certain properties, including the Commuter Service Passenger Easement. See Compl. 7. What happened next is the crux of the parties’ dispute. SEPTA argues that Conrail successfully transferred the easement to it through a Transfer Agreement signed by both parties in 1982. See ECF No. 8-1 at 11-12; ECF No. 8-8. Amtrak disagrees. It contends that, by the easement’s clear terms, Conrail had no authority to convey the Commuter Easement without offering Amtrak a first option to purchase the easement. Compl. 7. Amtrak suggests that it exercised this option, bought the easement, and won an arbitration that confirmed the legality of its acquisition.
SEPTA contends that the Court lacks jurisdiction to resolve this dispute for two reasons. ECF No. 8-1 at 17. First, it suggests that the 3R Act proscribes judicial review of any rights reserved by the Final System Plan to Conrail.
II.
The Court must dismiss Amtrak’s claims if it lacks subject matter jurisdiction to consider them.
III.
At this early junction, Amtrak has met its burden of establishing the Court’s jurisdiction. Consider first the 3R Act. True, the Act limits judicial review of the Final System Plan to matters concerning the value of the rail properties to be conveyed under the plan and the value of the consideration to be received for such properties.
But viewed in the light most favorable to Amtrak, the Complaint does not ask the Court to review the Final System Plan at all. Rather, Amtrak seeks judicial review of an easement and a related operating agreement it made with Conrail. Amtrak alleges that it granted to Conrail certain easements and rights on the [Northeastern Corridor] Properties, which included a Commuter Passenger Service Easement. Compl. 4. It states that the easement gave Amtrak a right of first refusal if Conrail tried to transfer the easement.
SEPTA’s arguments to the contrary are unpersuasive. It contends that the easement was explicitly intended to memorialize [Conrail’s trackage rights] set forth in the [Plan]. ECF No. 8-1 at 9. Perhaps. But if the easement merely memorializes these pre-existing rights, then the Plan itself granted Amtrak a right of first refusal, as this right is unambiguously set forth in the easement. See ECF No. 8-7 at 7.
SEPTA tries to elude this conclusion by suggesting that the easement’s right of first refusal clause constituted an impermissible modification of the Final System Plan. ECF No. 14 at 12-3. But the Plan itself derails this argument. It says only that, [a]s to lines designated over to Amtrak, [the Plan] reserves to [Conrail] appropriate trackage rights for the operation of commuter services. See ECF No. 8-5 at 3.
The Plan does not describe the form these trackage rights must take. It does not, for example, specify whether Amtrak may lease the rail properties to Conrail rather than grant an easement. Nor does it prohibit Conrail from entering into any agreements with Amtrak about the assignability or transferability of these trackage rights. The Plan, in other words, does not clearly prohibit the right of first refusal agreed upon between the parties. It is a review of this contractual agreement that Amtrak seeks. Thus, giving Amtrak the benefit of all favorable inferences that can be drawn from the facts it alleges, the Court finds that it can proceed to the merits of the parties’ dispute without falling afoul of the 3R Act’s bar on judicial review. Wright, 503 F. Supp. 2d at 170.
SEPTA also argues that NERSA prohibits judicial review of Amtrak’s claims. Section 507 of NERSA states that [t]ransfers of properties . . . pursuant to agreements negotiated under [Section 506] . . . shall not be subject to judicial review.
Not so. To begin with, Sections 506 and 507 of NERSA were repealed by Congress in 1994. See P.L. 103-272. SEPTA suggests that these sections remain binding as to transfers of rail property that occurred before the repeal. ECF No. 8-1 at 13 n.11. SEPTA points to the text of the repeal statute, which states that the laws specified in the following schedule are repealed, except for the rights and duties that matured . . . before the date of enactment of this Act.
But it is unclear whether a jurisdiction stripping provision can create rights and duties that mature before its repeal. As Amtrak notes, while the repeal language suggests Congress intended to preserve substantive rights, there is nothing in the language [of the statute] that suggests Congress intended to preserve non-substantive provisions like Section 507. ECF No. 13 at 19.
More, even if Section 507 does apply, the Court may still review Amtrak’s claims. Section 507 bars review of transfers of rail properties under Section 506. Section 506, in turn, defines rail properties as assets or rights owned, leased, or otherwise controlled by Conrail.
To hold otherwise would, as Amtrak highlights, lead to absurd results. Take the following scenario as an example. Near the train tracks in a town are several houses. Conrail agrees to transfer the tracks—which it owns—and an individual’s house—which it does not—to a regional transit authority. The parties sign an agreement stating that this transfer is being executed under Section 506 of NERSA. If SEPTA’s argument is correct, the individual property owner would have no legal recourse to assert ownership of his house. Nothing in NERSA’s text or structure suggests that Congress intended this bizarre result.
IV.
In short, the Court is satisfied, based on Amtrak’s allegations, that it will be able to reach the merits of the parties’ arguments without violating either the 3R Act or NERSA. It is therefore
ORDERED that SEPTA’s Motion to Dismiss, ECF No. 8, is DENIED; and it is further
ORDERED that Amtrak’s Motion for a Hearing, ECF No. 15, is DENIED as moot.
SO ORDERED.
TREVOR N. McFADDEN, U.S.D.J.
Dated: July 11, 2019