Zayo Grp. LLC v. Norfolk S. Ry. Co.

610 F.Supp.3d 851

ZAYO GROUP LLC, Plaintiff,

v.NORFOLK SOUTHERN RAILWAY COMPANY, Defendant.

Civil Action No. 1:21-cv-1300

United States District Court, E.D. Virginia, Alexandria Division.

Signed July 11, 2022

Charles Anthony Zdebski, Jeffrey P. Brundage, Robert James Gastner, Eckert Seamans Cherin & Mellott LLC, Washington, DC, Eric Michael Page, Eckert Seamans Cherin & Mellott LLC, Richmond, VA, for Plaintiff.

Gordon Dwyer Todd, Tobias Samuel Loss-Eaton, Pro Hac Vice, Sidley Austin LLP, Washington, DC, Rowland Braxton Hill, IV, Merritt Law, PLLC, Richmond, VA, Timothy George McCormick, Christian & Barton, LLP, Richmond, VA, for Defendant.

ORDER

Liam O'Grady, United States District Judge

Introduction

This matter comes before the Court on the Defendant's, Norfolk Southern Railway Company's ("Norfolk Southern"), Motion to Dismiss the Amended Complaint for failure to state a claim. Dkt. 52. The matter has been fully briefed by the Parties and is ripe for consideration.

Procedural Background

This civil action was initially removed from proceedings before the Virginia Corporation Commission. See Dkt. 1. The Court has previously denied the Plaintiffs, Zayo Group's ("Zayo"), Motion to Remand. Dkt. 27. With permission of the Court, Zayo filed an Amended Complaint. Dkt. 50. In response, Norfolk Southern has filed a Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6).

Factual Background

Zayo is a limited liability company organized under the laws of Delaware. See Dkt. 50 at 1. Zayo is a telecommunications company that provides services in the Commonwealth of Virginia. Id. at 4. Norfolk Southern is a railroad corporation that operates rail lines across the country, including in Virginia. Id. at 2. The Parties signed a contract (the "Lease" or "Duct Lease") which allows Zayo to operate a fiber-optic cable along a 24.7-mile underground duct (the "Duct") which lies parallel to a railroad track owned by the Defendant. Id. at 4; see Dkt. 50-1 (the Lease). The railroad track and duct run from Manassas, Virginia to Alexandria, Virginia.

The Lease contained a renewal provision which allowed Zayo to extend the lease for a period of 10 years. See Dkt. 50-1 at 2. Zayo has been displeased with the value that was calculated for the adjusted rental rate for the extension period. See Dkt. 50 at 4. This Court, in a different civil action, has previously found the Lease between the Parties is a valid and enforceable agreement that created a binding determination of the value of the adjusted rent for the period of the 10-year extension.¹ See Civil case no. 1:21-cv-1299, Dkt. 60. Zayo now seeks to institute condemnation proceedings against the duct under Virginia Code § 25.1-102 to obtain a "non-exclusive" easement. Dkt. 50 at 8.

Legal Standard

To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a complaint must contain sufficient factual allegations that will "state a claim to relief that is plausible on its face" if those allegations are accepted as true. Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) must be considered in combination with Federal Rule of Civil Procedure 8(a)(2), which requires "a short and plain statement of the claim showing that the pleader is entitled to relief" so as to "give the defendant fair notice of what the ... claim is and the grounds upon which it rests." Id. (quoting Conley v. Gibson , 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) ). Pleadings that are merely "labels and conclusions" will not be accepted as true. Ashcroft v. Iqbal , 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly , 550 U.S. at 555, 127 S.Ct. 1955 ).

Discussion

The Court has previously ruled that the Interstate Commerce Commission Termination Act (the "ICCTA") completely preempts state law claims that would seek to transfer possession of land that is owned by a railroad. Dkt. 27 at 4 (citing Skidmore v. Norfolk Southern Ry. Co. , 1 F. 4th 206, 218 (4th Cir. 2021) ). The ICCTA defines a railroad to include "a switch, spur, track, terminal, terminal facility, and a freight depot, yard, and ground, used or necessary for transportation." 49 USC § 10102(6)(C). The ICCTA confers exclusive jurisdiction to the Surface and Transportation Board by stating that the Board's jurisdiction 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.

49 USC § 10501(b). The Act also goes on to explain, "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." Id. The Fourth Circuit has explained that "the Termination Act's exclusive cause of action demonstrates Congress's clear intent to ‘entirely displace’ attempts to use state-law adverse possession or prescriptive easement claims to dispossess a rail of land over which it has a right of way." Skidmore , 1 F.4th at 218.

1. The easement Zayo seeks is exclusive

Zayo has Amended its Complaint in an attempt to avoid the Court's previous ruling that its state-law condemnation proceedings are completely preempted by the ICCTA. Instead of seeking complete condemnation, Zayo alleges that it requires a "non-exclusive" easement. Dkt. 50 at 7. Zayo argues that the Fourth Circuit's holding in Skidmore indicates that a non-exclusive easement is not completely preempted by the ICCTA. Dkt. 60 at 2-3. Therefore, Zayo argues the remedy sought is available and has not been displaced by the Federal Statute. In Skidmore , the Fourth Circuit analyzed the plaintiff's complaint which indicated that the easement she sought was exclusive. 1 F.4th at 215 ("Nowhere in her pleadings or briefs does she suggest that the claim is limited to the nonexclusive ownership of the land at issue.") The Fourth Circuit went on to hold that because the plaintiff's quiet title claims "operate to exclude Norfolk Southern from the land at issue," the proposed civil actions would be preempted by the ICCTA.

Zayo believes that based on this holding, the Amended Complaint cannot be dismissed because there are sufficient factual allegations that the easement sought as a remedy would be non-exclusive. Dkt. 60 at 5. In deciding a Motion to Dismiss, the Court "can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." Iqbal , 556 U.S. at 679, 129 S.Ct. 1937. In the current case, the allegation that the easement would be non-exclusive is a legal conclusion and is not considered to be true by the Court. Therefore, it is necessary to look at the non-conclusory factual allegations within the Complaint to determine if Zayo seeks an easement that is exclusive or non-exclusive.

The Amended Complaint states that "Zayo's use of its easement ... shall be carried out in such a manner as not to unduly interfere with property." Dkt. 50 at 7. Further, the Amended Complaint states that the easement "shall be consistent with the terms of the Lease to the fullest possible legal and practical extent ..." Id. In its supporting memorandum, Zayo argues that the terms of the Lease indicate the easement will not interfere with Norfolk Southern's use of the railroad, because there has been no interference for the two decades the Lease has been in place. Dkt. 60 at 5.

However, a review of the Lease indicates that the contract grants the rights to an exclusive easement.² The first clause of the lease states that "Lessor hereby leases to Lessee and Lessee leases from Lessor the exclusive right to use the duct." Dkt. 50-1 at 3. The Lease also describes the uses permitted to Zayo under the terms of the lease (which would be incorporated into the easement sought in the Amended Complaint):

(2) Use. Lessee shall have the right to use the Leased Facilities for the purpose of constructing, installing, operating and maintaining Lessee's fiber optic cable, innerducts, manholes, huts (subject to available space) and related equipment, ...

Id. The Lease—which would define the easement—also clearly indicates that the easement is to be exclusive in the Granting Clause's definition of the easement. Further, Zayo seeks to maintain a permanent installation within the easement.³ It follows that while that structure was there, Norfolk Southern could not make use of the easement. As these are the factual allegations that are contained in the Amended Complaint, there is no basis to conclude that the easement that is sought by Zayo could be considered non-exclusive for the purposes of assessing complete preemption by the ICCTA.

As Zayo seeks a remedy under Virginia law, the Court will apply Virginia law to define what constitutes an exclusive easement as opposed to a non-exclusive easement. See Felder v. Casey , 487 U.S. 131, 108 S.Ct. 2302, 101 L.Ed.2d 123 (1988) (state law is applied to state law claims in a Federal district court). Under Virginia law, an easement in gross is exclusive if there is a servient estate and no dominant estate, and the easement is personal to the grantee. Corbett v. Ruben , 223 Va. 468, 472, 290 S.E.2d 847 (1982) (citing Stokes Inc. v. Matney , 194 Va. 339, 344, 73 S.E.2d 269 (1952) ); see also Va. Elec. & Power Co. v. N. Va. Reg'l Park Auth. , 270 Va. 309, 319, 618 S.E.2d 323 (2005) (The Virginia Supreme Court analyzed unambiguous terms in a deed to decide if an easement was exclusive). In contrast, a non-exclusive easement in gross "is...